(Mark One)x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended October 2, 2004orTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from ____________________________ to ____________________________Commission File Number: 0-25662ANADIGICS, Inc.(Exact name of registrant as specified in its charter)Delaware(State or other jurisdiction of incorporation or organization)
22-2582106(I.R.S. Employer Identification No.)141 Mt. Bethel Road, Warren, NJ(Address of principal executive offices)
07059(Zip Code)908-668-5000(Registrant's telephone number, including area code)(Former name, former address and former fiscal year, if changed since last report)



























INDEX





ANADIGICS, Inc.








Part I.
Financial InformationItem 1.
Financial Statements (unaudited)Condensed consolidated balance sheets - October 2, 2004 and December 31, 2003Condensed consolidated statements of operations and comprehensive loss - Three and nine months ended October 2, 2004 and September 27, 2003Condensed consolidated statements of cash flows - Nine months ended October 2, 2004 and September 27, 2003Notes to condensed consolidated financial statements - October 2, 2004Item 2.
Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3.
Quantitative and Qualitative Disclosures About Market RiskItem 4.
Controls and ProceduresPart II.
Other InformationItem 1.
Legal ProceedingsItem 6.
ExhibitsSignatures













PART I - FINANCIAL STATEMENTS





ITEM 1 - .  FINANCIAL STATEMENTS (UNAUDITED)





ANADIGICS, Inc.


CONDENSED CONSOLIDATED BALANCE SHEETS


(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)





October 2, 2004

December 31, 2003(unaudited)


(Note 1
)AssetsCurrent assets:Cash and cash equivalents

$
24,326

$
18,525Marketable securities


45,032


54,130Accounts receivable


14,529


12,074Inventories


16,743


10,321Prepaid expenses and other current assets


3,539


3,243Total current assets


104,169


98,293Marketable securities


38,506


48,975Property and equipment:Equipment and furniture


133,281


130,815Leasehold improvements


38,455


38,437Projects in process


1,647


1,609173,383


170,861Less accumulated depreciation and amortization


(127,490
)

(115,619
)45,893


55,242Goodwill and other intangibles, net of amortization


6,345


1,788Other assets


4,612


3,600Total assets

$
199,525

$
207,898Liabilities and stockholders equityCurrent liabilities:Accounts payable

$
12,159

$
9,497Accrued liabilities


4,471


5,618Accrued restructuring costs


1,002


1,994Capital lease obligations


34


84Total current liabilities


17,666


17,193Long-term debt


84,700


66,700Other long-term liabilities


3,108


2,959Commitments and contingenciesStockholders equity:Common stock, $0.01 par value, 144,000,000 shares authorized, 32,884,185 and 31,225,888 issued and outstanding at October 2, 2004 and December 31, 2003


329


312Additional paid-in capital


343,032


335,477Deferred compensation


(1,312
)

-Accumulated deficit


(247,683
)

(214,881
)Accumulated other comprehensive (loss) income


(315
)

138Total stockholders equity


94,051


121,046Total liabilities and stockholders equity

$
199,525

$
207,898







See accompanying notes.











ANADIGICS, Inc.


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


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





Three Months Ended

Nine months endedOctober 2, 2004

September 27, 2003

October 2, 2004

September 27, 2003(unaudited)

(unaudited)Net sales

$
25,053

$
17,750

$
68,935

$
51,874Cost of sales


19,811


17,538


58,193


50,867Gross profit


5,242


212


10,742


1,007Research and development expenses


7,884


8,029


25,652


23,466Selling and administrative expenses


5,482


4,795


17,371


13,834Restructuring and other charges


-


-


-


625Purchased in-process R&D


-


-


-


1,690Operating loss


(8,124
)

(12,612
)

(32,281
)

(38,608
)Interest income


469


741


1,679


2,629Interest expense


(955
)

(940
)

(2,835
)

(2,821
)Gain on repurchase of Convertible notes


327


-


327


-Other (expense) income


(36
)

183


308


160Net loss

$
(8,319
)
$
(12,628
)
$
(32,802
)
$
(38,640
)Net loss per share

$
(0.25
)
$
(0.41
)
$
(1.02
)
$
(1.26
)Weighted average common shares outstanding


32,770,442


30,674,033


32,251,721


30,674,033













CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS


(DOLLARS IN THOUSANDS)





Three months ended

Nine months endedOctober 2, 2004

September 27, 2003

October 2, 2004

September 27, 2003(unaudited)

(unaudited)Net loss

$
(8,319
)
$
(12,628
)
$
(32,802
)
$
(38,640
)Unrealized gain (loss) on marketable securities


86


(341
)

(421
)

(468
)Foreign currency translation adjustment


3


5


(13
)

18Reclassification adjustment:Net realized (gain) loss previously in other comprehensive income


-


-


(19
)

15Comprehensive loss

$
(8,230
)
$
(12,964
)
$
(33,255
)
$
(39,075
)








See accompanying notes.








