10-K 1 rfmd2014329-10xk.htm 10-K RFMD 2014.3.29-10-K
 
 
 
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 March 29, 2014
or
¨  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the transition period from_______ to_______
 
 
 
Commission file number 0-22511
 
 
 
 
RF Micro Devices, Inc. 
(Exact name of registrant as specified in its charter)
 
 
 
North Carolina 
State or other jurisdiction of
incorporation or organization
 
56-1733461 
(I.R.S. Employer
Identification No.)
 
 
 
7628 Thorndike Road
Greensboro, North Carolina 
(Address of principal executive offices)
 
 
27409-9421 
(Zip Code)
 
 
 
Registrant's telephone number, including area code (336) 664-1233
 
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
 
 
Title of each class
Common Stock, no par value
 
Name of each exchange on which registered
The NASDAQ Stock Market LLC
(NASDAQ Global Select 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 x No ¨

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 Web site, 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 registrant's knowledge, in definitive proxy or information statements incorporated by reference 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, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer,” “accelerated filer" and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
Accelerated filer ¨
 
 
Non-accelerated filer ¨ (Do not check if a smaller reporting company)
Smaller reporting company ¨

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

The aggregate market value of the registrant's common stock held by non-affiliates of the registrant was approximately $1,594,903,268 as of September 28, 2013. For purposes of such calculation, shares of common stock held by persons who hold more than 10% of the outstanding shares of common stock and shares held by directors and officers of the registrant and their immediate family members have been excluded because such persons may be deemed to be affiliates. This determination is not necessarily conclusive.

There were 286,149,524 shares of the registrant's common stock outstanding as of May 9, 2014.
 
 
 
DOCUMENTS INCORPORATED BY REFERENCE

None.
 
 



 

RF MICRO DEVICES, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 29, 2014
INDEX
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
 
 
 
 
 
 
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 

 
 
 
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
 
 
 
 
 
 
 
Item 15.
 
 
 
 
 

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Forward-Looking Information

This report includes "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to certain disclosures contained in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These forward-looking statements include, but are not limited to, statements about our plans, objectives, representations and contentions, and are not historical facts and typically are identified by the use of terms such as "may," "will," "should," "could," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue" and similar words, although some forward-looking statements are expressed differently. You should be aware that the forward-looking statements included herein represent management's current judgment and expectations, but our actual results, events and performance could differ materially from those expressed or implied by forward-looking statements. We do not intend to update any of these forward-looking statements or publicly announce the results of any revisions to these forward-looking statements, other than as is required under the federal securities laws.
 
The following discussion should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements, including the notes thereto.

PART I

We use a 52- or 53-week fiscal year ending on the Saturday closest to March 31 of each year. Fiscal years 2014, 2013 and 2012 were 52-week years. Our other fiscal quarters end on the Saturday closest to June 30, September 30 and December 31 of each year.

Unless the context requires otherwise, references in this report to "RFMD," the "Company," "we," "us" and "our" refer to RF Micro Devices, Inc. and its subsidiaries on a consolidated basis.

ITEM 1. BUSINESS.

Company Overview

RF Micro Devices, Inc. was incorporated under the laws of the State of North Carolina in 1991. We are a global leader in the design and manufacture of high-performance radio frequency (RF) solutions. Our products enable worldwide mobility, provide enhanced connectivity, and support advanced functionality in the mobile device, wireless infrastructure, wireless local area network (WLAN or WiFi), cable television (CATV)/broadband, Smart Energy/advanced metering infrastructure (AMI), and aerospace and defense markets. We are recognized for our diverse portfolio of semiconductor technologies and RF systems expertise, and we are a preferred supplier to the world’s leading mobile device, customer premises and communications equipment providers. Our design and manufacturing expertise encompasses many semiconductor process technologies, which we source both internally and through external suppliers. Our broad design and manufacturing resources enable us to deliver products optimized for our customers’ performance, cost and time-to-market requirements.

Operating Segments

We design, develop, manufacture and market our products to both domestic and international original equipment manufacturers (OEMs) and original design manufacturers (ODMs) in both wireless and wired communications applications, in each of our following operating segments.

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Cellular Products Group (CPG) – CPG is a leading global supplier of cellular radio frequency solutions which perform various functions in the cellular front end section. The cellular front end is located between the transceiver and the antenna. These RF solutions are increasingly required in third generation (3G) and fourth generation (4G) devices, and they include power amplifier (PA) modules, transmit modules, antenna control solutions, antenna switch modules, switch filter modules and switch duplexer modules. CPG supplies its broad portfolio of cellular RF solutions into a variety of mobile devices, including smartphones, handsets, notebook computers, and tablets.

•
Multi-Market Products Group (MPG) – MPG is a leading global supplier of a broad array of RF solutions such as PAs, low noise amplifiers (LNAs), variable gain amplifiers, high power gallium nitride (GaN)

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transistors, attenuators, mixers, modulators, switches, voltage-controlled oscillators (VCOs), phase locked loop modules, circulators, isolators, multi-chip modules, front end modules, and a range of military and space components (amplifiers, mixers, VCOs and power dividers). Major communications applications include mobile wireless infrastructure (second generation (2G), 3G and 4G), point-to-point and microwave radios, WiFi (infrastructure and mobile devices), and CATV wireline infrastructure. Industrial applications include Smart Energy/AMI, private mobile radio, and test and measurement equipment. Aerospace and defense applications include military communications, radar and electronic warfare, as well as space communications. During fiscal 2013, our foundry services were realigned from our Compound Semiconductor Group to our MPG.

•
Compound Semiconductor Group (CSG) – CSG is a business group that was established to leverage our compound semiconductor technologies and related expertise in RF and non-RF end markets and applications. 

Our reportable segments are CPG and MPG for fiscal 2014. CSG does not currently meet the quantitative threshold for an individually reportable segment under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 280-10-50-12. These business segments are based on the organizational structure and information reviewed by our Chief Executive Officer, who is our chief operating decision maker (or CODM), and are managed separately based on the end markets and applications they support. The CODM allocates resources and assesses the performance of each operating segment primarily based on operating income (loss) and operating income (loss) as a percentage of revenue.

For financial information about the results of our operating segments for each of the last three fiscal years, refer to Note 17 of the Notes to the Consolidated Financial Statements set forth in Part II, "Item 8. Financial Statements and Supplementary Data" of this report.

Proposed Merger

On February 22, 2014, we entered into an Agreement and Plan of Merger and Reorganization (the "Merger Agreement") with TriQuint Semiconductor, Inc. ("TriQuint") providing for the combination of RFMD and TriQuint in a merger of equals under a new holding company currently named Rocky Holding, Inc. We believe the combination will create a new leader in radio frequency solutions, with new growth opportunities and a broad portfolio of enabling technologies.

Upon completion of the mergers, RFMD shareholders will receive 0.2500 of a share of common stock of the new holding company for each share of RFMD common stock, and TriQuint stockholders will receive 0.4187 of a share of common stock of the new holding company for each share of TriQuint common stock. We anticipate that RFMD shareholders and TriQuint stockholders will each hold approximately 50% of the shares of common stock of the new holding company issued and outstanding immediately after completion of the proposed merger. Rocky Holding, Inc. intends to apply to list its common stock on the NASDAQ Global Select Market ("NASDAQ"), subject to official notice of issuance. Prior to completion of the mergers, we anticipate that Rocky Holding, Inc. will change its name, adopt a NASDAQ symbol for its common stock, and register a new trade name and logo that reflect the key attributes of the combined company.

On April 14, 2014, Rocky Holding, Inc. filed a Registration Statement on Form S-4 (which contains a preliminary joint proxy statement/prospectus) as contemplated by the Merger Agreement.

Consummation of the merger with TriQuint is subject to, among other things, the separate approvals of both RFMD shareholders and TriQuint stockholders and regulatory approvals. We currently anticipate the merger will be completed during the second half of calendar year 2014.

Acquisition

During fiscal 2013, we acquired Amalfi Semiconductor, Inc. (“Amalfi”), a fabless semiconductor company specializing in cost effective, high performance RF and mixed-signal integrated circuits (ICs) for the rapidly growing entry-level smartphone market. We are leveraging Amalfi's RF complementary metal oxide semiconductor (CMOS) and mixed-signal IC technology to develop a growing portfolio of high-performance RF solutions. The product portfolio is targeted primarily at the entry-level smartphone market, and we have successfully shipped

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products using the technology to a number of customers, including handset manufacturers based in China as well as leading multinational smartphone manufacturers.

Refer to Note 5 of the Notes to the Consolidated Financial Statements set forth in Part II, "Item 8. Financial Statements and Supplementary Data" of this report for further information related to this acquisition.

Asset Transfer Transaction

During fiscal 2013, we entered into an asset transfer agreement with IQE, Inc. ("IQE"), a leading global supplier of advanced semiconductor wafer products and wafer services, to transfer our molecular beam epitaxy (MBE) wafer growth operations (located in Greensboro, N.C.) to IQE. The transaction with IQE has reduced our manufacturing costs, strengthened our supply chain and provided us with access to newly developed wafer starting process technologies. The assets transferred to IQE included leasehold interest in the real property, building and improvements used for the facility, and machinery and equipment located in the facility, all of which were written off during fiscal 2013. In conjunction with the asset transfer agreement, we entered into a wafer supply agreement with IQE, under which IQE supplies us with wafer starting materials. This wafer supply agreement was recorded as an intangible asset and provides us with competitive wafer pricing through March 31, 2016. Approximately 70 employees at our MBE facility became employees of IQE as part of this transaction. In addition, IQE assumed the lease related to the MBE facility for the real property and related improvements.

Refer to Note 6 of the Notes to the Consolidated Financial Statements set forth in Part II, "Item 8. Financial Statements and Supplementary Data" of this report for further information related to this transaction.

Restructuring

In the fourth quarter of fiscal 2014, we initiated a restructuring to reduce operating expenses that resulted in restructuring expenses of approximately $2.5 million, primarily related to employee termination benefits. As part of this restructuring, we discontinued engineering efforts related to an in-process research and development (IPRD) project and impaired the intangible asset in the amount of $11.3 million. Also during fiscal 2014, we initiated restructuring efforts to achieve manufacturing efficiencies that resulted in restructuring expenses of approximately $4.1 million, primarily related to employee termination benefits.

In the second quarter of fiscal 2014, we sold our gallium arsenide (GaAs) semiconductor manufacturing facility located in the United Kingdom (U.K.) to Compound Photonics and recorded restructuring expenses of approximately $4.4 million during fiscal 2014. The remaining product demand from that facility was transitioned to our GaAs manufacturing facility in Greensboro, N.C.  We have also partnered with external foundries to establish second sources for additional GaAs capacity.  The U.K. facility had been our primary source for cellular switches, the majority of which we have transitioned to higher performance, lower cost silicon on insulator (SOI) material. 

Refer to Note 12 of the Notes to the Consolidated Financial Statements set forth in Part II, "Item 8. Financial Statements and Supplementary Data" of this report for further information related to restructuring.

Industry Overview

Our business is diversified across multiple industries. The cellular handset industry is our largest market and is characterized by large unit volumes, significant product mix shift, high technical barriers to entry and relatively short product lifecycles.

The cellular market is rapidly transitioning to smartphones and tablets based on the High Speed Packet Access (HSPA) and Long Term Evolution (LTE) interface standards. Entry level 2G-only handsets are still shipping in large volumes, but this market segment is decreasing as a percentage of total handsets shipped. The rapidly increasing global demand for internet access, email, social media, video sharing, and other mobile applications is driving the demand for smartphones, tablets, and other mobile data devices. These devices typically contain more RF content than basic or feature phones. They support 2G, 3G and increasingly 4G air interface standards, require multiple frequency bands for broad geographic coverage, and target higher performance specifications. With smartphones growing faster than the overall handset market and containing more RF content, we expect our addressable market to grow faster than the overall handset market.


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The RF content is also growing rapidly in notebook computers and machine-to-machine (M2M) data devices. In notebook computers, the broad availability of high speed 3G and 4G networks is increasing the demand for cellular functionality. Single-band WiFi has been a standard feature for these platforms and they are now utilizing dual frequency bands for higher data rates. Similarly, M2M devices are increasingly integrating cellular content for a growing number of applications, including automotive, smart grid and electric and water utilities, medical, fleet management, and point-of-sale.

In cellular infrastructure, network operators continue to expand their 3G and 4G networks. The expanding data traffic loads on networks are increasing the requirements for more and faster wireless backhaul systems (such as remote radio heads) that connect cellular base stations to switching centers. Wireless backhaul is commonly used in Asian and European wireless networks, driving increased use of high performance microwave radios. In addition, to increase network coverage and capacity, the cellular infrastructure market is expanding to include new architectures utilizing small cells such as micro cells, pico cells, and femtocells. In CATV infrastructure, the rapid growth in consumer data usage, primarily through high definition television (HDTV), Internet protocol television (IPTV), and voice over Internet protocol (VoIP), as well as the associated increases in Internet traffic, are driving market growth and placing increased emphasis on product performance, integration and power consumption. Additionally, to support increased CATV data rates, a new network standard called DOCSIS 3.1 has been developed to enable greater capacity and speed while also decreasing costs by increasing energy efficiency and decreasing cost per bit.

In our other markets, efforts to reduce energy consumption and lower carriers’ operating budgets are placing greater value on higher performance RF solutions. Also, Smart Energy/AMI systems, which are increasingly implemented using the Zigbee™ standard or other technologies requiring integrated RF components, are also proliferating. In WiFi, we are forecasting rapid growth in our market opportunity and have increased emphasis on our ability to innovate and deliver world-class products, given the increasing performance requirements of 802.11ac, the proliferation of WiFi in mobile devices and non-mobile equipment, including routers, access points, set-top boxes and televisions.

Across our customers’ diversified industries, their end-market products continue to increase in complexity and RF content. This is expanding our addressable market and increasing our opportunities to deliver more highly integrated, higher value solutions. At the same time, we are leveraging our core capabilities, including scale manufacturing, advanced packaging capabilities and deep systems-level integration expertise, to target a greater number of applications and market opportunities.

Strategy

RFMD seeks to deliver best-in-class RF solutions and technologies to a broad set of customers and markets to enable the global macro trends related to mobility, broadband connectivity, and energy conservation.

We are sharply focused on profitable growth and diversification through product and technology leadership. We develop and launch over one hundred new products each year to expand our presence in existing and new markets and to diversify our revenue base.

We leverage core capabilities in systems-level design, product development, our robust supply chain, and process and packaging technologies to meet or exceed our customers' complex requirements related to amplification, switching, filtering, signal integrity, and other RF and non-RF functionality. Through Optimum Technology Matching®, we match the absolute best technologies to the unique performance and cost requirements of each customer's individual applications.

We believe our investments in these and other core capabilities position RFMD to be a leading beneficiary of the increasing RF and non-RF complexity in the transmit and receive chains of wireless and wired broadband applications.

Our management and board of directors regularly review our results of operations and competitive position in the markets in which we operate as well as our strategic options in light of our company-specific conditions and industry conditions, including whether acquisitions, dispositions or other potential transactions offer meaningful opportunities to enhance shareholder value.

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Markets

We design, develop, manufacture and market our products to both domestic and international OEMs and ODMs for the following commercial, industrial, military, aerospace and other markets in both wireless and wired communications applications:

Aerospace and Defense – Aerospace and defense markets in which we compete include radar equipment, satellite communications, broadband communications equipment, and foundry services.

Broadband Components – This market is comprised of several segments that relate to cable and broadband transmission. Major products include CATV hybrid-based amplifiers, which boost voice and data signals over established cable transmission lines.

Cellular Devices – In cellular applications, communication is established through mobile devices by making a connection with a base station via RF channels. The ability of the mobile device to transfer data and maintain this connection over a long distance and for long periods of time is significantly impacted by the performance of the RF section of the device. We provide a broad portfolio of cellular RF products for mobile devices, including PA modules, transmit modules, RF power management ICs, switch filter modules, switch duplexer modules, and antenna control solutions.

Smart Energy/AMI – Utility companies (electric, gas, and water) are upgrading their networks for automated meter reading and control. The most basic AMI systems provide a way for a utility company to measure customer usage remotely without touching or physically reading a meter. More sophisticated AMI systems have data links to major household appliances to enable measurement and control.

WiFi – WiFi is used primarily for short-range home or office network applications in personal computers, gaming platforms, tablets, smartphones and other consumer devices. WiFi is also used in wireless access points and routers, such as those used in wireless hotspots. As part of the Internet of Things (IoT), WiFi is also expanding into other consumer products such as set-top boxes and televisions.

Wireless Infrastructure – Base stations are installed across a geographic area to create wireless telecommunications networks that enable mobile devices to communicate with one another or with wired telephones. Each base station is equipped to transmit and receive RF signals through an antenna to and from mobile devices. The base station market is typified by a requirement for highly reliable products with superior durability and performance. Point-to-point microwave radios are also used for wireless infrastructure backhaul. In point-to-point applications, transmission and reception between two fixed points occur wirelessly. Common applications include broadcasting, backhaul (the way a cellular base station connects to the rest of the telephone network), and trunking for use in operating data links within communications carriers and IT infrastructure.

Other Markets – Through CSG, we leverage our compound semiconductor technologies and related expertise in RF and non-RF end markets and applications by offering foundry services to third parties.

Manufacturing

We have a global supply chain that routinely ships millions of units per day. Our products have varying degrees of complexity and rely on semiconductors and other components that are manufactured in-house or outsourced. The majority of our products are multi-chip modules utilizing multiple semiconductor process technologies. We are a leading supplier of RF solutions and a leading manufacturer of compound semiconductors, including GaAs heterojunction bipolar transistor (HBT), GaAs pseudomorphic high electron mobility transistor (pHEMT), and GaN, for RF applications.

We operate a wafer fab located in Greensboro, N.C. for the production of GaAs and GaN wafers. We previously operated an additional wafer fab located in Newton Aycliffe, U.K., but we sold this facility in July 2013 and the remaining product demand from this facility was transitioned to our GaAs facility in Greensboro, N.C. We also use multiple silicon-based process technologies, including SOI and CMOS, in our products. We outsource all silicon manufacturing to leading silicon foundries. Demand for silicon CMOS PAs and SOI switches, as well as wafer bumping and die processing, has increased significantly. This increased demand requires external support from our silicon foundries and wafer bumping suppliers. In packages that employ bumped die, the electrical connections are

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created directly on the surface of the die, which eliminates wirebonds so that the die may be attached directly to a substrate or leadframe. This type of technology provides a higher density interconnection capability than wirebonded die and enables smaller and thinner form factors.

Once the semiconductor manufacturing is complete, the wafers are singulated, or separated, into individual units called die. For the majority of our products, the next step in our manufacturing process is assembly. During assembly, the die and other necessary components are placed on a high density interconnect substrate to provide connectivity between the die and the components. This populated substrate is formed into a microelectronic package. Once assembled, the products are tested for RF performance and prepared for shipment through a tape and reel process. To assemble and test our products, we primarily use internal assembly facilities in the United States (U.S.), China and Germany, and we also utilize several external suppliers. The growing demand for other packaging technologies, such as Wafer Level Chip Scale Packaging (WLCSP), is supported by external suppliers.

During fiscal 2013, lower demand in the first half of the year resulted in under-utilization of our internal factories. However, during the second half of fiscal 2013 and during fiscal 2014, demand increased significantly for both our cellular RF solutions and our mobile WiFi products, which led to increases in the utilization of our internal factories and sourcing from our qualified suppliers.

Our quality management system is registered to ISO 9001 standards and our environmental management system is registered to ISO 14001:2004. This means that a third-party independent auditor has determined that these systems meet the requirements developed by the International Organization of Standardization, a non-governmental network of the national standards institutes of over 150 countries. The ISO 9001 standards provide models for quality assurance in design/development, production, installation and servicing. The ISO 14001:2004 standards provide a structure within which a company can develop or strengthen its quality system for managing its environmental affairs. We believe that all of our key vendors and suppliers are compliant with applicable ISO 9000 or QS 9000 series specifications, which means that their operations have in each case been determined by auditors to comply with certain internationally developed quality control standards. We qualify and monitor assembly contractors based on cost and quality.

In fiscal 2013, RFMD was granted ISO/TS 16949 certification, which covers our manufacturing facilities in Greensboro, N.C. The ISO/TS 16949 certificate is the highest international quality standard for the automotive industry and incorporates ISO technical specifications that are more stringent than ISO 9001 quality management systems requirements. The goal of the ISO/TS 16949 standard is to enhance existing quality management systems, which, when combined with customer-specific requirements, support continual improvement through defect prevention and a reduction in variation and waste in the supply chain. The ISO/TS 16949 standard combines North American and European automotive requirements and serves the global automotive market.

Products and Applications

We offer a broad line of products that range from single-function components to highly integrated circuits and multi-chip modules (MCMs). Our ICs include gain blocks, LNAs, PAs, switches, antenna tuners, receivers, transmitters, transceivers, modulators, demodulators, attenuators, frequency synthesizers and VCOs. Our MCM products include PA modules, switch filter modules, switch duplexer modules, VCOs, phase-locked loops (PLLs), coaxial resonator oscillators (CROs), variable gain amplifiers, hybrid amplifiers, and power doublers. Our products employ a broad array of semiconductor process technologies, including GaAs, GaN, CMOS, silicon germanium (SiGe), and SOI.

Raw Materials

We purchase numerous raw materials, passive components and substrates for our products and manufacturing processes.  We currently use independent foundries to supply all of our silicon-based integrated circuits.  Our manufacturing strategy includes a balance of internal and external sites (primarily for assembly operations), which helps reduce costs, provides flexibility of supply, and minimizes the risk of supply disruption. We routinely qualify multiple sources of supply and manufacturing sites and closely monitor suppliers’ key performance indicators. Our suppliers' and our manufacturing sites are geographically diversified (with our largest volume sources distributed throughout Southern and Eastern Asia), and we believe we have adequate sources for the supply of raw materials, passive components and substrates for our products and manufacturing needs.


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Customers

We design, develop, manufacture and market our products to both domestic and international OEMs and ODMs in both wireless and wired communications applications.

Our largest customer, Samsung Electronics, Co., Ltd. (Samsung), accounted for approximately 25% and 22% of our total revenue in fiscal 2014 and fiscal 2013, respectively. In addition, we sold our products to another end customer through multiple contract manufacturers, which in the aggregate accounted for approximately 20% of total revenue in fiscal 2014. In fiscal 2012, Samsung and Nokia Corporation (Nokia) accounted for approximately 22% and 14% of our total revenue, respectively. The majority of the revenue from these customers was from the sale of our CPG products. No other end customer accounted for more than 10% of our total revenue in any of the past three fiscal years. Our customer diversification strategy has successfully reduced our percentage of sales attributable to any one product or any one customer and diversified our customer base in both CPG and MPG.

Information about revenue, operating profit or loss and total assets is presented in Part II, Item 8, “Financial Statements and Supplementary Data” of this report.

Sales and Marketing

We sell our products worldwide directly to customers as well as through a network of domestic and foreign sales representative firms and distributors. We select our domestic and foreign sales representatives based on technical skills and sales experience, as well as the presence of complementary product lines and the customer base served. We provide ongoing training to our internal, as well as our external, sales representatives and distributors to keep them informed of, and educated about, our products. We maintain an internal sales and marketing organization that is responsible for key account management, application engineering support to customers, developing sales and advertising literature, and preparing technical presentations for industry conferences. We have sales and customer support centers located throughout the world.

Our applications engineers interact with customers during all stages of design and production, provide customers with product application notes and engineering data, maintain regular contact with customer engineers, and assist in the resolution of technical problems. We believe that maintaining a close relationship with customers and platform providers and providing them with strong technical support enhances their level of satisfaction and enables us to anticipate their future product needs.

Research and Development

Our research and development (R&D) activities enable the technologies and products necessary to maintain our leadership in the wireless and wired broadband communications markets. Our R&D activities focus on leading-edge products in our core markets and new technology development for new high growth markets.

We have developed several generations of GaAs process technologies that we manufacture internally. We invest in these technologies to improve device performance and reduce manufacturing costs. We also develop and qualify technologies made available to us from key suppliers. We combine these external technologies with our own proprietary design methods, intellectual property (IP), and other expertise, to improve performance, increase integration, reduce size and reduce the cost of our products. During fiscal 2014, we expanded our use of SOI technology. We qualified an additional silicon foundry and now have multiple sources of supply of SOI. We also launched several new SOI-based product categories for production, including antenna control solutions, antenna switch modules, switch filter modules and switch duplexer modules.

Our R&D activities help accelerate the deployment of advanced modulation schemes, new frequency bands, and other next-generation technologies to enable global high speed wireless and wired broadband data networks. Specifically, our RF systems-level expertise and our innovations in new product architectures, new circuit techniques, and other new proprietary technologies are enabling us to solve the increasingly complex RF challenges related to linearity, power consumption, and other critical performance metrics. For example, we announced a highly integrated platform solution called RF Fusion™ that is a complete RF front end solution for 4G world phones and tablets.


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RFMD is a pioneer in envelope tracking (ET) technology for wireless applications, and we are incorporating our ET technology into power management components and our most advanced PAs. During fiscal 2014, we released our first ET power management IC which is designed to operate with multiple tier 1 chipsets. We are also developing PAs that demonstrate industry-leading performance with third-party power management components. Our use of ET technology enables us to track the envelope of high-speed modulation signals and adjust the PA in real time to maximize efficiency and maintain required levels of linearity. This technology is increasingly necessary to maximize mobile device data rates and meet user expectations for battery life and maximum case temperatures.

We continue to develop and release new GaN-based products and invest in new GaN process technologies to exploit GaN's performance advantages across existing and new product categories. The inherent wide band gap, high electron mobility, and high breakdown voltage characteristics of GaN semiconductor devices offer significant performance advantages versus competing technologies. We are also developing other advanced GaN process technologies that target applications where we anticipate GaN devices will provide a disruptive performance advantage and deliver meaningful energy savings in end-market products. In fiscal 2014, we introduced the world's first 6-inch GaN-on-silicon carbide wafers for manufacturing RF power transistors for both military and commercial use. We are converting all GaN production and development to 6-inch diameter wafers using our existing high-volume, 6-inch GaAs foundry to reduce platform cost for the growing GaN device market.

In the area of packaging technologies, we are developing and qualifying packaging technologies that allow us to improve performance and reduce or replace gold in our products. We are continuing to invest in packaging technologies such as WLCSP and copper pillar bump that eliminate wire bonds, reduce the size and component height, and improve performance, while reducing the cost of packaging our products.

In fiscal years 2014, 2013, and 2012, we incurred approximately $197.3 million, $178.8 million and $151.7 million, respectively, in research and development expenses. We are continuing to invest in new RF component products and new process technologies in support of our growth and diversification goals.

Competition

We operate in a very competitive industry characterized by rapid advances in technology and new product introductions. Our competitiveness depends on our ability to improve our products and processes faster than our competitors, anticipate changing customer requirements and successfully develop and launch new products while reducing our costs. Our competitiveness is also affected by the quality of our customer service and technical support and our ability to design customized products that address each customer's particular requirements within the customer's cost limitations. Many of our current and potential competitors have entrenched market positions and customer relationships, established patents, copyrights and other IP rights and substantial technological capabilities. In some cases, our competitors are also our customers or suppliers. Additionally, many of our competitors may have significantly greater financial, technical, manufacturing and marketing resources than we do, which may allow them to implement new technologies and develop new products more quickly than we can.

Intellectual Property

We value IP and actively seek opportunities to leverage our IP to promote our business interests. Such IP includes patents, copyrights, trademarks, know-how and trade secrets. Moreover, we respect the IP of others and have implemented policies and procedures to mitigate the risk of infringing or misappropriating third party IP.

Patent applications are filed within the U.S. and in other countries where we have a market presence. On occasion, some applications do not mature into patents for various reasons, including, but not limited to, rejections based on prior art. We also continue to acquire patents through acquisitions or direct prosecution efforts. We believe the scope of our patent portfolio is sufficient to protect our business.

Our business, including a significant percentage of our patents, is focused on RF communication devices, components, sub-components, systems, software and processes. The duration of our most relevant patents is sufficient to support our business, especially in view of the limited market life of many of our products. As we improve upon existing products and invent new ones, patents are acquired to further enhance our return on investment in products that utilize these inventions.


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In our continuing endeavor to create strong brands for our products and services, we federally register trademarks, service marks and trade names that distinguish our products and services in the market. We diligently monitor these marks for their proper and intended use.

We also protect our interest in proprietary information, including business strategies, unpatented inventions, formulae, processes, and other business information that provide a competitive advantage. Such information is closely monitored and made available only to those employees whose responsibilities require access to the information.

Seasonality

Sales of our products are often subject to seasonal fluctuations. This primarily reflects the seasonal demand fluctuations for the end-products, such as mobile handsets, that incorporate our components. If anticipated sales or shipments do not occur when expected, expenses and inventory levels in that quarter can be disproportionately high, and our results of operations for that quarter, and potentially for future quarters, may be adversely affected.

Backlog

Due to industry practice and our experience, we do not believe that backlog as of any particular date is indicative of future results. Our sales are the result of consumption of standard and custom products from RFMD-owned finished goods inventory at certain customers’ “hub” locations and from purchase orders for delivery of standard and custom products. The quantities projected for consumption of hub inventory and quantities on purchase orders, as well as the shipment schedules, are frequently revised within agreed-upon lead times to reflect changes in the specific customer’s needs. As industry practice allows customers to cancel orders with limited advance notice prior to shipment, and with little or no penalty, we believe that backlog as of any particular date may not be a reliable indicator of our future revenue levels.

Employees

On March 29, 2014, we had 3,482 employees. We believe that our future prospects will depend, in part, on our ability to continue to attract and retain skilled employees. Competition for skilled personnel is intense, and the number of persons with relevant experience, particularly in RF engineering, product design and technical marketing, is limited. None of our U.S. employees are represented by a labor union. A number of our European-based employees (less than 5% of our global workforce as of March 29, 2014) are subject to collective bargaining-type arrangements, and we have never experienced any work stoppage. We believe that our current employee relations are good.

Geographic Financial Summary

A summary of our operations by geographic area is as follows (in thousands):
 
Fiscal Year
 
2014
 
2013
 
2012
Sales:
 
 
 
 
 
United States
$
342,805

 
$
296,442

 
$
246,661

International
805,426

 
667,705

 
624,691

 
 
 
 
 
 
Long-lived tangible assets:
 
 
 
 
 
United States
$
120,885

 
$
114,635

 
$
130,665

International
75,111

 
76,891

 
67,256


Sales for geographic disclosure purposes are based on the “sold to” address of the customer. The “sold to” address is not always an accurate representation of the location of final consumption of our products. Of our total revenue for fiscal 2014, approximately 41% ($468.0 million) was attributable to customers in China and approximately 17% ($190.6 million) was attributable to customers in Taiwan.


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Long-lived tangible assets primarily include property and equipment. At March 29, 2014, approximately $69.7 million (or 36%) of our total property and equipment was located in China.

For the risks associated with our foreign operations, refer to Item 1A, “Risk Factors.”
 
Environmental Matters

By virtue of operating our wafer fabrication facility, we are subject to a variety of extensive and changing federal, state and local governmental laws, regulations and ordinances related to the use, storage, discharge and disposal of toxic, volatile or otherwise hazardous chemicals used in the manufacturing process. Any failure to comply with such requirements currently in effect or subsequently adopted could result in the imposition of fines upon us, the suspension of production or a cessation of operations, the occurrence of which could have an adverse impact upon our earnings and competitive position. In addition, such requirements could restrict our ability to expand our facilities or require us to acquire costly equipment or incur other significant expenses to comply with environmental regulations. We believe that costs arising from existing environmental laws will not have a material adverse effect on our financial position or results of operations. We are an ISO 14001:2004 certified manufacturer with a comprehensive Environmental Management System (EMS) in place in order to help ensure control of the environmental aspects of the manufacturing process. Our EMS mandates compliance and establishes appropriate checks and balances to minimize the potential for non-compliance with environmental laws and regulations.

We actively monitor the hazardous materials that are used in the manufacture, assembly and testing of our products, particularly materials that are retained in the final product. We have developed specific restrictions on the content of certain hazardous materials in our products, as well as those of our suppliers and outsourced manufacturers and subcontractors. This helps to ensure that our products are compliant with the requirements of the markets into which the products will be sold. For example, our products are compliant with the European Union (EU) RoHS Directive (2011/65/EU on the Restriction of Use of Hazardous Substances), which prohibits the sale in the EU market of new electrical and electronic equipment containing certain families of substances above a specified threshold.

There can be no assurance that the environmental laws 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. We do not currently anticipate any material capital expenditures for environmental control facilities for the remainder of fiscal 2015 or fiscal 2016.

Access to Public Information

We make available, free of charge through our website (http://www.rfmd.com), our annual and quarterly reports on Forms 10-K and 10-Q (including related filings in XBRL format) and current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file these reports with, or furnish them to, the Securities and Exchange Commission (SEC). The public may also request a copy of our forms filed with the SEC, without charge upon written request, directed to:

Investor Relations Department
RF Micro Devices, Inc.
7628 Thorndike Road
Greensboro, N.C. 27409-9421

The information contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K. We have included our website address as a factual reference and do not intend it as an active link to our website.

In addition, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. You may also read and copy any documents that we file with the SEC at the SEC’s Public Reference Room located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for information on the operation of the Public Reference Room.


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ITEM 1A. RISK FACTORS.

Our operating results fluctuate.

Our revenue, earnings, margins and other operating results have fluctuated significantly in the past and may fluctuate significantly in the future. If demand for our products fluctuates as a result of economic conditions or for other reasons, our revenue and profitability could be impacted. Our future operating results will depend on many factors, including, but not limited to, the following:

•
changes in business and economic conditions, including downturns in the semiconductor industry and the overall economy;

•
changes in consumer confidence caused by changes in market conditions, including changes in the credit markets, expectations for inflation, unemployment levels, and energy or other commodity prices;

•
our ability to accurately predict market requirements and evolving industry standards in a timely manner;

•
our ability to accurately predict customer demand and thereby avoid the possibility of obsolete inventory, which would reduce our profit margins;

•
the ability of third-party foundries and third-party assembly, test and tape and reel suppliers and other third-party subcontractor suppliers to handle our products in a timely and cost-effective manner that meets our customers' requirements;

•
our customers’ and distributors’ ability to manage the inventory that they hold and to forecast their demand;

•
our ability to achieve cost savings and improve yields and margins on our new and existing products;

•
our ability to respond to downward pressure on the average selling prices of our products caused by our customers or our competitors; and

•
our ability to utilize our capacity efficiently or acquire additional capacity in response to customer demand.

It is likely that our future operating results could be adversely affected by one or more of the factors set forth above or other similar factors. If our future operating results are below the expectations of stock market analysts or our investors, our stock price may decline.

Our industry's technology changes rapidly.

We design and manufacture high-performance semiconductor components for wireless applications. Our markets are characterized by the frequent introduction of new products in response to evolving product and process technologies and consumer demand for greater functionality, lower costs, smaller products and better performance. As a result, we have experienced and will continue to experience some product design obsolescence. We expect our customers' demands for reductions in cost and improvements in product performance to continue, which means that we must continue to improve our product designs and develop new products that may use new technologies. It is possible that competing technologies will emerge that permit the manufacture of ICs that are equivalent or acceptable in terms of performance, but lower in cost, to the products we make under existing processes. If we cannot design products using competitive technologies or develop competitive products, our operating results will be adversely affected.


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

The average selling prices of our products have historically decreased over the products' lives and we expect them to continue to do so. To offset these average selling price decreases, we must achieve yield improvements and other cost reductions for existing products, and introduce new products that can be manufactured at lower costs. In higher-tier, performance-driven markets we offer solutions that deliver the advantages of superior performance. In lower-tier, cost-driven markets we offer solutions that deliver market acceptable performance at lower cost. If we do not continue to identify markets that require superior performance or if we do not continue to offer products that command a premium price for superior performance, or if we do not achieve market acceptable performance in our products for cost-driven markets, our operating results could be adversely affected.

We depend on a few large customers for a substantial portion of our revenue.

A substantial portion of our revenue comes from large purchases by a small number of customers. Our future operating results depend on both the success of our largest customers and on our success in diversifying our products and customer base. We are focusing on a diversification strategy that includes growing our market share across a broad base of the leading cellular handset OEMs.

We typically manufacture custom products on an exclusive basis for individual customers for a negotiated period of time. Increasingly, the largest cellular handset OEMs are releasing fewer new phone models on an annual basis, which heightens the importance of achieving design wins for these larger opportunities. While the rewards for a design win are financially greater, competition for these projects is intense. The concentration of our revenue with a relatively small number of customers makes us particularly dependent on factors affecting those customers. For example, if demand for their products decreases, they may stop purchasing our products and our operating results would suffer. Most of our customers can cease incorporating our products into their products with little notice to us and with little or no penalty. The loss of a large customer and failure to add new customers to replace lost revenue would have a material adverse effect on our business, financial condition and results of operations.

We operate in a very competitive industry and must continue to implement innovative technologies.

We compete with several companies primarily engaged in the business of designing, manufacturing and selling RF solutions, as well as suppliers of discrete products such as transistors, capacitors and resistors. Our customers, platform providers or competitors could develop products or process technologies that compete with or replace our products or process technologies. A decision by any of our large customers or platform providers to design and/or manufacture ICs internally or through third-party suppliers or partners could have an adverse effect on our operating results. Increased competition could mean lower prices for our products, reduced demand for our products and a corresponding reduction in our ability to recover development, engineering and manufacturing costs.

Many of our existing and potential competitors have entrenched market positions, historical affiliations with OEMs, considerable internal manufacturing capacity, established IP rights and substantial technological capabilities. Many of our existing and potential competitors may have greater financial, technical, manufacturing or marketing resources than we do. We cannot be sure that we will be able to compete successfully with our competitors.

Our operating results are substantially dependent on development of new products and achieving design wins.

Our future success will depend on our ability to develop new product solutions for existing and new markets. We must introduce new products in a timely and cost-effective manner and secure production orders from our customers. The development of new products is a highly complex process, and we have experienced delays in completing the development and introduction of new products at times in the past. Our successful product development depends on a number of factors, including the following:

•
the accuracy of our prediction of market requirements and evolving standards;

•
our ability to design products that meet our customers’ cost, size and performance requirements;

•
acceptance of our new product designs;

•
the availability of qualified product designers;

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•
our timely completion and execution of product designs and ramp of new products according to our customers’ needs with acceptable manufacturing yields;

•
acceptance of our customers' products by the market and the variability of the life cycle of such products; and

•
our ability to successfully design, develop, manufacture and integrate new products.

We may not be able to design and introduce new products in a timely or cost-efficient manner, and our new products may fail to meet the requirements of the market or our customers. In that case, we likely will not reach the expected level of production orders, which could adversely affect our operating results. Even when a design win is achieved, our success is not assured. Design wins may require significant expenditures by us and typically precede volume revenue by six to nine months or more. Many customers seek a second source for all major components in their devices, which can significantly impact the revenue obtained from a design win. The actual value of a design win to us will ultimately depend on the commercial success of our customer’s product.

Decisions about the scope of operations of our business could affect our results of operations and financial condition.

Changes in the business environment could lead to changes in our decisions about the scope of operations of our business, and these changes could result in restructuring and asset impairment charges. Factors that could cause actual results to differ materially from our expectations with regard to changing the scope of our operations include:

•
timing and execution of plans and programs that may be subject to local labor law requirements, including consultation with appropriate work councils;

•
changes in assumptions related to severance and post-retirement costs;

•
future divestitures;

•
new business initiatives and changes in product roadmap, development and manufacturing;

•
changes in employment levels and turnover rates;

•
changes in product demand and the business environment; and

•
changes in the fair value of certain long-lived assets.

We face risks associated with the operation of our manufacturing facilities.

We operate a wafer fabrication facility in Greensboro, N.C. and previously operated a wafer fabrication facility in Newton Aycliffe, U.K. In the second quarter of fiscal 2014, we sold our Newton Aycliffe, U.K.-based GaAs production facility and the remaining product demand from that facility was transitioned to our GaAs manufacturing facility in Greensboro, N.C. We currently use several international and domestic assembly suppliers, as well as internal assembly facilities in China, the U.S. and Germany to assemble and test our products. We currently have our own test and tape and reel facilities located in Greensboro, N.C. and China, and we also utilize contract suppliers and partners in Asia to test our products.

A number of factors will affect the future success of our facilities, including the following:

•
demand for our products;

•
our ability to adjust production capacity in a timely fashion in response to changes in demand for our products;

•
our ability to generate revenue in amounts that cover the significant fixed costs of operating the facilities;


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•
our ability to qualify our facilities for new products and new technologies in a timely manner;

•
the availability of raw materials and the impact of the volatility of commodity pricing on raw materials, including GaAs substrates, gold and high purity source materials such as gallium, aluminum, arsenic, indium, silicon, phosphorous and beryllium;

•
our manufacturing cycle times;

•
our manufacturing yields;

•
the political and economic risks associated with the increased reliance on our manufacturing operations in China and Germany;

•
potential violations by our international employees or third-party agents of international or U.S. laws relevant to foreign operations;

•
our reliance on our internal facilities;

•
our reliance on our U.S. wafer fabrication facilities located in the same geographic area;

•
our ability to hire, train and manage qualified production personnel;

•
our compliance with applicable environmental and other laws and regulations, including social responsibilities and conflict minerals requirements;

•
our ability to avoid prolonged periods of down-time in our facilities for any reason; and

•
the occurrence of natural disasters anywhere in the world, which could directly or indirectly affect our supply chain, such as the 2011 earthquake and tsunami in Japan and the 2011 flooding in Thailand.
 
If we experience poor manufacturing yields, our operating results may suffer.

Our products are very complex. Each product has a unique design and is fabricated using semiconductor process technologies that are highly complex. In many cases, the products are assembled in customized packages. Our products, many of which consist of multiple components in a single package, feature enhanced levels of integration and complexity. Our customers insist that our products be designed to meet their exact specifications for quality, performance and reliability. Our manufacturing yield is a combination of yields across the entire supply chain including wafer fabrication, assembly and test yields. Due to the complexity of our products, we periodically experience difficulties in achieving acceptable yields on certain new and existing products.

Our customers also test our components once they have been assembled into their products. The number of usable products that result from our production process can fluctuate as a result of many factors, including the following:

•
design errors;

•
defects in photomasks (which are used to print circuits on a wafer);

•
minute impurities in materials used;

•
contamination of the manufacturing environment;

•
equipment failure or variations in the manufacturing processes;

•
losses from broken wafers or other human error; and

•
defects in packaging.


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We constantly seek to improve our manufacturing yields. Typically, for a given level of sales, when our yields improve, our gross margins improve, and when our yields decrease, our unit costs are higher, our margins are lower, and our operating results are adversely affected.

Costs of product defects and errata (deviations from published specifications) could include (i) writing off the value of inventory, (ii) disposing of products that cannot be fixed, (iii) recalling products that have been shipped, (iv) providing product replacements or modifications, (v) direct and indirect costs incurred by our customers in recalling their products due to defects in our products, and (vi) defending against litigation. These costs could be large and may increase expenses and lower gross margin. Our reputation with customers could be damaged as a result of product defects and errata, and product demand could be reduced. These factors could harm our business and financial results.

Industry overcapacity and current macroeconomic conditions could cause us to underutilize our manufacturing facilities and have a material adverse effect on our financial performance.

It is difficult to predict future growth or decline in the demand for our products, which makes it very difficult to estimate requirements for production capacity. In prior fiscal years, we have added significant capacity through acquisitions as well as by expanding capacity at our existing wafer fabrication facilities.

In the past, capacity additions by us and our competitors sometimes exceeded demand requirements, leading to oversupply situations. Fluctuations in the growth rate of industry capacity relative to the growth rate in demand for our products contribute to cyclicality in the semiconductor market. This is currently putting and may in the future put pressure on our average selling prices and have a material adverse effect on us.

As many of our manufacturing costs are fixed, these costs cannot be reduced in proportion to the reduced revenues experienced during periods in which we underutilize our manufacturing facilities as a result of reduced demand. If the demand for our products is not consistent with our expectations, underutilization of our manufacturing facilities may have a material adverse effect on our gross margin and other operating results.

We are subject to increased inventory risks and costs because we build our products based on forecasts provided by customers before receiving purchase orders for the products.

In order to ensure availability of our products for some of our largest customers, we start manufacturing certain products in advance of receiving purchase orders based on forecasts provided by these customers. However, these forecasts do not represent binding purchase commitments and we do not recognize sales for these products until they are shipped to or consumed by the customer. As a result, we incur significant inventory and manufacturing costs in advance of anticipated sales. Because demand for our products may not materialize, manufacturing based on forecasts subjects us to increased risks of high inventory carrying costs, increased obsolescence and increased operating costs. These inventory risks are exacerbated when our customers purchase indirectly through contract manufacturers or hold component inventory levels greater than their consumption rate because this reduces our visibility regarding the customers' accumulated levels of inventory. If product demand decreases or we fail to forecast demand accurately, we could be required to write-off inventory, which would have a negative impact on our gross margin and other operating results.

We depend heavily on third parties.

We purchase numerous component parts, substrates and silicon-based products from external suppliers. We also utilize third-party suppliers for numerous services, including die processing, wafer bumping, test and tape and reel. 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 and fabrication costs.

We currently use several external manufacturing suppliers to supplement our internal manufacturing capabilities. We believe all of our key vendors and suppliers are compliant with applicable ISO 9000 or QS 9000 standards. However, if these vendors' processes vary in reliability or quality, they could negatively affect our products and, therefore, our results of operations.


18

We increasingly sell certain of our products through platform providers and our inability to manage these evolving relationships may have an adverse effect on our business, financial condition and results of operations.

We are focused on developing and maintaining relationships with platform providers to help us sell our products. These platform providers are typically large companies that provide system reference designs for OEMs and ODMs that include the platform provider's baseband and other complementary products. Certain platform providers own or control IP that provides them with a dominant market position for their baseband products for certain air interface standards, which provides them with significant influence and control over sales of RF products for these standards. Platform providers have historically looked to us and our competitors to provide RF products to their customers as part of the overall system design and we must compete to have our RF products included in the platform provider's system reference design. Our relationships with certain platform providers are evolving, particularly as they work to develop more fully integrated solutions in silicon that include their own RF technologies and components.

In platform provider relationships, we generally do not control the end customer relationship. As a result, we are dependent upon the platform provider as the prime contractor to appropriately manage the end customer. The failure of the platform provider to do so can lead to situations where projects are delayed, modified or terminated for reasons outside our control.

Platform providers may be in a different business from ours or we may be their customer or competitor; therefore, we must balance our interest in obtaining new business with competitive and other factors. Because platform providers control the overall system reference design, if they offer competitive RF technologies or their own RF solutions as a part of their reference design and exclude our products from the design, we are at a distinct competitive disadvantage with OEMs and ODMs that are seeking a turn-key design solution, even if our products offer superior performance.

Our relationships with platform providers are complex and evolving and inability to manage these relationships could have an adverse effect on our business, financial condition and results of operations.

We are subject to risks from international sales and operations.

We operate globally with sales offices and research and development activities as well as manufacturing, assembly and testing facilities in multiple countries. As a result, we are subject to risks and factors associated with doing business outside the U.S. Global operations involve inherent risks that include currency controls and fluctuations as well as tariff, import and other related restrictions and regulations.

Sales to customers located outside the U.S. accounted for approximately 70% of our revenue in fiscal 2014. We expect that revenue from international sales will continue to be a significant part of our total revenue. Because the majority of our foreign sales are denominated in U.S. dollars, our products become less price-competitive in countries with currencies that are low or are declining in value against the U.S. dollar. Also, we cannot be sure that our international customers will continue to accept orders denominated in U.S. dollars.

