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Energy management excellence
Annual report and accounts 2009
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Making it happen!
Contents
Dialog Semiconductor creates energy-efficient, highly integrated, mixed-signal
circuits optimised for personal mobile, lighting & display and automotive
applications. The Company provides flexible and dynamic support, world-class
innovation and the assurance of dealing with an established business partner.
With its unique focus and expertise in system Power Management, Dialog brings decades of
experience to the rapid development of integrated circuits for Power Management, audio, display
processing and motor control. Dialog’s processor companion chips are key for enhancing both the
performance of hand-held products and the consumers’ multimedia experience. With world-class
manufacturing partners, Dialog operates a fabless business model.
Dialog Semiconductor Plc is headquartered near Stuttgart with a global sales, R&D and marketing
organisation. In 2009, it had US$217.6 million in revenue and was one of the fastest growing
European public semiconductor companies. At year end 2009, Dialog Semiconductor had 339
employees. The Company is listed on the Frankfurt (FWB: DLG) stock exchange.
Section 1: Overview
2 Dialog at a glance
4 Our markets
6 Chairman’s statement
7 Dialog Semiconductor shares in 2009
Section 2: Business review
10 Business review and strategy
12 Chief Executive’s review
15 Solutions, products technology and key customers
18 Financial review
22 Risks and their management
23 Corporate social responsibility
Section 3: Management and governance
25 Executive management
26 Board of Directors
27 Directors’ report
29 Corporate Governance
32 Directors’ remuneration report
35 Statement of Directors’ responsibilities
35 Responsibility statement
Section 4: Consolidated financial statements and notes
36 Independent Auditors’ report to the members of Dialog Semiconductor Plc
37 Consolidated statement of financial position
38 Consolidated income statement
39 Statement of comprehensive income
40 Consolidated statement of changes in Shareholders’ equity
41 Consolidated statement of cash flows
42 Notes to the consolidated financial statements
Section 5: Company financial statements and notes
81 Company statement of financial position
82 Company statement of changes in equity
83 Company statement of cash flows
84 Notes to the Company financial statements
Section 6: Additional information
85 Glossary
87 Advisers and corporate information
88 Group directory
Capturing the best
moments of your life
Power Management: Extending battery lifetime of portable devices with a
high level of integration and software configurability of power management
functionality on a single chip. The DA9052 Power Management IC radically
changes how engineers can now implement power management in their
portable devices.
Section 1 | Overview
Dialog at a glance
Financial highlights
• 34.5% growth in revenue
Total revenue: 2007-2009 (US$m)
• Full-year 2009 net income of US$32.7 million
or 15.0% of sales completing nine quarters
of successive profitability
86.8
217.6
161.8
+34.5%
2009 versus 2008
• Improved annual gross margin of 44.9%
2007
2008
2009
• Successful equity offering, raising net proceeds
US$59.7 million
• Closing year cash balance of US$123.1 million,
increase of US$86.2 million over 2008
• Diluted 2009 Earnings Per Share (EPS) –
of 60 cents
• Dialog remains debt free
Operational highlights
• Continued Power Management design wins
within the smartphone market segment, with
2009 seeing the ramp of high-volume designs
in several industry leaders’ products
Gross margin: 2007-2009 (%)
44.9
38.7
33.4
+16%
2009 versus 2008
2007
2008
2009
Operating profit: 2007-2009 (US$m)
28.67
+381.8%
2009 versus 2008
• Success within the emerging 3G Android
-17.27
5.95
smartphone segment with the first design win
announced with LG for China Mobile
2007
2008
2009
• Adoption of our 3G/HSPA Power Management
technology in convergent devices, including
ebooks and netbooks
• Entrance in 2009 to the portable audio market
with a very low power solution
• Strategic partnership with Intel® and first
design wins in 2009 for Power Management
companion products for Atom™ processors
• Entry to German TecDAX index
in September 2009
2 Dialog Semiconductor Plc Annual report and accounts 2009
Enriching your
viewing experience
Innovative display drivers: SmartExtend™ OLED drivers providing more
vivid and brighter displays, improved video performance at lower power
consumption and thinner form factors, with our e-ink drivers enabling the
adoption of e-readers in next generation portable convergent devices.
Section 1 | Overview
Our markets
Dialog focuses on high-volume,
high-growth markets, engaging with
the industry leaders in their segments.
Dialog is a global designer, developer and supplier of mixed
signal integrated circuits with a focus on the integration of
Power Management, audio, motor control and display processing
functionalities. Dialog’s main markets are high-volume portable
products (cellphones, smartphones and other portable consumer
electronic devices), automotive and industrial applications.
Dialog is a fabless semiconductor company outsourcing the
capital intensive production of silicon wafers, packaging and
testing of integrated circuits to leading Asian suppliers.
Wireless
Our wireless Power Management, audio and display
semiconductor solutions are designed to meet the needs of the
latest smartphones, 3G/HSPA cellphones, netbooks, portable
media players, e-readers and other portable convergent devices.
Portable media players*
(Million units)
Netbooks*
(Million units)
Smartphones*(inc. MID and MM phones)
(Million units)
3G/HSPA Cellphones*
(Million units)
10% CAGR
450
275
27% CAGR
50
26% CAGR
1,000
16% CAGR
647
15
320
314
2008
2013
2008
2013
2008
2013
2008
2013
*Source Dialog, Venture-Q and IDC 2009
Automotive and Industrial
In automotive, Dialog’s products are used in motor control
applications for comfort and safety systems and for Power
Management in automotive infotainment systems. In the
industrial market, Dialog provides power electronics solutions
for lighting such as electronic ballasts for fluorescent or
high-intensity industrial lighting with the future developments
focused on energy-efficient LED lighting solutions.
Automotive Motor Control
IC TAM (US$ million)*
730
650
600
2009
2010
2011
*Source Dialog 2009
4 Dialog Semiconductor Plc Annual report and accounts 2009
Deep technology base
Dialog has long-standing expertise in developing
analogue and mixed signal products, with a
focus on Power Management integrated circuits.
The Company in 2009 has leveraged its expertise
to add audio and display integrated circuits
to its product portfolio. It aims to offer the
highest level of Power Management mixed
signal integration in the industry, with rapid
design cycle and time-to-volume production.
Getting to your
destination on time
Infotainment: Enabling with Intel® the next generation of automotive
infotainment systems with advanced Power Management and clocking
companion ICs for the Atom Processors™.
Section 1 | Overview
Chairman’s statement
Dear Shareholders,
In 2009, Dialog once again grew at an impressive level and
mastered difficult situations. We successfully navigated through
a year of worldwide economic downturn, and what was an
extremely testing time for our industry.
Across all financial fronts, Dialog performed and grew profitably
at a rate ahead of the closest peers that we track, and the
industry as a whole.
A key event in 2009 was the successful equity placing in
September 2009 which raised net proceeds of US$59.7 million.
This provides Dialog with significant capital with which to
make strategic investments and accelerate the development
of the Company.
We substantially increased our trading liquidity, very often now
seeing more than one million shares traded on a daily basis. This
increase in liquidity, the strong financial performance reported
each quarter, along with the equity offering were instrumental
in attracting new high-calibre institutional investors to our
Shareholder base. All of this translated into significant share
value creation with the share price up more than 11 times
from its 2009 opening level.
As the economic climate has improved over the past 12 months,
Dialog has sought to position itself by developing key
technologies and supplying major customers in the portable
Power Management market. However, the challenge of
diversifying both our product base and addressable market is a
journey which we will seek to progress during the coming year.
Many employees participate in the success of Dialog through
our stock Option Programme and the Long Term Incentive
Programmes (which we have in place for the management team).
The Board remains committed to providing employees with all
the support necessary in terms of performance-based rewards
that harmonise the interest of the Company with that of its
Shareholders. These instruments are appropriate to maintain
Dialog’s attractiveness as an employer in this highly competitive
market for specialists.
The Board wishes to pay tribute to the management, who have
delivered this tremendous performance while overcoming new
challenges and developing further as a team.
Finally, we have confirmed our excellent position in the market
and the outlook is very positive. I would like to thank you for your
trust in us and hope that you will continue to accompany us on
our journey.
We are looking forward to another year of progress.
Greg Reyes
Chairman
6 Dialog Semiconductor Plc Annual report and accounts 2009
Section 1 | Overview
Dialog Semiconductor shares in 2009
Dialog substantially outperformed the
market with the share price growing
by more than 1,100% in 2009 and
share liquidity increasing by 575%.
Dialog gains the confidence of the
market with many new high-calibre
investors attracted as stockholders.
Share price development
For Dialog shares, 2009 was a record year in terms of growth.
Starting the year at €0.66, it steadily rose during the year. In
September, an equity offering for 12 million ordinary shares was
priced at €3.65; a premium of 4% to the date the offering was
announced. Post issuance of the shares, the stock continued to
rise steadily reaching a high for the year in December at €8.42
before closing the year at €7.63.
The following graphs chart the cumulative Shareholder return of
the Company for the past 12 months and for the past five years,
compared with selected technical benchmark indices – Germany’s
TecDAX index – which Dialog itself entered in September 2009,
and the Philadelphia SE Semiconductor index (“SOX”). As can be
seen from the graph, for 2009 Dialog outperformed the TecDAX
by 55 times and the SOX by more than 17 times.
This means that in the course of 2009, we succeeded in achieving
one of our most important corporate objectives; namely, to increase
the value of the Company for the benefit of the Shareholders.
2009 12-month Dialog Semiconductor share price performance
1400
1200
1000
800
600
400
200
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DIALOG SEMICON. (XET)
TECDAX (XETRA) – PRICE INDEX
PRIME BIOTECHNOLOGY IG – PRICE INDEX
PHILADELPHIA SE SEMICONDUCTOR – PRICE INDEX
Dialog Semiconductor Plc Annual report and accounts 2009 7
Section 1 | Overview
Dialog Semiconductor shares in 2009
2005-2009 Dialog Semiconductor share price performance
500
400
300
200
100
0
5
0
6
0
7
0
8
0
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DIALOG SEMICON. (XET)
TECDAX (XETRA) – PRICE INDEX
PRIME BIOTECHNOLOGY IG – PRICE INDEX
PHILADELPHIA SE SEMICONDUCTOR – PRICE INDEX
Share fundamentals for the financial year 2009
Total number of shares outstanding and registered as of 31 December 2009
Weighted average number of shares during 2009 (diluted)
Weighted average number of shares during 2009 (basic)
Type
Par value (in £)
Bloomberg Symbol
Reuters Symbol
ISIN
Key figures for the financial year 2009 based on weighted average number of shares (basic)
Sales per share (in US$)
Operating profit per share (in US$)
Net profit per share (in US$)
Book value per share as of 31 December 2009 (in US$)
Accounting standards
Market data 2009
Exchange segment Germany
Designated sponsor
Market capitalisation as of 31 December 2009 (in millions of €)
Daily Turnover of shares during 2009
8 Dialog Semiconductor Plc Annual report and accounts 2009
61,568,930
54,463,940
48,867,949
Ordinary
0.1
DLG
DLGS.DE
GB0059822006
4.45
0.59
0.67
3.94
IAS/IFRS
Midcap, Prime All Share,
Prime Technology,
Technology All Share
Close Brothers Seydler
469.16
510,571 shares/day
Section 1 | Overview
Trading in Dialog shares
Dialog shares are traded in Germany on the XETRA and Frankfurt
regulated official markets and on all other German regional
exchanges on the open market.
Dividend policy
Dialog Semiconductor participates in industries that are
considered to be global growth engines and provides its services
and products to major players in these industries. Dialog’s Board
of Directors is committed to reinvesting all profits into laying the
framework for future growth and continues to believe that,
in line with the strategic changes under way, this policy
is in the best interests of all its Shareholders.
Investor relations
Dialog Semiconductor understands the importance of clear
communication with investors and analysts, particularly during
a period of great uncertainty and global economic crisis. During
2009, the management team continued its efforts to ensure that
the market was kept up to date with the effect the changing
macro environment was having on its business, together with
the important and exciting changes under way at the Company.
Dialog Semiconductor’s shares are followed by a number of
analysts representing major banks and research institutions in
Europe. During 2009, we issued trading updates and quarterly
earning reports, we held our annual analyst conference,
presented at several investor conferences and international
roadshows, and, in addition, kept in regular contact with
our investors and analysts. Information provided, including
presentations, press releases and reports of the Company,
as well as the recommendations of analysts covering the
Company, can be downloaded from the corporate Website:
www.dialog-semiconductor.com.
TecDAX Index
Dialog was granted entry to the TecDAX index during 2009.
The TecDAX tracks the 30 largest and most actively traded
companies from the various technology sectors of the Prime
Standard segment, excluding those listed in the German DAX
index. It is amongst the most important and leading stock indices
in Germany and membership is decided by a ranking, based on
a company’s free-float market capitalisation and stock market
trading volume.
Freefloat
Dialog’s freefloat is 56,462,392 million shares or 91.7% of
the 61,568,930 outstanding shares. The freefloat is calculated
by excluding 2,520,960 shares held by Adtran per their
last notification and 2,585,578 shares held in the Dialog
Semiconductor Plc employee ownership trust as notified on
8 February 2010.
The freefloat includes the following shares held on behalf of
discretionary clients:
• 4,414,925 (7.16%) held by JP Morgan Asset Management
Holding Inc., as notified on 6 October 2009;
• 2,656,316 (4.31%) held by the Bank of New York Mellon,
as per the share registrar on 8 February 2010;
• 1,925,965 (3.13%) held by Allianz Global Investors, as per the
share registrar on 8 February 2010;
• 1,884,864 (2.99%) held by Capital Group International Inc.,
as notified on 30 November 2009; and
• 2,400,000 (3.89%) held by Citibank, as per the share registrar
on 8 February 2010.
And 2,028,828 shares (3.29%) held by X-Fab Semiconductors
AG, as notified on 28 January 2010.
Disclosure of interests
The provisions of the UK Companies Act 2006 require that any
person acquiring a direct interest of 3% or more of a class of
shares issued by the Company – with voting rights at the
Company’s general meeting – must inform the Company of its
interest within two working days. If the 3% interest is exceeded,
the Shareholder must inform the Company of any increase or
decrease of one percentage point in its interest.
With respect to voting rights attached to shares held by
investment managers (on behalf of clients), by scheme operators
and ICVCs in accordance with DTR 5.1.5, the first threshold for
disclosure is set at 5% with the next level set at 10% and every
percentage above 10%.
Dialog Semiconductor Plc Annual report and accounts 2009 9
Section 2 | Business review
Business review and strategy
Execution to our strategy has enabled
us to again achieve high growth in
2009 – beyond the industry and our
peers – with increased profitability,
and dramatically improve our cash
position from both operations and
a successful equity offering.
Dialog’s principal objective in recent years has been to be the
leading global supplier of high integrated Power Management
mixed signal integrated circuits addressing the portable devices
market. To meet these objectives, this year Dialog has:
Demonstration of Dialog’s Class G Audio Codec IC – DA7210.
Expanded its relationships with key industry leaders
Grown sales in North America and Asia
Dialog has relationships with a number of high-volume customers,
Dialog successfully increased its revenue in North America to
many of which are key industry leaders in their respective sectors.
represent 47.6% of its turnover for the year. Additionally, it achieved
Dialog has in 2009 continued to focus its sales and marketing
important milestones with major Asian cellphone customers;
efforts on these customers to increase its semiconductor content
one of which emerged as a greater than 10% revenue customer
in the customers’ various portable device platforms.
in Q2 2009 and also successfully worked with Samsung with
the application of its e-ink display technology into an innovative
smartphone keypad design.
Increased its customer base by leveraging its portfolio
of standard solutions
Dialog has increasingly adapted some of its solutions to multiple
customers and transitioned its portfolio to offer more standard
Continued to focus on fabless business model while
optimising operating efficiencies
products. Additionally, by engaging in basic corporate identity
Dialog remained focused on its existing business model, which
and brand development activities in the engineering and design
included fully outsourcing silicon wafer production and test to Asian
communities worldwide, coupled with the recent expansion of its
foundry manufacturing plants and test houses, and supplying ASICs
sales force, Dialog in 2009 has laid the foundations for marketing
and ASSPs using mainstream CMOS-based process technologies.
its products to a much broader customer base.
It also invested in increasing operating efficiencies by taking
advantage of advanced Management Information Systems for
Dialog also continued to expand platform relationships with
planning logistics and sales operations.
application processor vendors within the portable space, including
NEC Electronics; to enter the embedded market; i.e., replacing
discrete Power Management solutions with an integrated device
for Intel® Atom™-based applications; and to leverage Dialog’s
experience to address the motor control and lighting market with
energy efficient standard products.
10 Dialog Semiconductor Plc Annual report and accounts 2009
Worked proactively with and refined customers’
system architecture
Dialog continued to work with its customers to refine the systems
architecture of their various device platforms and provided them
high integrated Power Management IC solutions. Dialog achieved
this by leveraging the engineering expertise of its employees in
design, product development and testing.
Maximising run time
Audio: Dialog’s new family of ultra low power HiFi audio and headphone
drivers CODECS extends the battery lifetimes of mp3 portable media devices.
Section 2 | Business review
Chief Executive’s review
Leading the industry – 2009 was a
truly spectacular year and a year to
remember for Dialog, and I believe a
major turning point in our more than
10-year history as a public company.
Dialog’s Board and executive team focused its efforts to solidify
our position as a leading Power Management IC provider to
industry leaders in smartphones and portable media devices while
delivering strong revenue and profitability growth through the
industry downturn. We also reinforced our customer relationships
and strengthened our balance sheet while our Company’s stock
price and market valuation appreciated more than 1,100%.
Following a long-standing commitment to Dialog, Apax
Partners LLP – the global private equity advisory firm that led the
leveraged buyout of the Company in 1998 – placed its remaining
shareholding of Dialog with quality institutional investors. Apax’s
contribution over the past 11 years has been very important
to our development and growth and on behalf of Dialog’s
management and its Board, I would like to thank Apax Partners.
In September we completed an international equity offering
and issued 12 million new shares, raising net proceeds of
US$59.7 million. The shares were placed with tier 1 institutional
investors, following a very successful roadshow. We now have
a healthy balance sheet with US$123.1 million in cash, allowing
us to fund our foreseeable future growth. In addition, we plan to
expand our engineering and technical support teams, particularly
in the US and Asia, and acquire complementary technology and
intellectual property.
Despite the economic downturn, in 2009 we reached and in
some cases exceeded all the important strategic and economic
goals which we had set, thereby establishing the basis for the
further growth of Dialog. While in 2009, the semiconductor
industry, according to analysts, declined 12%, we delivered an
impressive 34.5% increase in revenue and, with the close of the
last quarter, recorded nine successive quarters of profitability.
Already in early 2010, we have demonstrated the first use of
these proceeds when we recently acquired specific Power
Management technology assets, intellectual property rights and
an employee team located in Munich from Diodes Zetex Gmbh.
Small acquisitions like this and IP licensing of complementary
technology will allow us to further differentiate our products
and maintain our leadership.
Our gross margin improved 6.2 percentage points for the full
year to 44.9%. In addition, our net income margin, increased
by 10.8 percentage points to 15.0%. This increase is particularly
noteworthy given the continued investments we made in our
R&D activities, including increasing our engineering, sales and
marketing headcount. This positive business performance reaffirms
our determination to continue to execute on our chosen strategy.
One year ago I was dissatisfied with our share price development.
Today I am extremely pleased that 2009 saw us increasing our
share price from €0.66 at the start of the year to close the year at
€7.63, an appreciation of more than 1,100%, catching up with
the underlying performance of the Company.
We experienced an increase in the trading volume of our shares,
where the average daily volume traded in the last quarter has
increased to 1,072,000 shares – more than six times of that a
ear ago. This has helped to make Dialog an attractive investment
for the larger European institutional funds, many of whom we
saw take a recent position in Dialog. The increase in our market
capitalisation and liquidity led us to being admitted in the second
half of the year to the important German TecDAX stock index –
another important milestone for our Company.
Diversification of our revenue sources continues as a strategic
initiative for Dialog as it enhances financial stability of the
Company. We are achieving this by continuously expanding our
customer base – now more than 10 within the cellphone space
and selling a broader base of standard products. We have taken
far-reaching steps towards this in 2009 where we launched three
12 Dialog Semiconductor Plc Annual report and accounts 2009
Accelerating the
transition
Smartphones: 2009 saw the rise in adoption of smartphones, with Dialog’s
Power Management technologies used by leading smartphone manufacturers.
Dialog’s success is based on providing innovative and differentiating
technologies to extend the battery lifetime and user experience.
