-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KlkV1Rzy9jQxujwjXY0dgDfqLHz7JN10w8IU7bLfyBv6YYFip9/ajS2YjBwkUKGX ySibEU0VXEEGpO+Ks1HP5w== 0000950134-97-008245.txt : 19971114 0000950134-97-008245.hdr.sgml : 19971114 ACCESSION NUMBER: 0000950134-97-008245 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970928 FILED AS OF DATE: 19971112 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DALLAS SEMICONDUCTOR CORP CENTRAL INDEX KEY: 0000749420 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 751935715 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10464 FILM NUMBER: 97713095 BUSINESS ADDRESS: STREET 1: 4401 S BELTWOOD PKWY CITY: DALLAS STATE: TX ZIP: 75244-3292 BUSINESS PHONE: 2144500400 MAIL ADDRESS: STREET 2: 4401 S BELTWOOD PKWY CITY: DALLAS STATE: TX ZIP: 75244-3292 10-Q 1 FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1997 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 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 Identification No.) incorporation or organization) 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 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- -------- Number of shares outstanding of the registrant's Common Stock as of November 2, 1997: 27,459,162. ---------- 2 DALLAS SEMICONDUCTOR CORPORATION INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PAGE NO. -------- Condensed Consolidated Statements of Income (Unaudited) Three months and nine months ended September 28, 1997 and September 29, 1996 ............................................... 3 Condensed Consolidated Balance Sheets September 28, 1997 (Unaudited) and December 29, 1996 ................ 4 Condensed Consolidated Statements of Cash Flows (Unaudited) Nine months ended September 28, 1997 and September 29, 1996 ........ 5 Notes to Condensed Consolidated Financial Statements ................. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ......... 7 - 9 PART II. OTHER INFORMATION ITEMS 1. THROUGH 6. ................................................... 10 SIGNATURE ............................................................. 11 EXHIBIT 27. ART. 5 FDS 3RD QUARTER 10-Q ............................... 12
- 2 - 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DALLAS SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months Nine months ended ended ------------------- -------------------- Sept. 28, Sept. 29, Sept. 28, Sept. 29, (Thousands except per share amounts) 1997 1996 1997 1996 - ------------------------------------ -------- -------- -------- -------- Net sales $ 93,069 $ 72,023 $272,813 $207,969 Operating costs and expenses: Cost of sales 44,710 41,490 134,104 112,450 Research and development 11,517 9,057 33,890 25,341 Selling, general, and administrative 13,531 10,535 39,715 30,756 -------- -------- -------- -------- Total costs and expenses 69,758 61,082 207,709 168,547 -------- -------- -------- -------- Operating income 23,311 10,941 65,104 39,422 Interest income, net 1,287 708 3,326 2,256 -------- -------- -------- -------- Income before income taxes 24,598 11,649 68,430 41,678 Provision for income taxes 7,687 3,844 21,823 13,754 -------- -------- -------- -------- Net income $ 16,911 $ 7,805 $ 46,607 $ 27,924 ======== ======== ======== ======== Net income per share $ 0.57 $ 0.28 $ 1.59 $ 1.00 ======== ======== ======== ======== Weighted average common and common equivalent shares outstanding 29,659 27,826 29,300 27,912 ======== ======== ======== ======== Dividends declared per share $ 0.035 $ 0.03 $ 0.105 $ 0.09 ======== ======== ======== ========
See accompanying notes. - 3 - 4 DALLAS SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
Sept. 28, Dec. 29, (Thousands except share amounts) 1997 1996 - -------------------------------------------- ---------- ---------- (Unaudited) Assets Current assets: Cash and short-term investments $ 110,974 $ 70,274 Accounts receivable, net 55,178 42,812 Inventories 57,247 49,629 Deferred tax assets 6,867 3,457 Other current assets 3,855 3,791 ---------- ---------- Total current assets 234,121 169,963 Property, plant and equipment, at cost: Land 7,804 7,429 Building and improvements 46,267 43,145 Machinery and equipment 247,494 223,439 ---------- ---------- 301,565 274,013 Less accumulated depreciation (160,581) (135,114) ---------- ---------- Property, plant and equipment, net 140,984 138,899 Other assets 5,237 5,001 ---------- ---------- $ 380,342 $ 