<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 28, 1997
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 1, 1998: $1,315,876,826.
Number of shares outstanding of the registrant's Common Stock as of
February 1, 1998: 27,849,245.
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 21, 1998, are
incorporated by reference into Part III.
<PAGE> 2
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 complimentary metal oxide silicon (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 fourteen-year history, Dallas Semiconductor has developed 292
proprietary base products with over 2,000 variations shipped to more than
15,000 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 1997 growth rates and relative size of the
Company's main product categories.
Communications Automatic Information
System Extension Microcontrollers
Commercial Timekeeping Computer Timekeeping
Nonvolatile RAMs Others
PRODUCT DEVELOPMENT
The Company developed 25 new proprietary base products during the 1997
fiscal year. The Company's research and development expenditures for fiscal
1997 were $46 million, compared to expenditures in 1996 and 1995 of $35 million
and $29 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
Descriptions of the Company's product categories are as follows.
COMMUNICATIONS. 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.
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SYSTEM EXTENSION. This product category 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.
COMMERCIAL TIMEKEEPING. Accurate clock-calendar information remains
in demand in the ever evolving communications, consumer, industrial and medical
markets (CCIM). A comprehensive line-up of CCIM timekeepers from the Company,
including more than 45 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.
NONVOLATILE RAMS. Static random access memory(SRAM) chips 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.
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.
The Automatic Information product category 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 category 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.
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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 categories of Microcontroller devices, both
based on the popular 8051 instruction set. The first, the Secure
Microcontroller category, 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
product line allow users to "lock" their software into the processor thereby
protecting it from unauthorized access and protecting valuable intellectual
property. The second product category 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.
COMPUTER TIMEKEEPING. The personal computer has been the dominant
target market for computer timekeeping. This market is extremely cost sensitive
and highly competitive. Cost pressures and competition are met by higher levels
of integration and feature enhancement. The Company has differentiated
Timekeeping products by adding features including NV SRAM, energy conservation
components, and - most recently -Year 2000 compliance.
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.
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 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 trans-mission 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 defined in the final stage of manufacturing, a
broad product mix is available without losing the economic
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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 28% in 1996 and by approximately 18% in 1997. During fiscal 1997
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 1997 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 SRAMs, 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 SRAMs.
SALES
Sales are made to distributors and to OEMs. For fiscal 1997 no OEM
customer accounted for more than 5% of the Company's net sales, and the
Company's top 25 OEM customers accounted for approximately 28% of net sales. The
Company sells its products to customers by utilizing its own sales force and a
global network of independent sales representative firms and distributors.
During fiscal 1997 sales to domestic distributors represented approximately 34%
of the Company's net sales, with the Company's largest domestic distributor,
Avnet, accounting for a total of approximately 11.1% 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 43% of net sales in fiscal 1997. Export sales were 20% and 23% in
Europe and the Far East, respectively, in fiscal 1997. The Company's export
sales are billed in United States dollars and, therefore, the Company's results
of operations are not subject to currency exchange adjustments. Although export
sales are subject to government export regulations, the Company has not
experienced any significant difficulties to date because of these regulations.
The Company recognizes revenues from sales to distributors at the time
of shipment to the distributor. As is common in the semiconductor industry, the
Company grants price protection to distributors. Under this policy,
distributors are granted credits for the difference between the price they were
originally charged for products in inventory at the time of a price reduction
and the reduced price which the Company subsequently charges distributors.
From time-to-time, distributors are also granted credits on an individual basis
for Company-approved price reductions to specific customers made to meet
competition. The Company also grants distributors limited rights to return
products. The Company maintains reserves against which these credits and
returns are charged.
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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 28, 1997, the Company's backlog
was approximately $80 million, as compared to approximately $72 million at
December 29, 1996. 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 211 U.S.
patents and seven foreign patents. The expiration dates of the Company's
patents range from 1998 to 2015. 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 registered mask works, and the inherent limitations of the
protection afforded under such laws.