Section 2 | Business review
Chief Executive’s review
The economic crisis which we are all coming through is bringing
us not only tremendous challenges but also major opportunities.
As a leader in Power Management integrated technology,
we’re now a highly respected partner worldwide when it comes
to enhancing the battery efficiency of portable devices. We see
enormous long-term growth prospects opening up for us in these
fields as energy efficiency becomes of ever increasing importance
to our society.
In 2010 we aim to achieve:
(cid:1) continued profitable revenue growth driven by market share
gain in Power Management and Audio ICs especially within
the smartphone and portable media device market;
(cid:1) advanced innovation with our continuing success based on
two key factors: a sharp focus on customers and a winning
product portfolio based on a solid road map for the future;
(cid:1) volume production of our passive matrix OLED IC display
technology together with our display module partners,
offering superior performance and a more energy efficient
solution than incumbent displays today; and
(cid:1) continued diversification of our customer and product base
in both portable and other industrial markets through both
organic development and inorganic activities – including
complementary technology-based acquisitions.
We concluded the year by winning the prestigious Global
Semiconductors Association inaugural EMEA Leadership Council
Award, the Elektra Company of the Year and Elektra Fabless
Semiconductor Supplier of the Year Awards. This is a strong
testament from the semiconductor industry to our core
technologies, and the strength of the newly invigorated Dialog, for
the Company as a whole to be acknowledged publicly in this way.
Global Semiconductor Association (GSA) Award
presented to Dialog Semiconductor at US Silicon
Valley event in December 2009.
As we pursue our long-term corporate strategy, our financial
and operational targets are clearly defined where we aim for
continued growth ahead of the industry and our closest peers.
We will continue to provide transparency regarding current
performance, future opportunities and strategies in
our communication.
This is truly an exciting time to be leading such a dynamic company,
and I am confident in the continued future success of Dialog.
Dr Jalal Bagherli
Chief Executive Officer
Layout of a Dialog Power Management Chip.
product families that will provide the basis to accelerate
further diversification. These include a programmable Power
Management device which revolutionises the way analogue
designers can now design their system, our first stand-alone
Audio IC, which sets a competitive benchmark in the industry for
low power consumption. Additionally, to support the increasingly
popular Intel® Atom™ micro processors, we provide very high
integrated Power Management companion devices and already
have announced a strategic partnership with Harman Becker who
will use our devices in their automotive infotainment platforms.
It was a difficult year for our Automotive and Industrial segment,
with the global crisis within the automotive industry affecting
sharply our automotive revenue early in the year. However, a
pickup was seen late in the year where our shipments recovered
to near historical levels. The transition to energy saving lighting,
including LEDs, is providing an opportunity for Dialog to further
build on our existing lighting business. To capitalise on this
opportunity, during the year we announced a joint development
centre in Austria with Tridonic Atco – a leader in lighting.
Underpinning our success was an exceptional performance by
the whole team at Dialog who responded magnificently to the
opportunities and challenges of 2009, and to whom I offer my
sincere thanks. At the same time, I would like to also thank our
customers and business partners for their long-standing loyalty
and the trust they put in us. The same applies to our
Shareholders, as we strive to continue to deliver sustainable
shareholder value.
14 Dialog Semiconductor Plc Annual report and accounts 2009
Section 2 | Business review
Solutions, products technology and key customers
Dialog has combined its Power
Management technology leadership
and dedicated customer support,
delivering fully optimised integrated
products and solutions.
Our solutions
Our solutions address two major markets: mobile handset
and portable electronic devices, and automotive and industrial
electronics. The continuing decrease in size – and increase
in capabilities – of portable devices is a major driver in the
development of our solutions. High-speed data, video and
high-quality audio on mobile telephones and other hand-held
products, make huge demands on battery energy management,
as well as on the technology which controls the quality of images
and displays. Our skill in developing highly integrated silicon
solutions enables our customers to design products which deliver
excellent performance as well as market-leading talk and standby
times. In the automotive market customers use our products in
the comfort and safety systems, as well as in the management
and control of the electronic systems they design for cars; and
in the industrial market customers use our products in highly
integrated smart-power management systems, such as intelligent
electronic ballasts for fluorescent lighting.
Design, development and production
We are justifiably recognised for the quality and feature-rich
functionality of our mixed signal standard Integrated Circuit
(“IC”) and Application Specific Integrated Circuit (“ASIC”)
solutions. We nevertheless continually work to increase our digital
and analog design expertise, and to develop our software. During
2009, we invested US$42.6 million in research and development.
Our ability to develop mixed signal ASIC and Application Specific
Standard Product (“ASSP”) designs rapidly, enables us to respond
to customers’ needs for new solutions that increase performance,
while at the same time reducing cost. Our strategy of modifying
and reusing a wide set of specialised analog building blocks
speeds up the design process; in addition, our use of industry
standard design tools increases the level of automation and the
quality of verification in our products. Our commitment to
continuously deepening our expertise has resulted in increased
levels of integration and product innovation in all business sectors.
Power Management and Audio ICs
Effective Power Management – in which the design of chips used
in hundreds of millions of mobile phones and other portable
devices has given us a great deal of experience – is increasingly
one of the fundamentals of system design. However, Power
Management constantly presents new challenges with the
introduction of multi-core processors, increased peak currents
due to lower geometry technologies and multiple sleep modes.
Lithium batteries need to charge faster, safer and from a wider
variety of sources such as USB ports demanding, for example,
powerpath control. These trends impact the Power Management
IC directly, and we constantly evolve our core technology and
intellectual property to extend our market-leading status.
With a long legacy of delivering different Power Management
designs for world-leading mobile phone manufacturers and
portable consumer OEMs, we optimise all aspects of the design
including electrical, thermal and mechanical (packaging)
considerations. These designs offer unprecedented integration with
multiple Power Management and analogue functions on the chip,
including programmable high-performance LDOs (low drop-out
voltage regulators), high-efficiency DC-DC voltage converters,
intelligent battery charging circuits, software programmable LED
drivers, sensor ADCs, USB interfaces, and multichannel audio
capabilities. By capitalising on our experience in integrating
high- and low-voltage circuits on CMOS – the most widely used
semiconductor technology – and combining it with our experience
in developing and integrating high-performance CODECs and
other analog functions, we are able to offer a selection of
differentiated Power Management and audio solutions. The
integration of more than 30 different functions on a single chip
delivers significant space, power and cost savings to our customers.
In 2009, we launched a new class of Power Management product
– DA9052, an advanced system Power Management integrated
circuit (PMIC) that offers designers greater flexibility in reducing
power consumption, size and cost in mobile phones and other
portable multimedia devices. Conceived as a platform-PMIC,
capable of supporting all major families of application and
mobile graphics processors, DA9052 offers a superior level
of user configurability compared to standard PMIC products.
Dialog Semiconductor Plc Annual report and accounts 2009 15
Section 2 | Business review
Solutions, products technology and key customers
Display drivers and related-system ICs
The demands from the market for the next generation of portable
displays to be “always on”, thinner, with longer battery life with
higher visual and video performance even in bright sunlight
means the current technology based on Liquid Crystals (LCD) is
struggling. To address these important market needs a number of
new display technologies, such as OLED, e-paper and MEMs have
been launched. Dialog has not only worked closely with the key
innovators of these display technologies but also key users to
develop and introduce a range of truly innovative low power
silicon driver solutions.
Dialog in 2009 together with TDK has been working on
completing the development of a passive matrix OLED panel
which is based on Dialog’s SmartXtend™ driver technology. The
technology uses a number of innovative techniques, including a
unique addressing scheme, accurate dynamic current matching
and state-of-the-art Power Management to outperform LCD
displays. SmartXtend™ will form the basis of a new family of
PM-OLED drivers which will be brought to production. This
technology has a very strong value proposition in terms of power
consumption, performance and cost over competing technologies.
Dialog provides ASICs for windscreen wiper motors, electric
window motors and active restrainer seat belt systems. Its
partnership with leading automotive suppliers has resulted in
development of integrated circuits which can be connected
directly to a car battery without external protection circuits.
For the industrial market, Dialog develops innovative control
ASICs both for conventional light sources, such as fluorescent or
high-intensity discharge (“HID”) lamps, and for emerging LEDs.
These devices seek to deliver optimal control and regulation of light
sources, while maximising their service life. Through intelligent
control, using advanced digital signal processing, these devices
help to minimise energy consumption.
Manufacture, assembly and testing
We outsource our wafer production to selected foundries,
principally in Singapore and Taiwan, which provide high-quality
products and have the ability to meet both our stringent
qualification requirements and tight deadlines. Our choice of
CMOS, rather than bipolar, technology enables more transistors
to be integrated on a single chip – a necessary requirement for
our target markets – and the end products are less power hungry.
Automotive and industrial system ICs
Dialog supplies ASICs to leading European automotive suppliers
who in turn deliver Dialog-based products to many leading car
manufacturers. These devices capitalise on Dialog’s expertise and
knowledge of technology, ranging from Power Management
systems and mixed signal design, to high voltage circuits and
embedded microprocessors on a single integrated circuit in an
automotive-qualified CMOS process (including flash memory).
The final assembly of our chips is outsourced to a number of
qualified subcontractors in Asia. Our test programmes, based on
our own and individual customers’ specifications, are developed
by our test engineers in parallel with the design process. All test
development is undertaken at our Nabern facility using the same
type of test equipment and handling interfaces that are used in
our offshore test subcontractors in order to speed up the volume
ramp and production transfer process. All production testing
Dialog operates a fabless model and minimises capital expenditure by outsourcing
its manufacturing, assembly and test to Asian foundries – while maintaining control
over the quality and reliability of its products.
Presentation to Dialog from our long-standing silicon foundry partner TSMC,
in commemoration of the Swindon, UK, office opening.
16 Dialog Semiconductor Plc Annual report and accounts 2009
Section 2 | Business review
Dialog’s devices are de-capsulated, either fully or in part, and then inspected with a scanning electron microscope. This gives information about the device’s surface topography,
contamination and other properties.
Principal customers
Many of Dialog’s principal customers are leading portable
device and automotive and industrial equipment manufacturers
that purchase both ASICs and ASSPs solutions. Customers
with a significant contribution to revenue include Apple, Bosch,
RIM (Research in Motion), SonyEricsson and TridonicAtco.
Given the rapidly evolving nature of the technology used in
Dialog’s target markets, the Company strives to develop long-
term relationships with its major customers and seeks to adopt
a partnership approach for both standard products and custom
solutions. Customers look to Dialog for its technical expertise,
while close working relationships with customers provide Dialog
with an opportunity to develop and refine market-leading
products with recognised industry leaders.
and warehousing of final product is outsourced to our Asian test
subcontract partners enabling direct drop shipments to our end
customers. We have also created a specialist offshore operations
and support centre in Taiwan. We have our own manufacturing
and technical engineers close to foundries, and assembly and test
subcontractors in Asia. By being “on the spot” to resolve any
potential engineering issues quickly, they can forestall potential
delays in production.
Quality and environment control
We have an uncompromising approach to quality assurance in
every area of our operations and an uncompromising goal to
deliver “zero fail” products. Active employee participation in error
prevention approaches has enabled us to win the approval of all
our major customers and to exceed their parts per million (ppm)
failure rate expectations. The overall objective of our quality
management system is to provide all our customers with the
assurance that our products and services not only fulfil their
current contractual requirements, but will also meet their future
needs. We are committed to minimising our impact on the
environment by developing and promoting environmentally
compatible products, and operate in accordance with the ISO
14001 international environmental quality standard. We
continuously promote awareness and knowledge of environmental
issues throughout the organisation to ensure that they become a
natural part of the decision-making process. As we demand the
same standards from our suppliers we only form supply partnerships
with those who are accredited to the same international quality
standards. For more detailed information on specific products,
please see our Website: www.dialog-semiconductor.com.
Dialog Semiconductor Plc Annual report and accounts 2009 17
Section 2 | Business review
Financial review
“A strong balance sheet with sustained,
profitable growth positions us well
going forward.”
Jean-Michel Richard, CFO, Vice-President Finance.
The following tables detail the historical consolidated statements
of the operations of Dialog for the years ended 31 December
2009 and 2008:
Revenues
Audio & Power Management
Display systems
Automotive/Industrial
Corporate Sector
Revenues
Cost of sales
Gross profit
Selling and marketing expenses
General and administrative expenses
Research and development expenses
Other operating income
Restructuring and related impairment charges
Operating profit (loss)
Interest income and other financial income
Interest expense and other financial expense
Foreign currency exchange gains and losses, net
Result before income taxes
Income tax benefit
Net profit
2009
2008
US$000
% of revenues
US$000
% of revenues
176,569
5,987
33,531
1,526
217,613
(119,886)
97,727
(14,183)
(12,584)
(42,621)
333
–
28,672
203
(212)
162
28,825
3,902
32,727
81.1
2.8
15.4
0.7
100.0
(55.1)
44.9
(6.5)
(5.8)
(19.6)
0.2
0.0
13.2
0.1
(0.1)
0.1
13.3
1.7
15.0
121,355
5,149
35,193
133
161,830
(99,217)
62,613
(11,007)
(9,853)
(36,721)
775
145
5,952
874
(919)
126
6,033
728
6,761
75.0
3.2
21.7
0.1
100.0
(61.3)
38.7
(6.8)
(6.1)
(22.7)
0.5
0.1
3.7
0.5
(0.6)
0.1
3.7
0.5
4.2
Change
%
45.5
16.3
(4.7)
1,047.4
34.5
20.8
56.1
28.9
27.7
16.1
(57.0)
(100.0)
381.7
(76.8)
(76.9)
28.6
377.8
436.0
384.1
Results of operations
Segment reporting
Revenues in the audio & power management segment for the
year ended 31 December 2009 were US$176.6 million compared
with US$121.4 million in 2008, an increase of 45.5%. The
increase in this sector is primarily driven by the success of our
growing range of 3G/HSPA integrated Power Management and
audio products and Power Management solutions for Portable
Media Players. Our 3G/HSPA customer base now includes six
cellular customers. Additionally, we continue to see the adoption
of our solutions by leading Smartphone manufacturers in more
of their products. The operating profit in the audio & power
management segment (see note 24a to the consolidated
financial statements) increased to US$47.0 million compared with
US$21.9 million in the same period 2008, an increase of 114.9%.
Revenues in the display systems segment were US$6.0 million
for the year ended 31 December 2009 (2008: US$5.1 million).
Whilst 2009 revenue was partially generated from funded
research and development activity, in late Q2-2009, we started
first shipment to Samsung of our innovative power-saving keypad
driver using e-ink technology. The operating loss in this segment
(see note 24a to the consolidated financial statements) for year
ended 31 December 2009 was US$12.4 million (2008: US$11.0
million). These losses reflect our investment in the emerging ultra
low power display technology.
18 Dialog Semiconductor Plc Annual report and accounts 2009
Section 2 | Business review
Revenues from our automotive/industrial applications segment
were US$33.5 million for the year ended 31 December 2009 (2008:
US$35.2 million), representing 15.4% of our total revenues
(2008: 21.7%). Operating loss in the segment (see note 24a to
the consolidated financial statements) was US$3.6 million for the
year ended 31 December 2009 (2008: US$875,000 operating
losses). This set of results reflects the difficult global environment
experienced during most of 2009 in the automotive industry.
Revenues in the corporate sector for year ended 31 December
2009 were US$1.5 million (2008: US$0.1 million). The amount
in 2009 primarily relates to the unexpected cash settlement
against revenues which had not been recognised in 2006 as a
result of the insolvency of BenQ Mobile. For further information,
please refer to note 27.
The operating losses recorded in the corporate sector for the year
ended 31 December 2009 of US$2.3 million (2008: US$4.1 million)
(see note 24a to the consolidated financial statements) are
primarily resulting from sales discounts for early payments, the
costs of the holding company, stock option expenses and from
expenses in relation to the Long Term Incentive Plan introduced
in 2008.
217.6
Revenues FY 2009
Revenues
Total revenues for the year
ended 31 December 2009
were US$217.6 million (2008:
US$161.8 million. This increase
of 34.5% results mainly from
higher sales volumes in our
audio & Power Management
sector as described above.
Excluding the effect of the cash
settlement from BenQ Mobile
insolvency recorded in April
2009 (see note 27), revenues for the full year 2009 would have
been US$215.7 million.
161.8
2009
2008
61.3
Cost of sales as %
of revenue FY 2009
Cost of sales
Cost of sales consists of
material costs, the costs of
outsourced production and
assembly, related personnel
costs and applicable overhead
and depreciation of test and
other equipment. For the year
ended 31 December 2009,
cost of sales increased by
20.8% to US$119.9 million
(2008: US$99.2 million),
resulting from increased
revenues recorded during the year. However, as a percentage of
total revenues, cost of sales in the same periods decreased from
61.3% to 55.1%. This demonstrates the gains made possible
2008
2009
55.1
by our continuous efforts to improve the Company’s product mix,
test time and yields. Excluding the effect of the cash settlement
from BenQ Mobile insolvency (see note 27), cost of sales as a
percentage of revenue would have been 55.6% for the full
year 2009.
Gross profit
Gross profit for the year ended 31 December 2009 was
US$97.7 million (2008: US$62.6 million). Our gross profit
increased from 38.7% of revenues in 2008 to 44.9% of revenues
for the year ended 31 December 2009, driven by lower cost of
sales as a percentage of revenue and the accelerated introduction
of new products as prescribed above. Excluding the effect of
the cash settlement from BenQ insolvency recorded in Q2-2009
(see note 27), gross margin would have been 44.4% for the full
year 2009.
Selling and marketing expenses
Selling and marketing expenses consist primarily of salaries, sales
commissions, travel expenses, advertising and other marketing
costs. In 2009, selling and marketing expenses increased to
US$14.2 million (2008: US$11.0 million) in line with increased
production volume and as a result of the Company’s investment
in creating value by increasing staff in strategic marketing
functions. However, given the increased revenues recorded in
2009 over 2008, selling and marketing expenses decreased from
6.8% of total revenues in 2008 to 6.5% of total revenues in the
year ended 31 December 2009.
General and administrative expenses
General and administrative expenses consist primarily of
personnel and support costs for our finance, human resources
and other management departments. In 2009 general and
administrative expenses increased to US$12.6 million (2008:
US$9.9 million). This mainly reflects the increase in share-based
compensation expenses recorded in 2009 in line with the
Company share price performance during the same period.
For the year ended 31 December 2009, general and
administrative expenses as a percentage of revenues were
5.8% compared with 6.1% in 2008.
Research and development expenses
Research and development expenses consist principally of design
and engineering-related costs associated with the development
of new Application Specific Integrated Circuits (“ASICs”) and
Application Specific Standard Products (“ASSPs”). Research
and development expenses (net of customer-funded projects)
increased to US$42.6 million in 2009 (2008: US$36.7 million).
The absolute US$ increase in research and development expenses
was primarily due to an increased headcount of our R&D
personnel in support of our growth strategy. As a percentage
of total revenues, research and development expenses decreased
from 22.7% (2008) to 19.6% (2009), resulting from a higher
revenue base in the latter period.
Dialog Semiconductor Plc Annual report and accounts 2009 19
Section 2 | Business review
Financial review
Other operating income
Other operating income of US$0.3 million in the year ended
31 December 2009 relates to the unexpected settlement against
receivables which had been written down in 2006 as a result
of the insolvency of BenQ Mobile. For further information,
please refer to note 27.
Other operating income in 2008 relates to the release of two
reserves: one in connection with the spin-off of the digital
imaging business (DIS), the other in connection with a warranty
claim. In 2008 the Company was able to release those reserves
after both issues were closed.
Operating profit
We reported an operating
profit of US$28.7 million for
the year ended 31 December
2009 (2008: US$6.0 million).
The improvement primarily
resulted from increased
revenues and gross profits
recognised in 2009.
Operating profit FY 2009
28.7
6.0
Excluding the effect of the
BenQ Mobile settlement
recorded in Q2-2009 – see above and note 27 – operating
profits for year ended 31 December 2009 would have been
US$26.4 million or 12.2% of total revenues.
2008
2009
Interest income and other financial income
For the year ended 31 December 2009, interest income and
other financial income from the Company’s investments
(primarily short term) was US$203,000 compared with
US$874,000 in the previous year. The reduction is primarily
the result of lower interest rates despite increased liquidity.
Interest expense and other financial expense
Interest expense and other financial expense consist primarily
of expenses from the Group’s factoring arrangement.
Interest and other financial expenses in 2009 were US$212,000
(2008: US$919,000). The reduction is primarily the result of
reduced factoring utilisation and lower interest rates.
