SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 1994
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-10464
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DALLAS SEMICONDUCTOR CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 75-1935715
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4401 South Beltwood Parkway, Dallas, Texas 75244-3292
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 450-0400
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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
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Number of shares outstanding of the registrant's Common Stock as of
October 2, 1994: 25,494,161.
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<PAGE> 2
DALLAS SEMICONDUCTOR CORPORATION
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
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Item 1. FINANCIAL STATEMENTS Page No.
- ------- ------------------------------------------------------ --------
Condensed Consolidated Statements of Income (Unaudited)
Three and nine months ended October 2, 1994 and October 3, 1993 ......3
Condensed Consolidated Balance Sheets
October 2, 1994 (Unaudited) and January 2, 1994.......................4
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine months ended October 2, 1994 and October 3, 1993 ................5
Notes to Condensed Consolidated Financial Statements ............. 6 - 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- ------- ----------------------------------------
FINANCIAL CONDIDTION AND RESULTS OF OPERATIONS ...... 8 - 10
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PART II. OTHER INFORMATION
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Items 1. through 6. ................................................. 11
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SIGNATURE ............................................................ 12
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<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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DALLAS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended Nine months ended
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Oct. 2, Oct. 3, Oct. 2, Oct. 3,
(Thousands except per share amounts) 1994 1993 1994 1993
- ------------------------------------ ------- ------- -------- --------
Net sales $45,201 $41,008 $133,425 $114,857
Operating costs and expenses:
Cost of sales 22,556 20,420 66,248 57,181
Research and development 5,663 4,919 16,536 14,371
Selling, general and
administrative 6,596 5,893 19,456 16,528
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Total 34,815 31,232 102,240 88,080
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Operating income 10,386 9,776 31,185 26,777
Interest income, net 776 715 2,446 2,071
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Income before income taxes 11,162 10,491 33,631 28,848
Provision for income taxes 3,795 3,672 11,435 10,280
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Net income $ 7,367 $ 6,819 $ 22,196 $ 18,568
======= ======= ======== ========
Net income per share $ .27 $ .25 $ .81 $ .69
======= ======= ======== ========
Weighted average common and common
equivalent shares outstanding 27,231 27,225 27,391 26,913
======= ======= ======== ========
See accompanying notes.
<PAGE> 4
DALLAS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
Oct. 2, Jan. 2,
(Dollars in thousands except per share amounts) 1994 1994
- ----------------------------------------------- --------- ---------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 3,615 $ 12,012
Short-term cash investments 6,047 20,303
Accounts receivable, net 28,077 23,351
Inventories 35,969 30,605
Deferred tax assets 3,725 2,366
Other current assets 2,751 2,551
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Total current assets 80,184 91,188
Property, plant and equipment, at cost:
Land 5,400 4,219
Building and improvements 27,921 19,480
Machinery and equipment 125,647 95,791
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158,968 119,490
Less accumulated depreciation (80,743) (70,099)
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Property, plant and equipment, net 78,225 49,391
Cash investments (municipal bonds,
U.S. government agency obligations and
corporate notes and bonds) 52,624 43,958
Other assets 2,799 2,007
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$213,832 $186,544
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 14,155 $ 9,508
Accrued salaries and benefits 4,593 5,058
Accrued taxes other than income 1,695 1,862
Other accrued liabilities 2,111 2,011
Income taxes payable 2,541 2,567
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Total current liabilities 25,095 21,006
Commitments
Stockholders' equity:
Preferred stock, $0.10 par value;
5,000,000 shares authorized; no shares
issued and outstanding --- ---
Common stock, $0.02 par value; 40,000,000
shares authorized; issued:
25,525,161 shares at October 2, 1994, and
25,358,679 shares at January 2, 1994 511 507
Additional paid-in capital 80,298 78,817
Retained earnings 108,410 86,214
Treasury stock, 31,000 shares at cost (482) --
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Total stockholders' equity 188,737 165,538
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$213,832 $186,544
========= ========
Total cash, cash equivalents and
cash investments $ 62,286 $ 76,273
======== ========
See accompanying notes.
