<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 1, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from . . . . . . . . . . . . . to . . . . . . . . . .
COMMISSION FILE NUMBER: 1-10464
DALLAS SEMICONDUCTOR CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-1935715
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of each class Name of each exchange on which registered
COMMON STOCK, $.02 PAR VALUE NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant as of March 1, 1995: $399,213,100.
Number of shares outstanding of the registrant's Common Stock as of
March 1, 1995: 25,879,485.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement for the
registrant's Annual Meeting of Stockholders to be held on April 25, 1995, are
incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS
Dallas Semiconductor Corporation (the "Company" or "Dallas
Semiconductor") designs, manufactures and markets electronic chips and
chip-based subsystems. Founded in 1984, the Company uses customer problems as
an entry point to develop products with widespread applications. The Company
is committed to new product development as a means to attempt to increase
future revenues and diversify its markets, product offerings and customers.
The Company has used its advanced technologies in an effort to gain a
competitive edge over traditional approaches to semiconductors. Combining
lithium energy cells with low-power CMOS chips can power them for the useful
life of the equipment. Direct laser writing can enhance chip capabilities with
higher levels of precision and/or unique identities. Special packaging gives
improved functionality to silicon chips.
In its eleven-year history, Dallas Semiconductor has developed 215
proprietary base products with over 1,000 variations shipped to more than 8,000
customers worldwide. A direct sales force and distribution network sell to
original equipment manufacturers (OEMs) of personal computers and workstations,
scientific and medical equipment, industrial controls, automatic
identification, telecommunications and other products.
The Company organizes its products into 14 product families sharing
common technologies, markets or applications:
Automatic Identification SIP Stik(TM) Prefabs
Integrated Battery Backup and Software Authorization
Battery Chargers System Extension
Intelligent Sockets Telecommunications
Microcontrollers Teleservicing
Multiport Memory Timekeeping
Nonvolatile RAM (NVRAM) User-Insertable Memory
Silicon Timed Circuits
PRODUCT DEVELOPMENT
The Company developed 25 new base products during the 1994 fiscal year
including the DS87C520 One Time Programmable High Speed Micro, the DS1689 3
Volt Real Time Clock and the DS2151 Single Chip T1 Transceiver. The Company's
research and development expenditures for fiscal year 1994 were approximately
$22.7 million, compared to expenditures in 1993 and 1992 of $19.4 million and
$16.5 million, respectively. Dallas Semiconductor intends to continue to
commit substantial resources to the development of new products. There can be
no assurance, however, that such products, if developed, will gain market
acceptance.
PRODUCT FAMILIES
A description of each of the Company's 14 product families is as
follows:
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AUTOMATIC IDENTIFICATION. The Company has developed a family of Auto
ID chips that can be attached to an object, or carried by a person, which
identifies the user and holds relevant information. Unlike barcodes, users do
not need to refer to a remote database to decipher the code -- the information
is available in the device itself. These read/write data carriers can also be
updated via computer while affixed to an object. Auto ID chips can facilitate
automation by tracking a work piece as it travels along an assembly line; they
can also be used to identify people for access to secure areas. Using Dallas
Semiconductor's one-wire(TM) technology, a memory chip can be read or written
with the touch of a probe. Touch Memory(TM) devices can be packaged in a
stainless steel MicroCan(TM) 16mm in diameter.
INTEGRATED BATTERY BACKUP AND BATTERY CHARGERS. Microprocessor-based
systems lose information when affected by a loss of power. When system power
is resumed, the task that was being performed at the time of power loss must be
restarted. Uninterruptible power supplies have historically been provided as
relatively expensive, bulky, external units. A solution to this problem is
necessitated in industrial automation applications and in systems which are
located in remote sites or are otherwise difficult to reprogram when
information is lost. Battery Backup products include a three-part chip set
which operates in three steps. First, the Power Monitor warns a microprocessor
of an impending power failure before it happens, providing time for critical
data to be stored in nonvolatile memory before system power is lost. Second,
the Nonvolatile Controller/Decoder converts random access memory (RAM) into
nonvolatile memories and safeguards against RAM data loss during power up and
down transients, by automatically switching to battery power when system power
failure occurs. Third, the SmartBattery supplies uninterruptible power in the
absence of system power to maintain data in nonvolatile memory. Battery
charger chips optimize charging time and conditions for various types of
rechargeable batteries.
INTELLIGENT SOCKETS. Often, after a system's design is complete, the
manufacturer may desire to enhance functionality because of increased
competition from newer products. Dallas Semiconductor has incorporated active
electronics in connectors which can be plugged into a system and add
capabilities without requiring substantive changes in the existing system. For
example, many systems manufacturers desire the capability to make RAMs in
existing systems nonvolatile. In this instance, they can unplug a memory
circuit in a system currently in use, plug the SmartSocket into that space, and
plug the memory circuit into the SmartSocket. Another example is a requirement
in many existing systems to monitor and record time of day. The SmartWatch
plugs into existing systems and keeps time of day to hundredths of a second
while also making connected memory circuits nonvolatile.
MICROCONTROLLERS. A microcontroller typically combines a central
processing unit, data memory, program memory, and input-output devices on a
single chip in order to control a wide variety of electronic systems. Unlike
rigid ROM (read only memory) or EPROM (electrically programmable ROM) based
microcontrollers, all of Dallas Semiconductor's secure microcontrollers are
designed for change: they contain memory that is high performance, read/write,
and nonvolatile for more than 10 years. This memory is initially loaded via a
serial port and can be dynamically partitioned to fit program and data storage
requirements of a particular task. System performance can be improved based on
cumulative knowledge maintained in nonvolatile RAM. As a result of added
crashproofing circuitry, processing of a task can resume after a power outage.
Variations of Dallas Semiconductor's microcontroller include features such as
timekeeping and security functions. Another segment of this product family,
High Speed Micros, are 8051-compatible devices that offer higher performance
and less consumption of power than the industry standard 8051 devices.
MULTIPORT MEMORY. The existence of many different data transmission
rates and standards has created a problem in transporting data among different
systems. A receiving system may be too slow to keep up with data sent from
another system. First In, First Out (FIFO) memories are capable of
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providing the necessary elasticity between different data rates. The Company
offers a line of FIFO memories with identical pin outs that allow them to be
interchanged. This product family also includes two- and four-part RAMs that
couple up to four computers at low cost.
NONVOLATILE RAM. Static RAMs (SRAMs), which were first introduced
over 20 years ago, are used for high speed storage and retrieval of data.
SRAMs have always had the undesirable characteristic of data loss when power is
disrupted. Dallas Semiconductor has combined its circuitry and understanding
of ultra low power CMOS SRAMs with improvements in long life lithium power
sources to develop a family of Nonvolatile RAM products. Nonvolatile RAMs
integrate a lithium power source and intelligent control circuitry to retain
data even in the absence of system power. The control circuit, by monitoring
the level of system voltage available to the memory at all times, switches to
the lithium power source when necessary, and also protects the memory contents
against inadvertent changes during system power fluctuations. A lithium power
source provides backup power for more than 10 years in the absence of system
power. Nonvolatile RAMs are packaged to fit into existing sockets and can
replace other widely used memory devices. These products perform better in
many applications than EEPROM's (erasable electrically programmable ROM),
EPROMs, or shadow RAMs because they provide unlimited data write cycles,
safeguard against corrupted data and write data in as fast as 70 nanoseconds.
Partitionable Nonvolatile SRAMs provide write protection of critical programs
and data memory.
SILICON TIMED CIRCUITS. Electronic systems require exact timing to
control the transmission of data between their component parts. Timing
requirements vary across systems. Historically, systems designers have not
been able to use semiconductors as timing references because of their lack of
precision; they consequently achieved the required accuracy by using, in
combination, quartz crystals and hybrid passive components, known as delay
lines. Dallas Semiconductor's all-silicon delay lines offer single chip
reliability, economy and significantly greater precision due to their
laser-defined specifications. Direct laser writing provides precise accuracy
and, because the products are defined in the final stage of manufacturing, a
broad product mix is available without losing the economic benefits of standard
integrated circuit production. Customers are provided maximum flexibility, as
well as the option of purchasing tailor-made products at the approximate cost
of standard, off-the-shelf solutions. These all-silicon products can be
designed into new systems, as well as retrofitted into existing systems which
otherwise utilize hybrid approaches.
SIP STIK(TM) PREFABS. SIP Stiks are pretested sub-assemblies that
snap into locking connectors for rapid construction of electronic systems.
This low profile form factor permits high density yet offers the advantages of
modularity. These major building blocks are pretested and ready for final
assembly into a planar motherboard fitted with AMP MicroEdge(TM) connectors as
required by a particular application. Most components of these SIP Stik sub-
assemblies are comprised of products from various other product families.
SOFTWARE AUTHORIZATION. These products provide security for
intellectual property (e.g. software and data). In an information age, an
increasing demand exists to provide security for intellectual property and
data. Prominent examples are publishers of premium-priced personal computer
software who have strong motivation to protect their products from unauthorized
use. Devices in this product family can also be used to control access to
buildings and equipment. The devices in this family come in various form
factors including a token, a 16mm MicroCan(TM) and an ergonomically designed
plastic key.
