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 1, 1995
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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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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
November 5, 1995: 26,345,387.
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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 1, 1995 and October 2, 1994 .... 3
Condensed Consolidated Balance Sheets
October 1, 1995 (Unaudited) and January 1, 1995 .................... 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine months ended October 1, 1995 and October 2, 1994 .............. 5
Notes to Condensed Consolidated Financial Statements (Unaudited) .... 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- ------- ----------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ........ 7 - 8
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PART II. OTHER INFORMATION
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Items 1. through 6. ................................................. 9
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SIGNATURE ............................................................ 10
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EXHIBIT 27. ART. 5 FDS FOR 3RD QUARTER 10-Q ......................... 11
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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 Nine months
ended ended
----------------- ------------------
Oct. 1, Oct. 2, Oct. 1, Oct. 2,
(Thousands except per share amounts) 1995 1994 1995 1994
- ------------------------------------ ------- ------- -------- --------
Net sales $60,512 $45,201 $169,582 $133,425
Operating costs and expenses:
Cost of sales 30,429 22,556 85,292 66,248
Research and development 7,436 5,663 20,925 16,536
Selling, general and administrative 9,292 6,596 25,934 19,456
------- ------- -------- --------
Total costs and expenses 47,157 34,815 132,151 102,240
------- ------- -------- --------
Operating income 13,355 10,386 37,431 31,185
Interest income, net 894 776 2,417 2,446
------- ------- -------- --------
Income before income taxes 14,249 11,162 39,848 33,631
Provision for income taxes 4,702 3,795 13,278 11,435
------- ------- -------- --------
Net income $ 9,547 $ 7,367 $ 26,570 $ 22,196
======= ======= ======== ========
Net income per share $ 0.34 $ 0.27 $ 0.96 $ 0.81
======= ======= ======== ========
Weighted average common and common
equivalent shares outstanding 28,083 27,231 27,667 27,391
======= ======= ======== ========
Dividends declared per share $ 0.025 $ -- $ 0.075 $ --
======= ======= ======== ========
See accompanying notes.
<PAGE> 4
DALLAS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
Oct. 1, Jan. 1,
(Dollars in thousands except per share amounts) 1995 1995
- ----------------------------------------------- ---------- ----------
(unaudited)
Assets
Current assets:
Cash and cash investments $ 79,197 $ 64,520
Accounts receivable, net 32,794 28,330
Inventories 43,179 40,453
Deferred tax assets 2,645 2,561
Other current assets 3,220 3,730
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Total current assets 161,035 139,594
Property, plant and equipment, at cost:
Land 6,325 5,400
Building and improvements 32,362 28,617
Machinery and equipment 154,929 130,216
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193,616 164,233
Less accumulated depreciation (100,622) (85,391)
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Property, plant and equipment, net 92,994 78,842
Other assets 4,300 2,791
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$258,329 $221,227
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 19,072 $ 14,827
Accrued salaries and benefits 6,934 5,328
Accrued taxes other than income 1,881 2,486
Other accrued liabilities 3,500 2,712
Income taxes payable 1,334 1,121
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Total current liabilities $ 32,721 $ 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:
26,380,367 shares at October 1, 1995, and
25,575,586 shares at January 1, 1995 528 511
Additional paid-in capital 85,374 80,562
Retained earnings 140,581 115,962
Treasury stock, shares at cost:
55,625 shares at October 1, 1995, and
153,900 shares at January 1, 1995 (875) (2,282)
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Total stockholders' equity 225,608 194,753
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$258,329 $221,227
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See accompanying notes.
<PAGE> 5
DALLAS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
---------------------
Oct. 1, Oct. 2,
(Thousands) 1995 1994
- ----------------------------------------------- --------- ---------
Cash flows from operating activities:
Net income $ 26,570 $ 22,196
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 15,231 10,644
Deferred tax benefit (84) (1,359)
Increase in receivables (4,464) (4,726)
Increase in inventories (2,726) (5,364)
Decrease (increase) in other current assets 1,368 (200)
Increase in accounts payable 4,245 4,647
Increase (decrease) in accrued salaries & benefits 1,606 (465)
Decrease in accrued taxes other than income (605) (167)
Increase in other accrued liabilities 788 100
Increase in income taxes payable 2,156 656
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Net cash provided by operating activities 44,085 25,962
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Cash flows from investing activities:
Additions to property, plant and equipment (29,383) (39,478)
Increase in other assets (1,509) (792)
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Net cash used by investing activities (30,892) (40,270)
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Cash flows from financing activities:
Proceeds from issuance of stock
upon exercise of stock options 3,855 803
Purchase of treasury stock (420) (482)
Dividend paid to shareholders (1,951) --
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Net cash provided by financing activities 1,484 321
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Net increase (decrease) in cash
and cash investments 14,677 (13,987)
Cash and cash investments at beginning
of the period 64,520 76,273
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Cash and cash investments at end of period $ 79,197 $ 62,286
======== ========
Cash payments for:
Income taxes $ 11,206 $ 12,141
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 $ 1,943 $ 682
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 October 1, 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 nine
months ended October 1, 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.