<PAGE> 5
DALLAS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
----------------------
Oct. 2, Oct. 3,
(Thousands) 1994 1993
- -------------------------------------------- -------- --------
Cash flows from operating activities:
Net income $ 22,196 $ 18,568
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,644 10,273
Deferred tax benefit (1,359) (874)
Increase in receivables (4,726) (7,018)
Increase in inventories (5,364) (3,511)
(Increase) decrease in other current assets (200) 108
Increase (decrease) in accounts payable 4,647 (1,789)
Decrease in accrued salaries and benefits (465) (488)
Decrease in accrued taxes other than income (167) (36)
Increase in other accrued liabilities 100 47
Increase in income taxes payable 656 726
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Net cash provided by operating activities 25,962 16,006
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Cash flows from investing activities:
Purchases of cash investments (32,321) (24,607)
Proceeds from sales and maturities of
cash investments 37,911 16,537
Additions to property, plant and equipment (39,478) (16,313)
Increase in other assets (792) (98)
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Net cash used by investing activities (34,680) (24,481)
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Cash flows from financing activities:
Proceeds from issuance of common stock
upon exercise of stock options 803 1,862
Purchase of treasury stock (482) --
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Net cash provided by financing activities 321 1,862
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Net decrease in cash and cash equivalents (8,397) (6,613)
Cash and cash equivalents at beginning of
period 12,012 9,270
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Cash and cash equivalents at end of period $ 3,615 $ 2,657
======== ========
Cash payments for:
Interest $ 1 $ 132
Income taxes $ 12,141 $ 10,329
Supplementary schedule of non-cash financing activities:
Reduction of income tax payable and increase
in paid-in capital resulting from the tax benefit
of stock option exercises $ 682 $ 1,412
See accompanying notes.
<PAGE> 6
DALLAS SEMICONDUCTOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. INTERIM ACCOUNTING POLICY
The accompanying condensed consolidated financial statements have not
been audited by independent auditors, except for the balance sheet as
of January 2, 1994. In the opinion of the Company's management, the
accompanying financial statements reflect all adjustments (consisting only
of normal recurring accruals) necessary to present fairly the Company's
financial position at October 2, 1994 and January 2, 1994,and results of
operations and cash flows for the periods presented.
Certain footnote information has been condensed or omitted from these
financial statements. Therefore, these financial statements should be read
in conjunction with the financial statements and related notes included in
the Company's 1993 Annual Report, which statements and notes were
incorporated by reference in the Company's Annual Report on Form 10-K for
the year ended January 2, 1994. Results of operations for the three and nine
months ended October 2, 1994 are not necessarily indicative of results to be
expected for the full year.
Certain amounts have been reclassified to conform to the current period
presentation.
The difference between primary and fully diluted net income per share
was not material in any period.
Oct. 2, Jan. 2,
2. INVENTORIES (in thousands) 1994 1994
-------- ---------
Raw materials $ 5,065 $ 3,910
Work-in-process 19,100 17,937
Finished goods 11,804 8,758
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$ 35,969 $ 30,605
======== ========
Inventories are stated at the lower of standard cost, which approximates
actual cost (first-in, first-out), or market.
<PAGE> 7
DALLAS SEMICONDUCTOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. INCOME TAXES
The provision for income taxes includes estimated federal and state income
taxes at statutory rates and a deferred tax benefit for the three and nine
months ended October 2, 1994 of $626,000 and $1,359,000, respectively. The
Company's effective tax rate was 34% in the three and nine month period
ended October 2,1994, decreasing from 35% and 36% for the same periods in
1993, respectively. This decrease was a result of changes in anticipated
differences between income for financial statement purposes and taxable
income for the periods, partially offset by the enactment of the 1993
Omnibus Budget Reconciliation Act.
<PAGE> 8
DALLAS SEMICONDUCTOR CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATI0NS
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Net sales for the third quarter of 1994 were $45,201,000, an increase of
10% over the third quarter of 1993. Net sales for the first nine months of
1994 were $133,425,000, an increase of 16% over the same period in 1993.
The Company's revenue growth for both periods was supported by increased
unit sales of new and existing products in several product families
including System Extension, Automatic Identification, Telecommunications,
Microcontroller, and other product families.
Gross margins remained constant at 50% for the third quarter and first nine
months of 1994 and 1993.
Research and development ("R&D") expenses for the third quarter and first
nine months of 1994 increased 15% over the same periods in 1993. The
increase in both periods resulted primarily from increased personnel costs.
R&D expenses as a percent of net sales increased to 13% from 12% for the
three month periods ended October 2, 1994 and October 3, 1993, respectively.
R&D expenses decreased to 12% from 13% for the nine month periods ended
October 2, 1994 and October 3, 1993, respectively.
Selling, general and administrative ("SG&A") expenses for the third quarter
of 1994 increased 12% compared with the third quarter of 1993. In the first
nine months of 1994, SG&A expenses increased 18% from the same period of
1993. SG&A expenses as a percent of net sales increased to 15% from 14%
for the three and nine month periods ended October 2, 1994 and October 3,
1993, respectively. The increase in SG&A expenses in the third quarter
resulted primarily from increased personnel costs and higher commissions on
increased sales.