SYSTEM EXTENSION. These CMOS products add a variety of special
features to systems without encumbering design. The MicroMonitor acts as a
"watchdog" for system malfunction by checking the three most important
indicators of correct microprocessor operation -- power supply, software
execution and override push-button. If it detects a problem, the MicroMonitor
shuts down the system, then resets
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it for correct operation. The Eliminator replaces the equivalent of an 8 or 16
station manual DIP switch, thus eliminating burdensome hand setting of
mechanical switches. The Line Powered Transceiver connects portable systems to
personal computers without consuming battery energy. Digital Resistors change
their resistance under control of software.
TELECOMMUNICATIONS. An emerging and rapidly growing market exists for
high capacity voice, data and video transmission. High capacity digital links
in North America and Europe are known as T1 and CEPT, respectively. A
comprehensive chip set developed by Dallas Semiconductor addresses the
requirements of these protocols and includes integrated circuits that double or
quadruple the capacity of existing voice communication links through digital
signal processing compression techniques. Other products include voice
messaging processors, interface, buffer and monitoring chips and devices that
provide digital speech recording and play back. Line Interfaces, such as the
SCSI (small computer system interface) Terminator, quiet transmission lines
between computers and peripherals, such as disk drives, permitting high speed,
high integrity data transmissions.
TELESERVICING. Teleservicing products monitor equipment performance
24 hours a day, diagnose problems with machinery malfunctions and make
adjustments and repairs from a desktop computer over an ordinary telephone
line. These products include microcontroller systems with integral modems and
timekeeping functions, various modems and controllers and data access
arrangement (DAA) chips.
TIMEKEEPING. Systems benefit by knowing the time-of-day, but the use
of this feature has previously been limited by its expense and high component
count. By employing a self-contained lithium energy source in conjunction with
a silicon chip and quartz, the Company has created a family of clock/calendar
products within a single component, powered for more than 10 years. Real Time
Clocks with RAMification add memory used to store information essential to the
operation of the computer, such as configuration data, personalization
information or identification numbers. This information is maintained for over
10 years in the absence of external power. The DS1587 Real Time Clock,
introduced in 1992, includes a "wake-up" feature whereby a personal computer
can turn itself on at a pre-set time, perform a task and turn itself off.
Other products include elapsed time counters, a miniaturized timekeeping system
sealed in a 16mm MicroCan and products that add features such as nonvolatile
RAM and watchdog circuitry to the timekeeping function.
USER-INSERTABLE MEMORY. Manufacturers of equipment often wish to
facilitate user configuration of their standard products. In many instances,
user insertable solid state memories offer distinct advantages over alternative
media, such as magnetic tape or disk. Such memories, however, demand
specialized packaging capable of withstanding harsher environmental conditions
than those normally encountered by semiconductor memory circuits. Dallas
Semiconductor has developed a family of Nonvolatile SRAMs specifically to
address this application sector. These products range in density from 256 bits
to 4 million bits, the largest of which replaces rotating memory subsystems in
certain personal computer systems. The CyberCard portable data carriers can be
inserted and withdrawn 50,000 times. A miniaturized version, called the
CyberKey, is small and lightweight so as to be suitable to be easily carried in
a pocket. Secured versions of these various data carrier products protect
against unauthorized use.
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MANUFACTURING
In March 1987, the Company began production at its advanced wafer
fabrication facility, in which it is currently producing high performance CMOS
integrated circuits with sub-micron geometries. This facility processes six-
inch wafers and utilizes an automated modular process technology that provides
substantial flexibility in the manufacturing process and significantly reduces
the number of persons required for operation. Additional equipment has been
installed from time to time in this fabrication facility, and physical
expansion was undertaken in late 1988 and early 1989. The Company completed
the construction of an additional fabrication module in 1994. Initial
alignment of wafers in this expanded fabrication facility began in June 1994
and wafer production in support of the Company's production plans began in the
fourth quarter of 1994. This fabrication facility expansion project, which
began in 1993, has initially increased the Company's wafer fabrication capacity
by approximately twenty percent. When fully equipped, this facility is
expected to permit a doubling of the Company's previous production capacity.
Dallas Semiconductor makes only limited use of foundries, where appropriate, in
order to maintain a second manufacturing source, to reduce fixed costs and
capital requirements and to enable it to devote its own facility to the
fabrication of wafers requiring more advanced process technologies and finer
circuit geometries. During fiscal 1994, virtually all of the wafers used by
the Company were processed at its own facility.
After silicon wafers have been fabricated they are cut into individual
chips. These chips are then assembled with other components and incorporated
into specialized packaging. The Company assembles some of its products at its
facilities in Dallas, Texas. The Company also makes use of overseas assembly
contractors in certain instances. Testing of substantially all of the
Company's products is performed by the Company with automated test processes
organized as part of its assembly facilities.
PRODUCT COMPONENTS
During fiscal 1994, the Company was able to obtain an adequate supply
of static memory circuits from multiple suppliers. These circuits are used in
a number of the Company's products. The Company anticipates that, at least for
the short term, an adequate supply of these memory circuits will be available;
however, given the historically unpredictable and undependable supply of these
components, shortages may recur causing future sales of some Company products
to be delayed or lost. If such shortages occur, future sales and earnings from
products using these circuits, primarily Nonvolatile RAMs, could be adversely
affected. Additionally, any significant fluctuations in the purchase price for
these components could impact the Company's gross margins. The Company
continues to seek alternative sources for these components, including internal
production of static memory circuits for use in its own products, primarily the
Nonvolatile RAMs.
SALES
Sales are made to distributors and to OEMs. During fiscal year 1994,
no OEM customer accounted for more than 5% of the Company's net sales, and the
Company's top 25 OEM customers accounted for approximately 28% of net sales.
The Company sells its products directly to OEMs through its own sales force,
sales representative firms, and domestic and foreign distributors. During
fiscal year 1994, sales to domestic distributors represented approximately 34%
of the Company's net sales, with the Company's largest domestic distributor,
Avnet, accounting for a total of approximately 10% of net sales.
The Company sells its products in a number of foreign countries,
including a number of countries in Europe and the Far East. Export sales
accounted for 38% of net sales in fiscal 1994 which were essentially evenly
divided between European countries and the Far East. The Company's export
sales
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are billed in United States dollars and, therefore, the Company's results of
operations are not subject to currency exchange adjustments. Although export
sales are subject to government export regulations, the Company has not
experienced any significant difficulties to date because of these regulations.
The Company recognizes revenues from sales to distributors at the time
of shipment to the distributor. As is common in the semiconductor industry,
the Company grants price protection to distributors. Under this policy,
distributors are granted credits for the difference between the price they were
originally charged for products in inventory at the time of a price reduction
and the reduced price which the Company subsequently charges distributors.
From time to time, distributors are also granted credits on an individual basis
for Company-approved price reductions to specific customers made to meet
competition. The Company also grants distributors limited rights to return
products. The Company maintains reserves against which these credits and
returns are charged.
BACKLOG
The Company's backlog, although useful for scheduling production, does
not represent actual sales and should not be used as a measure of future
revenues. Backlog orders are generally subject to cancellation without penalty
at the option of the purchaser and to changes in delivery schedules and do not
reflect adjustments made for price decreases passed on to distributors or
credits for returned products. As of January 1, 1995, the Company's backlog
was approximately $33.7 million, as compared to approximately $28.8 million at
January 2, 1994. The Company includes in its backlog all released purchase
orders shippable within the next twelve months.
THE SEMICONDUCTOR INDUSTRY AND COMPETITION
The semiconductor industry is characterized by rapid technological
change, intense competition from domestic and foreign competitors, cyclical
market patterns, price erosion, occasional shortages of materials, variations
in manufacturing yields and efficiencies and significant expenditures for
capital equipment and product development. The industry has from time to time
experienced severely depressed business conditions as well as short term
softness and imbalances. While the Company's strategy is designed to reduce
its exposure to these factors, fluctuations in operating results could occur
due to one or more of these factors. The available supply of certain memory
circuits used in a number of the Company's products has historically been
unpredictable and undependable. Shortages in the supply of these circuits
could limit the Company's future sales and earnings growth, and significant
price fluctuations in the purchase price for these circuits could impact the
Company's gross margins. See "Item 1. Business - Product Components."
