<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 29, 1996
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: (972) 371-4000
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 February 2, 1997: $708,268,579.
Number of shares outstanding of the registrant's Common Stock as of
February 2, 1997: 26,853,785
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 22, 1997, are
incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS
Except for the historical information contained herein, matters
discussed in the Annual Report on Form 10-K contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Actual results could differ materially
from those projected in the forward-looking statements as a result of the
factors set forth in this report. Although the Company believes that the
expectations reflected in such forward-looking statements are based on
reasonable assumptions, there can be no assurance that such expectations will
be achieved.
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 uses its advanced technologies to gain a competitive edge
over the 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 thirteen-year history, Dallas Semiconductor has developed 267
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 categories sharing
common technologies, markets or applications as shown below. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" of this report for the 1996 growth rates and relative size of the
Company's main product categories.
Computer Timekeeping System Extension
Commercial Timekeeping Automatic Information
Telecommunications Nonvolatile SRAMs
Microcontrollers Others
PRODUCT DEVELOPMENT
The Company developed 21 new proprietary base products during the 1996
fiscal year. The Company's research and development expenditures for fiscal
1996 were $35 million, compared to expenditures in 1995 and 1994 of $28.6
million and $22.7 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.
PRODUCTS
A description of the Company's product categories is as follows.
COMPUTER TIMEKEEPING. The year 2000 compliant family of clocks
introduced in 1995 includes Nonvolatile SRAM densities from 214 bytes to 8K
bytes with a pin compatible upgrade path. The devices offer hardware solutions
that correctly address year 2000 problems in personal computers and embedded
systems. These new clocks offer "wakeup" and "kickstart" features in compliance
with PC-95 specifications for soft power on and soft power down by controlling
the system power supply. Systems utilizing the power control features can be
put into an energy-conserving powered down state and be powered up by the
wakeup alarm on a preset date and time by depressing a key on a keypad or from
a modem ring detect signal.
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COMMERCIAL 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.
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/Asia are known as T1/E1 networks. A set of highly
integrated chips developed by Dallas Semiconductor addresses the requirements
of these protocols and provides one of the most cost-effective solutions
available in the industry while minimizing board space and power requirements.
Transmission line terminators, 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.
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. Dallas
Semiconductor offers two product families of microcontroller devices, both
based on the popular 8051 instruction set. The first, the secure
microcontroller family, is based on the concept of using battery-backed non-
volatile SRAM to hold program and data information. Unlike rigid ROM (read only
memory) or EPROM (electrically programmable ROM) based microcontrollers, all of
Dallas Semiconductor's secure microcontrollers are designed for change. By
using high-performance, read/write SRAM memory, software is easily modified and
remains nonvolatile for more than 10 years. This memory is initially loaded via
a serial port and can be dynamically allocated to fit program and data storage
requirements of a particular task. Unique security features of this family
allow users to "lock" their software into the processor thereby protecting it
from unauthorized access and protecting valuable intellectual property. The
second product family of microcontrollers is based on a completely redesigned
8051 core that executes the same instruction set up to three times faster with
no hardware changes. With this improved execution efficiency and because these
devices were designed to be pin-for-pin compatible, they offer users the unique
ability to add features and improve performance of their system without a
complete redesign.
SYSTEM EXTENSION. This product family provides complete solutions to
common problems facing many systems designers. Nearly all of the products
include both analog and digital circuitry on the same chip. Direct-to-Digital
Temperature Sensors help manage the growing thermal problems facing designers
as the inevitable march to put more power into shrinking form factors
continues. Digital Potentiometers permit a digital microprocessor to easily
control an analog parameter such as volume or display screen brightness. CPU
Supervisors monitor the power supply voltages in a system and issue a warning
to the system should any fall below a critical value.
AUTOMATIC INFORMATION. The Company has developed a family of Automatic
Information 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. Automatic
Information 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. iButton(TM)
devices are packaged in a stainless steel MicroCan(TM) 16mm in diameter.
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The Automatic Information family also includes Software Authorization
products that 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. Publishers of premium-priced personal
computer software who have strong motivations to protect their products from
unauthorized use is one example of this demand. Devices in this product family
can also be used to control access to buildings and equipment. Cryptographic
iButton(TM) is a new product that enables a standard PC to send secure
communications across networks, such as the Internet, to facilitate electronic
commerce or to send private e-mail messages.
NONVOLATILE RAMS. 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.
Recent additions to the product line have increased memory capacity, added
features to the basic architecture, and offered a solution for surface mount
systems.
OTHER. A description of some of the more significant categories described as
"Other" include the following.