Income taxes
For the year ended 31 December 2009, an income tax benefit of
US$3.9 million was recorded (2008: US$0.7 million). The amount
in 2009 consists of a current tax expense of US$3.2 million and
a deferred tax benefit of US$7.1 million. In Q4 2009 previously
unrecognised deferred tax assets were recognised. This resulted
in a contribution of US$7.5 million to the Company’s net profit
(for further information, please refer to note 4).
20 Dialog Semiconductor Plc Annual report and accounts 2009
32.7
Net income FY 2009
Net profit
For the reasons described
above, in 2009, net profit
increased by US$26.0 million
to US$32.7 million or 15.0%
of total revenues (2008:
US$6.8 million or 4.2% of total
revenues). For the year ended
31 December 2009, basic
earnings per share were
US$0.67 (2008: US$0.15) and
diluted earnings per share were
US$0.60 (2008: US$0.15). Excluding the effect of the cash
settlement from the BenQ Mobile insolvency recorded in April
2009 (see above and note 27), net income for year ended
31 December 2009 would have been US$30.4 million.
2009
2008
6.8
Liquidity and capital resources
Cash flows
Cash generated from operating activities was US$33.2 million
(2008: US$9.3 million). The cash inflow in 2009 mainly resulted
from the operating income (before depreciation, amortisation
and other non-cash effective expenses) and higher trade accounts
payable. This cash inflow was partly offset by increased trade
accounts receivables and inventory balances. The cash inflow
in 2008 related primarily to the operating income (before
depreciation, amortisation and other non-cash effective
expenses). This cash inflow was partly offset by cash used
to finance the increased working capital.
Cash used for investing activities in 2009 was US$12.3 million
(2008: cash generated US$12.1 million). Cash used for investing
activities in 2009 consisted primarily of the purchase of tooling
(masks), laboratory equipment, probe cards, load boards and
other advanced test equipment for a total of US$5.9 million
(2008: US$3.5 million), the purchase of intangible assets of
US$1.8 million (2008: US$2.8 million) and payments related
to capitalised development costs of US$1.0 million (2008:
US$1.4 million). In addition, the cash outflow in 2009 includes
a balance sheet reclassification of US$3.0 million from cash to
restricted cash (for further information, please refer to note 25
of the consolidated financial statements). 2008 cash inflow from
investing activities resulted primarily from the net sale of securities
of US$19.7 million.
Section 2 | Business review
Liquidity
At 31 December 2009 we had cash and cash equivalents and
restricted cash of US$123.1 million (31 December 2008:
US$36.9 million). The working capital (defined as current assets
minus current liabilities) was US$134.4 million (31 December
2008: US$47.4 million).
2009 we had no amounts outstanding under these facilities.
In addition, we have a factoring agreement which provides the
Company with up to US$30.0 million of readily available cash.
Accordingly, we believe the funding available from these and
other sources will be sufficient to satisfy our working capital
requirements in the near to medium term if needed.
If necessary, we have available for use short-term credit facilities
amounting to US$14.2 million that bear interest at rates between
LIBOR +0.75 and LIBOR +1% per annum. At 31 December
2009
US$000
123,148
45,663
168,811
9,807
5,005
1,174
7,514
2008
US$000
36,915
30,388
67,303
7,734
4,640
676
–
Change
US$000
86,233
15,275
101,508
2,073
365
498
7,514
%
233.6
50.3
150.8
26.8
7.9
73.7
–
192,311
80,353
111,958
139.3
34,380
952
156,979
192,311
19,877
271
60,205
80,353
14,503
681
96,774
111,958
73.0
251.9
160.7
139.3
Non-current liabilities relate to capital lease and hire purchase
commitments.
Shareholders’ equity increased to US$157.0 million (US$60.2 million
at 31 December 2008) which is mainly the result of the September
2009 capital increase (please refer to note 19) and our net profit.
The equity ratio (equity over total assets) was 81.6% (74.9% at
31 December 2008).
Statement of financial position
Assets
Cash and cash equivalents and restricted cash
All other current assets
Total current assets
Property, plant and equipment, net
Intangible assets
All other non-current assets
Deferred tax assets
Total assets
Liabilities and Shareholders’ equity
Current liabilities
Non-current liabilities
Net Shareholders’ equity
Total Liabilities and Shareholders’ equity
Balance sheet total was US$192.3 million at 31 December 2009
(31 December 2008: US$80.4 million). Cash and cash equivalents
and restricted cash increased by 233.6% to US$123.1 million
at 31 December 2009 (31 December 2008: US$36.9 million).
This increase is mainly related to the net cash proceeds from the
September 2009 capital increase (US$59.7 million) received in
Q4-2009 and an operating cash inflow as prescribed above.
Other current assets increased by 50.3% to US$45.7 million
(31 December 2008: US$30.4 million), driven by higher trade
accounts receivables and inventory balances.
Total non-current assets increased by 80.1% to US$23.5 million.
This increase is mainly due to recognised deferred tax assets
in Q4-2009 amounting to US$7.5 million (2008: nil), higher
balances of property, plant and equipment and intangible
assets as capital expenditures and investments were higher
than depreciation and amortisation and impairment charges.
Dialog Semiconductor Plc Annual report and accounts 2009 21
Section 2 | Business review
Risks and their management
The market
The market in which we compete is intensely competitive and
highly cyclical, and is characterised by continuous development
and technological improvement. Our future success depends on
our ability to anticipate and respond to new market trends, to
implement new designs rapidly to meet customers’ needs, and to
keep abreast of the technological changes. As a result, we invest
in research and development to enable us to create innovative
designs and products on a cost-effective, timely basis.
Revenue and profitability
We returned to profitability in 2008 after having not been profitable
for the prior seven financial years, and cannot guarantee that
we will remain profitable in the future. But we constantly seek
to improve profitability by launching new products and acquiring
new customers. Since we continue to rely on a relatively small
number of customers for a substantial proportion of our revenue,
the loss of one or more of these customers would be likely to
have a material effect. Our goal is to spread this risk by acquiring
more customers.
We are attempting to reduce the risk of our revenues, profitability
and growth being affected by a slow down in the wireless
communications market by winning customers in other sectors.
Third-party costs
During 2007, we outsourced our manufacturing and testing
to lower-cost environments, where there is excellent capacity,
to overcome the potential problem of an inability to access
manufacturing capacity which would result in increased costs
and, therefore, decreased revenue.
Supplier risk
If any of the Company’s suppliers were to become insolvent,
there could be a risk of the Company’s production being
interrupted. For this reason, the Company tries to source its
components from at least two different suppliers and from
different sites. In addition, the Company takes the precautions
for supplier insolvency with its risk management system in which
information on the creditworthiness of suppliers is kept. This
seeks to identify suppliers at risk at an early stage.
Intellectual property
We seek to protect our intellectual property from being copied
or used by others by appropriate use of patents, copyrights
and trademarks.
22 Dialog Semiconductor Plc Annual report and accounts 2009
Interest rate risk
The Group earns interest from bank deposits and uses money
market deposits with highly rated financial institutions. During
the year, the Group has held cash on deposit with a range of
maturities from one week to three months. This can vary in view
of changes in the underlying currency’s interest rates and the
Group’s cash requirements. The Group has no long-term debt
and no amounts outstanding under short-term credit facilities as
at 31 December 2009 (2008: US$nil). The Group’s policy is to manage
its interest income using a mix of fixed and variable interest rate
debts. In order to achieve this policy, the Group invests in highly
liquid funds having a matching investment strategy. Once the
operating business has been financed, short-term excess funds
are invested with reputable financial institutions.
Currency risk
The Company’s functional – and presentational – currency is the
US dollar, and the majority of its revenue and expenses are in that
currency. There are, however, foreign exchange risks associated
with transactions, and recognised assets and liabilities in other
currencies, primarily the euro and the pound sterling. Transaction
currency exposures arise from sales or purchases in currencies
other than the US dollar. We use forward currency contracts
to eliminate our exposure associated with the payment of salaries
and wages in other currencies. We maximise the effectiveness
of our hedge derivatives by matching the terms and conditions
of the hedge to those of the underlying obligation. (See note 25
on page 76 for further information.)
Other price risks
IFRS 7 requires us to disclose how hypothetical changes in risk
variables, such as stock exchange prices, would affect the price
of financial instruments. In 2008, the Group sold all securities for
cash, eliminating all price risk associated with such instruments.
Credit risk
The Company is exposed to credit risk from its operating activities
and certain of its financing activities. We ensure that our exposure
to bad debt is minimised by monitoring all customers who trade
on credit terms, and receivable balances. In August 2007, we
entered into a factoring agreement with a reputable German
financial institution for a total of €10 million to finance our
growth. In 2008, the amount was increased to US$ 30.0 million.
Since the financial institution assumes all risks associated with the
collection of receivables from selected customers, the agreement
significantly reduces our risks associated with their collection.
We, in turn, have pledged US$6.5 million of our securities to
the financial institution concerned. These will be drawn on only
if an action of ours partially or completely invalidates the claim
on a receivable that had been financed through the factoring
programme. In 2008, the securities were converted to cash.
Section 2 | Business review
Risks and their management
Corporate social responsibility
In 2009, the pledge amount was reduced to US$3.0 million and
converted to cash. Our exposure to credit risks arising from other
financial assets, such as cash and cash equivalents, available-for-
sale and held-to-maturity financial investments, would arise from
the default of a counterparty and is limited to the carrying
amount of the particular instruments.
Liquidity risk
We monitor our liquidity on a quarterly basis with the objective
of avoiding interest on short-term bank liabilities or overdrafts.
Our policy is to structure the maturity of our current financial
assets in the Group to meet 100% of the respective maturities
and liabilities.
An international equity offering was launched in Q3 2009, with
the subscription being approximately three times oversubscribed.
Twelve million new ordinary shares were priced at €3.65,
representing a premium of 4% to the price on the offer
announcement date. The shares were placed with a number of
Tier 1 institutional investors to raise gross proceeds of €43.8 million
(US$ 64.3 million). Net proceeds (after deduction of offering
expenses of US$4.7 million) were US$59.7 million. The proceeds
from the offering will be used to increase our working capital
resources to fund future growth, to acquire complementary
technology and intellectual property and expand our design
and technical support teams, particularly in the US and Asia.
By providing an exciting work experience in an attractive environment, with
investment in our people and resources, Dialog continues to attract leading
talent in the industry.
Dialog considers that the social challenges of corporate
responsibility should be based on fair wages, healthy and
safe working conditions, respect for human rights, honest
relationships and commitment to community development.
With regard to these challenges, Dialog is committed to the
adoption of the Electronics Industry Code of Conduct (EICC)
standard as the model for ensuring that working conditions
for internal and external suppliers are safe and that all workers
are treated with respect and dignity.
This commitment is reflected in Dialog’s own “Code of Conduct”,
which addresses all the key areas defined in the EICC standard
along with recognised standards such as International Labour
Organization Standards (ILO), Universal Declaration of Human
Rights (UDHR), Social Accountability International (SAI) and the
Ethical Trading Initiative (ETI).
In addition, the Company complies with the worldwide ISO
14001 Environmental Standard – and expects its suppliers to do
the same – in order to ensure that all manufacturing processes
are environmentally compliant.
Human rights and code of conduct
Dialog’s philosophy is that all its suppliers must demonstrate a
commitment to upholding workers’ human rights and to treating
them with dignity and respect. Standards such as the UDHR,
SAI and the ETI have been used as a basis for these requirements.
All labour must be given voluntarily and workers must be free
to leave their employment on reasonable notice. Child labour
must not be used at any stage of manufacturing. Working hours
must not exceed the maximum set by local laws and wages must
comply with all applicable laws.
Dialog and its suppliers must ensure that workers are not
threatened or subjected to inhumane or harsh treatment,
harassment or any form of unlawful discrimination. Open
communication and direct engagement between workers and
management is encouraged, even in those countries where
there is no meaningful legal protection.
In order to promote its philosophy several new initiatives have
been introduced to all of Dialog’s manufacturing partners during
2009, including a detailed code of conduct for them to review
and implement.
Detailed self-audits have been performed by all our suppliers in
order to verify the implementation of this code of conduct and
on-site audits and inspections are performed regularly by Dialog
to verify its continuing maintenance.
Health and safety
Dialog considers a safe and healthy working environment to be
essential in the maintenance of employees’ morale and in the
Dialog Semiconductor Plc Annual report and accounts 2009 23
Section 2 | Business review
Corporate social responsibility
production of high-quality and innovative products. As a result,
we require our major suppliers also to be committed to ensuring
the creation of healthy and safe working conditions. We expect
them to provide evidence of suitable controls, safe working
procedures, preventative maintenance and general protective
measures in their working environments.
When hazards cannot be adequately controlled by these means
alone, suitable protective clothing or equipment is supplied, and
evacuation procedures and facilities are in place at Dialog’s and
suppliers’ premises.
Connecting with employees
Dialog aims to attract and retain the best people by ensuring that
all employees receive comprehensive on-the-job formal training,
coaching and mentoring. Clear and regular communication is
achieved through regular Company-wide information sessions,
led by the CEO, and every effort is made to keep employees fully
aware of Company matters that affect them.
We encourage employee feedback at all levels for new ideas
to improve business efficiency and performance. We support
initiatives and fundraising in the local communities in which
we work.
Ethics
Dialog believes that continued success in the semiconductor market
can be achieved only by adopting high standards of ethical
behaviour when dealing with customers, suppliers and workers.
It is particularly important to protect Intellectual Property (“IP”),
which is the key to ensuring the development of innovative
solutions to complex problems. Any transfer of technology or
know-how is always done in a manner that protects IP rights;
effective protection also means that products can be discussed
openly with our business partners.
The disclosure of information which is related to business
activities, structure, our financial situation and performance
is always carried out in accordance with applicable regulations
and prevailing industry practices. We expect the highest standards
of integrity from all Dialog stakeholders; any malpractice is
strictly prohibited and may result in immediate termination
and legal action.
Neither we nor our suppliers offer or accept inducements or
any other means of obtaining undue or improper advantage.
We have a “whistle-blower” policy in place to protect employees’
confidentiality and encourage our suppliers to do the same.
Management systems
Dialog’s management system complies with the EICC code.
It is certified to the ISO 9001 international standard as a formal
implementation of the code and is committed to implementing
and facilitating continuous improvements, and to mitigating
operations-related risks. To enable us to comply with all applicable
24 Dialog Semiconductor Plc Annual report and accounts 2009
laws, regulations and customer requirements, as required by
the code, we also ensure that all our major supply-chain partners
are accredited at least to the same standard. To ensure that we
constantly improve our management systems, we regularly review
and audit internal and supply-chain management systems.
The environment and environmental protection
The environmental agenda at Dialog considers climate change
environmental protection aspects (air, land and water quality),
effective resource management (eco-efficiency) and sustainability.
Our commitment to the environment is evidenced by our ISO14001
certification. Since we firmly believe that sustainable development
can be secured only if we safeguard our valuable resources,
we deal only with suppliers that have similar environmental
goals and are also accredited to the ISO14001 standard.
Within our supply chain, we continually emphasise that
environmental issues should be an instinctive part of any
decision-making process, and that suppliers should use
environmentally friendly technology to:
(cid:1) reduce and eliminate emissions of ozone-depleting, and other
volatile organic chemicals (VOC);
(cid:1) design and manufacture only environmentally friendly products;
(cid:1) manage, reduce and dispose of hazardous substances safely;
(cid:1) monitor and control waste water and solid waste emissions;
(cid:1) reduce and eliminate all types of waste, including water
and energy;
(cid:1) reduce waste by maximising product yields; and
(cid:1) ensure all environmental permits are obtained, maintained
and kept current.
As a fabless semiconductor company, it is important to Dialog
that all of its manufacturing partners also follow their
requirement to respect the environment.
To this end every supplier is required to complete a self-audit
questionnaire to identify and document compliance to Dialog’s
environmental requirements.
Also, evidence of compliance to requirements is checked during
regular supplier on-site audits.
Some recent examples of the environmental improvements
implemented by our suppliers are:
(cid:1) reduction of VOC Emissions through the use of local scrubbers;
(cid:1) reduction in water usage by 2% due to water recycling
and developing of rainwater drainage systems to increase
the collection of rainwater for reuse;
(cid:1) reduction of scrap (failed devices) by maximising product yields;
and
(cid:1) use of recycling facilities for extractions and reuse of precious
metal and plastic. This has enabled a raw material recycle rate
increase of around 7% compared to 2008.
Section 3 | Management and governance
Executive management
From left to right: Dr Jalal Bagherli, Gary Duncan, Peter Hall, Udo Kratz, Jean-Michel Richard, Jürgen Friedel, Manoj Thanigasalam, Mark Tyndall and Mohamed Djadoudi.
Dr Jalal Bagherli
Chief Executive Officer
Jalal joined Dialog, as CEO, in September 2005.
He was previously Vice President and General Manager
of the Mobile Multimedia business unit for Broadcom
Corporation and the CEO of Alphamosaic. He has
extensive experience of the semiconductor industry
through his previous professional and executive
positions at Texas Instruments and Sony, and a wealth
of knowledge about the Far Eastern, European and
North American markets. He is a non-executive
Director of Lime Microsystems Ltd.
Gary Duncan
Vice President, Engineering
Gary, who joined the Company in 1987, is responsible
for the design and development of our semiconductor
products. Before joining Dialog, he held senior
engineering and management roles at Plessey and ES2.
Peter Hall
Vice President, Supply Operations and Facilities
Peter joined Dialog in 1987 and is responsible for
supply operations, procurement and facilities. He also
reports directly to the Audit Committee in his role
as Internal Audit Manager. His previous experience
includes management and engineering positions at
STC Semiconductors and MEM in Switzerland. Peter
holds a BSc in electrical and electronic engineering
from Newcastle University and an MSc in digital design
techniques from Herriot Watt University, Edinburgh,
and an MBA from the Open University, United
Kingdom.
Mark Tyndall
VP Business Development
and Corporate Strategy
Mark Tyndall joined Dialog Semiconductor as Vice
President of Business Development and Corporate
Strategy in September 2008. Prior to Dialog, Mark was
Vice President of Business Development and Corporate
Relations at MIPS Technologies. From 1999 to 2006,
he held the position of Vice President of Business
Development at Infineon and has also served as a
Board Director of a number of start-up companies,
several of which were successfully acquired. Earlier
in his career, Mark held management positions in
marketing at Fujitsu Microelectronics and in design
at Philips Semiconductors.
Mohamed Djadoudi
Vice President, Global Manufacturing Operations
and Quality
Mohamed joined Dialog in March 2007 and is
responsible for product engineering, test and assembly
development, data automation, software support,
offshore manufacturing operations and quality.
Mohamed has 25 years’ experience in the field of
semiconductor manufacturing operations, starting
initially with IBM in France and the US. He was
previously Senior Vice President and Chief Technology
Officer of the Unisem group, an assembly and test
subcontractor based in Malaysia and China. He also
held the position of Vice President of Test Operations
at ASAT based in Hong Kong before becoming one of
the original members of the management buy-out
team of ASAT UK (Atlantis Technology UK), where he
served as the Technical Director. Mohamed holds an
Electronic and Electrotechnic degree from the Paris
University of Technology.
Udo Kratz
Vice President, General Manager Audio
and Power Management Business Unit
Udo joined Dialog in May 2006. He is responsible
for the Audio and Power Management Business Unit,
which makes products for the mobile phone and
portable consumer markets. His 20+ years’ experience
in the semiconductor industry was gained in general
management, senior marketing and engineering
at Robert Bosch GmbH, Sony Semiconductor and
Infineon Technologies. Udo holds an electronic
engineering degree from the University for Applied
Sciences, Mannheim.
Jean-Michel Richard
CFO, Vice President Finance
Jean-Michel joined the Company in September 2006
to head up its finance department. He was previously
Finance Director for the Global Manufacturing and
Technology Division of ON Semiconductor, in Phoenix,
Arizona, and before that held senior finance and
treasury positions at ON and Motorola, in Europe
and the US. Jean-Michel holds a Masters in Economics
from the University of Geneva, Switzerland.
Jürgen Friedel
Vice President, General Manager Automotive
and Industrial Business Unit
Jürgen joined Dialog in 1999 and is responsible for the
Automotive and Industrial Business Unit. He previously
held senior management positions at SEL/ITT and
National Semiconductor, in Germany. Jürgen holds
a diploma in communications engineering from the
University for Applied Sciences, Esslingen.