ANADIGICS, Inc.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(DOLLARS IN THOUSANDS)








Nine months endedOctober 2, 2004

September 27, 2003(unaudited)**CASH FLOWS FROM OPERATING ACTIVITITIES**Net loss

$(32,802)

$(38,640)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation


11,904


13,902Amortization


1,126


957Amortization of deferred compensation


286


-Gain on repurchase of Convertible notes


(327
)

-Amortization of premium on marketable securities


1,654


1,786Purchased in-process R&D


-


1,690Loss on disposal of equipment


-


26Changes in operating assets and liabilities:Accounts receivable


(2,455
)

(1,711
)Inventory


(6,422
)

1,951Prepaid expenses and other assets


(295
)

1,044Accounts payable


2,662


481Accrued liabilities and other liabilities


(1,853
)

(1,063
)Net cash used in operating activities


(26,522
)

(19,577
)**CASH FLOWS FROM INVESTING ACTIVITIES**Purchases of plant and equipment


(2,889
)

(2,297
)Business acquisitions


(55
)

(3,015
)Proceeds from sale of equipment


50


-Purchases of marketable securities


(32,636
)

(79,180
)Proceeds from sale of marketable securities


50,109


94,747Net cash provided by investing activities


14,579


10,255**CASH FLOWS FROM FINANCING ACTIVITIES**Payment of capital lease obligations


(50
)

(76
)Proceeds from issuance of long-term debt, net of offering costs


35,895


-Repurchase of Convertible notes


(19,400
)Issuance of common stock


1,299


-Net cash provided by (used in) financing activities


17,744


(76
)Net increase (decrease) in cash and cash equivalents


5,801


(9,398
)Cash and cash equivalents at beginning of period


18,525


24,343Cash and cash equivalents at end of period

$
24,326

$
14,945








See accompanying notes.








ANADIGICS, Inc.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - OCTOBER 2, 2004





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








1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




BASIS OF PRESENTATION




The accompanying unaudited, condensed, consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended October 2, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.




The condensed, consolidated balance sheet at December 31, 2003 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2003.




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





INCOME TAXES




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





IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS





In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). FIN 46 is the interpretation of Accounting Research Bulletin No. 51 Consolidated Financial Statements, which addresses consolidation by business enterprises of variable interest entities. FIN 46 is effective immediately for all variable interest entities created after January 31, 2003 and effective for periods ending after March 15, 2004 for variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. The adoption of FIN 46 did not have any impact on the Companys financial position or results of operations.





In October 2004, the Emerging Issues Task Force (EITF) issued EITF 04-08, The Effect of Contingently Convertible Debt on Diluted Earnings per Share, which requires the dilutive effect of contingently convertible debt instruments to be included in EPS. Accordingly, the shares issuable upon conversion of contingently convertible debt instruments are to be considered in the diluted earnings per share calculation, regardless of whether the contingent conditions for their conversion are satisfied, so long as they are dilutive. EITF 04-08 is effective for reporting periods ending after December 15, 2004 and is not expected to have an impact on the Companys calculation of diluted earnings per share.





STOCK BASED COMPENSATION








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




On July 23, 2004, the Company granted 403,204 restricted shares under the 1995 and 1997 Long-Term Incentive Share Award plans ("Plans"). On the date of the grant, the market price of the shares was $4.01. The value of the grant has been recorded as deferred compensation, a component of Stockholders Equity and is being amortized over the required one-year vest period. At October 2, 2004, 4,850 restricted shares have been forfeited under the conditions of the Plans.