OTHER: INTEGRATED BATTERY BACKUP. Nearly all electronic systems
operate under the control of one or more microprocessors (uP). The instructions
for these uPs or the data they use are subject to loss or corruption in the
event of a power outage. Power outages can be inadvertent or intentional, but
in either case an orderly transition to an alternate source of power is
critical to retain instructions or data held in random access memory (RAM). The
Nonvolatile Controller monitors the main power supply to the RAM in a system.
In the event of a power failure it switches the RAM over to an alternate source
of power and prevents any data loss or corruption. The Smart Battery operates
as a miniature uninterruptible power supply (UPS) by not only detecting a main
power supply failure, but providing the switchover circuitry and an embedded
alternate power source.
OTHER: 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 sockets which can be soldered into a system board and add
capabilities without requiring substantive changes in the existing system. For
example, many systems manufacturers desire the capability to make SRAMs (static
random access memory) in existing systems nonvolatile. In this instance, they
can replace the SRAM's socket in a system currently in use with a SmartSocket
in the same place, and plug the memory circuit into the SmartSocket. A lithium
battery and control circuit within the SmartSocket now allow the SRAM to retain
data in the event of a loss of system power. Another example is a requirement
in many existing systems to monitor and record time of day. The SmartWatch
replaces standard SRAM sockets in existing systems and adds the ability to keep
time of day to hundredths of a second while also making connected memory
circuits nonvolatile.
OTHER: 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 or separately, 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
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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.
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. Physical expansion of this
facility was completed in 1989 and an additional wafer fabrication facility
module was completed in 1994. Additional equipment is installed from time-to-
time to support higher production volumes or advanced processing needs. The
Company's wafer fabrication facility increased its wafer production by
approximately 45% in 1995 and by approximately 28% in 1996. During fiscal 1996
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 performs module assembly
operations and final testing for substantially all of the Company's products in
Dallas, Texas.
PRODUCT COMPONENTS
During fiscal 1996 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 1996 no OEM
customer accounted for more than 3.1% of the Company's net sales, and the
Company's top 25 OEM customers accounted for 24.2% 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 1996
sales to domestic distributors represented approximately 31% of the Company's
net sales, with the Company's largest domestic distributor, Avnet, accounting
for a total of approximately 10.7% 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 45% of net sales in fiscal 1996. Export sales were 18% and 27% in
Europe and the Far East, respectively, in fiscal 1996. 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
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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 29, 1996, the Company's backlog
was approximately $72.1 million, as compared to approximately $59.5 million at
December 31, 1995. The Company includes in its backlog all released purchase
orders shippable within the next 12 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,
alternative technologies, the Company's success in developing new products and
process technologies, market acceptance of new products, distributor and sales
representative performances, the ability of the Company to continue
diversifying its product line, manufacturing performance, subcontractor
performance, availability and price fluctuations of components and other raw
materials, and other factors. Any of these uncertainties could cause a severe
near-term impact on the Company's order growth, net sales growth or results of
operations.
PATENTS AND INTELLECTUAL PROPERTIES
Dallas Semiconductor has to date acquired or been granted 181 U.S.
patents and two foreign patents. The expiration dates of the Company's patents
range from 1998 to 2014. None of the patents individually is considered
material to the Company's business. The Company has a number of patent
applications pending, although no assurance can be given that patents will ever
be issued 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
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registered mask works, and the inherent limitations of the protection afforded
under such laws.
The Company has been notified that it may be infringing certain patents
held by others. These notices are in various stages of evaluation. In the event
infringement is claimed and the Company believes that a license is necessary or
desirable, a license may be sought. The Company believes that if sought, a
license could be obtained on commercially reasonable terms, although no
assurance can be given in this regard.
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 29, 1996 the Company had 1,348 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 1996, the Company
continued its practice of utilizing contract labor supplied by temporary
agencies, primarily in the manufacturing area. At December 29, 1996, the
Company was utilizing the services of 438 such temporary agency employees.
ITEM 2. PROPERTIES
The Company's headquarters are located in Dallas, Texas. As of December
29, 1996 the Company owned approximately 35 acres of land that includes
approximately 550,000 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 1996, the Company purchased an
additional four acres that include an additional 83,000 square feet of building
space. A portion of this space is currently subject to certain existing leases.
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, 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 subsidiary, Dallas Semiconductor Corporation (Taiwan), leases an
office facility in Taipei, Taiwan. The Company's foreign sales corporation
operates out of Bridgetown, Barbados, W.I.
ITEM 3. LEGAL PROCEEDINGS
None.
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 3, 1997, is provided with respect
to each executive officer of the registrant pursuant to General Instruction G
of Form 10-K.
<TABLE>
<CAPTION>
NAME AGE CURRENT TITLE AND POSITION
---- --- --------------------------
<S> <C> <C>
C.V. Prothro 54 Chairman of the Board of Directors, President and
Chief Executive Officer
Chao C. Mai 61 Senior Vice President
Michael L. Bolan 50 Vice President - Marketing and Product Development
F.A. Scherpenberg 50 Vice President - Computer Products
Alan P. Hale 36 Vice President - Finance
</TABLE>
Mr. Prothro has been Chairman of the Board since February 1984 and
served as acting President of the Company from February 1984 to November 1985.