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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 28, 1997 the Company had 1,497 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 1997, the Company
continued its practice of utilizing contract labor supplied by temporary
agencies, primarily in the manufacturing area. At December 28, 1997, the
Company was utilizing the services of 406 such temporary agency employees.
ITEM 2. PROPERTIES
The Company's headquarters are located in Dallas, Texas. As of
December 28, 1997 the Company owned approximately 40 acres of land that
includes approximately 632,000 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 1997, the Company purchased
an additional five acres that included an additional 70,000 square feet of
building space. A portion of this space is currently subject to certain
existing leases. The Company currently leases a total of 48,000 square feet of
nearby building space for additional warehousing.
The Company currently leases small office facilities for its sales
staff in Irvine, California, Sunnyvale, California, Woodland Hills, California,
Chelmsford, Massachusetts, Marlton, New Jersey, Hoffman Estates, Illinois,
Akron, Ohio and Dallas, Texas, under short term leases. The Company leases a
small office facility in Beaverton, Oregon for design engineering. 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 established a new subsidiary in November 1997, Dallas
Semiconductor Corporation (Germany), which leases an office facility in Munich,
Germany. 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 2, 1998, 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 55 Chairman of the Board of Directors, President and
Chief Executive Officer
Chao C. Mai 62 Senior Vice President
Michael L. Bolan 51 Vice President - Marketing and Product Development
F.A. Scherpenberg 51 Vice President - Computer Products
Alan P. Hale 37 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 28, 1997, there were approximately
573 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 1996
and 1997 fiscal years:
<TABLE>
<CAPTION>
1996 1997
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Prices:
High $22.75 $22.00 $19.38 $23.63 $27.00 $41.00 $42.50 $55.00
Low 18.00 17.75 17.38 17.75 22.75 25.63 32.81 35.50
End 18.38 18.13 18.25 22.25 26.13 37.19 41.81 37.38
</TABLE>
In January 1995, the Board of Directors authorized the initiation of a
quarterly dividend program. Total dividends paid in 1997 were $0.14 per share
or $3,815,000. On January 20, 1998 the Board of Directors increased its annual
cash dividend on the Company's common stock from $0.14 to $0.16 per share. The
board also declared a quarterly cash dividend of $0.04 on each outstanding
share of its common stock, payable on March 2, 1998 to holders of record on
February 13, 1998.
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ITEM 6. SELECTED FINANCIAL DATA
CONSOLIDATED SELECTED FINANCIAL DATA
(Dollars in Thousands, Except per Share Amounts)
<TABLE>
<CAPTION>
Fiscal Years
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING SUMMARY:
Net sales $ 368,212 $ 288,354 $ 233,274 $ 181,432 $ 156,869
Costs and expenses:
Cost of sales 178,441 157,056 117,615 90,289 78,051
Research and development 46,078 34,974 28,602 22,651 19,402
Selling, general and administrative 53,838 42,175 35,483 26,584 22,588
---------- ---------- ---------- ---------- ----------
Operating income 89,855 54,149 51,574 41,908 36,828
Interest income, net 4,681 2,937 3,366 3,165 2,825
---------- ---------- ---------- ---------- ----------
Income before income taxes 94,536 57,086 54,940 45,073 39,653
Provision for income taxes 29,981 18,723 18,258 15,325 14,062
---------- ---------- ---------- ---------- ----------
Net income $ 64,555 $ 38,363 $ 36,682 $ 29,748 $ 25,591
========== ========== ========== ========== ==========
Net income per share, basic $ 2.37 $ 1.45 $ 1.41 $ 1.17 $ 1.02
Net income per share, diluted $ 2.19 $ 1.37 $ 1.32 $ 1.09 $ 0.95
Shares used to calculate net
income per share:
Basic 27,206 26,458 26,075 25,456 25,071
Diluted 29,457 27,990 27,762 27,288 26,949
Dividends declared per share $ 0.14 $ 0.12 $ 0.10 -- --
FINANCIAL POSITION AT YEAR END:
Cash and short-term investments $ 114,608 $ 70,274 $ 69,304 $ 64,520 $ 76,273
Additions to property, plant and equipment
58,645 60,451 49,329 44,743 21,091
Depreciation and amortization 35,789 28,379 21,344 15,292 13,922
Total assets 417,142 313,863 272,425 221,227 186,544
Total liabilities 66,085 41,125 37,443 26,474 21,006
Stockholders' equity 351,057 272,738 234,982 194,753 165,538
Book value per weighted average
share, diluted 11.92 9.74 8.46 7.14 6.14
</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 1997, 1996, and 1995 fiscal years.
