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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 DECEMBER 31, 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 checkmark 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 the 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, 1996: $496,348,260.
Number of shares outstanding of the registrant's Common Stock as of March 1,
1996: 26,377,041.
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 23, 1996, 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 twelve-year history, Dallas Semiconductor has developed 246
proprietary base products with over 1,000 variations shipped to more than
10,000 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, consumer electronics and other markets.
The Company organizes its products into product families sharing
common technologies, markets or applications. See page 14 of this report for
the 1995 growth rates and relative size of the Company's main product families.
Automatic Identification SIP Stik(TM) Prefabs
Integrated Battery Backup Software Authorization
Intelligent Sockets System Extension
Microcontrollers Telecommunications
Multiport Memory Timekeeping
Nonvolatile SRM (NV SRAM)
Silicon Timed Circuits
PRODUCT DEVELOPMENT
The Company developed 31 new base products during the 1995 fiscal year
including the DS83C520, 16K ROM High Speed MICRO and the DS1345, Low Profile 1M
NV SRAM. The Company's research and development expenditures for fiscal year
1995 were approximately $28.6 million, compared to expenditures in 1994 and
1993 of $22.7 million and $19.4 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.
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PRODUCT FAMILIES
A description of the Company's product families is as follows:
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 l-Wire(TM) technology, a memory chip can be read or written with
the touch of a probe. Touch Memory(TM) devices are packaged in a stainless
steel MicroCan(TM) 16mm in diameter.
INTEGRATED BATTERY BACKUP. 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.
The Nonvolatile Controller 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. The SmartBattery supplies uninterruptible power in the absence
of system power to maintain data in nonvolatile memory.
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 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.
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NONVOLATILE SRAM. 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 SRAM products. Nonvolatile SRAMs
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. 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. Priva'C(TM) is a new product that uses our Touch
Memory(TM) technology to control access to files on a PC.
SYSTEM EXTENSION. These CMOS products add a variety of special
features to systems without encumbering design. CPU Supervisors act as
"watchdog" for system malfunction by checking the three most important
indicators of correct microprocessor operation -- power supply, software
execution and override push-button. If they detect a problem, the CPU
Supervisors shut down the system, then reset it for correct operation. Digital
Resistors change their resistance under control of software. Temperature
sensors provide a digital reading of temperature instead of the usual analog
reading, providing a range and accuracy unparalleled in the industry.
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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/E1 networks. 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. 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.
TIMEKEEPING. Accurate clock-calendar information is required in the
ever evolving communications, consumer, industrial and medical markets (CCIM).
A comprehensive line-up of CCIM timekeepers from the Company, including more
than 40 base products in both chip and module packaging are in production to
meet this need. Serial Timekeepers provide advanced features including
clock-calendar display, talk-time, re-dial timing, and power management for
digital cellular phones. Phantom and Watchdog modules are used in data
communications network routers, hubs and bridges to monitor communications
traffic and store the exhaustive amounts of network configuration data.
Bytewide Watchdog Timekeepers are also required in industrial control and
medical equipment with extended functions including Nonvolatile SRAM and A/D
conversion.
In the personal computing market the Plug and Play clock family
introduced in 1995 includes Nonvolatile SRAM densities from 214 bytes to 8K
bytes with a pin compatible upgrade path. The Nonvolatile SRAM stores
configuration data for Plug and Play PC's. A single motherboard design can be
configured as a low end system using the DS1687 and 242 bytes of Nonvolatile
SRAM or as a high end system using the DS17887 with 8K bytes of Nonvolatile
SRAM. The new clocks offer both "wake-up" and "kickstart" features in
compliance with the PC-95 specifications for soft power on and soft power down.
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 and was completed in the fourth quarter of fiscal year 1994,
initially increased the Company's wafer fabrication capacity by approximately
20%. In fiscal year 1995, the Company increased its wafer production by
approximately 45%. 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 1995, virtually all
of the wafers used by the Company were processed at its own facility.
After silicon wafers have been fabricated, the Company utilizes
overseas assembly contractors to cut the wafers into individual chips and
assemble them into integrated circuit packaging. The Company
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performs some assembly operations at its facilities in Dallas, Texas. Final
testing of substantially all of the Company's products is also performed at its
Dallas facilities.
PRODUCT COMPONENTS
During fiscal 1995, 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 1995,
no OEM customer accounted for more than 4% of the Company's net sales, and the
Company's top 25 OEM customers accounted for approximately 25% 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 1995, 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 11% 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 39% of net sales in fiscal 1995. Export sales were 17% and 22%
in Europe and the Far East, respectively, in fiscal 1995. The Company's export
sales 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 December 31, 1995, the Company's backlog
was approximately $59.5 million, as compared to
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approximately $33.7 million at January 1, 1995. 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 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 155 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 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
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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 December 31, 1995, the Company had 1,078 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 fiscal 1995, the Company
continued its practice of utilizing contract labor supplied by temporary
agencies, primarily in the manufacturing area. At December 31, 1995, the
Company was utilizing the services of 462 such temporary agency employees.