Mr. Prothro was named Chief Executive Officer of the Company in January 1989
and President of the Company in October 1989. Since August 1983, Mr. Prothro
has been a general partner of Southwest Enterprise Associates, L.P., a venture
capital fund. Previously, he served as Chief Executive Officer of Mostek
Corporation, a semiconductor manufacturer, during 1981-82, and as its President
and Chief Operating Officer from 1977 to 1981.
Dr. Mai joined the Company as Vice President - Engineering in February
1984. He served in such capacity until he became Vice President - Manufacturing
in November 1985 and as Vice President - Wafer Fabrication and Technology
Development from June 1988 until January 1993. Dr. Mai was named Senior Vice
President in January 1993. Previously he was employed in various capacities by
Mostek Corporation for over 13 years including the position of Vice President
of Process Research and Development beginning in 1980.
Mr. Bolan joined the Company as Director of Marketing in June 1984. He
served in that capacity until his election as Vice President - Marketing and
Product Development in November 1985. He was employed as an analyst for
Southwest Enterprise Associates, L.P. from November 1983 to June 1984. Prior
thereto he was employed by Mostek Corporation from November 1978 to October
1983 in various capacities in technical planning, product planning and
marketing.
Mr. Scherpenberg was a Product Manager for the Company from May 1984 to
March 1989 and Director of Sales from March 1989 to July 1989. He served as
Vice President - Sales from July 1989 to July 1990, and became Vice President -
Computer Products in July 1990. Prior to his employment with the Company, Mr.
Scherpenberg was employed by Mostek Corporation for approximately five years 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.
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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 29, 1996, there were approximately
637 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 1995
and 1996 fiscal years:
<TABLE>
<CAPTION>
1995 1996
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Prices:
High $18.38 $21.25 $24.38 $22.50 $22.75 $22.00 $19.38 $23.63
Low 15.13 17.38 19.88 18.63 18.00 17.75 17.38 17.75
End 18.38 20.50 20.50 20.75 18.38 18.13 18.25 22.25
</TABLE>
In January 1995, the Board of Directors authorized the initiation of a
quarterly dividend program. Total dividends paid in 1996 were $0.12 per share
or $3,176,000. On January 23, 1997 the Board of Directors increased its annual
cash dividend on the Company's common stock from $0.12 to $0.14 per share. The
board also declared a quarterly cash dividend of $0.035 on each outstanding
share of its common stock, payable on March 3, 1997 to holders of record on
February 14, 1997.
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ITEM 6. SELECTED FINANCIAL DATA
CONSOLIDATED SELECTED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Years
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING SUMMARY:
Net sales $288,354 $233,274 $181,432 $156,869 $120,155
Costs and expenses:
Cost of sales 157,056 117,615 90,289 78,051 59,567
Research and development 34,974 28,602 22,651 19,402 16,547
Selling, general and administrative 42,175 35,483 26,584 22,588 17,712
-------- -------- -------- -------- --------
Operating income 54,149 51,574 41,908 36,828 26,329
Interest income, net 2,937 3,366 3,165 2,825 2,658
-------- -------- -------- -------- --------
Income before income taxes 57,086 54,940 45,073 39,653 28,987
Provision for income taxes 18,723 18,258 15,325 14,062 10,435
-------- -------- -------- -------- --------
Net income $ 38,363 $ 36,682 $ 29,748 $ 25,591 $ 18,552
======== ======== ======== ======== ========
Net income per share $ 1.37 $ 1.32 $ 1.09 $ 0.95 $ 0.71
Weighted average common and common
equivalent shares outstanding 27,990 27,762 27,288 26,949 26,082
Dividends declared per share $ 0.12 $ 0.10 -- -- --
FINANCIAL POSITION AT YEAR END:
Cash and short-term investments $ 70,274 $ 69,304 $ 64,520 $ 76,273 $ 65,799
Additions to property, plant and
equipment 60,451 49,329 44,743 21,091 15,779
Depreciation and amortization 28,379 21,344 15,292 13,922 13,136
Total assets 313,863 272,425 221,227 186,544 156,247
Total liabilities 41,125 37,443 26,474 21,006 20,572
Stockholders' equity 272,738 234,982 194,753 165,538 135,675
Book value per weighted average share 9.74 8.46 7.14 6.14 5.20
</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 1996, 1995, and 1994 fiscal years.