<TABLE>
<CAPTION>
(Dollars in Millions)
----------------------------------------------------------
1997 % 1996 % 1995 %
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 368.2 100.0 $ 288.4 100.0 $ 233.3 100.0
Cost of sales 178.4 48.5 157.1 54.5 117.6 50.4
Gross margin 189.8 51.5 131.3 45.5 115.7 49.6
Research and development 46.1 12.5 35.0 12.1 28.6 12.3
Selling, general and administrative 53.8 14.6 42.2 14.6 35.5 15.2
Operating income 89.9 24.4 54.1 18.8 51.6 22.1
Interest income, net 4.7 1.3 3.0 1.0 3.4 1.4
Provision for income taxes 30.0 8.2 18.7 6.5 18.3 7.8
Net income $ 64.6 17.5 $ 38.4 13.3 $ 36.7 15.7
</TABLE>
1997 Results of Operations Compared with 1996
Net sales in 1997 were $368.2 million, up 28% compared with $288.4
million in 1996. 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)
------------------------------------------
1995 1996 1997 '96-'97
Net Sales Net Sales Net Sales Growth
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Product Categories
------------------
Communications $ 32.6 $ 50.1 $ 82.6 65%
System Extension 27.6 37.6 61.7 64%
Commercial Timekeeping 28.7 35.6 50.9 43%
NV RAMs 32.6 37.8 46.3 22%
Automatic Information 17.6 19.4 38.8 100%
Microcontrollers 20.2 29.7 30.7 3%
Computer Timekeeping 37.6 47.1 22.7 (52)%
Others 36.4 31.1 34.5 11%
-------- -------- -------- --------
Company Total $ 233.3 $ 288.4 $ 368.2 28%
======== ======== ======== ========
</TABLE>
Export sales accounted for 43% and 45% of total net sales in 1997 and
1996, respectively. Export sales were 20% and 23% in Europe and the Far East,
respectively. During 1997, 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 $178.4 and $157.1 million in 1997 and 1996,
respectively. Gross margins increased to 51.5% in 1997 from 45.5% in 1996. The
increase in gross margins resulted primarily from increased efficiency in
factory operations and a sales-mix shift toward higher margin products.
Research and development ("R&D") expenses were $46.1 million and $35.0
million or 12.5% and 12.1% of net sales in 1997 and 1996, 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 25 new base products in 1997 compared
with 21 new base product introductions in 1996. 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 292 at
fiscal year end 1997.
Selling, general and administrative ("SG&A") expenses increased to
$53.8 million in 1997 from $42.2 million in 1996. SG&A expenses as a percent of
sales remained constant at 14.6%. The increase consisted primarily of increased
sales commissions to support higher net sales and increased personnel costs.
Operating income in 1997 was $89.9 million, up 66% from $54.1 million
in 1996. Operating income as a percentage of net sales (operating margin)
increased to 24.4% in 1997 from 18.8% in 1996. The increase resulted primarily
from the gross margin increase of 6.0%.