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





Three months ended

Nine months endedOctober 2, 2004

September 27, 2003

October 2, 2004

September 27, 2003Net loss, as reported

$(8,319)

$(12,628)

$(32,802)

$(38,640)Stock based compensation included in reported net loss

294

-

313

7Stock based compensation expense under fair value reporting


(1,935
)

(1,510
)

(5,280
)

(5,188
)Pro-forma net loss

$
(9,960
)
$
(14,138
)
$
(37,769
)
$
(43,821
)Net loss per shareAs reported

$
(0.25
)
$
(0.41
)
$
(1.02
)
$
(1.26
)Pro-forma

$
(0.30
)
$
(0.46
)
$
(1.17
)
$
(1.43
)




WARRANTY





The Company provides, by a current charge to income, an amount it estimates, by examining historical returns and other information it deems critical, will be needed to cover future warranty obligations for products sold during the year. The accrued liability for warranty costs is included in accrued liabilities in the condensed consolidated balance sheets.  Warranty reserve movements in the nine months ended October 2, 2004 included $301 in actual charges and $363 in provisions resulting in the balance of $167 at October 2, 2004. Warranty reserve movements in the nine months ended September 27, 2003 were $234 in actual charges and $10 in provisions.




RECLASSIFICATIONS





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





2. BUSINESS ACQUISITIONS





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





On October 14, 2003, the Company acquired certain assets of a CDMA wireless handset power amplifier developer, formerly named Tavanza, a wholly-owned subsidiary of Celeritek. The Company paid cash consideration of $1,000 and incurred $255 in acquisition-related costs.





The acquisitions were accounted for using the purchase method of accounting. The results of operations for RFS and Tavanza are included in the results of operations of the Company from the respective dates of purchase. There are no significant differences between the accounting policies of the Company and RFS or Tavanza.





The aggregate acquisition consideration of $8,920, after giving effect to the March 31, 2004 purchase consideration, was allocated to the assets acquired and liabilities assumed, based on their fair values as follows:




TotalFair value of tangible assets

$
1,029Fair value of liabilities assumed


(527
)In-process research and development


1,863Process technology


210Covenant-not-to-compete


175Customer list


240Goodwill


5,930Total purchase price

$
8,920


The Company recorded a charge of $1,863 representing the fair value of certain acquired research and development projects relating to dual band, high gain and modules applications for Wireless LAN and certain passive-free power amplifier applications, in the case of Tavanza, that were determined to have not reached technological feasibility and to not have alternative future uses. The fair value of such projects was determined based on discounted net cash flows. These cash flows were based upon managements estimates of future revenues and expected profitability of each technology. The rate used to discount these projected cash flows accounted for the time value of money, as well as the risks of realization of cash flows.




The following table reflects the changes in goodwill for the period from December 31, 2003 to October 2, 2004:




Balance at December 31, 2003

$
1,227Additions, primarily related to RFS share issuance


4,703Balance at October 2, 2004

$
5,930





The following unaudited pro-forma consolidated financial information reflects the results of operations for the three and nine months ended September 27, 2003, as if the acquisitions of RFS and Tavanza had occurred on December 31, 2002 and after giving effect to purchase accounting adjustments. The charge for purchased in-process research and development is not included in the pro-forma results because it is non-recurring.








Three

NineMonths ended September 27, 2003Pro-forma revenue

$
17,750

$
52,233Pro-forma net loss


(13,128
)

(39,920
)Pro-forma net loss per share

$
(0.43
)
$
(1.30
)





These pro-forma results have been prepared for comparative purposes only and do not purport to be indicative of what operating results would have been had the acquisitions actually taken place on December 31, 2002. In addition, these results are not intended to be a projection of future results and do not reflect any synergies that might be achieved from the combined operations.





3.  INVENTORIES




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





October 2, 2004

December 31, 2003Raw materials

$
2,796

$
3,302Work in process


9,386


7,200Finished goods


7,963


4,56420,145


15,066Reserves


(3,402
)

(4,745
)Total

$
16,743

$
10,321




4. LOSS PER SHARE




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





Three months ended

Nine months endedOctober 2, 2004


September 27, 2003


October 2, 2004


September 27, 2003Weighted average common shares outstanding used to calculate basic loss per share


32,770,442


30,674,033


32,251,721


30,674,033Net effect of dilutive securities based upon the treasury stock method using an average market price


-*


-*


-*


-*Weighted average common and dilutive securities outstanding used to calculate diluted loss per share


32,770,442


30,674,033


32,251,721


30,674,033








* Any dilution arising from the Company's outstanding stock options or shares potentially issuable


upon conversion of the Convertible notes are not included as their effect is anti-dilutive.