<TABLE>
<CAPTION>
(Dollars in millions)
---------------------------------------------------
1996 % 1995 % 1994 %
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 288.4 100.0 $ 233.3 100.0 $ 181.4 100.0
Cost of sales 157.1 54.5 117.6 50.4 90.3 49.8
Gross margin 131.3 45.5 115.7 49.6 91.1 50.2
Research and development 35.0 12.1 28.6 12.3 22.7 12.5
Selling, general and administrative 42.2 14.6 35.5 15.2 26.5 14.6
Operating income 54.1 18.8 51.6 22.1 41.9 23.1
Interest income, net 3.0 1.0 3.4 1.4 3.1 1.7
Provision for income taxes 18.7 6.5 18.3 7.8 15.3 8.4
Net income $ 38.4 13.3 $ 36.7 15.7 $ 29.7 16.4
</TABLE>
1996 Results of Operations Compared with 1995
Net sales in 1996 were $288.4 million, up 24% compared with $233.3 million
in 1995. Net sales increases resulted from higher unit sales of new and/or
existing products in several product categories as shown in the table below.
<TABLE>
<CAPTION>
(Dollars in millions)
--------------------------------------
1996 1995 1994 '95-'96
Product Categories Net Sales Net Sales Net Sales Growth
- - ------------------ --------- --------- --------- ------
<S> <C> <C> <C> <C>
Telecommunications $ 50.1 $ 32.5 $ 21.8 54%
Computer Timekeeping 47.1 38.4 34.6 23%
NV SRAMs 37.8 32.6 27.5 16%
System Extension 37.6 27.6 18.9 36%
Commercial Timekeeping 35.6 28.7 22.1 24%
Microcontrollers 28.7 19.1 10.4 50%
Automatic Information 19.5 16.8 14.2 16%
Others 32.0 37.6 31.9 -15%
------- ------- ------- -----
Company Total $ 288.4 $ 233.3 $ 181.4 24%
======= ======= ======= =====
</TABLE>
Export sales accounted for 45% and 39% of total net sales in 1996 and 1995,
respectively. Export sales were 18% and 27% in Europe and the Far East,
respectively. During 1996, 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 $157.1 and $117.6 million in 1996 and 1995,
respectively. Gross margins declined to 45.5% in 1996 from 49.6% in 1995. The
decline in gross margins resulted principally from pricing pressures that were
not offset by cost reductions.
Research and development ("R&D") expenses were $35.0 million and $28.6
million or 12.1% and 12.3% of net sales in 1996 and 1995, respectively. Higher
R&D expenses resulted primarily from 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 21 new base products in 1996 compared
with 31 new base product introductions in 1995. 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 267 at
fiscal year end 1996.
Selling, general and administrative ("SG&A") expenses increased to $42.2
million from $35.5 million or 14.6% and 15.2% of net sales in 1996 and 1995,
respectively. The increase consisted primarily of increased sales commissions
to support higher net sales and increased personnel costs.
- 11 -
<PAGE> 12
Operating income in 1996 was $54.1 million, up 5% from $51.6 million in
1995. Operating income as a percentage of net sales (operating margin)
decreased to 18.8% in 1996 from 22.1% in 1995. The decrease resulted primarily
from the gross margin decline of 4.1%.
Net interest income was $3.0 and $3.4 million in 1996 and 1995,
respectively. Net interest income declined primarily due to lower average cash
balances in 1996. 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 $18.7 million in 1996 and $18.3 million
in 1995. The provision for income taxes consisted of estimated federal and
state income taxes at statutory rates and a deferred tax benefit of $0.7
million in 1996 and $0.2 million in 1995. The Company's effective tax rate
decreased to 32.8% in 1996 from 33.2% in 1995 as a result of the reinstatement
and modification of the federal research and development tax credit by the
Small Business Jobs Protection Act of 1996, partially offset by 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 decisions and results, including general economic conditions, changes
in conditions affecting original equipment manufacturers, competition,
alternative technologies, the Company's success in developing new products and
process technologies, market acceptance of the Company's new products,
distributor and sales representative performances, the ability of the Company
to continue diversifying its product line, manufacturing performance,
subcontractor performance, availability and price fluctuations of raw
materials, and other factors. Any of these uncertainties could cause a severe
near-term impact on the Company's order growth, net sales growth or results of
operations.
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.
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.
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.
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 increased salaries and benefits. The Company introduced 31 new
base products in 1995 compared with 25 new base product introductions in 1994.
The cumulative number of base products introduced by the Company totaled 246 at
fiscal year end 1995.
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 consisted
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.
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.
- 12 -
<PAGE> 13
Financial Condition
The Company's cash and short-term investments totaled $70.3 million at
December 29, 1996, compared with $69.3 million at December 31, 1995. The
increase in cash and short-term investments was primarily the result of net
cash provided from operations of $63.6 million, offset by investments in
property, plant and equipment of $60.5 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 1996 decreased slightly to 4.1,
compared with 4.3 at fiscal year end 1995. The Company expects to fund its 1997
capital needs primarily with cash flows from operations, supplemented where
appropriate with existing cash and short-term investments or external
financing.