- 11 -
<PAGE> 12
Net interest income was $4.7 and $3.0 million in 1997 and 1996,
respectively. Net interest income increased primarily due to higher average
cash balances in 1997. 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 $30.0 million in 1997 and $18.7
million in 1996. The provision for income taxes consisted of estimated federal
and state income taxes at statutory rates and a deferred tax benefit of $6.2
million in 1997 and $0.7 million in 1996. The Company's effective tax rate
decreased to 31.7% in 1997 from 32.8% in 1996 as a result of the extension of
the federal research and development tax credit by the Taxpayer Relief Act of
1997 and anticipated differences between income for financial statement
purposes and taxable income for the two periods.
The Company has undertaken a preliminary evaluation of its mission
critical systems and believes that any cost that may arise to ensure
functionality in the year 2000 would be insignificant.
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.
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 families.
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.
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.
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. The Company introduced 21 new
base products in 1996 compared with 31 new base product introductions in 1995.
The cumulative number of base products introduced by the Company totaled 267 at
fiscal year end 1996.
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.
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.
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.
Financial Condition
The Company's cash and short-term investments totaled $114.6 million
at December 28, 1997,
- 12 -
<PAGE> 13
compared with $70.3 million at December 29, 1996. The increase in cash and
short-term investments was primarily the result of net cash provided from
operations of $97.2 million, offset by investments in property, plant and
equipment of $58.6 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 1997 decreased slightly to 3.8,
compared with 4.1 at fiscal year end 1996. The Company expects to fund its
1998 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 1997
totaled $58.6 million, compared with $60.5 million in 1996. The 1997 capital
additions included $4.0 million in building purchases near its facilities in
Dallas. As of December 28, 1997, the Company owned approximately 632,000
square feet of building space and 40 acres of land in Dallas. Capital additions
in 1997 included $28.1 million in capital expenditures for wafer fabrication
("fab") equipment and $21.2 million for manufacturing and test equipment.
Capital expenditures in 1998 are anticipated to be $80 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 28, 1997, 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 1997 were $0.14 per share
or $3,815,000. On January 20, 1998 the Board of Directors increased the annual
cash dividend on the Company's common stock from $0.14 to $0.16 per share. The
board also declared a quarterly cash dividend of $0.04 on each outstanding
share of its common stock, payable on March 2, 1998 to holders of record on
February 13, 1998.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF INCOME
(Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Fiscal Years Ended
------------------
December 28, December 29, December 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $ 368,212 $ 288,354 $ 233,274
Operating costs and expenses:
Cost of sales 178,441 157,056 117,615
Research and development 46,078 34,974 28,602
Selling, general, and administrative 53,838 42,175 35,483
------------ ------------ ------------
Operating income 89,855 54,149 51,574
Interest income, net 4,681 2,937 3,366
------------ ------------ ------------
Income before income taxes 94,536 57,086 54,940
Provision for income taxes 29,981 18,723 18,258
------------ ------------ ------------
Net income $ 64,555 $ 38,363 $ 36,682
============ ============ ============
Net income per common share, basic $ 2.37 $ 1.45 $ 1.41
Net income per common share, diluted $ 2.19 $ 1.37 $ 1.32
------------ ------------ ------------
Shares used to calculate net income
per share:
Basic 27,206 26,458 26,075
Diluted 29,457 27,990 27,762
------------ ------------ ------------
Dividends declared per share $ 0.14 $ 0.12 $ 0.10
------------ ------------ ------------
</TABLE>
See accompanying notes.