Manoj Thanigasalam
Vice President, General Manager Display Systems
Business Unit
Manoj joined the Company in March 2006. Responsible
for the Display Systems Business Unit, he was
previously Vice President of Business Development at
ZBD Displays and, before that, was General Manager
of marketing for the Digital TV and wireless
communications market at Sony Semiconductor.
He has also worked for Texas Instruments, Philips,
ARM and LSI Logic. Manoj holds a degree in physics
and electronics from Bradford University.
Dialog Semiconductor Plc Annual report and accounts 2009 25
Section 3 | Management and governance
Board of Directors
From left to right: Gregorio Reyes, Jalal Bagherli, Chris Burke, Aidan Hughes, John McMonigall, Russ Shaw, Peter Tan and Peter Weber.
Gregorio Reyes
Chairman
Gregorio joined the Board in December 2003. His
experience is primarily in data storage and magnetic
recording, semiconductors, and telecommunications.
He was President and CEO of National Micronetics from
1981 to 1984, and Chairman and CEO of American
Semiconductor Equipment Technologies from 1986
to 1990. He co-founded Sunward Technologies in
1985 and was Chairman and CEO until 1994. He is
currently non-executive Chairman of LSI Logic and
a non-executive director of Seagate Technology.
Dr Jalal Bagherli
Chief Executive Officer
Jalal joined Dialog, as CEO, in September 2005.
He was previously Vice President & General Manager
of the Mobile Multimedia business unit for Broadcom
Corporation and the CEO of Alphamosaic. He has
extensive experience of the semiconductor industry,
through his previous professional and executive
positions at Texas Instruments and Sony, and a wealth
of knowledge about the Far Eastern, European and
North American markets. He is a non-executive director
of Lime Microsystems Ltd.
Chris Burke
Non-executive Director
Chris joined the Board in July 2006. Until the end of
2004, he was CTO at Vodafone UK Limited and was
previously CTO at Energis, after spending 15 years
in Research & Development at Northern Telecom.
He holds appointments at Connectivity Ltd (an Esprit,
and 3i Portfolio Company) and OneAccess. He invests
from his own fund and provides strategic advice to
a wide range of investors and technology companies,
including HP Communications & Media, Juniper
Networks and a variety of venture capital funds.
Aidan Hughes
Non-executive Director, Chair of Audit Committee
Aidan joined the Board in October 2004. He qualified
as a Chartered Accountant with Price Waterhouse in
the 1980s before taking senior accountant roles at
Lex Service Plc and Carlton Communications Plc.
He was Finance Director of the Sage Group plc from
1993 until 2000 and, from December 2001 to August
2004, was a director of Communisis Plc. He is a
director of, and investor in, a number of UK private
technology companies.
John McMonigall
Non-executive Director
John joined the Board in March 1998. He has been
a director at Apax Partners since 1990 and, between
1986 and 1990, held a variety of senior positions at
British Telecommunications plc and was also a member
of the management board. He is currently on the
board of several other public and private companies,
including Autonomy Plc.
Russ Shaw
Non-executive Director, Chair of Remunerations
& Nominations Committee
Russ joined the Board in July 2006. He is currently
the Vice President & General Manager for Skype with
responsibilities for its Mobile Division as well as Europe,
Middle East and Africa. Previously, he was at Telefonica
where he was the Global Director of Innovation. Before
joining Telefonica, he was the Innovation Director at
O2, which he joined as Marketing Director in 2005.
The strong brand and product range he established
resulted in significant customer growth. His more-than
20 years’ senior marketing and brand management
experience in the telecoms and financial services
area has enabled him to bring an excellent level of
knowledge to Dialog.
Peter Tan
Non-executive Director
Peter joined the Board in July 2006. He has held senior
management roles across a wide range of technology
companies, including National Semiconductors Pte Ltd,
Molex Singapore Pte Ltd, Apple Computer Inc. and
Flextronics International Inc. He is presently Managing
Partner of JP Asia Capital Partners Pte Ltd, and also sits
on the board of Vacuumschmelze (VAC) Luxembourg
S.a.r.l., VariOptic SA, Innotek Limited and SMRT
Corporation Ltd. Besides his Board role, Peter has
an advisory function in the National University of
Singapore BTech Program and is a member of the
International Evaluation Panel for the Singapore
National Research Foundation. Peter holds a Diploma
in Management Studies from the University of Chicago
and an Executive MBA Degree from the Golden Gate
University, San Francisco.
Peter Weber
Non-executive Director
Peter joined Dialog on 1 February 2006. He brought
with him 35 years’ experience, gained at a broad range
of companies in the semiconductor sector, including
Texas Instruments, Intel, Siliconix, the Temic Group and
Netro Corporation. Since 1998 he has been an investor
and management consultant, and is a director of a
number of companies in Europe and the US. Peter
holds an MSEE degree in communications engineering.
26 Dialog Semiconductor Plc Annual report and accounts 2009
Section 3 | Management and governance
Directors’ report
The Directors of Dialog Semiconductor Plc (“Dialog” or “the
Company”) present their annual report and audited financial
statements for the year ended 31 December 2009. These
accounts have been prepared under IFRS for UK reporting
purposes and are available on the Company’s Website:
www.dialog-semiconductor.com.
Principal activities and review of the business
Dialog Semiconductor creates some of the world’s most energy-
efficient, highly integrated, mixed-signal integrated circuits. These
are optimised for personal mobile, industrial and automotive
applications. The Company provides flexible and dynamic
support, world-class innovation, and the assurance of dealing
with an established business partner. Customers with a significant
contribution to revenue include Sony Ericsson, Apple, RIM, Bosch
and Tridonic Atco. With its unique focus and expertise in system
Power Management, Dialog brings decades of experience to
the rapid development of integrated circuits for power and
motor control, audio and display processing. Dialog’s processor
companion chips are essential for enhancing both the
performance of hand-held products and the consumers’
multimedia experience. Automotive applications include
intelligent motor control for comfort and safety systems. With
world-class manufacturing partners, Dialog operates a fabless
business model. Dialog Semiconductor Plc is headquartered near
Stuttgart, Germany, with operations in Austria, China, Germany,
Japan, Korea, Taiwan, the UK and the USA. The Company
employs 339 worldwide and is listed on the Frankfurt (FWB: DLG)
stock exchange.
Going concern
After reviewing the 2010 budget and longer-term plans, the
Directors are satisfied that, at the time of approving the financial
statements, it is appropriate to adopt the going-concern basis in
preparing the financial statements of the Company.
Dividends
The Directors do not recommend the payment of a dividend
(2008: nil). They are committed to re-investing all profits into
the business and believe that this policy is in the best interests
of its Shareholders.
Purchase of own shares
The Company operates an Employee Share Option Trust which
purchases shares in the Company for the benefit of employees
under the Company’s share option scheme. Since the Company
has de facto control of the assets and liabilities of the Trust,
they are included in the Company and Group balance sheets.
At 31 December 2009, the Trust held 2,663,318 shares, which
represented 4.3% of the total called-up share capital, at a
nominal value of £266,332.
Share capital
Details of the share capital are set out in note 19 to the
consolidated financial statements.
Substantial shareholdings
Details of substantial shareholdings are on page 9 of this
annual report.
More information about the business is set out in the Chairman’s
statement, on page 6, and in the Business review, on pages 10 to 24.
Directors
The Directors, together with their biographies, are listed on
page 26 of this report.
Future developments
The Group’s stated objective is to be the leading global supplier of
lowest-power, highest-quality mixed-signal components and system
level solutions to the wireless and automotive markets. The
Company is currently leveraging its expertise to expand its stand-
alone audio product portfolio, capitalising on the success of its
newly introduced low power and high quality Audio IC, and to add
innovative ultra low power display technologies such as PM-OLED.
Retirement
On 22 April 2009, Michael Glover retired from the Company’s
Board of Directors.
Directors’ remuneration and interests
Directors’ remuneration and interests are detailed in the Directors’
remuneration report on pages 32 to 34 of this annual report.
Research and development (R&D)
The Group believes that its future competitive position will
depend on its ability to respond to the rapidly changing needs
of its customers by developing new designs in a timely and
cost-effective manner. To this end, the Company’s management
is committed to investing in researching and developing new
products and customising existing products.
To date, R&D projects have been in response to key customers’
requests to assist in the development of new products, and for
the development of application-specific standard products
(ASSPs). The Company does not expect any material change
to this approach in the foreseeable future.
No Director had a material interest during the year ended
31 December 2009 in any contract of significance with any
Group company.
Directors’ third-party indemnity provisions
The Company has granted an indemnity to its Directors against
proceedings brought against them by third parties, by reason
of their being Directors of the Company, to the extent permitted
by the Companies Act 2006. Such indemnity remains in force
as at the date of approving the Directors’ report.
Dialog Semiconductor Plc Annual report and accounts 2009 27
Responsibility statement under the Disclosure and
Transparency Rules
Each of the Directors listed on page 26 confirm that to the best
of their knowledge:
(cid:1) the financial statements, prepared in accordance with IFRS
as adopted by the European Union, give a true and fair view
of the assets, liabilities, financial position and profit of the
Company and the undertakings included in the consolidation
taken as a whole; and
(cid:1) the Directors’ report and the Group Operating and Financial
Review include a fair review of the development and the
performance of the business and the position of the Company
and the undertakings included in the consolidation taken
as a whole, together with a description of the principal risks
and uncertainties that they face.
Annual General Meeting
The notice convening the Annual General Meeting will be
published separately and posted on the Company’s Website.
The meeting will be held at Tower Bridge House, St Katherine’s
Way, London E1W 1AA on 5 May 2010 at 9am.
Auditors
In accordance with Section 384 of the Companies Act 2006,
a resolution for the re-appointment of Ernst & Young LLP as
auditors of the Company is to be proposed at the forthcoming
Annual General Meeting.
By order of the Board
Dr Jalal Bagherli
Director
11 February 2010
Section 3 | Management and governance
Directors’ report
Election and re-election of Directors
In accordance with the Company’s Articles of Association,
one-third of the non-executive Directors have to stand for
re-election at the Annual General Meeting. The next Annual
General Meeting will be held on 5 May 2010 at 9am.
Corporate Governance
The Company’s Corporate Governance statement is set out
on pages 29 and 31 of this report.
Supplier payment policy
It is the Group’s policy to pay creditors in accordance with the
terms and conditions agreed with them, and in accordance with
contractual and other legal obligations. Days payable outstanding
for the Group at 31 December 2009 was 52 days (2008: 47 days).
Financial instruments
The Group’s financial risk management and policies, and exposure
to risks, are set out on pages 22 to 23.
Political and charitable contributions
The Group made no political contributions during the period.
We made charitable contributions of US$6,542 to local
community projects (2008: US$8,993).
Employee policies
It is our policy to support our people through training, career
development and opportunities for promotion. We operate
an open management approach and consult with our staff on
matters which are of concern to them. We share information
with employees on the performance of the Company which,
together with profit related bonuses and stock option awards,
encourage staff involvement.
Disabled persons
Our policy provides for disabled persons, whether registered
or not, to be considered for employment, training and career
development in accordance with their aptitudes and abilities.
Statement on disclosure of information to auditors
The Directors who were members of the Board at the time of
approving the Directors’ report are listed on page 26. Having
made enquiries of fellow Directors and of the Company’s
auditors, each of the Directors affirms that:
(cid:1) to the best of their knowledge and belief, there is no
information relevant to the preparation of their report
of which the Company’s auditors are unaware; and
(cid:1) they have taken all reasonable steps to be aware of relevant
audit information and to establish that the Company’s auditors
are aware of that information.
28 Dialog Semiconductor Plc Annual report and accounts 2009
Section 3 | Management and governance
Corporate Governance
Governance standards
Dialog Semiconductor Plc is committed to implementing high levels of governance. Accordingly, Dialog Semiconductor (as a foreign
company listed on the German stock exchange) has established and published its own Corporate Governance principles corresponding
in substance to the provision of the “German Declaration on Corporate Governance”.
Dialog’s Corporate Governance principles are published on its Website (www.dialog-semiconductor.com). The Website also contains
a full version of the Company’s Code of Business Conduct and Ethics. This details Dialog’s expectations regarding the ethical standards
that each Director, officer and employee should follow while acting on the Company’s behalf.
Corporate Governance information relating to the past financial year is set out below.
Shareholders and the Annual General Meeting (“AGM”)
The AGM, at which the annual financial statements and audit reports are presented, is the main forum for Shareholders to exercise
their voting rights. Directors appointed by the Board during any given year are subject to Shareholder approval at the AGM.
In addition, one-third of the Directors must resign each year and may put themselves forward for re-election. Changes to the
constitution of the Company are decided by Shareholders’ resolution. Similarly, the AGM is the forum at which Shareholders can
authorise the Directors to issue new shares.
Dialog does not have any shares in issue which have multiple voting rights, preferential voting rights or maximum voting rights.
Board of Directors
The Board is responsible for determining Dialog’s business strategy and ensuring that an executive is appointed to implement it.
It is also responsible for overseeing the financial aspects of the business.
The Board, which met five times during the year, currently consists of seven non-executive Directors and one executive Director.
The compensation provided to each Director is detailed in the Directors’ remuneration report on pages 32 to 34. The executive
Director’s remuneration is performance related and is connected to a set of goals and Dialog’s profitability.
Audit Committee, and Remuneration and Nomination Committee
Dialog’s Audit Committee comprises the following Directors: Aidan Hughes (Chairman), John McMonigall and Peter Tan. The
Committee is responsible for monitoring financial statements and reviewing the performance of the external auditors. It also assesses the
efficiency of the audit process and (among other things) considers compliance with accounting standards. The Chief Executive Officer,
Chief Financial Officer, the Company Secretary and representatives of the external auditors usually attend Audit Committee meetings.
The Remuneration and Nomination Committee is chaired by Russ Shaw who is assisted by Chris Burke and Peter Weber.
The responsibility of the Committee, among other things, is to determine subject to Board approval, the salaries and incentives
of Dialog’s senior executives and decide on the size and composition of the Board. Corporate Governance is monitored at Board
level – a reflection of the importance it is given by the Board.
During the year, the Audit, and Remuneration and Nomination Committees met frequently to analyse issues under their jurisdiction,
usually on the day before each Board meeting.
Dialog Semiconductor Plc Annual report and accounts 2009 29
Section 3 | Management and governance
Corporate Governance
Transparency
Under UK Disclosure and Transparency Rules, significant Shareholders are required to notify Dialog of a shareholding of 3% or more.
Dialog must then notify BaFin and the Stock Exchange. Under S.15a of the German Securities Trading Act (Wertpapierhandelsgesetz)
transactions in the Company’s shares carried out by members of the Board of Directors and their family members are reported and
published without delay.
The Company operates a Code of Dealing in its shares which is designed to prevent insider trading and the abuse of price-
sensitive information.
The Board appreciates the value of keeping Shareholders informed of Dialog’s performance throughout the year. As a result,
it publishes quarterly financial reports, together with key information on the AGM, on its Website.
Takeovers directive
At 31 December 2009, the Company’s issued share capital comprised a single class of shares referred to as ordinary shares. Details
of the share capital can be found in note 19 consolidated financial statements.
On a show of hands at a general meeting of the Company every holder of shares present in person and entitled to vote shall have one
vote and on a poll, every member present in person or by proxy and entitled to vote shall have one vote for every ordinary share held.
The notice of the general meeting specifies deadlines for exercising voting rights either by proxy notice or present in person or by proxy
in relation to resolutions to be passed at general meeting. All proxy votes are counted and the numbers for, against or withheld in
relation to each resolution are announced at the annual general meeting and published on the Company’s website after the meeting.
There are no restrictions on the transfer of ordinary shares in the Company other than:
(cid:1) certain restrictions may from time to time be imposed by laws and regulations (for example, insider trading laws);
(cid:1) employees of the Company are not allowed to trade in shares or exercise options in certain close periods (such close periods
normally start two weeks before the end of each quarter and end 48 hours after the release of the financial results).
Changes in the share capital of the Company in 2009 were as follows:
(cid:1) On 25 September 2009, the shareholders of the Company approved an offering of 12 million new ordinary shares of 10 pence each
in the capital of the Company;
(cid:1) On 20 October 2009, the Company completed an offering of 3,500,000 previously unissued ordinary shares at 10 pence each
to its employee share options trust.
Details of both changes in share capital can be found in note 19 to the consolidated financial statements. Besides that, the Company
did not purchase own shares and the Company holds no shares in treasury.
The Company is not aware of any agreements between Shareholders that may result in restrictions on the transfer of securities and
for voting rights.
There are no agreements between the Company and its Directors or employees providing for compensation for loss of office or
employment (whether through resignation, purported redundancy or otherwise) that occurs because of a takeover bid. The agreements
between the Company and its Directors for compensation for loss of office are given in the Directors remuneration report on page 32.
The Company’s articles of association may only be amended by a special resolution at a general meeting of Shareholders.
30 Dialog Semiconductor Plc Annual report and accounts 2009
Section 3 | Management and governance
Internal control
In accordance with the EU Transparency Directive (DTR 7.2.5), Dialog’s Board of Directors and Audit Committee acknowledge that they
are responsible for the Company’s processes of internal control and for reviewing its effectiveness. Such processes are designed to
manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute
assurance against material misstatement or loss.
The Company has an ongoing process for identifying, evaluating and managing the significant risks it faces. This process is reviewed in
accordance with the EU Transparency Directive. The process was in place during 2009 and up to the date of the approval of the 2009
annual report and financial statements.
The Company’s Board and Audit Committee can confirm that necessary actions have been taken to remedy any significant failings
or weaknesses identified from these process reviews and from two additional independent IT audits performed during 2009.
Business conduct and ethics
Dialog seeks to comply with all laws and regulations that have an impact on its business. In addition, the Company expects its
employees and Directors to act with honesty, integrity and fairness in the conduct of its business. Dialog’s Code of Business Conduct
and Ethics is published on the Company’s Website.
Dialog is committed to taking account of interests outside the Company, including those of employees, business partners, the
environment and the local communities on which it has an impact. The Board values, and has developed, a culture of corporate social
responsibility that takes the above factors into consideration.
Audit and auditors
The consolidated financial statements have been audited by Dialog’s auditors, Ernst and Young (“E&Y”). E&Y were appointed in
October 2006 following a tender process.
The remuneration given to the auditors over the past two financial years is detailed in notes 3 and 31 to the consolidated financial
statements on pages 55 and 84.
The Company’s audited financial statements for the year ended 31 December 2008, and the reports from the Directors and
auditors thereon, were presented to, and approved by, the Shareholders at the AGM of the Company held on 22 April 2009.
E&Y, the Company’s independent auditors, were reappointed until the following AGM.
Declaration of conformity with regard to the German Corporate Governance Code
Dialog Semiconductor Plc has established and published its own Corporate Governance principles corresponding in substance
to the provisions of the German “Corporate Governance Code” as amended on 14 June 2007 thereby adopting in substance
the recommendations of the Government Commission on the German Corporate Governance Code. This declaration is available
on the internet at: www.dialog-semiconductor.com.
Gregorio Reyes
Chairman
11 February 2010
Dialog Semiconductor Plc Annual report and accounts 2009 31
Section 3 | Management and governance
Directors’ remuneration report
Policy on Directors’ remuneration
The Board is responsible for setting the Company’s policy on Directors’ remuneration; the Remuneration and Nomination Committee
agrees the remuneration for each executive Director.
The primary objectives of the Company’s policy on executive Directors’ remuneration are, first, that it should be structured so as
to attract and retain executives of a high calibre, with the skills and experience necessary to develop the Company successfully and,
second, to reward them in a way which encourages the creation of value for the Company’s Shareholders.
The performance measurement of each executive Director and the determination of his annual remuneration package are undertaken
by the Remuneration and Nomination Committee.
No Director is involved in deciding his or her own remuneration. The Remuneration and Nomination Committee comprises
non-executive Directors and its role is, inter alia, to apply the Board’s policy on remuneration. The current members of the
Committee are Russ Shaw (Chairman), Chris Burke and Peter Weber.
The Company has one executive Director, Dr Jalal Bagherli, who was appointed on 12 September 2005. The executive Director’s
remuneration consists of three components:
1. Salary – reflects the executive’s experience, responsibilities and market value;
2. Bonus – as part of his remuneration, Dr Bagherli receives bonuses based on objectives set by the Remuneration and Nomination
Committee relative to the performance of the Group, as an incentive to Dr Bagherli to achieve relevant and demanding targets,
in relation to revenue growth, operating profit, design wins; and
3. Share options – details are set out in note 21 to the consolidated financial statements.
Compensation of non-executive Directors
Non-executive Directors, for example, are paid quarterly for their roles as Directors. Additional fees are paid to the Chairman of the
Company’s Board committees, the Audit Committee, and the Remuneration and Nomination Committee.