The majority of our assembly, test and tape and reel vendors are located in Asia. This subjects us to regulatory, geopolitical and other risks of conducting business outside the U.S. We do the majority of our business with our foreign assemblers in U.S. dollars. Our manufacturing costs could increase in countries with currencies that are increasing in value against the U.S. dollar. Also, we cannot be sure that our international manufacturing suppliers will continue to accept orders denominated in U.S. dollars.

In addition, if terrorist activity, armed conflict, civil or military unrest or political instability occur in the U.S. or other locations, such events may disrupt manufacturing, assembly, logistics, security and communications, and could also result in reduced demand for our products. Pandemics and similar major health concerns could also adversely affect our business and our customer order patterns. We could also be affected if labor issues disrupt our transportation or manufacturing arrangements or those of our customers or suppliers. On a worldwide basis, we regularly review our key infrastructure, systems, services and suppliers, both internally and externally, to seek to identify significant vulnerabilities as well as areas of potential business impact if a disruptive event were to occur. Once identified, we assess the risks, and as we consider it to be appropriate, we initiate actions intended to minimize the risks and their potential impact. However, there can be no assurance that we have identified all significant risks or that we can mitigate all identified risks with reasonable effort.


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A slowdown in the Chinese economy could limit the growth in demand for devices containing our products, which would have a material adverse effect on our business, results of operations and prospects.

We believe that an increase in demand in China for handsets and other devices that include our products will be an important factor in our future growth. Although the Chinese economy has grown significantly in recent years, there can be no assurance that such growth will continue. Any weakness in the Chinese economy could result in a decrease in demand for devices containing our products, which could materially and adversely affect our business, results of operations and prospects.

Economic regulation in China could materially and adversely affect our business and results of operations.

We have a significant portion of our assembly and testing capacity in China. In recent years, the Chinese economy has experienced periods of rapid expansion and wide fluctuations in the rate of inflation. In response to these factors, the Chinese government has, from time to time, adopted measures to regulate growth and contain inflation, including measures designed to restrict credit or to control prices. Such actions in the future could increase the cost of doing business in China or decrease the demand for our products in China, which could have a material adverse effect on our business and results of operations.

In order to compete, we must attract, retain, and motivate key employees, and our failure to do so could harm our results of operations.

In order to compete, we must:

•
hire and retain qualified employees;

•
continue to develop leaders for key business units and functions;

•
expand our presence in international locations and adapt to cultural norms of foreign locations; and

•
train and motivate our employee base.

Our future operating results and success depend on keeping key technical personnel and management and expanding our sales and marketing, research and development and administrative support. We do not have employment agreements with the vast majority of our employees. We must also continue to attract qualified personnel. The competition for qualified personnel is intense, and the number of people with experience, particularly in RF engineering, IC design, and technical marketing and support, is limited. We cannot be sure that we will be able to attract and retain other skilled personnel in the future.

Our operating results may be adversely impacted by the inability of certain of our customers to access their traditional sources of credit to finance the purchase of products from us, which could lead them to reduce their level of purchases or seek credit or other accommodations from us.

The inability of our customers to access capital efficiently could cause disruptions in their businesses, thereby negatively impacting ours. For example, if our customers do not have sufficient liquidity, they could reduce or limit new purchases, which could result in lower demand for our products or place us at risk for any trade credit we have extended to them if they are unable to repay us. This risk may increase if a general economic downturn materially impacts our customers and they are not able to manage their business risks adequately or do not properly disclose their financial condition to us.

We may engage in future acquisitions that dilute our shareholders’ ownership and cause us to incur debt and assume contingent liabilities.

As part of our business strategy, we expect to continue to review potential acquisitions that could complement our current product offerings, augment our market coverage or enhance our technical capabilities, or that may otherwise offer growth or margin improvement opportunities. For a discussion of risks associated with our pending merger with TriQuint, which is subject to regulatory and shareholder approval and customary closing conditions, see "Risk Factors Relating to Our Pending Merger with TriQuint" below. In the event of future acquisitions of businesses, products or technologies, we could issue equity securities that would dilute our current shareholders' ownership,

20

incur substantial debt or other financial obligations or assume contingent liabilities. Such actions by us could seriously harm our results of operations or the price of our common stock. Acquisitions also entail numerous other risks that could adversely affect our business, results of operations and financial condition, including:

•
unanticipated costs, capital expenditures or working capital requirements associated with the acquisition;

•
acquisition-related charges and amortization of acquired technology and other intangibles that could negatively affect our reported results of operations;

•
diversion of management's attention from our business;

•
injury to existing business relationships with suppliers and customers;

•
failure to successfully integrate acquired businesses, operations, products, technologies and personnel; and

•
unrealized expected synergies.

The price of our common stock has fluctuated widely in the past and may fluctuate widely in the future.

Our common stock, which is traded on the NASDAQ Global Select Market, has experienced and may continue to experience significant price and volume fluctuations that could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in financial results, financial performance below analysts’ estimates, and activities or developments affecting our customers and other publicly traded companies in the semiconductor industry could cause the price of our common stock to fluctuate substantially. Moreover, in recent periods, our common stock, the stock market in general and the market for shares of semiconductor industry-related stocks in particular have experienced extreme price fluctuations, which have often been wholly or partially unrelated to the operating performance of the affected companies. Any similar fluctuations in the future could adversely affect the market price of our common stock. If our stock price declines in the future, it may be more difficult to raise capital, or we may be unable to do so at all, which could have a material adverse impact on our business and results of operations.

We rely on our intellectual property portfolio and may face additional claims of infringement.

Our success depends in part on our ability to procure, commercialize and enforce IP rights and to operate our business without infringing on the IP rights of others. Additionally, because of the volume of creative works conceived and used throughout our facilities, some of these works may not receive the benefit of federal registration and thus, the IP rights in these works may be diminished. In addition, the wireless and semiconductor industries are subject to frequent patent and other IP rights litigation. Patent litigation is both expensive and unpredictable in part because in most jurisdictions, the infringing party cannot compel the patent holder to grant a license to the infringed patent. In the event that a license is obtainable, there is no guarantee that a commercially reasonable license can be negotiated. See Item 3, "Legal Proceedings" for a description of pending litigation against us alleging patent infringement.

Security breaches and other similar disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

We rely on trade secrets, technical know-how and other unpatented proprietary information relating to our product development and manufacturing activities. We try to protect this information by entering into confidentiality agreements with our employees, consultants, strategic partners and other parties. We also restrict access to and distribution of our technologies, documents and other proprietary information.

Despite these efforts, internal or external parties may attempt to copy, disclose, obtain or use our products, services or technology without our authorization. Additionally, current, departing or former employees or third parties could attempt to improperly use or access our computer systems and networks to misappropriate our proprietary information and technology, obtain or release sensitive competitive or customer information or employee personal data, or interrupt our business. Like others, we are also potentially subject to other significant system or network disruptions, including new system implementations, computer viruses, facility access issues and energy blackouts. 


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Like many companies, from time to time, we have experienced verifiable attacks on our computer systems by unauthorized outside parties; however, we do not believe that such attacks have resulted in any material damage to us or our customers. Because the techniques used by computer hackers and others to access or sabotage networks constantly evolve and generally are not recognized until launched against a target, we may be unable to anticipate, counter or ameliorate these techniques. As a result, our technologies and processes may be misappropriated and the impact of any future incident cannot be predicted. Any loss of such information could harm our competitive position, result in a loss of customer confidence in the adequacy of our threat mitigation and detection processes and procedures, or cause us to incur significant costs to remedy the damages caused by the incident. We routinely implement improvements to our network security safeguards and we are devoting increasing resources to the security of our information technology systems. We cannot assure that such system improvements will be sufficient to prevent or limit the damage from any future cyber attack or network disruptions.

We rely on customers and third-party service providers, such as foundries, assembly and test contractors, distributors, credit card processors and other vendors that have access to our sensitive data to have safeguards in place to protect our data. Failure of these parties to properly safeguard our data could result in security breaches and loss of our data.

The costs related to cyber or other security threats or computer systems disruptions typically would not be fully insured or indemnified by other means. Occurrence of any of the events described above could result in loss of competitive advantages derived from our research and development efforts or our IP, early obsolescence of our products, or adversely affect our internal operations, the products we provide to our customers, our future financial results, our reputation or our stock price.

We may be subject to other lawsuits and claims relating to our products.

We cannot be sure that third parties will not assert product liability or other claims against us, our customers or our licensors with respect to existing and future products. Any litigation could result in significant expense and liability to us and divert the efforts of our technical and management personnel, whether or not the litigation is determined in our favor or covered by insurance.

If wireless devices pose safety risks, we may be subject to new regulations, and demand for our products and those of our customers may decrease.

Concerns over the effects of radio frequency emissions continue. Interest groups have requested that the Federal Communications Commission investigate claims that wireless communications technologies pose health concerns and cause interference with airbags, hearing aids and medical devices. Concerns have also been expressed over, and state laws have been enacted to mitigate, the possibility of safety risks due to a lack of attention associated with the use of wireless devices while driving. Legislation that may be adopted in response to these concerns or adverse news or findings about safety risks could reduce demand for our products and those of our customers in the U.S. as well as in foreign countries.

We are subject to stringent environmental regulations.

We are subject to a variety of federal, state and local requirements governing the protection of the environment. These environmental regulations include those related to the use, storage, handling, discharge and disposal of toxic or otherwise hazardous materials used in our manufacturing processes. A change in environmental laws or our failure to comply with environmental laws 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. Growing concerns about climate change, including the impact of global warming, may result in new regulations with respect to greenhouse gas emissions. Our compliance with this legislation may result in additional costs.

Compliance with new regulations regarding the use of “conflict minerals” could limit the supply and increase the cost of certain metals used in manufacturing our products.

The SEC recently adopted a final rule to implement Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act), which requires new disclosures regarding the use of “conflict” minerals, generally tantalum, tin, tungsten, or gold that originated in the Democratic Republic of Congo

22

or an adjoining country. These disclosures are required whether or not these products containing conflict minerals are manufactured by us or third parties. Verifying the source of any conflict minerals in our products will create additional costs in order to comply with the new disclosure requirements, and because our supply chain is complex, we may face reputation challenges if we are unable to sufficiently verify the origins for all metals used in our products through the due diligence procedures that we implement. In addition, the new rule may reduce the number of suppliers who provide conflict-free metals, and may affect our ability to obtain products in sufficient quantities or at competitive prices. Some customers may require that all of our products are certified to be conflict-free; if we cannot satisfy these customers, they may choose a competitor's products. The new disclosure rules require the first report to be filed with the SEC by May 31, 2014 for the 2013 calendar year. Although we expect to be able to file the required report on time, we are dependent upon the information provided by our many suppliers. To the extent that the information we receive from our suppliers is inaccurate or inadequate or our processes in obtaining such information do not meet the SEC’s diligence requirements, we could also face SEC enforcement risks.

Provisions in our governing documents could discourage takeovers and prevent shareholders from realizing an investment premium.

Certain provisions of our articles of incorporation and bylaws could have the effect of making it more difficult for a third party to acquire, or discourage a third party from attempting to acquire, control of RFMD. These provisions include the ability of our Board of Directors to designate the rights and preferences of preferred stock and issue such shares without shareholder approval and the requirement of supermajority shareholder approval of certain transactions with parties affiliated with RFMD. Such provisions could limit the price that certain investors might be willing to pay in the future for shares of our common stock.

Our operating results could vary as a result of the methods, estimates and judgments we use in applying our accounting policies.

The methods, estimates and judgments we use in applying our accounting policies have a significant impact on our results of operations (see "Critical Accounting Policies and Estimates" in Part II, Item 7 of this Form 10-K). Such methods, estimates and judgments are, by their nature, subject to substantial risks, uncertainties and assumptions, and factors may arise over time that lead us to change our methods, estimates and judgments that could significantly affect our results of operations.

We may not be able to borrow funds under our credit facility or secure future financing.

On March 19, 2013, we entered into a four-year senior credit facility with Bank of America, N.A., as Administrative Agent and a lender, and a syndicate of other lenders (the “Credit Agreement”). The Credit Agreement includes a $125 million revolving credit facility, which includes a $5 million sublimit for the issuance of standby letters of credit and a $5 million sublimit for swingline loans. We may request, at any time and from time to time, that the revolving credit facility be increased by an amount not to exceed $50 million. The revolving credit facility is available to finance working capital, capital expenditures and other lawful corporate purposes. This facility contains various conditions, covenants and representations with which we must be in compliance in order to borrow funds. We cannot assure that we will be in compliance with these conditions, covenants and representations in the future when we may need to borrow funds under this facility. In addition, this facility expires on March 19, 2017, after which time we may need to secure new financing. We cannot assure that we will be able to secure new financing, or financing on terms that are acceptable to us.

The degree to which we are leveraged could have important consequences, including, but not limited to, the following:

•
our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate or other purposes may be limited;

•
we may be more vulnerable to economic downturns, less able to withstand competitive pressures and less flexible in responding to changing business and economic conditions; and

•
a portion of our cash flow from operations will be dedicated to the payment of the principal of, and interest on, our indebtedness.


23

Our ability to service our indebtedness will depend upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory, and other factors, some of which are beyond our control. If our operating results are not sufficient to service our future indebtedness, we will be forced to take actions such as reducing or delaying business activities, acquisitions, investments, and/or capital expenditures, selling assets, restructuring or refinancing our indebtedness, or seeking additional equity capital or bankruptcy protection. We may not be able to effect any of these remedies on satisfactory terms or at all. As of March 29, 2014, we have no outstanding amounts under the Credit Agreement (refer to Note 9 of the Notes to the Consolidated Financial Statements set forth in Part II, "Item 8. Financial Statements and Supplementary Data" of this report for further information related to the Credit Agreement).

Changes in our effective tax rate may impact our results of operations.

A number of factors may increase our future effective tax rates, including the following:

•
the jurisdictions in which profits are determined to be earned and taxed;

•
the resolution of issues arising from tax audits with various tax authorities;

•
changes in the valuation of our net deferred tax assets;

•
adjustments to income taxes upon finalization of various tax returns;

•
increases in expenses not deductible for tax purposes;

•
changes in available tax credits;

•
changes in tax laws or the interpretation of such tax laws, and changes in generally accepted accounting principles; and

•
a future decision to repatriate non-U.S. earnings for which we have not previously provided for U.S. taxes.

Any significant increase in our future effective tax rates could reduce net income for future periods.

Risk Factors Relating to the Pending Merger with TriQuint

Obtaining required regulatory approvals may prevent or delay completion of the transaction or reduce the anticipated benefits of the transaction or may require changes to the structure or terms of the transaction.

Completion of the transaction is conditioned upon, among other things, the expiration or termination of the waiting period (and any extensions thereof) applicable to the transaction under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the approval for listing of the combined company's common stock on NASDAQ, and receipt of all required clearances or approvals applicable to the completion of the transaction under the antitrust laws of the People’s Republic of China by the Ministry of Commerce of the People’s Republic of China. The time it takes to obtain these approvals may delay the completion of the transaction. Further, regulatory authorities may place certain conditions on their approval of the transaction. Satisfying these conditions may also delay the completion of the transaction and/or may reduce the anticipated benefits of the transaction, which could have a material adverse effect on our business and cash flows, financial condition and results of operations. Additionally, at any time before or after the transaction is completed, the Antitrust Division of the Department of Justice, the Federal Trade Commission or U.S. state attorneys general could take action under the antitrust laws in opposition to the transaction, including seeking to enjoin completion of the transaction, condition completion of the transaction upon the divestiture of assets of RFMD or TriQuint or their respective subsidiaries or impose restrictions on the combined company’s post-merger operations. Any of these requirements or restrictions may prevent or delay completion of the transaction or may reduce the anticipated benefits of the transaction, which could also have a material adverse effect on our business and cash flows, financial condition and results of operations.


24

We will be subject to business uncertainties and contractual restrictions while the transaction is pending.

Uncertainty about the effect of the transaction on employees and customers may have an adverse effect on RFMD. These uncertainties may impair our ability to retain and motivate key personnel and could cause customers and others that deal with the Company to defer entering into contracts with either of them or making other decisions concerning either of them or seek to change existing business relationships with them. We have agreements with our customers containing provisions that may allow those customers to terminate their agreements with us if the transaction is completed. If key employees of RFMD depart because of uncertainty about their future roles and the potential complexities of the transaction, RFMD’s business could be harmed. In addition, the Merger Agreement restricts RFMD from making various acquisitions and taking other specified actions until the transaction occurs without the consent of the other party. These restrictions may prevent RFMD from pursuing attractive business opportunities that may arise prior to the completion of the transaction.

The Merger Agreement limits our ability to pursue alternatives to the transaction.

We have agreed that we will not solicit, initiate, knowingly encourage or knowingly facilitate inquiries or proposals, or engage in discussions or negotiations, regarding transactions in which a party other than RFMD or TriQuint could obtain ownership of more than 15% of the voting securities of RFMD or TriQuint, subject to limited exceptions. We have also agreed that our board of directors will not change its recommendation to our shareholders or approve or enter into any alternative agreement, subject to limited exceptions. The Merger Agreement also requires each party to call, give notice of and hold a meeting of its shareholders for the purpose of obtaining the approval of its respective shareholders. This special meeting requirement does not apply to a party if the Merger Agreement is terminated in accordance with its terms. In addition, under specified circumstances, we may be required to pay a termination fee to TriQuint of either $17.1 million or $66.7 million (depending on the specific circumstances) if the transaction is not completed. These provisions might discourage a potential acquirer that might be interested in acquiring all or a significant part of RFMD from considering or proposing an acquisition, even if it were prepared to pay consideration with greater value than that proposed in the Merger Agreement, or these provisions might result in a potential competing acquirer proposing to pay less to acquire RFMD than it might otherwise have been willing to pay.

Our shareholders will have a reduced ownership and voting interest after the transaction and will exercise less influence over management.

After the completion of the transaction, our shareholders will own a smaller percentage of the combined company than they now own of RFMD. Immediately upon completion of the transaction, we anticipate that RFMD shareholders and TriQuint stockholders will each hold approximately 50% of the shares of the combined company's common stock then issued and outstanding. Consequently, our shareholders, as a group, will each have reduced ownership and voting power in the combined company compared to their ownership and voting power in RFMD.

The transaction may not be completed, which could negatively affect our ongoing business in several ways.

If the transaction is not completed, our ongoing business may be adversely affected and we will be subject to several risks and consequences, including the following:

•
We may be required, in specified circumstances, to pay TriQuint a termination fee of either $66.7 million or $17.1 million (depending on the specific circumstances);

•
We will be required to pay various costs relating to the transaction, whether or not the transaction is completed, such as significant fees and expenses relating to legal, accounting, financial advisor and printing services;

•
under the Merger Agreement, we are subject to specified restrictions on the conduct of our business prior to completing the transaction that may adversely affect our ability to execute our business strategies; and

•
matters relating to the transaction may require substantial commitments of time and resources by our management, which could otherwise have been devoted to other opportunities that, had they been pursued, might have been beneficial to RFMD as an independent company.


25

In addition, if the transaction is not completed, we may experience negative reactions from the financial markets and from our customers, suppliers and employees. We also could be subject to litigation related to a failure to complete the transaction or to enforce our obligations under the Merger Agreement. These risks could materially affect our business, financial results and stock prices, even if the transaction is not completed.

We will incur significant transaction and merger-related transition costs in connection with the transaction.

We expect that we will incur significant costs in connection with completing the transaction and integrating the operations of the two companies. We may incur additional costs to maintain employee morale and to retain key employees. We will also incur significant legal, accounting and other transaction fees and other costs associated with the transaction. Some of these costs are payable regardless of whether the transaction is completed. Moreover, in specified circumstances, we may be required to pay a termination fee of either $66.7 million or $17.1 million (depending on the specific circumstances) if the transaction is not completed.

Several lawsuits have been filed against TriQuint, its board members, RFMD, Rocky Holding, and the subsidiaries formed for purposes of the merger challenging the transaction, and an adverse ruling in any of these lawsuits may prevent the transaction from becoming effective or delay its completion.

TriQuint, its board members, RFMD, Rocky Holding and the subsidiaries formed for purposes of the merger have been named as defendants in lawsuits brought by and on behalf of TriQuint stockholders challenging the transaction, and seeking, among other things, to enjoin the defendants from completing the transaction on the agreed-upon terms or to rescind the transaction if they are completed. Other similar lawsuits challenging the transaction may be filed against TriQuint, RFMD, their respective boards of directors, Rocky Holding, and the subsidiaries formed for purposes of the merger.
One of the conditions to the closing of the transaction is that no order preventing the completion of the transaction has been issued by a court of competent jurisdiction. If the plaintiffs in these lawsuits are successful in obtaining an injunction from a court of competent jurisdiction prohibiting the defendants from completing the transaction on the agreed-upon terms, then the transaction may not be completed within the expected timeframe, or at all.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES.

Our corporate headquarters is located in Greensboro, N.C., where we have two office buildings (leased), a six-inch wafer production facility (owned), and a research and development and prototyping facility (leased). In Greensboro, we also have a previously idled production facility (leased) that has been reconfigured to perform certain manufacturing operations. In addition, we have a partially upfitted manufacturing facility (leased) that is unoccupied due to a prior restructuring.
 
We have an assembly and test facility located in Beijing, China (the building is owned and RFMD holds a land-use right for the land), where we assemble and test modules. In Broomfield, Colorado (leased) and Brooksville, Florida (owned), we have assembly and test sites for highly customized modules and products, including modules and products that support our aerospace and defense business. We also have a facility capable of supporting a variety of packaging and test technologies in Nuremberg, Germany (leased).

In the second quarter of fiscal 2014, we sold our GaAs semiconductor manufacturing facility located in the U.K. to Compound Photonics and the remaining product demand from that facility was  transitioned to our six-inch wafer production facility in Greensboro, N.C.

We lease space for our design centers in Chandler, Arizona; Carlsbad, Los Gatos, San Jose, Torrance, and Westlake Village, California; Broomfield, Colorado; Hiawatha, Iowa; Billerica, Massachusetts; Charlotte, N.C.; Richardson, Texas; Shanghai, China; Nørresundby, Denmark; and Colomiers, France. In addition, we lease space for sales and customer support centers in Beijing, Shanghai, and Shenzhen, China; Reading, England; Bangalore, India; Tokyo, Japan; Seoul, South Korea; and Taipei, Taiwan.

26


In the opinion of management, our properties have been well-maintained, are in sound operating condition and contain all equipment and facilities necessary to operate at present levels. We believe all of our facilities are suitable and adequate for our present purposes. We do not identify or allocate assets by operating segment. For information on net property, plant and equipment by country, see Note 17 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this report.

ITEM 3. LEGAL PROCEEDINGS.

We are involved in litigation and other legal proceedings in the ordinary course of business as well as the matter identified below. No liability has been established in the financial statements regarding current litigation as the potential liability, if any, is not probable or cannot be reasonably estimated.

Since February 14, 2012, we have been a party in legal proceedings with Peregrine Semiconductor Corporation (“Peregrine”) in which Peregrine has asserted infringement of certain of its patents. The proceedings commenced with a complaint filed by Peregrine in the United States International Trade Commission (“ITC”), which Peregrine ultimately decided to dismiss. After various procedural matters following the dismissal of the ITC proceeding, we are currently a party to a lawsuit initiated by Peregrine in the United States District Court for the Southern District of California alleging infringement of certain Peregrine patents. In December 2013, we filed a counterclaim against Peregrine alleging infringement by Peregrine of one of our patents and seeking declaratory relief regarding non-infringement and unenforceability of Peregrine’s patents. In March 2014, Peregrine's infringement claims for two of its four asserted patents were dismissed with prejudice. We intend to continue to vigorously defend our position that we have not infringed any valid claim of any of the Peregrine patents in the above-referenced legal proceeding.

ITEM 4. MINE SAFETY DISCLOSURES.

Not Applicable.


PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Our common stock is traded on the NASDAQ Global Select Market under the symbol "RFMD." The table below shows the high and low sales prices of our common stock for the periods indicated, as reported by The NASDAQ Stock Market LLC. As of May 9, 2014, there were 1,930 holders of record of our common stock.

 
High
 
Low
Fiscal Year Ended March 29, 2014
 
 
 
First Quarter
$
5.75

 
$
4.88

Second Quarter
5.90

 
4.71

Third Quarter
6.20

 
4.80

Fourth Quarter
7.96

 
4.50

 
 
 
 
 
High
 
Low
Fiscal Year Ended March 30, 2013
 
 
 
First Quarter
$
4.96

 
$
3.45

Second Quarter
4.44

 
3.47

Third Quarter
4.89

 
3.50

Fourth Quarter
5.43

 
4.30


We have never declared or paid cash dividends on our common stock. See Note 9 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this report for information concerning restrictions on our ability to pay cash dividends. We currently intend to retain our earnings for use in our business and do not anticipate paying any cash dividends in the foreseeable future.

27

PERFORMANCE GRAPH
 
Fiscal Year End
 
2009
2010
2011
2012
2013
2014
Total Return Index for:
 
 
 
 
 
 
RF Micro Devices, Inc.
100.00
363.50
466.42
363.50
388.32
562.04
NASDAQ Composite
100.00
158.32
185.39
210.13
226.02
296.17
NASDAQ Electronic Components
100.00
158.85
184.71
189.24
177.48
239.48

Notes:
A. The lines represent monthly index levels derived from compounded daily returns, assuming reinvestment of all dividends.
B.
The indexes are reweighted daily, using the market capitalization on the previous trading day.
C.
If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.
D.
The index level for all series was set to $100.00 on March 28, 2009.







28


Purchases of Equity Securities
Period
 
Total number of shares purchased
 
Average price paid per share
 
Total number of shares purchased as part of publicly announced plans or programs
 
Approximate dollar value of shares that may yet be purchased under the plans or programs
December 29, 2013 to January 25, 2014
 
0
 

$0.00

 
0
 
$137.4 million
January 26, 2014 to February 22, 2014
 
0
 

$0.00

 
0
 
$137.4 million
February 23, 2014 to March 29, 2014
 
0
 

$0.00

 
0
 
$137.4 million
Total
 
0
 

$0.00

 
0
 
$137.4 million
 
 
 
 
 
 
 
 
 

On January 25, 2011, we announced that our board of directors authorized the repurchase of up to $200 million of our outstanding common stock, exclusive of related fees, commissions or other expenses, from time to time during a period commencing on January 28, 2011 and expiring on January 27, 2013. This share repurchase program authorizes us to repurchase shares through solicited or unsolicited transactions in the open market or in privately negotiated transactions. On January 31, 2013, our board of directors authorized an extension of our 2011 share repurchase program to repurchase up to $200 million of our outstanding common stock through January 31, 2015. Because of RFMD's incorporation in North Carolina, which does not recognize treasury shares, the repurchased shares are canceled at the time of repurchase. Shares repurchased are deemed authorized but unissued shares of common stock. No shares were repurchased under this share repurchase program during the fourth quarter of fiscal 2014.

29

ITEM 6. SELECTED FINANCIAL DATA.

The selected financial data set forth below for the fiscal years indicated were derived from our audited consolidated financial statements. The information should be read in conjunction with our consolidated financial statements and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this report.
 
Fiscal Year End
 
2014
 
2013
 
2012
 
2011
 
2010
 
 
(In thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
1,148,231

 
$
964,147

 
$
871,352

 
$
1,051,756

 
$
978,393

 
 
 
 
 
 
 
 
 
 
 
 
Operating costs and expenses:
 
 
 
 
 
 
 
 
 
 
Cost of goods sold
743,304

 
658,332

 
582,586

 
662,085

 
623,224

 
Research and development
197,269

 
178,793

 
151,697

 
141,097

 
138,960

 
Marketing and selling
74,672

 
68,674

 
63,217

 
59,470

 
56,592

 
General and administrative
76,732

 
64,242

 
50,107

 
48,003

 
48,316

 
Other operating expense (income)
28,913

(4) 
9,786

 
(898
)
 
1,582

 
4,895

 
Total operating costs and expenses
1,120,890

 
979,827

 
846,709

 
912,237

 
871,987

 
Income (loss) from operations
27,341

 
(15,680
)
 
24,643

 
139,519

 
106,406

 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
(5,983
)
 
(6,532
)
 
(10,997
)
 
(17,140
)
 
(23,997
)
 
Interest income
179

 
249

 
468

 
787

 
1,291

 
Other income (expense), net
2,336

 
(3,936
)
 
1,514

 
339

 
1,134

 
Income (loss) before income taxes
23,873

 
(25,899
)
 
15,628

 
123,505

 
84,834

 
Income tax (expense) benefit
(11,231
)
 
(27,100
)
(3) 
(14,771
)
(2) 
1,053

(1) 
(13,815
)
 
Net income (loss)
$
12,642

 
$
(52,999
)
 
$
857

 
$
124,558

 
$
71,019

 
Net income (loss) per share:
 
 
 
 
 
 
 
 
 
 
Basic
$
0.04

 
$
(0.19
)
 
$
0.00

 
$
0.46

 
$
0.27

 
Diluted
$
0.04

 
$
(0.19
)
 
$
0.00

 
$
0.44

 
$
0.25

 
Shares used in per share calculation:
 
 
 
 
 
 
 
 
 
 
Basic
281,996

 
278,602

 
276,289

 
272,575

 
267,349

 
Diluted
288,074

 
278,602

 
282,576

 
280,394

 
289,429

 
 
 
 
 
 
 
 
 
 
 
 
 
As of Fiscal Year End
 
2014
 
2013
 
2012
 
2011
 
2010
 
Cash and cash equivalents
171,898

 
101,662

 
135,524

 
131,760

 
104,778

 
Short-term investments
72,067

 
77,987

 
164,863

 
159,881

 
134,882

 
Working capital
317,445

 
330,523

 
421,182

 
465,222

 
396,091

 
Total assets
920,312

 
931,999

 
964,584

 
1,025,393

 
1,014,008

 
Long-term debt and capital lease obligations, less current portion
18

 
82,123

 
119,102

 
177,557

 
289,837

 
Shareholders' equity
676,351

 
639,014

 
672,331

 
676,355

 
530,084

 

1 Income tax benefit for fiscal 2011 includes the effects of a reduction of a valuation reserve against deferred tax assets.  
2 Income tax expense for fiscal 2012 includes the effects of an increase of a valuation reserve against foreign and domestic deferred tax assets.  
3 Income tax expense for fiscal 2013 includes the effects of an increase of a valuation reserve against the U.K. net deferred tax asset as a result of the decision to phase out manufacturing at the U.K. facility (see Note 12 of the Notes to the Consolidated Financial Statements for additional details). 
4 Other operating expense (income) includes the impairment of intangible assets of $11.3 million and restructuring expenses of $11.1 million (see Note 12 of the Notes to the Consolidated Financial Statements), as well as acquisition and integration related expenses of $5.1 million (see Note 7 of the Notes to the Consolidated Financial Statements). 

30

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

This Annual Report on Form 10-K includes "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about our plans, objectives, representations and contentions, including those related to our proposed merger with TriQuint, and are not historical facts and typically are identified by use of terms such as "may," "will," "should," "could," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue" and similar words, although some forward-looking statements are expressed differently. You should be aware that the forward-looking statements included herein represent management's current judgment and expectations, but our actual results, events and performance could differ materially from those expressed or implied by forward-looking statements. We do not intend to update any of these forward-looking statements or publicly announce the results of any revisions to these forward-looking statements, other than as is required under the federal securities laws. Our business is subject to numerous risks and uncertainties, including those relating to variability in our operating results, the inability of certain of our customers or suppliers to access their traditional sources of credit, our industry’s rapidly changing technology, our dependence on a few large customers for a substantial portion of our revenue, our ability to implement innovative technologies, our ability to bring new products to market and achieve design wins, the efficient and successful operation of our wafer fabrication facilities, assembly facilities and test and tape and reel facilities, our ability to adjust production capacity in a timely fashion in response to changes in demand for our products, variability in manufacturing yields, industry overcapacity and current macroeconomic conditions, inaccurate product forecasts and corresponding inventory and manufacturing costs, dependence on third parties and our ability to manage platform providers and customer relationships, our dependence on international sales and operations, our ability to attract and retain skilled personnel and develop leaders, the possibility that future acquisitions may dilute our shareholders’ ownership and cause us to incur debt and assume contingent liabilities, fluctuations in the price of our common stock, additional claims of infringement on our intellectual property portfolio, lawsuits and claims relating to our products, security breaches and other similar disruptions compromising our information and exposing us to liability, the impact of stringent environmental regulations, and the receipt of required regulatory approvals related to the proposed merger with TriQuint and the completion of the proposed transaction. These and other risks and uncertainties, which are described in more detail under Item 1A, “Risk Factors” in this Annual Report on Form 10-K and in other reports and statements that we file with the SEC, could cause actual results and developments to be materially different from those expressed or implied by any of these forward-looking statements.

The following discussion should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements, including the notes thereto.
OVERVIEW

Company

We are a global leader in the design and manufacture of high-performance radio frequency (RF) solutions. Our products enable worldwide mobility, provide enhanced connectivity, and support advanced functionality in the mobile device, wireless infrastructure, wireless local area network (WLAN or WiFi), cable television (CATV)/broadband, Smart Energy/advanced metering infrastructure (AMI), and aerospace and defense markets. We are recognized for our diverse portfolio of semiconductor technologies and RF systems expertise, and we are a preferred supplier to the world's leading mobile device, customer premises and communications equipment providers.

Proposed Merger

On February 22, 2014, we entered into the Merger Agreement with TriQuint providing for the combination of RFMD and TriQuint in a merger of equals under a new holding company currently named Rocky Holding, Inc. We believe the combination will create a new leader in radio frequency solutions, with new growth opportunities and a broad portfolio of enabling technologies.

Upon completion of the mergers, RFMD shareholders will receive 0.2500 of a share of common stock of the new holding company for each share of RFMD common stock, and TriQuint stockholders will receive 0.4187 of a share of common stock of the new holding company for each share of TriQuint common stock. We anticipate that RFMD shareholders and TriQuint stockholders will each hold approximately 50% of the shares of common stock of the new holding company issued and outstanding immediately after completion of the mergers. Rocky Holding, Inc. intends to apply to list its

31

common stock on the NASDAQ Global Select Market, subject to official notice of issuance. Prior to completion of the mergers, we anticipate that Rocky Holding, Inc. will change its name, adopt a NASDAQ symbol for its common stock, and register a new trade name and logo that reflect the key attributes of the combined company.

Consummation of the merger with TriQuint is subject to, among other things, the separate approvals of both RFMD shareholders and TriQuint stockholders and regulatory approvals. We currently anticipate the merger will be completed during the second half of calendar year 2014.

Business Segments

We design, develop, manufacture and market our products to both domestic and international original equipment manufacturers and original design manufacturers in both wireless and wired communications applications, in each of our following operating segments.

•
Cellular Products Group (CPG) is a leading global supplier of cellular RF solutions which perform various functions in the cellular front end section.  The cellular front end section is located between the transceiver and the antenna.  These RF solutions include power amplifier (PA) modules, transmit modules, PA duplexer modules, antenna control solutions, antenna switch modules, switch filter modules,  switch duplexer modules, and RF power management solutions.  CPG supplies its broad portfolio of cellular RF solutions into a variety of mobile devices, including smartphones, handsets, notebook computers and tablets.

•
Multi-Market Products Group (MPG) is a leading global supplier of a broad array of RF solutions, such as PAs, low noise amplifiers, variable gain amplifiers, high power gallium nitride transistors, attenuators, modulators, switches, VCOs, phase locked loop modules, multi-chip modules, front end modules, and a range of military and space components (amplifiers, mixers, VCOs and power dividers). Major communications applications include mobile wireless infrastructure, point-to-point and microwave radios, small cells, WiFi (routers, access points, mobile devices and customer premises equipment), and CATV infrastructure. Industrial applications include Smart Energy/AMI, private mobile radio, and test and measurement equipment. Aerospace and defense applications include military communications, radar and electronic warfare, as well as space communications. During fiscal 2013, our foundry services were realigned from our Compound Semiconductor Group to our MPG.

•
Compound Semiconductor Group (CSG) is a business group that was established to leverage our compound semiconductor technologies and related expertise in RF and non-RF end markets and applications. 

As of March 29, 2014, our reportable segments are CPG and MPG. CSG does not currently meet the quantitative threshold for an individually reportable segment under ASC 280-10-50-12. These business segments are based on the organizational structure and information reviewed by our Chief Executive Officer, who is our chief operating decision maker (or CODM), and are managed separately based on the end markets and applications they support. The CODM allocates resources and evaluates the performance of each operating segment primarily based on operating income and operating income as a percentage of revenue.

Fiscal 2014 Management Summary

•
Our revenue increased 19.1% in fiscal 2014 to $1,148.2 million as compared to $964.1 million in fiscal 2013, primarily due to increased demand for our cellular RF solutions for smartphones and our WiFi products.

•
Our gross margin for fiscal 2014 increased to 35.3% as compared to 31.7% for fiscal 2013. This increase was primarily due to manufacturing and sourcing-related cost reductions and increased demand, which were partially offset by average selling price erosion.

•
Our operating income was $27.3 million in fiscal 2014 as compared to an operating loss of $15.7 million in fiscal 2013. This increase was primarily due to higher revenue and improved gross margin, which was partially offset by increased personnel expenses, impairment of IPRD, increased consulting expenses, restructuring expenses associated with achieving both manufacturing efficiencies and operating expense reductions, expenses related to the proposed merger with TriQuint, and expenses related to the phase out of manufacturing and sale of our U.K-based GaAs facility.

•
Our net income per diluted share was $0.04 for fiscal 2014 compared to net loss per diluted share of $0.19 for fiscal 2013.

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•
We generated positive cash flow from operations of $130.8 million for fiscal 2014 as compared to $71.3 million for fiscal 2013. This year-over-year increase was primarily attributable to improved profitability resulting from higher revenue.

•
Capital expenditures totaled $66.8 million in fiscal 2014 as compared to $54.6 million in fiscal 2013, primarily due to the addition of manufacturing capacity.

•
During fiscal 2014, we repurchased approximately 2.5 million shares of common stock for approximately $12.8 million, including transaction costs.

•
On February 22, 2014, we entered into the Merger Agreement with TriQuint and have recorded merger-related expenses and integration costs totaling $5.1 million through March 29, 2014.

•
During fiscal 2014, we recorded $11.1 million of restructuring expenses, primarily related to (1) efforts initiated to achieve manufacturing efficiencies, (2) efforts initiated to reduce operating expenses, and (3) expenses associated with the sale of our GaAs semiconductor manufacturing facility in the U.K. (see Note 12 of the Notes to the Consolidated Financial Statements).

•
In the fourth quarter of fiscal 2014, we discontinued engineering efforts on an in-process research and development project and recorded an intangible impairment charge of $11.3 million (see Note 12 of the Notes to the Consolidated Financial Statements).

RESULTS OF OPERATIONS

Consolidated

The following table presents a summary of our results of operations for fiscal years 2014, 2013 and 2012:

 
2014
 
2013
 
2012
(In thousands, except percentages)
Dollars
 
% of
Revenue
 
Dollars
 
% of
Revenue
 
Dollars
 
% of
Revenue
Revenue
$
1,148,231

 
100.0
%
 
$
964,147

 
100.0
 %
 
$
871,352

 
100.0
 %
Cost of goods sold
743,304

 
64.7

 
658,332

 
68.3

 
582,586

 
66.9

Gross profit
404,927

 
35.3

 
305,815

 
31.7

 
288,766

 
33.1

Research and development
197,269

 
17.2

 
178,793

 
18.5

 
151,697

 
17.4

Marketing and selling
74,672

 
6.5

 
68,674

 
7.1

 
63,217

 
7.3

General and administrative
76,732

 
6.7

 
64,242

 
6.7

 
50,107

 
5.7

Other operating expense (income)
28,913

 
2.5

 
9,786

 
1.0

 
(898
)
 
(0.1
)
Operating income (loss)
$
27,341

 
2.4
%
 
$
(15,680
)
 
(1.6
)%
 
24,643

 
2.8
 %

Revenue

Our overall revenue increased $184.1 million, or 19.1%, in fiscal 2014 as compared to fiscal 2013. Fiscal 2014 reflects increased demand for our cellular RF solutions for smartphones and our WiFi products.

Our overall revenue increased $92.8 million, or 10.6%, in fiscal 2013 as compared to fiscal 2012. Fiscal 2013 reflected increased demand for both our 3G/4G cellular RF solutions and our mobile WiFi products. These increases were slightly offset by lower demand for our 2G products that are used in low-end phones and lower demand for our wireless infrastructure products.

Our largest customer, Samsung Electronics, Co., Ltd. (Samsung), accounted for approximately 25% and 22% of our total revenue in fiscal 2014 and fiscal 2013, respectively. In addition, we sold our products to another end customer through multiple contract manufacturers, which in the aggregate accounted for approximately 20% of total revenue in fiscal 2014. In fiscal 2012, Samsung and Nokia Corporation (Nokia) accounted for approximately 22% and 14% of our total revenue,

33

respectively. The majority of the revenue from these customers was from the sale of our CPG products. No other customer accounted for more than 10% of our total revenue. Our customer diversification strategy has successfully reduced our percentage of sales to any one customer and diversified our customer base across both CPG and MPG.

International shipments amounted to $805.4 million in fiscal 2014 (approximately 70% of revenue) compared to $667.7 million in fiscal 2013 (approximately 69% of revenue) and $624.7 million in fiscal 2012 (approximately 72% of revenue). Shipments to Asia totaled $756.1 million in fiscal 2014 (approximately 66% of revenue) compared to $603.6 million in fiscal 2013 (approximately 63% of revenue) and $568.5 million in fiscal 2012 (approximately 65% of revenue).

Gross Margin

Our overall gross margin for fiscal 2014 increased to 35.3% as compared to 31.7% in fiscal 2013. This increase was primarily due to manufacturing and sourcing-related cost reductions and increased demand, which were partially offset by average selling price erosion.

Our overall gross margin for fiscal 2013 decreased to 31.7% as compared to 33.1% in fiscal 2012. This decrease was primarily due to certain costs associated with the transfer of our MBE operations to IQE, costs related to the acquisition of Amalfi (including intangible amortization and inventory step-up), and price erosion on the average selling prices of our products. These decreases were partially offset by higher factory utilization resulting from increased demand and a favorable change in product mix toward higher margin products.

Operating Expenses

Research and Development

In fiscal 2014, research and development expenses increased $18.5 million, or 10.3%, compared to fiscal 2013, primarily due to increased personnel expenses associated with both new product development for 3G/4G mobile devices and our investment in CMOS PAs.

In fiscal 2013, research and development expenses increased $27.1 million, or 17.9%, compared to fiscal 2012, primarily due to expenses resulting from new product development for 3G/4G mobile devices as well as increased investments targeting customer diversification, and increases in headcount and related personnel expenses (including Amalfi headcount and related personnel expenses).

Marketing and Selling

In fiscal 2014, marketing and selling expenses increased $6.0 million, or 8.7%, compared to fiscal 2013, primarily due to increased salaries and commission expenses in support of our customer diversification efforts and in support of our new products for 3G/4G mobile devices.

In fiscal 2013, marketing and selling expenses increased $5.5 million, or 8.6%, compared to fiscal 2012, primarily due to an increase in headcount and related personnel expenses in support of our customer diversification efforts and in support of our new products for 3G/4G mobile devices.

General and Administrative

In fiscal 2014, general and administrative expenses increased $12.5 million, or 19.4%, compared to fiscal 2013 primarily due to increased consulting expenses.

In fiscal 2013, general and administrative expenses increased $14.1 million, or 28.2%, compared to fiscal 2012 primarily due to legal expenses resulting from intellectual property rights (IPR) litigation ($6.0 million for fiscal 2013), increased personnel expenses, and increased share-based compensation expenses.

Other Operating Expense (Income)

In fiscal 2014, other operating expenses increased $19.1 million compared to fiscal 2013, primarily due to an impairment of IPRD, restructuring expenses associated with achieving both manufacturing efficiencies and operating cost reductions, merger-related expenses and integration costs associated with the proposed merger with TriQuint, and expenses related to the phase out of manufacturing and sale of our U.K.-based GaAs facility (see Notes 7 and 12

34

of the Notes to the Consolidated Financial Statements in Part II, Item 8 for further explanations of these expenses). These increases were partially offset by the loss realized on the transfer of our MBE wafer growth operations to IQE as well as acquisition-related expenses associated with the acquisition of Amalfi during fiscal 2013.
 
In fiscal 2013, other operating expenses increased $10.7 million compared to fiscal 2012. During fiscal 2013, other operating expenses increased $5.0 million due to the loss realized on the transfer of our MBE wafer growth operations to IQE (see Note 6 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this report).

In addition, during fiscal 2013, we recorded restructuring expenses of $1.3 million and acquisition-related expenses of $1.5 million associated with the acquisition of Amalfi.

Operating Income

Our overall operating income was $27.3 million for fiscal 2014 as compared to an operating loss of $15.7 million for fiscal 2013. This increase in operating income was primarily due to higher revenue and improved gross margin, which were partially offset by increased personnel expenses, an impairment of IPRD, increased consulting expenses, restructuring expenses associated with achieving both manufacturing efficiencies and operating expense reductions, merger-related expenses and integration costs associated with the proposed merger with TriQuint, and expenses related to the phase out of manufacturing and sale of our U.K.-based GaAs facility. During fiscal 2013, other operating expenses included a $5.0 million loss realized on the transfer of our MBE wafer growth operations to IQE, Inc. as well as expenses related to the purchase of Amalfi.
 
Our overall operating loss was $15.7 million for fiscal 2013 as compared to an operating income of $24.6 million for fiscal 2012. This decrease was primarily due to increases in headcount and related personnel expenses and other expenses associated with new product development for 3G/4G mobile devices, lower gross margin, increases in legal expenses resulting from IPR litigation, a loss of approximately $5.0 million related to the IQE transaction, increases in share-based compensation expenses and expenses related to the purchase of Amalfi.

Segment Product Revenue, Operating Income and Operating Income as a Percentage of Revenue

Cellular Products Group
 
Fiscal Year
 
2014
 
2013
 
2012
(In thousands, except percentages)
 
 
 
 
 
Revenue
$
935,313

 
$
761,425

 
$
664,242

Operating income
$
109,862

 
$
52,574

 
$
61,776

Operating income as a % of revenue
11.7
%
 
6.9
%
 
9.3
%

CPG revenue increased $173.9 million, or 22.8%, in fiscal 2014 as compared to fiscal 2013, primarily due to increased demand for our cellular RF solutions for smartphones.

CPG operating income increased $57.3 million, or 109.0%, in fiscal 2014 as compared to fiscal 2013, primarily due to higher revenue and improved gross margin (resulting from manufacturing and sourcing-related cost reductions, partially offset by average selling price erosion) which was partially offset by increased personnel expenses associated with new product development for 3G/4G mobile devices and our investment in CMOS PAs.

CPG revenue increased $97.2 million, or 14.6%, in fiscal 2013 as compared to fiscal 2012, primarily due to increased demand for our 3G/4G cellular RF solutions which was slightly offset by lower demand for our 2G products used in low-end phones.

CPG operating income decreased $9.2 million, or 14.9%, in fiscal 2013 as compared to fiscal 2012, primarily due to increased operating expenses related to new product development for 3G/4G mobile devices as well as investments targeting customer diversification, and increases in headcount and related personnel expenses (including Amalfi headcount and related personnel expenses). Although erosion in the average selling prices of our established products contributed to the decrease in operating income, it was significantly offset by higher factory utilization resulting from increased demand and a favorable change in product mix toward higher margin products.