ITEM 2. PROPERTIES
The Company's headquarters are located in Dallas, Texas. As of
December 31, 1995, the Company owned approximately 30.8 acres of land that
included approximately 479,000 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. In 1995, the Company
purchased an additional 7.97 acres that include an additional 136,310 square
feet of building space. A portion of this 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, Carmel,
Indiana, 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. In October 1994, Crystal filed an Answer and Counterclaims
pursuant to which it raised various defenses to the Company's claims and
alleged that
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certain of the Company's products infringe various Crystal patents. In
September 1995, Crystal and the Company entered into a settlement agreement
that resolved all disputes between the parties.
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, 1996, is provided with
respect to each executive officer of the registrant pursuant to General
Instruction G of Form 10-K.
CURRENT TITLE
Name AGE AND POSITION
---- --- ------------
C.V. Prothro 53 Chairman of the Board of
Directors, President and
Chief Executive Officer
Chao C. Mai 60 Senior Vice President
Michael L. Bolan 49 Vice President - Marketing
and Product Development
F.A. Scherpenberg 49 Vice President - Computer
Products
Alan P. Hale 35 Vice President - Finance
Douglas L. Powell 71 Vice President - Sales &
Strategic Marketing
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.
Mr. 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
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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 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 was 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 December 31, 1995, there were approximately
663 holders of record of the Company's common stock. Set forth below are the
high, 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 1994
and 1995 fiscal years:
<TABLE>
<CAPTION>
1994 1995
1st 2nd 3rd 4th 1st 2nd 3rd 4th
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Prices:
High $ 20.00 $ 19.88 $ 18.63 $ 16.63 $ 18.38 $ 21.25 $ 24.38 $ 22.50
Low 15.13 16.75 14.88 13.50 15.13 17.38 19.88 18.63
End 16.88 18.13 15.50 16.63 18.38 20.50 20.50 20.75
</TABLE>
In January 1995, the Board of Directors authorized the initiation of a
quarterly dividend program. Total dividends paid in 1995 were $.10 per share
or $2,610,000. On January 26, 1996 the Board of Directors increased its annual
cash dividend on the Company's common stock from $.10 to $.12 per share. The
board also declared a quarterly cash dividend of $.03 on each outstanding share
of its common stock, payable on March 1, 1996 to holders of record on February
15, 1996.
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ITEM 6. SELECTED FINANCIAL DATA
CONSOLIDATED SELECTED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Years
----------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING SUMMARY:
Net sales $ 233,274 $ 181,432 $ 156,869 $ 120,155 $ 103,764
Costs and expenses:
Cost of sales 117,615 90,289 78,051 59,567 51,800
Research and development 28,602 22,651 19,402 16,547 15,096
Selling, general and administrative 35,483 26,584 22,588 17,712 16,380
--------- --------- --------- --------- ---------
Operating income 51,574 41,908 36,828 26,329 20,488
Interest income, net 3,366 3,165 2,825 2,658 2,533
--------- --------- --------- --------- ---------
Income before income taxes 54,940 45,073 39,653 28,987 23,021
Provision for income taxes 18,258 15,325 14,062 10,435 8,281
--------- --------- --------- --------- ---------
Net income $ 36,682 $ 29,748 $ 25,591 $ 18,552 $ 14,740
========= ========= ========= ========= =========
Net income per share $ 1.32 $ 1.09 $ 0.95 $ 0.71 $ 0.58
Weighted average common and common
equivalent shares outstanding 27,762 27,288 26,949 26,082 25,633
Dividends declared per share $ 0.10 -- -- -- --
FINANCIAL POSITION AT YEAR END:
Cash and short-term investments $ 69,304 $ 64,520 $ 76,273 $ 65,799 $ 53,031
Additions to property, plant and equipment 49,329 44,743 21,091 15,779 13,059
Depreciation and amortization 21,344 15,292 13,922 13,136 12,878
Total assets 272,425 221,227 186,544 156,247 129,170
Total liabilities 37,443 26,474 21,006 20,572 15,819
Stockholders' equity 234,982 194,753 165,538 135,675 113,351
Book value per weighted average share 8.46 7.14 6.14 5.20 4.42
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table contains certain amounts, and the amounts as a
percentage of net sales, reflected in the Company's consolidated statements of
operations for the 1995, 1994, and 1993 fiscal years.
