SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-10464
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DALLAS SEMICONDUCTOR CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 75-1935715
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4401 South Beltwood Parkway, Dallas, Texas 75244-3292
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 450-0400
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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Number of shares outstanding of the registrant's Common Stock as of
May 5, 1996: 26,394,129.
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<PAGE> 2
DALLAS SEMICONDUCTOR CORPORATION
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
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Item 1. FINANCIAL STATEMENTS Page No.
- ------- ------------------------------------------------------ --------
Condensed Consolidated Statements of Income (Unaudited)
Three months ended March 31, 1996 and April 2, 1995 ................. 3
Condensed Consolidated Balance Sheets
March 31, 1996 (Unaudited) and December 31, 1995 .................... 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three months ended March 31, 1996 and April 2, 1995 ................. 5
Notes to Condensed Consolidated Financial Statements ................. 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- ------- ----------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ......... 7 - 8
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PART II. OTHER INFORMATION
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Items 1. through 6. .................................................. 9
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SIGNATURE ............................................................. 10
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EXHIBIT 27. ART. 5 FDS 1ST QUARTER 10-Q ............................... 11
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<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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DALLAS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended
--------------------
Mar. 31, Apr. 2,
(Thousands except per share amounts) 1996 1995
- ------------------------------------ -------- --------
Net sales $ 65,584 $ 52,035
Operating costs and expenses:
Cost of sales 33,697 26,045
Research and development 7,875 6,532
Selling, general and administrative 9,794 7,905
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Total 51,366 40,482
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Operating income 14,218 11,553
Interest income, net 800 733
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Income before income taxes 15,018 12,286
Provision for income taxes 4,956 4,116
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Net income $ 10,062 $ 8,170
======== ========
Net income per share $ .36 $ .30
======== ========
Weighted average common and common
equivalent shares outstanding 27,959 27,243
======== ========
Dividends declared per share $ .03 $ .025
======== ========
See accompanying notes.
<PAGE> 4
DALLAS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
Mar. 31, Dec. 31,
(Thousands except share amounts) 1996 1995
- ----------------------------------------------- --------- ---------
(unaudited)
Assets
Current assets:
Cash and short-term investments $ 60,845 $ 69,304
Accounts receivable, net 40,482 36,702
Inventories 52,343 48,290
Deferred tax assets 2,233 2,774
Other current assets 4,676 4,216
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Total current assets 160,579 161,286
Property, plant and equipment, at cost:
Land 6,963 6,963
Building and improvements 37,939 35,735
Machinery and equipment 188,614 170,864
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233,516 213,562
Less accumulated depreciation (113,130) (106,735)
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Property, plant and equipment, net 120,386 106,827
Other assets 5,034 4,312
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$285,999 $272,425
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 26,399 $ 20,418
Accrued salaries and benefits 4,962 8,544
Accrued taxes other than income 1,001 2,337
Other accrued liabilities 3,219 3,804
Income taxes payable 5,988 2,340
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Total current liabilities 41,569 37,443
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:
26,473,536 shares at March 31, 1996, and
26,438,883 shares at December 31, 1995 529 529
Additional paid-in capital 86,215 85,900
Retained earnings 159,304 150,034
Treasury stock, shares at cost:
91,525 shares at March 31, 1996 and
83,425 shares at December 31, 1995 (1,618) (1,481)
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Total stockholders' equity 244,430 234,982
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$285,999 $272,425
======== ========
See accompanying notes.
<PAGE> 5
DALLAS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
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Mar. 31, Apr. 2,
(Thousands) 1996 1995
- -------------------------------------------- -------- --------
Cash flows from operating activities:
Net income $ 10,062 $ 8,170
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,395 4,907
Deferred tax expense (benefit) 541 (68)
Increase in receivables (3,780) (1,716)
Increase in inventories (4,053) (4,672)
(Increase) decrease in other current assets (460) 552
Increase (decrease) in accounts payable 5,981 (1,659)
Decrease in accrued salaries and benefits (3,582) (542)
Decrease in accrued taxes other than income (1,336) (1,554)
Decrease in other accrued liabilities (585) (534)
Increase in income taxes payable 3,765 4,138
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Net cash provided by operating activities 12,948 7,022
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Cash flows from investing activities:
Additions to property, plant and equipment (19,954) (5,982)
Increase in other assets (722) (549)
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Net cash used by investing activities (20,676) (6,531)
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Cash flows from financing activities:
Proceeds from issuance of stock
upon exercise of stock options 198 1,877
Purchase of treasury stock (137) (420)
Dividend paid to shareholders (792) (644)
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Net cash (used) provided by financing activities (731) 813
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Net change in cash and short-term investments (8,459) 1,304
Cash and short-term investments
at beginning of period 69,304 64,520
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Cash and short-term investments at end of period $ 60,845 $ 65,824
======== ========
Cash payments for income taxes $ 650 $ 47
Supplementary schedule of non-cash financing activities:
Reduction of income tax payable and increase
in paid-in capital resulting from the tax
benefit of stock option exercises $ 117 $ 549
See accompanying notes.