35

Multi-Market Products Group
 
Fiscal Year
 
2014
 
2013
 
2012
(In thousands, except percentages)
 
 
 
 
 
Revenue
$
212,897

 
$
202,722

 
$
207,110

Operating income
$
32,315

 
$
11,181

 
$
10,930

Operating income as a % of revenue
15.2
%
 
5.5
%
 
5.3
%

MPG revenue increased $10.2 million, or 5.0%, in fiscal 2014 as compared to fiscal 2013, primarily due to increased demand for our WiFi products.

MPG operating income increased $21.1 million, or 189.0%, in fiscal 2014 as compared to fiscal 2013, primarily due to improved gross margin resulting from manufacturing and sourcing-related cost reductions and increased revenue, which was partially offset by average selling price erosion.

MPG revenue decreased $4.4 million, or 2.1%, in fiscal 2013 as compared to fiscal 2012, primarily due to the lower demand for our wireless infrastructure products. This decrease was partially offset by increased demand for our mobile WiFi products.

MPG operating income increased $0.3 million, or 2.3%, in fiscal 2013 as compared to fiscal 2012, primarily due to decreases in personnel related expenses and other expenses related to the elimination of investments in our lower performing products. The improvement in MPG expenses was partially offset by decreased gross margins resulting from an unfavorable change in product mix toward lower margin products.

See Note 17 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this report for a reconciliation of segment operating income (loss) to the consolidated operating income (loss) for fiscal years 2014, 2013 and 2012.

OTHER (EXPENSE) INCOME AND INCOME TAXES

 
Fiscal Year
(In thousands)
2014
 
2013
 
2012
Interest expense
$
(5,983
)
 
$
(6,532
)
 
$
(10,997
)
Interest income
179

 
249

 
468

Loss on retirement of convertible subordinated notes
—

 
(2,756
)
 
(908
)
Other income (expense)
2,336

 
(1,180
)
 
2,422

Income tax expense
(11,231
)
 
(27,100
)
 
(14,771
)

Interest expense

Interest expense has decreased as a result of lower debt balances. During the first quarter of fiscal 2013, our 0.75% Convertible Subordinated Notes due 2012 (the "2012 Notes") became due and we paid the remaining principal balance of $26.5 million. During fiscal 2013, we purchased and retired $47.4 million original principal amount of our 1.00% Convertible Subordinated Notes due 2014 (the "2014 Notes"). During fiscal 2012, we purchased and retired $35.8 million aggregate principal amount of our 2012 Notes.

Loss on the retirement of convertible subordinated notes

During fiscal 2014, we did not purchase and retire any of our 2014 Notes. The remaining principal balance of our 2014 Notes was retired in the first quarter of fiscal 2015. During fiscal 2013, we purchased and retired $47.4 million original principal amount of our 2014 Notes for an average price of $98.34, which resulted in a loss of $2.8 million as a result of applying ASC 470-20. During fiscal 2012, we purchased and retired $35.8 million aggregate principal amount of our 2012 Notes for an average price of $103.27, which resulted in a loss of approximately $0.9 million as a result of applying ASC 470-20.


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Other income (expense)

In fiscal 2014, we incurred a foreign currency gain of $0.2 million as compared to a loss of $1.2 million in fiscal 2013 and a gain of $0.9 million in fiscal 2012. The foreign currency gain for fiscal 2014 was driven by the changes in the local currency denominated balance sheet accounts, and the depreciation of the U.S dollar against the British Pound and Euro. The foreign currency loss for fiscal 2013 was driven by the changes in the local currency denominated balance sheet accounts, the appreciation of the U.S dollar against the British Pound and Euro, and the depreciation of the U.S. dollar against the Renminbi. Additionally, during fiscal 2014, we recognized a $2.1 million gain on an equity investment (see Note 1 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this report for further information on our equity investment). Investment gains and losses were insignificant in fiscal 2013. During fiscal 2012, we recognized a $1.6 million gain on an equity investment.

Income taxes

Income tax expense for fiscal 2014 was $11.2 million, which is primarily comprised of tax expense related to international operations. For fiscal 2014, this resulted in an annual effective tax rate of 47.05%.

In comparison, income tax expense for fiscal 2013 was $27.1 million, which was primarily comprised of tax expense related to international operations, a $1.3 million reduction in U.K. deferred tax assets due to a decrease in the U.K. tax rate, and a $12.0 million increase in the valuation allowance against U.K. deferred tax assets in connection with the phase out of manufacturing operations at the Newton Aycliffe, U.K. facility. For fiscal 2013, this resulted in an annual effective tax rate of (104.64%).

For fiscal 2012, income tax expense was $14.8 million, which was comprised primarily of tax expense related to international operations and a $1.6 million reduction in U.K. deferred tax assets due to a decrease in the U.K. tax rate, offset by a $1.1 million tax benefit from the reversal of uncertain tax position accruals related to success-based fees incurred in connection with prior business combinations. For fiscal 2012, this resulted in an annual effective tax rate of 94.52%.

A valuation allowance has been established against net deferred tax assets in the taxing jurisdictions where, based upon the positive and negative evidence available, it is more likely than not that the related net deferred tax assets will not be realized. Realization is dependent upon generating future income in the taxing jurisdictions in which the operating loss carryovers, credit carryovers, depreciable tax basis, and other tax deferred assets exist. The realizability of these deferred tax assets are reevaluated on a quarterly basis. As of the end of fiscal years 2012, 2013 and 2014, the valuation allowance against domestic and foreign deferred tax assets was $112.7 million, $164.2 million, and $143.3 million, respectively.

As of the beginning of fiscal 2012, there was a $92.3 million valuation allowance against $90.5 million of U.S. net deferred tax assets and $1.8 million of Shanghai, China net deferred tax assets. The $20.4 million increase in the valuation allowance during fiscal 2012 was comprised of a $22.2 million increase related to changes in domestic net deferred tax assets during fiscal 2012 offset by a $1.8 million decrease from the release of the Shanghai, China valuation allowance upon completing the liquidation of that legal entity. The remaining valuation allowance as of the end of fiscal 2012 was related to the U.S. net deferred tax assets.

The valuation allowance against net deferred tax assets increased in fiscal 2013 by $51.5 million. The increase was comprised of $12.0 million established during the fiscal year related to the U.K. net deferred tax assets, $10.8 million related to the Amalfi acquisition, and a $28.7 million increase related to other changes in domestic deferred tax assets during the fiscal year. The U.K. valuation allowance was recorded as a result of the decision, announced in March 2013, to phase out manufacturing at the U.K. facility. Consequently, we determined that this represented significant negative evidence, and that it was no longer “more likely than not” that any U.K. deferred tax assets remaining at the end of fiscal 2014 would ultimately be realized.

The valuation allowance against net deferred tax assets decreased in fiscal 2014 by $20.9 million. The decrease was comprised of the reversal of the $12.0 million U.K. valuation allowance established during fiscal 2013 and $15.1 million related to deferred tax assets used against deferred intercompany profits, offset by increases related to a $3.4 million adjustment in the net operating losses acquired in the Amalfi acquisition and $2.8 million for changes in net deferred tax assets for domestic and other foreign subsidiaries during the fiscal year. The U.K. valuation allowance was reversed in connection with the sale of the U.K. manufacturing facility in fiscal 2014 and the write-off of the remaining U.K. deferred tax assets.


37


As of March 29, 2014, we had federal loss carryovers of approximately $118.9 million that expire in fiscal years 2020 to 2032 if unused and state losses of approximately $109.6 million that expire in fiscal years 2015 to 2032 if unused. Federal research credits of $64.4 million, federal foreign tax credits of $6.2 million, and state credits of $22.5 million may expire in fiscal years 2015 to 2033, 2018 to 2023, and 2015 to 2028, respectively. Federal alternative minimum tax credits of $1.5 million carry forward indefinitely. Included in the amounts above are certain net operating losses (NOLs) and other tax attribute assets acquired in conjunction with the Filtronic, Sirenza, Silicon Wave, Inc., and Amalfi acquisitions. The utilization of these acquired domestic tax assets is subject to certain annual limitations as required under Internal Revenue Code Section 382 and similar state income tax provisions.

Our gross unrecognized tax benefits totaled $31.7 million as of March 31, 2012, $37.9 million as of March 30, 2013, and $39.4 million as of March 29, 2014. Of these amounts, $24.4 million (net of federal benefit of state taxes), $29.7 million (net of federal benefit of state taxes), and $30.9 million (net of federal benefit of state taxes) as of March 31, 2012, March 30, 2013, and March 29, 2014, respectively, represent the amounts of unrecognized tax benefits that, if recognized, would impact the effective tax rate in each of the fiscal years. It is the Company’s policy to recognize interest and penalties related to uncertain tax positions as a component of income tax expense. As of March 29, 2014 accrued interest and penalties related to unrecognized tax benefits totaled $2.3 million, of which $0.9 million was recognized in fiscal 2014. Included in the balance of gross unrecognized tax benefits at March 29, 2014, is up to $0.5 million related to tax positions for which it is reasonably possible that the total amounts could significantly change in the next 12 months. This amount represents a potential decrease in gross unrecognized tax benefits related to reductions for tax positions in prior years.

SHARE-BASED COMPENSATION

Under FASB ASC 718, “Compensation – Stock Compensation” (ASC 718), share-based compensation cost is measured at the grant date, based on the estimated fair value of the award using an option pricing model (Black-Scholes), and is recognized as expense over the employee's requisite service period.

As of March 29, 2014, total remaining unearned compensation cost related to nonvested restricted stock units and options was $22.8 million, which will be amortized over the weighted-average remaining service period of approximately 1.2 years.

LIQUIDITY AND CAPITAL RESOURCES

We have funded our operations to date through sales of equity and debt securities, bank borrowings, capital equipment leases and revenue from product sales. Beginning in fiscal 1998, we have raised approximately $1,053.3 million, net of offering expenses, from public and Rule 144A securities offerings. As of March 29, 2014, we had working capital of approximately $317.4 million, including $171.9 million in cash and cash equivalents, compared to working capital at March 30, 2013, of $330.5 million, including $101.7 million in cash and cash equivalents.

Our total cash, cash equivalents and short-term investments were $244.0 million as of March 29, 2014. This balance includes approximately $49.6 million held by our foreign subsidiaries. If these funds held by our foreign subsidiaries are needed for our operations in the U.S., we would be required to accrue and pay U.S. taxes to repatriate these funds. However, under our current plans, we expect to permanently reinvest these funds outside of the U.S. and do not expect to repatriate them to fund our U.S. operations.

Share Repurchase

On January 25, 2011, we announced that our board of directors authorized the repurchase of up to $200 million of our outstanding common stock, exclusive of related fees, commissions or other expenses, from time to time during a period commencing on January 28, 2011 and expiring on January 27, 2013. This share repurchase program authorizes the Company to repurchase shares through solicited or unsolicited transactions in the open market or in privately negotiated transactions. On January 31, 2013, our board of directors authorized an extension of our 2011 share repurchase program to repurchase up to $200 million of our outstanding common stock through January 31, 2015.

During fiscal 2014, we repurchased 2.5 million shares at an average price of $5.03 on the open market. During fiscal 2013, we repurchased approximately 1.9 million shares at an average price of $3.75 on the open market and during fiscal 2012, we repurchased approximately 4.9 million shares at an average price of $6.18 on the open market. Between January 25, 2011 and March 29, 2014, we repurchased approximately $62.6 million of our common stock under this program, leaving us with an additional authorization of up to approximately $137.4 million under the program.

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Cash Flows from Operating Activities

Operating activities in fiscal 2014 provided cash of $130.8 million, compared to $71.3 million in fiscal 2013. This year-over-year increase was primarily attributable to improved profitability resulting from higher revenue. Net cash provided by operations for fiscal 2014 also includes outflows related to merger-related expenses and integration costs incurred in connection with the proposed merger with TriQuint.

Cash Flows from Investing Activities

Net cash used in investing activities in fiscal 2014 was $57.0 million compared to $14.5 million in fiscal 2013. This change was primarily due to a decrease in net proceeds from maturities of available-for-sale securities as well as increased purchases of property and equipment for fiscal 2014 as compared to fiscal 2013. These increases in cash used in investing activities were partially offset by the purchase of Amalfi for approximately $47.7 million during fiscal 2013.

In the first quarter of fiscal 2015, we commenced construction on a new manufacturing facility in China to significantly expand our internal assembly and test capabilities. Costs related to this new facility are expected to account for approximately 25% of our total fiscal 2015 capital expenditures, which are currently expected to be in line with fiscal 2014 and which we expect to fund with cash flows from operations. The actual amount of capital expenditures will be dependent on our sourcing strategy for manufacturing capacity and the rate and pace of new technology development.

Cash Flows from Financing Activities

Net cash used in financing activities in fiscal 2014 was $4.2 million compared to $89.7 million in fiscal 2013. Net cash used in financing activities was higher during fiscal 2013 as we paid the $26.5 million remaining principal balance of the 2012 Notes, repurchased and retired $47.4 million original principal amount of our 2014 Notes, and paid the $6.3 million remaining balance of our bank loan. During fiscal 2014, we did not purchase and retire any of our 2014 Notes. The $87.5 million remaining principal balance of our 2014 Notes was retired in the first quarter of fiscal 2015 with cash on hand.

Our future capital requirements may differ materially from those currently anticipated and will depend on many factors, including, but not limited to, market acceptance of our products, volume pricing concessions, capital improvements, demand for our products, technological advances and our relationships with suppliers and customers. Based on current and projected levels of cash flow from operations, coupled with our existing cash and cash equivalents, and our revolving credit facility, we believe that we have sufficient liquidity to meet both our short-term and long-term cash requirements. However, if there is a significant decrease in demand for our products, or in the event that growth is faster than we had anticipated, operating cash flows may be insufficient to meet our needs. If existing resources and cash from operations are not sufficient to meet our future requirements or if we perceive conditions to be favorable, we may seek additional debt or equity financing. We cannot be sure that any additional equity or debt financing will not be dilutive to holders of our common stock. Further, we cannot be sure that additional equity or debt financing, if required, will be available on favorable terms, if at all.

Proposed Merger

It is currently the expectation that our proposed merger with TriQuint will result in approximately $150 million in cost synergies by the end of the second year following the closing.

In the second half of fiscal 2014, we have recorded approximately $5.1 million of merger-related expenses and integration costs in “Other operating expense (income)” on the Consolidated Statements of Operations. We currently expect to incur an additional $15.0 million to $30.0 million for merger-related expenses and integration costs in connection with the consummation of this transaction.

The merger is subject to approval by the shareholders of each of the two companies and the receipt of certain regulatory approvals and other customary closing conditions. If the Merger Agreement is terminated in certain circumstances, RFMD or TriQuint would be required to pay the other a termination fee of $66.7 million. If the Merger Agreement is terminated due to the failure of the shareholders of RFMD or the stockholders of TriQuint to approve the merger, RFMD or TriQuint, as the case may be, will be required to pay the other a fee of $17.1 million.



39

IMPACT OF INFLATION

We do not believe that the effects of inflation had a significant impact on our revenue or income from continuing operations during fiscal years 2014, 2013 and 2012. Our financial results in fiscal 2015 could be adversely affected by wage and commodity price inflation (including precious metals).

OFF-BALANCE SHEET ARRANGEMENTS

As of March 29, 2014, we had no off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

CONTRACTUAL OBLIGATIONS

The following table summarizes our significant contractual obligations and commitments (in thousands) as of March 29, 2014, and the effect such obligations are expected to have on our liquidity and cash flows in future periods.

 
Payments Due By Period
 
Total
 
Less than
 
 
 
 
 
More than
 
Payments
 
1 year
 
1-3 years
 
3-5 years
 
5 years
Capital commitments
$
9,760

 
$
9,221

 
$
539

 
$
—

 
$
—

Capital leases
91

 
73

 
18

 
—

 
—

Operating leases
48,843

 
8,899

 
14,687

 
9,410

 
15,847

Convertible debt (including interest) *
87,941

 
87,941

 
—

 
—

 
—

Purchase obligations
103,710

 
100,632

 
3,078

 
—

 
—

Wafer supply agreement
7,166

 
7,166

 
—

 
—

 
—

Total
$
257,511

 
$
213,932

 
$
18,322

 
$
9,410

 
$
15,847

 
 
 
 
 
 
 
 
 
 
* The 2014 Notes had a remaining principal balance of $87.5 million as of March 29, 2014. The 2014 Notes were subsequently retired on April 15, 2014.

Capital Commitments

On March 29, 2014, we had capital commitments of approximately $9.8 million, primarily for increasing manufacturing capacity, as well as for equipment replacements, equipment for process improvements and general corporate requirements.

Capital Leases

We lease certain equipment and computer hardware and software under non-cancelable lease agreements that are accounted for as capital leases. Interest rates on capital leases ranged from 6.0% to 6.4% as of March 29, 2014. Equipment under capital lease arrangements is included in property and equipment and has a net cost of approximately $0.3 million as of both March 29, 2014 and March 30, 2013.

Operating Leases

We lease the majority of our corporate, wafer fabrication and other facilities from several third-party real estate developers. The remaining terms of these operating leases range from approximately one year to 14 years. Several have renewal options of up to two ten-year periods and several also include standard inflation escalation terms. Several also include rent escalation, rent holidays and leasehold improvement incentives, which are recognized to expense on a straight-line basis. The amortization period of leasehold improvements made either at the inception of the lease or during the lease term is amortized over the lesser of the remaining life of the lease term (including renewals that are reasonably assured) or the useful life of the asset. We also lease various machinery and equipment and office equipment under non-cancelable operating leases. The remaining terms of these operating leases range from less than one year to approximately three years. As of March 29, 2014, the total future minimum lease payments were approximately $48.7 million related to facility operating leases and approximately $0.2 million related to equipment operating leases.


40

Convertible Debt

In April 2007, we issued $200 million aggregate principal amount of the 2012 Notes and $175 million aggregate principal amount of the 2014 Notes (together with the 2012 Notes, the “Notes”). The Notes were issued in a private placement to Merrill Lynch, Pierce, Fenner & Smith Incorporated for resale to qualified institutional buyers. Offering expenses in connection with the issuance of the Notes, including discounts and commissions, were approximately $8.8 million, which are being amortized as interest expense over the terms of the Notes based on the effective interest method.

The 2012 Notes became due on April 15, 2012 (the remaining balance of $26.5 million was paid with cash on hand) and the 2014 Notes matured on April 15, 2014. Interest on the 2014 Notes was payable in cash semiannually in arrears on April 15 and October 15 of each year. The 2014 Notes were subordinated unsecured obligations of the Company and ranked junior in right of payment to all of the Company’s existing and future senior debt. The 2014 Notes effectively were subordinated to the indebtedness and other liabilities of the Company’s subsidiaries. The 2014 Notes became due on April 15, 2014, and the remaining principal balance of $87.5 million plus interest of $0.4 million was paid with cash on hand.

During fiscal 2013, we purchased and retired $47.4 million original principal amount of our 2014 Notes for an average price of $98.34, which resulted in a loss of $2.8 million as a result of applying ASC 470-20. During fiscal 2012, we purchased and retired $35.8 million aggregate principal amount of our 2012 Notes for an average price of $103.27, which resulted in a loss of approximately $0.9 million as a result of applying ASC 470-20. ASC 470-20 requires us to record gains and losses on the early retirement of our 2012 Notes and 2014 Notes in the period of derecognition, depending on whether the fair market value at the time of derecognition was greater than, or less than, the carrying value of the debt.

As of March 29, 2014, the 2014 Notes had a fair value on the Private Offerings, Resale and Trading through Automated Linkages ("PORTAL") Market of $88.7 million, compared to a carrying value of $87.3 million. As of March 30, 2013, the 2014 Notes had a fair value on the PORTAL Market of $86.7 million, compared to a carrying value of $82.0 million.

The indentures governing our 2014 Notes contain certain non-financial covenants, and as of March 29, 2014, we were in compliance with these covenants.

Credit Agreement

On March 19, 2013, we entered into a four-year senior credit facility with Bank of America, N.A., as Administrative Agent and a lender, and a syndicate of other lenders (the “Credit Agreement”). The Credit Agreement includes a $125.0 million revolving credit facility, which includes a $5.0 million sublimit for the issuance of standby letters of credit and a $5.0 million sublimit for swingline loans. We may request, at any time and from time to time, that the revolving credit facility be increased by an amount not to exceed $50.0 million. The revolving credit facility is available to finance working capital, capital expenditures and other lawful corporate purposes. Our obligations under the Credit Agreement are jointly and severally guaranteed by certain subsidiaries. On August 15, 2013, the Credit Agreement was amended to revise the definition of "Eurodollar Base Rate" and a provision regarding restricted payments. We currently have no outstanding amounts under the Credit Agreement.

The Credit Agreement contains various conditions, covenants and representations with which we must be in compliance in order to borrow funds and to avoid an event of default, including financial covenants that we must maintain a consolidated leverage ratio not to exceed 2.50 to 1.0 as of the end of any fiscal quarter and a consolidated liquidity ratio not to be less than 1.05 to 1.0 as of the end of any fiscal quarter. We must also maintain Consolidated EBITDA (as defined in the Credit Agreement) of not less than $75.0 million as of the end of any four-fiscal-quarter period of the Company. We are in compliance with these covenants as of March 29, 2014. See Note 9 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this report for further details.

Other Debt

During fiscal 2008, we entered into a loan denominated in Renminbi with a bank in Beijing, China. In April 2012, this loan balance equaled U.S. $6.3 million and was repaid at maturity with cash on hand.

During fiscal 2007, we entered into a $25.0 million asset-based financing equipment term loan. During fiscal 2012, the equipment term loan became due and the remaining balance of $3.9 million was paid with cash on hand.


41

Purchase Obligations

Our purchase obligations, totaling approximately $103.7 million, are primarily for the purchase of raw materials and manufacturing services that are not recorded as liabilities on our balance sheet because we have not yet received the related goods or services as of March 29, 2014.

Wafer Supply Agreement

During the first quarter of fiscal 2013, we entered into an asset transfer agreement with IQE under which we transferred our MBE wafer growth operations (located in Greensboro, North Carolina) to IQE. The transaction with IQE was intended to lower our manufacturing costs, strengthen our supply chain and provide us with access to newly developed wafer starting process technologies. The assets transferred to IQE included our leasehold interest in the real property, building and improvements used for the facility and machinery and equipment located in the facility. Approximately 70 employees at our MBE facility became employees of IQE as part of the transaction. In conjunction with the asset transfer agreement, we entered into a wafer supply agreement with IQE under which IQE will supply us with competitively priced wafer starting materials through March 31, 2016. As of March 29, 2014, our minimum purchase commitment related to the wafer supply agreement is approximately $7.2 million (see Note 6 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this report for further details).

Other Contractual Obligations

As of March 29, 2014, in addition to the amounts shown in the Contractual Obligations table above, we have $41.7 million of unrecognized income tax benefits and accrued interest, of which $11.1 million have been recorded as liabilities. We are uncertain as to if, or when, such amounts may be settled.

As discussed in Note 10 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this report, we have an unfunded pension plan in Germany with a benefit obligation of approximately $5.5 million as of March 29, 2014. Pension benefit payments are not included in the schedule above as they are not available for all periods presented. Pension benefit payments were less than $0.1 million in fiscal 2014 and are expected to be less than $0.1 million in fiscal 2015.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of consolidated financial statements requires management to use judgment and estimates. The level of uncertainty in estimates and assumptions increases with the length of time until the underlying transactions are completed. Actual results could differ from those estimates. The accounting policies that are most critical in the preparation of our consolidated financial statements are those that are both important to the presentation of our financial condition and results of operations and require significant judgment and estimates on the part of management. Our critical accounting policies are reviewed periodically with the Audit Committee of the Board of Directors. We also have other policies that we consider key accounting policies, such as policies for revenue recognition (see Note 1 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this report); however, these policies typically do not require us to make estimates or judgments that are difficult or subjective.

Inventory Reserves. The valuation of inventory requires us to estimate obsolete or excess inventory. The determination of obsolete or excess inventory requires us to estimate the future demand for our products within specific time horizons, generally 12 to 24 months. The estimates of future demand that we use in the valuation of inventory reserves are the same as those used in our revenue forecasts and are also consistent with the estimates used in our manufacturing plans to enable consistency between inventory valuations and build decisions. Product-specific facts and circumstances reviewed in the inventory valuation process include a review of the customer base, market conditions, and customer acceptance of our products and technologies, as well as an assessment of the selling price in relation to the product cost.

Historically, inventory reserves have fluctuated as new technologies have been introduced and customers’ demand has shifted. Inventory reserves had a 1% or lower impact on margins in fiscal years 2014, 2013 and 2012.

Goodwill and Intangible Assets. Goodwill is recorded when the purchase price paid for a business exceeds the estimated fair value of the net identified tangible and intangible assets acquired. Intangibles are recorded when such assets are acquired by purchase or license. The value of our intangibles, including goodwill, could be

42

impacted by future adverse changes such as: (i) any future declines in our operating results; (ii) a decline in the value of technology company stocks, including the value of our common stock; (iii) a prolonged or more significant slowdown in the worldwide economy or the semiconductor industry; or (iv) any failure to meet the performance projections included in our forecasts of future operating results.

Goodwill

We have determined that our reporting units as of fiscal 2014 are CPG, MPG and CSG for purposes of allocating and testing goodwill. In evaluating our reporting units we first consider our operating segments and related components in accordance with FASB guidance. Goodwill is allocated to our reporting units that are expected to benefit from the synergies of the business combinations generating the underlying goodwill. As of March 29, 2014, our goodwill balance of $103.9 million is allocated to our CPG and MPG reporting units.

We account for goodwill in accordance with FASB's authoritative guidance, which requires that goodwill and certain intangibles are not amortized, but are subject to an annual impairment test. We complete our goodwill impairment test on an annual basis on the first day of the fourth quarter in each fiscal year, or more frequently, if changes in facts and circumstances indicate that an impairment in the value of goodwill recorded on our balance sheet may exist. In fiscal 2013, we adopted FASB Accounting Standards Update (ASU) 2011-08 "Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment" (ASU 2011-08), which provides entities with an option to perform a qualitative assessment (commonly referred to as "step zero") to determine whether further quantitative analysis for impairment of goodwill is necessary. In performing step zero for our goodwill impairment test, we are required to make assumptions and judgments including but not limited to the following: the evaluation of macroeconomic conditions as related to our business, industry and market trends, and the overall future financial performance of our reporting units and future opportunities in the markets in which they operate. We also consider recent fair value calculations of our reporting units as well as cost factors such as changes in raw materials, labor or other costs. If impairment indicators are present after performing step zero, we would perform a quantitative impairment analysis to estimate the fair value of goodwill. In doing so, we would estimate future revenue, consider market factors and estimate our future profitability and cash flows. Based on these key assumptions, judgments and estimates, we determine whether we need to record an impairment charge to reduce the value of the goodwill carried on our balance sheet to its estimated fair value. Assumptions, judgments and estimates about future values are complex and often subjective and can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy or our internal forecasts. Although we believe the assumptions, judgments and estimates we have made have been reasonable and appropriate, different assumptions, judgments and estimates could materially affect our results of operations.

We performed a step zero analysis for our goodwill impairment test in the fourth quarter of fiscal 2014. As a result of our analysis, no further quantitative impairment test was deemed necessary for fiscal 2014. There was no impairment of goodwill as a result of our annual impairment tests completed during the fourth quarters of fiscal years 2013 and 2012.

Intangible Assets

Intangible assets are recorded when such assets are acquired by purchase or license. Finite-lived intangible assets consist primarily of technology licenses, customer relationships, a wafer supply agreement and developed technology resulting from business combinations and are subject to amortization. Indefinite-lived intangible assets consist of IPRD.

Technology licenses are recorded at cost and are amortized on a straight-line basis over the lesser of the estimated useful life of the technology or the term of the license agreement, ranging from approximately six to 15 years.

The fair value of customer relationships acquired prior to fiscal 2013 was based on the benefit derived from the incremental revenue and related cash flows as a direct result of the customer relationship. These forecasted cash flows are discounted to present value using an appropriate discount rate. The fair value of customer relationships acquired during fiscal 2013 was determined based on an income approach using the “with and without method," in which the value of the asset is determined by the difference in discounted cash flows of the profitability of the Company "with" the asset and the profitability of the Company "without" the asset. Customer relationships are amortized on a straight-line basis over the estimated useful life, ranging from three to ten years.

43


The fair value of developed technology acquired prior to fiscal 2013 was determined by discounting forecasted cash flows directly related to the existing product technology, net of returns on contributory assets. The fair value of developed technology acquired during fiscal 2013 was determined based on an income approach using the "excess earnings method," which estimated the value of the intangible assets by discounting the future projected earnings of the asset to present value as of the valuation date. Developed technology is amortized on a straight-line basis over the estimated useful life of six years.

The fair value of the wafer supply agreement was determined using the incremental income method, which is a discounted cash flow method within the income approach. Under this method, the fair value was estimated by discounting to present value the additional savings from expense reductions in operations at a discount rate to reflect the risk inherent in the wafer supply agreement as well as any tax benefits. The wafer supply agreement is amortized on a units of use activity method and has a useful life of approximately four years.

IPRD is recorded at fair value as of the date of acquisition as an indefinite-lived intangible asset until the completion or abandonment of the associated research and development efforts or impairment. The fair value of the acquired IPRD was determined based on an income approach using the "excess earnings method," which estimated the value of the intangible assets by discounting the future projected earnings of the asset to present value as of the valuation date. Upon completion of development, acquired IPRD assets are transferred to finite-lived intangible assets and amortized over their useful lives. See Note 8 of the Notes to the Consolidated Financial Statements in Part II, Item 8 for additional information regarding an impairment of assets recorded in the fourth quarter of fiscal 2014.

We regularly review identified intangible assets to determine if facts and circumstances indicate that the useful life is shorter than we originally estimated or that the carrying amount of the assets may not be recoverable. If such facts and circumstances exist, we assess the recoverability of identified intangible assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets and occur in the period in which the impairment determination was made.

Impairment of Long-lived Assets. We review the carrying values of all long-lived assets whenever events or changes in circumstances indicate that such carrying values may not be recoverable. Factors that we consider in deciding when to perform an impairment review include significant under-performance of a business, significant negative industry or economic trends, and significant changes or planned changes in our use of assets.

In making impairment determinations for long-lived assets, we utilize certain assumptions, including but not limited to: (i) estimations and quoted market prices of the fair market value of the assets; and (ii) estimations of future cash flows expected to be generated by these assets, which are based on additional assumptions such as asset utilization, length of service that the asset will be used in our operations and estimated salvage values.

Income Taxes. In determining income for financial statement purposes, we must make certain estimates and judgments in the calculation of tax expense, the resultant tax liabilities, and in the recoverability of deferred tax assets that arise from temporary differences between the tax and financial statement recognition of revenue and expense.

As part of our financial process, we assess on a tax jurisdictional basis the likelihood that our deferred tax assets can be recovered. If recovery is not likely (a likelihood of less than 50 percent), the provision for taxes must be increased by recording a reserve in the form of a valuation allowance for the deferred tax assets that are estimated not to ultimately be recoverable. In this process, certain relevant criteria are evaluated including: the amount of income or loss in prior years, the existence of deferred tax liabilities that can be used to absorb deferred tax assets, the taxable income in prior carryback years that can be used to absorb net operating losses and credit carrybacks, future expected taxable income, and prudent and feasible tax planning strategies. Changes in taxable income, market conditions, U.S. or international tax laws, and other factors may change our judgment regarding realizability. These changes, if any, may require material adjustments to the net deferred tax assets and an accompanying reduction or increase in income tax expense which will result in a corresponding increase or decrease in net income in the period when such determinations are made. See Note 13 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this report for additional information regarding changes in the valuation allowance and net deferred tax assets.

44


As part of our financial process, we also assess the likelihood that our tax reporting positions will ultimately be sustained. To the extent it is determined it is more likely than not that a tax reporting position will ultimately not be recognized and sustained, a provision for unrecognized tax benefit is provided by either reducing the applicable deferred tax asset or accruing an income tax liability. Our judgment regarding the sustainability of our tax reporting positions may change in the future due to changes in U.S. or international tax laws and other factors. These changes, if any, may require material adjustments to the related deferred tax assets or accrued income tax liabilities and an accompanying reduction or increase in income tax expense which will result in a corresponding increase or decrease in net income in the period when such determinations are made. See Note 13 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this report for additional information regarding our uncertain tax positions and the amount of unrecognized tax benefits.

RECENT ACCOUNTING PRONOUNCMENTS

In July 2013, the FASB issued ASU 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” ("ASU 2013-11"). ASU 2013-11 requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction of a deferred tax asset or a tax credit carryforward, excluding certain exceptions. This ASU will be effective for us beginning with the first quarter of fiscal 2015 and we do not believe that the adoption of this standard will significantly impact our consolidated financial statements.

In February 2013, the FASB issued ASU 2013-02, "Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income." ASU 2013-02 requires reporting the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required to be reclassified in its entirety to net income. For other amounts that are not required to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures that provide additional detail about these amounts. The amendments do not change the current requirements for reporting net income or other comprehensive income in the financial statements. We adopted this guidance in the first quarter of fiscal 2014. The adoption of this guidance affected the presentation of comprehensive income, but did not impact our financial position, results of operations or cash flows.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Financial Risk Management

We are exposed to financial market risks, including changes in interest rates, currency exchange rates and certain commodity prices. The overall objective of our financial risk management program is to seek a reduction in the potential negative earnings effects from changes in interest rates, foreign exchange rates and commodity prices arising from our business activities. We manage these financial exposures through operational means and by using various financial instruments. These practices may change as economic conditions change.

Interest Rates

Available-for-sale securities
We are exposed to interest rate risk primarily from our investments in available-for-sale securities. In accordance with an investment policy approved by the Audit Committee of our Board of Directors, our available-for-sale securities are predominantly comprised of U.S. government/agency securities. We continually monitor our exposure to changes in interest rates and the credit ratings of issuers with respect to our available-for-sale securities. As a result of this monitoring and volatility of the financial markets, we adopted a more conservative investment strategy, and we are currently investing in lower risk and consequently lower interest-bearing investments. 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 unfavorably.

At March 29, 2014, we held available-for-sale investments with an estimated fair value of $184.0 million. We do not purchase financial instruments for trading or speculative purposes. Our investments are classified as available-for-sale securities and are recorded on the balance sheet at fair value with unrealized gains and losses reported as a separate component of accumulated other comprehensive (loss) income. Our investments earned an average annual interest rate of approximately 0.1% in fiscal 2014 or less than $0.1 million in interest income. In fiscal 2013, our

45

investments earned an average annual interest rate of approximately 0.1% or approximately $0.1 million in interest income. We do not have any investments denominated in foreign currencies and therefore are not subject to foreign currency risk on such investments.

Credit Agreement
The Credit Agreement includes a $125.0 million revolving credit facility, which includes a $5.0 million sublimit for the issuance of standby letters of credit and a $5.0 million sublimit for swingline loans. We may request, at any time and from time to time, that the revolving credit facility be increased by an amount not to exceed $50.0 million. The interest rates on this facility are variable; however, since we have no outstanding balances under the Credit Agreement, there is no interest rate risk related to this facility as of March 29, 2014.

Currency Exchange Rates

As a global company, our results are affected by movements in currency exchange rates. Our exposure may increase or decrease over time as our foreign business levels fluctuate in the countries where we have operations, and these changes could have a material impact on our financial results. Our functional currency is typically the U.S. dollar. We have foreign operations in Europe and Asia and a substantial portion of our revenue is derived from sales to customers outside the U.S. Our international revenue is primarily denominated in U.S. dollars. Operating expenses and certain working capital items related to our foreign-based operations are, in some instances, denominated in the local foreign currencies and therefore are affected by changes in the U.S. dollar exchange rate in relation to foreign currencies, such as the Renminbi, Euro and Pound Sterling. If the U.S. dollar weakens compared to the Renminbi, Euro, Pound Sterling and other currencies, our operating expenses for foreign operations will be higher when remeasured back into U.S. dollars. We seek to manage our foreign exchange risk in part through operational means.

For fiscal 2014, we incurred a foreign currency gain of $0.2 million compared to a foreign currency loss of $1.2 million in fiscal 2013, which is recorded in “Other income (expense).”  The foreign currency gain for fiscal 2014 was driven by the changes in the local currency denominated balance sheet accounts, and the depreciation of the U.S. dollar against the British Pound and Euro.
 
Our financial instrument holdings, including foreign receivables, cash and payables at March 29, 2014, were analyzed to determine their sensitivity to foreign exchange rate changes. In this sensitivity analysis, we assumed that the change in one currency's rate relative to the U.S. dollar would not have an effect on other currencies' rates relative to the U.S. dollar. All other factors were held constant. If the U.S. dollar declined in value 10% in relation to the re-measured foreign currency instruments, our net income would have increased by approximately $3.1 million. If the U.S. dollar increased in value 10% in relation to the re-measured foreign currency instruments, our net income would have decreased by approximately $2.5 million.

Commodity Prices

We routinely use precious metals in the manufacture of our products. Supplies for such commodities may from time to time become restricted, or general market factors and conditions may affect the pricing of such commodities. In fiscal 2014, we were able to complete process technology improvements that are replacing gold with lower-cost materials to reduce this exposure. We also have an active reclamation process to capture any unused gold. While we continue to attempt to mitigate the risk of similar increases in commodities-related costs, there can be no assurance that we will be able to successfully safeguard against potential short-term and long-term commodity price fluctuations.

46



47
RF Micro Devices, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands)


 
March 29, 2014
 
March 30, 2013
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
171,898

 
$
101,662

Short-term investments (Notes 1 & 3)
72,067

 
77,987

Accounts receivable, less allowance of $313 and $434 as of March 29, 2014 and March 30, 2013, respectively
137,417

 
143,647

Inventories (Notes 1 & 4)
125,703

 
161,193

Prepaid expenses
12,721

 
13,034

       Other receivables (Note 1)
13,181

 
16,233

Other current assets (Note 13)
4,431

 
2,481

Total current assets
537,418

 
516,237

Property and equipment:
 
 
 
Land
3,706

 
3,706

Building
94,929

 
95,655

Machinery and equipment
547,991

 
517,413

Leasehold improvements
45,464

 
45,788

Furniture and fixtures
10,753

 
10,814

Computer equipment and software
35,782

 
33,147

 
738,625

 
706,523

Less accumulated depreciation
(552,901
)
 
(538,494
)
 
185,724

 
168,029

Construction in progress
10,272

 
23,497

Total property and equipment, net
195,996

 
191,526

Goodwill (Notes 1, 5, 6 & 8)
103,901

 
104,846

Intangible assets, net (Notes 1 & 8)
54,990

 
93,197

Long-term investments (Notes 1 & 3)
3,841

 
4,281

Other non-current assets (Notes 1 & 13)
24,166

 
21,912

Total assets
$
920,312

 
$
931,999

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
79,783

 
$
123,468

Accrued liabilities
51,824

 
55,760

Current portion of long-term debt, net of unamortized discount (Note 9)
87,263

 
—

Other current liabilities (Notes 11 & 13)
1,103

 
6,486

Total current liabilities
219,973

 
185,714

Long-term debt, net of unamortized discount (Note 9)
—

 
82,035

Other long-term liabilities (Notes 10, 11, 12 & 13)
23,988

 
25,236

Total liabilities
243,961

 
292,985

Commitments and contingent liabilities (Note 11)


 


Shareholders’ equity:
 
 
 
Preferred stock, no par value; 5,000 shares authorized; no shares issued and outstanding
—

 
—

Common stock, no par value; 500,000 shares authorized; 284,858 and 280,160 shares issued and outstanding at March 29, 2014 and March 30, 2013, respectively
1,284,402

 
1,259,420

Accumulated other comprehensive loss, net of tax
(785
)
 
(498
)
Accumulated deficit
(607,266
)
 
(619,908
)
Total shareholders’ equity
676,351

 
639,014

Total liabilities and shareholders’ equity
$
920,312

 
$
931,999

See accompanying notes.

48
RF Micro Devices, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)


 
Fiscal Year
 
2014
 
2013
 
2012
 
 
 
 
 
 
Revenue
$
1,148,231

 
$
964,147

 
$
871,352

Cost of goods sold
743,304

 
658,332

 
582,586

Gross profit
404,927

 
305,815

 
288,766

 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
Research and development
197,269

 
178,793

 
151,697

Marketing and selling
74,672

 
68,674

 
63,217

General and administrative
76,732

 
64,242

 
50,107

Other operating expense (income) (Notes 5, 6, 8 & 12)
28,913

 
9,786

 
(898
)
Total operating expenses
377,586

 
321,495

 
264,123

Income (loss) from operations
27,341

 
(15,680
)
 
24,643

 
 
 
 
 
 
Interest expense
(5,983
)
 
(6,532
)
 
(10,997
)
Interest income
179

 
249

 
468

Loss on retirement of convertible subordinated notes (Note 9)
—

 
(2,756
)
 
(908
)
Other income (expense)
2,336

 
(1,180
)
 
2,422

Income (loss) before income taxes
$
23,873

 
$
(25,899
)
 
$
15,628

 
 
 
 
 
 
Income tax expense (Note 13)
(11,231
)
 
(27,100
)
 
(14,771
)
Net income (loss)
$
12,642

 
$
(52,999
)
 
$
857

 
 
 
 
 
 
Net income (loss) per share (Note 14):
 
 
 
 
 
Basic
$
0.04

 
$
(0.19
)
 
$
0.00

Diluted
$
0.04

 
$
(0.19
)
 
$
0.00

 
 
 
 
 
 
Shares used in per share calculation (Note 14):
 
 
 
 
 
Basic
281,996

 
278,602

 
276,289

Diluted
288,074

 
278,602

 
282,576

 
 
 
 
 
 

See accompanying notes.





49
RF Micro Devices, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)


 
Fiscal Year
 
2014
 
2013
 
2012
Net income (loss)
$
12,642

 
$
(52,999
)
 
$
857

Other comprehensive loss:
 
 
 
 
 
Unrealized gain (loss) on marketable securities, net of tax
3

 
33

 
(68
)
Change in pension liability
(348
)
 
(124
)
 
(511
)
Foreign currency translation adjustment, including intra-entity foreign currency transactions that are of a long-term-investment nature
55

 
(250
)
 
33

Reclassification adjustments, net of tax:
 
 
 
 
 
Recognized loss on marketable securities
—

 
4

 
—

Amortization of pension actuarial loss (gain)
3

 
—

 
(8
)
Other comprehensive loss
(287
)
 
(337
)
 
(554
)
Total comprehensive income (loss)
$
12,355

 
$
(53,336
)
 
$
303


See accompanying notes.



50
RF Micro Devices, Inc. and Subsidiaries
Consolidated Statements of Shareholders’ Equity
(In thousands)


 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
 
 
Other
 
 
 
 
 
Common Stock
 
Comprehensive
 
Accumulated
 
 
 
Shares
 
Amount
 
(Loss) Income
 
Deficit
 
Total
Balance, April 2, 2011
275,376

 
$
1,243,728

 
$
393

 
$
(567,766
)
 
$
676,355

Comprehensive income:
 
 
 
 
 
 
 
 
 
Net income
—

 
—

 
—

 
857

 
857

Other comprehensive loss
—

 
—

 
(554
)
 
—

 
(554
)
Repurchase of convertible subordinated notes, net of tax
—

 
(1,777
)
 
—

 
—

 
(1,777
)
Exercise of stock options and vesting of restricted stock units, net of shares withheld for employee taxes
5,699

 
(2,232
)
 
—

 
—

 
(2,232
)
Issuance of common stock in connection with employee stock purchase plan
820

 
3,855

 
—

 
—

 
3,855

Repurchase of common stock, including transaction costs
(4,903
)
 
(30,373
)
 
—

 
—

 
(30,373
)
Share-based compensation expense
—

 
26,200

 
—

 
—

 
26,200

Balance, March 31, 2012
276,992

 
1,239,401

 
(161
)
 
(566,909
)
 
672,331

Comprehensive income:
 
 
 
 
 
 
 
 
 
Net loss
—

 
—

 
—

 
(52,999
)
 
(52,999
)
Other comprehensive loss
—

 
—

 
(337
)
 
—

 
(337
)
Repurchase of convertible subordinated notes, net of tax
—

 
(1,251
)
 
—

 
—

 
(1,251
)
Exercise of stock options and vesting of restricted stock units, net of shares withheld for employee taxes
4,028

 
(5,736
)
 
—

 
—

 
(5,736
)
Issuance of common stock in connection with employee stock purchase plan
999

 
3,348

 
—

 
—

 
3,348

Repurchase of common stock, including transaction costs
(1,859
)
 
(6,999
)
 
—

 
—

 
(6,999
)
Share-based compensation expense
—

 
30,657

 
—

 
—

 
30,657

Balance, March 30, 2013
280,160

 
1,259,420

 
(498
)
 
(619,908
)
 
639,014

Comprehensive income:
 
 
 
 
 
 
 
 
 
Net income
—

 
—

 
—

 
12,642

 
12,642

Other comprehensive loss
—

 
—

 
(287
)
 
—

 
(287
)
Exercise of stock options and vesting of restricted stock units, net of shares withheld for employee taxes
6,246

 
3,326

 
—

 
—

 
3,326

Issuance of common stock in connection with employee stock purchase plan
987

 
4,617

 
—

 
—

 
4,617

Repurchase of common stock, including transaction costs
(2,535
)
 
(12,780
)
 
—

 
—

 
(12,780
)
Share-based compensation expense
—

 
29,819

 
—

 
—

 
29,819

Balance, March 29, 2014
284,858

 
$
1,284,402

 
$
(785
)
 
$
(607,266
)
 
$
676,351


See accompanying notes.

51
RF Micro Devices, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)


 
Fiscal Year
 
2014
 
2013
 
2012
Cash flows from operating activities:
 
 
 
 
 
Net income (loss)
$
12,642

 
$
(52,999
)
 
$
857

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
 
Depreciation
45,698

 
49,357

 
57,949

Intangible amortization
28,638

 
23,107

 
18,390

Non-cash interest expense and amortization of debt issuance costs
5,101

 
5,793

 
9,378

Investment discount amortization, net
(40
)
 
(101
)
 
(219
)
Excess tax benefit from exercises of stock options
(50
)
 
—

 
—

Deferred income taxes
441

 
16,796

 
4,283

Foreign currency adjustments
(507
)
 
10

 
(507
)
Loss on retirement of convertible subordinated notes
—

 
2,756

 
908

(Income) loss from equity investment (Note 1)
(2,146
)
 
44

 
(1,631
)
Loss on impairment of intangible assets (Note 12)
11,300

 
—

 
—

Loss (gain) on assets and other, net
3,184

 
4,342

 
(1,256
)
Share-based compensation expense
29,901

 
30,819

 
26,174

Changes in operating assets and liabilities:
 
 
 
 
 
Accounts receivable, net
6,160

 
(38,400
)
 
19,847

Inventories
35,266

 
(19,071
)
 
19,466

Prepaid expense and other current and non-current assets
(1,543
)
 
(537
)
 
(11,321
)
Accounts payable
(43,393
)
 
46,821

 
(21,375
)
Accrued liabilities
4,825

 
(815
)
 
1,399

Income tax payable/recoverable
(4,653
)
 
960

 
6,178

Other liabilities
25

 
2,370

 
(4,307
)
Net cash provided by operating activities
130,849

 
71,252

 
124,213

Investing activities:
 
 
 
 
 
Purchase of securities available-for-sale
(125,037
)
 
(89,959
)
 
(205,849
)
Proceeds from maturities of securities available-for-sale
130,999

 
176,975

 
201,001

Proceeds from the sale of equity investment
2,586

 
—

 
—

Purchase of business, net of cash acquired
—

 
(47,697
)
 
—

Purchase of intangibles
(1,327
)
 
—

 
—

Purchase of property and equipment
(66,753
)
 
(54,636
)
 
(46,051
)
Proceeds from sale of property and equipment
2,499

 
840

 
984

Net cash used in investing activities
(57,033
)
 
(14,477
)
 
(49,915
)
Financing activities:
 
 
 
 
 
Payment of debt
—

 
(79,432
)
 
(41,853
)
Excess tax benefit from exercises of stock options
50

 
—

 
—

Debt issuance cost
(122
)
 
(1,240
)
 
—

Proceeds from the issuance of common stock
17,480

 
3,988

 
11,285

Repurchase of common stock, including transaction costs
(12,780
)
 
(6,999
)
 
(30,373
)
Tax withholding paid on behalf of employees for restricted stock units
(9,113
)
 
(5,959
)
 
(9,658
)
Restricted cash associated with financing activities
305

 
34

 
267

Repayment of capital lease obligations
(65
)
 
(62
)
 
(57
)
Net cash used in financing activities
(4,245
)
 
(89,670
)
 
(70,389
)
Effect of exchange rate changes on cash
665

 
(967
)
 
(145
)
Net increase (decrease) in cash and cash equivalents
70,236

 
(33,862
)
 
3,764

Cash and cash equivalents at the beginning of the period
101,662

 
135,524

 
131,760

Cash and cash equivalents at the end of the period
$
171,898

 
$
101,662

 
$
135,524

Supplemental disclosure of cash flow information:
 
 
 
 
 
Cash paid during the year for interest
$
1,205

 
$
1,409

 
$
2,315

Cash paid during the year for income taxes
$
15,350

 
$
8,941

 
$
14,554

See accompanying notes.