313,863 ========== ========== Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 19,193 $ 22,475 Accrued salaries and benefits 17,999 8,641 Accrued taxes other than income 2,866 831 Other accrued liabilities 9,320 5,824 Income taxes payable 1,150 3,354 ---------- ---------- Total current liabilities 50,528 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: 27,436,833 shares at September 28, 1997, and 26,696,807 shares at December 29, 1996 548 534 Additional paid-in capital 101,907 88,601 Retained earnings 228,977 185,221 Treasury stock, shares at cost: 91,525 shares at September 28, 1997 and 91,525 shares at December 29, 1996 (1,618) (1,618) ---------- ---------- Total stockholders' equity 329,814 272,738 ---------- ---------- $ 380,342 $ 313,863 ========== ==========
See accompanying notes - 4 - 5 DALLAS SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended ------------------------ Sept. 28, Sept. 29, (Thousands) 1997 1996 - -------------------------------------------- ---------- ---------- Cash flows from operating activities: Net income $ 46,607 $ 27,924 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 26,104 20,460 Deferred tax (benefit)/expense (3,410) 3,113 Increase in receivables (12,366) (9,455) Increase in inventories (7,618) (3,501) Increase in other current assets (64) (77) (Decrease) increase in accounts payable (3,282) 420 Increase (decrease) in accrued salaries and benefits 9,358 (1,462) Increase (decrease) in accrued taxes other than income 2,035 (182) Increase in other accrued liabilities 3,496 925 Increase in income taxes payable 3,146 101 ---------- ---------- Net cash provided by operating activities 64,006 38,266 ---------- ---------- Cash flows from investing activities: Additions to property, plant and equipment (28,189) (46,627) Increase in other assets (236) (718) ---------- ---------- Net cash used in investing activities (28,425) (47,345) ---------- ---------- Cash flows from financing activities: Proceeds from issuance of stock upon exercise of stock options 7,970 1,257 Purchase of treasury stock -- (137) Dividends paid to shareholders (2,851) (2,379) ---------- ---------- Net cash provided by (used in)financing activities 5,119 (1,259) ---------- ---------- Net change in cash and short-term investments 40,700 (10,338) Cash and short-term investments at beginning of period 70,274 69,304 ---------- ---------- Cash and short-term investments at end of period $ 110,974 $ 58,966 ========== ========== Cash payments for income taxes $ 22,087 $ 10,540 Supplementary schedule of non-cash financing activities: Reduction of income tax payable and increase in paid-in capital resulting from the tax benefit of stock option exercises $ 5,350 $ 500 Disposition of assets $ 696 $ --
See accompanying notes. - 5 - 6 DALLAS SEMICONDUCTOR CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. INTERIM ACCOUNTING POLICY The accompanying condensed consolidated financial statements have not been audited by independent auditors, except for the balance sheet as of December 29, 1996. In the opinion of the Company's management, the accompanying financial statements reflect all adjustments (consisting only of normal recurring accruals) necessary to present fairly the Company's financial position at September 28, 1997 and December 29, 1996, and results of operations and cash flows for the periods presented. Certain footnote information has been condensed or omitted from these financial statements. Therefore, these financial statements should be read in conjunction with the financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 29, 1996. Results of operations for the three and nine month periods ended September 28, 1997 are not necessarily indicative of results to be expected for the full year. The difference between primary and fully diluted net income per share was not material in any period presented as historically calculated under APB No. 15. In February 1997, the Financial Accounting Standards Review Board issued Statement No. 128 (FASB 128), Earnings Per Share, which is effective for both interim and annual periods ending after December 15, 1997. FASB 128 changes the calculation of primary and fully diluted earnings per share. Primary earnings per share excludes the dilutive effect of stock options and is expected to increase reported primary earnings per share for the quarters ended September 28, 1997 and September 29, 1996 by $0.05 and $0.01 per share, respectively. Fully diluted earnings per share includes the dilutive effect of stock options and is equivalent to our historically reported earnings per share amounts. 2. INVENTORIES (Thousands)