<TABLE>
<CAPTION>
(Dollars in millions)
---------------------------------------------------------------
1995 % 1994 % 1993 %
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C>
Net sales $ 233.3 100.0 $ 181.4 100.0 $ 156.9 100.0
Cost of sales 117.6 50.4 90.3 49.8 78.1 49.8
Gross margin 115.7 49.6 91.1 50.2 78.8 50.2
Research and development 28.6 12.3 22.7 12.5 19.4 12.4
Selling, general and administrative 35.5 15.2 26.5 14.6 22.6 14.4
Operating income 51.6 22.1 41.9 23.1 36.8 23.4
Interest income, net 3.4 1.4 3.1 1.7 2.9 1.9
Provision for income taxes 18.3 7.8 15.3 8.4 14.1 9.0
Net income $ 36.7 15.7 $ 29.7 16.4 $ 25.6 16.3
</TABLE>
1995 Results of Operations Compared with 1994
Net sales in 1995 were $233.3 million, up 28.6% compared with $181.4
million in 1994. Net sales increases resulted from higher unit sales of new
and/or existing products in several product families as shown in the table
below.
<TABLE>
<CAPTION>
(Dollars in millions)
------------------------------------
1995 1994 '94-'95
Product Family Net Sales Net Sales Growth
- -------------- --------- --------- ------
<S> <C> <C> <C>
PC Timekeeping $ 38.4 $ 34.6 11%
Non-PC Timekeeping 28.7 22.1 30%
NV SRAMs 32.6 27.5 19%
Telecommunications 32.5 21.8 49%
System Extension 27.6 18.9 46%
Microcontrollers 19.1 10.4 84%
Silicon Timed Circuits 17.8 11.7 52%
Automatic Identification 13.6 10.7 27%
Other Families 23.0 23.7 -3%
------ ------ ----
Company Total $233.3 $181.4 29%
====== ====== ====
</TABLE>
Export sales accounted for 39% and 38% of total net sales in 1995 and
1994, respectively. Export sales were 17% and 22% in Europe and the Far East,
respectively. During 1995, the Company continued its policy of generally not
selling or licensing manufacturing or marketing rights to its products or the
underlying proprietary technologies.
Cost of sales were $117.6 and $90.3 million in 1995 and 1994,
respectively. Gross margins declined slightly to 49.6% in 1995 from 50.2% in
1994. The slight decline was a result of lower average selling prices and a
sales mix shift toward lower margin products.
Research and development ("R&D") expenses were $28.6 million and $22.7
million or 12.3% and 12.5% of net sales in 1995 and 1994, respectively. Higher
R&D expenses resulted primarily from
14
<PAGE> 15
increased salaries and benefits. 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 31 new base products in 1995 compared with 25 new base product
introductions in 1994. 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 246 at fiscal year end 1995.
Selling, general and administrative ("SG&A") expenses increased to
$35.5 million from $26.5 million or 15.2% and 14.6% of net sales in 1995 and
1994, respectively. The increase consists primarily of increased salaries and
benefits, sales commissions, and advertising expenditures to support higher
sales volume.
Operating income in 1995 was $51.6 million, up 23.1% from $41.9
million in 1994. Operating income as a percentage of net sales (operating
margin) decreased to 22.1% in 1995 from 23.1% in 1994. The decrease resulted
from higher selling, general and administrative expenses as a percentage of net
sales in 1995.
Net interest income was $3.4 and $3.1 million in 1995 and 1994,
respectively. Net interest income increased primarily due to higher average
cash balances and decreased interest expense during 1995. Changes in interest
rates will continue to affect net interest income as will any substantial
change in the Company's cash and short-term investments or any substantial
change in borrowings.
The provision for income taxes was $18.3 million in 1995 and $15.3
million in 1994. The provision for income taxes consisted of estimated federal
and state income taxes at statutory rates and a deferred tax benefit of $0.2
million for both 1995 and 1994. The Company's effective tax rate decreased to
33.2% in 1995 from 34.0% in 1994 as a result of changes in anticipated
differences between income for financial statement purposes and taxable income
for the two periods. 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
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.
1994 Results of Operations Compared with 1993
Net sales in 1994 were $181.4 million, up 15.7% 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.
15
<PAGE> 16
Cost of sales were $90.3 and $78.1 million in 1994 and 1993,
respectively. Gross margins remained constant at 50.2% for the fiscal years
ended 1994 and 1993.
R&D expenses increased to $22.7 million or 12.5% and $19.4 million
or 12.4% of net sales in 1994 and 1993, respectively. Higher R&D expenses
resulted primarily from increased salaries and benefits from increased
headcount. The Company introduced 25 new base products in 1994 compared with
21 new base product introductions in 1993. The cumulative number of base
products introduced by the Company totaled 215 at fiscal year end 1994.
SG&A expenses were $26.5 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 23.4% in 1993. The decrease resulted
from higher operating expenses as a percentage of net sales in 1994.
Net interest income was $3.1 and $2.9 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.
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 for 1994 and 1993, respectively. The Company's effective tax rate
decreased to 34.0% 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.