52
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
March 29, 2014


1.
THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES

RF Micro Devices, Inc. (the "Company") was incorporated under the laws of the State of North Carolina in 1991. The Company is a global leader in the design and manufacture of high-performance radio frequency (RF) solutions. The Company’s products enable worldwide mobility, provide enhanced connectivity, and support advanced functionality in the mobile device, wireless infrastructure, wireless local area network (WLAN or WiFi), cable television (CATV)/broadband, Smart Energy/advanced metering infrastructure (AMI), and aerospace and defense markets. The Company is recognized for its diverse portfolio of semiconductor technologies and RF systems expertise and is a preferred supplier to the world's leading mobile device, customer premises and communications equipment providers. The Company’s design and manufacturing expertise encompasses all major applicable semiconductor process technologies, which are sourced through both internal and external suppliers. The Company’s broad design and manufacturing resources enable the Company to deliver products optimized for customers’ performance, cost and time-to-market requirements.

Principles of Consolidation

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

The results of operations, assets and liabilities associated with the acquisition of Amalfi Semiconductor, Inc. (“Amalfi”) completed during fiscal 2013 have been included in the Consolidated Statements of Operations from the acquisition date (November 9, 2012) and are reflected in the Consolidated Balance Sheet as of March 30, 2013 (see Note 5).

During the fourth quarter of fiscal 2014, the Company sold a portion of an equity method investment for $2.6 million which resulted in a gain of $1.5 million. As of March 29, 2014 and March 30, 2013, the carrying value of the equity investment is $1.7 million and $2.1 million, respectively. The investment is recorded in “Long-term investments” in the Consolidated Balance Sheets. The Company purchased raw materials from its equity investee totaling approximately $6.6 million, $7.0 million and $9.2 million, for fiscal years 2014, 2013 and 2012, respectively.

Accounting Periods

The Company uses a 52- or 53-week fiscal year ending on the Saturday closest to March 31 of each year. The most recent three fiscal years ended on March 29, 2014, March 30, 2013, and March 31, 2012. Fiscal years 2014, 2013 and 2012 were 52-week years.

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities approximate fair values as of March 29, 2014 and March 30, 2013 (see Note 3 and Note 9).

Use of Estimates

The preparation of the Consolidated Financial Statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The actual results that we experience may differ materially from our estimates. The Company makes estimates for the returns reserve, rebates, allowance for doubtful accounts, inventory valuation including reserves, warranty reserves, income tax valuation, current and deferred income taxes, uncertain tax positions, non-marketable equity investments, other-than-temporary impairments of investments, goodwill, long-lived assets and other financial statement amounts on a regular basis and makes adjustments based on historical experiences and expected future conditions. Accounting estimates require difficult and subjective judgments and actual results may differ from the Company’s estimates.


53
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

Cash and Cash Equivalents

Cash and cash equivalents consist of demand deposit accounts, money market funds, and other temporary, highly- liquid investments with original maturities of three months or less when purchased.
Investments

Investments are accounted for in accordance with FASB ASC 320, “Investments – Debt and Equity Securities.”

Available-for-Sale Investments
Investments available-for-sale at March 29, 2014, and March 30, 2013, consisted of U.S. government/agency securities and auction rate securities.  Available-for-sale investments with an original maturity date greater than approximately three months and less than one year are classified as current investments. Available-for-sale investments with an original maturity date exceeding one year are classified as long-term. 

Available-for-sale securities are carried at fair value as determined by quoted market prices, with the unrealized gains and losses, net of tax, reported in "Other comprehensive (loss) income."  The cost of securities sold is based on the specific identification method and any realized gain or loss is included in “Other income (expense).”  The amortized cost of available-for-sale securities is adjusted for amortization of premium and accretion of discounts, which are included as a portion of interest.

The Company assesses individual investments for impairment quarterly.  Investments are impaired when the fair value is less than the amortized cost.  If an investment is impaired, the Company evaluates whether the impairment is other-than-temporary.  A debt investment impairment is considered other-than-temporary if (i) the Company intends to sell the security, (ii) it is more likely than not that the Company will be required to sell the security before recovery of the entire amortized cost basis, or (iii) the Company does not expect to recover the entire amortized cost basis of the security (a credit loss).  Other-than-temporary declines in the Company's debt securities are recognized as a loss in the statement of operations if due to credit loss; all other losses on debt securities are recorded in "Other comprehensive (loss) income."  The previous amortized cost basis less the other-than-temporary impairment becomes the new cost basis and is not adjusted for subsequent recoveries in fair value. 
 
Inventories

Inventories are stated at the lower of cost or market determined using the average cost method. The Company’s business is subject to the risk of technological and design changes. The Company evaluates inventory levels quarterly against sales forecasts on a product family basis to evaluate its overall inventory risk. Reserves are adjusted to reflect inventory values in excess of forecasted sales which include management's analysis and assessment of overall inventory risk. 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 is recorded at the full inventory cost, net of the reserve. Abnormal production levels are charged to the income statement in the period incurred rather than as a portion of inventory cost.

Product Warranty

The Company generally sells products with a limited warranty on product quality. The Company accrues for known warranty issues if a loss is probable and can be reasonably estimated, and accrues for estimated incurred but unidentified issues based on historical activity. The accrual and the related expense for known product warranty issues were not significant during the periods presented. Due to product testing and the short time typically between product shipment and the detection and correction of product failures and the historical rate of losses, the accrual and related expense for estimated incurred but unidentified issues were not significant during the periods presented.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets, ranging from one year to 20

54
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

years. The Company’s assets acquired under capital leases and leasehold improvements are amortized over the lesser of the asset life or lease term (which is reasonably assured) and included in depreciation.

The Company performs a review if facts and circumstances indicate that the carrying amount of assets may not be recoverable or that the useful life is shorter than had originally been estimated. The Company assesses the recoverability of the assets held for use by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. If the Company determines that the useful lives are shorter than the Company had originally estimated, the net book value of the assets is depreciated over the newly determined remaining useful lives. The Company identifies property and equipment as “held for sale” based on the current expectation that, more likely than not, an asset or asset group will be sold or otherwise disposed. The held for sale assets cease depreciation once the assets are classified to the held for sale category at their fair market value less costs to sell.

The Company capitalizes the portion of the interest expense related to certain assets that are not ready for their intended use and this amount is depreciated over the estimated useful lives of the qualified assets. The Company additionally records capital-related government grants earned as a reduction to property and equipment and depreciates such grants over the estimated useful lives of the associated assets.

Other Receivables

The Company records miscellaneous non-product receivables that are collectible within 12 months in “Other receivables,” such as value-added tax receivables ($10.1 million as of March 29, 2014 and $13.9 million as of March 30, 2013, which are reported on a net basis), interest receivables and other miscellaneous items.

Goodwill and Intangible Assets

The value of the Company’s goodwill and purchased intangible assets could be impacted by future adverse changes such as: (i) future declines in RFMD’s operating results, (ii) a decline in the value of technology company stocks, including the value of RFMD’s common stock, (iii) a prolonged or more significant slowdown in the worldwide economy or the semiconductor industry, or (iv) failure to meet the performance projections included in RFMD’s forecasts of future operating results.

Goodwill

The Company has determined that its reporting units at the fiscal 2014 annual measurement date were CPG, MPG and CSG for purposes of allocating and testing goodwill. In evaluating its reporting units, the Company first considers its operating segments and related components in accordance with FASB guidance. Goodwill is allocated to the reporting units that are expected to benefit from the synergies of the business combinations generating the underlying goodwill. As of March 29, 2014, $93.6 million of the Company’s goodwill balance is allocated to the MPG reporting unit and $10.3 million is allocated to the CPG reporting unit.

Goodwill is recorded when the purchase price paid for a business exceeds the estimated fair value of the net identified tangible and intangible assets acquired. The Company evaluates its goodwill for potential impairment on an annual basis on the first day of the fourth quarter in each fiscal year, or more frequently if events or circumstances indicate that an impairment in the value of goodwill recorded on the Company's balance sheet may exist. In fiscal 2013, the Company adopted FASB ASU 2011-08 "Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment," which provides entities with an option to perform a qualitative assessment (commonly referred to as "step zero") to determine whether further quantitative analysis for impairment of goodwill is necessary. In performing step zero for the goodwill impairment test, the Company is required to make assumptions and judgments including but not limited to the following: the evaluation of macroeconomic conditions as related to the Company's business, industry and market trends, and the overall future financial performance of the Company's reporting units and future opportunities in the markets in which the reporting units operate. The Company also considers recent fair value calculations of its reporting units as well as cost factors such as changes in raw materials, labor or other costs. If impairment indicators are present after performing step zero, the Company would perform a quantitative impairment analysis to estimate the fair value of goodwill. In doing so, the Company

55
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

would estimate future revenue, consider market factors and estimate the Company's future profitability and cash flows. Based on these key assumptions, judgments and estimates, the Company determines whether it needs to record an impairment charge to reduce the value of the goodwill carried on its balance sheet to the estimated fair value. Assumptions, judgments and estimates about future values are complex and often subjective and can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in the Company's business strategy or internal forecasts. Although the Company believes the assumptions, judgments and estimates it has made have been reasonable and appropriate, different assumptions, judgments and estimates could materially affect its results of operations.

The Company performed a step zero analysis for its goodwill impairment test as of the annual measurement date. As a result of this analysis, no further quantitative impairment test was deemed necessary for fiscal 2014. There was no impairment of goodwill as a result of the Company's annual impairment tests completed during the fourth quarters of fiscal years 2013 and 2012.
Intangible Assets

Intangible assets are recorded when such assets are acquired by purchase or license. Finite-lived intangible assets consist primarily of technology licenses, customer relationships, a wafer supply agreement and developed technology resulting from business combinations and are subject to amortization. Indefinite-lived intangible assets consist of in-process research and development (IPRD).

Technology licenses are recorded at cost and amortized on a straight-line basis over the lesser of the estimated useful life of the technology or the term of the license agreement, ranging from approximately six to 15 years.

The fair value of customer relationships acquired prior to fiscal 2013 was based on the benefit derived from the incremental revenue and related cash flows as a direct result of the customer relationship. These forecasted cash flows are discounted to present value using an appropriate discount rate. The fair value of customer relationships acquired during fiscal 2013 was determined based on an income approach using the “with and without method," in which the value of the asset is determined by the difference in discounted cash flows of the profitability of the Company "with" the asset and the profitability of the Company "without" the asset. Customer relationships are amortized on a straight-line basis over the estimated useful life, ranging from three to ten years.

The fair value of developed technology acquired prior to fiscal 2013 was determined by discounting forecasted cash flows directly related to the existing product technology, net of returns on contributory assets. The fair value of developed technology acquired during fiscal 2013 was determined based on an income approach using the "excess earnings method," which estimated the value of the intangible assets by discounting the future projected earnings of the asset to present value as of the valuation date. Developed technology is amortized on a straight-line basis over the estimated useful life of six years.

The fair value of the wafer supply agreement was determined using the incremental income method, which is a discounted cash flow method within the income approach. Under this method, the fair value was estimated by discounting to present value the additional savings from expense reductions in operations at a discount rate to reflect the risk inherent in the wafer supply agreement as well as any tax benefits. The wafer supply agreement is amortized on a units of use activity method and has a useful life of approximately four years.

IPRD is recorded at fair value as of the date of acquisition as an indefinite-lived intangible asset until the completion or abandonment of the associated research and development efforts or impairment. The fair value of the acquired IPRD was determined based on an income approach using the "excess earnings method," which estimated the value of the intangible assets by discounting the future projected earnings of the asset to present value as of the valuation date. Upon completion of development, acquired IPRD assets are transferred to finite-lived intangible assets and amortized over their useful lives. See Note 8 for additional information regarding an impairment of IPRD assets recorded in the fourth quarter of fiscal 2014.

The Company regularly reviews identified intangible assets to determine if facts and circumstances indicate that the useful life is shorter than the Company originally estimated or that the carrying amount of the assets may not be recoverable. If such facts and circumstances exist, the Company assesses the recoverability of identified intangible

56
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets and occur in the period in which the impairment determination was made.

Revenue Recognition

The Company's net revenue is generated principally from sales of semiconductor products. The Company recognizes revenue from product sales when the fundamental criteria are met, such as the time at which the title and risk and rewards of product ownership are transferred to the customer, price and terms are fixed or determinable, no significant vendor obligation exists and collection of the resulting receivable is reasonably assured. Sales of products are generally made through either the Company's sales force, manufacturers' representatives or through a distribution network. Revenue from the majority of the Company’s products is recognized upon shipment of the product to the customer from a Company-owned or third-party location. Some revenue is recognized upon receipt of the shipment by the customer. The Company has limited rebate programs offering price protection to certain distributors. These rebates represent less than 2% of net revenue and can be reasonably estimated based on specific criteria included in the rebate agreements and other known factors at the time. Reductions in revenue are recorded during the period in which the revenue related to those rebate agreements is recognized.

The Company also recognizes a portion of its net revenue through other agreements such as non-recurring engineering fees and cost-plus contracts for research and development work, royalty income, intellectual property (IP) revenue, and service revenue. These agreements are collectively less than 1% of consolidated revenue on an annual basis. Revenue from non-recurring engineering fees is recognized when the service is completed or upon certain milestones, as provided for in the agreements. Revenue from cost plus contracts is recognized on the percentage of completion method based on the costs incurred to date and the total contract amount, plus the contractual fee. Royalty income is recognized based on a percentage of sales of the relevant product reported by licensees during the period. The Company additionally licenses or sells its rights to use portions of its IP portfolio, which includes certain patent rights useful in the manufacture and sales of certain products. IP revenue recognition is dependent on the terms of each agreement. The Company will recognize IP revenue (i) upon delivery of the IP and (ii) if the Company has no substantive future obligation to perform under the arrangement. The Company will defer recognition of IP revenue where future performance obligations are required to earn the revenue or the revenue is not guaranteed. Revenue from services is recognized during the period that the service is performed.
Accounts receivable are recorded for all revenue items listed above. The Company evaluates the collectability of accounts receivable based on a combination of factors. In cases where the Company is aware of circumstances that may impair a specific customer’s ability to meet its financial obligations subsequent to the original sale, the Company will record an allowance against amounts due, and thereby reduce the receivable to the amount the Company reasonably believes will be collected. For all other customers, the Company recognizes allowances for doubtful accounts based on the length of time the receivables are past due, industry and geographic concentrations, the current business environment and the Company’s historical experience.

The Company's terms and conditions do not give its customers a right of return associated with the original sale of its products. However, the Company will authorize sales returns under certain circumstances, which include perceived quality problems, courtesy returns and like-kind exchanges. The Company evaluates its estimate of returns by analyzing all types of returns and the timing of such returns in relation to the original sale. Reserves are adjusted to reflect changes in the estimated returns versus the original sale of product.

Shipping and Handling Cost

The Company recognizes amounts billed to a customer in a sale transaction related to shipping and handling as revenue. The costs incurred by the Company for shipping and handling are classified as cost of goods sold in the Consolidated Statements of Operations.

Research and Development

The Company charges all research and development costs to expense as incurred.

57
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)


Advertising Costs

The Company expenses advertising costs as incurred. The Company recognized advertising expense of $0.1 million, $0.4 million, and $0.3 million for fiscal years 2014, 2013 and 2012, respectively.

Income Taxes

The Company accounts for income taxes under the liability method which requires recognition of deferred tax assets and liabilities for the temporary differences between the financial reporting and tax basis of assets and liabilities and for tax carryforwards. Deferred tax assets and liabilities are measured using the enacted statutory tax rates in effect for the years in which the differences are expected to reverse. A valuation allowance is provided against deferred tax assets to the extent the Company determines it is more likely than not (a likelihood of more than 50 percent) that some portion or all of its deferred tax assets will not be realized.

A minimum recognition threshold is required to be met before the Company recognizes the benefit of an income tax position in its financial statements. The Company’s policy is to recognize accrued interest and penalties, if incurred, on any unrecognized tax benefits as a component of income tax expense.

It is the Company’s policy to invest the earnings of foreign subsidiaries indefinitely outside the U.S. Accordingly, the Company does not provide an allowance for U.S. income taxes on unremitted foreign earnings.

Share-Based Compensation

Under FASB ASC 718, “Compensation – Stock Compensation” (ASC 718), share-based compensation cost is measured at the grant date, based on the estimated fair value of the award using an option pricing model (Black-Scholes), and is recognized as expense over the employee's requisite service period.

As of March 29, 2014, total remaining unearned compensation cost related to nonvested restricted stock units and options was $22.8 million, which will be amortized over the weighted-average remaining service period of approximately 1.2 years.

Foreign Currency Translation

The financial statements of foreign subsidiaries have been translated into U.S. dollars in accordance with FASB ASC 830, “Foreign Currency Matters.”  The functional currency for most of the Company’s international operations is the U.S. dollar.  The functional currency for the remainder of the Company’s foreign subsidiaries is the local currency. Assets and liabilities denominated in foreign currencies are translated using the exchange rates on the balance sheet dates.  Revenues and expenses are translated using the average exchange rates throughout the year. Translation adjustments are shown separately as a component of “Accumulated other comprehensive (loss) income” within “Shareholders’ equity” in the Consolidated Balance Sheets.  Foreign currency transaction gains or losses (transactions denominated in a currency other than the functional currency) are reported in “Other income (expense)” in the Consolidated Statements of Operations.

Recent Accounting Pronouncements

In July 2013, the FASB issued ASU 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” ("ASU 2013-11") ("ASU 2013-11"). ASU 2013-11 requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction of a deferred tax asset or a tax credit carryforward, excluding certain exceptions. This ASU will be effective for the Company beginning with the first quarter of fiscal 2015 and the Company does not believe that the adoption of this standard will significantly impact its consolidated financial statements.


58
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

In February 2013, the FASB issued ASU 2013-02, "Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income." ASU 2013-02 requires reporting the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required to be reclassified in its entirety to net income. For other amounts that are not required to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures that provide additional detail about these amounts. The amendments do not change the current requirements for reporting net income or other comprehensive income in the financial statements. The Company adopted this guidance in the first quarter of fiscal 2014. The adoption of this guidance affected the presentation of comprehensive income, but did not impact the Company's financial position, results of operations or cash flows.

2.    CONCENTRATIONS OF CREDIT RISK

The Company’s principal financial instrument subject to potential concentration of credit risk is accounts receivable, which is unsecured. The Company provides an allowance for doubtful accounts equal to estimated losses expected to be incurred in the collection of accounts receivable. The Company has adopted credit policies and standards intended to accommodate industry growth and inherent risk and it believes that credit risks are moderated by the financial stability of its major customers, conservative payment terms and the Company’s strict credit policies.

Revenue from significant customers, those representing 10% or more of total revenue for the respective periods, is summarized as follows:
 
Fiscal Year
 
2014
2013
2012
Samsung Electronics, Co., Ltd. (Samsung)
25%
22%
22%
Nokia Corporation (Nokia)
N/A
N/A
14%

In addition, the Company sold its products to another end customer through multiple contract manufacturers, which in the aggregate accounted for approximately 20% of total revenue in fiscal 2014. The majority of the revenue from these customers was from the sale of the Company’s CPG products.

Samsung accounted for approximately 25% and 29% of the Company's total accounts receivable balance as of March 29, 2014 and March 30, 2013, respectively. Samsung and Nokia collectively accounted for approximately 28% of the Company’s total accounts receivable balance as of March 31, 2012.


59
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

3.    INVESTMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

Investments

The following is a summary of available-for-sale securities as of March 29, 2014 and March 30, 2013 (in thousands):

 
Available-for-Sale Securities
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated Fair  
Value
March 29, 2014
 
 
 
 
 
 
 
U.S. government/agency securities
$
133,064

 
$
1

 
$
—

 
$
133,065

Auction rate securities
2,150

 
—

 
—

 
2,150

Money market funds
48,800

 
—

 
—

 
48,800

 
$
184,014

 
$
1

 
$
—

 
$
184,015

March 30, 2013
 
 
 
 
 
 
 
U.S. government/agency securities
$
77,988

 
$
3

 
$
(4
)
 
$
77,987

Auction rate securities
2,150

 
—

 
—

 
2,150

Money market funds
26,328

 
—

 
—

 
26,328

 
$
106,466

 
$
3

 
$
(4
)
 
$
106,465


The estimated fair value of available-for-sale securities was based on the prevailing market values on March 29, 2014 and March 30, 2013. We determine the cost of an investment sold based on the specific identification method.

The gross realized gains and losses recognized on available-for-sale securities for both fiscal years 2014 and 2013, were insignificant.

There were no available-for-sale investments in a continuous unrealized loss position for fewer than 12 months as of March 29, 2014. The available-for-sale investments that were in a continuous unrealized loss position for fewer than 12 months as of March 30, 2013 consisted of U.S. government/agency securities with gross unrealized losses of less than $0.1 million and an aggregate fair value of $14.0 million. There were no available-for-sale investments in a continuous unrealized loss position for 12 months or greater as of March 29, 2014 or as of March 30, 2013.

The amortized cost of investments in debt securities with contractual maturities is as follows (in thousands):

 
March 29, 2014
 
March 30, 2013
 
Cost
 
Estimated
Fair Value
 
Cost
 
Estimated
Fair Value
Due in less than one year
$
181,864

 
$
181,865

 
$
104,316

 
$
104,315

Due after ten years
2,150

 
2,150

 
2,150

 
2,150

Total investments in debt securities
$
184,014

 
$
184,015

 
$
106,466

 
$
106,465


Fair Value of Financial Instruments

The Company measures the fair value of its marketable securities, which are comprised of U.S. government/agency securities, auction rate securities (ARS), and money market funds. Marketable securities are reported in cash and cash equivalents, short-term investments and long-term investments on the Company’s Consolidated Balance Sheets and are recorded at fair value and the related unrealized gains and losses are included in "Accumulated other comprehensive loss," a component of Shareholders’ equity, net of tax.


60
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

Recurring Fair Value Measurements

The fair value of the financial assets measured at fair value on a recurring basis was determined using the following levels of inputs as of March 29, 2014 and March 30, 2013 (in thousands):

 
Total
 
Quoted Prices In
Active Markets For
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
March 29, 2014
 
 
 
 
 
U.S. government/agency securities
$
133,065

 
$
133,065

 
$
—

Auction rate securities
2,150

 
—

 
2,150

Money market funds
48,800

 
48,800

 
—

 
$
184,015

 
$
181,865

 
$
2,150

March 30, 2013
 
 
 
 
 
U.S. government/agency securities
$
77,987

 
$
77,987

 
$
—

Auction rate securities
2,150

 
—

 
2,150

Money market funds
26,328

 
26,328

 
—

 
$
106,465

 
$
104,315

 
$
2,150


ARS are debt instruments with interest rates that reset through periodic short-term auctions. The Company’s Level 2 ARS are valued at par based on quoted prices for identical or similar instruments in markets that are not active. As of March 29, 2014 and March 30, 2013, the Company did not have any Level 3 securities.

Nonrecurring Fair Value Measurements

The Company's non-financial assets, such as intangible assets and property and equipment, are measured at fair value when there is an indicator of impairment, and recorded at fair value only when an impairment charge is recognized (see Note 8 for an IPRD impairment recorded in the fourth quarter of fiscal 2014). During the first quarter of fiscal 2014, the Company recorded a $1.7 million impairment of certain property and equipment as a result of the phase out of manufacturing and the then-pending sale of its U.K. manufacturing facility. As of June 29, 2013, the fair value of these impaired assets was estimated to be $0.8 million using a significant Level 3 unobservable input (market valuation approach). The market valuation approach uses prices and other relevant information generated primarily by recent market transactions involving similar or comparable assets, as well as the Company's experience. During the second quarter of fiscal 2014, the Company sold its U.K. manufacturing facility, which resulted in a loss on these impaired assets of $0.6 million.

The Company did not have any material non-financial assets or liabilities measured at fair value during fiscal 2013, other than assets and liabilities assumed in the business acquisition of Amalfi (see Note 5).

Other Fair Value Disclosures

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities approximate fair values because of the relatively short-term maturities of these instruments.

The fair value of the Company’s 2014 Notes is measured using a Level 1 input obtained from the PORTAL Market and is disclosed in Note 9 to the Consolidated Financial Statements.


61
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

4.    INVENTORIES

The components of inventories, net of reserves, are as follows (in thousands):
 
Fiscal Year
 
2014
 
2013
Raw materials
$
32,927

 
$
45,656

Work in process
51,544

 
64,108

Finished goods
41,232

 
51,429

Total inventories
$
125,703

 
$
161,193


5.    BUSINESS ACQUISITION

On November 9, 2012, the Company completed its acquisition of Amalfi Semiconductor, Inc. ("Amalfi") pursuant to the Agreement and Plan of Merger by and among RFMD, Chameleon Acquisition Corporation, a wholly-owned subsidiary of the Company ("Merger Sub"), Amalfi, and Shareholder Representative Services LLC, solely in its capacity as the escrow representative. On the terms and subject to the conditions set forth in the Agreement and Plan of Merger, the Company acquired 100% of the outstanding equity securities of Amalfi through the merger of Merger Sub with and into Amalfi (the "Merger"). As a result of the Merger, Amalfi, as the surviving corporation, became a wholly-owned subsidiary of the Company. Amalfi is a fabless semiconductor company specializing in cost effective, high performance RF and mixed-signal ICs for the rapidly growing entry-level smartphone market. The Company is leveraging Amalfi's RF CMOS and mixed-signal IC technology to develop a growing portfolio of high-performance RF solutions. The product portfolio is targeted primarily at the entry-level smartphone market, and the Company has successfully shipped products using the technology to a number of customers, including handset manufacturers based in China as well as leading multinational smartphone manufacturers.

The Company acquired Amalfi for a total purchase price of approximately $48.4 million, net of cash received of $37.6 million (adjusted for working capital adjustments and holdback reserves). The final purchase price was allocated to Amalfi's assets and liabilities based upon fair values as determined by the Company, as follows (in thousands):

Cash and cash equivalents
$
37,575

Accounts receivable
4,809

Inventories
10,660

Prepaid expenses and other assets
933

Property and equipment
1,164

Intangible assets (Note 8)
31,900

Goodwill
10,254

Total assets
97,295

Accounts payable and accrued liabilities
(11,293
)
Total purchase price
$
86,002


The measurement period (up to one year from the acquisition date pursuant to Accounting Standards Codification (ASC) Topic 805 "Business Combinations" (ASC 805)) was concluded during the third quarter of fiscal 2014. The $10.3 million allocated to goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed, which is assigned to the Company's CPG operating segment.

Amalfi's results of operations, which include revenue of $16.5 million and an operating loss of $9.5 million, are included in the Company’s Consolidated Statements of Operations for the period of November 9, 2012 through March 30, 2013.


62
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

During fiscal 2013, the Company recorded Amalfi acquisition-related costs of approximately $1.5 million as well as approximately $1.3 million of restructuring costs (for employee termination benefits and lease termination costs) in “Other operating expense (income)” on the Consolidated Statements of Operations. In fiscal 2014, the Company recorded immaterial restructuring expenses related to the completion of the restructuring efforts associated with the Amalfi acquisition.

The following unaudited pro forma consolidated financial information for fiscal years 2013 and 2012, assumes that the Amalfi acquisition, which closed on November 9, 2012, was completed as of April 3, 2011 (in thousands, except per share data):

 
Fiscal Year
 
2013
 
2012
Revenue
$
995,441

 
$
891,262

Net loss
(62,114
)
 
(20,607
)
Basic net loss per common share
(0.22
)
 
(0.07
)
Diluted net loss per common share
(0.22
)
 
(0.07
)

Pro forma net loss includes adjustments for amortization expense of acquired intangible assets, acquisition-related costs, a step-up in the value of acquired inventory and property and equipment, and interest expense (income).

These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the operating results that would have been achieved had the acquisition actually taken place as of April 3, 2011. In addition, these results are not intended to be a projection of future results and do not reflect synergies that might be achieved from the combined operations.

6.     ASSET TRANSFER TRANSACTION

During fiscal 2013, the Company entered into an asset transfer agreement with IQE, Inc. ("IQE") under which it transferred its MBE operations (located in Greensboro, N.C.) to IQE. The transaction with IQE was intended to lower the Company’s manufacturing costs, strengthen its supply chain and provide it with access to newly developed wafer starting process technologies. The assets transferred to IQE had a total book value of approximately $24.4 million and included the Company’s leasehold interest in the real property, building and improvements used for the facility and machinery and equipment located in the facility, all of which were written off during the first quarter of fiscal 2013. In addition, the Company wrote-off approximately $1.0 million of MPG-related goodwill as a result of this transaction. The asset transfer agreement contains standard representations, warranties, covenants and indemnities of the parties for transactions of this type.

In conjunction with the asset transfer agreement, the Company and IQE entered into a wafer supply agreement under which IQE will supply the Company with wafer starting materials. This wafer supply agreement, which is recorded as an intangible asset on the Company’s Consolidated Balance Sheets, provides the Company with competitive wafer pricing through March 31, 2016 (see Note 1). As of March 29, 2014, the Company's minimum purchase commitment related to the wafer supply agreement is approximately $7.2 million.

Approximately 70 employees at the Company’s MBE facility became employees of IQE as part of the transaction described above. In addition, the lease related to the MBE facility for the real property and related improvements was assumed by IQE. The difference in the value of consideration received and consideration transferred was recorded in “Other operating expense (income)” and reduced the Company’s pre-tax income in the first quarter of fiscal year 2013 by approximately $5.0 million. The Company does not expect to incur any additional material costs related to the disposal of the MBE assets, the assumption of the lease by IQE or the transfer of RFMD employees to IQE.

7.     MERGER AGREEMENT

On February 22, 2014, RFMD and TriQuint entered into an Agreement and Plan of Merger and Reorganization providing for the business combination of RFMD and TriQuint. Acquisition costs (of $3.2 million) and integration

63
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

costs (of $1.9 million) associated with the proposed merger are being expensed as incurred and are presented in the Condensed Consolidated Statement of Operations as "Other operating expense (income)." Certain fees are contingent on the transaction closing.

8.    GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for fiscal years 2013 and 2014, are as follows (in thousands):

Balance as of March 31, 2012
$
95,628

Amalfi acquisition (Note 5)
10,191

Written off due to transfer of MBE operations (Note 6)
(973
)
Balance as of March 30, 2013
$
104,846

Written off due to sale of the U.K. facility
(1,008
)
Amalfi acquisition adjustments (Note 5)
63

Balance as of March 29, 2014*
$
103,901


*As of March 29, 2014, the Company’s goodwill balance of $103.9 million was comprised of gross goodwill of $725.5 million less accumulated impairment losses of $619.6 million, a write-off of $1.0 million due to the transfer of the MBE operations, and a write-off of $1.0 million due to the sale of the U.K. facility.

During the second quarter of fiscal 2014, the Company sold its gallium arsenide (GaAs) semiconductor manufacturing facility located in the U.K. to Compound Photonics. As a result of this transaction, the Company wrote-off approximately $1.0 million of MPG-related goodwill.

Goodwill is allocated to the reporting units that are expected to benefit from the synergies of the business combinations generating the underlying goodwill. As of March 29, 2014, $93.6 million and $10.3 million of the Company’s goodwill balance was allocated to its MPG reporting unit and CPG reporting unit, respectively. The Company conducts its annual goodwill impairment test on the first day of the fourth quarter in each fiscal year at its reporting unit level (CPG, MPG and CSG) and based on the Company’s fiscal 2014 and fiscal 2013 annual impairment reviews of goodwill, no impairment was indicated, as the estimated fair value of MPG and CPG exceeded its carrying value.

As of March 29, 2014, approximately $1.7 million of net goodwill related to the 2008 acquisition of Sirenza Microdevices, Inc. ("Sirenza") is expected to be deductible for income tax purposes in future periods.

The following summarizes certain information regarding gross carrying amounts and amortization of intangibles (in thousands):
 
March 29, 2014
 
March 30, 2013
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
Intangible Assets:
 
 
 
 
 
 
 
Technology licenses
$
12,006

 
$
10,418

 
$
10,346

 
$
10,118

Customer relationships
47,103

 
26,391

 
47,103

 
21,644

Developed technology
102,163

 
78,540

 
102,163

 
61,907

Wafer supply agreement
20,443

 
11,376

 
20,443

 
4,489

In-process research and development
—

 
—

 
11,300

 
—

Total
$
181,715

 
$
126,725

 
$
191,355

 
$
98,158



64
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

In fiscal 2013, as a result of the acquisition of Amalfi, intangibles increased by $31.9 million. The following table sets forth the components of these intangible assets (in thousands):
 
Fair Value
     Developed technology
$
19,200

     Customer relationships
1,400

     In-process research and development
11,300

Total
$
31,900


In the fourth quarter of fiscal 2014, the Company initiated a restructuring effort to reduce operating expenses (see Note 12 for further information on the restructuring). As part of this restructuring, the Company discontinued engineering efforts on the in-process research and development project and an impairment charge of $11.3 million was recorded in "Other operating expense (income)." This CPG-related IPRD was acquired as part of the Amalfi acquisition.

During the first quarter of fiscal 2013, the Company entered into a wafer supply agreement under which IQE is supplying the Company with wafer starting materials. This wafer supply agreement provides the Company with competitive wafer pricing through March 31, 2016 (see Note 6).

Intangible asset amortization expense was $28.6 million, $23.1 million and $18.4 million in fiscal years 2014, 2013 and 2012, respectively. The following table provides the Company's estimated future amortization expense based on current amortization periods for the periods indicated (in thousands):
Fiscal Year
Estimated
Amortization
Expense
2015
$
22,533

2016
11,964

2017
8,367

2018
7,664

2019
4,904


9.    DEBT

Debt at March 29, 2014 and March 30, 2013 is as follows (in thousands):
 
March 29, 2014
 
March 30, 2013
Convertible subordinated notes due 2014, net of discount
$
87,263

 
$
82,035

Total debt
87,263

 
82,035

Less current portion
87,263

 
—

Total long-term debt
$
—

 
$
82,035


Convertible Debt

In April 2007, the Company issued $200 million aggregate principal amount of 0.75% convertible subordinated notes due 2012 (the “2012 Notes”) and $175 million aggregate principal amount of 1.00% convertible subordinated notes due 2014 (the “2014 Notes” and, together with the 2012 Notes, the “Notes”). The Notes were issued in a private placement to Merrill Lynch, Pierce, Fenner & Smith Incorporated for resale to qualified institutional buyers. Offering expenses in connection with the issuance of the Notes, including discounts and commissions, were approximately $8.8 million, which are being amortized as interest expense over the terms of the Notes based on the effective interest method.

The 2012 Notes became due on April 15, 2012 and the remaining balance of $26.5 million was paid with cash on hand. Holders had the right to convert the 2014 Notes based on the applicable conversion rate of 124.2969 shares of the Company’s common stock per $1,000 principal amount of the notes (which is equal to an initial conversion price

65
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

of approximately $8.05 per share), subject to adjustment, only under certain specified circumstances. The 2014 Notes became due on April 15, 2014, and the remaining principal balance of $87.5 million plus interest of $0.4 million was paid with cash on hand. Accordingly, the 2014 Notes are recorded in "Current portion of long term debt" on the Consolidated Balance Sheet as of March 29, 2014. Interest on the 2014 Notes was payable in cash semiannually in arrears on April 15 and October 15 of each year. The 2014 Notes were subordinated unsecured obligations of the Company and ranked junior in right of payment to all of the Company’s existing and future senior debt. The 2014 Notes effectively were subordinated to the indebtedness and other liabilities of the Company’s subsidiaries.

During fiscal 2013, the Company purchased and retired $47.4 million original principal amount of its 2014 Notes for an average price of $98.34, which resulted in a loss of $2.8 million. During fiscal 2012, the Company purchased and retired $35.8 million aggregate principal amount of its 2012 Notes for an average price of $103.27, which resulted in a loss of approximately $0.9 million. In accordance with FASB ASC 470-20, “Debt – Debt with Conversions and Other Options” (ASC 470-20), the Company records gains and losses on the early retirement of its 2012 Notes and 2014 Notes in the period of derecognition, depending on whether the fair market value at the time of derecognition was greater than, or less than, the carrying value of the debt.

As of March 29, 2014, the 2014 Notes had a fair value on the PORTAL Market of $88.7 million, compared to a carrying value of $87.3 million. As of March 30, 2013, the 2014 Notes had a fair value on the PORTAL Market of $86.7 million, compared to a carrying value of $82.0 million.

The following tables provide additional information about the Notes, which are subject to ASC 470-20 (in thousands):
 
2012 Notes
 
2014 Notes
 
2014
 
2013
 
2014
 
2013
Carrying amount of the equity component (common stock)
$
19,954

*
$
19,954

*
$
33,241

 
$
33,241

Principal amount of the convertible subordinated notes
$
—

 
$
—

 
$
87,503

 
$
87,503

Unamortized discount of the liability
component
—

 
—

 
(240
)
 
(5,468
)
Net carrying amount of liability component
$
—

 
$
—

 
$
87,263

 
$
82,035

 
 
 
 
 
 
 
 
* The 2012 Notes became due and were repaid on April 15, 2012. The carrying amount of the equity component, which is recorded in common stock on the Company's Consolidated Balance Sheets is a permanent component of equity per ASC 470-20.
 
 
2012 Notes
 
2014 Notes
 
 
2013
 
2012
 
2014
 
2013
 
2012
Effective interest rate on liability component
 
7.3
%
 
7.3
%
 
7.2
%
 
7.2
%
 
7.2
%
Cash interest expense recognized
 
$
11

 
$
285

 
$
873

 
$
1,023

 
$
1,342

Non-cash interest expense recognized (discount amortization)
 
$
69

 
$
2,372

 
$
5,228

 
$
5,688

 
$
6,958


As of March 29, 2014, the unamortized discount will be fully amortized for the 2014 Notes. As of March 29, 2014, the if-converted value of the 2014 Notes did not exceed the principal amount of the 2014 Notes.


66
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

Credit Agreement

In March 2013, the Company and certain material domestic subsidiaries of the Company (the “Guarantors”) entered into a four-year senior credit facility with Bank of America, N.A., as Administrative Agent and a lender, and a syndicate of other lenders (the “Credit Agreement”). The Credit Agreement includes a $125.0 million revolving credit facility, which includes a $5.0 million sublimit for the issuance of standby letters of credit and a $5.0 million sublimit for swingline loans. The Company may request, at any time and from time to time, that the revolving credit facility be increased by an amount not to exceed $50.0 million. The revolving credit facility is available to finance working capital, capital expenditures and other lawful corporate purposes. The Company’s obligations under the Credit Agreement are jointly and severally guaranteed by the Guarantors. On August 15, 2013, the Credit Agreement was amended to revise the definition of "Eurodollar Base Rate" and a provision regarding restricted payments. The Company currently has no outstanding amounts under the Credit Agreement.

In connection with the closing of the Credit Agreement, the Company also entered into a security and pledge agreement (the “Security and Pledge Agreement”) which the Company and the Guarantors granted a security interest in substantially all of the Company's personal property and pledged all of the equity of the Company's domestic subsidiaries and 65% of the equity of their foreign subsidiaries. The Company also entered into a deed of trust granting a mortgage in favor of the Administrative Agent on its wafer facility in Greensboro, N.C.

At the Company’s option, loans under the Credit Agreement shall bear interest at (i) the Applicable Rate (as defined below) plus the Eurodollar Rate (as defined in the Credit Agreement as amended) or (ii) the Applicable Rate plus a rate equal to the higher of (a) the federal funds rate plus 0.50%, (b) the prime rate of the Administrative Agent, or (c) the Eurodollar Rate plus 1.0% (the “Base Rate”). All swingline loans will bear interest at a rate equal to the Applicable Rate plus the Base Rate. The Eurodollar Rate is equal to the rate per annum calculated from the British Bankers Association LIBOR rate, as published by Reuters, for dollar deposits for interest periods of one, two, three or six months, as selected by the Company and as quoted by the Administrative Agent. The Applicable Rate for Eurodollar Rate loans ranges from 2.25% per annum to 2.75% per annum. The Applicable Rate for Base Rate loans ranges from 1.25% per annum to 1.75% per annum. Interest for Eurodollar Rate loans shall be payable at the end of each applicable interest period or at three-month intervals, if such interest period is six months or longer. Interest for Base Rate loans shall be payable quarterly in arrears. The Company paid an undrawn commitment fee, an arrangement fee and an upfront fee pursuant to the terms of the Credit Agreement. The Company will also pay a quarterly fee for any letters of credit issued under the agreement. The initial fees associated with the Credit Agreement were capitalized and are being amortized to interest expense using the straight-line method over the remaining term to maturity.

The Credit Agreement contains various conditions, covenants and representations with which the Company must be in compliance in order to borrow funds and to avoid an event of default, including financial covenants that the Company must maintain a consolidated leverage ratio not to exceed 2.50 to 1.0 as of the end of any fiscal quarter of the Company and a consolidated liquidity ratio not to be less than 1.05 to 1.0 as of the end of any fiscal quarter of the Company. The Company must also maintain Consolidated EBITDA (as defined in the Credit Agreement) of not less than $75.0 million as of the end of any four-fiscal-quarter period of the Company. The Company is in compliance with these financial covenants as of March 29, 2014. The Credit Agreement also contains non-financial covenants including restrictions on liens, indebtedness, investments, acquisitions, dispositions, fundamental changes, changes to the nature of the business, restricted payments (such as cash dividends), capital expenditures, prepayments of other indebtedness, sale and leaseback transactions, and other customary restrictions.

The Credit Agreement also contains customary events of default, and the occurrence of an event of default will increase the applicable rate of interest by 2.0% and could result in the termination of commitments under the revolving credit facility, the declaration that all outstanding loans are due and payable in whole or in part and the requirement of cash collateral deposits in respect of outstanding letters of credit. Outstanding amounts are due in full on the maturity date of March 19, 2017 (with amounts borrowed under the swingline option due in full no later than ten business days after such loan is made).


67
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

Other Debt

During fiscal 2008, the Company entered into a loan denominated in Renminbi with a bank in Beijing, China. In April 2012, this loan balance that equaled U.S. $6.3 million was repaid at maturity with cash on hand.

During fiscal 2007, the Company entered into a $25.0 million asset-based financing equipment term loan. In fiscal 2012, the equipment term loan became due and the remaining balance of $3.9 million was paid with cash on hand.

10.     RETIREMENT BENEFIT PLANS

U.S. Defined Contribution Plan

Each U.S. employee is eligible to participate in the Company’s fully qualified 401(k) plan immediately upon hire. An employee may invest pretax earnings in the 401(k) plan up to the maximum legal limits (as defined by Federal regulations).

Employer contributions to the plan are made at the discretion of the Company’s Board of Directors. An employee is fully vested in the employer contribution portion of the plan after completion of two continuous years of service. The Company contributed $4.7 million, $4.3 million and $4.0 million to the plan during fiscal years 2014, 2013 and 2012, respectively.

Germany Defined Benefit Pension Plan

The Company maintains a qualified defined benefit pension plan for its subsidiary located in Germany. The plan is unfunded with a benefit obligation of approximately $5.5 million and $4.4 million as of March 29, 2014 and March 30, 2013, respectively, which is included in “Accrued liabilities” and “Other long-term liabilities” in the Consolidated Balance Sheets. The assumptions used in calculating the benefit obligation for the plan are dependent on the local economic conditions and were measured as of March 29, 2014 and March 30, 2013. The net periodic benefit costs were approximately $0.3 million for fiscal years 2014, 2013 and 2012.  

European Defined Contribution Plans

Employees of the Company’s Denmark, France and United Kingdom (U.K.) subsidiaries are eligible to participate in a stakeholder pension plan immediately upon hire or after three months of service. Employees of our Finland subsidiary are eligible to participate in a government mandated plan immediately upon hire. Employees may invest their earnings in their respective plans and receive a tax benefit based upon the plan. The Company contributed $0.7 million to these plans during fiscal 2014 and $1.0 million during fiscal years 2013 and 2012.  

Asian Defined Contribution Plans

Employees of the Company’s subsidiaries located in Taiwan, Korea and Japan are eligible to participate in a national pension plan immediately upon hire. Employees may invest their earnings in their respective national pension plans and receive a tax benefit based upon the national pension plan. Employer contributions to the plans are at the discretion of their local government regulators. The Company contributed $0.1 million to these defined contribution plans for each of the last three fiscal years.

11.    COMMITMENTS AND CONTINGENT LIABILITIES

The Company leases certain equipment and computer hardware and software under non-cancelable lease agreements that are accounted for as capital leases. Interest rates on capital leases ranged from 6.0% to 6.4% as of March 29, 2014. Equipment under capital lease arrangements is included in property and equipment and has a cost of approximately $0.3 million as of March 29, 2014 and March 30, 2013.

The Company leases the majority of its corporate, wafer fabrication and other facilities from several third-party real estate developers. The remaining terms of these operating leases range from less than one year to 14 years. Several have renewal options of up to two ten-year periods and several also include standard inflation escalation terms. Several also include rent escalation, rent holidays, and leasehold improvement incentives which are recognized to

68
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

expense on a straight-line basis. The amortization period of leasehold improvements made either at the inception of the lease or during the lease term is amortized over the lesser of the remaining life of the lease term (including renewals that are reasonably assured) or the useful life of the asset. The Company also leases various machinery and equipment and office equipment under non-cancelable operating leases. The remaining terms of these operating leases range from less than one year to approximately three years. As of March 29, 2014, the total future minimum lease payments were approximately $48.7 million related to facility operating leases and approximately $0.2 million related to equipment operating leases.