Gross capital additions to property, plant and equipment in 1996 totaled
$60.5 million, compared with $49.3 million in 1995. The 1996 capital additions
included $2.8 million in building purchases near its facilities in Dallas. As
of December 29, 1996, the Company owned approximately 550,000 square feet of
building space and 35 acres of land in Dallas. Capital additions in 1996
included $25.3 million in capital expenditures for wafer fabrication ("fab")
equipment and $21.6 million for manufacturing and test equipment.
Capital expenditures in 1997 are anticipated to be $65 million and will be
used primarily for fabrication equipment, 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 29, 1996, 215,900 shares at a cumulative average
price of $15.96, totaling $3,446,000, 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 1996 were $0.12 per share
or $3,176,000. On January 23, 1997 the Board of Directors increased its annual
cash dividend on the Company's common stock from $0.12 to $0.14 per share. The
board also declared a quarterly cash dividend of $0.035 on each outstanding
share of its common stock, payable on March 3, 1997 to holders of record on
February 14, 1997.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF INCOME
(Thousands except per share amounts)
<TABLE>
<CAPTION>
Fiscal years ended
------------------
December 29, December 31, January 1,
1996 1995 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $ 288,354 $ 233,274 $ 181,432
Operating costs and expenses:
Cost of sales 157,056 117,615 90,289
Research and development 34,974 28,602 22,651
Selling, general, and administrative 42,175 35,483 26,584
------------ ------------ ------------
Operating income 54,149 51,574 41,908
Interest income, net 2,937 3,366 3,165
------------ ------------ ------------
Income before income taxes 57,086 54,940 45,073
Provision for income taxes 18,723 18,258 15,325
------------ ------------ ------------
Net income $ 38,363 $ 36,682 $ 29,748
============ ============ ============
Net income per common share $ 1.37 $ 1.32 $ 1.09
============ ============ ============
Weighted average common and common
equivalent shares outstanding 27,990 27,762 27,288
============ ============ ============
Dividends declared per share $ 0.12 $ 0.10 --
============ ============ ============
</TABLE>
See accompanying notes.
- 13 -
<PAGE> 14
PRIVATE CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 29, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 70,274 $ 69,304
Accounts receivable, less allowance for doubtful accounts of $373
and $375 at fiscal year end 1996 and 1995, respectively 42,812 36,702
Inventories 49,629 48,290
Deferred tax assets, net 3,457 2,774
Other current assets 3,791 4,216
------------ ------------
Total current assets 169,963 161,286
Property, plant and equipment, at cost: 274,013 213,562
Less accumulated depreciation (135,114) (106,735)
------------ ------------
Property, plant and equipment, net 138,899 106,827
Other assets 5,001 4,312
------------ ------------
$ 313,863 $ 272,425
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable 22,475 $ 20,418
Accrued salaries and benefits 8,641 8,544
Accrued taxes other than income 831 2,337
Other accrued liabilities 5,824 3,804
Income taxes payable 3,354 2,340
------------ ------------
Total current liabilities 41,125 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:
26,696,807 shares issued at December 29, 1996, and
26,438,883 shares issued at December 31, 1995 534 529
Additional paid-in capital 88,601 85,900
Retained earnings 185,221 150,034
Treasury stock shares at cost:
91,525 shares at December 29, 1996
83,425 shares at December 31, 1995 (1,618) (1,481)
------------ ------------
272,738 234,982
------------ ------------
$ 313,863 $ 272,425
============ ============
</TABLE>
See accompanying notes.
- 14 -
<PAGE> 15
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
<TABLE>
<CAPTION>
Fiscal years ended
------------------
December 29, December 31, January 1,
1996 1995 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 38,363 $ 36,682 $ 29,748
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 28,379 21,344 15,292
Deferred tax benefit (683) (213) (195)
Increase in accounts receivable (6,110) (8,372) (4,979)
Increase in inventories (1,339) (7,837) (9,848)
Decrease (increase) in other current assets 425 (486) (1,179)
Increase in accounts payable 2,057 5,591 5,319
Increase in accrued salaries and benefits 97 3,216 270
(Decrease) increase in accrued taxes other than income (1,506) (149) 624
Increase in other accrued liabilities 2,020 1,092 895
Increase (decrease) in income taxes payable 1,900 3,354 (658)
------------ ------------ ------------
Net cash provided by operating activities 63,603 54,222 35,289
------------ ------------ ------------
Cash Flows from Investing Activities:
Additions to property, plant and equipment (60,451) (49,329) (44,743)
Increase in other assets (689) (1,521) (784)
------------ ------------ ------------
Net cash used in investing activities (61,140) (50,850) (45,527)
------------ ------------ ------------
Cash Flows from Financing Activities:
Repayments of capitalized lease obligations and long-term debt -- -- (194)
Proceeds from issuance of common stock upon exercise of stock
options and other 1,820 5,048 961
Purchase of treasury stock (137) (1,026) (2,282)
Dividends paid to shareholders (3,176) (2,610) --
------------ ------------ ------------
Net cash (used in) provided by financing activities (1,493) 1,412 (1,515)
------------ ------------ ------------
Net increase (decrease) in cash and short-term investments 970 4,784 (11,753)
Cash and short-term investments at beginning of year 69,304 64,520 76,273
------------ ------------ ------------
Cash and short-term investments at end of year $ 70,274 $ 69,304 $ 64,520
============ ============ ============
Cash payments for:
Income taxes $ 17,505 $ 15,117 $ 15,846
</TABLE>
See accompanying notes.