Financial Condition
The Company's cash and short-term investments totaled $69.3 million at
December 31, 1995, compared with $64.5 million at January 1, 1995. The
increase in cash and short-term investments was primarily the result of net
cash provided from operations ($54.2 million), offset by investments in
property, plant and equipment ($49.3 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 1995 decreased to 4.3, compared
with 5.3 at fiscal year end 1994, primarily due to an increase in accounts
payable resulting from increased capital additions and inventories in the
fourth quarter of 1995. The Company expects to fund its 1996 capital needs
primarily with cash flows from operations, supplemented where appropriate with
existing cash and short-term investments or external financing.
16
<PAGE> 17
Gross capital additions to property, plant and equipment in 1995
totaled $49.3 million, compared with $44.7 million in 1994. The 1995 capital
additions included $4.4 million in building purchases near its facilities in
Dallas. As of December 31, 1995, the Company owned 479,000 square feet of
building space and 30.8 acres of land in Dallas. In addition, the Company
continues to lease 35,000 square feet of building space. Capital additions in
1995 included $18.6 million in capital expenditures for wafer fabrication
("fab") equipment and $18.9 million for manufacturing and test equipment.
Since the completion of the fab expansion in 1994, the Company's wafer
fabrication capacity has initially increased by 45 percent.
Capital expenditures in 1996 will approximate $70.0 million and will
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 December 31, 1995, 207,800 shares at a cumulative average
price of $15.92, totaling $3,308,000, have been purchased pursuant to this
stock repurchase plan.
In January 1995, the Board of Directors authorized the initiation of a
quarterly dividend program. Total dividends paid in 1995 were $.10 per share
or $2,610,000. On January 26, 1996 the Board of Directors increased its annual
cash dividend on the Company's common stock from $.10 to $.12 per share. The
board also declared a quarterly cash dividend of $.03 on each outstanding share
of its common stock, payable on March 1, 1996 to holders of record on February
15, 1996.
17
<PAGE> 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF INCOME
(Thousands except per share amounts)
<TABLE>
<CAPTION>
Fiscal years ended
-----------------------------------------------------------
December 31, January 1, January 2,
1995 1995 1994
------------ ----------- ------------
<S> <C> <C> <C>
Net sales $ 233,274 $ 181,432 $ 156,869
Operating costs and expenses
Cost of sales 117,615 90,289 78,051
Research and development 28,602 22,651 19,402
Selling, general, and administrative 35,483 26,584 22,588
---------- ---------- -----------
Operating income 51,574 41,908 36,828
Interest income, net 3,366 3,165 2,825
---------- ---------- -----------
Income before income taxes 54,940 45,073 39,653
Provision for income taxes 18,258 15,325 14,062
---------- ---------- -----------
Net income $ 36,682 $ 29,748 $ 25,591
========== ========== ==========
Net income per common share $ 1.32 $ 1.09 $ 0.95
========== ========== ==========
Weighted average common and common
equivalent shares outstanding 27,762 27,288 26,949
========== ========== ==========
Dividends declared per share $ 0.10 -- --
========== ========== ==========
</TABLE>
See accompanying notes
18
<PAGE> 19
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31, January 1,
1995 1995
---------------- ----------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and short-term investments $ 69,304 $ 64,520
Accounts receivable, less allowance for doubtful accounts of $375 and
$323 at fiscal year end 1995 and 1994, respectively 36,702 28,330
Inventories 48,290 40,453
Deferred tax assets 2,774 2,561
Other current assets 4,216 3,730
-------- --------
Total current assets 161,286 139,594
Property, plant and equipment, at cost: 213,562 164,233
Less accumulated depreciation (106,735) (85,391)
-------- --------
Property, plant and equipment, net 106,827 78,842
Other assets 4,312 2,791
-------- --------
$272,425 $221,227
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 20,418 $ 14,827
Accrued salaries and benefits 8,544 5,328
Accrued taxes other than income 2,337 2,486
Other accrued liabilities 3,804 2,712
Income taxes payable 2,340 1,121
-------- --------
Total current liabilities 37,443 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:
26,438,883 shares issued at December 31, 1995, and
25,575,586 shares issued at January 1, 1995 529 511
Additional paid-in capital 85,900 80,562
Retained earnings 150,034 115,962
Treasury stock shares at cost:
83,425 shares at December 31, 1995
153,900 shares at January 1, 1995 (1,481) (2,282)
-------- --------
Total stockholders' equity 234,982 194,753
-------- --------
$272,425 $221,227
======== ========
</TABLE>
See accompanying notes.