Minimum future lease payments under non-cancelable capital and operating leases as of March 29, 2014, are as follows (in thousands):

Fiscal Year
Capital
 
Operating
2015
$
73

 
$
8,899

2016
18

 
7,761

2017
—

 
6,926

2018
—

 
5,292

2019
—

 
4,118

Thereafter
—

 
15,847

Total minimum payment
91

 
$
48,843

Less amounts representing interest
4

 
 
Present value of minimum lease payments
87

 
 
Less current portion
69

 
 
Obligations under capital leases, less current portion
$
18

 
 

Rent expense under operating leases, including facilities and equipment, was approximately $10.7 million, $10.1 million, and $7.4 million for fiscal years 2014, 2013 and 2012, respectively. See Note 12 for information related to the lower rent expense in fiscal 2012.

Legal Matters

The Company accrues a liability for legal contingencies when it believes that it is both probable that a liability has been incurred and that it can reasonably estimate the amount of the loss. The Company reviews these accruals and adjusts them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel and other relevant information. To the extent new information is obtained and the Company's views on the probable outcomes of claims, suits, assessments, investigations or legal proceedings change, changes in the Company's accrued liabilities would be recorded in the period in which such determination is made. For the matter referenced below, no liability has been established in the financial statements regarding current litigation as the potential liability, if any, is not probable or the amount cannot be reasonably estimated.

Since February 14, 2012, the Company has been a party in legal proceedings with Peregrine Semiconductor Corporation (“Peregrine”) in which Peregrine has asserted infringement of certain of its patents. The proceedings commenced with a complaint filed by Peregrine in the United States International Trade Commission (“ITC”), which Peregrine ultimately decided to dismiss. After various procedural matters following the dismissal of the ITC proceeding, the Company is currently a party to a lawsuit initiated by Peregrine in the United States District Court for the Southern District of California alleging infringement of certain Peregrine patents. In December 2013, the Company filed a counterclaim against Peregrine alleging infringement by Peregrine of a Company patent and seeking declaratory relief regarding non-infringement and unenforceability of Peregrine’s patents. In March 2014, Peregrine's infringement claims for two of its four asserted patents were dismissed with prejudice. The Company intends to continue to vigorously defend its position that it has not infringed any valid claim of any of the Peregrine patents in the above-referenced legal proceeding.


69
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

12.    RESTRUCTURING

During fiscal 2014, the Company recorded $11.1 million of restructuring expenses, related to (1) efforts initiated to achieve manufacturing efficiencies, (2) efforts initiated to reduce operating expenses, (3) expenses associated with the sale of its GaAs semiconductor manufacturing facility in the U.K., and (4) expenses associated with the 2009 economic restructuring efforts.

During fiscal 2014, the Company initiated restructuring efforts to achieve manufacturing efficiencies. The Company recorded restructuring charges in “Other operating (income) expense” of approximately $4.1 million, primarily related to employee termination benefits.

In the fourth quarter of fiscal 2014, the Company initiated another restructuring to reduce operating expenses that resulted in restructuring expenses of approximately $2.5 million, primarily related to employee termination benefits recorded in “Other operating (income) expense.” At the end of fiscal 2014, restructuring obligations primarily relating to employee termination benefits totaled $1.1 million and were included in “Accrued liabilities” in the Consolidated Balance Sheets. As part of this restructuring, the Company discontinued engineering efforts related to an IPRD project and impaired the intangible asset in the amount of $11.3 million, which is also recorded in “Other operating expense (income)” (see Note 8).

In March 2013, the Company announced that it would phase out manufacturing in its Newton Aycliffe, U.K.-based GaAs facility and transition the remaining product demand from that facility to its GaAs manufacturing facility in Greensboro, N.C.  During the second quarter of fiscal 2014, the Company sold its U.K.-based GaAs facility to Compound Photonics. The Company recorded restructuring charges in “Other operating expense (income)” of approximately $4.4 million and $0.8 million in fiscal years 2014 and 2013, respectively, primarily related to impaired property, plant and equipment and employee termination benefits. At the end of fiscal 2013, restructuring obligations (relating primarily to employee termination benefits) totaled $0.8 million and were included in “Accrued liabilities” in the Consolidated Balance Sheets. As of March 29, 2014, the restructuring associated with the phase out of manufacturing and sale of the Newton Aycliffe, U.K.-based GaAs facility is complete.

In fiscal 2009, the Company initiated a restructuring to reduce manufacturing capacity and costs and operating expenses due primarily to lower demand for its products resulting from the global economic slowdown. The restructuring decreased the Company’s workforce and resulted in the impairment of certain property and equipment, among other charges. The Company recorded restructuring charges in “Other operating expense (income)” of approximately $0.1 million, $0.2 million and $(1.4) million in fiscal years 2014, 2013 and 2012, respectively, related to employee termination benefits, impaired assets (including property, plant and equipment), and lease and other contract termination costs. The current and long-term restructuring obligations (relating primarily to lease obligations) totaling $3.9 million and $4.6 million as of March 29, 2014 and March 30, 2013, respectively, are included in “Accrued liabilities” and “Other long-term liabilities” in the Consolidated Balance Sheets. During fiscal 2012, the restructuring obligation and related rent expense was reduced by $1.7 million as a result of the Company utilizing one of the facilities previously exited due to a change in manufacturing operations. The remaining activity related to these obligations during fiscal 2012 was primarily due to payments associated with our exited leased facilities. As of March 29, 2014, the restructuring associated with the adverse macroeconomic business environment is substantially complete. The Company expects to record approximately $0.9 million of additional restructuring charges primarily associated with ongoing expenses related to exited leased facilities.

13.    INCOME TAXES

Income (loss) before income taxes consists of the following components (in thousands):
 
Fiscal Year
 
2014
 
2013
 
2012
United States
$
(7,120
)
 
$
(72,895
)
 
$
(45,031
)
Foreign
30,993

 
46,996

 
60,659

Total
$
23,873

 
$
(25,899
)
 
$
15,628



70
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

The components of the income tax provision are as follows (in thousands):
 
Fiscal Year
 
2014
 
2013
 
2012
Current (expense) benefit:
 
 
 
 
 
Federal
$
(875
)
 
$
(515
)
 
$
1,106

State
24

 
73

 
73

Foreign
(9,939
)
 
(9,862
)
 
(11,667
)
 
(10,790
)
 
(10,304
)
 
(10,488
)
Deferred (expense) benefit:
 
 
 
 
 
Federal
$
488

 
$
(214
)
 
$
(580
)
State
59

 
(13
)
 
(35
)
Foreign
(988
)
 
(16,569
)
 
(3,668
)
 
(441
)
 
(16,796
)
 
(4,283
)
Total
$
(11,231
)
 
$
(27,100
)
 
$
(14,771
)

A reconciliation of the (provision for) or benefit from income taxes to income tax (expense) or benefit computed by applying the statutory federal income tax rate to pre-tax (loss) income for fiscal years 2014, 2013 and 2012 is as follows (dollars in thousands):
 
Fiscal Year
 
2014
 
2013
 
2012
 
Amount
Percentage
 
Amount
Percentage
 
Amount
Percentage
Income tax (expense) benefit at statutory federal rate
$
(8,355
)
35.00
 %
 
$
9,065

35.00
 %
 
$
(5,470
)
35.00
 %
Decrease (increase) resulting from:
 
 
 
 
 
 
 
 
State benefit (provision), net of federal (provision) benefit
75

(0.31
)
 
(827
)
(3.19
)
 
849

(5.43
)
Research and development credits
3,177

(13.31
)
 
6,257

24.16

 
3,422

(21.90
)
Foreign tax credits
574

(2.41
)
 
2,434

9.39

 
1,998

(12.78
)
Effect of changes in income tax rate applied to net deferred tax assets
(65
)
0.27

 
(1,250
)
(4.83
)
 
(1,568
)
10.04

Foreign tax rate difference
636

(2.66
)
 
3,218

12.43

 
7,486

(47.90
)
Change in valuation allowance
5,890

(24.67
)
 
(40,675
)
(157.05
)
 
(20,408
)
130.58

Repurchase of convertible subordinated notes
—

—

 
438

1.69

 
622

(3.98
)
Adjustments to net deferred tax assets
2,939

(12.31
)
 
(872
)
(3.37
)
 
597

(3.82
)
Share-based compensation
(635
)
2.66

 
(2,108
)
(8.14
)
 
(66
)
0.42

Tax reserve adjustments
(1,482
)
6.21

 
(515
)
(1.99
)
 
2,084

(13.33
)
Deemed dividend
(1,122
)
4.70

 
(1,749
)
(6.75
)
 
(3,971
)
25.41

Write-off U.K. gross deferred tax assets
(12,699
)
53.19

 
—

—

 
—

—

Other income tax benefit (expense)
(164
)
0.69

 
(516
)
(1.99
)
 
(346
)
2.21

 
$
(11,231
)
47.05
 %
 
$
(27,100
)
(104.64
)%
 
$
(14,771
)
94.52
 %
 
 
 
 
 
 
 
 
 
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the basis used for income tax purposes. The deferred income tax assets and liabilities are measured in each taxing jurisdiction using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.


71
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)


Significant components of the Company’s net deferred income taxes are as follows (in thousands):

 
Fiscal Year
 
2014
 
2013
Deferred income tax assets:
 
 
 
Inventory reserve
$
9,813

 
$
8,107

Basis in stock and other investments
2,748

 
5,547

Equity compensation
17,860

 
18,574

Accumulated depreciation/basis difference
29,260

 
42,541

Net operating loss carry-forwards
37,676

 
57,632

Research and other credits
71,406

 
66,796

Other deferred assets
9,189

 
10,643

Total deferred income tax assets
177,952

 
209,840

Valuation allowance
(143,264
)
 
(164,244
)
Total deferred income tax assets, net of valuation allowance
$
34,688

 
$
45,596

 
 
 
 
Deferred income tax liabilities:
 
 
 
Amortization and purchase accounting basis difference
$
(10,862
)
 
$
(18,183
)
Convertible debt discount
(83
)
 
(1,918
)
Deferred gain
(4,994
)
 
(6,320
)
Other deferred liabilities
(501
)
 
(744
)
Total deferred income tax liabilities
(16,440
)
 
(27,165
)
Net deferred income tax assets
$
18,248

 
$
18,431

 
 
 
 
Amounts included in consolidated balance sheets:
 
 
 
Current assets
$
4,419

 
$
2,760

Current liabilities
(200
)
 
(329
)
Non-current assets
14,913

 
17,221

Non-current liabilities
(884
)
 
(1,221
)
 
 
 
 
Net deferred income tax assets
$
18,248

 
$
18,431


At March 29, 2014, the Company has recorded a $143.3 million valuation allowance against the U.S. net deferred tax assets and small net deferred assets at several foreign subsidiaries. These valuation allowances were established based upon management's opinion that it is more likely than not that the benefit of these deferred tax assets may not be realized. Realization is dependent upon generating future income in the taxing jurisdictions in which the operating loss carryovers, credit carryovers, depreciable tax basis and other tax deferred assets exist. It is management's intent to evaluate the realizability of these deferred tax assets on a quarterly basis.

As of the beginning of fiscal 2012, there was a $92.3 million valuation allowance against $90.5 million of U.S. net deferred tax assets and $1.8 million of Shanghai, China net deferred tax assets. The $20.4 million increase in the valuation allowance during fiscal 2012 was comprised of a $22.2 million increase related to changes in domestic deferred tax assets during fiscal 2012, offset by a $1.8 million decrease related to the release of the Shanghai, China valuation allowance upon completing the liquidation of that legal entity.

The valuation allowance against net deferred tax assets increased in fiscal 2013 by $51.5 million from the $112.7 million balance as of the end of fiscal 2012. The change was comprised of $12.0 million established during the fiscal year related to the U.K., $10.8 million related to the Amalfi acquisition, and a $28.7 million increase related to changes in domestic deferred tax assets during the fiscal year. The U.K. valuation allowance was recorded as a result of the decision, announced in March 2013, to phase out manufacturing at the Newton Aycliffe U.K. facility. Consequently, the Company determined that this represented significant negative evidence, and that it was no longer

72
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

“more likely than not” that any U.K. deferred tax assets remaining at the end of fiscal 2014 would ultimately be realized.

The valuation allowance against net deferred tax assets decreased in fiscal 2014 by $20.9 million. The decrease was comprised of the reversal of the $12.0 million U.K. valuation allowance established during fiscal 2013 and $15.1 million related to deferred tax assets used against deferred intercompany profits, offset by increases related to a $3.4 million adjustment in the net operating losses acquired in the Amalfi acquisition and $2.8 million for other changes in net deferred tax assets for domestic and for other foreign subsidiaries during the fiscal year. The U.K. valuation allowance was reversed in connection with the sale of the U.K. manufacturing facility in fiscal 2014 and the write-off of the remaining U.K. deferred tax assets.

As of the end of fiscal 2014, a valuation allowance of $143.3 million remained against the net deferred tax assets in the U.S. as the significant negative evidence of current and cumulative pre-tax losses for the most recent three-year period in that jurisdiction was not overcome by available positive evidence.

As of March 29, 2014, the Company had federal loss carryovers of approximately $118.9 million that expire in fiscal years 2020 to 2032 if unused and state losses of approximately $109.6 million that expire in fiscal years 2015 to 2032 if unused. Federal research credits of $64.4 million, federal foreign tax credits of $6.2 million, and state credits of $22.5 million may expire in fiscal years 2015 to 2033, 2018 to 2023, and 2015 to 2028, respectively. Federal alternative minimum tax credits of $1.5 million will carry forward indefinitely. Included in the amounts above are certain net operating losses (NOLs) and other tax attribute assets acquired in conjunction with the Filtronic, Sirenza, Silicon Wave, Inc., and Amalfi acquisitions. The utilization of acquired domestic assets is subject to certain annual limitations as required under Internal Revenue Code Section 382 and similar state income tax provisions.

The Company has continued to expand its operations and increase its investments in numerous international jurisdictions. These activities expose the Company to taxation in multiple foreign jurisdictions. It is management's opinion that current and future undistributed foreign earnings will be permanently reinvested. Accordingly, no provision for U.S. federal and state income taxes has been made thereon. It is not practical to estimate the additional tax that would be incurred, if any, if the permanently reinvested earnings were repatriated. At March 29, 2014, the Company has not provided U.S. taxes on approximately $226.3 million of undistributed earnings of foreign subsidiaries that have been reinvested outside the U.S. indefinitely.
 
A subsidiary in a foreign jurisdiction was granted an exemption from income taxes for a two-year period (calendar 2010 and 2011) followed by a three-year period (calendar 2012 through 2014) at one-half the normal tax rate. There was no income tax expense impact in fiscal 2014 as the foreign subsidiary was in the process of being liquidated and no income tax benefit was accrued for the losses incurred during the year. Income tax expense was increased in fiscal 2013 by less than $0.1 million (less than $0.001 per basic or diluted share) and decreased in fiscal 2012 by less than $0.1 million (less than $0.001 per basic or diluted share) as a result of this agreement. This agreement will expire in fiscal 2015.

The Company’s gross unrecognized tax benefits totaled $39.4 million as of March 29, 2014, $37.9 million as of March 30, 2013, and $31.7 million as of March 31, 2012. Of these amounts, $30.9 million (net of federal benefit of state taxes), $29.7 million (net of federal benefit of state taxes), and $24.4 million (net of federal benefit of state taxes) as of March 29, 2014,  March 30, 2013,  March 31, 2012, respectively, represent the amounts of unrecognized tax benefits that, if recognized, would impact the effective tax rate in each of the fiscal years.


73
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

A reconciliation of the fiscal 2012 through fiscal 2014 beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):
 
Fiscal Year
 
2014
 
2013
 
2012
Beginning balance
$
37,917

 
$
31,727

 
$
32,941

Additions based on positions related to current year
2,181

 
2,209

 
1,067

Additions for tax positions in prior years
229

 
4,780

 
450

Reductions for tax positions in prior years
(904
)
 
(482
)
 
(2,699
)
Expiration of Statute of Limitations
—

 
(317
)
 
(32
)
Settlements
—

 
—

 
—

Ending Balance
$
39,423

 
$
37,917

 
$
31,727


Of the fiscal 2013 additions to tax positions in prior years, $4.4 million was assumed by the Company in the Amalfi acquisition and relates to positions taken on tax returns for pre-acquisition periods.

It is the Company’s policy to recognize interest and penalties related to uncertain tax positions as a component of income tax expense. During fiscal years 2014, 2013 and 2012, the Company recognized $0.9 million, $0.7 million, and $0.6 million, respectively, of interest and penalties related to uncertain tax positions. Accrued interest and penalties related to unrecognized tax benefits totaled $2.3 million, $1.3 million, and $0.6 million as of March 29, 2014, March 30, 2013 and March 31, 2012, respectively.

Within the next 12 months, the Company believes it is reasonably possible that up to $0.5 million of gross unrecognized tax benefits may be reduced as a result of reductions for temporary tax positions taken in prior years.

Returns for fiscal years 2005 through 2009 have been examined by the U.S. federal taxing authorities and returns for fiscal 2011 and subsequent tax years remain open for examination. North Carolina returns for fiscal years 2006 through 2008 have been examined by the tax authorities and returns for fiscal 2011 and subsequent tax years remain open for examination. Returns for calendar years 2005 through 2007 have been examined by the German taxing authorities and returns for subsequent fiscal tax years remain open for examination. Other material jurisdictions that are subject to examination by tax authorities are California (fiscal 2010 through present), the U.K. (fiscal 2012 through present), and China (calendar year 2004 through present). Tax attributes (including net operating loss and credit carryovers) arising in earlier fiscal years remain open to adjustment.


74
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

14.    NET INCOME (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except per share data):

 
For Fiscal Year
 
2014
 
2013
 
2012
Numerator:
 
 
 
 
 
Numerator for basic and diluted net income (loss) per share — net income (loss) available to common shareholders
$
12,642

 
$
(52,999
)
 
$
857

Denominator:
 
 
 
 
 
Denominator for basic net income (loss) per share — weighted average shares
281,996

 
278,602

 
276,289

Effect of dilutive securities:
 
 
 
 
 
Share-based awards
6,078

 
—

 
6,287

Denominator for diluted net income (loss) per share — adjusted weighted average shares and assumed conversions
288,074

 
278,602

 
282,576

Basic net income (loss) per share
$
0.04

 
$
(0.19
)
 
$
0.00

Diluted net income (loss) per share
$
0.04

 
$
(0.19
)
 
$
0.00


In the computation of diluted net income per share for fiscal years 2014 and 2012, 7.2 million shares and 6.3 million shares, respectively, were excluded because the exercise price of the options was greater than the average market price of the underlying common stock and the effect of their inclusion would have been anti-dilutive. In the computation of diluted net loss per share for fiscal 2013, all outstanding share-based awards were excluded because the effect of their inclusion would have been anti-dilutive.

The computation of diluted net income (loss) per share does not assume the conversion of the Company’s $200 million initial aggregate principal amount of the 2012 Notes or the Company’s $175 million initial aggregate principal amount of 2014 Notes. The 2012 Notes and 2014 Notes generally would become dilutive to earnings if the average market price of the Company’s common stock exceeds approximately $8.05 per share. The 2012 Notes became due on April 15, 2012, and the remaining principal balance of $26.5 million was paid with cash on hand (see Note 9). The 2014 Notes became due on April 15, 2014, and the remaining principal balance of $87.5 million was paid with cash on hand (see Note 9).

15.    SHARE-BASED COMPENSATION

Summary of Stock Option Plans

Directors’ Option Plan
In April 1997, the Company and its shareholders adopted the Non-employee Directors’ Stock Option Plan. Under the terms of this plan, directors who are not employees of the Company are entitled to receive options to acquire shares of common stock. An aggregate of 1.6 million shares of common stock have been reserved for issuance under this plan, subject to adjustment for certain events affecting the Company’s capitalization. No further awards can be granted under this plan.

1999 Stock Incentive Plan
The 1999 Stock Incentive Plan (the "1999 Stock Plan"), which the Company’s shareholders approved at the 1999 annual meeting of shareholders, provides for the issuance of a maximum of 16.0 million shares of common stock pursuant to awards granted thereunder. The maximum number of shares of common stock that may be issued under the plan pursuant to grant of restricted awards shall not exceed 2.0 million shares. The number of shares reserved for issuance under the 1999 Stock Plan and the terms of awards may be adjusted upon certain events affecting the Company’s capitalization. No further awards can be granted under this plan.


75
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

Sirenza Microdevices, Inc. Amended and Restated 1998 Stock Plan
In connection with the merger of a wholly owned subsidiary of the Company with and into Sirenza and the subsequent merger of Sirenza with and into the Company, the Company assumed the Sirenza Amended and Restated 1998 Stock Plan. This plan provides for the grant of awards to acquire common stock to employees, non-employee directors and consultants. This plan permits the grant of incentive and nonqualified options, restricted awards and performance share awards. No further awards can be granted under this plan.

2003 Stock Incentive Plan
The Company's shareholders approved the 2003 Stock Incentive Plan (the "2003 Plan") on July 22, 2003, and, effective upon that approval, new stock option and other share-based awards for employees were granted only under the 2003 Plan. The Company was also permitted to grant other types of equity incentive awards, under the 2003 Plan, such as stock appreciation rights, restricted stock awards, performance shares and performance units. On May 2, 2012, the Company granted performance-based restricted stock units that were awarded on May 15, 2013, after it was determined that certain performance objectives had been met. The aggregate number of shares subject to performance-based restricted stock units awarded for fiscal 2013 under the 2003 Plan was 2.0 million shares. On May 4, 2011, the Company granted performance-based restricted stock units that were awarded on May 2, 2012, after it was determined that certain performance objectives had been met. The aggregate number of shares subject to performance-based restricted stock units awarded for fiscal 2012 under the 2003 Plan was 1.4 million shares. In the past, the Company had various employee stock and incentive plans identified above under which stock options and other share-based awards were granted. Stock options and other share-based awards that were granted under prior plans and were outstanding on July 22, 2003 continued in accordance with the terms of the respective plans.

The maximum number of shares issuable under the 2003 Plan could not exceed the sum of (a) 30.3 million shares, plus (b) any shares of common stock (i) remaining available for issuance as of the effective date of the 2003 Plan under the Company's prior plans and (ii) subject to an award granted under a prior plan, which awards were forfeited, canceled, terminated, expired or lapsed for any reason. No further awards can be granted under this plan.

2012 Stock Incentive Plan
The Company currently grants stock options and restricted stock units to employees and directors under the 2012 Stock Incentive Plan (the "2012 Plan"). The Company's shareholders approved the 2012 Plan on August 16, 2012, and, effective upon that approval, new stock option and other share-based awards for employees and directors may be granted only under the 2012 Plan. The Company is also permitted to grant other types of equity incentive awards, under the 2012 Plan, such as stock appreciation rights, restricted stock awards, performance shares and performance units. The aggregate number of shares subject to performance-based restricted stock units awarded for fiscal 2014 under the 2012 Plan was 1.2 million shares. In the past, the Company had various employee stock and incentive plans identified above under which stock options and other share-based awards were granted. Stock options and other share-based awards that were granted under prior plans and were outstanding on August 16, 2012 continued in accordance with the terms of the respective plans.

The maximum number of shares issuable under the 2012 Plan may not exceed the sum of (a) 17.0 million shares, plus (b) any shares of common stock (i) remaining available for issuance as of the effective date of the 2012 Plan under the Company's prior plans and (ii) subject to an award granted under a prior plan, which awards are forfeited, canceled, terminated, expire or lapse for any reason. As of March 29, 2014, 20.3 million shares were available for issuance under the 2012 Plan.

2006 Directors’ Stock Option Plan
At the Company’s 2006 annual meeting of shareholders, shareholders of the Company adopted the 2006 Directors’ Stock Option Plan, which replaced the Non-Employee Directors’ Stock Option Plan and reserved an additional 1.0 million shares of common stock for issuance to non-employee directors. Under the terms of this plan, directors who are not employees of the Company are entitled to receive options to acquire shares of common stock. An aggregate of 1.4 million shares of common stock has been reserved for issuance under this plan, including shares remaining available for issuance under the prior Non-employee Directors’ Stock Option Plan. No further awards can be granted under this plan.

Employee Stock Purchase Plan
In April 1997, the Company adopted its Employee Stock Purchase Plan ("ESPP"), which is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. All regular full-time employees

76
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

of the Company (including officers) and all other employees who meet the eligibility requirements of the plan may participate in the ESPP. The ESPP provides eligible employees an opportunity to acquire the Company’s common stock at 85% of the lower of the closing price per share of the Company’s common stock on the first or last day of each six-month purchase period. At March 29, 2014, 3.8 million shares were available for future issuance under this plan, subject to anti-dilution adjustments in the event of certain changes in the capital structure of the Company. The Company makes no cash contributions to the ESPP, but bears the expenses of its administration. The Company issued 1.0 million shares under the ESPP in fiscal 2014.

For fiscal years 2014, 2013 and 2012, the primary share-based awards and their general terms and conditions are as follows:

Stock options are granted to employees with an exercise price equal to the market price of the Company’s stock at the date of grant, generally vest over a four-year period from the grant date, and generally expire 10 years from the grant date. Restricted stock units granted by the Company in fiscal years 2014, 2013 and 2012 are either service-based, performance and service-based, or based on shareholder return. Service-based restricted stock units generally vest over a four-year period from the grant date. Performance and service-based restricted stock units are earned based on Company performance of stated metrics generally during the fiscal year and, if earned, vest one-half when earned and the balance over two years. Restricted stock units based on shareholder return are earned based upon total shareholder return of the Company in comparison to the total shareholder return of a benchmark index and vest over one-year, two-year and three-year performance periods. Under the 2012 Plan for fiscal years 2014 and 2013 and the 2006 Directors’ Stock Option Plan for fiscal 2012, stock options granted to non-employee directors (other than initial options, as described below) had an exercise price equal to the market price of the Company’s stock at the date of grant, vested immediately upon grant and expire 10 years from the grant date. Each non-employee director who is first elected or appointed to the Board of Directors will receive an initial option at an exercise price equal to the market price of the Company’s stock at the date of grant, which vests over a two-year period from the grant date and expires 10 years from the grant date. At the director’s option, he may instead elect to receive all or part of the initial grant in restricted stock units. Thereafter, each non-employee director is eligible to receive an annual option or, if he so chooses, an annual grant of restricted stock units.

The options and restricted stock units granted to certain officers of the Company generally will, in the event of the officer's termination other than for cause, continue to vest pursuant to the same vesting schedule as if the officer had remained an employee of the Company (unless the administrator of the plan determines otherwise) and as a result, these awards are expensed at grant date. In fiscal 2014, share-based compensation of $11.0 million was recognized upon the grant of 2.2 million options and restricted share units to certain officers of the Company.

Share-Based Compensation

Under ASC 718, share-based compensation cost is measured at the grant date, based on the estimated fair value of the award using an option pricing model, and is recognized as expense over the employee's requisite service period. ASC 718 covers a wide range of share-based compensation arrangements including stock options, restricted share plans, performance-based awards, share appreciation rights and employee stock purchase plans.

Total pre-tax share-based compensation expense recognized in the Consolidated Statements of Operations was $29.9 million for fiscal 2014, net of expense capitalized into inventory. For fiscal years 2013 and 2012, the total pre-tax share-based compensation expense recognized was $30.8 million and $26.2 million, respectively.

A summary of activity of the Company’s director and employee stock option plans follows:

77
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

 




Shares
(in thousands)
 


Weighted-
Average
Exercise
Price
 
Weighted-Average Remaining Contractual Term (in years)
 


Aggregate
Intrinsic
Value
(in thousands)
Outstanding as of March 30, 2013
10,634
 
$
5.92

 
 
 
 
Granted
358
 
$
5.03

 
 
 
 
Exercised
(2,267)
 
$
5.48

 
 
 
 
Canceled
(1,701)
 
$
6.94

 
 
 
 
Forfeited
(11)
 
$
5.92

 
 
 
 
Outstanding as of March 29, 2014
7,013
 
$
5.77

 
3.11
 
$
13,558

Vested and expected to vest as of
March 29, 2014
7,003
 
$
5.77

 
3.10
 
$
13,527

Options exercisable as of March 29, 2014
6,476
 
$
5.83

 
2.68
 
$
12,102


The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, based upon the Company’s closing stock price of $7.70 as of March 29, 2014, that would have been received by the option holders had all option holders with in-the-money options exercised their options as of that date.

The fair value of each option award is estimated on the date of grant using a Black-Scholes option-pricing model based on the assumptions noted in the following tables:
 
Fiscal Year
 
2014
2013
2012
Expected volatility
43.2
%
51.6
%
57.2
%
Expected dividend yield
0.0
%
0.0
%
0.0
%
Expected term (in years)
5.5

5.5

5.4

Risk-free interest rate
1.4
%
0.8
%
1.4
%
Weighted-average grant-date fair value of options granted during the period
$
2.08

$
1.80

$
3.19


The total intrinsic value of options exercised during fiscal 2014, was $3.1 million. For fiscal years 2013 and 2012, the total intrinsic value of options exercised was $0.5 million and $2.6 million, respectively.

Cash received from the exercise of stock options and from participation in the employee stock purchase plan (excluding accrued employee refunds) was $17.1 million for fiscal 2014 and is reflected in cash flows from financing activities in the Consolidated Statements of Cash Flows. The Company settles employee stock options with newly issued shares of the Company's common stock.

The Company used the implied volatility of market-traded options on the Company’s common stock for the expected volatility assumption input to the Black-Scholes option-pricing model, consistent with the guidance in ASC 718. The selection of implied volatility data to estimate expected volatility was based upon the availability of actively-traded options on the Company’s common stock and the Company’s assessment that implied volatility is more representative of future common stock price trends than historical volatility.

The dividend yield assumption is based on the Company’s history and expectation of future dividend payouts and may be subject to change in the future. The Company has never paid a dividend.

The expected life of employee stock options represents the weighted-average period that the stock options are expected to remain outstanding. The Company’s method of calculating the expected term of an option is based on the assumption that all outstanding options will be exercised at the midpoint of the current date and full contractual term, combined with the average life of all options that have been exercised or canceled. The Company believes

78
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

that this method provides a better estimate of the future expected life based on analysis of historical exercise behavioral data.

The risk-free interest rate assumption is based upon observed interest rates appropriate for the terms of the Company’s employee stock options.

ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Based upon historical pre-vesting forfeiture experience, the Company assumed an annualized forfeiture rate of 1.5% for both stock options and restricted stock units.

The following activity has occurred with respect to restricted stock unit awards:
 

Shares
(in thousands)
 
Weighted-Average
Grant-Date
Fair Value
Balance at March 30, 2013
10,547

 
$
4.63

Granted
5,328

 
4.59

Vested
(5,713)

 
4.76

Forfeited
(972)

 
4.53

Balance at March 29, 2014
9,190

 
$
4.53


As of March 29, 2014, total remaining unearned compensation cost related to nonvested restricted stock units was $22.0 million, which will be amortized over the weighted-average remaining service period of approximately 1.2 years.

The total fair value of restricted stock units that vested during fiscal 2014 was $30.0 million, based upon the fair market value of the Company’s common stock on the vesting date. For fiscal years 2013 and 2012, the total fair value of restricted stock units that vested was $21.0 million and $35.8 million, respectively.

16.    SHAREHOLDERS’ EQUITY

Share Repurchase

On January 25, 2011, the Company announced that its board of directors authorized the repurchase of up to $200 million of its outstanding common stock, exclusive of related fees, commissions or other expenses, from time to time during a period commencing on January 28, 2011 and expiring on January 27, 2013.  This share repurchase program authorizes the Company to repurchase shares through solicited or unsolicited transactions in the open market or in privately negotiated transactions. On January 31, 2013, the Company's board of directors authorized an extension of its 2011 share repurchase program to repurchase up to $200 million of its outstanding common stock through January 31, 2015. Because of the Company's incorporation in North Carolina, which does not recognize treasury shares, the repurchased shares are canceled at the time of repurchase. Shares repurchased are deemed authorized but unissued shares of common stock.

During fiscal 2014, the Company repurchased 2.5 million shares at an average price of $5.03 on the open market. During fiscal 2013, the Company repurchased approximately 1.9 million shares at an average price of $3.75 on the open market and during fiscal 2012, the Company repurchased approximately 4.9 million shares at an average price of $6.18 on the open market. Since January 2011, the Company repurchased a total of approximately 11.0 million shares of our common stock under this program at an average price of $5.70 on the open market for a total of $62.6 million. As of March 29, 2014, approximately $137.4 million remains available for repurchase.

Common Stock Reserved For Future Issuance

At March 29, 2014, the Company had reserved a total of approximately 48.7 million of its authorized 500.0 million shares of common stock for future issuance as follows (in thousands):


79
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

Outstanding stock options under formal directors’ and employees’ stock option plans
7,013
Possible future issuance under Company stock option plans
20,266
Employee stock purchase plan
3,812
Restricted share-based units granted
9,190
Possible future issuance pursuant to convertible subordinated notes*
8,444
Total shares reserved
48,725

*The 2014 Notes became due on April 15, 2014, and the remaining principal balance of $87.5 million was paid with cash on hand, therefore, the conversion feature will not be triggered.

17.    OPERATING SEGMENT AND GEOGRAPHIC INFORMATION

RFMD’s operating segments as of March 29, 2014 are its Cellular Products Group (CPG), Multi-Market Products Group (MPG) and Compound Semiconductor Group (CSG).

CPG is a leading global supplier of cellular radio frequency (RF) solutions which perform various functions in the cellular front end section.  The cellular front end section is located between the transceiver and the antenna.  These RF solutions include power amplifier (PA) modules, transmit modules, PA duplexer modules, antenna control solutions, antenna switch modules, switch filter modules,  switch duplexer modules, and RF power management solutions.  CPG supplies its broad portfolio of cellular RF solutions into a variety of mobile devices, including smartphones, handsets, notebook computers and tablets.

MPG is a leading global supplier of a broad array of RF solutions, such as PAs, low noise amplifiers, variable gain amplifiers, high power gallium nitride transistors, attenuators, modulators, switches, voltage-controlled oscillators (VCOs), phase locked loop modules, multi-chip modules, front end modules, and a range of military and space components (amplifiers, mixers, VCOs and power dividers). Major communications applications include mobile wireless infrastructure, point-to-point and microwave radios, small cells, WiFi (routers, access points, mobile devices and customer premises equipment) and cable television (CATV) infrastructure. Industrial applications include Smart Energy/Advanced Metering Infrastructure (AMI), private mobile radio, and test and measurement equipment. Aerospace and defense applications include military communications, radar and electronic warfare, as well as space communications.

During the second quarter of fiscal 2013, the Company's foundry services were realigned from its CSG to its MPG. CSG is a business group established to leverage RFMD’s compound semiconductor technologies and related expertise in RF and non-RF end markets and applications. 

As of March 29, 2014, the Company’s reportable segments are CPG and MPG. CSG does not currently meet the quantitative threshold for an individually reportable segment under ASC 280-10-50-12 and is therefore included in the “Other operating segment” line in the following tables. CPG and MPG are separate reportable segments based on the organizational structure and information reviewed by the Company’s Chief Executive Officer, who is the Company’s chief operating decision maker (or CODM), and are managed separately based on the end markets and applications they support. The CODM allocates resources and assesses the performance of each operating segment primarily based on non-GAAP operating income (loss) and non-GAAP operating income (loss) as a percentage of revenue.

The “All other” category includes operating expenses such as share-based compensation, amortization of purchased intangible assets, acquisition-related costs, loss on asset transfer transaction, intellectual property rights (IPR) litigation costs, the inventory revaluation resulting from the transfer of the Company's molecular beam epitaxy (“MBE”) operations, net restructuring costs, certain consulting costs, expenses related to a potential strategic transaction that was terminated and other miscellaneous corporate overhead expenses that the Company does not allocate to its reportable segments because these expenses are not included in the segment operating performance measures evaluated by the Company’s CODM. The CODM does not evaluate operating segments using discrete asset information. The Company’s operating segments do not record inter-company revenue. The Company does not allocate gains and losses from equity investments, interest and other income, or taxes to operating segments. Except as discussed above regarding the “All other” category, the Company’s accounting policies for segment reporting are the same as for RFMD as a whole.



80
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

The following tables present details of the Company’s reportable segments and a reconciliation of the “All other” category (in thousands):
 
Fiscal Year
 
2014
 
2013
 
2012
Revenue:
 
 
 
 
 
CPG
$
935,313

 
$
761,425

 
$
664,242

MPG
212,897

 
202,722

 
207,110

Other operating segment
21

 
—

 
—

Total revenue
$
1,148,231

 
$
964,147

 
$
871,352

Income (loss) from operations:
 
 
 
 
 
CPG
$
109,862

 
$
52,574

 
$
61,776

MPG
32,315

 
11,181

 
10,930

Other operating segment
(3,363
)
 
(2,766
)
 
(3,511
)
All other
(111,473
)
 
(76,669
)
 
(44,552
)
Income (loss) from operations
$
27,341

 
$
(15,680
)
 
$
24,643

Interest expense
$
(5,983
)
 
$
(6,532
)
 
$
(10,997
)
Interest income
179

 
249

 
468

Loss on retirement of convertible subordinated notes
—

 
(2,756
)
 
(908
)
Other income (expense)
2,336

 
(1,180
)
 
2,422

Income (loss) before income taxes
$
23,873

 
$
(25,899
)
 
$
15,628


 
Fiscal Year
 
2014
 
2013
 
2012
Reconciliation of “All other” category:
 
 
 
 
 
Share-based compensation expense
$
(29,901
)
 
$
(30,819
)
 
$
(26,174
)
Amortization of intangible assets
(28,638
)
 
(23,107
)
 
(18,390
)
Acquired inventory step-up and revaluation
—

 
(3,140
)
 
—

Impairment of intangible asset
(11,300
)
 
—

 
—

Acquisition and integration related costs
(8,105
)
 
(2,765
)
 
—

Restructuring and disposal costs associated with the phase out of manufacturing and sale of the U.K. facility
(8,118
)
 
(1,365
)
 
—

Loss on asset transfer transaction
—

 
(5,042
)
 
—

IPR litigation costs
(7,578
)
 
(5,955
)
 
—

Inventory revaluation resulting from transfer of MBE operations
—

 
(2,518
)
 
—

Certain consulting expense
(11,295
)
 
—

 
—

Other expenses (including restructuring, (gain) loss on property and equipment, and start-up costs)
(6,538
)
 
(1,958
)
 
12

Loss from operations for “All other”
$
(111,473
)
 
$
(76,669
)
 
$
(44,552
)

The consolidated financial statements include revenue to customers by geographic region that are summarized as follows (in thousands):
 
Fiscal Year
 
2014
 
2013
 
2012
Revenue:
 
 
 
 
 
United States
$
342,805

 
$
296,442

 
$
246,661

International
805,426

 
667,705

 
624,691


81
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

 
Fiscal Year
 
2014
2013
2012
Revenue:
 
 
 
United States
30%
31%
28%
Asia
66
63
65
Europe
4
6
5
Central and South America
—
—
1
Other
—
—
1

The consolidated financial statements include the following long-lived asset amounts related to operations of the Company by geographic region (in thousands):
 
Fiscal Year
 
2014
 
2013
 
2012
Long-lived tangible assets:
 
 
 
 
 
United States
$
120,885

 
$
114,635

 
$
130,665

International
75,111

 
76,891

 
67,256


Sales, for geographic disclosure purposes, are based on the “sold to” address of the customer. The “sold to” address is not always an accurate representation of the location of final consumption of the Company’s components. Of the Company’s total revenue for fiscal 2014, approximately 41% ($468.0 million) was from customers in China and 17% ($190.6 million) from customers in Taiwan. Long-lived tangible assets primarily include property and equipment and at March 29, 2014, approximately $69.7 million (or 36%) of the Company’s total property and equipment was located in China.


82
RF Micro Devices, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

18.    QUARTERLY FINANCIAL SUMMARY (UNAUDITED):

Fiscal 2014 Quarter
 
 
 
 
 
 
 
 
(in thousands, except
 
 
 
 
 
 
 
 
per share data)
First
 
Second
 
Third
 
Fourth
 
Revenue
$
292,996

 
$
310,716

 
$
288,520

 
$
255,999

 
Gross profit
93,469

 
104,656

 
107,523

 
99,279

 
Net income (loss)
1,561

(5) 
5,892

(5) 
6,235

(5),(6) 
(1,046
)
(5),(7) 
Net income (loss) per share:
 
 
 
 
 
 
 
 
Basic
$
0.01

 
$
0.02

 
$
0.02

 
$
(0.00
)
 
Diluted
$
0.01

 
$
0.02

 
$
0.02

 
$
(0.00
)
 
 
 
 
 
 
 
 
 
 
Fiscal 2013 Quarter
 
 
 
 
 
 
 
 
(in thousands, except
 
 
 
 
 
 
 
 
per share data)
First
 
Second
 
Third
 
Fourth
 
Revenue
$
202,660

 
$
209,671

 
$
271,213

(2) 
$
280,603

(3) 
Gross profit
64,254

 
66,535

 
86,810

 
88,216

 
Net loss
(19,139
)
(1) 
(16,456
)
 
(1,443
)
(2) 
(15,961
)
(3),(4) 
Net loss per share:
 
 
 
 
 
 
 
 
Basic
$
(0.07
)
 
$
(0.06
)
 
$
(0.01
)
 
$
(0.06
)
 
Diluted
$
(0.07
)
 
$
(0.06
)
 
$
(0.01
)
 
$
(0.06
)
 

1. In the first quarter of fiscal 2013, the Company realized a loss of $5.0 million related to the transfer of its MBE growth operations to IQE (see Note 6).
2. Amalfi's results of operations (revenue of $5.4 million and an operating loss of $5.9 million) are included in the Company's Statement of Operations in the third quarter of fiscal 2013 (see Note 5).
3. Amalfi's results of operations (revenue of $11.1 million and an operating loss of $3.6 million) are included in the Company's Statement of Operations in the fourth quarter of fiscal 2013 (see Note 5).
4. Income tax expense for the fourth quarter of fiscal 2013 includes the effects of an increase of a valuation reserve against the U.K. net deferred tax asset as a result of the decision to phase out manufacturing at the U.K. facility (see Note 13).
5. The Company recorded restructuring expenses of $2.9 million, $2.3 million, $3.0 million, and $2.9 million, in the first, second, third and fourth quarters of fiscal 2014, respectively (Note 12).
6. In the third quarter of fiscal 2014, the Company recorded acquisition related expenses of $2.9 million (Note 7).
7. In the fourth quarter of fiscal 2014, the Company impaired intangible assets of $11.3 million (Note 8) and recorded acquisition and integration related expenses of $2.2 million (Note 7).

The Company uses a 52- or 53-week fiscal year ending on the Saturday closest to March 31 of each year. The first fiscal quarter of each year ends on the Saturday closest to June 30, the second fiscal quarter of each year ends on the Saturday closest to September 30 and the third fiscal quarter of each year ends on the Saturday closest to December 31. Each quarter of fiscal 2014 and fiscal 2013 contained a comparable number of weeks (13 weeks).






83

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING


RF Micro Devices and Subsidiaries

Management of the Company is responsible for the preparation, integrity, accuracy and fair presentation of the Consolidated Financial Statements appearing in our Annual Report on Form 10-K for the fiscal year ended March 29, 2014. The financial statements were prepared in conformity with generally accepted accounting principles in the United States (GAAP) and include amounts based on judgments and estimates by management.

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Consolidated Financial Statements in accordance with GAAP. Our internal control over financial reporting is supported by internal audits, appropriate reviews by management, policies and guidelines, careful selection and training of qualified personnel, and codes of ethics adopted by our Company's Board of Directors that are applicable to all directors, officers and employees of our Company.

Because of its inherent limitations, no matter how well designed, internal control over financial reporting may not prevent or detect all misstatements. Internal controls can only provide reasonable assurance with respect to financial statement preparation and presentation. Further, the evaluation of the effectiveness of internal control over financial reporting was made as of a specific date, and continued effectiveness in future periods is subject to the risks that the controls may become inadequate because of changes in conditions or that the degree of compliance with the policies and procedures may decline.

Management assessed the effectiveness of the Company’s internal control over financial reporting, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, as of March 29, 2014. In conducting this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control--Integrated Framework (1992 framework). Based on our assessment, management believes that the Company maintained effective internal control over financial reporting as of March 29, 2014.

The Company’s auditors, Ernst & Young LLP, an independent registered public accounting firm, are appointed by the Audit Committee of the Company’s Board of Directors. Ernst & Young LLP has audited and reported on the Consolidated Financial Statements of RF Micro Devices, Inc. and subsidiaries and has issued an attestation report on the Company’s internal control over financial reporting. The reports of the independent registered public accounting firm are contained in this Annual Report on Form 10-K for the fiscal year ended March 29, 2014.

84

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting


The Board of Directors and Shareholders of RF Micro Devices, Inc. and Subsidiaries

We have audited RF Micro Devices, Inc. and Subsidiaries’ internal control over financial reporting as of March 29, 2014, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). RF Micro Devices, Inc. and Subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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

In our opinion, RF Micro Devices, Inc. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of March 29, 2014, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of RF Micro Devices, Inc. and Subsidiaries as of March 29, 2014 and March 30, 2013, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended March 29, 2014 of RF Micro Devices, Inc. and Subsidiaries and our report dated May 21, 2014 expressed an unqualified opinion thereon.
            
/s/ Ernst & Young LLP

Charlotte, North Carolina    

May 21, 2014


85

Report of Independent Registered Public Accounting Firm


The Board of Directors and Shareholders of RF Micro Devices, Inc. and Subsidiaries


We have audited the accompanying consolidated balance sheets of RF Micro Devices, Inc. and Subsidiaries as of March 29, 2014 and March 30, 2013, and the related consolidated statements of operations, comprehensive income (loss), shareholders' equity, and cash flows for each of the three years in the period ended March 29, 2014. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). 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 RF Micro Devices, Inc. and Subsidiaries at March 29, 2014 and March 30, 2013, and the consolidated results of their operations and their cash flows for each of the three years in the period ended March 29, 2014, 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), RF Micro Devices, Inc. and Subsidiaries’ internal control over financial reporting as of March 29, 2014, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated May 21, 2014 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Charlotte, North Carolina

May 21, 2014


86

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES.

(a) Evaluation of disclosure controls and procedures

As of the end of the period covered by this report, the Company’s management, with the participation of the Company's Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures in accordance with Rule 13a-15 under the Exchange Act. Based on their evaluation as of the end of the period covered by this report, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective, as of such date, to enable the Company to record, process, summarize and report in a timely manner the information that the Company is required to disclose in its Exchange Act reports. The Company's Chief Executive Officer and Chief Financial Officer also concluded that the Company’s disclosure controls and procedures were effective, as of the end of the period covered by this report, in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Internal control over financial reporting

Our Report of Management on Internal Control Over Financial Reporting is included with the financial statements in Part II, Item 8 of this Annual Report on Form 10-K and is incorporated herein by reference.

The Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting is included with the financial statements in Part II, Item 8 of this Annual Report on Form 10-K and is incorporated herein by reference.

