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Technology
Electronics Instruments & controls
(NASD: RFMI)

RF Monolithics, Inc.

4441 Signma Road
Dallas, TX 75244
Phone: 972-232-2903

David M. Kirk
President
Chief Executive Officer

Interview Conducted By:
Diane Reynolds, Co Publisher

CEOCFOinterviews.com
October 2002

Bio of President/Chief Executive Officer
David M. Kirk

David Kirk was named President and CEO as well as a member of the Board of Directors, in November 1999.  Prior to this appointment, David had been Vice President of Marketing for RF Monolithics, Inc. since June 1998.  His goal is to use his engineering expertise and marketing talents to provide leadership in the coming years.  Prior to joining RFM, David was a successful marketing executive for fourteen years, holding various positions at Murata Electronics North America, Inc.  David holds a Bachelor’s degree in electrical engineering from Clemson University in South Carolina.

Company Profile:

RF Monolithics, Inc. (RFM), founded in 1979, designs, develops, manufactures and markets a broad range of radio frequency (RF) components and module products for the automotive, telecommunication, consumer, distribution and industrial markets.  The Company’s products serving these markets are the Low-power Products Group, which include components and Virtual WireÒ   Short-range Radio, products; and the Communications Products Group, which includes filter and frequency control products.

RFM’s core technologies include Surface Acoustic Wave (SAW) technology and RF circuit design expertise.  SAW technology allows devices to convert RF signals to mechanical waves that implement very precise RF filtering and frequency control functions.  The Company’s customers also benefit from its RF circuit design expertise.  RFM’s engineers understand the complexity of RF design and the many problems our customers encounter when developing a wireless product or application. These core technologies enable RFM to remain competitive by offering a diverse range of products and providing value-added solutions and functionally integrated products, which gives customers a competitive edge in development of wireless applications.

CEOCFOinterviews: The company itself, people may have heard of the name or a little bit about it, but give them a round off view of the company as it stands today.

Mr. Kirk: RF Monolithics, is an electronic component company.  The technology behind the company is called “SAW Devices”, Surface Acoustic Wave, and that is a type of technology where you take an electrical signal and turn it into mechanical and then back to electrical using the mechanical properties of the sub stream.  So, with that, we make a variety of electronic components to filter, to osolators, and resonators.  The market that we are probably most well known for is in the resonator business, our low powered components business.  We in fact developed the product for remote keyless entries specifically for the automobiles and we’ve got a very large market share in that product.  From that we developed into a variety of other products, a virtual wireless family from osolators and from there we custom built.  These are the types of products.  Marketplaces, automotive, the telecom and base station area, a little bit of the optical network market and a variety of industrial things such as remote meter reading and that type of thing.

CEOCFOinterviews: So, what you are trying to do is to eliminate the use of wires all together?

Mr. Kirk: That is correct.  Specifically with the low power of family of products, low power components and also the virtual wireless family, we’ve got very good battery life with these products and then fairly high database, in some of our products up to 1megabit per second of data that is capable of being transferred.  Some of the applications last ten years on one battery, so, yes, exactly correct, eliminating the wires in full powered application. 

CEOCFOinterviews: The different businesses you are addressing, communications, industrial, automotive, consumer, where is the majority of the growth coming from?

Mr. Kirk: Well, right now the automotive is our largest business, about 30% of our business.  There still is some good life in that marketplace, keyless entries being the main stay for us.  The new application is tire pressure monitoring and that is showing some growth and usage in that particular marketplace.  In the industrial segment, the biggest area of growth is in automated meter reading.  There is some government regulations that are passing there with the deregulation of the power companies, and meter reading for water meters, gas meters, electrical meters, the water meter being the most opportune one for us, where in fact, long battery life on a meter, water meter for ten years transmitting some information, so, there is some of the growth with the areas for us.

CEOCFOinterviews: Are you doing this on a global basis?

Mr. Kirk: Some of the real strength is in fact serving these various and quite different marketplaces, but then globally we do 45% to 48% of our business in North America, and 30% in Asia and 15% or so in the rest of the world, so it is very good business for us.

CEOCFOinterviews: South America is a very underserved market.  Are you addressing that market?  Is it being received there?