Sept. 28, Dec. 29, 1997 1996 --------- -------- Raw materials $ 10,439 $ 6,688 Work-in-process 31,000 32,309 Finished goods 15,808 10,632 --------- -------- $ 57,247 $ 49,629 ========= ========
Inventories are stated at the lower of standard cost, which approximates actual cost (first-in, first-out), or market. 3. INCOME TAXES The provision for income taxes includes estimated federal and state income taxes at statutory rates and a deferred tax benefit for the three and nine month periods ended September 28, 1997 of $2,074,000 and $3,410,000, respectively. The Company's effective tax rate decreased to 31.3% for the third quarter of 1997 and to 31.9% for the first nine months of 1997 from 33.0% for the same periods in 1996, respectively. This decrease was the result of the reinstatement, modification and extension of the federal research and development tax credit by the Small Business Jobs Protection Act of 1996 and the Taxpayer Relief Act of 1997 and anticipated differences between income for financial statement purposes and taxable income for the two periods. - 6 - 7 DALLAS SEMICONDUCTOR CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This report contains 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 elsewhere 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. RESULTS OF OPERATIONS Net sales for the third quarter of 1997 were $93,069,000, an increase of 29% over the third quarter of 1996. The Company's revenue growth is supported by increased unit sales of new and existing products in several product families as shown in the table below:
NET SALES (Millions) - ---------------------------------------------------------------------------------------- Growth Product Family Q396 Q496 Q197 Q297 Q397 Q397 - Q396 - ---------------------------------------------------------------------------------------- Telecom $ 13.3 $ 15.0 $ 20.0 $ 20.0 20.7 56% System Extension 9.6 12.5 14.6 14.6 16.2 69% Commercial Timekeeping 7.7 9.3 10.1 14.0 12.9 68% Auto Information 5.1 5.3 7.0 8.6 10.5 106% NV SRAMs 8.9 9.5 12.3 13.0 10.4 17% Microcontrollers 7.7 5.9 7.8 6.2 9.6 25% Other Families 6.8 8.1 8.8 9.5 7.7 13% Computer Timekeeping 12.9 14.8 8.1 5.1 5.1 (60%) - ---------------------------------------------------------------------------------------- Company Total $ 72.0 $ 80.4 $ 88.7 $ 91.0 $ 93.1 29% - ----------------------------------------------------------------------------------------
Gross margins increased for the first nine months of 1997 to 51% from 46% during the same period in 1996. Gross margins increased in the third quarter of 1997 to 52% from 42% in the third quarter of 1996. The gross margin increase for both periods was caused primarily by increased efficiency in factory operations and a sales-mix shift toward higher margin products. Research and development ("R&D") expenses for the third quarter of 1997 increased 27% from the third quarter of 1996. R&D expenses increased 34% for the first nine months of 1997 over the same period in 1996. The increase for both periods resulted primarily from increased personnel costs due to increased headcount. R&D expenses as a percent of sales decreased to 12% from 13% for the third quarter of 1997 and 1996, respectively. R&D expenses as a percent of sales remained constant at 12% for the nine month periods ended September 28, 1997 and September 29, 1996, respectively. - 7 - 8 DALLAS SEMICONDUCTOR CORPORATION RESULTS OF OPERATIONS (CONTINUED) Selling, general, and administrative ("SG&A") expenses increased 28% and 29% for the third quarter of 1997 and the first nine months of 1997 over the same periods in 1996, respectively. The increase in SG&A expenses resulted primarily from increased sales commission amounts due to higher net sales and increased personnel costs. SG&A expenses as a percent of net sales remained constant at 15% for the three and nine month periods ended September 28, 1997 and September 29, 1996, respectively. Operating income increased 113% and 65% for the third quarter of 1997 and the first nine months of 1997 over the same periods in 1996, respectively. The increase for both periods was due primarily to higher gross profit margins. Operating