- 13 -
<PAGE> 14
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
December 28, December 29,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 114,608 $ 70,274
Accounts receivable, less allowance for doubtful accounts of
$380 and $373 at fiscal year end 1997 and 1996, respectively 62,337 42,812
Inventories 59,131 49,629
Deferred tax assets, net 9,689 3,457
Other current assets 4,475 3,791
------------ ------------
Total current assets 250,240 169,963
Property, plant and equipment, at cost: 330,591 274,013
Less accumulated depreciation (168,836) (135,114)
------------ ------------
Property, plant and equipment, net 161,755 138,899
Other assets 5,147 5,001
------------ ------------
$ 417,142 $ 313,863
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable 29,711 22,475
Accrued salaries and benefits 19,979 8,641
Accrued taxes other than income 3,678 831
Other accrued liabilities 10,345 5,824
Income taxes payable 2,372 3,354
------------ ------------
Total current liabilities 66,085 41,125
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:
27,639,784 shares issued at December 28, 1997, and
26,696,807 shares issued at December 29, 1996 553 534
Additional paid-in capital 106,161 88,601
Retained earnings 245,961 185,221
Treasury stock shares at cost:
91,525 shares at both December 28, 1997
and December 29, 1996 (1,618) (1,618)
------------ ------------
Total stockholders' equity 351,057 272,738
------------ ------------
$ 417,142 $ 313,863
============ ============
</TABLE>
See accompanying notes.
- 14 -
<PAGE> 15
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended
------------------
December 28, December 29, December 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 64,555 $ 38,363 $ 36,682
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 35,789 28,379 21,344
Deferred tax benefit (6,232) (683) (213)
Increase in accounts receivable (19,525) (6,110) (8,372)
Increase in inventories (9,502) (1,339) (7,837)
(Increase) decrease in other current assets (684) 425 (486)
Increase in accounts payable 7,236 2,057 5,591
Increase in accrued salaries and benefits 11,338 97 3,216
Increase (decrease) in accrued taxes other
than income 2,847 (1,506) (149)
Increase in other accrued liabilities 4,521 2,020 1,092
Increase in income taxes payable 6,895 1,900 3,354
------------ ------------ ------------
Net cash provided by operating activities 97,238 63,603 54,222
------------ ------------ ------------
Cash Flows from Investing Activities:
Additions to property, plant and equipment (58,645) (60,451) (49,329)
Increase in other assets (146) (689) (1,521)
------------ ------------ ------------
Net cash used in investing activities (58,791) (61,140) (50,850)
------------ ------------ ------------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock upon exercise
of stock options and other 9,702 1,820 5,048
Purchase of treasury stock -- (137) (1,026)
Dividends paid to shareholders (3,815) (3,176) (2,610)
------------ ------------ ------------
Net cash provided by or used in financing activities
5,887 (1,493) 1,412
------------ ------------ ------------
Net increase in cash and short-term investments 44,334 970 4,784
Cash and short-term investments at beginning of year 70,274 69,304 64,520
------------ ------------ ------------
Cash and short-term investments at end of year $ 114,608 $ 70,274 $ 69,304
============ ============ ============
Cash payments for income taxes $ 29,318 $ 17,505 $ 15,117
Disposition of assets $ 2,326 -- --
</TABLE>
See accompanying notes.
- 15 -
<PAGE> 16
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Years Ended December 28, 1997
(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 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
exercises -- -- 2,135 -- -- 2,135
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
Issuance of common stock 943 19 9,683 -- -- 9,702
Tax benefit from stock option
exercises -- -- 7,877 -- -- 7,877
Dividends declared -- -- -- (3,815) -- (3,815)
Net income -- -- -- 64,555 -- 64,555
---------- ---------- ---------- ---------- ---------- ----------
Balance at December 28, 1997 27,548 $ 553 $ 106,161 $ 245,961 $ (1,618) $ 351,057
========== ========== ========== ========== ========== ==========
</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 43%, 45%, and 39% of net sales in 1997, 1996, and
1995 respectively. Sales to domestic distributors comprised approximately 34%,
31%, and 34% of net sales in 1997, 1996, and 1995 respectively. In 1997, 1996
and 1995 one distributor accounted for $41,041,000 or 11%, $30,889,000 or 11%,
and $26,081,000 or 11% 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 1997, a 52-week year,
ended December 28, 1997. Fiscal years 1996 and 1995 ended December 29, 1996 and
December 31, 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 28, 1997 and
December 29, 1996 cash and short-term investments which had a maturity of
greater than 90 days when purchased were $107,214,000 and $69,483,000,
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
seven 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. In February 1997, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" effective for both interim and annual
periods ending after December 15, 1997. FASB 128 replaced the previously
required primary and fully diluted earnings per share with basic and diluted
earnings per share. Basic earnings per share excludes the dilutive effect of
stock options. Diluted earnings per share includes the dilutive effect of
stock options and is equivalent to our historically reported net income per
share amounts. In the 1997 Annual Report on Form 10-K basic earnings per share
is referred to "Net income per share, basic," and diluted earnings per share is
referred to "Net income per share, diluted."