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





5. REVENUE SOURCES





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





Three months ended

Nine months endedOctober 2, 2004


September 27 2003


October 2, 2004


September 27, 2003Broadband

$
13,055

$
8,267

$
35,146

$
24,817Wireless


11,998


9,483


33,789


27,057Total

$
25,053

$
17,750

$
68,935

$
51,874




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








Three months ended

Nine months endedOctober 2, 2004

September 27, 2003

October 2, 2004

September 27, 2003Asia

$
13,080

$
8,662

$
37,395

$
19,642USA and Canada


9,923


6,995


26,448


27,828Other


2,050


2,093


5,092


4,404Total

$
25,053

$
17,750

$
68,935

$
51,874








6. RESTRUCTURING AND OTHER CHARGES





During the first quarter of 2003, the Company recorded restructuring charges of $625 pertaining to severance and related benefits of workforce reductions undertaken in the quarter. The workforce reductions eliminated approximately 19 operations and administrative positions.





For the nine months ended October 2, 2004, the change of $992 in accrued restructuring costs principally represents cash payments of obligations under property leases.





7. LONG-TERM DEBT AND GAIN ON REPURCHASE OF CONVERTIBLE NOTES





On September 24, 2004, the Company issued $38,000 aggregate principal amount of 5% Convertible Senior Notes ("2009 Notes") due October 15, 2009. The 2009 Notes are convertible into shares of the Companys common stock at any time prior to their maturity, at an initial conversion rate, subject to adjustment, of 200 shares for each $1,000 principal amount, which is equivalent to a conversion price of $5.00 per share. Pursuant to the indenture, dated as of September 24, 2004, between the Company and U.S. Bank Trust Association, as trustee, in the event of a "fundamental change" on or prior to July 15, 2009, the Company will pay a make whole premium upon the repurchase or conversion of the 2009 Notes. Subject to certain exceptions, the make whole premium will be 1% of the principal amount of the 2009 Notes, plus an additional premium based on the date such "fundamental change" becomes effective and the price paid per share of the Companys common stock in the transaction constituting the "fundamental change". Interest on the 2009 Notes is payable semi-annually in arrears on April 15 and October 15 of each year.





On November 27, 2001, the Company issued $100,000 aggregate principal amount of 5% Convertible Senior Notes ("2006 Notes") due November 15, 2006. The outstanding 2006 Notes are convertible into shares of common stock at any time prior to their maturity or redemption by the Company. The 2006 Notes are convertible into shares of common stock at a rate of 47.619 shares for each $1,000 principal amount (convertible at a price of $21.00 per share), subject to adjustment. Interest on the 2006 Notes is payable semi-annually in arrears on May 15 and November 15 of each year.





As of October 2, 2004, $46,700 aggregate principal amount of the 2006 Notes remain outstanding. During the third quarter of 2002, the Company repurchased and retired $33,300 aggregate principal amount of the 2006 Notes. In addition, in the third quarter of 2004 and concurrent with the issuance of the 2009 Notes, the Company repurchased and retired $20,000 aggregate principal amount of the 2006 Notes for $19,758 in cash, inclusive of accrued interest of $358. The Company recognized a gain of $327 in the third quarter of 2004 in connection with this repurchase, after adjusting for the write-off of a proportionate share of unamortized offering costs.





8. OTHER INCOME (EXPENSE)





Other income (expense) for the nine months ended October 2, 2004 includes income from a $368 gain on the sale of securities and a $490 settlement received in connection with a claim against a former supplier, partially offset by a charge of $750 relating to the settlement of a contractual claim.













ANADIGICS, Inc.





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





RESULTS OF OPERATIONS





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





Three months ended

Nine months endedOctober 2, 2004

September 27, 2003

October 2, 2004

September 27, 2003Net sales


100.0
%

100.0
%

100.0
%

100.0
%Cost of sales


79.1


98.8


84.4


98.1Gross profit


20.9


1.2


15.6


1.9Research and development expenses


31.4


45.2


37.2


45.2Selling and administrative expenses


21.9


27.0


25.2


26.7Restructuring and other charges


-


-


-


1.2Purchased in-process R&D


-


-


-


3.3Operating loss


(32.4
)

(71.0
)

(46.8
)

(74.5
)Interest income


1.9


4.2


2.4


5.1Interest expense


(3.8
)

(5.3
)

(4.1
)

(5.4
)Gain on repurchase of Convertible notes


1.3


-


0.5


-Other (expense) income


(0.2
)

1.0


0.4


0.3Net loss


(33.2
%)

(71.1
%)

(47.6
%)

(74.5
%)











NET SALES. ****** Net sales increased 41.1% during the third quarter of 2004 to $25.1 million from $17.8 million in the third quarter of 2003. For the nine months ended October 2, 2004, net sales were $68.9 million, a 32.9% increase from net sales of $51.9 million for the nine months ended September 27, 2003.