<PAGE> 6
DALLAS SEMICONDUCTOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. INTERIM ACCOUNTING POLICY
The accompanying condensed consolidated financial statements have not
been audited by independent auditors, except for the balance sheet as
of December 31, 1995. In the opinion of the Company's management, the
accompanying financial statements reflect all adjustments (consisting only
of normal recurring accruals) necessary to present fairly the Company's
financial position at March 31, 1996 and December 31, 1995, and results of
operations and cash flows for the periods presented.
Certain footnote information has been condensed or omitted from these
financial statements. Therefore, these financial statements should be read
in conjunction with the financial statements and related notes included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1995.
Results of operations for the three months ended March 31, 1996 are not
necessarily indicative of results to be expected for the full year.
The difference between primary and fully diluted net income per share
was not material in any period.
Mar. 31, Dec. 31,
2. INVENTORIES (Thousands) 1996 1995
-------- ---------
Raw materials $ 8,080 $ 7,765
Work-in-process 32,894 30,120
Finished goods 11,369 10,405
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$ 52,343 $ 48,290
======== ========
Inventories are stated at the lower of standard cost, which approximates
actual cost (first-in, first-out), or market.
3. INCOME TAXES
The provision for income taxes includes estimated federal and state income
taxes at statutory rates and a deferred tax expense of $541,000 and deferred
tax benefit of $68,000 for the first quarter of 1996 and 1995, respectively.
The Company's effective tax rate decreased from 33.5% in the first quarter
of 1995 to 33.0% in the first quarter of 1996. This decrease was a result
of changes in anticipated differences between income for financial statement
purposes and taxable income for the two periods.
<PAGE> 7
DALLAS SEMICONDUCTOR CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
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Net sales for the first quarter of 1996 were $65,584,000 an increase of
26% over the first quarter of 1995. The Company's revenue growth is
supported by increased unit sales of new and existing products in several
product families as shown in the table below:
NET SALES
(Millions)
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Growth
Product Family Q195 Q295 Q395 Q495 Q196 Q196 - Q195
- --------------------------------------------------------------------------
Telecom $ 7.3 $ 7.6 $ 8.4 $ 9.2 $10.5 44%
NV SRAMs 8.3 8.2 8.5 7.7 9.9 19%
Other Families 9.7 10.3 10.7 9.6 9.6 -1%
PC Timekeeping 8.6 8.9 8.5 12.4 9.5 10%
Non-PC Timekeeping 5.5 7.6 7.9 7.7 9.1 65%
System Extension 6.0 6.5 7.4 7.6 7.1 18%
Microcontrollers 3.7 4.3 5.7 5.5 6.9 86%
Auto Identification 2.9 3.6 3.4 3.9 3.0 3%
- --------------------------------------------------------------------------
Company Total $52.0 $57.0 $60.5 $63.6 $65.6 26%
- --------------------------------------------------------------------------
Gross margins declined slightly in the first quarter of 1996 to 49% from 50%
in the first quarter of 1995. The decline was a result of lower average
selling prices and a sales-mix shift toward lower margin products.
Research and development ("R&D") expenses for the first quarter of
1996 increased 21% from the first quarter of 1995. The increase resulted
primarily from increased personnel costs due to increased headcount.
R&D expenses as a percent of sales decreased from 13% in the first quarter
of 1995 to 12% in the first quarter of 1996.
Selling, general and administrative ("SG&A") expenses for the first quarter
of 1996 increased 24% compared with the first quarter of 1995. The
increase in SG&A expenses resulted primarily from increased sales commission
amounts due to higher net sales, increased personnel costs and increased
advertising expenditures.