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.
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 1997, 1996 or 1995.
- 17 -
<PAGE> 18
3. BALANCE SHEET DETAIL
(Thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended
------------------
December 28, December 29,
1997 1996
------------ ------------
<S> <C> <C>
Inventories:
Raw materials $ 8,761 $ 6,688
Work-in-process 31,187 32,309
Finished goods 19,183 10,632
------------ ------------
$ 59,131 $ 49,629
============ ============
Property, plant and equipment:
Land and land improvements $ 8,757 $ 7,429
Building and improvements 52,067 43,145
Machinery and equipment 269,767 223,439
------------ ------------
$ 330,591 $ 274,013
============ ============
Accrued salaries and benefits:
Salaries, benefits and other $ 14,672 $ 5,139
Sales commissions 5,307 3,502
------------ ------------
$ 19,979 $ 8,641
============ ============
Accrued taxes other than income:
Ad Valorem taxes $ 3,212 $ 492
Other 466 339
------------ ------------
$ 3,678 $ 831
============ ============
</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 5,665,091 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, 266,053 and 275,483
shares were reserved for issuance on January 1st 1996, 1997 and 1998,
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 28, 1997, the 1984 Plan had
options outstanding at $6.25 with an expiration date of January 21, 2001. As
of December 28, 1997, the 1987 Plan had options outstanding ranging from $4.50
to $53.38 with a weighted average exercise price of $12.29 and expiration dates
ranging from October 4, 1999 to December 16, 2007. 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
(the "1993 Plan") was approved by the stockholders under which, as amended, an
aggregate of 3,612,893 shares of common stock has been reserved for issuance.
The 1993 Plan provided 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 beginning on January 1st 1994. Under the
1993 Plan provision, 263,555, 266,053 and 275,483 shares were reserved for
issuance on January 1st, 1996, 1997, and 1998, respectively. These shares are
reflected in the outstanding options table on the next page in the year
authorized. Under the 1993 Plan, as of December 28, 1997, 2,530,750 options
were outstanding ranging from $14.75 to $17.88 with a weighted average exercise
price of $15.55 and expiration dates ranging from July 9, 2003 to October 3,
2006.
- 18 -
<PAGE> 19
Total shares reserved for future issuance upon exercise of options are
6,372,501. 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 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
Options authorized 550,966 -- --
Options granted (269,350) 269,350 9,647,819
Options exercised -- (942,977) (9,700,388)
Options canceled 111,408 (111,408) (1,930,118)
------------ ------------ ------------
December 28, 1997 1,177,135 5,195,366 $ 72,015,662
============ ============ ============
</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 28, 1997, 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 28, December 29, December 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Provision at statutory rate $ 33,088 $ 19,980 $ 19,229
State and environmental taxes, net of
federal benefit 1,335 1,015 743
Tax exempt foreign sales corporation income (1,998) (1,442) (1,054)
Research and Development tax credit (1,344) (668) --
Other (1,100) (162) (660)
------------ ------------ ------------
Provision for income taxes $ 29,981 $ 18,723 $ 18,258
============ ============ ============
</TABLE>
- 19 -
<PAGE> 20
The components of the provision for income taxes are as follows (in thousands).
