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 July 2, 1995
------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- ------------
DALLAS SEMICONDUCTOR CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-1935715
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4401 South Beltwood Parkway, Dallas, Texas 75244-3292
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 450-0400
--------------
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
------- --------
Number of shares outstanding of the registrant's Common Stock as of
August 6, 1995: 26,264,418.
----------
<PAGE> 2
DALLAS SEMICONDUCTOR CORPORATION
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
------- ---------------------
Item 1. FINANCIAL STATEMENTS Page No.
------- ------------------------------------------------------ --------
Condensed Consolidated Statements of Income (Unaudited)
Three and six months ended July 2, 1995 and July 3, 1994 ........... 3
Condensed Consolidated Balance Sheets
July 2, 1995 (Unaudited) and January 1, 1995 ....................... 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six months ended July 2, 1995 and July 3, 1994 ..................... 5
Notes to Condensed Consolidated Financial Statements ................ 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
------- ----------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ........ 7 - 8
----------------------------------------------
PART II. OTHER INFORMATION
-------- ------------------
Items 1. through 3. ................................................. 9
------------------
Item 4. Submission of Matters to a Vote of Security Holders ......... 9
------------------------------------------------------------
Item 5. through 6. .................................................. 9
------------------
SIGNATURE ............................................................ 10
---------
EXHIBIT 27. ART. 5 FDS FOR 2ND QUARTER 10-Q ......................... 11
--------------------------------------------
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
------- --------------------
DALLAS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months Six months
ended ended
----------------- ------------------
July 2, July 3, July 2, July 3,
(Thousands except per share amounts) 1995 1994 1995 1994
------------------------------------ ------- ------- -------- --------
Net sales $57,036 $45,041 $109,071 $ 88,224
Operating costs and expenses:
Cost of sales 28,818 22,361 54,863 43,692
Research and development 6,957 5,620 13,489 10,873
Selling, general and administrative 8,738 6,576 16,643 12,860
------- ------- -------- --------
Total costs and expenses 44,513 34,557 84,995 67,425
------- ------- -------- --------
Operating income 12,523 10,484 24,076 20,799
Interest income, net 789 872 1,522 1,670
------- ------- -------- --------
Income before income taxes 13,312 11,356 25,598 22,469
Provision for income taxes 4,459 3,861 8,575 7,640
------- ------- -------- --------
Net income $ 8,853 $ 7,495 $ 17,023 $ 14,829
======= ======= ======== ========
Net income per share $ .32 $ .27 $ .62 $ .54
======= ======= ======== ========
Weighted average common and common
equivalent shares outstanding 27,674 27,526 27,459 27,470
======= ======= ======== ========
Dividends declared per share $ .025 -- $ .05 --
======= ======= ======== ========
See accompanying notes.
<PAGE> 4
DALLAS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
July 2, Jan. 1,
(Thousands except per share amounts) 1995 1995
----------------------------------------------- --------- ---------
(unaudited)
Assets
Current assets:
Cash and cash investments $ 69,148 $ 64,520
Accounts receivable, net 30,799 28,330
Inventories 44,215 40,453
Deferred tax assets 1,895 2,561
Other current assets 3,142 3,730
-------- --------
Total current assets 149,199 139,594
Property, plant and equipment, at cost:
Land 6,300 5,400
Building and improvements 31,600 28,617
Machinery and equipment 141,947 130,216
-------- --------
179,847 164,233
Less accumulated depreciation (95,220) (85,391)
-------- --------
Property, plant and equipment, net 84,627 78,842
Other assets 3,694 2,791
-------- --------
$237,520 $221,227
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 13,039 $ 14,827
Accrued salaries and benefits 5,911 5,328
Accrued taxes other than income 1,371 2,486
Other accrued liabilities 2,579 2,712
Income taxes payable 374 1,121
-------- --------
Total current liabilities $ 23,274 $ 26,474
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:
26,151,158 shares at July 2, 1995, and
25,575,586 shares at January 1, 1995 523 511
Additional paid-in capital 82,907 80,562
Retained earnings 131,691 115,962
Treasury stock, shares at cost:
55,625 shares at July 2, 1995, and
153,900 shares at January 1, 1995 (875) (2,282)
-------- --------
Total stockholders' equity 214,246 194,753
-------- --------
$237,520 $221,227
======== ========
See accompanying notes.