Our Directors are all reimbursed for any reasonable travel expenses incurred in connection with their attendance at Board meetings
or Board committees; they are also eligible to receive share options.
There is no contractually agreed termination benefit for non-executive Directors.
Directors’ contracts
The service agreement with Dr Jalal Bagherli, executive Director, dated 19 July 2005, is of unlimited duration. The agreement may
be terminated by either party on six months’ notice but increasing to 12 months on a change of control of the Company.
Performance graph
Details are set out on pages 7 and 8 of this report.
Share options
Details are set out in note 21 to the consolidated financial statements, on pages 67 to 69.
Directors’ share interests
Directors’ beneficial interests (as defined by the Companies Act 2006) in 10 pence ordinary shares of the Company are set out in
note 21a, on page 67, in the notes to the consolidated financial statements.
Directors’ pension arrangements
The Company contributes 9% of the executive Director’s basic salary to a pension scheme. There are no pension arrangements for
non-executive Directors.
Non-executive Directors’ terms
All non-executive Directors are appointed for up to three years by the Board of Directors, subject to any earlier requirements to
stand for a re-election as required by the Articles of Association (one-third of the non-executive Directors must stand for re-election
at each AGM).
32 Dialog Semiconductor Plc Annual report and accounts 2009
Section 3 | Management and governance
The compensation of the members of the Board of Directors is as follows:
Name and position
Dr Jalal Bagherli
Base salary
US$
Bonus
US$
Pensions
contribution
US$
Other
US$
2009
Total
US$
2008
Total
US$
Directors’ holdings at
31 December 2009
Shares
Options
Executive Director and CEO
313,085
211,333
28,178
24,233
576,829
439,872
600,576
102,624
Chris Burke
Non-executive Director
Michael Glover
39,136
Non-executive Director until 22 April 2009
9,629
Aidan Hughes
Non-executive Director and
Chairman of the Audit Committee
46,963
John McMonigall
Non-executive Director
Gregorio Reyes
Non-executive Chairman
Russ Shaw
39,136
46,963
Non-executive Director and Chairman of the
Remuneration and Nomination Committee
46,963
Peter Tan
Non-executive Director
Peter Weber
Non-executive Director
39,136
39,136
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
39,136
36,706
15,493
69,378
9,629
36,706
262,000
–
46,963
45,876
25,000
110,000
39,136
36,701
100,000
110,000
46,963
45,876
130,000
58,340
46,963
41,288
19,891
110,000
39,136
36,701
–
70,000
39,136
36,701
72,172
29,828
620,147
211,333
28,178
24,233
883,891
756,427
1,225,132
660,170
Share options granted to the executive Directors
As of 31 December 2009, Jalal Bagherli, executive Director held 102,624 options over ordinary shares which entitle him to acquire
the same amount of shares.
Exercise price
Date of grant
Expiry date
Vesting
period
31 December
2008
Forfeited
Exercised
Replaced
Returned
Market price
Gain on
of exercised
options1
€
the exercise
of options
€
31 December
2009
€2.00
12.09.2005 11.09.2015
4 years
60,000
€3.50
12.09.2005 11.09.2015
4 years
60,000
€5.00
12.09.2005 11.09.2015
4 years
60,000
€6.50
12.09.2005 11.09.2015
4 years
60,000
€8.00
12.09.2005 11.09.2015
4 years
60,000
–
–
–
–
–
(60,000)
–
–
–
–
£0.10
01.02.2006 18.07.2015 1-44 months
37,500
(2,907)
(34,593)
£0.10
01.02.2006 18.07.2015 1-44 months
23,055
(1,789)
(21,266)
–
–
–
–
–
–
–
(60,000)
(60,000)
(60,000)
(60,000)
––
––
€1.52
13.05.2009 12.05.2016 1-44 months
–
–
–
102,624
–
102,624
360,555
(4,696)
(115,859)
102,624
(240,000)
102,624
1) The market price is a weighted average price.
––
7.32
319,500
–
–
–
–
–
–
–
–
–
–
–
–
3.67
122,548
3.67
75,643
–
–
–
517,692
Dialog Semiconductor Plc Annual report and accounts 2009 33
Section 3 | Management and governance
Directors’ remuneration report
Share options granted to the non-executive Directors
Each non-executive Director was entitled to an initial grant of 50,000 options vesting monthly in 48 equal tranches. At each AGM,
non-executive Directors receive a further 20,000 options vesting over 12 months. Options may be exercised at the market price
prevailing at the date of grant. The non-executive Directors are not subject to performance criteria related to their remuneration.
The stock options granted to non-executive Directors are not, therefore, subject to the achievement of performance targets.
The share option grants to non-executive Directors are as follows:
Exercise price
Vesting
31 December
31 December
options
of options
Director
€
Date of grant
Expiry date
period
2008
Forfeited
Granted
Exercised
2009
€
€
Market price
Gain on
of exercised
the exercise
Chris Burke
1.40 12.07.2006
11.07.2013 48 months
1.80 10.05.2007
09.05.2014 12 months
1.35 30.04.2008
29.04.2015 12 months
1.17 22.04.2009
21.04.2016 12 months
Michael Glover
1.27 19.06.2006
18.06.2013 48 months
1.80 10.05.2007
09.05.2014 12 months
1.35 30.04.2008
29.04.2015 12 months
Aidan Hughes
1.27 19.06.2006
18.06.2013 48 months
1.80 10.05.2007
09.05.2014 12 months
1.35 30.04.2008
29.04.2015 12 months
1.17 22.04.2009
21.04.2016 12 months
John McMonigall 1.27 19.06.2006
18.06.2013 48 months
1.80 10.05.2007
09.05.2014 12 months
1.35 30.04.2008
29.04.2015 12 months
1.17 22.04.2009
21.04.2016 12 months
Gregorio Reyes
1.27 19.06.2006
18.06.2013 48 months
1.80 10.05.2007
09.05.2014 12 months
1.35 30.04.2008
29.04.2015 12 months
1.17 22.04.2009
21.04.2016 12 months
Russ Shaw
1.40 12.07.2006
11.07.2013 48 months
Peter Tan
1.80 10.05.2007
09.05.2014 12 months
1.35 30.04.2008
29.04.2015 12 months
1.17 22.04.2009
21.04.2016 12 months
1.40 12.07.2006
1.80 10.05.2007
11.07.2013 48 months
09.05.2014 12 months
1.35 30.04.2008
29.04.2015 12 months
1.17 22.04.2009
21.04.2016 12 months
Peter Weber
1.27 19.06.2006
18.06.2013 48 months
1.80 10.05.2007
09.05.2014 12 months
1.35 30.04.2008
29.04.2015 12 months
1.17 22.04.2009
21.04.2016 12 months
50,000
20,000
20,000
–
50,000
20,000
20,000
50,000
20,000
20,000
–
50,000
20,000
20,000
–
50,000
20,000
20,000
–
50,000
20,000
20,000
–
50,000
20,000
20,000
–
50,000
20,000
20,000
–
(14,588)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20,000
(40,622)
–
–
–
(35,412)
(20,000)
(20,000)
9,378
20,000
20,000
20,000
5.62
171,425
–
–
–
–
–
–
–
–
–
6.20
6.20
6.20
174,581
88,000
97,000
–
–
–
–
–
–
20,000
–
–
–
20,000
–
–
–
20,000
–
–
–
20,000
–
–
–
–
–
–
–
–
(41,664)
(9,996)
–
–
–
–
–
–
50,000
20,000
20,000
20,000
50,000
20,000
20,000
20,000
8,336
10,004
20,000
20,000
50,000
20,000
20,000
20,000
50,000
–
–
–
–
–
–
(20,000)
(20,000)
20,000
–
20,000
–
–
–
(42,706)
(20,000)
(17,466)
20,000
–
7,294
–
2,534
20,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5.60
5.60
180,405
37,985
–
–
–
–
–
–
–
7.33
7.33
–
7.12
7.12
7.12
–
–
–
–
–
–
–
–
110,500
119,500
–
249,830
106,400
100,779
–
Total
720,000
(14,588)
140,000
(287,866)
557,546
1,436,405
Approved by the Board of Directors and signed on its behalf by:
Tim Anderson
Secretary
11 February 2010
34 Dialog Semiconductor Plc Annual report and accounts 2009
Section 3 | Management and governance
Statement of Directors’ responsibilities
Statement of Directors’ responsibilities
The Directors are responsible for preparing the IFRS report and accounts 2009 and the Group and parent company financial statements
in accordance with the applicable law and regulations.
Company law requires the Directors to prepare Group and parent company financial statements for each financial year. Under the law
the Directors are required to prepare the Group financial statements in accordance with IFRS as adopted by the EU and have elected
to prepare the parent company financial statements on the same basis.
The Group and parent company financial statements are required by law and IFRS as adopted by the EU to present fairly the financial
position of the Group and the parent company and the performance for that period; the Companies Act 2006 provides in relation
to such financial statements that references in the relevant part of the Act to financial statements giving a true and fair view are
references to their achieving a fair presentation.
In preparing each of the Group and parent company financial statements, the Directors are required to:
(cid:1) select suitable accounting policies and then apply them consistently;
(cid:1) make judgements and estimates that are reasonable and prudent;
(cid:1) state whether they have been prepared in accordance with IFRS as adopted by the EU; and
(cid:1) prepare the financial statements on the going-concern basis unless it is inappropriate to presume that the Group and the parent
company will continue in business.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial
position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006.
They have a general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and
to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Directors’ report and Directors’ remuneration
report that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s
Website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislations in
other jurisdictions.
Responsibility statement
To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give
a true and fair view of the assets, liabilities, financial position and profit and loss of the Group, and the Group management report
includes a fair review of the development and performance of the business and the position of the Group, together with a description
of the principal opportunities and risks associated with the expected development of the Group.
Dr Jalal Bagherli
Chief Executive Officer
Jean-Michel Richard
CFO, Vice President Finance
11 February 2010
Dialog Semiconductor Plc Annual report and accounts 2009 35
Section 4 | Consolidated financial statements and notes
Independent Auditors’ report to the members
of Dialog Semiconductor Plc
We have audited the financial statements of Dialog Semiconductor Plc for the year ended 31 December 2009 which comprise the Group
and Parent Company Statements of Financial Position, the Group Statement of Comprehensive Income, the Group and Parent Company
Cash Flow Statements, the Group and Parent Company Statements of Changes in Equity and the related notes 1 to 34. The financial
reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs)
as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Directors’ Responsibilities Statement set out on page 35, the Directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the
financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the Group’s and the parent company’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the
overall presentation of the financial statements.
Opinion on financial statements
In our opinion:
(cid:1) the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 December
2009 and of the Group’s profit for the year then ended;
(cid:1) the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
(cid:1) the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the provisions of the Companies Act 2006; and
(cid:1) the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the
group financial statements, Article 4 of the IAS Regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
(cid:1) the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006;
(cid:1) the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent
with the financial statements; and
(cid:1) the information given in the Corporate Governance Statement set out pages 29 to 31 and the web-address (www.dialog-
semiconductor.com) with respect to internal control and risk management systems in relation to financial reporting processes and
about share capital structures is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
(cid:1) adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
(cid:1) the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
(cid:1) certain disclosures of Directors’ remuneration specified by law are not made; or we have not received all the information and
explanations we require for our audit.
Kevin Harkin (Senior Statutory Auditor)
for and on behalf of Ernst & Young LLP Statutory Auditor
Reading
11 February 2010
36 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
Consolidated statement of financial position
As at 31 December 2009
Assets
Cash and cash equivalents
Restricted cash
Trade accounts receivable and other receivables
Inventories
Income tax receivables
Other financial assets
Other current assets
Total current assets
Property, plant and equipment
Intangible assets
Deposits
Income tax receivables
Deferred tax assets
Total non-current assets
Total assets
Liabilities and Shareholders’ equity
Trade and other payables
Other financial liabilities
Provisions
Income taxes payable
Other current liabilities
Total current liabilities
Provisions
Other non-current financial liabilities
Total non-current liabilities
Ordinary shares
Additional paid-in capital
Accumulated deficit
Other reserves
Employee stock purchase plan shares
Net Shareholders’ equity
Notes
At 31 December
2009
US$000
At 31 December
2008
US$000
5
25
6
7
4
8
9
10
11
4
4
14
15
16
4
17
16
18
120,148
3,000
17,486
26,193
69
–
1,915
168,811
9,807
5,005
804
370
7,514
23,500
192,311
17,304
679
1,784
3,305
11,308
34,380
252
700
952
11,825
283,733
(135,667)
(2,102)
(810)
19
156,979
36,915
–
7,455
19,938
80
1,532
1,383
67,303
7,734
4,640
286
390
–
13,050
80,353
12,996
994
1,290
160
4,437
19,877
–
271
271
9,328
223,005
(169,758)
(2,231)
(139)
60,205
Total liabilities and Shareholders’ equity
192,311
80,353
These financial statements were approved by the Board of Directors on 11 February 2010 and were signed on its behalf by:
Dr Jalal Bagherli
Director
Dialog Semiconductor Plc Annual report and accounts 2009 37
Section 4 | Consolidated financial statements and notes
Consolidated income statement
For the year ended 31 December 2009
Revenue
Cost of sales
Gross profit
Selling and marketing expenses
General and administrative expenses
Research and development expenses
Other operating income
Gains and losses from restructuring
Operating profit
Interest income and other financial income
Interest expense and other financial expense
Foreign currency exchange gains and losses, net
Result before income taxes
Income tax benefit
Net profit
Earnings per share (in US$)
Basic
Diluted
Notes
3, 24, 27
24
3, 27
24
3
3
4
Weighted average number of shares (in thousands)
2
Basic
Diluted
2009
US$000
217,613
(119,886)
97,727
(14,183)
(12,584)
(42,621)
333
–
28,672
203
(212)
162
28,825
3,902
32,727
2008
US$000
161,830
(99,217)
62,613
(11,007)
(9,853)
(36,721)
775
145
5,952
874
(919)
126
6,033
728
6,761
2009
2008
0.67
0.60
0.15
0.15
48,868
54,464
45,125
45,408
38 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
Statement of comprehensive income
For the year ended 31 December 2009
Net profit
Exchange differences on translating foreign operations
Available-for-sale financial assets
Cash flow hedges
Income tax relating to components of other comprehensive income
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
2009
US$000
32,727
(113)
–
(179)
421
129
32,856
2008
US$000
6,761
(249)
(312)
(282)
(887)
(1,730)
5,031
Dialog Semiconductor Plc Annual report and accounts 2009 39
Section 4 | Consolidated financial statements and notes
Consolidated statement of changes in Shareholders´ equity
For the year ended 31 December 2009
Balance at 1 January 2008
Total comprehensive income
(loss)
Sale of employee stock
purchase plan shares
Equity settled transactions, net
of tax
Changes in Equity total
Balance at 31 December
2008/1 January 2009
Total comprehensive income
(loss)
Capital increase public offering
(gross proceeds)
Transaction costs of capital
increase – public offering
Capital increase for employee
share option plan (gross
proceeds)
Transaction costs of capital
increase – employee share
option plan
Sale of employee stock
purchase plan shares
Equity settled transactions, net
of tax
Changes in Equity total
Additional paid-in
Accumulated
Ordinary Shares
US$000
capital
US$000
deficit
US$000
Currency
translation
adjustment
US$000
9,328
222,914
(177,844)
(902)
Cash flow
Available-for-sale
hedges
US$000
89
securities
US$000
312
Employee stock
purchase plan
shares
US$000
Total
US$000
(205)
53,692
Other reserves
–
–
–
–
–
91
–
91
6,761
(1,136)
(282)
(312)
–
1,325
–
–
–
–
–
–
8,086
(1,136)
(282)
(312)
9,328
223,005
(169,758)
(2,038)
(193)
–
–
32,727
308
(179)
1,922
62,421
–
(4,685)
575
473
(41)
2,560
–
–
–
–
1,364
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(179)
(372)
–
66
–
66
5,031
157
1,325
6,513
(139)
60,205
–
32,856
–
–
64,343
(4,685)
(1,048)
–
–
(41)
377
2,937
–
1,364
(671)
96,774
(810)
156,979
–
–
–
–
–
–
–
–
–
–
2,497
60,728
34,091
308
Balance at 31 December 2009
11,825
283,733
(135,667)
(1,730)
40 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
Consolidated statements of cash flows
For the year ended 31 December 2009
Cash flows from operating activities:
Net profit
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Interest expense (income), net
Income tax benefit
Impairment of inventories
Depreciation of property, plant and equipment
Amortisation of intangible assets
Losses on disposals of fixed assets and impairment of fixed and financial assets
Expense related to share-based payments
Changes in working capital:
Trade accounts receivable and other receivables
Factoring
Inventories
Prepaid expenses
Trade accounts payable
Provisions
Other assets and liabilities
Cash generated from operations
Interest paid
Interest received
Income taxes paid
Cash flow from operating activities
Cash flows from investing activities:
Cash transferred to Restricted cash
Sale of property, plant and equipment
Purchases of property, plant and equipment
Purchases of intangible assets
Payments for capitalised development costs
Investments and deposits made
Purchase of securities
Sale of securities
Cash flow from (used for) investing activities
Cash flows from financing activities:
Cash flow from capital increase
Sale of employee stock purchase plan shares
Cash flow from financing activities
Cash flow from operating, investing and financing activities
Net foreign exchange difference
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Notes
2009
US$000
2008
US$000
32,727
6,761
3
4
10
11
21
6
25
25
10
11
11
6, 14
6, 14
9
(3,902)
973
4,473
2,146
723
1,364
(12,498)
2,485
(7,228)
(337)
4,196
416
7,573
33,120
(109)
219
(46)
33,184
(3,000)
–
(5,925)
(1,828)
(972)
(530)
–
–
(12,255)
59,617
2,937
62,554
83,483
(103)
(728)
1,220
5,614
2,124
1,016
1,325
(5,584)
632
(4,105)
(73)
(1,451)
470
1,837
8,955
(654)
1,077
(45)
9,333
–
64
(3,474)
(2,758)
(1,431)
(13)
(3,050)
22,758
12,096
–
157
157
21,586
(250)
(594)
83,233
36,915
120,148
20,992
15,923
36,915
Dialog Semiconductor Plc Annual report and accounts 2009 41
Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2009
1. General
The consolidated financial statements of Dialog Semiconductor Plc (“Dialog or the Group”) for the year ended 31 December 2009 were authorised for
issue in accordance with a resolution of the Directors on 11 February 2010. Dialog Semiconductor Plc is a company incorporated in the UK, whose
shares are publicly traded. The principal activities of the Group are set out in the segment reporting (note 24).
Company name and registered office
Dialog Semiconductor Plc
Tower Bridge House
St Katharine’s Way
London E1W 1AA
United Kingdom
Basis of presentation
The consolidated financial statements are prepared on the historical cost basis except that financial instruments classified as available-for-sale and
derivative financial instruments are stated at their fair value. The consolidated financial statements are presented in US dollars (“US$”) and all values are
rounded to the nearest thousand (US$000) except when otherwise stated.
Statement of compliance
The accompanying consolidated financial statements have been prepared on the basis of the recognition and measurement requirements of
International Financial Reporting Standards (IFRS) and its interpretation as adopted by the EU. Based on these standards, management has applied the
accounting policies as provided in note 2.
2. Summary of significant accounting policies
Changes in accounting policies and disclosures
The accounting policies are consistent with those of the previous financial year except for the changes resulting from the adoption of the following
revised and new Standards and new IFRIC interpretations during the year
IAS 1 – Presentation of Financial Statements (revised)
The revised IAS 1 was issued in September 2007 and is effective for periods beginning on or after 1 January 2009. The changes made are to
require information in financial statements to be aggregated on the basis of shared characteristics and to introduce a statement of
comprehensive income. The revised standard gives preparers of financial statements the option of presenting items of income and expense
and components of other comprehensive income either in a single statement of comprehensive income with subtotals, or in two separate
statements.
The Group has opted to present the items of comprehensive income in a separate statement.
IAS 23 – Borrowing Costs
The principal change to the Standard was to eliminate the option to expense all borrowing costs when incurred. This change did not have an
impact on these financial statements as there are currently no qualifying assets.