Sales of integrated circuits for Wireless applications increased 26.5% during the third quarter of 2004 to $12.0 million from $9.5 million in the third quarter of 2003. For the nine months ended October 2, 2004, net sales of integrated circuits for Wireless applications increased 24.9% to $33.8 million from $27.1 million in the nine-month period ended September 27, 2003. The increase in sales of integrated circuits for Wireless applications during the three and nine months ended October 2, 2004 was primarily due to increased customer demand for both our GSM and CDMA products.





Sales of integrated circuits for Broadband applications increased 57.9% during the third quarter of 2004 to $13.1 million from $8.3 million in the third quarter of 2003. For the nine months ended October 2, 2004, net sales of integrated circuits for Broadband applications increased 41.6% to $35.1 million from $24.8 million in the nine-month period ended September 27, 2003. The increase in sales in the three and nine month periods ended October 2, 2004 was primarily due to increased customer demand for both our Wireless LAN and cable infrastructure products. For the nine month period ended October 2, 2004, sales further reflect an increase in Wireless LAN sales following the acquisition of RF Solutions ("RFS") power amplifier business on March 31, 2003.





Geographically, sales to the Asia region during the three and nine months ended October 2, 2004 increased 51.0% and 90.4%, respectively, primarily due to the Company's expanded product distribution of WLAN and Wireless power amplifier module products.





Generally, selling prices for same product sales were lower during the third quarter of 2004 compared to the third quarter of 2003.





GROSS MARGIN. Gross margin during the third quarter of 2004 increased to 20.9% from 1.2% in the third quarter of 2003. For the nine months ended October 2, 2004, gross margin increased to 15.6% from 1.9% for the nine months ended September 27, 2003. The increase in gross margin in the three and nine month periods ended October 2, 2004 was primarily due to the increase in revenues, as well as higher production levels and the consequent absorption of fixed costs over higher unit volume.





RESEARCH AND DEVELOPMENT. Company sponsored research and development expense decreased 1.8% during the third quarter of 2004 to $7.9 million from $8.0 million during the third quarter of 2003. The decrease in expense in the third quarter of 2004 was due to reduced compensation cost following certain operating expense reduction initiatives. Company sponsored research and development expense for the nine months ended October 2, 2004 increased 9.3% to $25.6 million from $23.5 during the nine-month period ended September 27, 2003. The increase in the nine month period ended October 2, 2004 was primarily attributable to increased headcount and expense associated with the RFS and Tavanza acquisitions not fully included in 2003, as well as certain one-time compensation costs associated with operating expense reduction initiatives undertaken in 2004.





SELLING AND ADMINISTRATIVE. Selling and administrative expenses increased 14.3% during the third quarter of 2004 to $5.5 million from $4.8 million in the third quarter of 2003. Selling and administrative expenses increased 25.6% during the nine-month period ended October 2, 2004 to $17.4 million from $13.8 million in the nine-month period ended September 27, 2003. The increases in selling and administrative expenses in the three and nine months ended October 2, 2004 are primarily due to increased sales headcount and sales-related costs associated with our sales expansion efforts, including new application centers in Taiwan and Korea. Certain legal fees in connection with the settlement of a contractual claim in the second quarter of 2004 further impact the nine months comparison.





RESTRUCTURING AND OTHER CHARGES. During the first quarter of 2003, we recorded restructuring charges of $0.6 million pertaining to severance and related benefits of workforce reductions undertaken in that quarter. The workforce reductions eliminated approximately 19 positions in operations and administration.





PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT. The Company expensed purchased in-process research and development costs of $1.7 million as a result of the RFS acquisition on March 31, 2003. The charge represents the fair value of certain acquired research and development projects that were determined to have not reached technological feasibility and to not have alternative future uses.