The Company faces competition from major domestic and international
integrated circuit manufacturers, many of which have substantially greater
manufacturing, financial, distributing and marketing resources than the
Company, as well as from emerging companies attempting to obtain a share of the
existing market. The Company competes principally on the basis of the quality,
technical innovation, functionality and timeliness of introduction of its
products, the adaptability of such products to specific applications, and
price. The Company believes that the early recognition of market opportunities
and its willingness to invest substantial time and capital in product
development, coupled with product complexity and diversity, constitute an
important competitive advantage. The Company's ability to compete successfully
in the rapidly evolving semiconductor industry depends on numerous factors,
some of which are within the Company's control and others of which are
predominately outside of the Company's control. These factors include general
economic conditions, changes in conditions affecting OEMs, competition
(including alternative technologies), the Company's success in developing new
products and process technologies, market acceptance of new product
introductions, the ability of
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the Company to continue diversifying its product line, manufacturing
performance, availability and price fluctuations of components and other raw
materials, and other factors. Any of these factors could negatively impact the
Company's future revenues and operating results.
PATENTS AND INTELLECTUAL PROPERTIES
Dallas Semiconductor has to date acquired or been granted 148 U.S.
patents and 2 foreign patents. The Company has a number of patent applications
pending, although no assurance can be given that patents will ever issue from
such applications or that any patents, if issued, will be determined to be
valid. The Company has also registered a number of its trademarks, as well as
the mask works for certain of its products, and has sought copyright protection
for its software and product literature. No assurance can be given, however,
that such protection will give the Company any material competitive advantage
in the semiconductor industry, due to the possibility of rapid technological
obsolescence of such patented products, trademarks, copyrights and registered
mask works, and the inherent limitations of the protection afforded under such
laws.
The Company has been notified that it may be infringing certain
patents held by others. These notices are in various stages of evaluation. In
the event infringement is claimed and the Company believes that a license is
necessary or desirable, a license may be sought. The Company believes that if
sought, a license could be obtained on commercially reasonable terms, although
no assurance can be given in this regard. See Item 3. Legal Proceedings.
ENVIRONMENTAL REGULATION
The Company is subject to a variety of local, state and federal
governmental regulations in connection with emissions, the discharge of certain
chemicals during its manufacturing process and the handling and disposal of
various substances used in manufacturing. Failure to comply with present or
future regulations could result in the suspension or cessation of the Company's
operations. In addition, such regulations could in the future restrict the
Company's ability to expand at its present location or could require the
Company to acquire significant equipment or incur other substantial expenses.
EMPLOYEES
At January 1, 1995, the Company had 821 employees. The Company
believes that its future success is dependent upon its ability to employ and
retain qualified technical and management personnel, particularly the highly
skilled design engineers involved in the development of new products. The
competition for such personnel is intense. During 1994, the Company continued
its practice of utilizing contract labor supplied by temporary agencies,
primarily in the manufacturing area. At January 1, 1995, the Company was
utilizing the services of 466 such temporary agency employees.
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ITEM 2. PROPERTIES
The Company's headquarters are located in Dallas, Texas. As of
January 1, 1995, the Company owned approximately 22.9 acres of land that
included approximately 342,500 square feet of building space. The Company's
property provides space for administrative and engineering personnel, as well
as wafer fabrication, test and surface mount production areas, warehousing,
distribution facilities and assembly operations. On March 10, 1995, the
Company purchased an additional 3.5 acres that include an additional 49,550
square feet of office space. A portion of this newly acquired office space is
currently subject to certain existing leases. The Company currently leases a
total of 35,000 square feet of nearby building space for additional
warehousing. All indebtedness previously secured by the Company's land and
buildings has been repaid.
The Company currently leases small office facilities for its sales
staff in Irvine, California, Sunnyvale, California, Chelmsford, Massachusetts,
Marlton, New Jersey, Duluth, Georgia, Hoffman Estates, Illinois, Vancouver,
Washington, and Dallas, Texas, under short term leases. The Company's
subsidiary, Dallas Semiconductor Corporation Limited, leases an office facility
in Birmingham, England. The Company's foreign sales corporation operates out
of Bridgetown, Barbados, W.I.
ITEM 3. LEGAL PROCEEDINGS
In August 1994, the Company filed suit against Crystal Semiconductor
Corporation ("Crystal") in the United States District Court for the Western
District of Texas, Austin Division, alleging infringement of certain of the
Company's patents. The Company seeks monetary damages for such infringement
and injunctive relief, as well as its costs and fees involved in the
litigation. In October 1994, Crystal filed an Answer and Counterclaims
pursuant to which it raised various defenses to the Company's claims and
alleged that certain of the Company's products infringe various Crystal
patents. Crystal seeks actual and treble damages for such alleged infringement
in an unspecified amount, as well as its costs and fees. Additionally, Crystal
seeks a declaration that the Company's patent at issue is invalid.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following information as of March 1, 1995, is provided with
respect to each executive officer of the registrant pursuant to General
Instruction G of Form 10-K.
<TABLE>
<CAPTION>
Current Title
Name Age And Position
---- --- ------------
<S> <C> <C>
C. V. Prothro 52 Chairman of the Board
of Directors, President
and Chief Executive
Officer
Chao C. Mai 59 Senior Vice President
Michael L. Bolan 48 Vice President -
Marketing and Product
Development
F. A. Scherpenberg 48 Vice President -
Computer Products
Alan P. Hale 34 Vice President-Finance
Douglas L. Powell 70 Vice President - Sales &
Strategic Marketing
</TABLE>
Mr. Prothro has been Chairman of the Board since February 1984 and
served as acting President of the Company from February 1984 to November 1985.
Mr. Prothro was named Chief Executive Officer of the Company in January 1989
and President of the Company in October 1989. Since August 1983, Mr. Prothro
has been a general partner of Southwest Enterprise Associates, L.P., a venture
capital fund. Previously, he served as Chief Executive Officer of Mostek
Corporation, a semiconductor manufacturer, during 1981-82, and as its President
and Chief Operating Officer from 1977 to 1981.
Dr. Mai joined the Company as Vice President - Engineering in February
1984. He served in such capacity until he became Vice President -
Manufacturing in November 1985 and as Vice President - Wafer Fabrication and
Technology Development from June 1988 until January 1993. Dr. Mai was named
Senior Vice President in January 1993. Previously he was employed in various
capacities by Mostek Corporation for over thirteen years including the position
of Vice President of Process Research and Development beginning in 1980.
Mr. Bolan joined the Company as Director of Marketing in June 1984.
He served in that capacity until his election as Vice President - Marketing and
Product Development in November 1985. He was employed as an analyst for
Southwest Enterprise Associates, L.P. from November 1983 to June 1984. Prior
thereto he was employed by Mostek Corporation from November 1978 to October
1983 in various capacities in technical planning, product planning and
marketing.
Mr. Scherpenberg was a Product Manager for the Company from May 1984
to March 1989 and Director of Sales from March 1989 to July 1989. He served as
Vice President - Sales from July 1989 to July 1990, and became Vice President -
Computer Products in July 1990. Prior to his employment with the Company, Mr.
Scherpenberg was employed by Mostek Corporation for approximately five years
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in various capacities, including Field Applications Engineer and Strategic
Marketing and Applications Engineer.
Mr. Hale joined the Company in 1987 and has been Vice President of
Finance since 1992. Mr. Hale's prior positions with the Company include
Controller, Treasurer and Accounting Manager. Previously, he spent five years
as an auditor with the Dallas office of Ernst & Young LLP, where his primary
client base included Texas Instruments and other electronics manufacturers. He
is a CPA in the State of Texas and has received an MBA degree from Southern
Methodist University.
Mr. Powell became an employee of the Company in January 1995 after
working as a strategic marketing consultant to the Company for over two years
and it is anticipated that he will be elected as Vice President - Sales &
Strategic Marketing in April 1995. A thirty-five year veteran in the computer
and semiconductor industries, Mr. Powell previously held positions at General
Electric including computer design and field engineer and worldwide sales
manager for large mainframe computers. After eighteen years at General
Electric, Mr. Powell joined Motorola's semiconductor sector as manager of
worldwide strategic marketing, where he led the design and development of
microprocessor and communications peripheral semiconductors. Subsequently, he
accepted assignments as Worldwide Vice President of Computer Industry Sales and
Marketing and Vice President of R&D Strategic Planning.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Dallas Semiconductor's common stock is traded on the New York Stock Exchange
under the symbol DS. At January 1, 1995, there were approximately 749 holders
of record of the Company's common stock. Set forth below are the high and low
and quarter-end closing prices for the Company's common stock as reported by
The Wall Street Journal during each quarterly period of the 1993 and 1994
fiscal years:
<TABLE>
<CAPTION>
1993 1994
1st 2nd 3rd 4th 1st 2nd 3rd 4th
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Prices:
High $ 15.63 $ 15.50 $ 18.88 $ 18.75 $ 20.00 $ 19.88 $ 18.63 $ 16.63
Low 13.25 12.00 14.63 13.25 15.13 16.75 14.88 13.50
End 14.63 14.88 18.88 15.50 16.88 18.13 15.50 16.63
</TABLE>
In January 1995, the Company's Board of Directors authorized the initiation of
a quarterly dividend program. On February 1, 1995 the Company declared a $0.025
dividend on each outstanding share of its common stock, payable on March 1,
1995 to stockholders of record on February 15, 1995.