<TABLE>
<CAPTION>
Fiscal Years Ended
------------------
December 28, December 29, December 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Current provision $ 36,213 $ 19,406 $ 18,471
Deferred benefit (6,232) (683) (213)
------------ ------------ ------------
Provision for income taxes $ 29,981 $ 18,723 $ 18,258
============ ============ ============
</TABLE>
Current state amounts included in the provision for income taxes
include $2,590,000, $1,700,000, and $1,200,000 for the years ended 1997, 1996,
and 1995, respectively.
The components of the net deferred tax assets are as follows (in thousands).
<TABLE>
<CAPTION>
Fiscal Years Ended
------------------
December 28, December 29,
1997 1996
------------ ------------
<S> <C> <C>
Sales and inventory reserves $ 11,022 $ 8,850
Accrued expenses and other 8,547 3,391
Valuation allowance (3,973) (3,973)
------------ ------------
Deferred tax assets 15,596 8,268
Deferred tax liability (5,907) (4,811)
------------ ------------
Net deferred tax asset $ 9,689 $ 3,457
============ ============
</TABLE>
6. NET INCOME PER SHARE
For fiscal years ended December 31, 1995, December 29, 1996 and
December 28, 1997, "Net income per share, basic" and "Net income per share,
diluted" are calculated as follows (in thousands).
<TABLE>
<CAPTION>
Per Share
Net Income Shares Amounts
---------- -------- --------
<S> <C> <C> <C>
As of December 31, 1995:
Net income per share, basic $ 36,682 26,075 $ 1.41
========
Dilutive effect of stock options -- 1,687
-------- --------
Net income per share, diluted $ 36,682 27,762 $ 1.32
======== ======== ========
As of December 29, 1996:
Net income per share, basic $ 38,363 26,458 $ 1.45
========
Dilutive effect of stock options -- 1,532
-------- --------
Net income per share, diluted $ 38,363 27,990 $ 1.37
======== ======== ========
As of December 28, 1997:
Net income per share, basic $ 64,555 27,206 $ 2.37
========
Dilutive effect of stock options -- 2,251
-------- --------
Net income per share, diluted $ 64,555 29,457 $ 2.19
======== ======== ========
</TABLE>
- 20 -
<PAGE> 21
================================================================================
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 28, 1997 and December 29, 1996, and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the three fiscal years in the period ended December 28, 1997.
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 28, 1997 and
December 29, 1996, and the consolidated results of its operations and its cash
flows for each of the three fiscal years in the period ended December 28, 1997,
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, 1998
- 21 -
<PAGE> 22
SUPPLEMENTARY FINANCIAL DATA
(Unaudited) (Thousands, Except per Share Amounts)
<TABLE>
<CAPTION>
Fiscal Years
1996 and 1997 by Fiscal Quarter
-------------------------------
1996 1997
----------------------------------------- -----------------------------------------
1st 2nd 3rd 4th 1st 2nd 3rd 4th
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Summary:
Net sales $ 65,584 $ 70,362 $ 72,023 $ 80,385 $ 88,704 $ 91,040 $ 93,069 $ 95,399
Cost of sales 33,697 37,263 41,490 44,606 44,767 44,627 44,710 44,337
Operating income 14,218 14,263 10,941 14,727 20,302 21,491 23,311 24,751
Income before
income taxes 15,018 15,011 11,649 15,408 21,216 22,616 24,598 26,106
Net income 10,062 10,057 7,805 10,439 14,374 15,322 16,911 17,948
Net income per
share, basic $ 0.38 $ 0.38 $ 0.30 $ 0.39 $ 0.54 $ 0.56 $ 0.62 $ 0.65
Net income per
share, diluted $ 0.36 $ 0.36 $ 0.28 $ 0.37 $ 0.50 $ 0.52 $ 0.57 $ 0.60
</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 21, 1998, 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 21, 1998 (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 21, 1998, 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 21, 1998, is incorporated herein by reference.