INTEREST INCOME. ****** Interest income decreased 36.7% to $0.5 million during the third quarter of 2004 from $0.7 million during the third quarter of 2003. For the nine months ended October 2, 2004, interest income decreased 36.1% to $1.7 million from $2.6 million in the nine-month period ended September 27, 2003. The decreases were primarily due to lower invested funds and were compounded by lower interest rates.





INTEREST EXPENSE. Interest expense was largely flat at $1.0 million and $0.9 million during the three months of both 2004 and 2003, respectively. Interest expense was flat at $2.8 million during the nine month periods of both 2004 and 2003. The interest primarily related to the outstanding balance of our 5% Convertible Senior Notes due in 2006 ("2006 Notes"), since the Convertible Senior Notes due in 2009 ("2009 Notes") were issued on September 24, 2004.





GAIN ON REPURCHASE OF CONVERTIBLE NOTES. During the third quarter of 2004 and concurrent with the issuance of the 2009 Notes, we repurchased and retired $20.0 million aggregate principal amount of the 2006 Notes for $19.8 million in cash, inclusive of accrued interest of $0.4 million. We recognized a gain on the repurchase of $0.3 million after adjusting the write-off of a proportionate share of unamortized offering costs.





OTHER INCOME (EXPENSE). Other income (expense) for the nine months ended October 2, 2004 includes income from a $0.4 million gain on the sale of securities and a $0.5 million settlement received in connection with a claim against a former supplier, partially offset by a charge of $0.8 million relating to the settlement of a contractual claim.





LIQUIDITY AND CAPITAL RESOURCES





As of October 2, 2004, we had $24.3 million in cash and cash equivalents and $83.5 million in marketable securities. We had $84.7 million of interest-bearing debt outstanding as of October 2, 2004. These figures reflect our private offering of $38.0 million aggregate principal amount of 2009 Notes and concurrent repurchase of $20.0 million of 2006 Notes, on September 24, 2004.





Operating activities used $26.5 million in cash during the nine-month period ended October 2, 2004. Investing activities, which principally consisted of net sales of marketable securities of $17.5 million, partially offset by purchases of equipment of $2.9 million, provided $14.6 million of cash during the nine-month period ended October 2, 2004. Cash provided by financing activities primarily consisted of net proceeds of $16.5 million from our issuance of the 2009 Notes, net of offering costs and further reduced by our repurchase of $20.0 million aggregate principal amount of the 2006 Notes. Financing activities also provided $1.3 million of cash from share issuances for employee stock option exercises during the nine months ended October 2, 2004.





As of October 2, 2004, we had purchase commitments of approximately $0.8 million for equipment, furniture and leasehold improvements.





We believe that our existing sources of capital, including our existing cash and marketable securities will be adequate to satisfy operational needs and anticipated capital needs for the next twelve months and beyond. Our anticipated capital needs may include acquisitions of complimentary businesses or technologies, or investments in other companies or repurchases of our outstanding debt or equity. However, we may elect to finance all or part of our future capital requirements through additional equity or debt financing. There can be no assurance that such additional financing would be available on satisfactory terms.





IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS





In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). FIN 46 is the interpretation of Accounting Research Bulletin No. 51 Consolidated Financial Statements, which addresses consolidation by business enterprises of variable interest entities. FIN 46 is effective immediately for all variable interest entities created after January 31, 2003 and effective for fiscal years ending after March 15, 2004 for variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. The adoption of FIN 46 did not have any impact on the Companys financial position or results of operations.





In October 2004, the Emerging Issues Task Force (EITF) issued EITF 04-08, The Effect of Contingently Convertible Debt on Diluted Earnings per Share, which requires the dilutive effect of contingently convertible debt instruments to be included in EPS. Accordingly, the shares issuable upon conversion of contingently convertible debt instruments are to be considered in the diluted earnings per share calculation, regardless of whether the contingent conditions for their conversion are satisfied, so long as they are dilutive. EITF 04-08 is effective for reporting periods ending after December 15, 2004 and is not expected to have an impact on the Companys calculation of diluted earnings per share.