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<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
CONSOLIDATED SELECTED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Years
-------------------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING SUMMARY:
Net sales $181,432 $156,869 $120,155 $103,764 $100,018
Costs and expenses:
Cost of sales 90,289 78,051 59,567 51,800 50,877
Research and development 22,651 19,402 16,547 15,096 14,913
Selling, general and
administrative 26,584 22,588 17,712 16,380 16,142
-------- --------- -------- --------- ---------
Operating income 41,908 36,828 26,329 20,488 18,086
Interest income, net 3,165 2,825 2,658 2,533 2,279
-------- --------- -------- --------- ---------
Income before income taxes 45,073 39,653 28,987 23,021 20,365
Provision for income taxes 15,325 14,062 10,435 8,281 6,526
-------- --------- -------- --------- ---------
Net income $ 29,748 $ 25,591 $ 18,552 $ 14,740 $ 13,839
======== ========= ======== ========= =========
Net income per share $ 1.09 $ 0.95 $ 0.71 $ 0.58 $ 0.56
Weighted average common and
common equivalent shares
outstanding 27,288 26,949 26,082 25,633 24,924
FINANCIAL POSITION AT YEAR END:
Cash and cash investments $ 64,520 $ 76,273 $ 65,799 $ 53,031 $ 45,908
Additions to property, plant and
equipment 44,743 21,091 15,779 13,059 13,897
Depreciation and amortization 15,292 13,922 13,136 12,878 10,949
Total assets 221,227 186,544 156,247 129,170 120,137
Total liabilities 26,474 21,006 20,572 15,819 22,893
Stockholders' equity 194,753 165,538 135,675 113,351 97,244
Book value per weighted average
share 7.14 6.14 5.20 4.42 3.90
</TABLE>
- 12 -
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
1994 Results of Operations Compared with 1993
Net sales in 1994 were $181.4 million, up 16% compared with $156.9 million in
1993. Net sales increases resulting from higher unit sales of new and existing
products occurred in several product families, including Timekeeping,
Telecommunications, Automatic Identification, System Extension,
Microcontrollers, and Silicon Timed Circuits.
Export sales accounted for 38% and 34% of total net sales in 1994 and 1993,
respectively. Export sales were almost evenly divided between Europe and the
Far East.
Cost of sales was $90.3 and $78.1 million in 1994 and 1993, respectively. Gross
margins remained constant at 50.2% for both 1994 and 1993.
Research and development ("R&D") expenses increased to $22.7 million from $19.4
million or 12.5% and 12.4% of net sales in 1994 and 1993, respectively. Higher
R&D expenses resulted primarily from increased salaries and benefits from
increased headcount. Increased R&D spending reflects the Company s commitment
to new product development as a means to increase future revenues and to
further diversify the Company s product offerings. The Company introduced 25
new base products in 1994 compared with 21 new base product introductions in
1993. Product introduction occurs when sample quantities of product are shipped
to one or more customers. The cumulative number of base products introduced by
the Company totaled 215 at fiscal year end 1994.
Selling, general and administrative ("SG&A") expenses were $26.6 million and
$22.6 million in 1994 and 1993, respectively. The increase consists primarily
of increased salaries and benefits, and sales commissions to support higher
sales volume.
Operating income in 1994 was $41.9 million, up 13.8% from $36.8 million in
1993. Operating income as a percentage of net sales (operating margin)
decreased to 23.1% in 1994 from 23.5% in 1993. The decrease resulted from
higher operating expenses as a percentage of net sales in 1994.
Net interest income was $3.2 and $2.8 million in 1994 and 1993, respectively.
Net interest income increased due to higher interest rates on lower average
cash balances and decreased interest expense resulting from the expiration of
all capital lease obligations. 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.
Provision for income taxes was $15.3 million in 1994 and $14.1 million in 1993.
The provision for income taxes consisted of estimated federal and state income
taxes at statutory rates and a deferred tax benefit of $0.2 and $1.8 million
respectively for 1994 and 1993. The Company s effective tax rate decreased to
34% in 1994 from 35.5% in 1993 as 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. Management has evaluated the deferred tax assets as
described in Note 5 to the Consolidated Financial Statements and has determined
that it is more likely than not that certain reserve amounts are not expected
to be realized as future tax benefits. Accordingly, a valuation allowance has
been recorded and is evaluated by management quarterly.
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
- 13 -
<PAGE> 15
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.
1993 Results of Operations Compared with 1992
Net sales in 1993 were $156.9 million, up 31% compared with $120.2 million in
1992. Net sales increases resulting from higher unit sales of new and existing
products occurred in several product families, including Timekeeping,
Telecommunications, System Extension, Nonvolatile RAM, Microcontrollers, and
Automatic Identification.
Export sales accounted for 34% and 31% of total net sales in 1993 and 1992,
respectively. Export sales were almost evenly divided between Europe and the
Far East.
Cost of sales was $78.1 and $59.6 million in 1993 and 1992, respectively. Gross
margins remained relatively constant in 1993, decreasing to 50.2% from 50.4%
for the fiscal years ended 1993 and 1992, respectively. R&D expenses increased
to $19.4 million from $16.5 million or 12.4% and 13.8% of net sales in 1993 and
1992, respectively. Higher R&D expenses resulted primarily from increased
salaries and benefits. The Company introduced 21 new base products in 1993
compared with 15 new base product introductions in 1992. The cumulative number
of base products introduced by the Company totaled 190 at fiscal year end 1993.
SG&A expenses were $22.6 million and $17.7 million in 1993 and 1992,
respectively. The increase consists primarily of increased sales commissions,
salaries and benefits to support higher sales volume.
Operating income in 1993 was $36.8 million, up 40% from $26.3 million in 1992.
Operating income as a percentage of net sales (operating margin) increased to
23.5% in 1993 from 21.9% in 1992. The increase resulted from lower operating
expenses as a percentage of net sales in 1993.
Net interest income was $2.8 and $2.7 million in 1993 and 1992, respectively.
Despite higher levels of invested cash, interest income remained relatively
flat due to lower interest rates. Decreased interest expense resulted from
lower long-term capital lease obligations.
In February 1992, the Financial Accounting Standards Board (FASB) issued
Statement No. 109, "Accounting for Income Taxes," effective for fiscal years
beginning after December 15, 1992. The Company adopted Statement No. 109 in the
first quarter of 1993. The cumulative effect of the accounting change was not
material.
Provision for income taxes was $14.1 million in 1993 and $10.4 million in 1992.
The provision for income taxes consisted of estimated federal an state income
taxes at statutory rates and a deferred tax benefit of $1.8 million and $0.6
million for 1993 and 1992, respectively. The Company s effective tax rate
decreased from 36.0% in 1992 to 35.5% in 1993 as 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.
Financial Condition
Cash, cash equivalents and cash investments totaled $64.5 million at January 1,
1995, compared with $76.3 million at January 2, 1994. The decrease in cash,
cash equivalents and cash investments was primarily the result of investments
in property, plant and equipment ($44.7 million), and the purchase of treasury
stock
- 14 -
<PAGE> 16
($2.3 million), offset by net cash provided from operations ($35.3 million).
The Company continues to invest in financial instruments having maturities in
excess of one year to obtain yields higher than those available in the
short-term market.
The current ratio at fiscal year end 1994 decreased to 3.5, compared with 4.3
at fiscal year end 1993, primarily due to increased accounts payable resulting
from capital expenditures and inventory purchases. The Company expects to fund
its 1995 capital expenditures primarily with cash flows from operations,
supplemented where appropriate with existing cash and cash investments or
external financing.
At January 1, 1995 the Company owned approximately 342,500 square feet of
building space and 22.9 acres of land in Dallas, including a January 1994
purchase of four buildings adjacent to its facilities in Dallas for $2.4
million. In addition, the Company leases 35,000 square feet of nearby building
space. Gross additions to property, plant and equipment in 1994 totaled $44.7
million, compared with $21.1 million in 1993. Capital additions in 1994
included $21.6 million in capital expenditures related to the wafer fabrication
("fab") expansion project and the $2.4 million land and building purchase
discussed above. 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 fab expansion project was $26.1 million (including $21.6 million and
$4.5 million incurred in 1994 and 1993, respectively), and will initially
increase wafer fabrication capacity by approximately 20 percent.
Capital expenditures in 1995 will approximate $40 million and be used primarily
for fab, manufacturing and test equipment, and computer hardware and software.
In August 1994, the Board of Directors authorized the purchase from
time-to-time, depending on market conditions, of up to 500,000 shares of its
common stock. As of January 1, 1995, 153,900 shares totaling $2,282,000 have
been purchased pursuant to this stock repurchase plan.
In January 1995, the Board of Directors authorized the initiation of a
quarterly dividend program. On February 1, 1995 a $0.025 dividend was declared
on each outstanding share of common stock, payable on March 1, 1995 to
stockholders of record on February 15, 1995.