IFRS 7 Financial Instruments: Disclosures (amended)
The amended IFRS 7 was issued in March 2009 and is effective for periods beginning on or after 1 January 2009. The amendments improve
the disclosure requirements about fair value measurements and reinforce existing principles for disclosures about the liquidity risk associated
with financial instruments. The amendments to IFRS 7 introduce a three-level hierarchy for fair value measurement disclosures and require
entities to provide additional disclosures about the relative reliability of fair value measurements. In addition, the amendments clarify and
enhance the existing requirements for the disclosure of liquidity risk. However, it is no requirement to provide comparative disclosures in the
first year of application.
42 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
2. Summary of significant accounting policies continued
IFRS 8 – Operating Segments
IFRS 8 Operating Segments which replaces IAS 14 Segment Reporting was issued in November 2006 and is effective for annual periods
beginning on or after 1 January 2009. The IFRS requires an entity to adopt the “management approach” to reporting on the financial
performance of its operating segments. Generally, the information to be reported would be what management uses internally for evaluating
segmental performance and deciding how to allocate resources to operating segments.
In contrast to the former reporting structure with two operating segments, in accordance with IFRS 8, the Group now separately reports on
three operating segments which are Audio & Power Management, Display Systems and Automotive & Industrial. Prior-year figures have been
adjusted accordingly.
All other amended, revised or new standards and interpretations did not result in changes to the accounting policies or did not have a material effect on
the financial statements:
Interpretation/ Standard
Title
IFRS 1
IFRS 2
IAS 32
IAS 39
First-time Adoption of International Financial Reporting Standards and IAS 27 Consolidated
and separate Financial Statements
Share-Based Payments (vesting conditions and cancellations)
Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements (Puttable
Financial Instruments)
Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments
Disclosures (Effective Date and Transition)
IAS 39
Improvements to IFRSs A collection of amendments to International Financial Reporting Standards (annual
Financial Instruments and IFRIC 9 Reassessment of embedded derivatives
IFRIC 12
IFRIC 13
IFRIC 15
IFRIC 16
improvements project)
Service Concession Agreements
Customer Loyalty Programmes
Agreements for the Construction of Real Estate
Hedges of a Net Investment in a Foreign Operation
1) for periods ending on or after that date
Principles of consolidation and investments in affiliated companies
As in 2008, the consolidated financial statements include Dialog Semiconductor Plc and its subsidiaries as at 31 December each year:
Name
Dialog Semiconductor GmbH
Dialog Semiconductor (UK) Limited
Dialog Semiconductor, Inc.
Dialog Semiconductor KK
Registered office
Kirchheim/Teck, Germany
Swindon, UK
Wilmington, Delaware, USA
Tokyo, Japan
Effective date
1 January 2009
1 January 2009
1 January 2009
1 July 2008
30 June 20091
1 January 2009
1 January 2008
1 July 2008
1 January 2009
1 October 2008
Participation
100%
100%
100%
100%
Subsidiaries are fully consolidated from the date of acquisition, being the date on which Dialog obtains control, and continue to be consolidated until
the date such control ceases.
The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.
All intra-Group balances, income and expenses, and unrealised gains and losses resulting from intra-Group transactions are fully eliminated.
Foreign exchange
The functional currency for the Group entities is generally the currency in which they primarily generate and expend cash. Each entity in the Group
determines its own functional currency. Accordingly, the assets and liabilities of companies whose functional currency is other than the US dollar are
included in the consolidation by translating the assets and liabilities into the presentation currency (US$) at the exchange rates applicable at the end of
the reporting period. Equity accounts are measured at historical rates. The statements of income and cash flows are translated at the average exchange
rates during the year. The exchange differences arising on the translation are directly recognised in equity (other reserves).
Dialog Semiconductor Plc Annual report and accounts 2009 43
Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2009
2. Summary of significant accounting policies continued
Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. All differences are taken to
profit and loss with the exception of differences on monetary items that form part of a net investment in a foreign operation as well as differences on
foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal of the
net investment at which time they are recognised in profit or loss. Tax charges and credits attributable to exchange differences on those monetary items
and borrowings are also dealt with in equity. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using
the exchange rates as at the dates of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value is determined. Foreign currency transaction gains and losses are disclosed separately in the income
statement, at each reporting period. Key exchange rates against US dollars used in preparing the consolidated financial statements were:
Currency
Great Britain
Japan
Euro
Exchange rate at
Annual average exchange rate
31 December 2009
US$1 =
0.62
92.41
0.69
31 December 2008
US$1 =
0.69
90.43
0.72
2009
US$1 =
0.64
93.15
0.71
2008
US$1 =
0.54
103.43
0.68
Financial instruments
A financial instrument is any contract that gives rise to a financial asset in one entity and a financial liability or equity instrument in another. Financial
assets include, in particular, cash and cash equivalents, trade receivables and other loans and receivables, held-to-maturity investments and derivative
and non-derivative financial assets accounted for at fair value through profit or loss, as well as investments available for sale.
Financial liabilities generally substantiate claims for repayment in cash or another financial asset. In particular, this includes trade payables, liabilities to
banks and derivative financial liabilities.
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when, and only when, the entity currently has a
legal right to set off the recognised amounts and intends to settle on a net basis.
Financial assets
Financial assets within the scope of IAS 39 are classified as being at fair value through profit or loss, loans and receivables, held-to-maturity investments
or available-for-sale financial assets, as appropriate. When financial assets are first recognised, they are measured at fair value, plus, in case of
investments not at fair value through profit or loss, directly attributable transaction costs.
The Group determines the classification of its financial assets on first recognition and, where allowed and appropriate, re-evaluates this designation at
each financial year end.
All regular purchases and sales of financial assets are recognised on the settlement date, which is the date that the Group receives the asset. Regular
purchases or sales are classified as purchases or sales of financial assets that require delivery of assets within the period generally established by
regulation or convention of the market place.
At each reporting date, the Group assesses whether a financial asset or group of financial assets is impaired.
44 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
2. Summary of significant accounting policies continued
Financial assets held to maturity
Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held to maturity when the Group has the
positive intention and ability to do so. After initial measurement, held-to-maturity investments are measured at amortised cost using the effective
interest method. The effective interest method takes into account any premium or discount on acquisition and includes transaction costs and fees that
are an integral part of the effective interest rate.
Gains and losses are recognised in profit or loss when the investments are de-recognised or impaired, as well as through the amortisation process.
The carrying amount of financial assets held-to-maturity are tested at each reporting date to determine whether there is objective, material evidence of
impairment as outlined in IAS 39.59. Any impairment losses caused by the fair value being lower than the carrying amount are recognised in profit or
loss. The Group does not use allowance accounts in order to record the impairment in the statement of financial position but credits the impairment
loss directly against the book value of the financial assets.
If in a subsequent period the fair value increases and this increase can be related objectively to events occurring after the impairment was recognised,
the impairment loss is reversed to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. The fair value
which is required for impairment testing corresponds to the present value of the estimated future cash flows discounted using the original effective
interest rate.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market, such as trade
account receivables. Loans and receivables are recorded initially at fair value and do not bear interest. As of 31 December 2009 as well as 31 December
2008, loans and receivables of the Group comprise mostly trade accounts receivables from customers. The Group also classified cash, cash equivalents
(except for deposits designated as hedging instruments) and restricted cash as loans and receivables. After initial recognition, loans and receivables are
subsequently carried at amortised cost using the effective interest method, less any allowance for impairment, if necessary.
Gains and losses are recognised in the income statement when the loans and receivables are de-recognised or impaired. Interest income and expense on
the application of the effective interest method are also recognised in profit or loss.
The Group continuously reviews its allowance for doubtful accounts. Management considers the collectability of a trade account receivable to be
impaired when it is probable that the Group will be unable to collect all amounts due according to the sales terms, based on current information and
events regarding the customers’ ability to meet their obligations. The amount of the impairment loss on loans and receivables is measured as the
difference between the carrying amount of the asset and the present value of estimated future cash flows, discounted at the original effective interest
rate of the financial asset. The amount of the impairment loss is recognised in profit or loss.
If, in a subsequent reporting period, the amount of the impairment loss decreases, and the decrease can objectively be related to an event occurring
after the impairment was recognised, the previously recognised impairment loss is reversed and recognised in profit or loss.
When a trade receivable is considered to be impaired, any credit losses are included in the allowance for doubtful accounts through a charge to bad
debt expenses. Account balances are set off against the allowance after all means of collection have been exhausted and the potential for recovery is
considered remote. Recoveries of trade receivables previously written-off are recorded as other income when received. Reversals of impairment losses
are recognised in profit and loss. The Group does not have any off-balance sheet credit exposure related to its customers.
Receivables from work in process for customer specific development projects according to IAS 11 are recorded in the balance sheet line “trade account
receivables and other receivables” and are disclosed in the notes respectively.
Dialog Semiconductor Plc Annual report and accounts 2009 45
Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2009
2. Summary of significant accounting policies continued
Available-for-sale financial assets
Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified as loans and
receivables, held-to-maturity investments or as financial assets at fair value through profit or loss.
After initial measurement available-for-sale financial assets are measured at fair value. Unrealised gains and losses, net of the related tax effect, on
available-for-sale financial assets are excluded from earnings and are reported as a component of other reserves until realised, or the investment is
determined as being impaired.
At each reporting date, the carrying amounts of available-for-sale assets are assessed to determine whether there is objective, significant evidence of
impairment as outlined in IAS 39.59. Any impairment losses on available-for-sale financial assets are charged to earnings. The Group does not use
allowance accounts in order to record the impairment in the statement of financial position but credits the impairment loss directly against the book
value of the financial assets. If this impairment relates to losses previously recognised in equity then the impairment loss is transferred from equity to the
income statement. Reversals of impairment losses in respect of equity instruments or investment funds that are classified as available-for-sale are not
recognised in profit or loss. Reversals of impairment losses on debt instruments are reversed through profit or loss if the increase in fair value of the
instrument can be objectively related to an event occurring after the impairment loss was recognised in profit or loss.
The fair value of available-for-sale financial assets actively traded in organised financial markets is determined by reference to quoted market bid prices
at the close of business on the reporting date.
For investments in which there is no active market, fair value is determined using valuation techniques, including recent arm’s length market
transactions; reference to the current market value of another instrument which is substantially the same; discounted cash flow analysis; or other
valuation models. If the fair value of unquoted equity instruments cannot be measured with sufficient reliability, these instruments are measured at cost
(less any impairment losses, if applicable).
Derecognition of financial assets
A financial asset is derecognised when:
the right to receive cash flows from the asset have expired;
the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third
party under a “pass through agreement”; or
the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the
asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and
rewards of the asset, nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in it.
Financial liabilities
Financial liabilities primarily include trade accounts payable, liabilities due to banks, derivative financial liabilities and other liabilities.
Financial liabilities measured at amortised costs
After initial recognition at fair value, less directly attributable transaction costs, financial liabilities are subsequently measured at amortised cost using the
effective interest method.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include liabilities held for trading and financial liabilities designated upon initial recognition as at
fair value through profit or loss. Gains and losses on liabilities held for trading are recognised in profit or loss.
During the financial years 2009 and 2008 the Group did not classify any financial liabilities as financial liabilities at fair value through profit or loss.
46 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
2. Summary of significant accounting policies continued
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.
Hedging instruments and hedge accounting
The Group uses derivative financial instruments, such as forward contracts, mainly for the purposes of hedging currency risks that arise from its
operating activities. Beside the derivative financial instruments the Group designates certain deposits as hedging instruments in order to hedge foreign
currency risks as well. Such derivative financial instruments and deposits are initially recognised at fair value on the date on which a derivative contract is
entered into or the cash deposit is designated as a hedging instrument and is subsequently remeasured at fair value on each subsequent reporting date.
Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.
Any gains and losses arising from changes in the fair value on derivatives and the deposits during the year that do not qualify for hedge accounting are
taken directly to profit or loss.
The fair value of quoted derivatives is equal to their positive or negative market value. The fair value of forward currency contracts is calculated by
reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of the deposits is measured based on foreign
currency market rates at each reporting date.
The Group assesses whether embedded derivatives are required to be separated from host contracts when the Group first becomes party to the
contract. Reassessment occurs only if there is a change in the terms of the contract that significantly modify the cash flows that would otherwise be
required.
If the requirements for hedge accounting set out in IAS 39 are met, the Group designates and documents the hedge relationship from the date a
derivative contract is entered into or the cash deposit is designated as a hedging instrument, either as a fair value hedge or a cash flow hedge.
The Group did not enter into fair value hedges in 2009 and 2008.
In a cash flow hedge, the variability of cash flows to be received or paid related to a recognised asset or liability, or a highly probable forecast
transaction, or a firm commitment (in case of currency risks) is hedged. To hedge a currency risk of an unrecognised firm commitment, the Group
makes use of the option to recognise this as a cash flow hedge. The documentation of the hedge relationship includes identification of the hedging
instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in
offsetting the exposure to changes in the hedged cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in
achieving offsetting changes in cash flows, and are assessed on an ongoing basis to determine that they actually have been highly effective throughout
the financial reporting periods for which they were designated.
For cash flow hedges, fair value changes of the effective portion of the hedging instrument are recognised in other reserves, net of applicable taxes,
while any ineffective portion of the fair value changes are recognised immediately in profit or loss. Amounts taken to equity are transferred to the
income statement when the hedged transaction affects the income statement, such as when the forecast or committed expenses occur. If the forecast
transaction or firm commitment is no longer expected to occur, amounts previously recognised in equity are transferred to profit or loss.
If the hedging instrument does not, or no longer, qualifies for hedge accounting because the qualifying criteria for hedge accounting are not, or are no
longer met, the derivative financial instruments are classified as held for trading and the deposits are classified as loans and receivables. Amounts
previously recognised in equity are transferred to profit or loss.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts
previously recognised in equity remain in equity until the forecast transaction or the firm commitment occurs.
Dialog Semiconductor Plc Annual report and accounts 2009 47
Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2009
2. Summary of significant accounting policies continued
Cash and cash equivalents
Cash and cash equivalents include highly liquid investments with original maturity dates of three months or less and are subject to an insignificant risk
of changes in value. The financial position cash and cash equivalents also include deposits designated as hedging instruments.
Inventories
Inventories include assets held for sale in the ordinary course of business (finished goods), in the process of production (work in process) or in the form
of materials to be consumed in the production process (raw materials). Inventories are valued at the lower of cost and net realisable value. Cost, which
includes direct materials, labour and overhead, plus indirect overhead, is determined using the first-in, first-out (FIFO) method. Net realisable value is the
estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs to make the sale.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. These include the cost of replacing
part of the plant and equipment when that cost is incurred, if the recognition criteria are met. Depreciation is charged on a straight-line basis over the
estimated useful lives of the assets as follows:
Equipment
Test equipment
Leasehold improvements
Office and other equipment
Useful life
Three to eight years
Shorter of useful life or lease term
18 months to 13 years
The asset’s residual values, useful lives and methods of depreciation are reviewed, and adjusted if appropriate, at each financial year end.
Intangible assets
Purchased intangible assets with definite useful lives primarily consist of licences, software and patents, and are recorded at acquisition cost less
accumulated amortisation and accumulated impairment losses. Intangible assets are amortised on a straight-line basis over the estimated useful lives of
three to five years. For a particular software licence a useful life of ten years was estimated. Amortisation expenses are allocated to the cost of goods
sold, selling expenses, research and development expenses, or general administration expenses. The Group has no intangible assets with an indefinite
useful life.
Self-developed intangible assets are recorded on a cost basis. They are amortised on a straight-line basis over the estimated usefulness of 12-60 months.
The costs of internally generated intangible assets comprise all directly attributable costs necessary to create, produce and prepare the asset to be
capable of operating in a manner intended by management, e.g. costs of materials and services used or consumed in generating the intangible asset,
costs of employee benefits or fees to register a legal right. Reference is also made to the accounting policy regarding research and development costs in
this section.
Patents have been granted by the relevant government agency for a certain period, depending on the specific country, with the option of renewal at
the end of this period. In most cases the maximum lifetime of the patents is 20 years. They are amortised over the shorter period of expected future
benefit, which is principally ten years. Acquisition costs for patents are based on the cost of patent registration.
48 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
2. Summary of significant accounting policies continued
Impairment of non-monetary assets
In accordance with IAS 36, at each reporting date an assessment is made as to whether there is an indication that a non-monetary asset, such as
property, plant and equipment or purchased intangibles, may be impaired. If any such indication exists, an estimate is made of the asset’s recoverable
amount: the higher of an asset’s fair value, less cost to sell and its value in use. Where the carrying amount of an asset exceeds its recoverable amount,
the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted
to their present value, using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset. In determining the fair value less costs to sell, an appropriate valuation model is used. For assets, an assessment is made at each reporting date as
to whether any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, an
estimation of the recoverable amount is made. A previously recognised impairment loss is reversed only if there has been a change in the estimates used
to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is
increased to its recoverable amount. That increased amount, however, cannot exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss.
Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date of whether the
fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.
For arrangements entered into before 1 January 2005, the date of inception is deemed to be 1 January 2005 in accordance with the transitional
requirements of IFRIC 4.
Where the Group is lessee, finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item,
are capitalised at the inception of the lease at the fair value of the leased property or, if lower, the present value of the minimum lease payments. Lease
payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining
balance of the liability. Finance charges are reflected in profit and loss.
Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured.
Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, and other sales taxes or duty. The following specific
recognition criteria must also be met before revenue is recognised:
Sale of goods
Revenue from the sale of goods is derived from the sale of products, application specific integrated circuit (“ASIC”) and application specific standard
product (“ASSP”) to end customers. These products are manufactured and tested in accordance with customers’ technical specifications prior to delivery.
Revenue is recognised when title passes, the risks and rewards of ownership have been transferred to the customer, the fee is fixed or determinable,
and collection of the related receivable is probable. Revenues are recorded net of sales taxes and customer discounts, if any.
The Group has insurance for product claims and also records a provision for warranty costs as a charge in cost of sales, based on historical trends of
warranty costs incurred as a percentage of sales, which management has determined to be a reasonable estimate of the probable costs to be incurred
for warranty claims in a period.
Customer returns are permitted only for quality-related reasons within the applicable warranty period and any potential warranty claims are subject to
the Group’s determination that it is at fault for damages. Such claims must usually be submitted within a short period of the date of sale.
Research and development
Revenue from customer-specific research and development contracts involving the development of new customer-specific technology is recognised on
the percentage of completion basis when the outcome of the contract can be estimated reliably. A contract’s outcome can be estimated reliably when
total contract revenue can equally be estimated, it is probable that economic benefits associated with the contract will flow to the Group, and the stage
of contract completion can be measured reliably. When the Group is not able to meet those conditions, the policy is to recognise revenues only to the
extent the expenses incurred are eligible to be recovered. Completion is measured by reference to costs incurred to date as a percentage of estimated
total project costs. The percentage of completion method relies on estimates of total expected contract revenue and costs, as well as the dependable
Dialog Semiconductor Plc Annual report and accounts 2009 49
Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2009
2. Summary of significant accounting policies continued
measurement of the progress made towards completing the particular project. Losses on projects in progress are recognised in the period they become
likely and can be estimated.
Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attaching conditions will be complied
with. When the grant relates to an expense item, it is recognised as income over the period necessary to match the grant on a systematic basis to the
costs that it is intended to compensate. Grants are deducted in reporting the related expense. The Group does not receive grants that relate to assets.
Cost of sales
Cost of sales consists of the costs of outsourced production, assembly and test, personnel costs and applicable overheads and depreciation of
equipment. Provisions for estimated product warranties are recorded in cost of sales at the time the related sale is recognised.
Sales and marketing expenses
Sales and marketing expenses consist primarily of salaries, travel expenses, sales commissions, bad debt expenses and costs associated with advertising
and other marketing activities.
General and administrative expenses
General and administrative expenses consist primarily of personnel and support costs for finance, human resources, ERP system and other management
departments which are not attributable to development, production or sales functions.
Research and development costs
Costs identified as research costs are expensed as incurred, whereas development costs on an individual project are capitalised as an intangible asset
and amortised over the period of expected future benefit if the Group can demonstrate the following:
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
its intention to complete the intangible asset and use or sell it;
its ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits. Among other things, the Group can demonstrate the existence of a
market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset;
the availability of adequate technical, financial and other resources to complete the development and use or sell the intangible asset; and
its ability to measure reliably the expenditure attributable to the intangible asset during its development.
Interest income/expense
Interest income is recognised as interest accrues. Interest income includes interest income from investments in securities, cash and cash equivalents.
Income and expense resulting from the allocation of premiums and discounts is also included. Interest expense is generally expensed as incurred.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get
ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they
occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. The Group capitalises
borrowing costs for all eligible assets where construction was commenced on or after 1 January 2009. The Group continues to expense borrowing costs
relating to construction projects that commenced prior to 1 January 2009. In previous periods the Group expensed borrowing costs as incurred. The
change in accounting policy did not result in amounts of borrowing costs being capitalised as there were no qualifying assets in 2009.