Mr. Kirk: South America doesn’t represent a large market for us at this time.  We do have some electronic infrastructure, the base station market, that sort of thing, but not a whole lot of opportunities in South America for us at this time.  The real market that we see some very good growth for us is in China.  It is just a tremendous amount of opportunities; I’ve been to China two times this year myself.  Opportunities for us are on the manufacturing side as well as promoting and selling our products there.

CEOCFOinterviews:   Where is all of your manufacturing being done today?

Mr. Kirk: In the last two years we transitioned our manufacturing our assembly off shore.  We do front end fabrication here in Dallas, we now have four partners, two in the Philippines, and one in Japan and one in Taiwan. 

CEOCFOinterviews: Because the manufacturing is spread out so much, how are you able to control the quality of the products?

Mr. Kirk: Well, we in fact, the main stay of our business are automotive and automotive has to be ISO 9,000 and also a quality of regulation called QF 9,000.  So, we in fact make sure everyone of our partners are ISO 9,000 or QF 9,000, as we follow those standards around the world we can make sure we get the quality of products that we need.

CEOCFOinterviews: I was reading that the actual demand for your products is going up.  Are you going to be able to fulfill the need that is out there?

Mr. Kirk: With the additional partners, we started off with two assembly partners and we since then have two more.  We do believe we have the production capability with these partners.  We have also done some recent investigation in China to make sure that we remain competitive and can support the demand.   So, yes, I believe we have the production capability to support the required demand.

CEOCFOinterviews: What makes this company stand out among its competitors?

Mr. Kirk: One of the biggest things we have done is we focus on the low power applications.  Many of our competitors focus on hand set business, cellular handset business.  We in fact, try to stand clear of that particular business.   We have some good diverse communication with some communication businesses, some automotive, some industrial and see it as a growing market in this low power opportunity for us.  Many people talk about Blue Tooth being low power short range, be we actually in a slightly different market with a slightly longer battery life and we can see some tremendous opportunities there.  We continue to remain competitive with our manufacturing off shore and we will continue looking at other opportunities such as China.

CEOCFOinterviews: China seems like a big move.

Mr. Kirk: Really, it is.  I in fact have been there twice this year.  Great opportunities, we’ve seen a growth there in the cellular business, not just the handset, but also the infrastructure.  There is a growing market in the automotive, but we also see a growing market for the meter reading as well.  So, we see great low cost production capability there and also a growing market there.

CEOCFOinterviews: Technology, as it evolves, plays a major role in this company.  How are you able to keep up with it all?

Mr. Kirk: We in fact have over forty patents at this time and we continue to actually develop new patents.  Most recently we have issued our next generation virtual wire product.  So, we do recognize that technology is constantly changing, so we also want to maintain that we can be competitive, developing that, but also in fact developing new smaller packages for our current products, so we have to remain competitive on our current products but also make some new stuff.

CEOCFOinterviews: That is very important.  Some people just stay in one area and that is where they get lost.

Mr. Kirk: Oh, yes, you have to have a blend of maintaining your base business, which our low powered performance is doing very well for us with some growth opportunities in; the market and will remain that competiveneess with the off shore assembly.  As you mentioned, we do want to develop new products and the Third Generation Virtual Wire being the most significant for us.

CEOCFOinterviews: Your customers, do you have your own sales force?

Mr. Kirk:  We have a blend of manufacturer reps. and distributors and we’ve got one vice president field and then about five area sales directors that manage the fields force for reps or distributors.  It appears to be working very well for us at this particular time and it is in fact the most cost efficient sales structure for us.

CEOCFOinterviews: Is there any one customer in particular you rely on for the majority of your revenue?

Mr. Kirk: We’ve got a variety of customers, but five top customers added up to about 30% of our business, so we really are not dependant on any one specific customer and that has really been our strength.  Actually the market diversification and customer diversification.

CEOCFOinterviews: That’s very important.  Some people put all of their eggs in one basket and then that basket runs out.

Mr. Kirk: It really does.  We’ve got that and also the global business, the regional business that is 50% of our business in North America and 30% in Europe and Asia and that is really helping us here.  In the last two years we’ve done a tremendous job of restructuring, moving our assembly off shore and maintaining this good balance of business.