- 15 -
<PAGE> 16
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three years ended December 29, 1996
(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 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
exercises -- -- 788 -- -- 788
Net income -- -- -- 29,748 -- 29,748
--------- --------- --------- --------- --------- ---------
Balance at January 1, 1995 25,422 511 80,562 115,962 (2,282) 194,753
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
Issuance of common stock 258 5 1,815 -- -- 1,820
Treasury stock (8) -- -- -- (137) (137)
Tax benefit from stock option
exercises -- -- 886 -- -- 886
Dividends declared -- -- -- (3,176) -- (3,176)
Net income -- -- -- 38,363 -- 38,363
--------- --------- --------- --------- --------- ---------
Balance at December 29, 1996 26,605 $ 534 $ 88,601 $ 185,221 $ (1,618) $ 272,738
========= ========= ========= ========= ========= =========
</TABLE>
See accompanying notes.
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 45%, 39%, and 38% of net sales in 1996, 1995, and
1994 respectively. Sales to domestic distributors comprised approximately 31%,
34%, and 34% of net sales in 1996, 1995, and 1994 respectively. In 1996, 1995
and 1994 one distributor accounted for $30,889,000 or 11%, $26,081,000 or 11%,
and $18,641,000 or 10% 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.
- 16 -
<PAGE> 17
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 1996, a 52-week year, ended
December 29, 1996. Fiscal years 1995 and 1994 ended December 31, 1995 and
January 1, 1995, 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. Since 1995, the Company has 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 29, 1996 and December 31,
1995 cash and short-term investments which had a maturity of greater than 90
days when purchased were $69,483,000 and $67,958,000, respectively. Such
investments are carried at amounts which approximate their fair market value
based on quoted market prices. 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 calculated based on 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.
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 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" effective for all stock-based compensation awarded
after December 15, 1994. As allowed under this standard, the Company has
elected not to recognize the effects of stock-based compensation in its
financial statements. Pro forma effects on net income and earnings per share
are not material for the fiscal years 1996 or 1995.
- 17 -
<PAGE> 18
3. BALANCE SHEET DETAIL
<TABLE>
<CAPTION>
(Thousands) Fiscal years ended
------------------
December 29, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Inventories:
Raw materials $ 6,688 $ 7,765
Work-in-process 32,309 30,120
Finished goods 10,632 10,405
------------ ------------
$ 49,629 $ 48,290
============ ============
Property, plant and equipment:
Land and land improvements $ 7,429 $ 6,963
Building and improvements 43,145 35,735
Machinery and equipment 223,439 170,864
------------ ------------
$ 274,013 $ 213,562
============ ============
Accrued salaries and benefits:
Salaries, benefits and other $ 5,139 $ 5,296
Sales commissions 3,502 3,248
------------ ------------
$ 8,641 $ 8,544
============ ============
Accrued taxes other than income:
Ad Valorem taxes $ 492 $ 2,030
Other 339 307
------------ ------------
$ 831 $ 2,337
============ ============
</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 5,389,608 shares of common stock has been reserved for
issuance. On April 23, 1996, the 1987 Plan was amended to provide 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 1987 Plan provision, 263,555 and 266,053 shares were reserved for
issuance on January 1st 1996 and 1997, respectively. These shares are reflected
in the option table on the next page. 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 29, 1996, the 1984 Plan and the 1987 Plan had options outstanding
ranging from $0.70 to $6.25 and $2.00 to $22.13, 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, 254,216, 263,555 and 266,053 shares were reserved for
issuance on January 1st, 1995, 1996, and 1997, respectively. These shares are
reflected in the outstanding options table below in the year authorized. Under
the 1993 Plan, as of December 29, 1996, 2,844,000 options were outstanding
ranging from $14.75 to $17.88.
- 18 -
<PAGE> 19
Total shares reserved for future issuance upon exercise of options are
6,764,512. Additional information with respect to stock options under the 1984,
1987, and 1993 Plans is as follows.