(c) Changes in internal control over financial reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended March 29, 2014, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

BOARD OF DIRECTORS
Under our amended and restated bylaws, the Board of Directors (the “Board”) consists of seven to eleven members, as determined by the Board or the shareholders from time to time. Each director is elected annually to serve for a one-year term and until his successor is duly elected and qualified or until his death, resignation, removal or disqualification or until there is a decrease in the number of directors. There are no family relationships among any of our directors or officers. The names of our directors, their ages as of May 2, 2014, and their principal occupations and certain other information, follow:
Walter H. Wilkinson, Jr.    Age: 68

Mr. Wilkinson has served as a director since 1992 and has served as our Chairman of the Board of Directors since July 2008. He is the founder and a general partner of Kitty Hawk Capital, a venture capital firm

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established in 1980 and based in Charlotte, North Carolina. He currently serves on the board of the N.C. State University Foundation and has previously served on the boards of other universities and related organizations. He is a past member and director of the National Venture Capital Association and is a past member and Chairman of the National Association of Small Business Investment Companies. He is currently Chairman of the Carolinas Chapter of the National Association of Corporate Directors (“NACD”) and is a NACD Leadership Fellow, having completed the NACD’s program for corporate directors. During his career he has helped to start or expand dozens of rapidly growing companies in a variety of industries. Mr. Wilkinson serves or has served as a director of numerous venture-backed companies, both public and private.
Mr. Wilkinson was selected as a director due to his strong leadership skills and his valuable understanding of our history gained as a founding investor. With over 35 years of venture capital experience, Mr. Wilkinson also brings a unique perspective to the Board. He has overseen the successful growth and evolution of numerous businesses and understands the challenges of leading both private and public companies through changing economic conditions and that boards of directors must work together in a collegial and effective manner to provide appropriate guidance to management.
Robert A. Bruggeworth
Age: 53

Mr. Bruggeworth has served as our President since June 2002 and Chief Executive Officer since January 2003. He was appointed to the Board of Directors in January 2003. He served as our Vice President of Wireless Products from September 1999 to January 2002 and President of Wireless Products from January 2002 to June 2002. Mr. Bruggeworth was previously employed at AMP Inc. (now TE Connectivity LTD), a supplier of electrical and electronic connection devices, from July 1983 to April 1999. He held a number of manufacturing and engineering management positions at AMP Inc., most recently as Divisional Vice President of Global Computer and Consumer Electronics based in Hong Kong, China. Mr. Bruggeworth is a member of the board of directors of Mine Safety Appliances Company, a publicly traded global leader in the development, manufacture and supply of sophisticated safety products that protect people’s health and safety.
 
Mr. Bruggeworth was selected as a director because his position as Chief Executive Officer and President puts him directly in a position to understand our business and the challenges and issues that we face. In addition, Mr. Bruggeworth provides the Board with strong leadership skills and substantial global business experience. Mr. Bruggeworth brings over 25 years of experience in the technology sector to the Board, including specific expertise with respect to manufacturing, marketing and material sourcing for high technology products.
Daniel A. DiLeo
Age: 66
 
Mr. DiLeo was elected to the Board of Directors in August 2002. He is currently the principal of Dan DiLeo, LLC, a consulting firm that he founded in March 2002. Mr. DiLeo was an Executive Vice President of Agere Systems Inc., a manufacturer of semiconductor components and optoelectronics, from March 2001 to April 2002. He served as President of the Optoelectronics Division of Lucent Technologies, Inc., a manufacturer of semiconductor components and optoelectronics, from November 1999 to March 2001, Vice President from June 1998 to October 1999 and Vice President of the wireless business unit from January 1995 to May 1998. He currently sits on the board and/or advises several private semiconductor device companies in the U.S. and Europe. From May 2000 to May 2009, Mr. DiLeo also served as a director of Data I/O Corporation, a publicly traded company that designs and manufactures equipment and software to program devices for original equipment manufacturers.
 
Mr. DiLeo was selected as a director because he has over 35 years of experience in the semiconductor industry, including specific expertise in device design, development, manufacturing and marketing. He has advised the boards of directors of several high tech start-ups in Europe and the U.S. with a focus on early stage and turnaround strategies and funding, and has acted as a mentor to new CEOs. In addition, Mr. DiLeo also brings to the Board extensive knowledge of global markets, capital expansion and strategic development.





Jeffery R. Gardner
Age: 54

Mr. Gardner was appointed to the Board of Directors in November 2004. Since January 2006, Mr. Gardner has been the President, Chief Executive Officer and a member of the board of directors of Windstream Corporation, a publicly traded spin-off of the landline business of ALLTEL Corporation that provides voice, broadband and entertainment services to customers in 48 states. From January 2000 to December 2005, Mr. Gardner was the Executive Vice President and Chief Financial Officer of ALLTEL. From August 1998 to January 2000, he was the Senior Vice President of Finance and the Treasurer of ALLTEL. He is currently an NACD Leadership Fellow, having completed the NACD’s program for corporate directors. Mr. Gardner is a member of the Business Roundtable, an association of chief executive officers of leading U.S. companies. He also is former Chairman of the United States Telecom Association. Mr. Gardner has been in the communications industry since 1986 and joined ALLTEL in 1998 when ALLTEL and 360 Communications Company merged. At 360 Communications, Mr. Gardner held a variety of senior management positions, including: Senior Vice President of Finance, which included treasury, accounting and capital markets responsibilities; President of the Mid-Atlantic Region; Vice President and General Manager of the Las Vegas market; and Director of Finance. Since 2008, he has served as a member of the Executive Committee of USTelecom, a telecommunications trade association.
 
Mr. Gardner was selected as a director because his experience as a current CEO and former CFO of public companies in the wireless telecommunications industry provides the Board with valuable industry insight, including extensive knowledge regarding the requirements of downstream customers. Additionally, Mr. Gardner brings to the Board specific expertise in the areas of strategic development, finance, financial reporting and accounting and internal controls.
John R. Harding
Age: 59

Mr. Harding was appointed to the Board of Directors in November 2006. Mr. Harding co-founded and is Chairman, President and Chief Executive Officer of eSilicon Corporation, a privately held company that designs and manufactures complex, custom chips for a broad and growing portfolio of large and small firms. Before starting eSilicon Corporation in May 2000, Mr. Harding served as President, Chief Executive Officer, and director of the publicly traded Cadence Design Systems, Inc., which acquired his former employer, Cooper & Chyan Technology, Inc. Mr. Harding has held a variety of senior management positions at Zycad Corporation and his career also includes positions with TXL and IBM Corporation. Mr. Harding has also held leadership roles at Drew University and Indiana University (IU), where he was Vice Chairman of the Board of Trustees and a member of IU’s School of Public and Environmental Affairs Advisory Board, respectively. In addition, Mr. Harding currently serves on the board of directors of AMD and has served as a member of the Steering Committee at the U.S. Council on Competitiveness and was a former National Academies' Committee member for Software, Growth and Future of the U.S. Economy. In 2012, Mr. Harding was re-elected as the value chain producer director to the board of directors of the Global Semiconductor Alliance, a position he has held since 2010. Mr. Harding is a frequent international speaker on the topics of innovation, entrepreneurship and semiconductor trends and policies.
 
Mr. Harding was selected as a director because his experience as Chairman and CEO of eSilicon Corporation provides the Board with a deep understanding of the challenges and issues facing semiconductor companies. In addition, Mr. Harding brings to the Board substantial operational experience, business acumen, and expertise in corporate strategy development gained from his experience as an entrepreneur starting several successful companies.
Masood A. Jabbar
Age: 64

Mr. Jabbar was appointed to the Board of Directors in March 2009. Mr. Jabbar is a private investor in start-up companies. Mr. Jabbar worked at Sun Microsystems, Inc. from 1986 to 2003, where he served in a series of progressively responsible roles including President of the Computer Systems Division, Chief Financial Officer of the $10 billion Sun Microsystems Computer Corporation, and Executive Vice President of Global Sales Operations. Mr. Jabbar’s career at Sun Microsystems, Inc. culminated as Executive Vice President and Advisor to the Chief Executive Officer, where he was responsible for advising the CEO on critical strategic issues. Prior to joining Sun Microsystems, Inc., Mr. Jabbar spent ten years in finance and accounting at Xerox Corporation and two years at



IBM Corporation. Mr. Jabbar is also a member of the Board of Directors of Silicon Image, Inc., a publicly traded fabless semiconductor company serving consumer electronics markets, JDS Uniphase Corporation, a publicly traded optical communications, test and measurement company, Calypso Technology Inc., a privately held company in the United States, and Trice Imaging, Inc., a privately held company in the United States. Mr. Jabbar previously served as a member of the board of directors of MSC Software, Inc., a former publicly traded design automation simulation software company, from June 2005 to February 2007 and again from March 2009 to September 2009, and Openwave Systems Inc., a publicly traded designer of software for mobile devices and wireless infrastructure, from August 2003 to November 2007. Mr. Jabbar also served as a member of the board of directors of The Picsel Group, a mobile user interface software company based in the United Kingdom, from January 2003 to May 2009.
 
Mr. Jabbar was selected as a director because he brings to the Board significant mergers and acquisitions and sales and marketing expertise gained from his experience at Sun Microsystems, Inc. Mr. Jabbar also brings extensive experience as an executive in sales and marketing with significant international experience. In addition, Mr. Jabbar's experiences at Xerox and as CFO of Sun Microsystems Computer Corporation provide the Board with valuable accounting and financial reporting expertise.
Casimir S. Skrzypczak
Age: 73

Mr. Skrzypczak was appointed to the Board of Directors in November 2007. Prior to serving as one of our directors, Mr. Skrzypczak served as a director of Sirenza Microdevices, Inc., or Sirenza, from January 2000 until it was acquired by us in November 2007. Mr. Skrzypczak’s appointment to our Board was made pursuant to the merger agreement for the Sirenza acquisition. From November 1999 to July 2001, Mr. Skrzypczak served as a Senior Vice President at Cisco Systems, a networking systems company, where he was responsible for the delivery and support of Cisco’s Products and Solutions for the Service Provider Market. He also managed Cisco’s worldwide Professional Services Group. Prior to joining Cisco, Mr. Skrzypczak served as a Group President at Telcordia Technologies, a telecommunications company, from March 1997 to October 1999. From 1985 to March 1997, Mr. Skrzypczak served as President of NYNEX Science & Technology, Inc., a subsidiary of NYNEX Corporation, a telecommunications company. At NYNEX, Mr. Skrzypczak was responsible for the formulation of NYNEX’s technology plans and network architecture, including the management and direction of NYNEX’s research and development programs. Mr. Skrzypczak also serves on the board of directors of a number of privately held companies. He previously served as a director of JDS Uniphase Corporation, a publicly traded optical communications, test and measurement company, from July 1997 to November 2011; RCN Corporation, a publicly traded cable service provider, from October 2009 to August 2010; ECI Telecom Ltd., a publicly traded supplier of telecommunications networking solutions, from July 2002 to September 2007; WebEx Communications, a publicly traded provider of web communications services, from August 2002 to June 2007; and Somera Communications, a publicly traded refurbished network equipment supplier, from October 2003 to September 2006.
 
Mr. Skrzypczak was selected as a director because his experience as a director of Sirenza provides the Board with valuable insight into the Multi-Market Products Group, or MPG, business. Additionally, Mr. Skrzypczak brings to the Board valuable public company board experience, including service as a lead director and chairman of a compensation committee and a governance committee. Due to Mr. Skrzypczak’s many years of experience in the technology sector, he is widely regarded as an expert on telecommunications network design, planning and evolution. Mr. Skrzypczak also contributes valuable strategic planning skills gained from his experience at NYNEX.



EXECUTIVE OFFICERS
Our current executive officers, their ages as of May 2, 2014, and titles are as follows:

Name
 
Age
 
Title
Robert A. Bruggeworth
 
53
 
President and Chief Executive Officer
Barry D. Church
 
52
 
Vice President, Corporate Controller and Principal Accounting Officer
Steven E. Creviston
 
50
 
Corporate Vice President and President of Cellular Products Group
Norman A. Hilgendorf
 
53
 
Corporate Vice President and President of Multi-Market Products Group
William A. Priddy, Jr.
 
53
 
Chief Financial Officer, Corporate Vice President of Administration and Secretary
Suzanne B. Rudy
 
59
 
Vice President, Corporate Treasurer, Compliance Officer and Assistant Secretary
James D. Stilson
 
67
 
Corporate Vice President of Operations
Certain information with respect to our executive officers is provided below. Officers are appointed to serve at the discretion of the Board. Information regarding Mr. Bruggeworth is included in the director profiles set forth above.
Barry D. Church has served as Vice President, Corporate Controller and Principal Accounting Officer since September 2001. He began his employment with us in March 1998. From March 1998 until August 1998, Mr. Church was Manager of Financial Planning and from September 1998 until September 2001 he was Controller. In addition to his tenure at RFMD, Mr. Church has 13 years of experience in various financial positions at Sara Lee Corporation and AT&T, Inc.
Steven E. Creviston has served as Corporate Vice President and President of Cellular Products Group, or CPG, since August 2007. From May 2002 to August 2007, he served as a Corporate Vice President of CPG, which was known as Wireless Products until April 2004. He began his employment with RFMD in December 1994 as Strategic Account Manager. From May 1997 to May 1999, Mr. Creviston was Director of Account Management, from June 1999 to April 2001 he was Product Line Director, and from May 2001 to May 2002 he was Divisional Vice President.
Norman A. Hilgendorf has served as President of RFMD’s Multi-Market Products Group, or MPG, since October 2011. From November 2007 until October 2011, he served as Vice President, Business Development. From 2000 to 2007, Mr. Hilgendorf served in a variety of roles for Sirenza Microdevices, Inc., which was acquired by RFMD in November 2007, including Chief Operating Officer, President – SMDI Segment, Chief Strategy Officer, VP Business Development and Strategic Marketing, and VP Sales and Marketing. Prior to Sirenza, he was Vice President and General Manager at Richardson Electronics, Ltd., a distributor of electronic components.
William A. Priddy, Jr. has served as Chief Financial Officer and Corporate Vice President of Administration since July 1997 and as Secretary since July 2003. He was Controller from December 1991 to December 1993, Treasurer and Controller from December 1993 to September 1998, and Vice President of Finance from December 1994 to July 1997. Prior to joining RFMD, Mr. Priddy was employed for five years with Analog Devices, Inc. in various positions in finance and marketing.
Suzanne B. Rudy has served as Vice President and Corporate Treasurer since November 2002 and as Compliance Officer and Assistant Secretary since January 2004. She has also served on the board of directors of Delta Apparel, Inc. since January 2012 and is currently an NACD Leadership Fellow. She was Corporate Treasurer from May 1999 until November 2002. Prior to joining RFMD, Ms. Rudy was employed for eight years at Precision Fabrics Group Inc. as Controller and for six years at BDO Seidman, LLP, most recently as a Tax Manager.
James D. Stilson has served as Corporate Vice President of Operations since January 2004. From July 1999 to January 2004, Mr. Stilson was the President of ASE Korea, Inc., a semiconductor assembly and test solution provider. From November 1997 to July 1999, he was the General Manager of Motorola Korea Ltd., which was purchased by the ASE Group to form ASE Korea, Inc. From April 1995 to November 1997, he was the Assistant General Manager of Motorola Korea Ltd.
 




SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under federal securities laws, RFMD’s directors, officers and beneficial owners of more than ten percent of RFMD’s common stock are required to report their beneficial ownership of common stock and any changes in that ownership to the SEC. Specific dates for such reporting have been established, and we are required to report any failure to file by the established dates. To our knowledge, all of these filing and reporting requirements were satisfied by our directors, officers and principal shareholders during the most recent fiscal year.
CODES OF ETHICS
Effective February 2004 and as most recently amended in May 2011, the Board adopted a Code of Business Conduct and Ethics to provide guidance on maintaining our commitment to high ethical standards. The Code of Business Conduct and Ethics applies to employees, officers, directors, agents and designated representatives of RFMD and our subsidiaries. We also adopted a separate code of ethics in February 2004 that is applicable specifically to the Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer or Controller and Treasurer.
Copies of both of these codes are available in the “Investors” section of our website under the heading “Corporate Governance” at http://www.rfmd.com or may be obtained by contacting the Investor Relations Department at 7628 Thorndike Road, Greensboro, North Carolina 27409-9421. In the event that we amend one or more of the provisions of either of our codes that requires disclosure under applicable law, SEC rules or NASDAQ listing standards, we intend to disclose such amendment on our website. Any waiver of the codes with respect to any executive officer or director of RFMD must be approved by the Board and will be promptly disclosed, along with the reasons for the waiver, as required by applicable law or NASDAQ rules.
AUDIT COMMITTEE
The Audit Committee is a separately-designated standing Audit Committee established in accordance with section 3(a)(58)(A) of the Exchange Act. The Audit Committee operates under a written charter adopted in May 2000 and most recently amended in May 2013. The Audit Committee is appointed by the Board to assist the Board in its duty to oversee our accounting, financial reporting and internal control functions and the audit of our financial statements. The Committee’s responsibilities include, among others, direct responsibility for: (a) hiring, firing, overseeing the work of and determining the compensation for the independent registered public accounting firm, which reports directly to the Audit Committee; (b) approving all audit and permissible non-audit services to be provided by the independent registered public accounting firm and establishing a policy for such approval; (c) periodically reviewing the significant accounting principles, policies and practices followed by RFMD in accounting for and reporting its financial results; (d) preparing the report of the Audit Committee required by SEC rules to be included in our proxy statement; (e) discussing from time to time with the independent registered public accounting firm and our accounting and internal audit management personnel whether RFMD is subject to any material risks or exposures and how management has attempted to minimize any such risk; and (f) establishing procedures for the receipt, retention and treatment of complaints received by RFMD regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
The current members of the Audit Committee are Messrs. Gardner (Chairman), Jabbar, and Skrzypczak, none of whom is an employee of RFMD and each of whom is independent under existing NASDAQ listing standards and SEC requirements. The Board has examined the SEC’s definition of “audit committee financial expert” and determined that Mr. Gardner satisfied this definition for fiscal year 2014 and fiscal year 2015.





ITEM 11. EXECUTIVE COMPENSATION.

COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

It is RFMD’s policy to ensure that the total compensation of each of our Chief Executive Officer, Chief Financial Officer and our next three most highly compensated executive officers, to whom we refer to collectively as the Named Executive Officers, reflects individual performance and rewards strong operating performance in the near term and completion of key initiatives that drive profitability and shareholder value in the longer term. Cash compensation consists of base salary and cash bonuses, and typically accounts for approximately 40% of each Named Executive Officer’s total compensation. Cash bonuses are based on corporate performance relative to financial goals that are established by the Compensation Committee on a semi-annual basis. Equity-based compensation is also set by the Compensation Committee and consists of service-based restricted stock units and performance-based restricted stock units and typically accounts for approximately 60% of each Named Executive Officer’s total compensation. Approximately 50% of the performance-based restricted stock units are tied to specified annual performance goals for the Company and the other 50% are tied to shareholder returns over a three-year period. While service-based restricted stock units provide important retention and medium-term and long-term incentives for our Named Executive Officers, performance-based restricted stock units provide both short-term incentives to complete specified annual business goals that we believe drive longer-term shareholder value and longer-term incentives because, once earned, they vest over time.

In fiscal 2014, we increased base salaries for our Named Executive Officers by an average of 2.3% in order to keep their base salaries competitive with those of their peers and awarded service-based restricted stock units in amounts consistent with our historical practices. Additionally our Named Executive Officers were awarded performance-based restricted stock units at 120% of the targeted number of units based on our achievement of five out of six specified performance goals (as discussed in more detail below), which we refer to as Performance-Based RSUs. Each Named Executive Officer was also awarded 78.6% of his targeted number of performance-based restricted stock units based on our total shareholder return, or TSR, in comparison to the TSR of a benchmark index, which we refer to as TSR Performance RSUs.

As a result of our strong financial performance in fiscal 2014, in the first half of the year, the Named Executive Officers received cash bonuses at 159.9% of their annual fiscal 2014 target percentage, and in the second half of the year, they received cash bonuses at 67.4% of such percentage. In fiscal 2014, our overall revenue increased 19.1% to $1,148.2 million, primarily due to increased demand for our cellular RF solutions for smartphones and WiFi products. Our gross margin for fiscal 2014 increased to 35.3% as compared to 31.7% for fiscal 2013. This increase was primarily due to manufacturing and sourcing-related cost reductions and increased demand, which was partially offset by average selling price erosion. Our operating income was $27.3 million in fiscal 2014 as compared to an operating loss of $15.7 million in fiscal 2013. This increase was primarily due to higher revenue and improved gross margin, which was partially offset by increased personnel expenses, impairment of in-process research and development, increased consulting expenses, restructuring expenses associated with achieving both manufacturing efficiencies and operating expense reductions, expenses related to the proposed transaction with TriQuint, and expenses related to the phase out of manufacturing and sale of our U.K.-based GaAs facility. We generated positive cash flow from operations of $130.8 million for fiscal 2014 as compared to $71.3 million for fiscal 2013.

The Compensation Committee decided not to make any changes to the elements or objectives of our compensation program in response to the results of the advisory vote to approve the compensation of our Named Executive Officers held at the 2013 Annual Meeting of Shareholders, in which more than 92% of voted shares were voted in favor of our Named Executive Officers’ compensation.

We believe our compensation program provides a balanced and stable foundation for achieving our intended objectives. Our compensation philosophy emphasizes team effort, which we believe fosters rapid adjustment and adaptation to fast-changing market conditions and helps us achieve not only our short-term and long-term goals, but also aligns the interests of our management team with those of RFMD and our shareholders.

As discussed below under “Compensation Decision-Making Processes - Other Compensation Policies,” we utilize comparative industry data to establish each Named Executive Officer’s range of base salary and equity-based compensation award opportunities, attempt to ensure that all compensation components are tax deductible to RFMD to the extent practicable and linked to company performance, maintain policies to prevent inappropriate backdating, spring-loading or repricing of options or stock awards, and do not provide “perquisites” to our executive officers.

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Compensation Program

Compensation Program Objectives and Philosophy

The objectives of RFMD’s compensation program are to enhance our ability to recruit and retain qualified management, motivate executives and other employees to achieve established performance goals and ensure an element of congruity between the financial interests of the executive management team and our shareholders. We believe the competition in our industry for qualified executives, including our Named Executive Officers, is extremely strong. To attract and retain highly qualified employees, we must maintain an overall compensation package that is competitive with those offered by our peer group companies and other competitors within our industry.

We do not establish subjective or objective goals or performance criteria based on individual performance for each Named Executive Officer or other members of management, although we do evaluate individual performance when making compensation decisions. Rather, we believe strongly that focusing on the management team as a group and company performance as a whole results in greater long-term success, and we currently condition all cash incentive and performance-based equity awards on the achievement of corporate financial, operational or stock price performance goals established by the Compensation Committee.

We believe that substantial equity ownership provides important medium- and long-term incentives and encourages the Named Executive Officers to take actions favorable to the long-term interests of RFMD and our shareholders. Accordingly, equity-based compensation subject to vesting requirements makes up a significant portion of the overall compensation of our Named Executive Officers.

Compensation Program Design

Our compensation program is designed to attract, retain and motivate employees and to reward them for achievements that we believe will bring RFMD success and likewise reward shareholders as a result of our success. This program is designed to be competitive with those of the companies in our industry with which we must vie for talent.

Our qualified defined contribution 401(k) plan is the only retirement plan available to our employees in the United States. To complement our 401(k) plan, we typically make significant annual service-based and performance-based equity awards to our Named Executive Officers that have extended vesting periods. Starting in fiscal 2014, we began awarding 50% of the performance-based awards as TSR Performance RSUs, which are earned based upon our TSR in comparison to the TSR of a benchmark index over a three-year period, and 50% as Performance-Based RSUs, which are earned based on the achievement of certain specified milestones. The purpose of these awards, which are discussed in more detail below, is to serve as both a retention and incentive mechanism in order to create value for both the award recipient and our shareholders. Each Named Executive Officer has a substantial portion of his potential financial net worth at risk because it is equity-based, and thus its value is dependent on and determined by our future performance.

Shortly before the end of each of fiscal 2013 and fiscal 2014, the Compensation Committee considered the following factors in establishing the compensation of our Named Executive Officers for the subsequent fiscal year:

•
RFMD’s overall operating performance during the fiscal year and the achievements of the Named Executive Officers with respect to: (a) progress that each business unit made in achieving its long-term strategic goals, including securing business from key customer accounts; (b) new products in development, scheduled for introduction or recently introduced; (c) generation of increased revenues; (d) our performance in relation to our industry competitors; (e) productivity improvements; and (f) profitability.

•
Individual performance appraisals of our Named Executive Officers and their contributions toward our performance goals and other objectives as established by the RFMD’s Board of Directors, or the Board, and the Compensation Committee, including assessments of each Named Executive Officer’s: (a) vision and strategy with respect to his individual business responsibilities; (b) work ethic and ability to motivate and influence others; (c) self-development and development of subordinates; and (d) execution of assigned tasks.

•
The compensation packages for executives who have similar positions and levels of responsibility at other publicly-held U.S. manufacturers of radio frequency components and other relevant products in similar markets (semiconductors).


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Compensation Decision-Making Processes

The Compensation Committee

The Compensation Committee is appointed by the Board to exercise the Board’s authority concerning compensation of the executive management team (including the Named Executive Officers), to make recommendations to the Board regarding compensation of our non-employee directors and to administer our stock-based and incentive compensation plans. The Committee typically meets in separate session in connection with regularly-scheduled meetings of the Board. In addition, the Committee sometimes schedules special meetings or non-meeting “work sessions,” either by telephone or in person, as necessary to fulfill its duties. Meeting agendas are established by the Chairman after consultation with the Vice President of Human Resources, other members of the Committee and, if appropriate, Mr. Bruggeworth, our Chief Executive Officer.

The current members of the Committee are Mr. DiLeo, Mr. Wilkinson and Mr. Harding, who serves as Chairman of the Committee. Each of these Committee members served on the Committee for all of fiscal 2014.

Role of the Compensation Consultants

During fiscal 2014, the Committee again retained the independent compensation consulting firm Compensia, Inc., which we refer to as Compensia, to assist it with executive and non-employee director compensation matters. The Committee selected Compensia based primarily on its principals’ depth of experience in the technology industry and its prior performance as a consultant to the Committee. Compensia’s recommendations to the Committee were generally in the form of suggested ranges for compensation or descriptions of policies that Compensia currently considers “best practices” in our industry.

During fiscal 2014, Compensia only worked for the Committee and performed no additional services for RFMD or any of the Named Executive Officers. The Committee Chairman approved all work performed by Compensia and received and approved copies of all invoices for services submitted by Compensia.

Additionally, during fiscal 2013, the Committee engaged the independent compensation consulting firm Connell & Partners, a division of Gallagher Benefits Services, which we refer to as C&P, to update our peer group and provide an analysis of director compensation, in each case for the Committee’s use in setting fiscal 2014 compensation. The Committee selected C&P based on its experience and knowledge of certain performance metrics in the technology industry.

During fiscal 2014, neither the Committee nor our management used the services of any other compensation consultant other than Compensia.

All of the work performed by Compensia is performed at the direction of the Committee. In connection with its engagement of Compensia, the Committee determined that Compensia was independent and that its engagement did not present any conflicts of interest.

Role of Executives in Establishing Compensation

During fiscal 2014, and as is typical at RFMD, there was a continuing dialogue among our Chief Executive Officer, other members of management (particularly the Vice President of Human Resources), Compensia, and Committee members regarding fiscal 2014 compensation considerations. Each of these parties was and continues to be encouraged to propose ideas or issues for the Committee to consider and evaluate with respect to our compensation structure and philosophy.

The Committee, with the assistance of Compensia, establishes the annual base salary, bonus opportunities and equity incentive awards for our Chief Executive Officer, Mr. Bruggeworth. Mr. Bruggeworth typically recommends to the Committee the annual base salary, bonus opportunities and equity award opportunities for the other members of the executive management team, including the other Named Executive Officers, for the Committee’s review, modification and approval.

To assist the Committee in overseeing compensation practices, the Committee periodically requests that the Human Resources, Finance and Treasury Departments’ personnel gather and present information on compensation-related topics. Certain members of the executive management team or other employees therefore attended portions of some Committee meetings during fiscal 2014 in order to fulfill these requests. Our Vice President of Human Resources attends most of the

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Committee’s meetings and typically serves as secretary of the meeting, but does not participate in executive sessions or any portion of any meeting where his own compensation is being discussed. Our Chief Executive Officer also attended most of the Committee’s meetings during fiscal 2014, but did not participate in any portion of any meeting where his own compensation was being determined. In addition, when deemed appropriate, the Committee held all or a portion of certain meetings during fiscal 2014 in executive session with only Committee members and, in several instances, representatives of Compensia present.

Use of Industry Comparative Data

We operate in a highly competitive industry in which retention of qualified personnel is a critical factor in operating a successful business. As such, we try to understand as much as possible about the total compensation levels and practices at other companies in our industry. Determining the relevant companies to use for such comparative purposes is not a simple task. With the help of our compensation consultants and our Human Resources Department, the Committee has developed a peer group of companies that it reviews at least annually and, if appropriate, adjusts periodically. The companies included in this peer group generally have revenues ranging from one-half to two times our annual revenue and are in the semiconductor, wireless components or sub-systems businesses. The peer group is comprised such that the median revenue size of the peer group is at or close to our projected annual revenue. At the time of the development of the peer group, RFMD was at the 48th percentile of revenues and the 33rd percentile of market capitalization of these companies. The peer group used in fiscal 2014 consisted of the following 21 companies:

Aeroflex Holding Corp.
Integrated Device Technology, Inc.
Photronics, Inc.
Atmel Corporation
International Rectifier Corporation
PMC-Sierra, Inc.
Cirrus Logic, Inc.
Intersil Corporation
Semtech Corp.
Cree, Inc.
LSI Corporation
Silicon Laboratories Inc.
Cypress Semiconductor Corporation
Microchip Technology Incorporated
Skyworks Solutions, Inc.
Diodes Incorporated
Microsemi Corporation
Spansion, Inc.
Fairchild Semiconductor International, Inc.
OmniVision Technologies, Inc.
TriQuint Semiconductor, Inc.

The Committee modified RFMD’s peer group with assistance from C&P during fiscal 2013 for purposes of setting compensation for fiscal 2014 due to the fact that some of the members in the 2013 peer group no longer satisfied our peer group revenue requirements.

In addition to peer group data, the Committee also uses proprietary broader-based semiconductor industry and technology sector compensation data. In general, this comparative data is used by the Committee to test, verify and gauge the suitability of the peer group data as a comparative tool.

Other Compensation Policies

With the assistance of the Committee, Compensia and the executive management team, we have developed a number of policies and practices that we relied upon during fiscal 2013 and fiscal 2014 and expect to continue to rely upon during fiscal 2015:

•
We generally have used comparative competitive data to establish base salaries for each Named Executive Officer at approximately the 50th percentile of the peer group and have provided cash performance incentives that, if earned at target, enabled the Named Executive Officer group to be eligible to earn total annual cash compensation at a level between the 50th and 75th percentile of the peer group. Within these industry comparable ranges, we specifically consider each Named Executive Officer’s performance and level of responsibility in comparison to the other Named Executive Officers when establishing base salaries and make adjustments we deem appropriate from the industry comparable position to ensure internal consistency in executive compensation. As discussed in more detail below under “Elements of Compensation - Cash Incentive Opportunities,” our bonus target was a percentage of the Named Executive Officer’s base salary that he was eligible to earn under the objective bonus criteria discussed below. The bonus program is structured so that the higher the level of the respective Named Executive Officer’s responsibility at RFMD, the greater the individual’s percentage of potential total performance-based cash compensation. For fiscal 2014, the performance-based cash compensation target was 100% of base salary for Mr. Bruggeworth, 75% for Messrs. Priddy, Creviston and Stilson, and 60% for Mr. Hilgendorf. This reflects the Committee’s view that Mr. Bruggeworth, as our CEO, bears overall management responsibility for RFMD, while our other Named Executive Officers have more narrow responsibilities tied to a particular business unit or function. Based on relevant peer

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group data, the fiscal 2015 target bonus percentage was increased to 115% for Mr. Bruggeworth. The bonus remained at 75% for each of Messrs. Priddy, Creviston and Stilson, and 60% for Mr. Hilgendorf.

•
We have worked to ensure that a substantial amount of each Named Executive Officer’s total equity compensation was performance-based, linked to our operating performance, and designed so that in the long-term, its value was largely derived from the market price of our common stock. While each individual compensation component, as well as the allocation of the cash components between base salary and the performance-based bonus opportunity, has been set based on peer group comparables, based on recommendations of Compensia as to best practices in our industry, we have established a policy that approximately 60% of the value of each Named Executive Officer’s potential equity awards will be linked to the successful achievement of certain pre-established, objective RFMD corporate financial, operational or stock price performance goals. See “Elements of Compensation - Performance-Based Restricted Stock Units” below for more information.

•
Awards of performance-based restricted stock units are linked to milestones on projects or key initiatives that the Committee believes have a strong potential to impact longer-term shareholder value creation, while cash incentive awards are linked to specified metrics for our operating performance.

•
We established an aggregate level of equity awards that approximated the median peer group run rate for such awards and that did not produce a level of stock plan overhang that was greater than the median of the peer group.

•
Under the RF Micro Devices, Inc. 2012 Stock Incentive Plan, or the 2012 Plan, no participant may be granted awards in any 12-month period for more than 2,000,000 shares of common stock (or the equivalent value thereof based on the fair market value per share of the common stock on the grant date of the award). Under the RF Micro Devices, Inc. 2003 Stock Incentive Plan, or the 2003 Plan, no participant may have been granted awards in any 12-month period for more than 800,000 shares of common stock (or the equivalent value thereof based on the fair market value per share of the common stock on the grant date of the award). We take these limitations into account in setting equity awards when they are applicable, which was not the case in fiscal 2014.

•
We attempted to ensure that cash and equity components of total compensation were tax deductible, to the maximum extent possible, by the use of shareholder-approved plans that are intended to comply with Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code.

•
We prohibit the backdating or spring-loading of equity awards. To further that goal, we generally grant service-based restricted stock units once a year to existing employees on or around the annual shareholder meeting date, and performance-based restricted stock unit opportunities generally are established shortly after the beginning of the fiscal year within the time constraints required under Section 162(m) of the Code.

•
We prohibit the repricing of previously granted stock options or stock appreciation rights without shareholder approval.

•
We do not provide “perquisites” to our executive officers.

•
Our securities trading policy prohibits any hedging of our securities by executive officers. This includes purchasing any financial instrument or contract, including prepaid variable forward contracts, equity swaps, collars and exchange traded funds, which is designed to hedge or offset any risk of decrease in the market value of our common stock.

•
Our securities trading policy prohibits the pledging of our securities by executive officers.

•
As part of the Committee’s regular process for determining whether performance-based compensation goals have been met, our Internal Audit Department reviews our performance against the applicable metrics for cash bonus and performance-based equity compensation, confirms the level of achievement of the applicable metrics and issues a report to the Committee.

The Committee also has additional responsibilities with respect to our compensation practices, which are set forth in its charter, which is available in the “Investors” section of our website under the heading “Corporate Governance” at http://www.rfmd.com.

Elements of Compensation


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Compensation arrangements for our Named Executive Officers under our fiscal 2014 compensation program consisted of four components: (a) a base salary; (b) a formula-based, shareholder-approved cash bonus program intended to be compliant with Code Section 162(m) to the extent practicable; (c) the grant of equity incentives in the form of performance-based and service-based restricted stock units; and (d) other compensation and employee benefits generally available to all of our employees, such as health insurance, group life and disability insurance and participation in our 401(k) plan and our Employee Stock Purchase Plan, or ESPP. We believe our overall and individual grant practices are consistent with comparable industry levels and contain sufficient performance-based elements. Accordingly, with respect to compensation decisions for fiscal 2015 we generally expect to follow similar practices to those used in fiscal 2014, although we reserve the right to modify such practices if we think it is in our best interest to do so.

Base Salaries

The Committee reviews and establishes individual salaries for the Named Executive Officers annually. In determining individual salaries, the Committee considers the scope of job responsibilities, individual contributions, labor market conditions, peer group data and our overall annual budget guidelines for merit and performance increases. Historically, the Committee’s objective has been to deliver base compensation levels for each Named Executive Officer at or near the median level for the comparable position of the peer group. After taking these factors into account, the Committee approved an average base salary increase of 2.3% for the Named Executive Officers for fiscal 2014.

Cash Incentive Opportunities

A large part of each Named Executive Officer’s potential total annual cash compensation is intended to be at risk and linked to our operating performance.

As noted above, the fiscal 2014 target cash bonus percentage for each of our Named Executive Officers, which was established by the Committee as a percentage of each executive officer’s fiscal 2014 annual base salary, was 100% for Mr. Bruggeworth,75% for each of Messrs. Priddy, Creviston and Stilson, and 60% for Mr. Hilgendorf. For fiscal 2014, the cash bonus award opportunities were based on two separate six-month performance periods. For each six-month period, the metrics used to measure performance were sales and non-GAAP operating income. Each metric had an established minimum, target and maximum level, and constituted 50% of the total bonus opportunity during each performance period. No bonus would be earned unless RFMD achieved a minimum non-GAAP operating margin during the relevant period. The cash bonus opportunity for fiscal 2014 was weighted 50% for the first half of the year and 50% for the second half of the year so that each Named Executive Officer had the opportunity to earn a cash bonus award in an amount between 50% and 200% of his annual fiscal 2014 target bonus percentage during each six-month period, depending on our level of sales and non-GAAP operating income during the relevant period. The Committee decided to continue to use sales and non-GAAP operating income because it believed they were the two key metrics that would drive shareholder value in fiscal 2014. The bonus earned for each metric was pro-rated for performance between minimum and maximum levels for such metric. The following table sets forth the target bonus level for and the calculation of the cash bonus paid to Named Executive Officers for the first six-month period:

First Half of Fiscal 2014 Annual Cash Bonus Award Components and Results
Performance Metric
Minimum
Target
Maximum
Achieved Results
Bonus Percentage Achieved
Weighting
Payout % Factor
Sales
$493.0M
$548.0M
$658.0M
$603.7M
150.7%
50%
75.3%
Operating Income
$28.0
$43.0
$73.0
$63.7
169.2%
50%
84.6%

The same metrics above were used for the second six-month period. The following table sets forth the calculation of the cash bonus paid to each Named Executive Officer for the second six-month period:

Second Half of Fiscal 2014 Annual Cash Bonus Award Components and Results
Performance Metric
Minimum
Target
Maximum
Achieved Results
Bonus Percentage Achieved
Weighting
Payout % Factor
Sales
$535M
$617.0M
$697M
$544.4M
55.8%
50%
27.9%
Operating Income
$50.0
$89.0
$129
$76.4
79.0%
50%
39.5%

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Cash bonuses for our Named Executive Officers, as well as for all of our other employees, when earned, are awarded pursuant to our Cash Bonus Plan. No minimum bonus is guaranteed. For fiscal year 2014, our compensation program was structured to provide our Named Executive Officers with the opportunity to earn, through a combination of base salary and target bonus awards, total cash compensation between the 50th and 75th percentile level of the peer group comparable positions.

For fiscal 2015, the Committee has again determined to measure cash bonus award opportunities based on two separate six-month performance periods, again using sales and non-GAAP operating income as the metrics for the first six-month period. Each metric has an established minimum, target and maximum level, and will constitute 50% of the total bonus opportunity. The Committee continues to believe that sales and non-GAAP operating income are the two key metrics that will drive shareholder value in fiscal 2015. However, in the event that the proposed transaction with TriQuint closes prior to September 27, 2014, the Committee has determined to utilize an alternative metric of gross margin to measure cash bonus opportunities for the first six-month period.

Each Named Executive Officer has the opportunity to earn a cash bonus award in an amount between 50% and 200% of fifty percent of his annual fiscal 2015 target bonus percentage during the first six-month period, depending on our level of sales and non-GAAP operating income. The fiscal 2015 target bonus percentage for each of our Named Executive Officers, which was established by the Committee as a percentage of each Named Executive Officer’s fiscal 2014 annual base salary, was increased to 115% (previously 100%) for Mr. Bruggeworth based on peer group data for chief executive officers and remained at 75% for each of Messrs. Priddy, Creviston and Stilson, and 60% for Mr. Hilgendorf. The bonus earned for each metric will be pro-rated for performance between minimum and maximum levels for such metric and no bonus will be earned unless RFMD achieves a minimum non-GAAP operating margin during the first six months of fiscal 2015.

In order to address the impact on bonuses of the potential shareholder approval and closing of the TriQuint transaction during the first performance period for fiscal 2015, the Committee determined that using an alternative metric was advisable in lieu of allowing the default rules under the Cash Bonus Plan to operate, which would result in a payout at 100% of target upon RFMD shareholder approval of the TriQuint transaction without regard to the achievement of any performance metric. Non-GAAP gross margin for fiscal 2015 calculated as of the last day of the month preceding the closing of the TriQuint transaction was the metric selected because of the Company’s strategic focus on improving its gross margin in fiscal 2015 and the belief that this metric would be an appropriate measure of financial performance of RFMD when the full six-month period was completed. The alternative metric has an established target and maximum level, and will constitute 100% of the total bonus opportunity. Any bonus earned based on the alternative metric will be pro-rated based on the number of days elapsed in the performance period until the closing of the TriQuint transaction. If the alternative gross margin metric is used, there will be a minimum payout of 50% of each Named Executive Officer’s bonus award for the first six-month period, subject to pro-ration as described above.

Subject to the closing of the TriQuint transaction, the Committee expects to establish the performance metrics for the second component of the cash bonus award for fiscal 2015, which is expected to be based on performance during the third and fourth quarters of fiscal 2015, during the third quarter of fiscal 2015.

Consistent with our industry and RFMD’s past practices and based on advice from Compensia, the Committee has again capped the fiscal 2015 potential cash bonus awards at two times each employee’s respective bonus target (subject to the fiscal year award limitation of $5,000,000 per participant applicable under the Cash Bonus Plan). In order to deduct the bonus compensation for tax purposes, the bonus program is shareholder-approved and intended to qualify under Code Section 162(m) to the extent practicable.

The fiscal 2015 minimum, target and maximum levels of sales and non-GAAP operating income and the target and maximum levels of non-GAAP gross margin as the alternative metric were derived from our internal operating plans, which are not disclosed publicly for competitive reasons. These target levels constitute confidential commercial and strategic financial information, and we believe that prospective disclosure of these targets would result in competitive harm to us. The Committee believes that the targeted levels of performance are challenging and reflect desired above-market performance, and thus typically would not be achieved all of the time. At the time the performance goals were established, the Committee also believed that performance at a level above the target level would be difficult, but not impossible, to achieve. The Committee recognizes that the likelihood of achievement in any given year may be different, and believes that the payout should be appropriate for the performance, regardless of how often it may happen. For the last five fiscal years, the Named Executive Officers have been awarded cash bonuses at the following percentages of the

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established target levels: fiscal 2010 (200%); fiscal 2011 (98.7%); fiscal 2012 (0%); fiscal 2013 (90.8%); and fiscal 2014 (113.7%).

Service-Based Restricted Stock Units

Our executive officers are also awarded service-based restricted stock units. We believe that these equity awards increase executive retention by providing important medium-term and long-term incentives for our Named Executive Officers and aligning their interests with the interests of RFMD and our shareholders.

For fiscal 2014, we issued service-based restricted stock units to certain members of the executive management team, including our Named Executive Officers. The amount of each award was determined by the Committee in August 2013 following our annual shareholders meeting after consideration of (a) each officer’s base salary, cash bonus award opportunities and performance-based restricted stock unit opportunities, (b) past accomplishments and performance, (c) overall responsibilities and anticipated performance required for the upcoming fiscal year, and (d) peer group comparables.  Consistent with the Committee’s philosophy of encouraging performance-based compensation, service-based restricted stock generally approximates 40% of the total value of all annual equity awards. The restricted stock units vest over a four-year period, with 25% vesting on each anniversary of the award date. Service-based restricted stock units for senior officers generally provide for continued vesting post-termination unless the Committee determines otherwise, subject to compliance with certain covenants, clawback provisions and other conditions. For fiscal 2014, the number of service-based shares of our common stock subject to restricted stock units earned by each Named Executive Officer, subject to the 2012 Plan equity cap discussed above, is shown below in the “2014 Grants of Plan-Based Awards Table.”

In fiscal 2015, we again expect to grant service-based restricted stock units to certain members of the executive management team, including our Named Executive Officers, during the second fiscal quarter. We expect to continue to use the same criteria we used in fiscal 2014 in setting these awards. We expect to condition post-termination vesting of service-based restricted stock units for senior officers on compliance with certain non-competition, non-disclosure, confidentiality and other covenants and the award, any underlying shares that vested following termination and any gain from the sale of such shares will be subject to recoupment or “clawback” by RFMD if such covenants are violated during the post-termination vesting period.

Performance-Based Restricted Stock Units

For fiscal 2014, approximately 60% of the annual equity awards granted to certain members of the executive management team, including each Named Executive Officer, were in the form performance-based restricted stock units. Fifty percent of these awards, which we refer to as TSR Performance RSUs, are earned based upon our TSR in comparison to the TSR of a benchmark index over a three-year period, and are designed to reward management for company-specific performance, as opposed to market-wide conditions overall. The other fifty percent of performance-based restricted stock unit awards, which we refer to as Performance-Based RSUs, are earned based upon the achievement of milestones on projects or key initiatives that the Committee believed had a strong potential to impact longer-term shareholder value creation. The milestones were objectives that in many cases advance our achievement of longer-term goals, and help ensure our continued performance as an industry leader. The achievement of these goals, as determined by the Committee, was team-based and applied to the executive management team as a group. There were no individually-based goals.

The TSR Performance RSUs can be earned and vest over a one-year, two-year and three-year performance period, beginning with a one-year period for fiscal year 2014. The number of TSR Performance RSUs earned for each performance period is determined based on our TSR performance measured against the TSR of the S&P SPDR Semiconductor ETF index during the performance period. Total shareholder return is measured by taking our average share price during the final 90 days of the relevant TSR performance period divided by the average share price during the 90 days prior to the start of fiscal 2014. The targeted amount of shares of our common stock subject to TSR Performance RSUs that could be earned by each Named Executive Officer was established by the Committee in June 2013 and the potential number of restricted stock units that could be earned in each performance period was based on a multiplier of the targeted amount that ranged from 0% to 200% based on our TSR in comparison to the TSR of the benchmark index. Based on our TSR for fiscal 2014 in comparison to the benchmark TSR, each Named Executive Officer was awarded 78.6% of his targeted number of TSR Performance RSUs for the year. For fiscal 2014, the number of shares of our common stock subject to TSR Performance RSUs earned by each Named Executive Officer, subject to the 2012 Plan equity cap discussed above, is shown below in the “2014 Grants of Plan-Based Awards Table.”


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The fiscal 2014 milestones for Performance-Based RSUs consisted of six objectives relating to the accomplishment of specific manufacturing cost improvements, developing and qualifying a key second source supplier, expansion of business with a key customer, achievement of a reference design position, and meeting customer demand for specified products. The targeted amount of shares of our common stock subject to Performance-Based RSUs that could be earned by each Named Executive Officer was established by the Committee in June 2013. The number of restricted stock units earned was determined by the objectives met and the specific payout percentage that was assigned to those objectives. Upon completion of fiscal 2014, the Committee determined that five of the six objectives had been achieved. The goals achieved related to (a) the accomplishment of two specific manufacturing cost improvements, (b) developing and qualifying a key second source supplier, (c) achievement of a reference design position, and (d) meeting customer demand for specific products. Accordingly, each member of the executive management team was awarded 120% of his targeted number of performance-based restricted stock units. To further encourage executive retention and growth in shareholder value, the shares of our common stock subject to restricted stock units earned by each Named Executive Officer will vest over a three-year period, with 50% vesting following completion of the performance period and the remaining 50% vesting in equal annual installments over each of the following two years, as long as the Named Executive Officer is still employed by us on each such vesting date. For fiscal 2014, the number of shares of our common stock subject to Performance-Based RSUs earned by each Named Executive Officer, subject to the 2012 Plan equity cap discussed above, is shown below in the “2014 Grants of Plan-Based Awards Table.”