- 15 -
<PAGE> 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF INCOME
(Thousands except per share amounts)
<TABLE>
<CAPTION>
Fiscal years ended
--------------------------------------------
January 1, January 2, January 3,
1995 1994 1993
--------- ---------- ----------
<S> <C> <C> <C>
Net sales $181,432 $156,869 $120,155
Operating costs and expenses
Cost of sales 90,289 78,051 59,567
Research and development 22,651 19,402 16,547
Selling, general and administrative 26,584 22,588 17,712
-------- -------- --------
Operating income 41,908 36,828 26,329
Interest income (net) 3,165 2,825 2,658
-------- -------- --------
Income before income taxes 45,073 39,653 28,987
Provision for income taxes 15,325 14,062 10,435
-------- -------- --------
Net income $ 29,748 $ 25,591 $ 18,552
======== ======== ========
Net income per common share $ 1.09 $ 0.95 $ 0.71
======== ======== ========
Weighted average common and common equivalent shares
outstanding 27,288 26,949 26,082
======== ======== ========
</TABLE>
See accompanying notes.
- 16 -
<PAGE> 18
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
January 1, January 2,
1995 1994
---------- ----------
<S> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents $ 7,105 $ 12,012
Short-term cash investments 10,425 20,303
Accounts receivable, less allowance for doubtful accounts of $323
and $310 at fiscal year end 1994 and 1993, respectively 28,330 23,351
Inventories 40,453 30,605
Deferred tax assets 2,561 2,366
Other current assets 3,730 2,551
-------- --------
Total current assets 92,604 91,188
Property, plant and equipment, at cost: 164,233 119,490
Less accumulated depreciation and amortization (85,391) (70,099)
--------- --------
Property, plant and equipment, net 78,842 49,391
Cash investments (municipal bonds, U.S. government agency
obligations, and corporate notes 46,990 43,958
Other assets 2,791 2,007
-------- --------
$221,227 $186,544
======== ========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 14,827 $ 9,508
Accrued salaries and benefits 5,328 5,058
Accrued taxes other than income 2,486 1,862
Other accrued liabilities 2,712 1,817
Current maturities of capital lease obligations - 194
Income taxes payable 1,121 2,567
-------- --------
Total current liabilities 26,474 21,006
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:
25,575,586 shares at January 1, 1995, and
25,358,679 shares at January 2, 1994 511 507
Additional paid-in capital 80,562 78,817
Retained earnings 115,962 86,214
Treasury stock, 153,900 shares at cost (2,282) -
-------- --------
Total stockholders' equity 194,753 165,538
-------- --------
$221,227 $186,544
======== ========
Total cash, cash equivalents and cash investments $ 64,520 $ 76,273
</TABLE>
See accompanying notes.
- 17 -
<PAGE> 19
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
<TABLE>
<CAPTION>
Fiscal years ended
---------------------------------------------
January 1, January 2, January 3,
1995 1994 1993
---------- ----------- ----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 29,748 $ 25,591 $18,552
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization 15,292 13,922 13,136
Deferred tax benefit (195) (1,786) (580)
Increase in accounts receivable (4,979) (5,541) (6,975)
Increase in inventories (9,848) (4,780) (4,501)
(Increase) decrease in other current assets (1,179) (511) 378
Increase (decrease) in accounts payable 5,319 (895) 6,569
Increase (decrease) in accrued salaries and benefits 270 (173) 3,010
Increase in accrued taxes other than income 624 277 139
Increase (decrease) in other accrued liabilities 895 1,193 (578)
(Decrease) increase in income taxes payable (658) 2,938 1,725
-------- -------- --------
Net cash provided by operating activities 35,289 30,235 30,875
-------- -------- --------
Cash Flows from Investing Activities:
Purchases of cash investments (32,100) (26,646) (46,987)
Proceeds from sales and maturities of cash investments 38,946 18,914 28,793
Additions to property, plant and equipment (44,743) (21,091) (15,779)
(Increase) decrease in other assets (784) (36) 12
-------- -------- --------
Net cash used by investing activities (38,681) (28,859) (33,961)
-------- -------- --------
Cash Flows from Financing Activities:
Repayments of capitalized lease obligations and long-term
debt (194) (1,095) (4,687)
Proceeds from issuance of common stock upon exercise of
stock options and warrants 961 2,461 2,347
Purchase of treasury stock (2,282) - -
-------- -------- --------
Net cash (used) provided by financing activities (1,515) 1,366 (2,340)
-------- -------- --------
Net (decrease) increase in cash and cash equivalents (4,907) 2,742 (5,426)
Cash and cash equivalents at beginning of year 12,012 9,270 14,696
-------- -------- --------
Cash and cash equivalents at end of year $ 7,105 $ 12,012 $ 9,270
======== ======== ========
Cash payments for:
Interest $ 89 $ 140 $ 290
Income taxes $ 15,846 $ 12,911 $ 9,289
Financing activities not affecting cash:
Reduction of income tax payable and increase in paid-in
capital resulting from the tax benefit of employee stock
option exercises $ 788 $ 1,811 $ 1,425
</TABLE>
See accompanying notes.
- 18 -
<PAGE> 20
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three years ended January 1, 1995
(Thousands)
<TABLE>
<CAPTION>
Common Stock
------------ Additional Treasury
Paid-In Retained Stock
Shares Amount Capital Earnings at Cost Total
------ ---- ------- -------- -------- --------
<S> <C> <C> <C> <<C> <C> <C>
Balance at December 29, 1991 24,171 $484 $70,796 $ 42,071 $ - $ 113,351
Issuance of common stock to employees
for cash 632 12 2,335 - - 2,347
Tax benefit from stock option exercises - - 1,425 - - 1,425
Net income - - - 18,552 - 18,552
------ ---- ------- -------- -------- ---------
Balance at January 3, 1993 24,803 496 74,556 60,623 - 135,675
Issuance of common stock to employees -
for cash 556 11 2,450 - - 2,461
Tax benefit from stock option exercises - - 1,811 - 1,811
Net income - - - 25,591 - 25,591
------ ---- ------- -------- -------- ---------
Balance at January 2, 1994 25,359 507 78,817 86,214 - 165,538
Issuance of common stock to employees -
for cash 217 4 957 - - 961
Treasury stock (154) - - - (2,282) (2,282)
Tax benefit from stock option exercises - - 788 - 788
Net income - - - 29,748 - 29,748
------ ---- ------- -------- ------- --------
Balance at January 1, 1995 25,422 $511 $80,562 $115,962 $(2,282) $194,753
====== ==== ======= ======== ======= ========
</TABLE>
See accompanying notes.
- 19 -
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Company
Dallas Semiconductor Corporation (the "Company") was incorporated in Delaware
in February 1984. The Company develops, manufactures and markets
high-performance complementary metal oxide silicon (CMOS) integrated circuits
and semiconductor-based systems that provide innovative and cost-effective
solutions to electronic design problems in a wide range of existing and
emerging markets.
Export sales, principally to customers in Europe and the Far East, represented
approximately 38%, 34%, and 31% of net sales in 1994, 1993, and 1992
respectively. Sales to domestic distributors comprised approximately 34%, 35%,
and 35% of net sales in 1994 , 1993, and 1992 respectively. In 1994, 1993 and
1992 one distributor accounted for $18,641,000 or 10%, $20,577,000 or 13%, and
$15,174,000 or 13% of net sales, respectively. No other customer accounted for
10% or more of net sales in the years presented.
2. Significant Accounting Policies
Fiscal year. The Company operates on a 52- or 53-week fiscal year ending on the
Sunday nearest December 31. Fiscal year 1994, a 52-week year, ended January 1,
1995. Fiscal years 1993 and 1992 ended January 2, 1994 and January 3, 1993,
respectively.
Principles of consolidation. The consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
Cash equivalents and short-term cash investments and long-term cash
investments. Cash equivalents and short-term cash investments and long-term
cash investments consist of municipal bonds and money market funds, U.S.
government agency obligations, and corporate notes. Cash equivalents have
maturities of three months or less when purchased. Short-term cash investments
have maturities of more than three months but not more than one year. Long-term
cash investments have maturities of more than one year.
In May 1993 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." The Company adopted the provisions of the new
standard for investments held as of or acquired after January 3, 1994. There
was no cumulative effect of adoption of Statement 115. Short-term cash
investments and long-term cash investments are both classified as held to
maturity and are recorded at amortized cost which approximates market.
Investment maturities range from one to sixty months.
Inventories. Inventories are stated at the lower of standard cost, which
approximates actual cost (first-in, first-out), or market.
Start-up costs. In 1994, a $26.1 million wafer fabrication ("fab") expansion
was completed. Fab start-up costs were expensed as incurred. Depreciation of
the fab expansion began on October 3, 1994 when the fab was ready for its
intended purpose.
Depreciation and amortization. Depreciation and amortization are provided by
the straight-line method over the shorter of the estimated useful lives of the
related assets or the term of the lease, generally three to 40 years for
building and improvements and two to five years for machinery and equipment.
Revenue recognition. Sales are recognized upon shipment to distributors and to
original equipment manufacturer ("OEM") customers. Sales to domestic
distributors are made under distributor agreements which
- 20 -
<PAGE> 22
provide the distributor certain price reduction and return and allowance
rights. Such sales are reduced for estimated future price reductions and
returns.