Operating income for the first quarter of 1996 increased 23% over the same
period in 1995. Operating income as a percent of sales remained constant at
22% for the three month periods ended March 31, 1996 and April 2, 1995.
Net interest income increased by $67,000 in the first quarter of 1996
compared with the first quarter of 1995. The increase resulted primarily from
higher average cash balances during the first quarter of 1996. Changes in
interest rates will continue to affect net interest income as will any
substantial change in the amount of the Company's cash and short-term
investments or borrowings.
<PAGE> 8
DALLAS SEMICONDUCTOR CORPORATION
RESULTS OF OPERATIONS (continued)
- ------------------------------
The provision for income taxes includes estimated federal and state income
taxes at statutory rates and a deferred tax expense of $541,000 and a deferred
tax benefit of $68,000 in the first quarter of 1996 and 1995, respectively.
The Company's effective tax rate decreased from 33.5% in the first quarter of
1995 to 33% in the first quarter of 1996. This decrease was a result of changes
in anticipated differences between income for financial statement purposes and
taxable income for the two periods.
A number of uncertainties exist that may influence the Company's future
operating results, including general economic conditions, changes in
conditions affecting original equipment manufacturers, competition
(including alternative technologies), the Company's success in developing
new products and process technologies, market acceptance of the Company's
new products, the ability of the Company to continue diversifying its
product line, manufacturing performance, availability and price
fluctuations of raw materials, and other factors.
FINANCIAL CONDITION
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Cash and short-term investments were $60.8 million at the end of the first
quarter of 1996, compared with $69.3 million at the end of fiscal year
1995. The decline in cash and short-term investments was primarily the
result of net cash provided from operations during the quarter of $12.9 million
offset by investments in property, plant, and equipment of $20.0 million.
The Company continues to invest in financial instruments having
maturities in excess of one year in order to obtain yields higher than
those available in the short-term market.
Capital additions were $20.0 million in the first quarter of 1996,
compared to $6.0 million for the same period of 1995. The higher level of
capital expenditures related primarily to wafer fabrication and test
equipment. Capital expenditures for 1996 are estimated to total
approximately $65.0 million and will be used primarily for wafer fabrication,
manufacturing and test equipment, and computer hardware and software.
In 1994 the board of directors authorized the purchase from time-to-time,
depending on market conditions, up to 500,000 shares of the Company's
common stock. As of March 31, 1996, a total of 215,900 shares, totalling
$3,445,856 have been purchased pursuant to this stock repurchase program.
On March 1, 1996, a $.03 dividend was paid on each outstanding share of
common stock to shareholders of record on February 15, 1996, totalling
$793,000. On April 23, 1996, a $.03 dividend was declared on each
outstanding share of common stock, payable on June 1, 1996, to shareholders
of record on May 15, 1996.
The Company had no long-term debt at the end of the first quarter of 1996
or at the end of fiscal 1995.
<PAGE> 9
DALLAS SEMICONDUCTOR CORPORATION
PART II. OTHER INFORMATION
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Items 1. - 5.
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Not applicable.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibit 27 - Financial Data Schedule
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None.
(b) Reports on Form 8-K
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No Reports on Form 8-K were filed during the period
for which this report is filed.
<PAGE> 10
DALLAS SEMICONDUCTOR CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DALLAS SEMICONDUCTOR CORPORATION
By: /s/ Alan P. Hale
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Alan P. Hale
Vice President, Finance
Date: May 10, 1996
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<PAGE> 11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> MAR-31-1996
<CASH> 60,845
<SECURITIES> 0
<RECEIVABLES> 40,482
<ALLOWANCES> 0
<INVENTORY> 52,343
<CURRENT-ASSETS> 160,579
<PP&E> 233,516
<DEPRECIATION> 113,130
<TOTAL-ASSETS> 285,999
<CURRENT-LIABILITIES> 41,569
<BONDS> 0
<COMMON> 529
0
0
<OTHER-SE> 244,430
<TOTAL-LIABILITY-AND-EQUITY> 285,999
<SALES> 65,584
<TOTAL-REVENUES> 65,584
<CGS> 33,697
<TOTAL-COSTS> 51,366
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 15,018
<INCOME-TAX> 4,956
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,062
<EPS-PRIMARY> .36
<EPS-DILUTED> 0
</TABLE>