For fiscal 2015, each Named Executive Officer received a performance-based restricted stock unit award based upon (i) our TSR in comparison to the total shareholder return of the S&P SPDR Semiconductor ETF index substantially identical to the TSR Performance RSUs described above and (ii) our achievement of certain company performance objectives similar to the Performance-Based RSUs described above. The awards will be earned, if at all, by each Named Executive Officer based upon the following: (i) 50% will be TSR Performance RSUs that will be earned based upon our TSR in comparison to the TSR of the benchmark index over a three-year period; and (ii) 50% will be Performance-Based RSUs that will be earned based upon our achievement of between one to five performance objectives established by the Committee that must be satisfied during our current fiscal year ending March 28, 2015. With respect to the Performance-Based RSUs, there are five performance objectives: one relates to developing and qualifying a key second source supplier, one relates to internally developing and qualifying a new GaN semiconductor process, another relates to achieving a specified non-GAAP gross margin financial metric, and the final two relate to specific manufacturing-related improvements.

The number of shares of our common stock subject to Performance-Based RSUs to be earned by each Named Executive Officer, if any, will be determined following the end of fiscal year 2015. The shares of restricted stock earned by each Named Executive Officer at the end of the performance period, if any, will vest over a three-year period, with 50% vesting following completion of the performance period and the remaining 50% vesting in equal annual installments over each of the following two years. No shares will be issued unless, and then only to the extent that, an award is both earned and vested. For fiscal 2015, the maximum number of performance-based shares of our common stock subject to Performance-based RSUs that may be earned (150% of the targeted number) by each Named Executive Officer is as follows: Mr. Bruggeworth, 129,900; Mr. Priddy, 50,700; Mr. Creviston, 67,500; Mr. Stilson, 33,000; and Mr. Hilgendorf, 30,450.

The TSR Performance RSUs will be earned and vest over a one-year, two-year and three-year performance period, beginning with a one-year period for fiscal year 2015. The number of TSR Performance RSUs earned will be determined based on our TSR performance measured against the TSR of the S&P SPDR semiconductor ETF index during a TSR performance period. If certain threshold TSR levels specified in the relevant award agreement are met in a TSR performance period, the Named Executive Officer will be granted an award for a number of shares equal to the target number of common shares multiplied by the applicable percentage assigned to such TSR performance level. Depending on our relative TSR performance over the three TSR performance periods, the Named Executive Officer may earn up to 200% of the target number of TSR Performance RSUs. Total shareholder return is measured by taking the average share price during the final 90 days of the relevant TSR performance period divided by the average share price during the 90 days prior to the start of fiscal 2015. For fiscal 2015, the maximum number of performance-based shares of our common stock subject to TSR Performance RSUs that may be earned (200% of the targeted number) by each Named Executive Officer is as follows: Mr. Bruggeworth, 173,200; Mr. Priddy, 67,600; Mr. Creviston, 90,000; Mr. Stilson, 44,000; and Mr. Hilgendorf, 40,600.

Effective for performance-based restricted stock unit awards granted on or after May 2, 2012 to senior officers (including the Named Executive Officers), such awards, once earned, will continue to vest following the individual’s termination of employment unless the individual’s employment is terminated for cause or due to death, in which case the award will be forfeited.  However, if the individual fails to comply with certain non-competition, non-disclosure, confidentiality and other

101

covenants, the award, any underlying shares that vested following termination and any gain from the sale of such shares will be subject to recoupment, or “clawback,” by RFMD.

Targeted levels of equity awards (including both service-based and performance-based awards) for each Named Executive Officer, as is the case with cash bonus awards, are established so that each individual has the opportunity to earn, if the maximum performance award levels are earned, a dollar value of equity awards that is between the 50th and 75th percentile level of the peer group comparable positions. As is the case with base salary and target bonus percentages, the target levels of performance-based and service-based restricted stock units for each Named Executive Officer are determined after consideration of (a) each officer’s base salary and cash bonus award opportunities; (b) past accomplishments and performance; (c) overall responsibilities and anticipated performance required for the upcoming fiscal year; and (d) peer group comparables.

For Performance-Based RSUs, we believe that the level of performance required to satisfy any of the objectives in any given year and reach the targeted award level should not be easily achievable. When we established the objectives for fiscal 2015 Performance-Based RSUs, we assigned an expected degree of difficulty of achieving each objective as either “medium” or “high” and two of the five objectives were rated as highly difficult to accomplish within the performance period. As for obtaining any awards equal to or greater than the target level of 100%, we believe that these payouts would be very difficult, but not impossible, to achieve. We recognize, however, that the likelihood of achievement of any level of award in any given year may be different, and believe that the amount of the award should be appropriate for the performance, regardless of how often it may happen. For the six fiscal years that we have granted performance-based restricted stock units based on completed objectives, we have averaged achieving five of the six goals per year. While this level of performance exceeds the expectations of the Committee, we believe it correlates with the performance attained. In addition, the Committee believes it is inherently difficult to predict whether these performance goals will be met, which is borne out by our experience that, at times, goals initially perceived by the Committee to have a high risk of failure are achieved, while those initially perceived to have a lower risk are not achieved. The Committee believes that one of the most important benefits to RFMD from the use of performance-based restricted stock units has been the sharp focus by all participating employees toward attaining the objectives as a team, including review on a monthly basis of the status of each objective by responsible employees.

Other Employee Benefits

Our Named Executive Officers are eligible to participate in the same employee benefit plans generally available to all of our employees, including health insurance, group life and disability insurance and eligibility to participate in our 401(k) and employee stock purchase plans. We do not maintain any deferred compensation plans.

Perquisites

Our Named Executive Officers do not receive any perquisites or personal benefits, as it has never been part of our culture to provide them. We believe that perquisites are viewed by some of our shareholders and employees as being discriminatory in nature and, as such, we have historically taken the position that these highly visible (and sometimes controversial) compensation components are not necessary to implement our current compensation philosophy and structure.

Employment Agreements

Historically, we have not entered into employment agreements with any of our Named Executive Officers because we believe that employment agreements have not been necessary in order to attract and retain talented personnel. However, due to the ever-changing marketplace in which we vie for talent, the Committee regularly reviews the need for employment agreements for some or all of our senior management team to help ensure that we remain competitive in our industry. In that regard, during fiscal 2009, the Committee determined that it was appropriate for us to enter into an employment agreement with our Chief Executive Officer, Mr. Bruggeworth. The Committee made this decision in order to help ensure that Mr. Bruggeworth devoted more of his time on longer-term strategic initiatives that are in our best interests, including those that may not be in his personal best interests. The employment agreement is thus structured in a way that the Committee believed would foster and incentivize Mr. Bruggeworth to conduct an unbiased evaluation of all strategic alternatives that might be available to us at any given time. The terms of this agreement are described in more detail below in the section entitled “Potential Payments upon Termination or Change-in-Control.” We have not entered into an employment agreement with any of the other Named Executive Officers.


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Change in Control Compensation

We have entered into change in control agreements with each of our Named Executive Officers and certain other members of our executive management team. We entered into these agreements in order to acknowledge the respective employee’s importance to us and our shareholders and to attempt to avoid the distraction and loss of key management personnel that may occur in connection with rumored or actual fundamental corporate organizational changes. During fiscal 2009, the Committee determined that it was appropriate for us to enter into amended and restated change in control agreements with each of our Named Executive Officers and certain members of our executive management team in order to comply with certain tax requirements imposed under Section 409A of the Code, and to reflect developing best practices and changes deemed appropriate by the Committee. Additionally, Mr. Bruggeworth’s change in control agreement was amended to conform to certain terms of the employment agreement he entered into with us earlier in fiscal 2009. The terms of these amended and restated change in control agreements are described in more detail below in the section entitled “Potential Payments Upon Termination or Change-in-Control.”

Conclusion

We believe our compensation program provides a balanced and stable foundation for awarding our Named Executive Officers for achieving our corporate objectives. As a result of our strong financial performance in fiscal 2014, the Named Executive Officers received cash bonuses at 113.7% of their annual fiscal 2014 target percentage. The objectives achieved under the Performance-Based RSU program during fiscal 2014 provided us with two specific manufacturing cost improvements, a new, qualified key second source supplier, a new reference design position, and the achievement of customer demand for specific products. Management, including our Named Executive Officers, was rewarded for these significant accomplishments with the grant of performance-based restricted stock units for shares of our common stock.

Our compensation philosophy emphasizes team effort, which we believe fosters rapid adjustment and adaptation to fast-changing market conditions. We believe that our combination of shorter-term cash incentive awards and longer-term service-based and performance-based restricted stock units, including three-year TSR Performance RSUs, will help us achieve our long-term goals and will continue to align the interests of the executive management team, including the Named Executive Officers, with those of RFMD and our shareholders during fiscal 2015 and beyond.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis that accompanies this report with our management. Based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K for the year ended March 29, 2014.

This Compensation Committee Report shall not be incorporated by reference into any of our previous or future filings with the SEC, unless any such filing explicitly incorporates this Report.

The Compensation Committee

John R. Harding (Chairman)
Daniel A. DiLeo
Walter H. Wilkinson, Jr.

SUMMARY COMPENSATION TABLE

The following table summarizes the compensation of the Named Executive Officers for each of the fiscal years ended March 29, 2014. March 30, 2013, and March 31, 2012. The Named Executive Officers are: (i) our Chief Executive Officer, (ii) our Chief Financial Officer, (iii) the next three most highly compensated executive officers serving RFMD at March 29, 2014, as determined by their total compensation in the table below. We use a 52- or 53-week fiscal year ending on the Saturday closest to March 31 of each year.


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Salary
Stock
Awards
(1)
Non-Equity Incentive Plan Compensation (2)
All Other Compensation (3)
Total Compensation
Name & Principal Position
Year
($)
($)
($)
($)
($)
Robert A. Bruggeworth, President and Chief Executive Officer
2014
2013
2012
682,813
662,925
643,558
2,871,107
2,943,936
2,943,568
775,976
602,703
-
9,059
8,810
8,721
4,338,955
4,217,744
3,595,847
 
 
 
 
 
 
 
William A. Priddy, Jr.,
Chief Financial Officer, Corporate Vice President of Administration and Secretary
2014
2013
2012
369,393
358,634
348,157
1,121,641
1,150,248
1,265,083
314,845
244,286
-

8,923
8,667
8,428
1,814,802
1,761,835
1,621,668
 
 
 
 
 
 
 
Steven E. Creviston,
Corporate Vice President and President of Cellular Products Group
2014
2013
2012
421,764
407,538
395,633

1,490,916
1,529,710
1,529,469
359,469
277,597
-
9,060
8,862
8,701
2,281,209
2,223,707
1,933,803
 
 
 
 
 
 
 
James D. Stilson,
Corporate Vice President of Operations
2014
2013
2012
323,703
317,298
307,947
728,550
747,435
747,448
275,923
216,130
-
8,849
8,630
8,448
1,337,025
1,289,493
1,063,843
 
 
 
 
 
 
 
Norman A. Hilgendorf,
Corporate Vice President and President of Multi-Market Products Group (4)
2014
2013

305,328
305,130

673,435
689,969

208,240
166,288

8,925
8,450

1,195,928
1,169,837

(1)
Represents the aggregate grant date fair value of service-based and performance-based restricted stock units granted during the fiscal years shown calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation, or ASC Topic 718, rather than an amount paid to or realized by the Named Executive Officer, disregarding the estimate of forfeitures related to service-based and performance-based, as applicable, vesting conditions. The aggregate grant date fair value is the amount we expect to expense in our financial statements over the award’s vesting schedule. See “Share-Based Compensation” in Note 14 of the Notes to the Consolidated Financial Statements set forth in Part II, “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for the assumptions used to calculate grant date fair value. There can be no assurance that the ASC Topic 718 grant date fair value amounts will ever be realized. Based on the achievement of five out of six of the performance metrics as approved by the Compensation Committee and the Board in May 2013, each Named Executive Officer received 120% of the target number of performance-based restricted stock units. See “2014 Grants of Plan-Based Awards Table” for information on grants awarded in fiscal year 2014.

(2)
Represents amounts paid under our Cash Bonus Plan.

(3)
Represents amounts contributed by RFMD to the accounts of the Named Executive Officers under our 401(k) plan.

(4)
Mr. Hilgendorf was not a named executive officer for the fiscal year ended March 31, 2012.



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2014 GRANTS OF PLAN-BASED AWARDS TABLE

The following table provides information on restricted stock units and plan-based cash incentive awards granted to or earned by each of our Named Executive Officers with respect to fiscal year 2014. There can be no assurance that the amounts set forth in the “Grant Date Fair Value of Stock Awards” column will ever be realized.

Name
Grant Date
(1)
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards
(2)
Estimated Possible Payouts Under Equity Incentive Plan Awards
(3)
All Other Stock Awards: Number of Shares of Stock or Units (#) (4)
Grant Date Fair Value of Stock Awards
($)
(5)
 
 
Threshold
($)
Target
 ($)
Maximum
($)
Threshold (#)
Target
(#)
Maximum (#)
 
 
Robert A. Bruggeworth
N/A
0
682,813
1,365,625

 
 
 
 
 
 
6/6/2013
 
 
 
65,970
293,200
513,100
 
 
 
8/14/2013
 
 
 
 
 
 
206,500
1,024,240
William A. Priddy, Jr.
N/A
0
277,045
554,090

 
 
 
 
 
 
6/6/2013
 
 
 
25,785
114,600
200,550
 
 
 
8/14/2013
 
 
 
 
 
 
80,600
399,776
Steven E. Creviston
N/A
0
316,323
632,646

 
 
 
 
 
 
6/6/2013
 
 
 
34,245
152,200
266,350
 
 
 
8/14/2013
 
 
 
 
 
 
107,300
532,208
James D. Stilson
N/A
0
242,777
485,555

 
 
 
 
 
 
6/6/2013
 
 
 
16,740
74,400
130,200
 
 
 
8/14/2013
 
 
 
 
 
 
52,400
259,904
Norman A. Hilgendorf
N/A
0
228,996
457,993

 
 
 
 
 
 
6/6/2013
 
 
 
15,480
68,800
120,400
 
 
 
8/14/2013
 
 
 
 
 
 
48,400
240,064

(1)
All equity awards granted to the Named Executive Officers in fiscal year 2014 were made pursuant to the 2012 Plan. The grant date above is determined in accordance with ASC Topic 718.

(2)
Each of the Named Executive Officers participates in our Cash Bonus Plan. The annual cash incentive award earned by each Named Executive Officer in fiscal 2014 is shown in the Summary Compensation Table under the column captioned “Non-Equity Incentive Plan Compensation.” The annual cash incentive opportunities available under the Cash Bonus Plan are described in greater detail under “Compensation Discussion and Analysis - Elements of Compensation - Cash Incentive Opportunities.”

(3)
Represents the number of shares of performance-based restricted stock units granted under the 2012 Plan with respect to performance in fiscal 2014. Under the 2012 Plan, no participant may be granted awards in any 12-month period for more than 2,000,000 shares of common stock (or the equivalent value thereof based on the fair market value per share of the common stock on the date of grant of an award). Fifty percent of these awards are earned based upon our TSR in comparison to the TSR of S&P SPDR Semiconductor ETF index over a three-year period, and fifty percent are earned based upon the achievement of milestones on projects or key initiatives. For the fiscal 2014 performance period, the relative TSR performance resulted in a 78.59% payout against the targeted number of shares. The milestone awards were awarded on May 14, 2014, after it was determined that five out of six of the performance objectives had been met with respect to fiscal 2014, resulting in a 120% payout based on the objectives met and the specific payout percentage that was assigned to those objectives. These awards vest in three installments, with 50% vesting following completion of the performance period, and the remaining 50% vesting in equal annual installments over each of the following two years, as long as the Named Executive Officer is still an employee of RFMD on

105

each such vesting date. The actual number of shares of our common stock subject to the performance-based restricted stock units that were awarded as of May 14, 2014 is as follows: Mr. Bruggeworth, 291,133 shares; Mr. Priddy, 113,792 shares; Mr. Creviston, 151,127 shares; Mr. Stilson, 73,875 shares; and Mr. Hilgendorf, 68,315 shares. For a detailed discussion of the performance-based restricted stock units, see “Compensation Discussion and Analysis - Elements of Compensation - Performance-Based Restricted Stock Units,” above.

(4)
These service-based restricted stock units granted under the 2012 Plan vest and are payable in shares of RFMD common stock after they are earned (in whole or in part) and no longer subject to forfeiture. These service-based restricted stock units vest over a period of four years and any unvested portion of such awards is generally forfeited upon termination of employment. However, in the event of termination of employment other than for cause, these service-based restricted stock units granted in fiscal 2014 to each Named Executive Officer generally will continue to vest over a period of four years as if the Named Executive Officer had remained an employee of RFMD (unless the Compensation Committee determines otherwise).

(5)
Amounts presented represent the aggregate grant date fair value calculated in accordance with ASC Topic 718 of our common stock awards granted during the year. The per-award grant date fair value was $4.96 for restricted stock units granted on August 14, 2013. See “Share-Based Compensation” in Note 14 of the Notes to the Consolidated Financial Statements set forth in Part II, “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for the assumptions used to calculate grant date fair value. There can be no assurance that the stock award value will equal the aggregate grant date fair value upon vesting.

Employee Benefit Plans

The discussion that follows describes the material terms of our principal equity plans in which the Named Executive Officers participate. The material terms of the employment agreement entered into by RFMD and Mr. Bruggeworth in fiscal 2009 and the change in control agreements entered into with our Named Executive Officers are described under “Potential Payments Upon Termination or Change-in-Control” below.
2012 Stock Incentive Plan. Our shareholders approved the 2012 Plan at the 2012 annual meeting of shareholders. The 2012 Plan provides for the issuance of a maximum number of the sum of (a) 17,000,000 shares, plus (b) any shares of common stock (1) remaining available for the grant of awards as of the 2012 Plan effective date under our prior plans, and/or (2) subject to an award granted under a prior plan, which award is forfeited, canceled, terminated, expires or lapses for any reason. Of the amount described in the preceding sentence, no more than 17,000,000 shares may be issued under the 2012 Plan pursuant to the grant of incentive stock options. Awards that may be granted under the 2012 Plan include incentive options and non-qualified options, stock appreciation rights, restricted stock awards and restricted units, performance awards and performance units, phantom stock awards and other stock-based awards. The number of shares reserved for issuance under the 2012 Plan and the terms of awards may be adjusted upon certain events affecting our capitalization. The 2012 Plan is administered by the Compensation Committee and replaced the 2003 Plan.

2003 Stock Incentive Plan. The 2003 Plan provided for the issuance of a maximum number of the sum of (a) 30,250,000 shares, plus (b) any shares of common stock (1) remaining available for issuance as of the effective date of the 2003 Plan under our prior plans and (2) subject to an award granted under a prior plan, which award is forfeited, canceled, terminated, expires or lapses for any reason. Awards that may be granted under the 2003 Plan include incentive options and non-qualified options, stock appreciation rights, restricted stock awards and restricted units, and performance awards and performance units. The number of shares reserved for issuance under the 2003 Plan and the terms of awards may be adjusted upon certain events affecting our capitalization. The 2003 Plan is also administered by the Compensation Committee and was replaced by the 2012 Plan. Effective August 20, 2012, no new grants can be made under the 2003 Plan.

1999 Stock Incentive Plan. The 1999 Plan provided for the issuance of a maximum of 16,000,000 shares of common stock (as adjusted to reflect stock splits) pursuant to awards granted under the plan. Awards may include incentive options and non-qualified options, stock appreciation rights and restricted stock awards and restricted units. The number of shares reserved for issuance under the plan and the terms of awards may be adjusted upon certain events affecting our capitalization. The 1999 Plan is also administered by the Compensation Committee and was replaced by the 2003 Plan.
1997 Key Employees’ Stock Option Plan. The 1997 Key Employees’ Stock Option Plan provided for the grant of incentive options and non-qualified options to purchase common stock to key employees and independent contractors providing services to RFMD. The aggregate number of shares of common stock that may be issued pursuant to options

106

granted under the plan may not exceed 10,400,000 shares (as adjusted to reflect stock splits), subject to adjustment upon certain events affecting our capitalization. This plan is also administered by the Compensation Committee. Awards may no longer be granted under the 1997 Plan.
Employee Stock Purchase Plan. The ESPP, which was amended by our shareholders at the 2012 annual meeting of shareholders, is intended to qualify as an “employee stock purchase plan” under Code Section 423.  The ESPP is intended to encourage stock ownership through means of payroll deductions.  All full-time employees (including the Named Executive Officers) are eligible to participate after being employed for three months.  An aggregate of 15,000,000 shares of common stock has been reserved for issuance under the ESPP, subject to certain anti-dilution adjustments. We make no cash contributions to the ESPP, but bear the expenses of its administration.

For a discussion of the methodology with respect to the grants of service-based restricted stock units, see ”Compensation Discussion and Analysis - Elements of Compensation - Service-Based Restricted Stock Units.” For a discussion of the objective performance goals and related considerations with respect to the May 2014 grants of performance-based restricted stock units, see “Compensation Discussion and Analysis - Elements of Compensation - Performance-Based Restricted Stock Units.” For a discussion of our Named Executive Officers’ base salaries and bonuses in proportion to their total compensation, see “Compensation Discussion and Analysis - Compensation Decision-Making Processes - Other Compensation Policies.”

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OUTSTANDING EQUITY AWARDS AT FISCAL 2014 YEAR-END TABLE

The following table shows the number of shares of our common stock covered by exercisable and unexercisable options and unvested restricted stock units held by our Named Executive Officers on March 29, 2014. This table includes unvested performance-based restricted stock units that had not yet been earned as of March 29, 2014.

 
 
Option Awards
Stock Awards
Name
Grant Date
 (1)
 
Number of Securities Underlying Unexercised Options
Exercisable
(#)
(2)
Option Exercise Price
($)
(3)
Option Expiration Date
(4)
Number of Shares or Units of Stock That Have Not Vested
(#)
(5)
Market Value of Shares or Units of Stock That Have Not Vested ($)
(6)
Robert A. Bruggeworth
 
 
 
 
 
 
 
 
8/14/2013
 
—
—
—
206,500

1,590,050

 
6/6/2013
 
—
—
—
307,581

2,368,374

 
8/16/2012
 
—
—
—
203,700

1,568,490

 
5/2/2012
 
—
—
—
217,688

1,676,198

 
8/3/2011
 
—
—
—
78,750

606,375

 
5/4/2011
 
—
—
—
76,063

585,685

 
8/4/2010
 
—
—
—
58,850

453,145

 
8/9/2007
 
222,717
$6.31
8/9/2017
—

—

 
8/1/2006
 
370,000
$6.15
8/1/2016
—

—

 
8/9/2005
 
370,000
$5.97
8/9/2015
—

—

 
7/27/2004
 
150,000
$5.80
7/27/2014
—

—

William A. Priddy, Jr.
 
 
 
 
 
 
 
 
8/14/2013
 
—
—
—
80,600

620,620

 
6/6/2013
 
—
—
—
120,221

925,702

 
8/16/2012
 
—
—
—
79,575

612,728

 
5/2/2012
 
—
—
—
85,063

654,985

 
8/3/2011
 
—
—
—
33,850

260,645

 
5/4/2011
 
—
—
—
32,688

251,698

 
8/4/2010
 
—
—
—
25,275

194,618

 
8/9/2007
 
107,647
$6.31
8/9/2017
—

—

 
8/1/2006
 
165,000
$6.15
8/1/2016
—

—
















108

 
Option Awards
Stock Awards
Name
Grant Date
 (1)
 
Number of Securities Underlying Unexercised
Options Exercisable
(#)
(2)
Option Exercise Price
($)
(3)
Option Expiration Date
(4)
Number of Shares or Units of Stock That Have Not Vested
(#)
(5)
Market Value of Shares or Units of Stock That Have Not Vested ($)
(6)
Steven E. Creviston
 
 
 
 
 
 
 
 
8/14/2013
 
—
—
—
107,300

826,210

 
6/6/2013
 
—
—
—
159,665

1,229,421

 
8/16/2012
 
—
—
—
105,825

814,853

 
5/2/2012
 
—
—
—
113,125

871,063

 
8/3/2011
 
—
—
—
40,900

314,930

 
5/4/2011
 
—
—
—
39,532

304,396

 
8/4/2010
 
—
—
—
30,575

235,428

 
8/9/2007
 
107,647
$6.31
8/9/2017
—

—

 
8/1/2006
 
165,000
$6.15
8/1/2016
—

—

 
8/9/2005
 
150,000
$5.97
8/9/2015
—

—

 
7/27/2004
 
95,000
$5.80
7/27/2014
—

—

James D. Stilson
 
 
 
 
 
 
 
 
8/14/2013
 
—
—
—
52,400

403,480

 
6/6/2013
 
—
—
—
78,049

600,977

 
8/16/2012
 
—
—
—
51,750

398,475

 
5/2/2012
 
—
—
—
55,250

425,425

 
8/3/2011
 
—
—
—
20,000

154,000

 
5/4/2011
 
—
—
—
19,313

148,710

 
8/4/2010
 
—
—
—
14,950

115,115

 
8/9/2007
 
50,111
$6.31
8/9/2017
—

—

 
8/1/2006
 
75,000
$6.15
8/1/2016
—

—

Norman A. Hilgendorf
 
 
 
 
 
 
 
 
8/14/2013
 
—
—
—
48,400

372,680

 
6/6/2013
 
—
—
—
72,175

555,748

 
8/16/2012
 
—
—
—
47,775

367,868

 
5/2/2012
 
—
—
—
51,000

392,700

 
10/3/2011
 
—
—
—
7,886

60,722

 
8/3/2011
 
—
—
—
15,250

117,425

 
5/4/2011
 
—
—
—
6,532

50,296

 
8/4/2010
 
—
—
—
11,375

87,588


(1)
The grant date is determined in accordance with ASC Topic 718.

(2)
Options generally vest and become exercisable in four equal installments on the first four anniversaries of the date of grant, subject to continued employment. On March 24, 2005, the Board of Directors approved the accelerated vesting of certain unvested and “out-of-the-money” stock options held by current employees, executive officers and non-employee directors with exercise prices greater than $5.31 per share, which was the closing sales price of RFMD’s common stock on NASDAQ on March 24, 2005. In the event of termination of employment other than for cause (and unless the Compensation Committee determines otherwise), options

109

granted to the Named Executive Officers generally will continue to vest pursuant to the same vesting schedule as if such individual had remained an employee of RFMD and, with respect to such options, the vested portions will be exercisable for the full option term. As of March 29, 2014, there were no unexercisable securities underlying unexercised options.

(3)
The option price is equal to the closing price of our common stock as reported by NASDAQ on the trading date immediately preceding the grant date.

(4)
Options generally expire 10 years after grant.

(5)
Service-based restricted stock units generally vest over a period of four years and any unvested portion of such units is generally forfeited upon termination of employment. Performance-based restricted stock units generally vest over a period of three years and any unvested portion of such units is generally forfeited upon termination of employment. However, in the event of termination of employment other than for cause, the service-based and performance-based restricted stock units granted to each Named Executive Officer generally will continue to vest over a period of four years as if the Named Executive Officer had remained an employee of RFMD (unless the Compensation Committee determines otherwise), subject in certain cases to compliance with certain covenants, clawback provisions and other conditions.

(6)
Based upon $7.70, which was the closing price of RFMD’s common stock as reported by NASDAQ on March 28, 2014, the last trading day of our fiscal year, multiplied by the number of shares subject to restricted stock units that had not yet vested.

2014 OPTION EXERCISES AND STOCK VESTING TABLE

The following table provides information on stock option exercises and the value realized upon exercise, and all stock awards vested and the value realized upon vesting, by the Named Executive Officers during fiscal 2014.
 
Options Awards
Stock Awards
Name
Number of
Shares Acquired
on Exercise
(#)
Value Realized on
Exercise ($) (1)
Number of Shares Acquired on Vesting (#) (2)
Value Realized on Vesting ($)
(3)
Robert A. Bruggeworth
—

—

627,756
3,372,038
William A. Priddy, Jr.
265,000

331,500

254,087
1,365,204
Steven E. Creviston
—

—

326,281
1,752,643
James D. Stilson
31,250

31,094

157,350
845,373
Norman A. Hilgendorf
—

—

119,219
639,065

(1)
The value realized on exercise is the product of the number of shares of stock multiplied by the difference between the market value of the underlying shares on the exercise date and the exercise price applicable to the stock options.

(2)
Share amounts are represented on a pre-tax basis. Our stock plans permit withholding a number of shares upon vesting to satisfy applicable withholding taxes.

(3)
The value realized on vesting represents the market value of our common stock on the vesting date multiplied by the number of shares vested, rounded to the nearest dollar.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL

As described above under Compensation Discussion and Analysis - Elements of Compensation - Employment Agreements,” Mr. Bruggeworth is the only Named Executive Officer who has an employment agreement with RFMD. The employment agreement and the change in control agreements, as amended, between the Named Executive Officers and RFMD are discussed below under the heading “Individual Agreements.”

The information below describes and quantifies certain compensation that would become payable under existing plans and arrangements if the Named Executive Officers’ employment had terminated on March 29, 2014 and the price per

110

share of our common stock on the date of termination was $7.70, which was the closing price of our common stock on March 28, 2014 (the last business day of our fiscal year). These benefits are in addition to benefits available generally to employees, such as distributions under our 401(k) plan, disability benefits and accrued vacation pay.

Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be different. Factors that could affect these amounts include the timing during the year of any such event and our stock price.

Equity Awards

Under our equity incentive plans, the option holder generally has 90 days to exercise vested options after the date employment ends (other than for death, disability, or termination for cause). The option holder’s estate may exercise the option upon the holder’s death (excluding amounts that had not vested) for a period of 365 days. Similarly, the option holder may exercise the option upon termination due to disability (excluding unvested amounts) for a period of 365 days. If the option holder is terminated for cause, all options are canceled immediately. However, options granted to the Named Executive Officers generally will continue to vest pursuant to the same vesting schedule, in the event of termination of employment other than for cause, as if such individual had remained an employee of RFMD and, with respect to such options, the vested portions will be exercisable for the full option term (unless the Compensation Committee determines otherwise), subject in certain cases to compliance with certain covenants, clawback provisions and other conditions.

Under our equity incentive plans, unvested restricted stock units are generally forfeited upon termination. However, service-based restricted stock units granted to the Named Executive Officers generally will continue to vest pursuant to the same vesting schedule, in the event of termination of employment other than for cause, as if such individual had remained an employee of RFMD (unless the Compensation Committee determines otherwise); however, the award shares that vest following termination, and any gain from sale of such shares will be subject to recoupment if the individual violates certain restrictive covenants or engages in other prohibited activities with respect to service-based RSUs granted on or after August 16, 2012. Unvested performance-based restricted stock units granted before May 2, 2012 are forfeited upon termination. Unvested performance-based restricted stock units granted on or after May 2, 2012 will continue to vest following the individual’s termination of employment according to the same vesting schedule as if the individual had remained an employee, unless the individual terminates employment due to cause or death; however, the award shares that vest following termination, and any gain from sale of such shares will be subject to recoupment if the individual violates certain restrictive covenants or engages in other prohibited activities.

401(k) Savings Plan

Our qualified defined contribution 401(k) plan is the only retirement plan available to U.S. employees, which includes each of our Named Executive Officers. For payroll periods beginning on or after January 1, 2010, we have matched 100% of the first 1% and 50% of the next 5% of each employee’s eligible earnings contributed to the plan. Employees vest in our contributions over a two-year period.

Employee Stock Purchase Plan

Upon termination of employment, all amounts in the participant’s account are paid to the participant.

Medical Benefits

All insurance benefits terminate effective midnight of the last day of employment. Health care continuation coverage rules, commonly referred to as COBRA, require us to provide employees enrolled in our health, dental and vision plans with an opportunity to purchase continued health care coverage at their own expense upon the occurrence of a qualifying event, such as termination of employment for reasons other than gross misconduct, reduction in hours worked, divorce, death or loss of dependency status. 


111

Individual Agreements
Employment Agreement with Mr. Bruggeworth. On November 10, 2008, we entered into an employment agreement, dated as of November 12, 2008, with Mr. Bruggeworth, our President and Chief Executive Officer.  The term of the employment agreement continues until the earliest of (a) November 11, 2010 (as extended as described in the following sentence); (b) Mr. Bruggeworth's death; (c) termination by RFMD for "Cause," as defined in the employment agreement or otherwise upon 30 days’ notice; (d) termination by Mr. Bruggeworth for "Good Reason," as defined in the employment agreement or otherwise on 30 days’ notice; or (e) the end of any 180-day Disability Period, as defined in the employment agreement.  The employment agreement is subject to automatic daily extension of the two-year term until notice of non-extension is given in accordance with the terms of the employment agreement.

Under the employment agreement, Mr. Bruggeworth is entitled to an annual base salary of $610,000, which amount will be reviewed annually by the Board and may be increased or reduced by the Board if part of a salary reduction plan for similarly situated officers.  Mr. Bruggeworth also is eligible to receive the following compensatory benefits:

•
A bonus opportunity under the Cash Bonus Plan for each performance period during the term of the employment agreement.  The target annual bonus opportunity in each performance period cannot be less than 100% of Mr. Bruggeworth's base salary.

•
The opportunity to receive periodic grants of equity compensation under the 2003 Plan or successor equity plans, in the Compensation Committee's discretion, so long as he is treated similarly to other senior executive officers.

•
The right to participate in other bonus or incentive plans, paid time off and other retirement plans and welfare benefits in which other senior executive officers may participate in accordance with our policies as in effect from time to time.

If the employment agreement is terminated, Mr. Bruggeworth would be entitled to be compensated in the following manner:

•
Termination for any reason:  Mr. Bruggeworth would be entitled to receive (a) base salary through the date of termination; (b) any previously earned but unpaid bonus under the Cash Bonus Plan for a completed performance period; (c) rights under equity plans, retirement plans and welfare benefit plans, which would be determined based on respective plan terms; and (d) unpaid paid time off per our policy.

•
Termination due to death or total disability:  Mr. Bruggeworth, or, in the case of his death, his beneficiary, would be entitled to receive the benefits described above under "Termination for any reason" plus the greater of Mr. Bruggeworth’s accrued annual bonus or accrued target bonus for the performance period in which the termination date occurs, in each case prorated based on the termination date.

•
Termination by RFMD without cause or by Mr. Bruggeworth with good reason:  Mr. Bruggeworth would be entitled to receive the benefits described above under "Termination for any reason" plus (a) salary continuation equal to two times base salary; (b) his accrued annual bonus (payable after end of performance period), prorated based on the termination date; (c) a special bonus equal to two times his target annual bonus; (d) continuation coverage of health care benefits (or substantially identical individual coverage, plus special health care benefit) for two years; (e) equity awards (other than performance-based equity awards), which will be governed by terms of the respective equity plan and individual equity award agreement (including the right of the Compensation Committee to determine if post-termination vesting and/or exercise rights apply); (f) performance-based equity awards and any previously earned equity-based awards, which will be deemed earned, if at all, on a pro rata basis only if performance goals are met during the performance period, with such earned awards being deemed fully vested at grant or as of the date of termination in the case of previously earned awards; and (g) eligibility to participate in other welfare benefit plans on the same terms and conditions as available to active employees.

•
Termination by RFMD for cause or by Mr. Bruggeworth without good reason:  Mr. Bruggeworth would be entitled to receive the benefits described above under "Termination for any reason," and the term of his employment would cease.

•
Change of Control:  Benefits (if any) paid under Mr. Bruggeworth's existing change in control agreement would offset benefits (if any) paid under the employment agreement following Mr. Bruggeworth's termination.


112

The employment agreement also establishes certain employment and post-termination obligations for Mr. Bruggeworth.  He is required to assist in any RFMD litigation and also is required to comply with certain confidentiality, nondisparagement, noncompetition and nonsolicitation covenants contained in the employment agreement. 

Further, the employment agreement provides that if independent accountants determine that part or all of the payments and benefits to be paid to Mr. Bruggeworth under the employment agreement and all other plans or arrangements of RFMD (a) constitute “parachute payments” under Code Section 280G, and (b) will more likely than not cause Mr. Bruggeworth to incur an excise tax under Code Section 4999 as a result of such payments or other benefits, RFMD will pay a gross-up payment so that the net amount Mr. Bruggeworth will receive after payment of any excise tax equals the amount that he would have received if the excise tax had not been imposed.  If the excise tax would not apply if the total payments to Mr. Bruggeworth were reduced by an amount less than 5%, then the amounts payable will be so reduced and gross-up payments would not be made to Mr. Bruggeworth.

The employment agreement also contains certain forfeiture and recoupment rights.  Generally, during the term of the employment agreement and the 24-month period following the expiration thereof, if Mr. Bruggeworth engages in a “Prohibited Activity,” then (a) any equity awards granted or subject to vesting during the Prohibited Activity Term would be forfeited; (b) any and all shares issued to Mr. Bruggeworth under an equity award granted during the Prohibited Activity Term would be forfeited (without payment of consideration); (c) any gain realized by Mr. Bruggeworth with respect to any shares issued pursuant to an equity award granted during the Prohibited Activity Term would be required to be immediately paid to RFMD; (d) any cash/incentive payments made during the Prohibited Activity Term would be required to be returned to RFMD; and (e) any rights to future cash/incentive payments granted during the Prohibited Activity Term would be forfeited.  RFMD also has an offset right to recover such amounts against amounts otherwise due to Mr. Bruggeworth.  For purposes of the employment agreement, "Prohibited Activity" includes (a) violation of certain restrictive covenants; (b) Mr. Bruggeworth's engaging in willful conduct that results in an obligation to reimburse RFMD under Section 304 of the Sarbanes-Oxley Act of 2002; or (c) Mr. Bruggeworth's engaging in fraud, theft, misappropriation, embezzlement or dishonesty to the material detriment of RFMD.  "Prohibited Activity Term" means the period starting when Mr. Bruggeworth first engaged in Prohibited Activity conduct and continuing without time limitation.

Change in Control Agreements. We have entered into change in control agreements with each of our Named Executive Officers. On December 31, 2008, the Compensation Committee approved entering into amended and restated change in control agreements, or the Change in Control Agreements, with certain officers of RFMD, including each of the Named Executive Officers. The change in control agreements were amended and restated to comply with certain tax requirements imposed under Code Section 409A regarding payment of compensation upon termination of employment, continuation of benefits and reimbursement of certain expenses, and to reflect developing best practices and changes deemed appropriate by the Compensation Committee. Mr. Bruggeworth’s change in control agreement was also amended to conform to certain terms of the employment agreement he entered into with RFMD earlier in fiscal 2009.
The term of each Named Executive Officer’s Change in Control Agreement will end on the earliest of (a) December 31, 2009 (October 2, 2012 for Mr. Hilgendorf), subject to automatic renewal for additional one-year periods unless RFMD gives notice to the Named Executive Officer that it does not wish to extend it; (b) the termination of the Named Executive Officer’s employment with RFMD for any reason prior to the change in control; or (c) the end of a two-year period following a change in control and the fulfillment by RFMD and the Named Executive Officer of all obligations under the Change in Control Agreement. Under each Change in Control Agreement, if a change in control of RFMD occurs while the Named Executive Officer is an employee of RFMD, and a qualifying termination of his employment with RFMD occurs within the two-year period following the change in control, then he is entitled to certain compensation payments and benefits. A “qualifying termination” means RFMD’s termination of the Named Executive Officer’s employment for a reason other than death, disability, retirement or cause, or termination of his employment for “good reason” (which includes a material reduction in duties and responsibilities or salary, the failure of RFMD to continue certain benefits and certain relocations).
Under each Change in Control Agreement, a “change in control” is deemed to have taken place upon the occurrence of certain events, including the acquisition by a person or entity of 40% or more of the outstanding common stock of RFMD, the merger or consolidation of RFMD with or into another corporation in which the holders of common stock immediately prior to the merger or consolidation have voting control over less than 60% of the surviving corporation outstanding immediately after such merger or consolidation, the sale of all or substantially all of the assets of RFMD or a change in the composition of a majority of the Board of RFMD within a 12-month period unless the nomination for election by our shareholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the 12-month period.

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The Change in Control Agreements for Mr. Bruggeworth and Mr. Priddy provide that, upon a qualifying termination after a change in control, RFMD will pay a severance benefit. To the extent the severance benefit as defined below exceeds the separation pay limit, the severance benefit will be paid within 30 days following the date of termination. The remaining portion of the severance benefit will be paid in periodic installments over two years following the termination. The severance benefit is equal to the sum of (a) two times the highest annual rate of base salary during the 12-month period before termination plus (b) two times the target annual bonus opportunity as defined in our Cash Bonus Plan for the year in which the termination occurs. The separation pay limit is equal to two times the lesser of (1) the sum of the executive’s annualized compensation based on the annual rate of pay for services provided to RFMD for the calendar year immediately preceding the calendar year for the termination and (2) the maximum dollar amount of compensation that may be taken into account under a tax-qualified retirement plan.
The Change in Control Agreements for the remaining Named Executive Officers provide that, upon a qualifying termination after a change in control, RFMD will pay a severance benefit. To the extent the severance benefit as defined below exceeds the separation pay limit, the severance benefit will be paid within 30 days following the date of termination. The remaining portion of the severance benefit will be paid in periodic installments over the one-year period following the termination. The severance benefit is equal to the sum of (a) one times the highest annual rate of base salary during the 12-month period before termination plus (b) one times the target annual bonus opportunity as defined in the Cash Bonus Plan for the year in which the termination occurs. All of the Change in Control Agreements also provide that, in the event of a qualifying termination after a change in control, the individual will receive a lump-sum cash amount equal to accrued salary and bonus payments, a pro rata portion of the annual bonus for the year of termination and any accrued vacation pay.
In addition, the Change in Control Agreements provide that upon a qualifying termination after a change in control, all RFMD stock options, stock appreciation rights or similar stock-based awards held by the Named Executive Officer will be accelerated and exercisable in full, and all restrictions on any restricted stock, performance stock or similar stock-based awards granted by RFMD will be removed and such awards will be fully vested. These individuals also would be entitled to “gross-up payments” equal to the amount of excise taxes, income taxes, interest and penalties if payments owed under the Change in Control Agreement are deemed excess parachute payments for federal income tax purposes. If the excise tax would not apply if the total payments to the executive were reduced by an amount less than 5%, then the amounts payable will be so reduced and gross-up payments would not be made to the executive. The Change in Control Agreements also provide that RFMD will continue to provide for one year (two years for Mr. Bruggeworth and Mr. Priddy) the same level of medical, dental, vision, accident, disability and life insurance benefits upon substantially the same terms and conditions as existed prior to termination and will provide such individual with one additional year (or two additional years for Mr. Bruggeworth and Mr. Priddy) of service credit under all non-qualified retirement plans and excess benefits plans in which the individual participated at termination.
The Change in Control Agreements also provide that the Named Executive Officers are subject to certain confidentiality, non-solicitation and non-competition provisions. In the event the individual fails to comply with any of these provisions, he will not be entitled to receive any payment or benefits under the Change in Control Agreement. The Change in Control Agreements are each subject to a general right of offset for any claim, right or action of RFMD against the Named Executive Officer, and obligations under the Change in Control Agreements must be assumed by and be binding on any successor to RFMD.
The following table sets forth information about potential payments to the Named Executive Officers, assuming that their employment was terminated following a change in control of RFMD as of March 28, 2014 (the last business day of the fiscal year) and that the price per share of our common stock on that date was $7.70. The table also assumes prior payment of any remaining accrued annual bonus in accordance with the terms of our Cash Bonus Plan and any portion of base salary that would have been accrued but not yet paid as of March 28, 2014. For a discussion of the specific payments that may become due upon closing of our proposed transaction with TriQuint, refer to the Registration Statement/Joint Proxy Statement on Form S-4 filed by Rocky Holding, Inc. with the SEC on April 14, 2014.
Potential Payments Upon a Qualifying Termination after a Change in Control


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Name
 
Robert A. Bruggeworth
William A. Priddy, Jr.
Steven E. Creviston
James D.
Stilson
Norman A. Hilgendorf
Base Salary
(1)
$1,366,391

$739,222

$422,039

$323,825

$305,329

Bonus
(2)
1,366,391

554,416

316,529

242,869

228,997

Option Awards
(3)
—

—

—

—

—

Stock Awards
(4)
8,848,319

3,520,993

4,596,300

2,246,184

2,005,021

Benefits Continuation
(5)
31,338

20,194

10,226

9,707

15,193

Accrued Vacation
(6)
65,692

34,274

28,291

24,682

26,964

Total
 
$11,678,131

$4,869,099

$5,373,385

$2,847,267

$2,581,504


(1)
For Messrs. Bruggeworth and Priddy, the amount represents two times the highest annual rate of base salary during the twelve-month period before termination. For the other Named Executive Officers, the amount represents one times the highest annual rate of base salary during the twelve-month period before termination. A portion of these amounts would be payable in a lump sum within 30 days following the date of termination, with the remainder to be paid in periodic installments, in accordance with our normal payroll practices, over a two-year period for Messrs. Bruggeworth and Priddy, and over a one-year period for the other Named Executive Officers.

(2)
For Messrs. Bruggeworth and Priddy, the amount represents two times the target annual bonus opportunity as defined in our Cash Bonus Plan for the year of termination. For the other Named Executive Officers, the amount represents one times the target annual bonus opportunity as defined in our Cash Bonus Plan for the year of termination. A portion of these amounts would be payable in a lump sum within 30 days following the date of termination, with the remainder to be paid in periodic installments, in accordance with our normal payroll practices, over a two-year period for Messrs. Bruggeworth and Priddy, and over a one-year period for the other Named Executive Officers.

(3)
Represents the intrinsic value of unvested options as of March 28, 2014.

(4)
Represents the intrinsic value of unvested performance- and service-based restricted stock units as of March 28, 2014.

(5)
Represents the value of continuing health, welfare and other benefits, based on the monthly premiums paid by RFMD at March 28, 2014 (for two years with respect to Messrs. Bruggeworth and Priddy, and one year with respect to the other Named Executive Officers).

(6)
Represents accrued vacation earned but not utilized, which would be payable in a lump sum within 30 days following the date of termination.

Other Potential Payments Upon Resignation, Severance for Cause, Severance without Cause, Retirement, or Constructive Termination
Other than Mr. Bruggeworth, the Named Executive Officers are not entitled to any cash payments from RFMD in the event of resignation, severance with or without cause, retirement or constructive termination. The following unvested restricted stock units, however, may continue to vest unless the Compensation Committee decides otherwise or an individual agreement provides otherwise. No Named Executive Officer owned unvested option awards as of March 28, 2014.

Name
 
William A.
Priddy, Jr.
Steven E.
Creviston
James D.
Stilson
Norman A. Hilgendorf
Stock Awards
(1)
$ 3,269,296
$ 4,291,904
 $ 2,097,474
 $ 1,954,725

(1)
Represents the intrinsic value of service-based restricted stock units for these Named Executive Officers at March 28, 2014.
In accordance with the terms of his employment agreement, Mr. Bruggeworth would have been entitled to the following payments from RFMD upon the occurrence of any of the termination events described in the table below as of March 28,

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2014. The table below assumes prior payment of any portion of base salary that would have been accrued but not yet paid as of March 28, 2014.
Although Mr. Bruggeworth is also entitled to change of control benefits under his employment agreement, pursuant to the terms of his employment agreement, any benefits payable under his Change in Control Agreement with RFMD offset any benefits paid under his employment agreement following his termination. As of March 28, 2014, the benefits payable under his Change in Control Agreement, as set forth in the above table, would have been equal to the change in control benefits payable under his employment agreement.