Research and development. Research and development costs are charged to
operations when incurred.
Net income per common share. Net income per common share is computed based upon
net income and the weighted average number of shares of common stock and
dilutive common equivalent shares outstanding. Common equivalent shares assume
the exercise of all dilutive stock options. The difference between primary and
fully diluted net income per common and common equivalent share was not
material in any year.
Income taxes. Taxes are reported under Accounting Statement No. 109 and,
accordingly, deferred taxes are recognized using the liability method, whereby
tax rates are applied to cumulative temporary differences based on when and how
they are expected to affect the tax return. Deferred tax assets and liabilities
are adjusted for tax rate changes.
Concentration of credit risk. The Company markets its products for sale to OEMs
and distributors primarily in the United States, Europe, and the Far East. The
Company performs ongoing credit evaluations of its customers and generally does
not require collateral. Reserves are maintained for potential credit losses and
historical losses have been within management's expectations.
The Company places its cash investments only in high credit quality financial
instruments, and limits the amount invested in any one institution or in any
type of instrument.
Reclassifications. Certain prior year amounts have been reclassified to conform
to the current year presentation.
3. Balance Sheet Detail
<TABLE>
<CAPTION>
(Thousands) Fiscal years ended
----------------------------
January 1, January 2,
1995 1994
--------- ---------
<S> <C> <C>
Inventories:
Raw materials $ 5,596 $ 3,910
Work-in-process 23,727 17,937
Finished goods 11,130 8,758
--------- ---------
$ 40,453 $ 30,605
========= =========
Property, plant and equipment:
Land and land improvements $ 5,400 $ 4,219
Building and improvements 28,617 19,480
Machinery and equipment 130,216 95,791
--------- ---------
$ 164,233 $ 119,490
========= =========
Accrued salaries and benefits:
Salaries, benefits and other $ 2,860 $ 3,060
Sales commissions 2,468 1,998
--------- ---------
$ 5,328 $ 5,058
========= =========
Accrued taxes other than income:
Ad valorem taxes $ 1,812 $ 1,592
Other 674 270
--------- ---------
$ 2,486 $ 1,862
========= =========
</TABLE>
- 21 -
<PAGE> 23
4. Stockholders' Equity
Stock options. In August 1984, the Company adopted the 1984 Stock Option Plan
(the "1984 Plan") under which, as amended, an aggregate of 2,220,919 shares of
common stock has been reserved for issuance. In 1994, 16,110 shares reserved
for the 1984 Plan expired unissued. In February 1987, the Company adopted the
1987 Stock Option Plan (the "1987 Plan") under which, as amended, an aggregate
of 4,860,000 shares of common stock has been reserved for issuance. All options
have been granted at no less than 100% of the fair market value of the stock at
the date of grant. The options generally are nontransferable and expire no
later than ten years (for the 1984 Plan) and eleven years (for the 1987 Plan)
from date of grant. Options generally are exercisable upon grant. Shares of
common stock issuable and/or exercised under the 1984 Plan and the 1987 Plan
vest based upon years of service, generally four years. Upon termination of a
participant s employment, the Company reserves the right to repurchase the
nonvested portion of the stock held by the employee, at the original option
price.
On April 26, 1994 , the 1993 Officer and Director Stock Option Plan ("1993
Plan") was approved by the stockholders. The 1993 Plan initially reserved an
aggregate of 2,300,000 shares for issuance and provides for an annual increase,
on and as of January 1st of each calendar year, of 1% of the number of shares
of common stock outstanding on December 31st of the preceding year. Under this
1993 Plan provision, 253,586 additional shares were reserved for issuance on
January 1, 1994 and 254,216 additional shares were reserved on January 1, 1995.
These shares are reflected in the outstanding options table below in the year
authorized. As of January 1, 1995, 2,269,000 options were outstanding at fair
market values ranging from $14.75 to $16.50.
Total shares reserved for future issuance upon exercise of options are
6,872,892. Additional information with respect to stock options under the 1984,
1987, and 1993 Plans is as follows:
<TABLE>
<CAPTION>
Outstanding Options
-----------------------------------
Options
Available Number Aggregate
for Grant of Shares Price
--------- --------- ----------
<S> <C> <C> <C>
December 29, 1991 566,347 3,862,645 $16,347,782
Options authorized 500,000 - -
Options granted (669,600) 669,600 5,712,453
Options exercised - (635,394) (2,391,818)
Options cancelled 70,920 (70,920) (422,043)
---------- --------- -----------
January 3, 1993 467,677 3,825,931 19,246,374
Options authorized 3,053,586 - -
Options granted (2,877,880) 2,877,880 42,678,829
Options exercised - (495,501) (2,139,375)
Options cancelled 23,128 (23,128) (203,972)
---------- --------- -----------
January 2, 1994 666,511 6,185,182 59,581,856
Options authorized 254,216 - -
Options granted (286,810) 286,810 4,520,271
Options exercised - (216,907) (960,528)
Options cancelled 28,407 (28,407) (386,663)
Options expired (16,110) - -
---------- --------- -----------
January 1, 1995 646,214 6,226,678 $62,754,936
========== ========= ===========
</TABLE>
In August 1994, the Board of Directors authorized the purchase, from
time-to-time, depending on market conditions, of up to 500,000 shares of its
common stock. As of January 1, 1995, 153,900 shares totaling
- 22 -
<PAGE> 24
$2,282,000 have been purchased pursuant to this stock repurchase program and
recorded using the cost method.
5. Income Taxes
The provision for income taxes differs from the amount computed by applying the
U.S. federal statutory income tax rate to income before income taxes as follows
(in thousands):
<TABLE>
<CAPTION>
Fiscal Years Ended
----------------------------------------------------
January 1, January 2, January 3,
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Provision at statutory rate $15,777 $13,878 $ 9,856
State and environmental taxes, net of federal
benefit 675 570 416
Tax exempt foreign sales corporation income (958) (666) (310)
Other (169) 280 473
------- ------- -------
Provision for income taxes $15,325 $14,062 $10,435
======= ======= =======
</TABLE>
The components of the provision for income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Years Ended
----------------------------------------------------
January 1, January 2, January 3,
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Current provision $15,520 $15,848 $11,015
Deferred benefit (195) (1,786) (580)
------- ------- -------
Provision for income taxes $15,325 $14,062 $10,435
======= ======= =======
</TABLE>
Current state amounts included in the provision for income taxes include
$1,266,000, $950,000 and $590,000 for the years ended 1994, 1993, and 1992,
respectively.
The components of the net deferred tax assets are as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Years Ended
----------------------------
January 1, January 2,
1995 1994
------- -------
<S> <C> <C>
Sales and inventory reserves $4,884 $ 5,285
Accrued expenses and other 1,819 1,054
Valuation allowance (3,973) (3,973)
------- -------
Deferred tax assets 2,730 2,366
Deferred tax liability (169) -
------- -------
Net deferred tax asset $ 2,561 $ 2,366
======= =======
</TABLE>
The valuation allowance of $3,973,000 was established as the future benefits of
certain reserves are not assured.
- 23 -
<PAGE> 25
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors and Stockholders.
We have audited the accompanying consolidated balance sheets of Dallas
Semiconductor Corporation as of January 1, 1995 and January 2, 1994, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three fiscal years in the period ended January 1, 1995. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and schedule based on our audits.
We conducted our audits in accordance with general accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Dallas
Semiconductor Corporation at January 1, 1995 and January 2, 1994, and the
consolidated results of its operations and its cash flows for each of the three
fiscal years in the period ended January 1, 1995, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
/s/ Ernst & Young LLP
Dallas, Texas
January 16, 1995
SUPPLEMENTARY FINANCIAL DATA
(Unaudited) (Thousands except per share amounts)
Fiscal Years
1993 & 1994 by fiscal quarter
<TABLE>
<CAPTION>
1993 1994
1st 2nd 3rd 4th 1st 2nd 3rd 4th
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING SUMMARY:
Net sales $ 35,503 $ 38,346 $ 41,008 $ 42,012 $ 43,183 $ 45,041 $ 45,201 $ 48,007
Cost of sales 17,688 19,073 20,420 20,870 21,331 22,361 22,556 24,041
Operating income 8,074 8,927 9,776 10,051 10,315 10,484 10,386 10,723
Income before
income taxes 8,756 9,601 10,491 10,805 11,113 11,356 11,162 11,442
Net income 5,604 6,145 6,819 7,023 7,334 7,495 7,367 7,552
Net income per
share $ 0.21 $ 0.23 $ 0.25 $ 0.26 $ 0.27 $ 0.27 $ 0.27 $ 0.28
</TABLE>
- 24 -
<PAGE> 26
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The section entitled "Election of Directors" located on pages 4
through 6 of the Company's definitive Proxy Statement for the Company's Annual
Meeting of Stockholders to be held April 25, 1995, is incorporated herein by
reference. Additional information with respect to executive officers of the
Company is found in Part I hereof under the heading "Executive Officers of the
Registrant."