Foreign currency exchange gains and losses
The foreign currency exchange gains and losses mainly result from foreign currency cash transactions and period end revaluation of foreign currency
denominated cash into US dollars. It is the Group’s view that these gains and losses are driven by the financing activities of the Group and are therefore
shown as non-operating results.
Employee benefits – defined contribution plans
Contributions to defined contribution and state-funded pension plans are recognised in the income statement as incurred.
50 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
2. Summary of significant accounting policies continued
Income taxes
Current income taxes for current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The
tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are accounted for using the liability method and are recognised for the future tax consequences attributable to
differences between the financial statement carrying amounts of assets and liabilities, and their respective tax bases, as well as on the carry-forward of
unused tax losses that can be utilised.
Deferred tax assets and liabilities are measured using tax rates that have been enacted, or substantially enacted, by the reporting date and which are
expected to apply to taxable income in the years, in which those temporary differences are expected to be recovered or settled. The effect of a change
in tax rates on deferred tax assets and liabilities is recognised in income in the period that includes the enactment date.
A deferred tax asset is recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences
can be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent, that it has become probable
that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists, to set off current tax assets against current tax liabilities and
the deferred income taxes relate to the same taxable entity and the same taxation authority.
Share-based payments
The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date, reflects the extent to which the vesting
period has expired and the best estimate of the number of equity instruments that will ultimately vest. The income statement charge or credit for a
period represents the movement in cumulative expense in the period.
Stock options
The Group has established an equity-settled share option scheme under which employees and Directors may be granted stock options to acquire shares
of Dialog.
The fair value of options granted is recognised as a compensation expense with a corresponding increase in equity. The fair value is measured at grant
date and spread over the service period during which the employees become unconditionally entitled to the options.
The fair value of the options granted is measured using the Black-Scholes option pricing model, taking into account the terms and conditions on which
the options were granted. Expectations of early exercise are accounted for within the average life of the options. The Group applies IFRS 2 to all options
granted after 7 November 2002 that had not been vested as of 1 January 2005.
Executives’ Long Term Incentive Plan
The Group operates an equity settled Long-Term Incentive Plan (LTIP). Under this plan, key executives are eligible to share in a percentage of the value
created for Shareholders in excess of an annual return hurdle measured over a three year performance period.
Each participant in the LTIP is awarded a number of units which convert into Company shares according to the level of outperformance of the
Company’s share price over the annual return hurdle. If this hurdle is not reached no units convert into Company shares.
The fair value of the awards is recognised as a compensation expense with a corresponding increase in equity. The fair value is measured at grant date,
using a Monte Carlo Model, taking into account the terms and conditions on which awards are granted and is spread over the service period during
which the key executives become unconditionally entitled to the awards.
Employee share trust – Treasury shares
The Group has established an employee share trust. The share trust is separately administrated and is funded by the Group, which consolidates the
assets, liabilities, income and expenses in its own accounts. The shares held by the trust are recorded at cost and are shown under “Employee stock
purchase plan shares” in the statement of changes in Shareholders’ equity.
Dialog Semiconductor Plc Annual report and accounts 2009 51
Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2009
2. Summary of significant accounting policies continued
Earnings per share
Basic earnings per share amounts are calculated by dividing net profit (loss) for the year attributable to ordinary equity holders of Dialog by the
weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of Dialog by the weighted average
number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued if all the securities or
other contracts to issue ordinary shares were exercised.
The weighted average number of shares outstanding is as follows:
Basic number of shares
Effect of dilutive options outstanding
Dilutive number of shares
2009
000
48,868
5,596
54,464
2008
000
45,125
283
45,408
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of
these financial statements.
The amount of anti-dilutive share options outstanding was 650,800 (2008: 2,892,211).
Significant accounting judgements, estimates and assumptions
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of
assets and liabilities, as well as disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period.
Subject to such estimates and judgements is the following:
Impairment of non-financial assets
The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. In case of such an indicator, an
impairment test is made. This requires the determination of the value in use and the fair value less costs to sell respectively of the assets. Estimating the
value in use requires management to make an estimate of the expected future cash flows from the asset and also to choose a suitable discount rate in
order to calculate the present value of those cash flows. The carrying amount of such assets at 31 December 2009 was US$13,413,000 (2008:
US$12,374,000). Further information regarding impairment charges is provided in notes 3 and 10.
Deferred tax assets
Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses
can be utilised.
Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing of
future taxable profits, together with future tax planning strategies. At year end 2009, net deferred tax assets amounting to US$7,514,000 were
recognised (2008: nil). The unrecognised deferred tax assets at 31 December 2009 were US$45,783,000 (2008: US$51,552,000). Further information
regarding the assessment of future taxable income is disclosed in note 4.
Share-based employee compensation awards
Stock options
Share-based payment transactions for stock options are measured by reference to the fair value at the date on which they are granted. The fair value of
share-based payments is determined using the Black-Scholes model, which involves making assumptions about interest rates, volatilities, market
conditions and fluctuation. Due to the nature of these assumptions, such estimates are subject to significant uncertainty. In 2009, the expense related
to stock options was US$851,000 (2008: US$940,000). For further information on stock options please refer to note 21.
52 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
2. Summary of significant accounting policies continued
Executives’ Long Term Incentive Plan
The fair value of the awards is recognised as a compensation expense with a corresponding increase in equity. The fair value is measured at grant date,
using a Monte Carlo Model, based on standard inputs such as the Company’s share price, interest rate, volatility of the Company’s share price, dividend
yield and expected life.
In 2009 an expense of US$514,000 was booked (2008: US$385,000 for the period of nine months the LTIP was in place). Further information regarding
LTIP is provided in note 21b.
Customer-specific research and development
For the determination of revenue and costs for customer-specific research and development contracts, management judgement is required. It is,
therefore, necessary to determine the stage of completion based on the progress made towards completing the particular project, as well as the
contract revenue and the contract costs. Besides an advance payment received from one customer, at 31 December 2009 no receivables or liabilities
from constructions contracts were outstanding (2008: US$nil).
Self-developed intangible assets
Development costs are capitalised in accordance with the accounting policy mentioned above, i.e. they are recorded on a cost basis. However, initial
capitalisation of costs is based on management’s judgement that technological and economical feasibility is confirmed, usually when a product
development project has reached a defined milestone according to an established project management model. In determining the probable future
economic benefits of the self-developed intangible asset, management makes assumptions regarding the expected future cash generation of the assets,
discount rates to be applied and the expected period of benefits. At 31 December 2009, the carrying amount of capitalised development costs was
US$1,305,000 (2008: US$1,271,000).
Actual results may differ from those estimates.
Recently issued accounting standards not yet adopted (Standards and Interpretations are endorsed by the EU except as
noted otherwise)
IFRS 1 First-time Adoption of International Financial Reporting Standards (revised)
The IASB has released a restructured version of IFRS 1 First-time-Adoption of International Reporting Standards in November 2008 (updated in respect
of the effective date in December 2008) which is effective for periods beginning on or after 1 July 2009. The restructuring of IFRS 1 was aimed to make
IFRS 1 easier for the reader to understand and to design it to better accommodate future changes. The new version of IFRS 1 retains the substance of
the previous version, but within a changed structure.
IFRS 1 First-time Adoption of International Financial Reporting Standards (amended)
The amended IFRS 1 was issued in July 2009 and is effective for periods beginning on or after 1 January 2010. The amendments exempt entities using
the full cost method from retrospective application of IFRSs for oil and gas assets as well as exempt entities with existing leasing contracts from
reassessing the classification of those contracts in accordance with IFRIC 4 Determining whether an Arrangement contains a Lease when the application
of their national accounting requirements produced the same result. The revised standard has not yet been endorsed by the EU.
IFRS 2 Share-based payment (amended)
The amended IFRS 2 Share-based Payment was issued in June 2009 and is effective for periods beginning on or after 1 January 2010. The amended
standard clarifies the accounting for group cash-settled share-based payment transactions in the financial statements of an individual subsidiary in a
group as well as the interaction of IFRS 2 and other standards. The amendments to IFRS 2 also incorporate guidance previously included in IFRIC 8
Scope of IFRS 2 and IFRIC 11 IFRS 2—Group and Treasury Share Transactions. As a result, the IASB has withdrawn IFRIC 8 and IFRIC 11. The revised
standard has not yet been endorsed by the EU.
IFRS 3 Business Combinations (revised) and IAS 27 Consolidated and Separate Financial Statements (amended)
The revised IFRS 3 and the amended IAS 27 were issued in January 2008 and are effective for annual periods beginning on or after 1 July 2009. The
changes made to the existing standards are comprehensive and mainly address the accounting for acquisition costs, contingent considerations, goodwill
and non-controlling interests, step acquisitions, partial disposal of an investment while a controlling interest is retained or control is lost, and acquisition
of additional shares after control is obtained.
Dialog Semiconductor Plc Annual report and accounts 2009 53
Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2009
2. Summary of significant accounting policies continued
IFRS 9 Financial Instruments
The new IFRS 9 was issued in November 2009 and is effective for periods beginning on or after 1 January 2013. The new standard for financial
instruments sets out provisions for the classification and measurement of financial assets. IFRS 9 uses a single approach to determine whether a financial
asset is measured at amortised cost or fair value, replacing the many different rules in IAS 39. The approach in IFRS 9 is based on how an entity
manages its financial instruments (its business model) and the contractual cash flow characteristics of the financial assets. The new standard also
requires a single impairment method to be used, replacing the many different impairment methods in IAS 39. The revised standard has not yet been
endorsed by the EU.
IAS 24 Related Party Disclosures (revised)
The revised IAS 24 was issued in November 2009 and is effective for periods beginning on or after 1 January 2011. The changes to IAS 24 simplify the
disclosure requirements for government-related entities and clarify the definition of a related party. The revised standard has not yet been endorsed by
the EU.
IAS 32 Financial Instruments: Presentation (amended)
The amended IAS 32 was issued in October 2009 and is effective for periods beginning on or after 1 February 2010. The amendment addresses the
accounting for rights issues (rights, options or warrants) that are denominated in a currency other than the functional currency of the issuer. Previously
such rights issues were accounted for as derivative liabilities. However, the amendment requires that, provided certain conditions are met, such rights
issues are classified as equity regardless of the currency in which the exercise price is denominated.
IAS 39 Financial Instruments: Recognition and Measurement
The amended IAS 39 Financial Instruments: Recognition and Measurement was issued in July 2008 and is effective for periods beginning on or after
1 July 2009. The amended standard clarifies how the existing principles underlying hedge accounting should be applied in two particular situations. The
Group does not expect material changes of its hedge accounting.
Improvements to IFRSs – a collection of amendments to International Financial Reporting Standards (annual improvements project)
The IASB has also issued a collection of amendments to various IFRSs (“Improvements to IFRSs”) in April 2009. This includes amendments to various
existing IFRSs. The Group does not expect material changes on its accounting due to the changes. The revised standard has not yet been endorsed by
the EU.
In addition, the following interpretations and amendments to interpretations have been issued:
Interpretation
Title
IFRIC 14
IFRIC 17
IFRIC 18
IFRIC 19
Amendment to IFRIC 14 Prepayments of a minimum funding requirement1
Distributions of non-cash assets to owners
Transfers of assets from customers
Extinguishing financial liabilities with equity instruments1
1) Interpretation has not yet been endorsed by the EU.
Effective date
1 January 2011
1 July 2009
1 July 2009
1 July 2010
The above listed interpretations and amendments to interpretations will not have an effect on the financial statements as they currently do not apply to
the Group.
The Group does not intend to make early application of the amended or revised Standards and Interpretation listed above.
54 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
3. Other disclosures to the income statements
a) Operating expenses and revenues
The operating result before income taxes is stated after charging:
Auditors' remuneration for the audit 1)
Depreciation of property, plant and equipment
Amortization of intangible assets
Personnel costs
Wages and salaries
Social and security costs
Share-based payment
Pension costs from defined contribution plans 2)
Included in revenues
Revenue from the sale of goods
Revenue from customer specific research and development contracts
Income attributable to prior periods from BenQ cash settlement (see note 27)
Included in cost of sales:
Costs in relation to customer specific research and development contracts
Amount of inventory recognized as expense
Impairment of inventories recognized as an expense
Included in other operating income
2009
US$000
(443)
(4,473)
(2,146)
2008
US$000
(423)
(5,614)
(2,124)
(36,771)
(28,787)
(4,811)
(1,364)
(2,569)
(2,758)
(1,325)
(2,321)
(45,515)
(35,191)
211,912
5,701
1,961
(5,701)
(98,947)
(973)
157,569
4,261
–
(4,261)
(78,807)
(1,220)
Income from recoveries on trade accounts receivable derecognized in prior periods
349
302
1) In addition to the auditors’ remuneration included in the operating result, in 2009 US$ 287,000 was paid to the auditors in relation to the capital increase. These costs were deducted from equity (see
note 19).
2) The pension costs from defined contribution plans include costs for the state funded pension plan in Germany of US$1,339,000 (2008: US$1,158,000).
b) Directors’ remuneration
Aggregate remuneration in respect of qualifying services
Number of Directors who received shares in respect of qualifying services
Number of Directors who exercised share options
In respect of the highest paid Director:
Aggregate remuneration
Pension contribution for the year
The highest paid director exercised 115,859 share options during the year.
2009
US$000
884
2009
No.
8
6
2009
US$000
577
28
2008
US$000
756
2008
No.
8
–
2008
US$000
440
30
Dialog Semiconductor Plc Annual report and accounts 2009 55
Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2009
3. Other disclosures to the income statements continued
c) Interest and other financial income and expense
Interest income and other financial income and expense comprise the following items:
Interest income
Other financial income
Interest expense
Other financial expenses
ca) Interest income and interest expense
Interest income and expenses comprise the following items:
Interest income
Interest expense
Of which: from financial instruments relating to categories in accordance with IAS 39
Loans and receivables
Financial liabilities measured at amortised costs
Available-for-sale financial assets
cb) Other financial income and other financial expenses
Other financial income and expenses comprise the following items:
Other financial income
Other financial expenses
Composition and categories in accordance with IAS 39:
Gain from the sale of available-for-sale financial assets
Loss from the sale of as held to maturity classified financial assets
2009
US$000
203
–
203
(212)
–
(212)
2009
US$000
203
(212)
(9)
94
(103)
–
(9)
2009
US$000
–
–
–
–
–
–
2008
US$000
776
98
874
(673)
(246)
(919)
2008
US$000
776
(673)
103
(519)
(18)
640
103
2008
US$000
98
(246)
(148)
98
(246)
(148)
d) Government grants
The Group receives government grants for research and development activities of its Edinburgh design centre. Under the condition that Dialog remains
located in Scotland and employs an agreed amount of employees in Scotland until 29 January 2011, the total grant that can be received is US$2.0
million (£1.3 million). In 2009 the Group received grants in the amount of US$879,000 (2008: US$654,000). In the profit and loss account the grants
received were deducted from research and development expenses.
56 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
3. Other disclosures to the income statements continued
e) Headcount
The average number of persons employed by the Group (including the Executive Director) during the year, analysed by category, was as follows:
Research and Development
Production
Sales and Marketing
Admin
IT
Income taxes
4.
Income (loss) before income taxes consists of the following:
Germany
Foreign
Income tax income (expense) is comprised of the following components:
Current taxes:
Germany
Foreign
Deferred taxes:
Germany
Foreign
Income tax benefit
Current taxes:
Current income tax charge
Adjustments in respect of current income tax of previous year
Deferred taxes:
Relating to origination and reversal of temporary differences
Relating to recognition of previously unrecognised deferred tax assets
Income tax benefit
2009
191
46
39
24
10
310
2009
US$000
31,490
(2,665)
28,825
2009
US$000
(3,069)
(122)
7,514
(421)
3,902
2009
US$000
(3,191)
–
(421)
7,514
3,902
2008
154
41
28
22
10
255
2008
US$000
3,643
2,390
6,033
2008
US$000
(139)
(20)
–
887
728
2008
US$000
(159)
–
887
–
728
The deferred tax benefit in 2009 mainly relates to the recognition of previously unrecognised deferred tax assets on carryforwards of unused tax losses.
Although Dialog is a UK company, its principal operations are located in Germany and its operating subsidiaries are all owned by its German subsidiary.
Accordingly, the following information is based on German corporate tax law.
Dialog Semiconductor Plc Annual report and accounts 2009 57
Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2009
Income taxes continued
4.
The tax rate for its German subsidiary is 15%; considering the impact of the solidarity surcharge of 5.5%, the federal corporate tax rate amounts to
15.825%. Combining the federal corporate tax rate with the trade tax rate of 12.551%, the combined statutory tax rate of the German subsidiary is
28.376%.
A reconciliation of income taxes determined using the combined German income tax rate of 28.376% (2008: 28.376%), is as follows:
Expected income tax benefit (expense)
Tax rate differential
Non-deductible portion of share based payments
Tax free income (non-deductible expenses)
Recognised deferred tax assets from prior periods
Benefit from previously unrecognised deferred tax assets that is used to reduce current tax expense
Adjustments recognised for tax of prior periods
Temporary differences arising from differences between functional currency and tax currency
Other
Actual income tax benefit
Deferred income tax assets and liabilities are summarised as follows:
Property, plant and equipment
Net operating loss carryforwards
Liabilities
Deferred taxes in relation to share option expenses
Deferred taxes in relation to tax credits
Other
Deferred tax assets
Property, plant and equipment
Intangible Assets
Other
Deferred tax liabilities
Net deferred tax assets
Recognised net deferred tax assets
Unrecognised deferred tax assets
2009
US$000
(8,179)
2
176
(109)
7,514
4,248
(88)
342
(4)
3,902
2008
US$000
(1,712)
(9)
(332)
(186)
–
2,046
626
291
4
728
At 31 December 2009
US$000
At 31 December 2008
US$000
206
46,427
2,841
3,021
1,250
33
53,778
(7)
(363)
(111)
(481)
53,297
7,514
45,783
296
47,130
3,403
–
1,049
32
51,910
(12)
(335)
(11)
(358)
51,552
–
51,552
58 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
Income taxes continued
4.
Tax loss carryforwards, temporary differences and net deferred tax assets are summarised as follows:
31 December 2009
31 December 2008
Tax loss
carryforwards
US$000
149,554
11,974
4,580
3,764
28
Temporary
differences
US$000
8,476
11,160
–
–
222
Tax credits
US$000
–
4,465
–
–
–
Net deferred tax
assets
US$000
43,577
7,728
1,557
339
96
53,297
Tax loss
carryforwards
US$000
161,918
1,922
4,486
3,871
–
Temporary
differences
US$000
10,590
1,055
–
–
176
Tax credits
US$000
–
3,746
–
–
–
Net deferred tax
assets
US$000
47,725
1,882
1,525
348
72
51,552
Germany
UK
US
Federal
State
Other
Total
In assessing whether the deferred tax assets can be used, management considers the probability that some, or all, of the deferred tax assets will not be
realised. The utilisation of deferred tax assets depends upon generating taxable profit during the periods in which those temporary differences become
deductible or tax-loss carryforwards can be utilised. Management considers the reversal of deferred tax liabilities, projected future taxable income,
benefits that could be realised from available tax planning strategies and other positive and negative factors in making this assessment.
The Group recorded the ninth consecutive quarter of positive net income in the fourth quarter of 2009. Therefore, based on the expected positive net
result for the near future, the management concluded to capitalise deferred tax assets in an amount of US$7,514,000 (2008: nil). The assessment was
based on the business plan for 2010 and beyond. Due to uncertainties immanent in the business of the Group, no further tax assets have been
recognised.
The Group did not recognise deferred tax assets in an amount US$ 45,783,000 (31 December 2008: 51,552,000).
The tax loss carryforwards in the US will expire between 2010 and 2023; other tax loss carryforwards have no expiration date.
Included in unrecognised deferred tax assets is an amount of US$1,250,000 (2008: US$1,049,000) (the increase results from foreign currency
adjustments) in relation to tax credits in the UK. This asset may be recovered against future taxable profits derived from certain overseas dividends for
the company concerned.
The amount shown under “income tax receivables” in the statement of financial position includes a corporation tax refund claim of the Group’s
German subsidiary. The total amount the German subsidiary is entitled to receive amounts to EUR 414,000 to be paid out in ten equal amounts during
2008 to 2017. The amount shown within the non-current assets represents the discounted part of the claim that is due after 2010. The amount that
will be paid in 2010 is shown within the current assets.