19
<PAGE> 20
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
<TABLE>
<CAPTION>
Fiscal years ended
------------------
December 31, January 1, January 2,
1995 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 36,682 $ 29,748 $ 25,591
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 21,344 15,292 13,922
Deferred tax benefit (213) (195) (1,786)
Increase in accounts receivable (8,372) (4,979) (5,541)
Increase in inventories (7,837) (9,848) (4,780)
Increase in other current assets (486) (1,179) (511)
Increase (decrease) in accounts payable 5,591 5,319 (895)
Increase (decrease) in accrued salaries and benefits 3,216 270 (173)
(Decrease) increase in accrued taxes other than
income (149) 624 277
Increase in other accrued liabilities 1,092 895 1,193
Increase (decrease) in income taxes payable 3,354 (658) 2,938
---------- ---------- ----------
Net cash provided by operating activities 54,222 35,289 30,235
---------- ---------- ----------
Cash Flows from Investing Activities:
Additions to property, plant and equipment (49,329) (44,743) (21,091)
Increase in other assets (1,521) (784) (36)
---------- ---------- ----------
Net cash used by investing activities (50,850) (45,527) (21,127)
---------- ---------- ----------
Cash Flows from Financing Activities:
Repayments of capitalized lease obligations and long-
term debt -- (194) (1,095)
Proceeds from issuance of common stock upon exercise of
stock options and other 5,048 961 2,461
Purchase of treasury stock (1,026) (2,282) --
Dividends paid to shareholders (2,610) -- --
---------- ---------- ----------
Net cash (used) provided by financing activities 1,412 (1,515) 1,366
---------- ---------- ----------
Net increase (decrease) in cash and short-term
investments 4,784 (11,753) 10,474
Cash and short-term investments at beginning of year 64,520 76,273 65,799
---------- ---------- ----------
Cash and short-term investments at end of year $ 69,304 $ 64,520 $ 76,273
========== ========== ==========
Cash payments for:
Income taxes $ 15,117 $ 15,846 $ 12,911
</TABLE>
See accompanying notes.
20
<PAGE> 21
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three years ended December 31, 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 January 3, 1993 24,803 $496 $74,556 $60,623 $ -- $135,675
Issuance of common stock 556 11 2,450 -- -- 2,461
Tax benefit from stock option -- -- 1,811 -- -- 1,811
exercises
Net income -- -- -- 25,591 -- 25,591
------ ---- ------- -------- -------- --------
Balance at January 2, 1994 25,359 507 78,817 86,214 -- 165,538
Issuance of common stock 217 4 957 -- -- 961
Treasury stock (154) -- -- -- (2,282) (2,282)
Tax benefit from stock option -- -- 788 -- -- 788
exercises
Net income -- -- -- 29,748 -- 29,748
------ ---- ------- -------- -------- --------
Balance at January 1, 1995 25,422 511 80,562 115,962 (2,282) 194,753
Issuance of common stock 987 18 3,203 -- 1,827 5,048
Treasury stock (54) -- -- -- (1,026) (1,026)
Tax benefit from stock option -- -- 2,135 -- -- 2,135
exercises
Dividends declared -- -- -- (2,610) -- (2,610)
Net income -- -- -- 36,682 -- 36,682
------ ---- ------- -------- -------- --------
Balance at December 31, 1995 26,355 $529 $85,900 $150,034 ($1,481) $234,982
====== ==== ======= ======== ======== ========
</TABLE>
See accompanying notes.
21
<PAGE> 22
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 39%, 38%, and 34% of net sales in 1995, 1994, and 1993
respectively. Sales to domestic distributors comprised approximately 34%, 34%,
and 35% of net sales in 1995, 1994, and 1993 respectively. In 1995, 1994 and
1993 one distributor accounted for $26,081,000 or 11%, $18,641,000 or 10%, and
$20,577,000 or 13% of net sales, respectively. No other distributor or
original equipment manufacturer ("OEM") 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 1995, a 52-week year, ended
December 31, 1995. Fiscal years 1994 and 1993 ended January 1, 1995 and
January 2, 1994, 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. The preparation of financial
statements requires the use of estimates from which actual results could vary.
Cash and short-term investments. During 1995, the Company classified its cash
equivalents and short-term investments as current. Cash and short-term
investments consist of municipal bonds and money market funds, U.S. government
agency obligations and corporate notes. At December 31, 1995 and January 1,
1995 cash and short-term investments which had a maturity of greater than 90
days when purchased were $67,958 and $57,415, respectively. Such investments
are carried at amounts which approximate their fair market value. The Company
places its investments only in high credit quality financial instruments, and
limits the amount invested in any one institution or in one instrument.
Inventories. Inventories are stated at the lower of standard cost, which
approximates actual cost (first-in, first-out), or market.
Depreciation. Depreciation is provided by the straight-line method over the
estimated useful lives of the related assets, generally forty years for
buildings, five to ten years on building improvements and two to five years for
computer hardware, software, and machinery and equipment.
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.