CEOCFOinterviews: With all that has happened with 9/11, has this affected your company in any way?

Mr. Kirk:  I really have not seen a whole lot affect financially, what we did learn was that our pipelines with our partners in Asia was cut when 9/11 happened.  So we have an increase inventory, more than we have expected, so we decreased inventories as a total with our move off shore, but we felt we have reduced them more than we have.  We’ve kept that pipeline a little bit more loaded so I guess that is a financial invite, but globally we have seen a little bit of decrease in our business, but we have weathered it nicely.

CEOCFOinterviews: Growth opportunities, do you see growth being done internally or do you see acquisitions or other partnerships?

Mr. Kirk: Right now we are focused on our growth for internal.   Right now we have some very good products right now with some of our large and growing marketplaces.  That is the best half at this particular time.  If an opportunity comes up for a merger or partnership or acquisition and it is in the shareholders best interest we will take a very good look at that.  Right now we have some very good products and we see some good growth opportunities.

CEOCFOinterviews: I was looking at your third quarter, which was nice, is that because of the tax refund or because of the internal growth of the company?

Mr. Kirk: No, it was a one-time event.  If you look at the underline of that we had a very good improved quarter.  Our gross profits were up as we actually had guided toward the operating cash flow positive and that we have a pre tax loss decreased so we did basically all of the things we said we were going to do.   The tax refund was nice; it was a one-time change and the number of years that we can count back.  So, we have basically said that was great, we took the tax refund but look at the progress we are making and we will continue to make into the next quarter as well.

CEOCFOinterviews: Is this the second increase over the year before?

Mr. Kirk: I believe that is correct and we are making progress quarter over quarter.  The tax refund was nice bonus but we want to continue making progress over our internal operations and we guided the fourth quarter, which ends in the month of August we will in fact potentially have marginally profitable at the operating level.

CEOCFOinterviews: What did the impact of the analyst now covering this company do for it?

Mr. Kirk: We believe that has been beneficial.  It was unfortunate that as we were continuing with this recovery program that both of our national analysts lost their particular analyst.  It has been very helpful here, recently having some reasonable coverage and believe we are getting some visibility.   We attended our first show out in California in May and we will continue to work on that as our progress improves.

CEOCFOinterviews: Going forward, even though the margins have increased, does the company has the cash or credit to go forward with an acquisition or partnership were to arise?

Mr. Kirk: Our relationship with our bank has been very, very good.   They have been with us for two years and they’ve seen a tremendous amount of success.  Three quarters are positive cash flow; we do have availability in the line to fund our current growth, so I believe we are in very good shape at this time.

CEOCFOinterviews: From a potential investor’s standpoint, they are looking at this company for the first time; you want to spark their interest.   What would you say to them?

Mr. Kirk: I think that the key thing I would ask them to do is to look at the couple of years we have had in recovery.  We in fact have done very well, we did exactly what we said we were going to do during that recovery process, we’ve also weathered the significant down in the economy in that time period as well.  Look at that, look at the products that we have, the variety of markets we serve and we see some very nice growth opportunities such as the tire pressure monitoring and meter reading, both of those have some government regulations behind them that are in fact going to make those happen, so we see good opportunities, we have recovered nicely, we have some good competitive manufacturing, good growth opportunities, and right products for the right markets right now, so we see some good opportunities for us in the coming years.

CEOCFOinterviews: You joined this company in 1999, what was your biggest challenge when you came aboard?

Mr. Kirk: I joined the company as BP of marketing in the middle of 1998 so for a couple of years I was looking at the opportunities for our products, tremendous we saw, right away we saw we had some difficulty in the manufacturing area to be competitive, so in 1999 I became President and CEO and that was when we started drastically changing the manufacturing things.  We still have some great marketing opportunities.  That is what we are working towards; right now we have the manufacturing place where we can make some of these opportunities happen.

CEOCFOinterviews: Do you have any closing comments for my readers?

Mr. Kirk: I look forward to any questions that may come away from the actual interview; we are looking for a good 2003.

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