FORWARD-LOOKING STATEMENTS





This quarterly report on Form 10-Q contains projections and other forward-looking statements (as that term is defined in the Securities Exchange Act of 1934, as amended). These projections and forward-looking statements reflect the Companys current views with respect to future events and financial performance and can generally be identified as such because the context of the statement will include words such as "believe", "anticipate", "expect", or words of similar import. Similarly, statements that describe our future plans, objectives, estimates or goals are forward-looking statements. No assurances can be given, however, that these events will occur or that these projections will be achieved and actual results and developments could differ materially from those projected as a result of certain factors. Important factors that could cause actual results and developments to be materially different from those expressed or implied by such projections and forward-looking statements include those factors detailed from time to time in our reports filed with the Securities and Exchange Commission, including the Companys annual report on Form 10-K for the year ended December 31, 2003, and those discussed elsewhere herein.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





The Company's market risk has not changed significantly for the risks disclosed in Item 7A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2003.





ITEM 4. CONTROLS AND PROCEDURES ****








Under the supervision and with the participation of certain members of the Companys management, including the President and Chief Executive Officer and Chief Financial Officer, the Company completed an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) to the Securities Exchange Act of 1934, as amended, (the "Exchange Act")). Based on this evaluation, the Companys President and Chief Executive Officer and Chief Financial Officer believe that the disclosure controls and procedures were effective as of October 2, 2004.





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











ANADIGICS, Inc.





PART II - OTHER INFORMATION





ITEM  1.  LEGAL PROCEEDINGS





ANADIGICS is not a party to any material litigation.





ITEM  6.  EXHIBITS





Exhibits:





10.1 Amendment No. 3 as of August 20, 2004 to the Employment Agreement dated June 1, 1999 between the Company and Ronald Rosenzweig.





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





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





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





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








SIGNATURES








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








ANADIGICS, INC.








By:
/s/ Thomas C. ShieldsThomas C. ShieldsSenior Vice Presidentand Chief Financial Officer








Dated: November 3, 2004
















Exhibit 10.1





ANADIGICS Inc.





Ronald Rosenzweig         20 August 2004


19509 Planters Point Drive


Boca Raton, FL 33434




Subject: Amendment - Agreement June 1, 1999 - Revision




Dear Ron:




This is to confirm the revision by the Board of Directors at the August 17, 2004 meeting in the extension of the Agreement dated June 1, 1999 between you and ANADIGICS, Inc. (and extended from July 2, 2002 through July 2, 2003 and from July 2, 2003 through July 2, 2004), regarding your employment by the Company. The existing agreement set to expire July 2, 2004, will be extended with the following terms and conditions.




1.
Your employment is extended for the period from July 2, 2004 through July 2, 2005 at 25% time as ANADIGICS employee.




2.
Your base salary compensation shall be at the annual rate of $100,000 paid biweekly.




3.
All terms of your agreement dated June 1, 1999 remain intact as part of this extension.




If you are in agreement with the foregoing, please sign and return to John Warren, a copy of this letter.






Very truly yours,











Bami Bastani


President & Chief Executive Officer


ANADIGICS, Inc.







Accepted and agreed to as stated.











Ronald Rosenzweig













Exhibit 31.1








CERTIFICATION





I, Bami Bastani, certify that:





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





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





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





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





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





b)
Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986;





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





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





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





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





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











Date:  November 3, 2004





By:
/s/ Bami BastaniBami BastaniPresident andChief Executive Officer












Exhibit 31.2








CERTIFICATION





I, Thomas Shields, certify that:





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





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





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





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





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





b)
Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986;





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





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





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





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





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











Date:  November 3, 2004


By:
/s/ Thomas C. ShieldsThomas C. ShieldsSenior Vice Presidentand Chief Financial Officer













Exhibit 32.1





CERTIFICATION





The undersigned, Bami Bastani, President and Chief Executive Officer of ANADIGICS, Inc. (the "Company") hereby certifies that the Quarterly Report of the Company on Form 10-Q for the period ended October 2, 2004 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.








Date: November 3, 2004


By:
/s/ Bami BastaniBami BastaniPresident andChief Executive Officer







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





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














Exhibit 32.2





CERTIFICATION





The undersigned, Thomas C. Shields, Senior Vice President and Chief Financial Officer of ANADIGICS, Inc. (the "Company") hereby certifies that the Quarterly Report of the Company on Form 10-Q for the period ended October 2, 2004 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.







Date: November 3, 2004


By:
/s/ Thomas C. ShieldsThomas C. ShieldsSenior Vice Presidentand Chief Financial Officer







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





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