Revenue recognition. Sales are recognized upon shipment to distributors and to
OEM customers. Sales to domestic distributors are made under distributor
agreements which provide the distributor certain price
22
<PAGE> 23
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 and warrants. 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 Statement of Financial Accounting
Standards 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. The Company maintains reserves for potential
credit losses and such losses have been within management's expectations.
Reclassifications. Certain prior year amounts have been reclassified to
conform to the current year presentation.
Stock Options. In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation." The Company is currently evaluating the impact of
this new standard and has not yet determined the method of implementation. As
of December 31, 1995, the Company's financial statements do not include any
effect of the new standard.
23
<PAGE> 24
3. Balance Sheet Detail
<TABLE>
<CAPTION>
(Thousands) Fiscal years ended
------------------
December 31, January 1,
1995 1995
-------------- ------------
<S> <C> <C>
Inventories:
Raw materials $ 7,765 $ 5,596
Work-in-process 30,120 23,727
Finished goods 10,405 11,130
--------- ---------
$ 48,290 $ 40,453
========== ==========
Property, plant and equipment:
Land and land improvements $ 6,963 $ 5,400
Building and improvements 35,735 28,617
Machinery and equipment 170,864 130,216
--------- ---------
$ 213,562 $ 164,233
========= =========
Accrued salaries and benefits:
Salaries, benefits and other $ 5,296 $ 2,860
Sales commissions 3,248 2,468
---------- ----------
$ 8,544 $ 5,328
========== ==========
Accrued taxes other than income:
Ad valorem taxes $ 2,030 $ 1,812
Other 307 674
---------- ----------
$ 2,337 $ 2,486
========== ==========
</TABLE>
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 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. As of December 31, 1995, the
1984 Plan and the 1987 Plan had options outstanding ranging from $.70 to $6.25
and $2.00 to $22.125, respectively. 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, 254,216 and 263,555 shares were reserved for
issuance on January 1st, 1994, 1995, and 1996, respectively. These shares are
reflected in the outstanding options table below in the year authorized. Under
the 1993 Plan, as of December 31, 1995, 2,219,000 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
6,226,775. Additional information with respect to stock options under the
1984, 1987, and 1993 Plans is as follows:
24
<PAGE> 25
<TABLE>
<CAPTION>
Outstanding Options
-------------------
Options
Available Number of Aggregate
for Grant Shares Price
------------- -------------- ---------------
<S> <C> <C> <C>
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
Options authorized 263,555 -- --
Options granted (173,000) 173,000 2,966,850
Options exercised -- (909,672) (4,188,069)
Options cancelled 202,499 (202,499) (2,935,700)
---------- --------- ----------
December 31, 1995 939,268 5,287,507 $58,598,017
========== ========= ===========
</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 December 31, 1995, 207,800 shares at a cumulative average
price of $15.92, totaling $3,308,000 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
------------------
December 31, January 1, January 2,
1995 1995 1994
------------- ------------- ------------
<S> <C> <C> <C>
Provision at statutory rate $ 19,229 $ 15,777 $ 13,878
State and environmental taxes, net of
federal benefit 743 675 570
Tax exempt foreign sales corporation
income (1,054) (958) (666)
Other (660) (169) 280
----------- ---------- -----------
Provision for income taxes $ 18,258 $ 15,325 $ 14,062
=========== ========== ===========
</TABLE>
25
<PAGE> 26
The components of the provision for income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------
December 31, January 1, January 2,
1995 1995 1994
-------------- ----------------- ---------------
<S> <C> <C> <C>
Current provision $18,471 $15,520 $15,848
Deferred benefit (213) (195) (1,786)
------- ------- -------
Provision for income taxes $18,258 $15,325 $14,062
======= ======= =======
</TABLE>
Current state amounts included in the provision for income taxes include
$1,200,000, $1,266,000, and $950,000 for the years ended 1995, 1994, and 1993,
respectively.
The components of the net deferred tax assets are as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------
December 31, January 1,
1995 1995
------------ ------------
<S> <C> <C>
Sales and inventory reserves $ 5,277 $ 4,884
Accrued expenses and other 3,234 1,819
Valuation allowance (3,973) (3,973)
------- -------
Deferred tax assets 4,538 2,730
Deferred tax liability (1,764) (169)
------- -------
Net deferred tax asset $ 2,774 $ 2,561
======= =======
</TABLE>
The valuation allowance of $3,973,000 was established as the future benefits of
certain reserves are not assured.
26
<PAGE> 27
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 December 31, 1995 and January 1, 1995, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three fiscal years in the period ended December 31, 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
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally 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 as of December 31, 1995 and January 1,
1995, and the consolidated results of its operations and its cash flows for
each of the three fiscal years in the period ended December 31, 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, presents fairly in all
material respects the information set forth therein.