<PAGE> 5
DALLAS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
---------------------
July 2, July 3,
(Thousands) 1995 1994
-------------------------------------------- -------- --------
Cash flows from operating activities:
Net income $ 17,023 $ 14,829
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 9,829 6,912
Deferred tax expense (benefit) 666 (733)
Increase in receivables (2,469) (3,258)
Increase in inventories (3,762) (2,979)
Decrease (increase) in other current assets 588 (380)
(Decrease) increase in accounts payable (1,788) 9,122
Increase (decrease) in accrued salaries & benefits 583 (174)
Decrease in accrued taxes other than income (1,115) (555)
Decrease in other accrued liabilities (133) (150)
(Decrease) increase in income taxes payable 551 (562)
-------- --------
Net cash provided by operating activities 19,973 22,072
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (15,614) (28,378)
Increase in other assets (903) (799)
-------- --------
Net cash used by investing activities (16,517) (29,177)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of stock
upon exercise of stock options 2,886 613
Purchase of treasury stock (420) --
Dividend paid to shareholders (1,294) --
-------- --------
Net cash provided by financing activities 1,172 613
-------- --------
Net increase (decrease) in cash
and cash investments 4,628 (6,492)
Cash and cash investments at beginning
of the period 64,520 76,273
-------- --------
Cash and cash investments at end of period $ 69,148 $ 69,781
======== ========
Cash payments for:
Income taxes $ 7,358 $ 8,935
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 $ 1,298 $ 547
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 1, 1995. 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 July 2, 1995 and January 1, 1995,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 1994 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 1, 1995. Results of operations for the three and six
months ended July 2, 1995 are not necessarily indicative of results to be
expected for the full year.
The difference between primary and fully diluted net income per share
was not material in any period.
July 2, Jan. 1,
2. INVENTORIES (in thousands) 1995 1995
-------- --------
Raw materials $ 7,013 $ 5,596
Work-in-process 25,659 23,727
Finished goods 11,543 11,130
-------- --------
$ 44,215 $ 40,453
======== ========
Inventories are stated at the lower of standard cost, which approximates
actual cost (first-in, first-out), or market.
3. INCOME TAXES
The provision for income taxes includes estimated federal and state income
taxes at statutory rates and a deferred tax expense for the three and six
months ended July 2, 1995 of $734,000 and $666,000, respectively. The
Company's effective tax rate was 33.5% in the three and six months ended
July 2, 1995, decreasing from 34.0% for the same periods in 1994. This
decrease was a result of changes in anticipated differences between income
for financial statement purposes and taxable income for the different
periods.
<PAGE> 7
DALLAS SEMICONDUCTOR CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
Net sales for the second quarter of 1995 were $57,036,000, an increase of
27% over the same period in 1994. The Company's revenue growth is supported
by increased unit sales of new and existing products in several product
families, including Telecommunications, System Extension, Timekeeping,
Silicon Timed Circuits, Microcontrollers, Automatic Identification and
NV SRAMs.
Gross margins remained constant at 50% for the first six months of 1995
and 1994. Gross margins remained relatively constant in the second
quarter of 1995 declining slightly to 49% from 50% in the second quarter
of 1994.
Research and development ("R&D") expenses for the second quarter of
1995 increased 24% over the same periods in 1994. The increase resulted
primarily from increased personnel costs due to increased headcount.
R&D expenses as a percent of sales decreased to 12% from 13% for the
three month period ended July 2, 1995 and July 3, 1994, respectively.
For the first six months of 1995 and 1994, R&D expenses as a percent
of sales have remained constant at 12%.
Selling, general and administrative ("SG&A") expenses for the second
quarter of 1995 increased 33% compared with the second quarter of 1994.
In the first six months of 1995, SG&A expenses increased 29% for the same
period in 1994. SG&A expenses as a percent of net sales remained constant
at 15% for the three and six month periods ended July 2, 1995 and
July 3, 1994. The increase in SG&A expenses resulted primarily from
increased sales commission amounts due to higher net sales, increased
personnel costs and increased advertising expenditures.
Operating income increased 19% and 16% for the second quarter of 1995 and
the first six months of 1995 over the same periods in 1994, respectively.
Operating income as a percent of sales decreased to 22% in the second
quarter of 1995 from 23% in the second quarter of 1994. Operating income
as a percent of net sales decreased to 22% from 24% for the first six
months of 1995 and 1994, respectively. The decrease in both periods
resulted from higher operating expenses as a percent of net sales.