- 22 -
<PAGE> 23
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 28, 1997 ...................................................................... 13
Consolidated Balance Sheets at December 28, 1997 and December 29, 1996 ....................... 14
Consolidated Statements of Cash Flows
for each of the three fiscal years in the period ended December 28, 1997 ..................... 15
Consolidated Statements of Stockholders' Equity
for each of the three fiscal years in the period ended December 28, 1997 ..................... 16
Notes to Consolidated Financial Statements .............................................. 16 - 20
Report of Ernst & Young LLP, Independent Auditors ............................................ 21
</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
<TABLE>
<CAPTION>
Previously Filed*
-------------------------------------------
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>
- 23 -
<PAGE> 24
<TABLE>
<CAPTION>
Previously Filed*
-------------------------------------------
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; 1996 10-K
is the Registrant's annual Report on Form 10-K for the fiscal year ended
December 29, 1996, 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).
- 24 -
<PAGE> 25
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 2, 1998
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. Prothro Chairman of the Board of Directors, President and March 2, 1998
- ------------------------------------------- Chief Executive Officer
C.V. Prothro
/s/Alan P. Hale Vice President - Finance March 2, 1998
- -------------------------------------------
Alan P. Hale
/s/Chao C. Mai Senior Vice President and Director March 2, 1998
- -------------------------------------------
Chao C. Mai
/s/Michael L. Bolan Vice President - Marketing and Product Development March 2, 1998
- ------------------------------------------- and Director
Michael L. Bolan
/s/Richard L. King Director March 2, 1998
- -------------------------------------------
Richard L. King
/s/M.D. Sampels Director March 2, 1998
- -------------------------------------------
M.D. Sampels
/s/Carmelo J. Santoro Director March 2, 1998
- -------------------------------------------
Carmelo J. Santoro
/s/Elmo R. Zumwalt, Jr. Director March 2, 1998
- -------------------------------------------
Elmo R. Zumwalt, Jr.
</TABLE>
- 25 -
<PAGE> 26
SCHEDULE II
DALLAS SEMICONDUCTOR CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1995, December 29, 1996
and December 28, 1997
<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:
1995 $ 323,000 $ 60,500 $ 8,500 $ 375,000
1996 $ 375,000 $ 19,000 $ 21,000 $ 373,000
1997 $ 373,000 $ 8,600 $ 1,600 $ 380,000
Distributor returns and allowances:
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
1997 $ 15,893,000 $ 59,420,000 $ 58,230,000 $ 17,083,000
Inventory Reserves:
1995 $ 7,178,000 $ 1,821,000 $ 901,000 $ 8,098,000
1996 $ 8,098,000 $ 3,480,000 $ 50,000 $ 11,528,000
1997 $ 11,528,000 $ 2,861,000 $ 130,000 $ 14,259,000
</TABLE>
- S1 -
<PAGE> 27
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<S> <C>
23 Consent of Independent Auditor
27 Financial Data Schedule
</TABLE>
<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, No.
33-80696 and No. 333-29247) 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, 1998, 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 28, 1997.
Dallas, Texas
March 2, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> DEC-28-1997
<CASH> 114,608
<SECURITIES> 0
<RECEIVABLES> 62,337
<ALLOWANCES> 0
<INVENTORY> 59,131
<CURRENT-ASSETS> 250,240
<PP&E> 330,591
<DEPRECIATION> 168,836
<TOTAL-ASSETS> 417,142
<CURRENT-LIABILITIES> 66,085
<BONDS> 0
0
0
<COMMON> 553
<OTHER-SE> 351,057
<TOTAL-LIABILITY-AND-EQUITY> 417,142
<SALES> 368,212
<TOTAL-REVENUES> 368,212
<CGS> 178,441
<TOTAL-COSTS> 278,357
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 94,536
<INCOME-TAX> 29,981
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,555
<EPS-PRIMARY> 2.37
<EPS-DILUTED> 2.19
</TABLE>