/s/ Ernst & Young LLP
Dallas, Texas
January 11, 1996
SUPPLEMENTARY FINANCIAL DATA
<TABLE>
<CAPTION>
(Unaudited) (Thousands except per share amounts)
Fiscal Years
1994 and 1995 by fiscal quarter
-------------------------------
1994 1995
----------------------------------------------------------------------------------------------
1st 2nd 3rd 4th 1st 2nd 3rd 4th
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Summary:
Net sales $43,183 $45,041 $45,201 $48,007 $52,035 $57,036 $60,512 $63,691
Cost of sales 21,331 22,361 22,556 24,041 26,045 28,818 30,429 32,323
Operating income 10,315 10,484 10,386 10,723 11,553 12,523 13,355 14,143
Income from
income taxes 11,113 11,356 11,162 11,442 12,286 13,312 14,249 15,093
Net income 7,334 7,495 7,367 7,552 8,170 8,853 9,547 10,112
Net income per share $ 0.27 $ 0.27 $ 0.27 $ 0.28 $ 0.30 $ 0.32 $ 0.34 $ 0.36
</TABLE>
27
<PAGE> 28
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" of the Company's definitive
Proxy Statement for the Company's Annual Meeting of Stockholders to be held
April 23, 1996, 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" of
the Company's definitive Proxy Statement for the Company's Annual Meeting of
Stockholders to be held April 23, 1996 (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" and "Election of Directors"
of the Company's definitive Proxy Statement for the Company's Annual Meeting of
Stockholders to be held April 23, 1996, are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The subsection entitled "Executive Compensation -- Compensation Committee
Interlocks and Insider Participation" of the Company's definitive Proxy
Statement for the Company's Annual Meeting of Stockholders to be held April 23,
1996, is incorporated herein by reference.
28
<PAGE> 29
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 December 31, 1995 18
Consolidated Balance Sheets at December 31, 1995 and January 1, 1995 19
Consolidated Statements of Cash Flows for each of the three fiscal
years in the period ended December 31, 1995 20
Consolidated Statements of Stockholders' Equity for each of the three
fiscal years in the period ended December 31, 1995 21
Notes to Consolidated Financial Statements 22-26
Report of Ernst & Young LLP, Independent Auditors 27
</TABLE>
The following consolidated financial statement schedule of Dallas
Semiconductor Corporation is included on the page set forth below:
<TABLE>
<S> <C>
Page in this
Annual Report
on Form 10-K
------------
Schedule VIII - Valuation Qualifying Accounts . . . . . . . . . . . . . . . . . . S-1
</TABLE>
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.
29
<PAGE> 30
(c) Exhibits
<TABLE>
<CAPTION>
Previously Filed*
---------------------------------
With File
Exhibit Number As 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 to 3(a)-4 Amendment to Restated Certificate of Incorporation of the
Form 10 0-16170 Registrant
3(b) Amdt. No. 2 to 3(b)-1 Bylaws of the Registrant, as amended
Form 10 0-16170
4(a) 1989 10-K 1-10464 4(a) 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 1-10464 10(b)-1 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
**10(b)-4 1988 10-K 0-16170 10(b)-5 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 1-10464 10(b)-6 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 1-10464 10(b)-7 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 1-10464 10(b)-8 Forms of Incentive 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(c)-1 1989 10-K 1-10464 10(b)-9 Form of Special Option entered into by and between the
Registrant and certain non-employee director optionees
</TABLE>
30
<PAGE> 31
<TABLE>
<S> <C> <C> <C>
**10(d)-1 1988 10-K 0-16170 10(c)-2 Form of Shareholder's Agreement between the Registrant and
employee stockholders
**10(d)-2 1989 10-K 1-10464 10(c)-2 Forms of Shareholder's Agreement between the Registrant and
employee stockholders
**10(d)-3 1989 10-K 1-10464 10(c)-3 Form of Amendment to Shareholder's Agreement between the
Registrant and employee stockholders
**10(e) 1992 10-K 1-10464 10(e) Officer and Key Employee Compensation Plan
**10(f)-1 1993 10-K 1-10464 10(f)-1 1993 Officer and Director Stock Option Plan of the Registrant
**10(f)-2 1993 10-K 1-10464 10(f)-2 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 1-10464 10(f)-3 Form of Stock Option Agreement relating to options granted to
officers and employee directors of the Registrant under the
1993 Officer and Director Stock Option Plan
**10(g) 1993 10-K 1-10464 10(g) Executive Bonus Plan
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 1-10464 22 Subsidiaries of the Registrant
+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).
31
<PAGE> 32
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.