Robert A. Bruggeworth
 
Termination for
Any Reason
Termination Due to Death or Total Disability
Termination without Cause or for Good Reason
Termination for
Cause
Termination without Good Reason
Base Salary
(1)
$
—

$
—

$
1,366,391

$
—

$
—

Accrued Annual Bonus
(2)
—

—

—

—

—

Special Bonus
(3)
—

—

1,366,391

—

—

Option Awards
(4)
—

—

—

—

—

Stock Awards
(5)
8,262,634

8,262,634

8,848,319

—

8,262,634

Benefits Continuation
(6)
—

—

31,338

—

—

Accrued Vacation
(7)
65,692

65,692

65,692

65,692

65,692

Total
 
$
8,328,326

$
8,328,326

$
11,678,131

$
65,692

$
8,328,326


(1)
With respect to the “Termination without Cause or for Good Reason” column, the amount shown represents two times base salary and would be payable in equal periodic installments, in accordance with the payroll schedule for our salaried personnel, over a two-year period.

(2)
Represents previously earned but unpaid cash bonus under our Cash Bonus Plan for a completed performance period, which would be payable in a lump sum within 30 days of the termination date. With respect to the “Termination Due to Death or Total Disability” column, the amount payable is the greater of the accrued annual bonus or the accrued target bonus, in each case for the performance period in which the termination date occurs, which would be payable in a lump sum within 45 days following the end of the performance period in which the termination date occurs. With respect to the “Termination without Cause or for Good Reason” column, the amount shown represents the accrued annual bonus, which would be payable within 45 days following the end of the performance period in which the termination date occurs. Under these severance scenarios, all or a portion of the accrued annual bonus may have already been paid or would nevertheless be payable without regard to the nature of Mr. Bruggeworth’s termination.

(3)
With respect to the “Termination without Cause or for Good Reason” column, the Special Bonus amount shown represents two times the target annual bonus opportunity as defined in our Cash Bonus Plan for the year in which the termination occurs, which would be payable in equal periodic installments, in accordance with the payroll schedule for our salaried personnel, over a two-year period. Mr. Bruggeworth is not entitled to a Special Bonus under the other severance scenarios set forth in the above table.

(4)
Represents the intrinsic value of unvested options as of March 28, 2014. The fair market value of the unvested option awards was $7.70 per share.

(5)
Represents the intrinsic value of unvested performance- and service-based restricted stock units as of March 28, 2014. With respect to the “Termination for Any Reason,” “Termination Due to Death or Total Disability” and “Termination Without Good Reason” columns, the amount shown: (a) represents the value of unvested service-based restricted stock units which shall continue to vest unless the Compensation Committee determines otherwise and (b) reflects that Mr. Bruggeworth’s unvested performance-based restricted stock units will be forfeited. With respect to the “Termination Without Cause or For Good Reason” column, the amount shown: (a) represents the value of unvested service-based restricted stock units which shall continue to vest unless the Compensation Committee determines otherwise and (b) reflects that if and to the extent performance goals are deemed met, Mr. Bruggeworth shall be deemed to have earned a pro-rata number of performance-based restricted stock units for the relevant performance period. With respect to the “Termination for Cause” column, the amount shown: (a) reflects that Mr. Bruggeworth’s unvested service-based restricted stock units will be

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forfeited unless the Compensation Committee determines otherwise and (b) reflects that Mr. Bruggeworth’s unvested performance-based restricted stock units will be forfeited unless the Compensation Committee determines otherwise.

(6)
Represents the value of continuing health, welfare and other benefits through March 28, 2016, based on the monthly premiums paid by RFMD at March 28, 2014.

(7)
Represents accrued vacation earned but not utilized, which would be payable in a lump sum within 30 days following the date of termination.
DIRECTOR COMPENSATION
As described more fully below, this chart summarizes the annual compensation for our non-employee directors for the year ended March 29, 2014. A director who is an RFMD employee, such as Mr. Bruggeworth, does not receive any compensation for service as a director.

Director Compensation for Fiscal Year Ended March 29, 2014
Name
Fees Earned or Paid in Cash

Stock
Awards
(1)
Option Awards
(1) (2) (3)
Total
Walter H. Wilkinson, Jr.
$
125,000

$
179,820

$
—

$
304,820

Daniel A. DiLeo
90,000

—

151,479

241,479

Jeffery R. Gardner
102,500

75,087

75,740

253,327

John R. Harding
102,500

—

151,479

253,979

Masood A. Jabbar
90,000

75,087

75,740

240,827

Casimir S. Skrzypczak
90,000

150,174

—

240,174

Erik H. van der Kaay (4)
34,000

—

—

34,000


(1)
Represents the aggregate grant date fair value of restricted stock units granted during the fiscal year computed in accordance with ASC Topic 718, rather than an amount paid to or realized by the director. See “Share-Based Compensation” in Note 14 of the Notes to the Consolidated Financial Statements set forth in Part II, “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for the assumptions made in determining the grant date fair value. Effective for the 2010 fiscal year, non-employee directors could elect to receive equity awards in the form of nonqualified options or restricted stock units or a combination of options and restricted stock units. Messrs. Wilkinson and Skrzypczak elected in fiscal year 2014 to receive all restricted stock units, and Messrs. DiLeo and Harding elected to receive all nonqualified options. Messrs. Jabbar and Gardner elected to receive a combination of options and restricted stock units. Mr. Wilkinson received restricted stock units for 37,000 shares, and Messrs. Gardner and Jabbar each received restricted stock units for 15,450 shares upon their re-election to the Board at the 2013 annual meeting of shareholders. Mr. Skrzypczak received restricted stock units for 30,900 shares upon his re-election to the Board at the 2013 annual meeting. The annual restricted stock units granted under the 2012 Plan vest on the first anniversary of the grant date, subject to continued service of the director until the vesting date. At March 29, 2014, the aggregate number of shares subject to outstanding restricted stock units was: Mr. Wilkinson - 37,000 shares; Mr. DiLeo - 0 shares; Mr. Gardner - 15,450 shares; Mr. Harding - 0 shares; Mr. Jabbar - 15,450 shares; Mr. Skrzypczak - 30,900 shares; and Mr. van der Kaay - 0 shares.

(2)
Represents the aggregate grant date fair value of stock options granted during the fiscal year computed in accordance with ASC Topic 718, rather than an amount paid to or realized by the director. See “Share-Based Compensation” in Note 14 of the Notes to the Consolidated Financial Statements set forth in Part II, “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for the assumptions made in determining the grant date fair value. Messrs. DiLeo and Harding each received 75,800 nonqualified options, and Messrs. Jabbar and Gardner each received 37,900 nonqualified options, upon re-election to the Board at the 2013 annual meeting of shareholders. At March 29, 2014, the aggregate number of shares subject to outstanding and unexercised options was: Mr. Wilkinson - 163,700 shares; Mr. DiLeo - 285,900 shares; Mr. Gardner - 127,400 shares; Mr. Harding - 50,000 shares; Mr. Jabbar - 221,450 shares; Mr. Skrzypczak - 103,545 shares; and Mr. van der Kaay - 153,100 shares.
  

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(3)
The per-share grant date fair value was $2.00 for options granted to Messrs. DiLeo, Gardner, Harding and Jabbar upon their re-election to the Board at the 2013 annual meeting of shareholders.

(4)
As Mr. van der Kaay did not stand for reelection to the Board at the 2013 annual meeting of shareholders, the amount reflects compensation solely for the first two quarters of fiscal 2014. He was not eligible for any fiscal 2014 stock awards. In recognition of Mr. van der Kaay’s full year of Board service in between the 2012 and 2013 annual meetings of shareholders, the Compensation Committee allowed the 38,200 restricted stock units granted to Mr. van der Kaay in connection with the 2012 annual meeting of shareholders to continue to vest as scheduled on August 23, 2013, which was nine days after Mr. van der Kaay did not stand for reelection at the 2013 annual meeting of shareholders.

Directors who were not employees of RFMD were compensated for their service as a director as shown in the chart below:

Schedule of Director Fees for Fiscal Year Ended March 29, 2014

Compensation Item
Amount

 
 
 
Annual Retainers
 
 
Chairman of the Board
  $125,000

 
Board Service
65,000

 
Committee Service
25,000

 
Audit Committee Chairman (Additional Fee)
12,500

 
Compensation Committee Chairman (Additional Fee)
12,500

 
Governance and Nominating Committee Chairman (Additional Fee) (1)
0

 
Finance Committee Chairman (Additional Fee)
0

 
Corporate Development Committee Chairman (Additional Fee)
0


(1)
The Chairman of the Board also serves as the Chairman of the Governance and Nominating Committee and
receives no additional compensation for serving in that capacity.

Cash Compensation

Beginning in fiscal year 2009, the method of cash compensation for non-employee members of the Board of Directors was changed by eliminating meeting fees and paying an annual retainer for Board service and a separate annual retainer for service on one or more committees, plus an additional fee for service as Chairman of the Board or as a committee chairman. The form of non-employee director compensation and the larger annual retainers were implemented as a result of a competitive pay analysis performed by Compensia, the independent compensation consultant retained by the Compensation Committee, and are designed to maintain the compensation for RFMD’s non-employee directors at or near the median levels paid by other companies in RFMD’s peer group. As a result of these changes, the cash compensation for non-employee members of the Board is at or near the median of that of other directors in our peer group. Beginning in fiscal 2010, the non-employee directors’ cash compensation for committee service was changed in light of the creation of two new standing committees. A single committee retainer for service on all committees replaced the separate Audit Committee, Compensation Committee and Governance and Nominating Committee retainers that were paid with respect to service in fiscal 2009. Each non-employee director is now paid the same amount for his service on any of the five standing Board committees without regard to the number of such committees on which he serves (except with respect to certain committee chairmen as noted above).

Equity Compensation

In fiscal year 2006, the Board and the shareholders approved the 2006 Directors Stock Option Plan, which we refer to as the 2006 Directors Plan. Under the terms of the 2006 Directors Plan, each non-employee director who is first elected or appointed to the Board is eligible to receive a non-qualified option, which we refer to as the initial option, to purchase 50,000 shares of our common stock at an option price equal to the fair market value of our common stock (based on the closing sales price of the common stock on the day immediately preceding the date of grant, which grant is made on the fifth business day after the date of election or appointment to the Board). Initial options vest in three equal installments on the date of grant and on each of the first and second anniversaries of the date of grant, subject to continued service on

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each vesting date. Initial options granted under the 2006 Directors Plan have a term of 10 years and vested options may be exercised at any time during that period. However, an initial option terminates if a participant’s service as a director is terminated for cause. Our shareholders approved the 2012 Plan at the 2012 annual meeting of shareholders. The 2012 Plan is administered by the Compensation Committee and replaced the 2006 Directors Plan. Effective August 20, 2012, no new grants were to be made under the 2006 Directors Plan. For more information about the 2012 Plan, see “Employee Benefit Plans - 2012 Stock Incentive Plan” above.
In fiscal 2014, each participating non-employee director who was re-elected also received an annual non-qualified option grant, which we refer to as the annual option, or an annual restricted stock unit grant, which we refer to as the annual RSU, pursuant to the 2012 Plan and the Director Compensation Plan, which was adopted by the Board in May 2009 and amended and restated effective August 16, 2012, and served to formalize our non-employee director compensation terms. Under the terms of the Director Compensation Plan and relevant equity plan, starting in fiscal 2010, non-employee directors may elect to receive equity awards in the form of 100% nonqualified options to purchase shares of our common stock, 100% restricted stock units, or RSUs, or 50% options and 50% RSUs. The value of the initial equity awards (options and RSUs combined) cannot exceed the total value of the initial options a director would otherwise be eligible to receive. Likewise, the value of annual equity awards cannot exceed the total value of the annual option a director otherwise would receive. For these purposes, “total value” is based on the number of shares that would otherwise be subject to an initial option or annual option, as the case may be, multiplied by the Black-Scholes value of the initial option or annual option. The Board approved this “cafeteria” plan feature following the recommendation of Compensia. The Director Compensation Plan also expressly permits the grant of supplemental options and supplemental RSUs. These supplemental awards can be designed to supplement initial or annual equity awards or they may be intended to serve as “stand-alone” awards, for instance, for extraordinary Board service.

In fiscal 2014, each non-employee board member could elect to receive a nonqualified stock option for 75,800 shares, an RSU for 30,900 shares, or a nonqualified stock option for 37,900 shares and an RSU for 15,450 shares. The non-employee Chairman of the Board could elect to receive a nonqualified stock option for 91,000 shares, an RSU for 37,000 shares or a nonqualified stock option for 45,500 shares and an RSU for 18,500 shares. The option price for each annual option is equal to the fair market value per share of our common stock on the grant date (that is, the closing sales price of the common stock on the day immediately preceding the date of grant, which grant is made on the fifth business day after the date of re-election to the Board). Annual options vest and become exercisable immediately on the date of grant. Annual RSUs vest one year after the date of grant. With respect to a new director who is first appointed or elected at an annual meeting of the shareholders, no annual option will be granted until the next annual meeting (assuming such director is re-elected at such annual meeting). With respect to a new director who is appointed or elected other than at an annual meeting of shareholders, the number of shares covered by the first annual option otherwise to be granted following the annual meeting of shareholders (assuming the director is re-elected at such annual meeting) would be reduced on a pro rata basis for each calendar quarter (or portion thereof) since the preceding annual shareholders meeting in which such a director was not in office. Like the initial option, an annual option has a term of 10 years and may be exercised at any time during that period, although the option terminates if a participant’s service as a director is terminated for cause.
As noted above, non-employee directors are also eligible to receive discretionary stock-based awards, which may be granted under the 2012 Plan. See “Employee Benefit Plans - 2012 Stock Incentive Plan,” above. No discretionary equity awards to non-employee directors were granted in fiscal year 2014.
Our securities trading policy prohibits any hedging of our securities by directors. This includes purchasing any financial instrument or contract, including prepaid variable forward contracts, equity swaps, collars and exchange traded funds, which is designed to hedge or offset any risk of decrease in the market value of our common stock. Our securities trading policy also prohibits any pledging of securities by our directors.

Other Compensation

We reimburse all directors for expenses incurred in their capacity as directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Messrs. DiLeo, Harding (Chairman) and Wilkinson. None of the current members of the Compensation Committee has ever served as an officer or employee of RFMD or had any relationship during fiscal 2014 that would be required to be disclosed pursuant to Item 404 of Regulation S-K. No interlocking relationships exist between our current Board of Directors or Compensation Committee and the board of directors or compensation committee of any other company.


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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information with respect to the beneficial ownership of RFMD’s common stock as of May 2, 2014 (unless otherwise indicated) by (a) each person known by RFMD to own beneficially more than five percent of the outstanding shares of our common stock, (b) each director, (c) the Named Executive Officers, and (d) all current directors and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or warrants held by that person that are currently exercisable or that are or may become exercisable within 60 days of May 2, 2014, and shares of restricted stock or restricted stock units that have vested or that will vest within 60 days of May 2, 2014, are deemed outstanding. These shares, however, are not deemed outstanding for purposes of computing the percentage ownership of any other person. Except as indicated in the footnotes to this table and under applicable community property laws, each shareholder named in the table has sole voting and dispositive power with respect to the shares set forth opposite the shareholder’s name. Unless otherwise indicated, the address of all listed shareholders is c/o RF Micro Devices, Inc., 7628 Thorndike Road, Greensboro, North Carolina 27409-9421. As of May 2, 2014, none of our directors or executive officers has pledged our common stock.
 
Beneficial Ownership
Name of Beneficial Owner
Number of Shares (1)
Percent of Class
BlackRock, Inc. and affiliates (2)
28,837,053
10.10
%
Citadel Advisors LLC and affiliates (3)
16,917,026
5.93
%
The Vanguard Group, Inc. (4)
16,850,570
5.90
%
Robert A. Bruggeworth (5)
1,643,691
*

Steven E. Creviston (6)
1,195,791
*

William A. Priddy, Jr. (7)
456,605
*

James D. Stilson (8)
499,789
*

Walter H. Wilkinson, Jr. (9)
389,892
*

Daniel A. DiLeo (10)
346,700
*

John R. Harding (11)
50,000
*

Masood A. Jabbar (12)
253,550
*

Casimir S. Skrzypczak (13)
231,252
*

Jeffery R. Gardner (14)
144,900
*

Norman A. Hilgendorf
187,763
*

Directors and executive officers as a group (13 persons) (15)
5,450,464
1.68
%

* Indicates less than one percent

(1)
As noted above, shares of RFMD common stock subject to options exercisable within 60 days of May 2, 2014 and shares of restricted stock or restricted stock units that have vested or that will vest within 60 days of May 2, 2014, are included.
(2)
Based upon information set forth in a Schedule 13G/A filed with the SEC on January 10, 2014 by BlackRock, Inc. (“BlackRock”) reporting the sole power to vote or to direct the vote of 27,894,957 shares and sole power to dispose or to direct the disposition of 28,837,053 shares. Various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, RFMD common stock. No one person’s interest in such RFMD common stock is more than 5% of the total outstanding common shares. The address of BlackRock is 40 East 52nd Street, New York, NY 10022.
(3)
Based upon information set forth in a Schedule 13G filed with the SEC on February 4, 2014 by Citadel Advisors LLC and affiliates (“Citadel”) reporting the shared power to vote or direct the vote of 16,917,026 shares and shared power to dispose or direct the disposition of 16,917,026 shares. The address of Citadel is c/o Citadel LLC, 131 S. Dearborn Street, 32nd Floor, Chicago, IL 60603.

120

(4)
Based upon information set forth in a Schedule 13G/A filed with the SEC on February 12, 2014 by The Vanguard Group, Inc. (“Vanguard”) reporting the sole power to vote or direct the vote of 386,849 shares, sole power to dispose or direct the disposition of 16,484,021, and shared power to dispose or direct the disposition of 366,549 shares. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of Vanguard, is the beneficial owner of 366,549 shares as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of Vanguard, is the beneficial owner of 20,300 shares as a result of its serving as investment manager of Australian investment offerings. The address of Vanguard is 100 Vanguard Blvd., Malvern, PA 19355.
(5)
Includes 1,012,717 shares of common stock issuable upon exercise of stock options.
(6)
Includes 422,647 shares of common stock issuable upon exercise of stock options.
(7)
Includes 107,647 shares of common stock issuable upon exercise of stock options.
(8)
Includes (a) 125,111 shares of common stock issuable upon exercise of stock options and (b) 1,634 shares of common stock held by Mr. Stilson’s wife, of which 1,220 are shares of common stock issuable upon exercise of stock options.
(9)
Includes 143,700 shares of common stock issuable upon exercise of stock options.
(10)
Includes 285,900 shares of common stock issuable upon exercise of stock options.
(11)
Includes 50,000 shares of common stock issuable upon exercise of stock options.
(12)
Includes 221,450 shares of common stock issuable upon exercise of stock options.
(13)
Includes 103,545 shares of common stock issuable upon exercise of stock options.
(14)
Includes 37,900 shares of common stock issuable upon exercise of stock options.
(15)
Includes 2,511,837 shares of common stock issuable upon exercise of stock options

EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes information as of March 29, 2014 relating to our equity compensation plans, under which grants of stock options, restricted stock and other rights to acquire shares of our common stock may be made from time to time.
 
Plan Category
(a)
Number of securities to be issued upon exercise of outstanding options, warrants and rights
 
(b)
Weighted-average exercise price of outstanding options, warrants and rights (1)
(c)
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
 
Equity compensation plans approved by security holders
16,142,606
 
$
5.81

24,077,803
(2)
Equity compensation plans not approved by security holders (3)
59,854
 
$
1.48

0
 
Total
16,202,460
(4
)
 
24,077,803
 
 
(1)
The weighted-average exercise price does not take into account restricted stock units because such units do not have an exercise price.

(2)
The total shares available for future issuance in column (c) may be the subject of awards other than options, warrants or rights granted under our 2012 Plan. For a more detailed discussion of these and other equity plans that have been approved by our shareholders, please see “Employee Benefit Plans,” above.

121

The number of securities remaining available for future issuance also includes securities that may be issued pursuant to the ESPP.
(3)
For a more detailed description of these plans, please see “Non-Shareholder Approved Plans,” below.
(4)
Includes shares subject to issuance pursuant to outstanding stock options and restricted stock units if certain service-based and/or performance- and service-based conditions are met. For more detailed information, please see “Service-Based Restricted Stock Units” and “Performance-Based Restricted Stock Units” under “Compensation Discussion and Analysis – Elements of Compensation,” above.

Non-Shareholder Approved Plans
Sirenza Microdevices, Inc. Amended and Restated 1998 Stock Plan

In connection with our acquisition of Sirenza in November 2007, we assumed the Sirenza Amended and Restated 1998 Stock Plan. This plan provides for the grant of options, stock purchase rights, stock appreciation rights, performance shares, performance units, restricted stock units and deferred stock units to employees, directors or consultants. The weighted average exercise price for the currently outstanding options is $1.48. As of March 29, 2014, no shares may be granted under the Sirenza plan.
In connection with our acquisition of Sirenza, options to purchase Sirenza common stock that were outstanding immediately prior to the acquisition were assumed by us and converted into options to purchase our common stock that are subject to the same vesting and other conditions that applied to the Sirenza options immediately prior to the acquisition.  Performance share awards, or PSAs, for Sirenza common stock that were outstanding immediately prior to the acquisition were assumed by us and converted into contingent rights to acquire our common stock that are subject to the same vesting and other conditions that applied to the Sirenza PSAs immediately prior to the acquisition.  Shares of Sirenza common stock underlying restricted stock awards, or RSAs, that were subject to forfeiture risks, repurchase options or other restrictions immediately prior to the acquisition were converted into shares of our common stock and/or cash and remain subject to the same restrictions that applied to the Sirenza RSAs immediately prior to the acquisition. The terms may be adjusted upon certain events affecting our capitalization.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

RELATED PERSON TRANSACTIONS
Related Person Transactions Policy
The Board maintains a written policy regarding transactions that involve RFMD and any of its executive officers, directors, director nominees or five percent or greater shareholders or their affiliates, which are referred to generally as “related persons.” The Governance and Nominating Committee will analyze and consider any such transaction in accordance with this written policy in order to determine whether the terms and conditions of the transaction are substantially the same as, or more favorable to RFMD than, transactions that would be available from unaffiliated parties.
The policy governs the procedures for review and consideration of all “related person transactions,” as that term is defined in the policy, to help ensure that any such transactions are timely identified and given appropriate consideration. Generally, any current or proposed financial transaction, arrangement or relationship in which a “related person” had or will have a direct or indirect material interest, in an amount exceeding $120,000 and in which RFMD was or will be a participant, requires the approval of the Governance and Nominating Committee or a majority of the disinterested members of the Board. Before granting such approval, the Governance and Nominating Committee will consider all of the relevant facts and circumstances to ensure that the proposed transaction is in the best interest of RFMD and its shareholders. The term “related person” is defined by the policy and by Item 404 of Regulation S-K.
In conducting its review of any proposed related person transaction, the Governance and Nominating Committee will consider all of the relevant facts and circumstances available to the Governance and Nominating Committee, including but not limited to (a) the benefits to RFMD; (b) the impact on a director’s independence in the

122

event the related person is a director, an immediate family member of a director or an entity in which a director is a partner, shareholder or executive officer; (c) the availability of other sources for comparable products or services; (d) the terms of the proposed related person transaction; and (e) the terms available to unrelated third parties or to employees generally in an arms-length negotiation. No member of the Governance and Nominating Committee will participate in any review, consideration or approval of any related person transaction with respect to which such member or any of his or her immediate family members is the related person.
The Governance and Nominating Committee may, from time to time as it determines in its discretion to be appropriate, review periodically any previously approved or ratified related person transaction to determine if it is in the best interests of us and our shareholders to continue, modify or terminate such related person transaction.
We did not engage in any related person transactions during fiscal year 2014.
CORPORATE GOVERNANCE
Independent Directors
In accordance with NASDAQ listing standards, and our Corporate Governance Guidelines, the Board of Directors must consist of a majority of independent directors. The Board has determined that Messrs. DiLeo, Gardner, Harding, Jabbar, Skrzypczak, and Wilkinson each satisfy the definition of “independent director” under these NASDAQ listing standards. The Board, in concert with its Governance and Nominating Committee, performed a review to determine the independence of its members and made a subjective determination as to each of these independent directors that no transactions, relationships or arrangements exist that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director of RFMD. In making these determinations, the Board reviewed the information provided by the directors and RFMD with regard to each director’s business and personal activities as they may relate to RFMD and its management.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEE INFORMATION
The following table shows the aggregate fees that we paid or accrued for the audit and other services provided by Ernst & Young LLP for fiscal years 2014 and 2013.

 
2014
 
2013
Audit Fees
$
1,391,316

 
$
815,389

Audit-Related Fees
—

 
63,555

Tax Fees
22,884

 
4,312

All Other Fees
—

 
—

Total
1,414,200

 
883,256

 
 
 
 
Audit Fees. This category includes fees for: (a) the audit of our annual financial statements and review of financial statements included in our quarterly reports on Form 10-Q; (b) the audit of our internal control over financial reporting; and (c) services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements for the relevant fiscal years.
Audit-Related Fees. This category includes the aggregate fees for assurance and related services provided by Ernst & Young LLP that are reasonably related to the performance of the audits or reviews of the financial statements and which are not reported above under “Audit Fees.”
Tax Fees. This category consists of professional services rendered by Ernst & Young LLP for tax compliance, tax planning, tax advice, and value added tax process review. The services for the fees disclosed under this category include tax return preparation, research and technical tax advice.
All Other Fees. This category includes the aggregate fees for products and services provided by Ernst & Young LLP that are not reported above under “Audit Fees,” “Audit-Related Fees” or “Tax Fees.”

123

The Audit Committee has considered the compatibility of the non-audit services performed by and fees paid to Ernst & Young LLP in fiscal year 2014 and the proposed non-audit related services and proposed fees for fiscal year 2015 and has determined that such services and fees are compatible with the independence of Ernst & Young.
Pre-Approval Policies and Procedures
The Audit Committee has adopted a policy that requires the Audit Committee to approve all audit and permissible non-audit services to be provided by the independent registered public accounting firm and any non-audit service provided by any other accounting firm if the cost of the service is reasonably expected to exceed $100,000. The Audit Committee has established a pre-approval policy for certain audit and non-audit services, up to a specified amount for each identified service that may be provided by the independent registered public accounting firm. The Chairman of the Audit Committee may specifically approve any service within the pre-approved audit and non-audit service category if the fees for such service exceed the maximum set forth in the policy, as long as the excess fees are not reasonably expected to exceed $25,000. Any such approval by the Chairman must be reported to the Audit Committee at its next scheduled meeting. The pre-approval fee levels for all services to be provided by the independent registered public accounting firm are reviewed annually by the Audit Committee.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a)    The following documents are filed as part of this report:

(1)     Financial Statements

i.    Consolidated Balance Sheets as of March 29, 2014 and March 30, 2013.

ii.
Consolidated Statements of Operations for fiscal years 2014, 2013 and 2012.

iii. Consolidated Statements of Comprehensive Income (Loss) for fiscal years 2014, 2013 and 2012.

iv.
Consolidated Statements of Shareholders' Equity for fiscal years 2014, 2013 and 2012.

v.
Consolidated Statements of Cash Flows for fiscal years 2014, 2013 and 2012.

vi.
Notes to Consolidated Financial Statements.

Report of Management on Internal Control Over Financial Reporting.

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting.

Report of Independent Registered Public Accounting Firm.

(2)     Financial Statement Schedules:

Schedule II – “Valuation and Qualifying Accounts” appears below.

All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions, are included within the consolidated financial statements or the notes thereto in this Annual Report on Form 10-K or are inapplicable and, therefore, have been omitted.


124

Schedule II

Valuation and Qualifying Accounts
Fiscal Years Ended 2014, 2013 and 2012
(In thousands)

 
Balance at Beginning of Period
 
Additions Charged to Costs and Expenses
 

Deductions from Reserve
 

Balance at End of Period
Year ended March 29, 2014
 
 
 
 
 
 
 
Allowance for doubtful accounts
$
434

 
$
—

 
$
121

(i)
$
313

Inventory reserve
21,644

 
6,982

 
2,053

(ii)
26,573

 
 
 
 
 
 
 
 
Year ended March 30, 2013
 
 
 
 
 
 
 
Allowance for doubtful accounts
$
353

 
$
116

 
$
35

(i)
$
434

Inventory reserve
22,461

 
4,907

 
5,724

(ii)
21,644

 
 
 
 
 
 
 
 
Year ended March 31, 2012
 
 
 
 
 
 
 
Allowance for doubtful accounts
$
800

 
$
—

 
$
447

(i)
$
353

Inventory reserve
20,082

 
6,161

 
3,782

(ii)
22,461


(i) The Company wrote-off a fully reserved balance against the related receivable; write-offs totaled less than $0.1 million for fiscal 2014, less than $0.1 million for fiscal 2013 and $0.1 million for fiscal 2012.

(ii) The Company sold excess inventory or wrote-off scrap related to quality and obsolescence against a fully reserved balance and reduced reserves based on the Company’s reserve policy.

(3) The exhibits listed in the accompanying Exhibit Index are filed as a part of this Annual Report on Form 10-K.

(b) Exhibits.
See the Exhibit Index.

(c) Separate Financial Statements and Schedules.
None.

125

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


 
 
 
RF Micro Devices, Inc.
 
 
 
 
Date:
May 21, 2014
 
/s/ Robert A. Bruggeworth
 
 
 
 By: Robert A. Bruggeworth
 
 
 
President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert A. Bruggeworth and William A. Priddy, Jr., and each of them, as true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all which said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.


126

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on May 21, 2014.

/s/ Robert A. Bruggeworth
 
Name:
Robert A. Bruggeworth
 
 
Title:
President, Chief Executive Officer and Director
 
 
 
(principal executive officer)
 
 
 
 
/s/ William A. Priddy, Jr.
 
Name:
William A. Priddy, Jr.
 
 
Title:
Chief Financial Officer, Corporate Vice President of Administration and Secretary
 
 
 
(principal financial officer)
 
 
 
 
/s/ Barry D. Church
 
Name:
Barry D. Church
 
 
Title:
Vice President and Corporate Controller
 
 
 
(principal accounting officer)
 
 
 
 
/s/ Walter H. Wilkinson, Jr.
 
Name:
Walter H. Wilkinson, Jr.
 
 
Title:
Chairman of the Board of Directors
 
 
 
 
/s/ Daniel A. DiLeo
 
Name:
Daniel A. DiLeo
 
 
Title:
Director
 
 
 
 
/s/ Jeffery R. Gardner
 
Name:
Jeffery R. Gardner
 
 
Title:
Director
 
 
 
 
/s/ John R. Harding
 
Name:
John R. Harding
 
 
Title:
Director
 
 
 
 
/s/ Masood A. Jabbar
 
Name:
Masood A. Jabbar
 
 
Title:
Director
 
 
 
 
/s/ Casimir S. Skrzypczak
 
Name:
Casimir S. Skrzypczak
 
 
Title:
Director
 
 
 
 
 
 
 
 
 
 
 
 


127

 
EXHIBIT INDEX
Exhibit
  No.
Description
2.1
Agreement and Plan of Merger and Reorganization, dated as of August 12, 2007, by and among RF Micro Devices, Inc., Iceman Acquisition Sub, Inc., and Sirenza Microdevices, Inc. (14)
2.2
Asset Transfer Agreement, dated June 5, 2012, between RF Micro Devices, Inc. and IQE, Inc. (26)**
2.3
Agreement and Plan of Merger, dated as of November 4, 2012, by and among RF Micro Devices, Inc., Chameleon Acquisition Corporation, Amalfi Semiconductor, Inc. and Shareholder Representative Services LLC, solely in its capacity as the escrow representative (29)
2.4
Agreement and Plan of Merger and Reorganization dated February 22, 2014, by and among TriQuint Semiconductor, Inc., RF Micro Devices, Inc. and Rocky Holding, Inc. (34)
3.1
Restated Articles of Incorporation of RF Micro Devices, Inc., dated July 27, 1999 (1)
3.2
Articles of Amendment of RF Micro Devices, Inc. to Articles of Incorporation, dated July 26, 2000 (2)
3.3
Articles of Amendment of RF Micro Devices, Inc. to Articles of Incorporation, dated August 10, 2001 (3)
3.4
Bylaws of RF Micro Devices, Inc., as amended and restated through November 8, 2007 (15)
4.1
Specimen Certificate of Common Stock (4)
4.2
Indenture, dated as of April 4, 2007, between RF Micro Devices, Inc. and U.S. Bank National Association, as Trustee, relating to the 1.00% Convertible Subordinated Notes due April 15, 2014 (5)
4.3
Form of Note for 1.00% Convertible Subordinated Notes due April 15, 2014, filed as Exhibit A to Indenture, dated as of April 4, 2007, between RF Micro Devices, Inc. and U.S. Bank National Association, as Trustee (5)
4.4
Registration Rights Agreement between RF Micro Devices, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, dated as of April 4, 2007 (5)

The registrant hereby undertakes to furnish to the Securities and Exchange Commission, upon its request, a copy of any instrument defining the rights of holders of long-term debt of the registrant not filed herewith pursuant to Item 601(b)(4)(iii) of Regulation S-K
10.1
Lease Agreement, dated October 31, 1995, between RF Micro Devices, Inc. and Piedmont Land Company, as amended (7)
10.2
Lease Agreement, dated October 9, 1996, between RF Micro Devices, Inc. and Highwoods/Forsyth Limited Partnership, as amended (7)
10.3
Lease Agreement, dated February 12, 1999, between Highwoods Realty Limited Partnership and RF Micro Devices, Inc. (8)
10.4
Lease Agreement, dated May 25, 1999, by and between CK Deep River, LLC and RF Micro Devices, Inc. (9)
10.5
Lease Agreement, dated November 5, 1999, between Highwoods Realty Limited Partnership and RF Micro Devices, Inc. (6)
10.6
Wafer Supply Agreement, dated June 9, 2012, between RF Micro Devices, Inc. and IQE, Inc. (30)**
10.7
2003 Stock Incentive Plan of RF Micro Devices, Inc., as amended through June 11, 2010 (21)*
10.8
Form of Stock Option Agreement (Senior Officers) pursuant to the 2003 Stock Incentive Plan of RF Micro Devices, Inc., as amended effective June 1, 2006 (11)*
10.9
Form of Restricted Stock Award Agreement (Service-Based Award for Senior Officers) pursuant to the 2003 Stock Incentive Plan of RF Micro Devices, Inc., as amended effective June 1, 2006 (11)*
10.10
Form of Stock Option Agreement for Employees pursuant to the 2003 Stock Incentive Plan of RF Micro Devices, Inc. (10)*
10.11
Form of Restricted Stock Award Agreement (Service-Based Award for Employees) pursuant to the 2003 Stock Incentive Plan of RF Micro Devices, Inc. (10)*
10.12
Form of Stock Option Agreement for Nonemployee Directors pursuant to the 2003 Stock Incentive Plan of RF Micro Devices, Inc. (12)*
10.13
RF Micro Devices, Inc. 2006 Directors Stock Option Plan, as amended and restated effective May 7, 2009 (19)*

128

10.14
Form of Stock Option Agreement - Initial Option, for Nonemployee Directors pursuant to the RF Micro Devices, Inc. 2006 Directors Stock Option Plan, effective July 31, 2006 (11)*
10.15
Form of Stock Option Agreement - Annual Option, for Nonemployee Directors pursuant to the RF Micro Devices, Inc. 2006 Directors Stock Option Plan, effective July 31, 2006 (11)*
10.16
RF Micro Devices, Inc. Cash Bonus Plan, as amended and restated effective June 20, 2011 (22)*
10.17
Nonemployee Directors' Stock Option Plan of RF Micro Devices, Inc. (as amended and restated through June 13, 2003) (13)*
10.18
Sirenza Microdevices, Inc. Amended and Restated 1998 Stock Plan, as Assumed by RF Micro Devices, Inc. and Amended and Restated Effective November 13, 2007 (15)*
10.19
Form of Restricted Stock Award Agreement (Performance-Based and Service-Based Award for Senior Officers) pursuant to the 2003 Stock Incentive Plan of RF Micro Devices, Inc. (16)*
10.20
Employment Agreement, dated as of November 12, 2008, between RF Micro Devices, Inc. and Robert A. Bruggeworth (17)*
10.21
Second Amended and Restated Change in Control Agreement, effective as of December 31, 2008, by and between RF Micro Devices, Inc. and Robert A. Bruggeworth (18)*
10.22
Amended and Restated Change in Control Agreement, effective as of December 31, 2008, by and between RF Micro Devices, Inc. and Barry D. Church (18)*
10.23
Amended and Restated Change in Control Agreement, effective as of December 31, 2008, by and between RF Micro Devices, Inc. and Steven E. Creviston (18)*
10.24
Amended and Restated Change in Control Agreement, effective as of December 31, 2008, by and between RF Micro Devices, Inc. and William A. Priddy, Jr. (18)*
10.25
Amended and Restated Change in Control Agreement, effective as of December 31, 2008, by and between RF Micro Devices, Inc. and Suzanne B. Rudy (18)*
10.26
Amended and Restated Change in Control Agreement, effective as of December 31, 2008, by and between RF Micro Devices, Inc. and James D. Stilson (18)*
10.27
Equity Award Election Form, pursuant to the RF Micro Devices, Inc. 2006 Directors Stock Option Plan, as amended and restated effective May 7, 2009 (19)*
10.28
Form of Stock Option Agreement - Annual/Supplemental Option, for Nonemployee Directors pursuant to the RF Micro Devices, Inc. 2006 Directors Stock Option Plan, as amended and restated effective May 7, 2009 (19)*
10.29
Form of Restricted Stock Unit Agreement - Initial RSU, for Nonemployee Directors pursuant to the 2003 Stock Incentive Plan of RF Micro Devices, Inc., as amended (19)*
10.30
Form of Restricted Stock Unit Agreement - Annual/Supplemental RSU, for Nonemployee Directors pursuant to the 2003 Stock Incentive Plan of RF Micro Devices, Inc., as amended (19)*
10.31
RF Micro Devices, Inc. Director Compensation Plan, effective May 7, 2009 (19)*
10.32
2009 Declaration of Amendment, effective July 30, 2009, to the Nonemployee Directors' Stock Option Plan of RF Micro Devices, Inc., as amended and restated through June 13, 2003 (19)*
10.33
Form of Restricted Stock Unit Agreement (Performance-Based and Service-Based Award) pursuant to the 2003 Stock Incentive Plan of RF Micro Devices, Inc., as amended (for awards prior to May 2, 2012)* (20)
10.34
Change in Control Agreement, effective as of October 3, 2011, by and between RF Micro Devices, Inc. and Norman A. Hilgendorf (23)*
10.35
Change in Control Agreement, effective as of October 26, 2011, by and between RF Micro Devices, Inc. and Hans Schwarz (23)*
10.36
Retirement and Transition Agreement, dated effective as of February 29, 2012, between Robert M. Van Buskirk and RF Micro Devices, Inc. (24)*
10.37
Retirement and Transition Agreement, dated as of April 5, 2012, between Jerry D. Neal and RF Micro Devices, Inc. (25)*
10.38
Form of Restricted Stock Unit Agreement (Service-Based Award for Senior Officers) pursuant to the 2003 Stock Incentive Plan of RF Micro Devices, Inc. (26)*
10.39
Form of Restricted Stock Unit Agreement (Performance-Based and Service-Based Award for Senior Officers) pursuant to the 2003 Stock Incentive Plan of RF Micro Devices, Inc. (26)*
10.40
Form of Restricted Stock Unit Agreement (Performance-Based and Service-Based Award) pursuant to the 2003 Stock Incentive Plan of RF Micro Devices, Inc., as amended (for awards on and after May 2, 2012) (35)*
10.41
RF Micro Devices, Inc. 2012 Stock Incentive Plan (27)*

129

10.42
RF Micro Devices, Inc. Director Compensation Plan, Amended and Restated Effective August 16, 2012 (28)*
10.43
Form of Director Annual/Supplemental Stock Option Agreement pursuant to the RF Micro Devices, Inc. 2012 Stock Incentive Plan (28)*
10.44
Form of Director Annual/Supplemental Restricted Stock Unit Agreement pursuant to the RF Micro Devices, Inc. 2012 Stock Incentive Plan (28)*
10.45
Form of Director Initial/Supplemental Stock Option Agreement pursuant to the RF Micro Devices, Inc. 2012 Stock Incentive Plan (28)*
10.46
Form of Director Initial/Supplemental Restricted Stock Unit Agreement pursuant to the RF Micro Devices, Inc. 2012 Stock Incentive Plan (28)*
10.47
Form of Senior Officer Stock Option Agreement pursuant to the RF Micro Devices, Inc. 2012 Stock Incentive Plan (28)*
10.48
Form of Senior Officer Performance-Based and Service-Based Restricted Stock Unit Agreement pursuant to the RF Micro Devices, Inc. 2012 Stock Incentive Plan (28)*
10.49
Form of Senior Officer Service-Based Restricted Stock Unit Agreement pursuant to the RF Micro Devices, Inc. 2012 Stock Incentive Plan (28)*
10.50
Form of Change in Control Agreement with RF Micro Devices, Inc. (28)*
10.51
Form of Restricted Stock Unit Agreement (Performance-Based Award for Senior Officers (TSR)) pursuant to the RF Micro Devices, Inc. 2012 Stock Incentive Plan (32)*
10.52
Form of Restricted Stock Unit Agreement (Performance-Based Award for Senior Officers (TSR)) pursuant to the RF Micro Devices, Inc. 2012 Stock Incentive Plan (33)*
10.53
Form of Senior Officer Performance-Based and Service-Based Restricted Stock Unit Agreement pursuant to the RF Micro Devices, Inc. 2012 Stock Incentive Plan (33) *
10.54
Credit Agreement, dated as of March 19, 2013, by and between RF Micro Devices, Inc., certain domestic subsidiaries of the Company, Bank of America, N.A., as administrative agent and lender, and a syndicate of other lenders (31)
10.55
Security and Pledge Agreement, dated March 19, 2013, by and among RF Micro Devices, Inc., the other parties identified as “Obligors” (as defined therein) and such other parties that may become Obligors thereunder after the date thereof, and Bank of America, N.A., as administrative agent (31)
10.56
First Amendment, dated as of August 15, 2013, to the Credit Agreement, dated as of March 19, 2013, by and between RF Micro Devices, Inc., certain domestic subsidiaries of the Company, Bank of America, N.A., as administrative agent and lender, and a syndicate of other lenders (33)
21
Subsidiaries of RF Micro Devices, Inc.
23
Consent of Ernst & Young LLP
31.1
Certification of Periodic Report by Robert A. Bruggeworth, as Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Periodic Report by William A. Priddy, Jr., as Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Periodic Report by Robert A. Bruggeworth, as Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of Periodic Report by William A. Priddy, Jr., as Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101
The following materials from our Annual Report on Form 10-K for the year ended March 29, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets as of March 29, 2014 and March 30, 2013, (ii) the Consolidated Statements of Operations for the years ended March 29, 2014, March 30, 2013, and March 31, 2012, (iii) the Consolidated Statements of Shareholders' Equity for the years ended March 29, 2014, March 30, 2013 and March 31, 2012, (iv) the Consolidated Statements of Cash Flows for the years ended March 29, 2014, March 30, 2013, and March 31, 2012, and (v) the Notes to the Consolidated Financial Statements.
_________

(1)
Incorporated by reference to the exhibit filed with our Quarterly Report on Form 10-Q for the quarterly period ended June 26, 1999.

(2)
Incorporated by reference to the exhibit filed with our Quarterly Report on Form 10-Q for the quarterly period ended July 1, 2000.

130


(3)
Incorporated by reference to the exhibit filed with our Quarterly Report on Form 10-Q for the quarterly period ended September 29, 2001.

(4)
Incorporated by reference to the exhibit filed with Amendment No. 1 to our Registration Statement on Form S-1, filed April 8, 1997 (File No. 333-22625).

(5)
Incorporated by reference to the exhibit filed with our Current Report on Form 8-K, filed April 10, 2007.

(6)
Incorporated by reference to the exhibit filed with our Quarterly Report on Form 10-Q for the quarterly period ended December 25, 1999.

(7)
Incorporated by reference to the exhibit filed with our Registration Statement on Form S-1, filed February 28, 1997 (File No. 333-22625).

(8)
Incorporated by reference to the exhibit filed with our Annual Report on Form 10-K for the fiscal year ended March 27, 1999.

(9)
Incorporated by reference to the exhibit filed with our Quarterly Report on Form 10-Q for the quarterly period ended June 26, 1999.

(10)
Incorporated by reference to the exhibit filed with our Annual Report on Form 10-K for the fiscal year ended April 2, 2005.

(11)
Incorporated by reference to the exhibit filed with our Current Report on Form 8-K, filed August 7, 2006.

(12)
Incorporated by reference to the exhibit filed with our Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2005.

(13)
Incorporated by reference to the exhibit filed with our Current Report on Form 8-K, filed May 8, 2006.

(14)
Incorporated by reference to the exhibit filed with our Current Report on Form 8-K, filed August 16, 2007.

(15)
Incorporated by reference to the exhibit filed with our Registration Statement on Form S-8, filed November 15, 2007 (File No. 333-147432).

(16)
Incorporated by reference to the exhibit filed with our Annual Report on Form 10-K for the fiscal year ended March 29, 2008.

(17)
Incorporated by reference to the exhibit filed with our Current Report on Form 8-K, filed November 14, 2008.

(18)
Incorporated by reference to the exhibit filed with our Quarterly Report on Form 10-Q for the quarterly period ended December 27, 2008.

(19)
Incorporated by reference to the exhibit filed with our Quarterly Report on Form 10-Q for the quarterly period ended June 27, 2009.

(20)
Incorporated by reference to the exhibit filed with our Annual Report on Form 10-K for the fiscal year ended April 3, 2010.

(21)
Incorporated by reference to the exhibit filed with our Current Report on Form 8-K, filed August 5, 2010.

(22)
Incorporated by reference to the exhibit filed with our Quarterly Report on Form 10-Q for the quarterly period ended July 2, 2011.

(23)
Incorporated by reference to the exhibit filed with our Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2011.


131

(24)
Incorporated by reference to the exhibit filed with our Current Report on Form 8-K, filed February 16, 2012.

(25)
Incorporated by reference to the exhibit filed with our Current Report on Form 8-K, filed April 11, 2012.

(26)
Incorporated by reference to the exhibit filed with our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012.

(27)
Incorporated by reference to the exhibit filed with our Registration Statement on Form S-8, filed August 16, 2012 (File No. 333-183356).

(28)
Incorporated by reference to the exhibit filed with our Quarterly Report on Form 10-Q for the quarterly period ended September 29, 2012.

(29)
Incorporated by reference to the exhibit filed with our Current Report on Form 8-K, filed November 16, 2012.

(30)
Incorporated by reference to the exhibit filed with our amended Quarterly Report on Form 10-Q/A, filed January 3, 2013.

(31)
Incorporated by reference to the exhibit filed with our Current Report on Form 8-K, filed March 25, 2013.

(32)
Incorporated by reference to the exhibit filed with our Quarterly Report on Form 10-Q for the quarterly period ended June 29, 2013.

(33)
Incorporated by reference to the exhibit filed with our Quarterly Report on Form 10-Q for the quarterly period ended September 28, 2013.

(34)
Incorporated by reference to the exhibit filed with our Current Report on Form 8-K, filed February 24, 2014.

(35)
Incorporated by reference to the exhibit filed with our Annual Report on Form 10-K for the fiscal year ended March 31, 2012.


*
Executive compensation plan or agreement

**
Portions of this exhibit have been granted confidential treatment by the Securities and Exchange Commission.

Our SEC file number for documents filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended, is 000-22511.


132