Operating income increased 6% and 16% for the third quarter and
first nine months of 1994 over the same periods in 1993, respectively.
Operating income as a percent of net sales decreased to 23% from 24% for
the third quarters of 1994 and 1993, respectively. Operating income as a
percent of net sales remained constant at 23% for the first nine months
of 1994 and 1993.
Net interest income for the third quarter and first nine months of 1994
increased by $61,000 and $375,000 over the same periods of 1993,
respectively. Higher average cash balances more than offset lower
<PAGE> 9
interest rates. Changes in interest rates will continue to affect net
interest income as will any substantial change in the Company's cash,
cash equivalents and cash investments or any substantial change in
borrowings.
The provision for income taxes includes estimated federal and state income
taxes at statutory rates and a deferred tax benefit for the three and nine
month periods ended October 2, 1994 of $626,000 and $1,359,000, respectively.
The Company's effective tax rate was 34% in the three and nine month
period ended October 2, 1994 decreasing from 35% and 36% for the same periods
in 1993, respectively. This decrease was a result of changes in anticipated
differences between income for financial statement purposes and taxable
income for the two periods, partially offset by the enactment of the 1993
Omnibus Budget Reconciliation Act in August, 1993.
A number of uncertainties exist that may influence the Company's future
operating results, including general economic conditions, changes in
conditions affecting original equipment manufacturers, competition
(including alternative technologies), the Company's success in developing
new products and process technologies, market acceptance of the Company's
new products, the ability of the Company to continue diversifying its
product line, manufacturing performance, availability and price
fluctuations of raw materials, and other factors.
FINANCIAL CONDITION
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Cash, cash equivalents and cash investments were $62.3 million at the
end of the third quarter of 1994, compared with $76.3 million at the
end of fiscal year 1993. The decrease in cash, cash equivalents and
cash investments was primarily the result of cash used for additions
to property, plant and equipment. The Company continued investing in
financial instruments having maturities in excess of one year in order to
obtain yields higher than those available in the short-term market.
Gross capital additions were $39.5 million for the first nine months of 1994,
compared with $16.3 million in the same period of 1993. Capital additions in
the first nine months of 1994 include $19.9 million in capital expenditures
related to the Company's wafer fabrication ("fab") expansion project and the
Company's January 1994 $2.4 million purchase of four buildings adjacent to
its facilities in Dallas. The Company anticipates that the majority of
capital additions during 1994, in addition to the building purchases, will
be for fab and test equipment, and computer hardware and
<PAGE> 10
software. Capital additions of approximately $6.0 million are anticipated for
the remainder of 1994 of which $1.0 million relate to fab equipment purchases
expected for the Company's fab expansion project. The fab expansion project
began its initial alignment of wafers on June 6, 1994 and effectively began
producing wafers in support of the Company's production plans after the end
of the third quarter. The total cost of the expansion project is estimated
at $25.4 million (composed of $4.5 million incurred in 1993, $19.9 million
in the first nine months of 1994, and $1.0 million estimated for the
remainder of 1994), and will initially increase the Company's wafer
fabrication capacity by approximately 20%.
The Company was authorized by the board of directors in August 1994 to
make use of some of its cash reserves to purchase from time-to-time,
depending on market conditions, up to 500,000 shares of its common stock.
As of October 2, 1994, a total of 31,000 shares, totalling $482,000 have
been purchased pursuant to this stock repurchase program.
The Company had no long-term debt at the end of the third quarter of 1994
or 1993.
<PAGE> 11
DALLAS SEMICONDUCTOR CORPORATION
PART II. OTHER INFORMATION
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Items 1.- 5.
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Not applicable.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibit 27 - Financial Data Schedule
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None.
(b) Reports on Form 8-K
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No Reports on Form 8-K were filed during the period
for which this report is filed.
<PAGE> 12
DALLAS SEMICONDUCTOR CORPORATION
SIGNATURE
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.
DALLAS SEMICONDUCTOR CORPORATION
By: /s/ Alan P. Hale
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Alan P. Hale
Vice President-Finance
Date: November 16, 1994
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<PERIOD-END> OCT-02-1994
<CASH> 3,615
<SECURITIES> 58,671
<RECEIVABLES> 28,077
<ALLOWANCES> 0
<INVENTORY> 35,969
<CURRENT-ASSETS> 80,184
<PP&E> 158,968
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<COMMON> 511
0
0
<OTHER-SE> 188,226
<TOTAL-LIABILITY-AND-EQUITY> 213,832
<SALES> 133,425
<TOTAL-REVENUES> 133,425
<CGS> 66,248
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