Dated: March 4, 1996
DALLAS SEMICONDUCTOR CORPORATION
By: /s/C.V. Prothro
-------------------------------------------------
C.V. Prothro, Chairman of the Board of Directors,
President and Chief Executive Officer
Pursuant to the requirements of the Securities and 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>
/s/C.V. Prothro Chairman of the Board of Directors, March 4, 1996
- --------------------------------------- President and Chief Executive Officer
C.V. Prothro
/s/Alan P. Hale Vice President - Finance March 4, 1996
- ---------------------------------------
Alan P. Hale
/s/Chao C. Mai Senior Vice President and Director March 4, 1996
- ---------------------------------------
Chao C. Mai
/s/Michael L. Bolan Vice President - Marketing and Product March 4, 1996
- ---------------------------------------
Michael L. Bolan Development and Director
/s/Richard L. King Director March 4, 1996
- ---------------------------------------
Richard L. King
/s/M.D. Sampels Director March 4, 1996
- ---------------------------------------
M.D. Sampels
/s/Carmelo J. Santoro Director March 4, 1996
- ---------------------------------------
Carmelo J. Santoro
/s/Elmo R. Zumwalt, Jr. Director March 4, 1996
- ---------------------------------------
Elmo R. Zumwalt, Jr.
</TABLE>
32
<PAGE> 33
SCHEDULE VIII
DALLAS SEMICONDUCTOR CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Years ended January 2, 1994, January 1, 1995
and December 31, 1995
<TABLE>
<CAPTION>
Additions
Balance at charged to Balance
beginning costs and at end
Classification of period expenses Deductions of period
- -------------- ----------- ------------ ---------- ---------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
1993 $ 285,000 $ 53,000 $ 28,000 $ 310,000
1994 $ 310,000 $ 34,000 $ 21,000 $ 323,000
1995 $ 323,000 $ 60,500 $ 8,500 $ 375,000
Distributor returns and allowances:
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
1995 $8,478,000 $ 37,073,000 $ 35,618,000 $9,933,000
Inventory Reserve:
1993 $3,489,000 $ 625,000 -- $4,114,000
1994 $4,114,000 -- -- $4,114,000
1995 $4,114,000 $ 1,136,000 -- $5,250,000
</TABLE>
S-1
<PAGE> 34
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Previously Filed*
---------------------------------
With File
Exhibit Number As 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 to 3(a)-4 Amendment to Restated Certificate of Incorporation of the
Form 10 0-16170 Registrant
3(b) Amdt. No. 2 to 3(B)-1 Bylaws of the Registrant, as amended
Form 10 0-16170
4(a) 1989 10-K 1-10464 4(a) 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 1-10464 10(b)-1 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
**10(b)-4 1988 10-K 0-16170 10(b)-5 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 1-10464 10(b)-6 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 1-10464 10(b)-7 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 1-10464 10(b)-8 Forms of Incentive 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(c)-1 1989 10-K 1-10464 10(b)-9 Form of Special Option entered into by and between the
Registrant and certain non-employee director optionees
</TABLE>
<PAGE> 35
<TABLE>
<S> <C> <C> <C>
**10(d)-1 1988 10-K 0-16170 10(c)-2 Form of Shareholder's Agreement between the Registrant and
employee stockholders
**10(d)-2 1989 10-K 1-10464 10(c)-2 Forms of Shareholder's Agreement between the Registrant and
employee stockholders
**10(d)-3 1989 10-K 1-10464 10(c)-3 Form of Amendment to Shareholder's Agreement between the
Registrant and employee stockholders
**10(e) 1992 10-K 1-10464 10(e) Officer and Key Employee Compensation Plan
**10(f)-1 1993 10-K 1-10464 10(f)-1 1993 Officer and Director Stock Option Plan of the Registrant
**10(f)-2 1993 10-K 1-10464 10(f)-2 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 1-10464 10(f)-3 Form of Stock Option Agreement relating to options granted to
officers and employee directors of the Registrant under the
1993 Officer and Director Stock Option Plan
**10(g) 1993 10-K 1-10464 10(g) Executive Bonus Plan
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 1-10464 22 Subsidiaries of the Registrant
+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).
<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, No. 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 11, 1996, with respect to
the consolidated financial statements and schedule of Dallas Semiconductor
Corporation included in the Annual Report (Form 10-K) for the fiscal year
ended December 31, 1995.
/s/ ERNST & YOUNG LLP
Dallas, Texas
March 4, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 69,304
<SECURITIES> 0
<RECEIVABLES> 36,702
<ALLOWANCES> 0
<INVENTORY> 48,290
<CURRENT-ASSETS> 161,286
<PP&E> 213,562
<DEPRECIATION> 106,735
<TOTAL-ASSETS> 272,425
<CURRENT-LIABILITIES> 37,443
<BONDS> 0
<COMMON> 529
0
0
<OTHER-SE> 234,982
<TOTAL-LIABILITY-AND-EQUITY> 272,425
<SALES> 233,274
<TOTAL-REVENUES> 233,274
<CGS> 117,615
<TOTAL-COSTS> 181,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 54,940
<INCOME-TAX> 18,258
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,682
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 0
</TABLE>