Net interest income for the second quarter and the first six months of
1995 decreased by $83,000 and $148,000 over the same periods in 1994,
respectively. The decrease resulted primarily from lower average cash
balances during the second quarter and the first six months of 1995.
Changes in interest rates will continue to affect interest income as
will any substantial change in the amount of the Company's cash and
cash investments or borrowings.
The provision for income taxes includes estimated federal and state income
taxes at statutory rates and a deferred tax expense for the three and six
month periods ended July 2, 1995 of $734,000 and $666,000, respectively.
The Company's effective tax rate was 33.5% for the second quarter and
first six months of 1995, decreasing from 34.0% for the same periods in
1994. This decrease was a result of changes in anticipated differences
between income for financial statement purposes and taxable income for
the different periods.
<PAGE> 8
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
-------------------
Cash and cash investments were $69.1 million at the end of the second
quarter of 1995, compared with $64.5 million at the end of fiscal year
1994. 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 $15.6 million in the first six months of 1995,
compared with $28.4 million in the same period of 1994. The decrease is
primarily the result of construction in progress on the wafer fabrication
facility during the first six months of 1994.
In May 1995, the Company purchased a 23,000 square foot warehouse
adjacent to its facility in Dallas for $645,000, increasing its owned
building space to approximately 415,000 square feet and owned land to
27.5 acres. Capital expenditures for 1995, estimated at approximately
$40 million, including year-to-date building purchases of $2.2. million,
are expected for wafer fabrication, manufacturing and test equipment,
and computer hardware and software.
In 1994 the board of directors authorized the purchase from time-to-time,
depending on market conditions, of up to 500,000 shares of the Company's
common stock. As of July 2, 1995, a total of 180,000 shares, at an
aggregate purchase price of $2,703,000 have been purchased pursuant to
this stock repurchase program.
On June 1, 1995, a $.025 dividend was paid on each outstanding share of
common stock to shareholders of record on May 15, 1995, totalling
$650,000. Cumulative dividends paid through July 2, 1995 total $1,294,000.
On August 1, 1995 a $0.25 dividend was declared on each outstanding share
of common stock, payable on September 1, 1995, to shareholders of record on
August 15, 1995.
The Company had no long-term debt at the end of the second quarter of 1995
or at the end of fiscal 1994.
<PAGE> 9
DALLAS SEMICONDUCTOR CORPORATION
PART II. OTHER INFORMATION
--------------------------
Items 1.- 3.
------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------
(a) The Company's annual meeting of stockholders was held on
April 25, 1995.
(b) (c) The following items were presented to the stockholders with
the following results.
Votes
Votes For Withheld
--------- --------
Election of Directors:
C.V. Prothro 23,185,839 221,955
Chao C. Mai 23,186,314 221,480
Micahel L. Bolan 23,185,329 222,465
Richard L. King 23,363,689 44,105
M.D. Sampels 23,222,574 185,220
Carmelo J. Santoro 23,365,764 42,030
E.R. Zumwalt, Jr. 23,330,734 77,060
Votes Broker
Votes For Against Abstentions Non-Votes
--------- ------- ----------- ---------
Selection of
Ernst & Young LLP as
independent auditors for
the 1995 fiscal year 23,357,503 14,375 35,916 --
Item 5. Other information
-------------------------
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibit 27 - Financial Data Schedule
------------------------------------
None.
(b) Reports on Form 8-K
-------------------
No Reports on Form 8-K were filed during the period
for which this report is filed.
<PAGE> 10
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
----------------
Alan P. Hale
Vice President, Finance
Date: August 16, 1995
---------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUL-02-1995
<CASH> 69,148
<SECURITIES> 0
<RECEIVABLES> 30,799
<ALLOWANCES> 0
<INVENTORY> 44,215
<CURRENT-ASSETS> 149,199
<PP&E> 179,847
<DEPRECIATION> 95,220
<TOTAL-ASSETS> 237,520
<CURRENT-LIABILITIES> 23,274
<BONDS> 0
<COMMON> 523
0
0
<OTHER-SE> 214,246
<TOTAL-LIABILITY-AND-EQUITY> 237,520
<SALES> 109,071
<TOTAL-REVENUES> 109,071
<CGS> 54,863
<TOTAL-COSTS> 84,995
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 25,598
<INCOME-TAX> 8,575
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,023
<EPS-PRIMARY> .62
<EPS-DILUTED> 0
</TABLE>