income as a percent of sales increased to 24% from 19% for the first nine months of 1997 and 1996, respectively. Net interest income for the third quarter of 1997 increased by $579,000 or 82% over the third quarter of 1996. Net interest income increased by $1,070,000 or 47% for the first nine months of 1997 over the same period in 1996. The changes in net interest income are due primarily to changes in the average cash balances for the three and nine month periods. Changes in interest rates will continue to effect net interest income as well as any substantial change in the Company's cash and short-term investments or any substantial change in borrowings. The provision for income taxes includes estimated federal and state income taxes at statutory rates and a deferred tax benefit for the three and nine month periods ended September 28, 1997 of $2,074,000 and $3,410,000, respectively. The Company's effective tax rate decreased to 31.3% in the third quarter of 1997 and to 31.9% for the first nine months of 1997 from 33.0% for the same periods in 1996, respectively. This decrease was a result of the reinstatement, modification and extension of the federal research and development tax credit by the Small Business Jobs Protection Act of 1996, and anticipated differences between income for financial statement purposes and taxable income for the two periods. A number of uncertainties exist that may influence the Company's future operating results, including general economic conditions, changes in conditions affecting original equipment manufacturers, competition, 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 performance, 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. FINANCIAL CONDITION Cash and short-term investments were $111 million at the end of the third quarter of 1997, compared with $70 million at the end of fiscal year 1996. The increase in cash and short-term investments were primarily the result of net cash provided from operations during the first nine months of 1997 of $64 million offset by investments in property, plant and equipment of $28 million. The Company continues to invest in financial instruments having maturities in excess of one year in order to obtain yields higher than those available in the short-term market. - 8 - 9 DALLAS SEMICONDUCTOR CORPORATION FINANCIAL CONDITION (CONTINUED) Capital additions were $10 million in the third quarter of 1997, compared to $12 million for the same period of 1996. Capital expenditures for the third quarter of 1997 related primarily to wafer fabrication and test equipment. Capital expenditures for 1997 are estimated to total approximately $50 million and will be used primarily for wafer fabrication, manufacturing and test equipment, and computer hardware and software. In 1994 the board of directors authorized the purchase from time-to-time, depending on market conditions, up to 500,000 shares of the Company's common stock. As of September 28, 1997, a total of 215,900 shares, totaling $3,446,000 have been purchased pursuant to this stock repurchase program. On September 2, 1997, a $0.035 dividend was paid on each outstanding share of common stock, to shareholders of record on August 15, 1997. On October 21, 1997, a $0.035 dividend was declared on each outstanding share of common stock, payable on December 1, 1997, to shareholders of record on November 14, 1997. The Company had no long-term debt at the end of the third quarter of 1997 or at the end of fiscal year 1996. - 9 - 10 DALLAS SEMICONDUCTOR CORPORATION PART II. OTHER INFORMATION ITEMS 1.- 5. Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBIT 27 - FINANCIAL DATA SCHEDULE (b) Reports on Form 8-K No Reports on Form 8-K were filed during the period for which this report is filed. - 10 - 11 DALLAS SEMICONDUCTOR CORPORATION SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DALLAS SEMICONDUCTOR CORPORATION By: /s/ Alan P. Hale ---------------------------- Alan P. Hale Vice President, Finance Date: November 10, 1997 ---------------------------- - 11 - 12 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27 FINANCIAL DATA SCHEDULE
EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-28-1997 SEP-28-1997 110,974 0 55,178 0 57,247 234,121 301,565 160,581 380,342 50,528 0 0 0 548 329,814 380,342 93,069 93,069 44,710 69,758 0 0 0 24,598 7,687 0 0 0 0 16,911 .57 0.00
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