Oct. 1, Jan. 1,
2. INVENTORIES (in thousands) 1995 1995
-------- --------
Raw materials $ 5,962 $ 5,596
Work-in-process 26,993 23,727
Finished goods 10,224 11,130
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$ 43,179 $ 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 benefit for the three and nine
months ended October 1, 1995 of $750,000 and $84,000, respectively. The
Company's effective tax rate was 33% in the three months ended October 1, 1995
and 33.3% in the nine months ended October 1, 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
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Net sales for the third quarter of 1995 were $60,512,000, an increase of
34% 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, Microcontrollers, Timekeeping, System Extension,
NV SRAMs, Telecommunications and Silicon Timed Circuits.
Gross margins remained relatively constant at 50% for the third quarter and
the first nine months of 1995 and 1994.
Research and development ("R&D") expenses for the third quarter of
1995 increased 31% over the same period 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 October 1, 1995 and October 2, 1994, respectively.
For the first nine 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 third
quarter of 1995 increased 41% compared with the third quarter of 1994.
In the first nine months of 1995, SG&A expenses increased 33% over the same
period in 1994. SG&A expenses as a percent of net sales remained constant
at 15% for the three and nine month periods ended October 1, 1995 and
October 2, 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 29% and 20% for the third quarter of 1995 and
the first nine months of 1995 over the same periods in 1994, respectively.
Operating income as a percent of sales decreased to 22% for the three
and nine month periods ended October 1, 1995 from 23% for the same periods
ended October 2, 1994. The decrease in both periods resulted from higher
operating expenses as a percent of net sales.
Net interest income for the third quarter of 1995 increased by $118,000 over
the same period in 1994, due primarily from higher average cash balances for
the three month period. Net interest income decreased by $29,000 during the
first nine months of 1995 over the same period in 1994, due primarily from
lower average cash balances for the nine month period. 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 benefit for the three and nine
month periods ended October 1, 1995 of $750,000 and $84,000, respectively.
The Company's effective tax rate was 33% for the third quarter and 33.3% for
the first nine 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 $79.2 million at the end of the third 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 $29.4 million in the first nine months of 1995,
compared with $39.5 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 nine months of 1994.
Estimated capital expenditures of $43 million in 1995, including year-to-date
building purchases of $2.2 million, are expected primarily 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 October 1, 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 August 1, 1995 a $0.025 dividend was declared on each outstanding share of
common stock, payable on September 1, 1995, to shareholders of record on
August 15, 1995 totaling $657,000. Cumulative dividends paid through October 1,
1995 total $1,951,000. On October 24, 1995 a $0.025 dividend was declared on
each outstanding share of common stock, payable on December 1, 1995, to
shareholders on record on November 15, 1995.
The Company had no long-term debt at the end of the third quarter of 1995 or
at the end of fiscal 1994.
<PAGE> 9
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> 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: November 16, 1995
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<PAGE> 11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> OCT-01-1995
<CASH> 79,197
<SECURITIES> 0
<RECEIVABLES> 32,794
<ALLOWANCES> 0
<INVENTORY> 43,179
<CURRENT-ASSETS> 161,035
<PP&E> 193,616
<DEPRECIATION> 100,622
<TOTAL-ASSETS> 258,329
<CURRENT-LIABILITIES> 32,721
<BONDS> 0
<COMMON> 528
0
0
<OTHER-SE> 225,608
<TOTAL-LIABILITY-AND-EQUITY> 258,329
<SALES> 169,582
<TOTAL-REVENUES> 169,582
<CGS> 85,292
<TOTAL-COSTS> 132,151
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 39,848
<INCOME-TAX> 13,278
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,570
<EPS-PRIMARY> 0.96
<EPS-DILUTED> 0
</TABLE>