ITEM 11. EXECUTIVE COMPENSATION
The sections entitled "Director Compensation" and "Executive
Compensation" located on pages 6 through 10 of the Company's definitive Proxy
Statement for the Company's Annual Meeting of Stockholders to be held April 25,
1995 (other than the subsections entitled "Report of Compensation Committee on
Executive Compensation" and "Comparison of Five Year Cumulative Total Return
Among the Company, S&P 500 Index and S&P Semiconductor Index"), is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The sections entitled "Certain Beneficial Owners" located on page 2
and "Election of Directors" located on pages 4 through 6 of the Company's
definitive Proxy Statement for the Company's Annual Meeting of Stockholders to
be held April 25, 1995, are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The subsection entitled "Executive Compensation -- Compensation
Committee Interlocks and Insider Participation" located on page 6 of the
Company's definitive Proxy Statement for the Company's Annual Meeting of
Stockholders to be held April 25, 1995, is incorporated herein by reference.
- 25 -
<PAGE> 27
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules
Index to Consolidated Financial Statements and Consolidated Financial
Statement Schedules
The following consolidated financial statements of Dallas Semiconductor
Corporation are included in Item 8 of this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
Pages in this
Annual Report on
Form 10-K
-----------------
<S> <C>
Consolidated Statements of Income for each of
the three fiscal years in the period ended
January 1, 1995 16
Consolidated Balance Sheets at January 1, 1995
and January 2, 1994 17
Consolidated Statements of Cash Flows for each
of the three fiscal years in the period ended
January 1, 1995 18
Consolidated Statements of Stockholders' Equity
for each of the three fiscal years in the period
ended January 1, 1995 19
Notes to Consolidated Financial Statements 20-23
Report of Ernst & Young LLP, Independent Auditors 24
</TABLE>
The following consolidated financial statement schedule of Dallas Semiconductor
Corporation is included on the page set forth below:
<TABLE>
<CAPTION>
Page in this
Annual Report
On Form 10-K
------------
<S> <C>
Schedule VIII - Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . S-1
</TABLE>
- 26 -
<PAGE> 28
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission have been
omitted as they are either not required, not applicable or the required
information is included in the financial statements or notes thereto.
(b) Reports on Form 8-K
None.
(c) Exhibits
<TABLE>
<CAPTION>
Previously Filed*
--------------------------
With
File As
Exhibit Number Exhibit Description
------- ------ ------- ------------------------------
<S> <C> <C> <C>
3(a)-1 33-16924 3(a)-3 Restated Certificate of Incorporation of the Registrant
3(a)-2 Amdt. No. 2 3(a)-4
to Form 10
0-16170
Amendment to Restated Certificate of Incorporation of the Registrant
3(b) Amdt. No. 2 3(b)-1 Bylaws of the Registrant, as amended
to Form 10
0-16170
4(a) 1989 10-K 4(a)
1-10464 Specimen form of Certificate for Common Stock of the Registrant
4(b) 33-16924 4 Specimen form of Certificate for Common Stock of the Registrant
**10(a)-1 33-16924 10(a) 1984 Stock Option Plan of the Registrant, as amended
**10(a)-2 33-24372 4.3.1 Form of Incentive Stock Option Agreement relating to 1984 Stock
Option Plan, as amended
**10(a)-3 33-24372 4.3.2 Form of Non-Qualified Stock Option Agreement relating to 1984 Stock
Option Plan, as amended
**10(b)-1 1991 10-K 10(b)-1
1-10464 Amended and Restated 1987 Stock Option Plan of the Registrant
**10(b)-2 33-24372 4.4.1 Form of Incentive Stock Option Agreement relating to options granted
to employees under the 1987 Stock Option Plan, as amended
**10(b)-3 33-24372 4.4.2 Form of Non-Qualified Stock Option Agreement relating to options
granted to employees under the 1987 Stock Option Plan, as amended
</TABLE>
- 27 -
<PAGE> 29
<TABLE>
<CAPTION>
Previously Filed*
--------------------------
With
File As
Exhibit Number Exhibit Description
------- ------ ------- ------------------------------
<S> <C> <C> <C>
**10(b)-4 1988 10-K 10(b)-5
0-16170 Form of Non-Qualified Stock Option Agreement relating to 1987 Stock
Option Plan, as amended (as granted on October 20, 1988)
**10(b)-5 1989 10-K 10(b)-6
1-10464 Forms of Non-Qualified Stock Option Agreements relating to options
granted to employees under the 1987 Stock Option Plan (as approved by
the Compensation Committee of the Board of Directors of the
Registrant on March 27, 1989)
**10(b)-6 1989 10-K 10(b)-7
1-10464 Forms of Non-Qualified Stock Option Agreements relating to options
granted to director-level employees and officers of the Registrant
under the 1987 Stock Option Plan (as approved by the Compensation
Committee of the Board of Directors of the Registrant on March 27,
1989)
**10(b)-7 1989 10-K 10(b)-8
1-10464 Forms of Incentive Stock Option Agreements relating to options gra-
nted to director-level employees and officers of the Registrant under
the 1987 Stock Option Plan (as approved by the Compensation Committee
of the Board of Directors of the Registrant on March 27, 1989)
**10(c)-1 1989 10-K 10(b)-9
1-10464 Form of Special Option entered into by and between the Registrant and
certain non-employee director optionees
**10(d)-1 1988 10-K 10(c)-2
0-16170
Form of Shareholder's Agreement between the Registrant and employee
stockholders
**10(d)-2 1989 10-K 10(c)-2
1-10464 Forms of Shareholder's Agreements between the Registrant and employee
stockholders
**10(d)-3 1989 10-K 10(c)-3
1-10464 Form of Amendment to Shareholder's Agreement between the Registrant
and employee stockholders
**10(e) 1992 10-K 10(e) Officer and Key Employee Compensation Plan
1-10464
**10(f)-1 1993 10-K 10(f)-1 1993 Officer and Director Stock Option Plan of the Registrant
1-10464
**10(f)-2 1993 10-K 10(f)-2
1-10464 Form of Stock Option Agreement relating to options granted to non-
employee directors of the Registrant under the 1993 Officer and
Director Stock Option Plan
**10(f)-3 1993 10-K 10(f)-3
1-10464 Form of Stock Option Agreement relating to options granted to offi-
cers and employee directors of the Registrant under the 1993 Officer
and Director Stock Option Plan
**10(g) 1993 10-K 10(g) Executive Bonus Plan
1-10464
</TABLE>
- 28 -
<PAGE> 30
<TABLE>
<CAPTION>
Previously Filed*
--------------------------
With
File As
Exhibit Number Exhibit Description
------- ------ ------- ------------------------------
<S> <C> <C> <C>
10(h) 33-16924 10(n) Form of Indemnification Agreement between the Registrant and its
officers and directors
10(i) 1992 10-K
1-10464 Lease Agreement by and between O. B. English, as Landlord, and the
Registrant, as Tenant, dated November 3, 1992 (4352 North Beltwood
Parkway)
21 1990 10-K 22 Subsidiaries of the Registrant
1-10464
+23 Consent of Independent Auditors
+27 Financial Data Schedule
</TABLE>
_________________________
*Incorporated herein by reference. Abbreviations used are as follows:
Amdt. No. 2 to Form 10 is the Registrant's Amendment No. 2 on Form 8, dated May
9, 1988, to its Registration Statement on Form 10, File No. 0-16170; 7/3/88
10-Q is the Registrant's Quarterly Report on Form 10-Q for the period ended
July 3, 1988, File No. 0-16170; 1988 10-K is the Registrant's Annual Report on
Form 10-K for the fiscal year ended January 1, 1989, File No. 0-16170; 1989
10-K is the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1989, File No. 1-10464; 1990 10-K is the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 30, 1990, File No.
1-10464; 1991 10-K is the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 29, 1991, File No. 1-10464; 1992 10-K is the
Registrant's Annual Report on Form 10-K for the fiscal year ended January 3,
1993, File No. 1-10464; and 1993 10-K is the Registrant's Annual Report on Form
10-K for the fiscal year ended January 2, 1994, File No. 1-10464.
+Filed herewith.
**Management contract or compensation plan or arrangement required to
be filed as an exhibit hereto pursuant to Item 14(c).
- 29 -
<PAGE> 31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
Dated: March 28, 1995
DALLAS SEMICONDUCTOR CORPORATION
By: /s/ C. V. Prothro
----------------------------------------------------------
C. V. Prothro, Chairman of the Board of Directors,
President and Chief Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ C. V. Prothro Chairman of the Board of
---------------------------------------- Directors, President and
C. V. Prothro Chief Executive Officer
/s/ Alan P. Hale Vice President - Finance
----------------------------------------
Alan P. Hale
/s/ Chao C. Mai Senior Vice President
--------------------------------------- and Director
Chao C. Mai
/s/ Michael L. Bolan Vice President - Marketing March 28, 1995
-------------------------------------- and Product Development
Michael L. Bolan and Director
/s/ Richard L. King Director
---------------------------------------
Richard L. King
/s/ M. D. Sampels Director
--------------------------------------
M. D. Sampels
/s/ Carmelo J. Santoro Director
--------------------------------------
Carmelo J. Santoro
/s/ Elmo R. Zumwalt, Jr. Director
------------------------------------
Elmo R. Zumwalt, Jr.