<TABLE>
<CAPTION>
Outstanding Options
-----------------------------
Options
Available Number of Aggregate
for Grant Shares Price
------------ ------------ ------------
<S> <C> <C> <C>
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 canceled 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 canceled 202,499 (202,499) (2,935,700)
------------ ------------ ------------
December 31, 1995 939,268 5,287,507 58,598,017
Options authorized 795,661 -- --
Options granted (989,400) 989,400 17,847,586
Options exercised -- (257,924) (1,821,459)
Options canceled 38,582 (38,582) (625,795)
------------ ------------ ------------
December 29, 1996 784,111 5,980,401 $ 73,998,349
============ ============ ============
</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 29, 1996, 215,900 shares at a cumulative average
price of $15.96, totaling $3,446,000 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 29, December 31, January 1,
1996 1995 1995
------------ ------------ ------------
<S> <C> <C> <C>
Provision at statutory rate $ 19,980 $ 19,229 $ 15,777
State and environmental taxes, net of
federal benefit 1,015 743 675
Tax exempt foreign sales corporation income (1,442) (1,054) (958)
Research and Development tax credit (668) -- --
Other (162) (660) (169)
------------ ------------ ------------
Provision for income taxes $ 18,723 $ 18,258 $ 15,325
============ ============ ============
</TABLE>
- 19 -
<PAGE> 20
The components of the provision for income taxes are as follows (in thousands).
<TABLE>
<CAPTION>
Fiscal Years Ended
------------------
December 29, December 31, January 1,
1996 1995 1995
------------ ------------ ------------
<S> <C> <C> <C>
Current provision $ 19,406 $ 18,471 $ 15,520
Deferred benefit (683) (213) (195)
------------ ------------ ------------
Provision for income taxes $ 18,723 $ 18,258 $ 15,325
============ ============ ============
</TABLE>
Current state amounts included in the provision for income taxes include
$1,700,000, $1,200,000, and $1,266,000 for the years ended 1996, 1995, and
1994, respectively.
The components of the net deferred tax assets are as follows (in thousands).
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------
December 29, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Sales and inventory reserves $ 8,850 $ 5,277
Accrued expenses and other 3,391 3,234
Valuation allowance (3,973) (3,973)
------------ ------------
Deferred tax assets 8,268 4,538
Deferred tax liability (4,811) (1,764)
------------ ------------
Net deferred tax asset $ 3,457 $ 2,774
============ ============
</TABLE>
================================================================================
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 29, 1996 and December 31, 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 29, 1996.
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 29, 1996 and December 31,
1995, and the consolidated results of its operations and its cash flows for
each of the three fiscal years in the period ended December 29, 1996, 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 7, 1997
- 20 -
<PAGE> 21
SUPPLEMENTARY FINANCIAL DATA
(Unaudited) (Thousands except per share amounts)
<TABLE>
<CAPTION>
Fiscal Years
1995 and 1996 by fiscal quarter
-------------------------------
1995 1996
------------------------------------- -------------------------------------
1st 2nd 3rd 4th 1st 2nd 3rd 4th
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Summary:
Net sales $52,035 $57,036 $60,512 $63,691 $65,584 $70,362 $72,023 $80,385
Cost of sales 26,045 28,818 30,429 32,323 33,697 37,263 41,490 44,606
Operating income 11,553 12,523 13,355 14,143 14,218 14,263 10,941 14,727
Income before
income taxes 12,286 13,312 14,249 15,093 15,018 15,011 11,649 15,408
Net income 8,170 8,853 9,547 10,112 10,062 10,057 7,805 10,439
Net income per share $ 0.30 $ 0.32 $ 0.34 $ 0.36 $ 0.36 $ 0.36 $ 0.28 $ 0.37
</TABLE>
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 22, 1997, 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 22, 1997 (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"), are 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 22, 1997, 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 22,
1997, is incorporated herein by reference.
- 21 -
<PAGE> 22
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
<TABLE>
<CAPTION>
The following consolidated financial statements of Dallas Semiconductor Pages in this Annual
Corporation are included in Item 8 of this Annual Report on Form 10-K. Report on Form 10-K
- - ---------------------------------------------------------------------- -------------------
<S> <C>
Consolidated Statements of Income
for each of the three fiscal years in the period ended December 29, 1996 . . . . . . . . 13
Consolidated Balance Sheets at December 29, 1996 and December 31, 1995 . . . . . . . . . 14
Consolidated Statements of Cash Flows
for each of the three fiscal years in the period ended December 29, 1996 . . . . . . . . 15
Consolidated Statements of Stockholders' Equity
for each of the three fiscal years in the period ended December 29, 1996 . . . . . . . . 16
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . 16 - 20
Report of Ernst & Young LLP, Independent Auditors . . . . . . . . . . . . . . . . . . . 20
</TABLE>
The following consolidated financial statement schedule of Dallas
Semiconductor Corporation is included on the page set forth below.
<TABLE>
<CAPTION>
Page in this Annual
Report on Form 10-K
-------------------
<S> <C>
Schedule II. 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.
(c) Exhibits
Previously Filed*
-----------------
<TABLE>
<CAPTION>
Exhibit With File 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 Form 10 0-16170 3(a)-4 Amendment to Restated Certificate of
Incorporation of the Registrant
3(b) Amdt. No. 2 to Form 10 0-16170 3(b)-1 Bylaws of the Registrant, as amended
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
</TABLE>
- 22 -
<PAGE> 23
Previously Filed*
-----------------
<TABLE>
<CAPTION>
Exhibit With File Number As Exhibit Description
- - ------- ---------------- ---------- -----------
<S> <C> <C> <C>
**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
**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:
Admit. 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; 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; 1994 10-K is the
Registrant's annual Report on Form 10-K for the fiscal year ended January 1,
1995, File No. 1-10464; 1995 10-K is the Registrant's annual Report on Form 10-
K for the fiscal year ended December 31, 1995, 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).
- 23 -
<PAGE> 24
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 3, 1997
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> <C>
/s/C.V. Protho Chairman of the Board of Directors, March 3, 1997
- - ------------------------ President and Chief Executive Officer
C.V. Prothro
/s/Alan P. Hale Vice President - Finance March 3, 1997
- - ------------------------
Alan P. Hale
/s/Chao C. Mai Senior Vice President and Director March 3, 1997
- - ------------------------
Chao C. Mai
/s/Michael L. Bolan Vice President - Marketing and March 3, 1997
- - ------------------------ Product Development and Director
Michael L. Bolan
/s/Richard L. King Director March 3, 1997
- - ------------------------
Richard L. King
/s/M.D. Sampels Director March 3, 1997
- - ------------------------
M.D. Sampels
/s/Carmelo J. Santoro Director March 3, 1997
- - ------------------------
Carmelo J. Santoro
/s/Elmo R. Zumwalt, Jr. Director March 3, 1997
- - ------------------------
Elmo R. Zumwalt, Jr.
</TABLE>
- 24 -
<PAGE> 25
SCHEDULE II
DALLAS SEMICONDUCTOR CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Years ended January 1, 1995, December 31, 1995
and December 29, 1996
<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:
1994 $ 310,000 $ 34,000 $ 21,000 $ 323,000
1995 $ 323,000 $ 60,500 $ 8,500 $ 375,000
1996 $ 375,000 $ 19,000 $ 21,000 $ 373,000
Distributor returns and allowances:
1994 $ 7,727,000 $34,840,000 $34,039,000 $ 8,528,000
1995 $ 8,528,000 $37,073,000 $35,618,000 $ 9,983,000
1996 $ 9,983,000 $50,171,000 $44,261,000 $15,893,000
Inventory Reserves:
1994 $ 7,047,000 $ 379,000 $ 248,000 $ 7,178,000
1995 $ 7,178,000 $ 1,821,000 $ 901,000 $ 8,098,000
1996 $ 8,098,000 $ 3,480,000 $ 50,000 $11,528,000
</TABLE>
- S1 -
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit With File 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 Form 10 0-16170 3(a)-4 Amendment to Restated Certificate of
Incorporation of the Registrant
3(b) Amdt. No. 2 to Form 10 0-16170 3(b)-1 Bylaws of the Registrant, as amended
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
**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:
Admit. 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; 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; 1994 10-K is the
Registrant's annual Report on Form 10-K for the fiscal year ended January 1,
1995, File No. 1-10464; 1995 10-K is the Registrant's annual Report on Form 10-
K for the fiscal year ended December 31, 1995, 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 7, 1997, 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 29, 1996.
/s/ ERNST & YOUNG LLP
Dallas, Texas
March 3, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> DEC-29-1996
<CASH> 70,274
<SECURITIES> 0
<RECEIVABLES> 42,812
<ALLOWANCES> 0
<INVENTORY> 49,629
<CURRENT-ASSETS> 169,963
<PP&E> 274,013
<DEPRECIATION> 135,114
<TOTAL-ASSETS> 313,863
<CURRENT-LIABILITIES> 41,125
<BONDS> 0
0
0
<COMMON> 534
<OTHER-SE> 272,738
<TOTAL-LIABILITY-AND-EQUITY> 313,863
<SALES> 288,354
<TOTAL-REVENUES> 288,354
<CGS> 157,056
<TOTAL-COSTS> 234,205
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 57,086
<INCOME-TAX> 18,723
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,363
<EPS-PRIMARY> 1.37
<EPS-DILUTED> 0
</TABLE>