</TABLE>
- 30 -
<PAGE> 32
SCHEDULE VIII
DALLAS SEMICONDUCTOR CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Years ended January 3, 1993, January 2, 1994
and January 1, 1995
<TABLE>
<CAPTION>
Additions
Balance at charged to Balance at
beginning costs and end of
Classification of period expenses Deductions period
-------------- --------- -------- ---------- ------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
1992 $ 285,000 $ 1,000 $ 1,000 $ 285,000
1993 $ 285,000 $ 53,000 $ 28,000 $ 310,000
1994 $ 310,000 $ 34,000 $ 21,000 $ 323,000
Distributor returns and allowances:
1992 $2,753,000 $14,197,000 $12,474,000 $4,476,000
1993 $4,476,000 $26,030,000 $22,861,000 $7,645,000
1994 $7,645,000 $34,840,000 $34,007,000 $8,478,000
Inventory Reserve:
1992 $3,510,000 $ 300,000 $ 321,000 $3,489,000
1993 $3,489,000 $ 625,000 - $4,114,000
1994 $4,114,000 - - $4,114,000
</TABLE>
S-1
<PAGE> 33
EXHIBIT INDEX
<TABLE>
<CAPTION>
Previously Filed*
----------------------------------
With
File As
Exhibit Number Exhibit Description
------- ------ ------- -----------
<S> <C> <C> <C>
3(a)-1 33-16924 3(a)-3 Restated Certificate of Incorporation of the Registrant
3(a)-2 Amdt. No. 2 3(a)-4 Amendment to Restated Certificate of Incorporation of the
to Form 10 Registrant
0-16170
3(b) Amdt. No. 2 3(b)-1 Bylaws of the Registrant, as amended
to Form 10
0-16170
4(a) 1989 10-K 4(a) Specimen form of Certificate for Common Stock of the
1-10464 Registrant
4(b) 33-16924 4 Specimen form of Certificate for Common Stock of the
Registrant
**10(a)-1 33-16924 10(a) 1984 Stock Option Plan of the Registrant, as amended
**10(a)-2 33-24372 4.3.1 Form of Incentive Stock Option Agreement relating to 1984
Stock Option Plan, as amended
**10(a)-3 33-24372 4.3.2 Form of Non-Qualified Stock Option Agreement relating to
1984 Stock Option Plan, as amended
**10(b)-1 1991 10-K 10(b)-1 Amended and Restated 1987 Stock Option Plan of the
1-10464 Registrant
**10(b)-2 33-24372 4.4.1 Form of Incentive Stock Option Agreement relating to
options granted to employees under the 1987 Stock Option
Plan, as amended
**10(b)-3 33-24372 4.4.2 Form of Non-Qualified Stock Option Agreement relating to
options granted to employees under the 1987 Stock Option
Plan, as amended
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
Previously Filed*
----------------------------------
With
File As
Exhibit Number Exhibit Description
------- ------ ------- -----------
<S> <C> <C> <C>
**10(b)-4 1988 10-K 10(b)-5 Form of Non-Qualified Stock Option Agreement relating
0-16170 1987 Stock Option Plan, as amended (as granted on October
20, 1988)
**10(b)-5 1989 10-K 10(b)-6 Forms of Non-Qualified Stock Option Agreements relating to
1-10464 options granted to employees under the 1987 Stock Option
Plan (as approved by the Compensation Committee of the
Board of Directors of the Registrant on March 27, 1989)
**10(b)-6 1989 10-K 10(b)-7 Forms of Non-Qualified Stock Option Agreements relating to
1-10464 options granted to director-level employees and officers of
the Registrant under the 1987 Stock Option Plan (as
approved by by the Compensation Committee of the Board of
Directors of the Registrant on March 27, 1989)
**10(b)-7 1989 10-K 10(b)-8 Forms of Incentive Stock Option Agreements relating to
1-10464 options granted to director-level employees and officers of
the Registrant under the 1987 Stock Option Plan (as
approved by the Compensation Committee of the Board of
Directors of the Registrant on March 27, 1989).
**10(c)-1 1989 10-K 10(b)-9 Form of Special Option entered into by and between the
1-10464 Registrant and certain non-employee director optionees
**10(d)-1 1988 10-K 10(c)-2 Form of Shareholder's Agreement between the Registrant and
0-16170 employee Stockholders
**10(d)-2 1989 10-K 10(c)-2 Forms of Shareholder's Agreements between the Registrant
1-10464 and employee stockholders
**10(d)-3 1989 10-K 10(c)-3 Form of Amendment to Shareholder's Agreement between the
1-10464 Registrant and employee stockholders
**10(e) 1992 10-K 10(e) Officer and Key Employee Compensation Plan
1-10464
**10(f)-1 1993 10-K 10(f)-1 1993 Officer and Director Stock Option Plan of the
1-10464 Registrant
**10(f)-2 1993 10-K 10(f)-2 Form of Stock Option Agreement relating to options
1-10464 granted to non-employee directors of the Registrant under
the 1993 Officer and Director Stock Option Plan
**10(f)-3 1993 10-K 10(f)-3 Form of Stock Option Agreement relating to options granted
10-464 to officers and employee directors of the Registrant under
the 1993 Officer and Director Stock Option Plan
**10(g) 1993 10-K 10(g) Executive Bonus Plan
1-10464
</TABLE>
<PAGE> 35
<TABLE>
<CAPTION>
Previously Filed*
----------------------------------
With
File As
Exhibit Number Exhibit Description
------- ------ ------- -----------
<S> <C> <C> <C>
10(h) 33-16924 10(n) Form of Indemnification Agreement between the Registrant
and its officers and directors
10(i) 1992 10-K Lease Agreement by and between O. B. English, as Landlord,
1-10464 and the Registrant, as Tenant, dated November 3, 1992
(4352 North Beltwood Parkway)
21 1990 10-K 22 Subsidiaries of the Registrant
1-10464
+23 Consent of Independent Auditors
+27 Financial Data Schedule Auditors
</TABLE>
---------------------
*Incorporated herein by reference. Abbreviations used are as follows: Amdt.
No. 2 to Form 10 is the Registrant's Amendment No. 2 on Form 8, dated May 9,
1988, to its Registration Statement on Form 10, File No. 0-16170; 7/3/88 10-Q is
the Registrant's Quarterly Report on Form 10-Q for the period ended July 3,
1988, File No. 0-16170; 1988 10-K is the Registrant's Annual Report on Form 10-K
for the fiscal year ended January 1, 1989, File No. 0-16170; 1989 10-K is the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 31,
1989, File No. 1-10464; 1990 10-K is the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 30, 1990, File No. 1-10464; 1991 10-K is the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 29,
1991, File No. 1-10464; 1992 10-K is the Registrant's Annual Report on Form 10-K
for the fiscal year ended January 3, 1993, File No. 1-10464; and 1993 10-K is
the Registrant's Annual Report on Form 10-K for the fiscal year ended January 2,
1994, File No. 1-10464.
+Filed herewith.
**Management contract or compensation plan or arrangement required to be
filed as an exhibit hereto pursuant to Item 14(c).
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(No. 33-24372, No. 33-36471, No. 33-40864, No. 33-48643, 33-68200 and No.
33-80696) on Form S-8 pertaining to the 1984 Stock Option Plan, the 1993
Officer and Director Stock Option Plan, the 1987 Stock Option Plan, the
Director Warrant Program and certain Nonemployee Director Options of Dallas
Semiconductor Corporation of our report dated January 16, 1995, with respect to
the consolidated financial statements and schedule of Dallas Semiconductor
Corporation included in the 1994 Annual Report (Form 10-K) for the fiscal year
ended January 1, 1995.
/s/ ERNST & YOUNG LLP
Dallas, Texas
March 28, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-1-1995
<PERIOD-END> JAN-1-1995
<CASH> 7,105
<SECURITIES> 57,415
<RECEIVABLES> 28,330
<ALLOWANCES> 0
<INVENTORY> 40,453
<CURRENT-ASSETS> 92,604
<PP&E> 164,223
<DEPRECIATION> 85,391
<TOTAL-ASSETS> 221,227
<CURRENT-LIABILITIES> 26,474
<BONDS> 0
<COMMON> 511
0
0
<OTHER-SE> 194,242
<TOTAL-LIABILITY-AND-EQUITY> 221,227
<SALES> 181,432
<TOTAL-REVENUES> 181,432
<CGS> 90,289
<TOTAL-COSTS> 139,524
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 45,073
<INCOME-TAX> 15,325
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,748
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 0
</TABLE>