5. Cash, cash equivalents and restricted cash
Cash at bank
Short-term deposits
Deposits designated as a hedging instrument
Cash and cash equivalents
Restricted Cash
2009
US$000
40,552
33,050
46,546
120,148
3,000
2008
US$000
14,222
22,693
–
36,915
–
Cash, cash equivalents and restricted cash
123,148
36,915
Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group.
Deposits designated as a hedging instrument are classified as cash flow hedges to cover firm commitments and forecast transactions in euros and
pound sterling. Please refer to note 25 Financial risk management objectives and policies – Hedging activities. Cash and cash equivalents earn interest at
the respective short-term deposit rates. The fair value of the cash and cash equivalents approximates its book value. As prescribed in note 25, in 2007
the Group entered into a selective factoring agreement. Included in cash at bank is an amount of US$12,030,000 (2008: US$ US$9,545,000) held at
Dialog Semiconductor Plc Annual report and accounts 2009 59
Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2009
5. Cash, cash equivalents and restricted cash continued
the factoring bank which represents the cash value of selected receivables sold to the factoring bank. This amount is non-interest bearing until the
related receivables have been entirely settled. The factoring bank charges interest on amounts drawn from the account.
Funds classified as long-term Restricted Cash serve as collateral for the Group’s factoring agreement. As part of the factoring agreement, in the first
quarter 2009 the Group had pledged US$6.5 million of cash to the factoring institution. The institution would draw down on these only if a commercial
action by Dialog were to invalidate – partly or completely – the claim on a receivable financed by the factoring programme. For further information on
the Group’s factoring agreement, please refer to note 25. In the second quarter 2009 the factoring bank decreased the pledged amount to $3.0 million.
6. Trade accounts receivable and other receivables
Trade accounts receivables
Receivables from factoring agreement
2009
US$000
15,365
2,121
17,486
2008
US$000
3,837
3,618
7,455
Trade receivables are non-interest bearing and are generally on 30-60-day terms.
As described in note 25, in 2007 the Group entered into a selective factoring agreement. The amount shown as receivables from the factoring
agreement represents a 15% retainer kept by the factoring bank against sold receivables. The retainer is released only once the receivable is fully paid
by the customer, at the latest, 120 days after the receivable becomes due or if the insurance event occurs. The amounts are non-interest bearing and
are generally on 30-60-day terms.
The recorded trade accounts receivable for which an impairment has been recognised, was US$1,406,000 and US$1,656,000 at 31 December 2009
and 2008, respectively. The related allowance for doubtful accounts was US$1,406,000 and US$1,656,000 at 31 December 2009 and 2008,
respectively.
The allowance for doubtful accounts developed as follows:
Allowance for doubtful accounts at beginning of year
Additions charged to bad debt expense
Write-offs charged against the allowance
Reductions credited to income
Effect of movements in foreign currency
2009
US$000
1,656
163
–
(349)
(64)
2008
US$000
1,624
16
–
(2)
18
Allowance for doubtful accounts at end of year
1,406
1,656
60 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
6. Trade accounts receivable and other receivables continued
As at 31 December 2009 and 2008, the aging analysis of trade account receivables is as follows:
Receivables neither past due nor impaired
Receivables past due, not impaired individually
Less than 30 days
30 to 59 days
60 to 89 days
90 to 280 days
Total
2009
US$000
13,924
–
1,440
–
1
0
2008
US$000
3,076
–
646
–
92
23
15,365
3,837
With respect to the receivables that are neither past due nor impaired, there are no indications as at the reporting date that the debtors will not meet
their payment obligations.
Inventories
7.
Inventories are comprised of the following:
Raw materials
Work-in-process
Finished goods
The carrying amount of inventories carried at net realisable value at 31 December 2009 is US$nil (2008: US$nil).
8. Other financial assets
Other financial assets comprise:
Deposits for hedging contracts
Hedging instruments
At 31 December 2009
US$000
At 31 December 2008
US$000
4,260
5,528
16,405
26,193
3,074
4,814
12,050
19,938
At 31 December 2009
US$000
At 31 December 2008
US$000
–
–
–
1,079
453
1,532
The deposits for hedging contracts were an advance settlement for hedging instruments with a negative fair value. The deposits are interest bearing
with 1% below the current base rate and are offset with amounts due when the hedge is settled.
The amount shown under hedging instruments includes the fair value of derivative financial instruments used for cash flow hedges. The Group is
exposed to currency risks in the course of its operating activities. These risks are reduced by the use of forward currency exchange contracts.
The Group has clear guidelines as to the use of those derivatives, and compliance is constantly monitored. For further information on the Group’s
hedging policy please see note 25.
Dialog Semiconductor Plc Annual report and accounts 2009 61
Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2009
9. Other current assets
Other current assets comprise:
Prepaid expenses
Other tax receivables
Other
At 31 December 2009
US$000
At 31 December 2008
US$000
1,165
448
302
1,915
807
508
68
1,383
10. Property, plant and equipment, net
A summary of activity for property, plant and equipment for the years ended 31 December 2009 and 2008 is as follows:
Test equipment
US$000
Leasehold
improvements
US$000
Office and other
equipment
Advance payments
US$000
US$000
Cost
Balance at 1 January 2008
Effect of movements in foreign currency
Additions
Reclassifications
Disposals
Balance at 31 December 2008/1 January 2009
Effect of movements in foreign currency
Additions
Reclassifications
Disposals
Balance at 31 December 2009
Depreciation and impairment losses
Balance at 1 January 2008
Effect of movements in foreign currency
Depreciation charge for the year
Impairment charges
Disposals
Balance at 31 December 2008/1 January 2009
Effect of movements in foreign currency
Depreciation charge for the year
Disposals
Balance at 31 December 2009
Net book value
At 1 January 2008
At 31 December 2008/1 January 2009
At 31 December 2009
70,799
(49)
1,358
6
(119)
71,995
19
2,302
–
(127)
74,189
(63,334)
47
(3,930)
(599)
116
(67,700)
(18)
(2,221)
126
(69,813)
7,465
4,295
4,376
1,154
(251)
209
–
–
1,112
118
1,205
40
(781)
1,694
(900)
204
(101)
(102)
–
(899)
(80)
(172)
759
(392)
254
213
1,302
19,715
(680)
2,334
–
(1,278)
20,091
253
2,915
–
(1,937)
21,322
(16,988)
618
(1,583)
–
1,048
(16,905)
(205)
(2,080)
1,648
(17,542)
2,727
3,186
3,780
6
(10)
50
(6)
–
40
5
346
(40)
(2)
349
–
–
–
–
–
–
–
–
–
–
6
40
349
Total
US$000
91,674
(990)
3,951
–
(1,397)
93,238
395
6,768
–
(2,847)
97,554
(81,222)
869
(5,614)
(701)
1,164
(85,504)
(303)
(4,473)
2,533
(87,747)
10,452
7,734
9,807
Impairment of property, plant and equipment
Impairment charges on test equipment in 2008 relate to the write-down of display testers to reduce the carrying amount to the value in use following
an underutilisation of this equipment. In determining the value in use for test equipment the expected future cash flows were discounted at a rate of
10.5% on a pre-tax basis. In the income statement those impairment charges are recognised in the line item “cost of sales” and are allocated to the
display systems segment. Impairment charges on leasehold improvements in 2008 relate to installed equipment in a rented office that the Group
62 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
10. Property, plant and equipment, net continued
vacated in 2009. The lease contract for this office was cancelled in December 2008. In the income statement this impairment charge was recognised in
the line item “general and administrative expenses” and it is allocated to the corporate segment.
Finance leases
The carrying value of property, plant and equipment held under finance leases at 31 December 2009 was US$1,005,000 (31 December 2008:
US$364,000). Additions during the year were US$940,000 (2008: US$481,000). As of the reporting date future minimum lease payments under those
finance lease contracts were US$1,107,000 (2008: US$353,000). The present value of the net minimum lease payments was US$974,000 (2008:
US$326,000).
11. Intangible assets
A summary of activity for intangible assets for the years ended 31 December 2009 and 2008 is as follows:
Cost
Balance at 1 January 2008
Effect of movements in foreign currency
Additions
Disposals
Balance at 31 December 2008/1 January 2009
Effect of movements in foreign currency
Additions
Disposals
Balance at 31 December 2009
Amortisation and impairment losses
Balance at 1 January 2008
Effect of movements in foreign currency
Amortisation charge for the year
Disposals
Balance at 31 December 2008/1 January 2009
Effect of movements in foreign currency
Amortisation charge for the year
Impairment charges
Disposals
Balance at 31 December 2009
Net book value
At 1 January 2008
At 31 December 2008/1 January 2009
At 31 December 2009
Purchased software,
licenses and other
US$000
Patents
US$000
Intangible assets from
internal development
US$000
13,672
(382)
2,681
(421)
15,550
124
1,526
(937)
16,263
(11,826)
325
(1,354)
323
(12,532)
(102)
(1,149)
(343)
867
–
–
364
–
364
–
404
–
768
–
–
(13)
–
(13)
–
(59)
Total
US$000
14,396
(382)
4,476
(421)
18,069
124
2,902
(937)
724
–
1,431
–
2,155
–
972
–
3,127
20,158
(127)
–
(757)
–
(884)
(938)
–
(11,953)
325
(2,124)
323
(13,429)
(102)
(2,146)
(343)
867
(13,259)
(72)
(1,822)
(15,153)
1,846
3,018
3,004
–
351
696
597
1,271
1,305
2,443
4,640
5,005
The impairment charges in 2009 relate to a licence that is no longer in use. In the income statement those impairment charges were recognised in the
line item “research and development expenses” and are allocated to the automotive and industrial segment.
Acquisitions to purchased software, licenses and other intangible assets in 2009 and 2008 mainly comprise software.
Dialog Semiconductor Plc Annual report and accounts 2009 63
Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2009
11. Intangible assets continued
Hire purchase
The carrying value of intangible assets held under hire purchase leases at 31 December 2009 was US$441,000 (31 December 2008: US$253,000).
Additions during the year were US$244,000 (2008: US$304,000). As of the reporting date future minimum payments under those hire purchase
contracts were US$504,000 (2008: US$301,000). The present value of the net minimum payments was US$405,000 (2008: US$283,000).
12. Investments
The Group holds a 7.66% interest in Digital Imaging Systems GmbH (DIS), a private entity that is not listed on a public stock exchange. As the fair value
cannot be reliably determined, the investment in DIS is accounted for at acquisition cost less accumulated impairment charges. The total investment in
DIS was US$2,662,000. In 2007, based on business and cash flow projections, the Group recognised a 100% impairment loss. Accordingly the book
value for DIS at 31 December 2009 and 2008 was nil.
13. Held-to-maturity securities
In the third quarter of 2007, securities totalling US$4.0 million were reclassified from “available-for-sale” to “held to maturity”. Whilst the Group
intention was always to hold those securities to maturity (12 August 2010), the rapidly worsening economic environment forced management to review
this position.
After careful consideration, the management concluded in the fourth quarter 2008 that it was more prudent to convert these securities into cash. As a
result of this, the entire US$4 million worth of securities were sold for cash. Management sees this as an isolated event that was beyond its control, one
that could not have been reasonably anticipated back in 2007.
14. Trade and other payables
Trade and other payables comprise:
Trade accounts payable
Other payables
At 31 December 2009
US$000
At 31 December 2008
US$000
15,074
2,230
17,304
11,033
1,963
12,996
Terms and conditions of the above other current liabilities:
trade payables are non-interest bearing and are normally settled on 30-60-day terms; and
other payables are non-interest bearing and have an average term of five months.
15. Other financial liabilities
Other financial liabilities include hire purchase agreements and finance lease obligations. In addition other financial liabilities in 2008 included the fair
value of derivative financial instruments used for cash flow hedges. The Group is exposed to currency risks in the course of its operating activities. These
risks are reduced by the use of forward currency exchange contracts.
64 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
16. Provisions
The Group issues various types of contractual product warranties under which it guarantees the performance of products delivered for a certain period
or term. The estimated provision is based on historical warranty data. The provision for dilapidation includes costs of dismantling and restoring the
offices of the Group to their original condition at end the end of the lease terms. The provision for rental obligations relates to an office that the Group
vacated in 2009 as it relocated to larger premises. The office was vacated before the end of the contractual lease term. As the likelihood of the Group
being able to sublet this office is low the Group has accounted for the rental obligations for the period the building is not used. The changes in the
provision are summarised as follows:
Balance at
1 January 2009
US$000
Currency change
US$000
Discount
US$000
Additions
US$000
Used
US$000
Released
US$000
At 31 December
2009
US$000
515
366
387
22
–
1,290
–
–
1,290
–
18
44
(3)
7
66
–
66
–
–
–
–
–
–
11
11
11
326
159
–
–
328
813
241
241
(72)
(241)
(3)
(19)
–
–
(50)
–
–
–
769
252
428
–
335
(335)
(50)
1,784
–
–
–
–
252
252
1,054
(335)
(50)
2,036
Obligations for product warranties
Dilapidation
Rental obligations
Restructuring
Pending legal claims
Total current
Dilapidation
Total non-current
Total
17. Other current liabilities
Other current liabilities comprise:
Obligations for personnel and social expenses
Advances received in relation to customer specific research and development contracts
Other
At 31 December 2009
US$000
At 31 December 2008
US$000
7,836
939
2,533
11,308
2,311
1,000
1,126
4,437
Terms and conditions of the above other current liabilities:
obligations for personnel and social expenses have an average term of three months (2008: three months); and
other payables are non-interest bearing and are normally settled on 30 day terms.
18. Other non-current financial liabilities
Other non-current financial liabilities include hire purchase agreements and finance lease obligations.
19. Shareholders’ equity and other reserves
Capital increase
On 25 September 2009 the shareholders of the Company approved an offering of 12 million new ordinary shares of 10 pence each in the capital of the
Company (the “New Shares”) with new and existing institutional investors at a price of EUR 3.65 per share to raise gross proceeds of 43.8 million €
(US$64.3 million); net proceeds (after deduction of offering expenses of US$4.7 million) were US$59.7 million. The trading of the New Shares
commenced on the Regulated Market (Regulierter Markt) of the Frankfurt Stock Exchange on 30 September 2009.
On 20 October 2009, the Company completed an offering of 3,500,000 previously unissued ordinary shares at £0.10 per share to its employee share
options trust (“Trust”) at a price of EUR 0,20 per share, to make such shares available for the exercise of stock option rights that had previously been
granted to employees. At 31 December 2009 and 31 December 2008, the Trust continued to hold 2,663,318 and 641,259 shares respectively. These
Dialog Semiconductor Plc Annual report and accounts 2009 65
Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2009
19. Shareholders’ equity and other reserves continued
shares are legally issued and outstanding for accounting purposes and accordingly have been reported in the caption “employee stock purchase plan
shares” as a reduction of shareholders’ equity.
Ordinary shares
At 31 December 2009, Dialog had authorised 104,311,860 (2008: 104,311,860) ordinary shares with a par value of £0.10 per share, of which
61,568,930 (2008: 46,068,930) shares were issued and outstanding.
At 1 January 2008 and 2009
Issued on 25 September 2009
Issued on 20 October 2009
At 31 December 2009
amount of shares
46,068,930
12,000,000
3,500,000
US$000
9,328
1,922
575
61,568,930
11,825
Dialog’s stock was previously issued in the form of bearer shares. On 16 November 2009, all shares were converted in registered shares. All shares are
fully paid.
Share premium
The account comprises additional paid-in capital in connection with the issue of shares.
Accumulated deficit
The accumulated deficit comprises losses and non-distributed earnings of consolidated Group companies. Because of the accumulated deficit, the
Group cannot pay a dividend and does not plan to pay dividends in the foreseeable future.
Other reserves
Currency translation reserve
The currency translation reserve is used to record exchange differences arising from the translation of the financial statements of subsidiaries whose
functional currency is not the US$.
Cash flow hedge reserve
The cash flow hedge reserve is used to record the portion of the gain or loss on a hedging instrument that is determined to be a highly effective cash
flow hedge.
Available-for-sale securities reserve
The available-for-sale securities reserve is used to record fair value changes on available-for-sale investments.
The related tax effects allocated to each component of other reserves for the years ended 31 December 2009 and 2008 are as follows:
Unrealised losses on available-for-sale
securities
Currency translation adjustment
Cash flow hedges
Other comprehensive income (loss)
Pre-tax
US$000
–
(113)
(179)
(292)
2009
Tax effect
US$000
Net
US$000
Pre-tax
US$000
2008
Tax effect
US$000
–
421
–
421
–
308
(179)
129
(312)
(249)
(282)
(843)
–
(887)
–
(887)
Net
US$000
(312)
(1,136)
(282)
(1,730)
In 2008 the Group sold all of its available-for-sale securities. The net realised gain of US$10,000 from those sales that had been previously (Q3 2008)
recognised directly in equity were recycled into profit and loss.
66 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
20. Pension scheme
The Group operates defined contribution pension schemes. The pension cost charge for the year represents contributions payable by the Group to the
funds and amounted to US$1,229,000 (2008: US$1,163,000). At 31 December 2009, contributions amounting to US$150,000 (2008: US$69,000)
were payable to the funds and are included in other current liabilities. Pension costs also include payments to the state funded pension plan in Germany
in the amount of US$1,339,000 (2008: US$1,158,000).
21. Share-based payments
a) Stock option plans
On 7 August 1998, the Group adopted a stock option plan (the “Plan”) under which employees, the executive management and the Executive
Directors may be granted from time to time, at the discretion of the Board, stock options to acquire up to 3,840,990 shares of the Group’s authorised
but unissued ordinary shares. On 16 May 2002 the Shareholders of the Group approved a resolution increasing the maximum amount of stock options
which may be granted by the Group at any time, to 15% of Dialog’s issued share capital on a diluted basis. At 31 December 2009, 10,865,105 shares
could be issued.
Unless otherwise determined by the board, stock options granted to employees are granted with an exercise price not less than the quoted price at the
date of grant, and vest during the service period of the employee without any further vesting conditions. Stock options granted before 31 October
2006 have terms of ten years and vest over periods of one or five years from the grant date. On 19 June 2006 the Board amended the stock option
plan under which stock options now have a seven-year life and vest monthly over a period of one to 48 months. The new stock options may not be
exercised until they have been held for one calendar year from the grant date. The new rules were implemented on grants made on or after 31 October
2006. The stock option plan was extended by the Board in 2009 to expire 31 January 2012.
At the 2006 Annual General Meeting, Shareholders approved a stock option plan for Non-executive Directors. Each Non-executive Director is entitled to
an initial grant of 50,000 options vesting over four years and each year thereafter, soon after each Annual Shareholder Meeting, a further 20,000
options vesting over 12 months are granted. Options are exercisable at the market price prevailing at the date of grant.
On 22 April 2009 the Board of Directors of the Company decided to offer the employees an option replacement programme for options which had an
exercise price which was below the current market price (underwater options). Under this option replacement programme option holders were offered
to replace their underwater options against a reduced number of replacement options with an exercise price set at the market price of the Company´s
shares at the replacement date. The total value of the replacement options was equal to the total value of the underwater options. The options value
was derived from a Black-Scholes valuation model as at the date of conversion. 107 employees decided to replace in total 1,098,952 underwater
options for 534,192 replacement options.
The fair value of all grants in the two-year period ended 31 December 2009 was estimated using the Black-Scholes option pricing model. Expectations
of early exercise are considered in the determination of the expected life of the options. The Group does not have adequate historical development of
the share price, particularly as a result of material unusual effects in the stock market in recent years. Furthermore, implicit volatility cannot be
determined since none of the Group’s options are actively traded. The Group has therefore based its calculation of expected volatility on an average of
its own volatility and the historical development of other companies in its business segment.
The following assumptions were used for stock option grants for the years ended 31 December 2009 and 2008:
Expected dividend yield
Expected volatility
Risk free interest rate
Expected life (in years)
Weighted average share price during the year (in US$)
Weighted average share price for Option grants (in US$)
Weighted average exercise price (in US$)
Weighted-average fair value (in US$)
2009
0%
42–54%
4.25%
2.0–6.0
6.57
5.23
5.23
2.08
2008
0%
40–48%
4.2%
2.0–6.0
1.32
1.43
1.43
0.84
Dialog Semiconductor Plc Annual report and accounts 2009 67
Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2009
21. Share-based payments continued
Stock option plan activity for the years ended 31 December 2009 and 2008 was as follows:
Outstanding at beginning of year
Granted
Exercised
Forfeited
Options replaced
Options returned
Outstanding at end of year
Options exercisable at year end
2009
2008
Weighted average
exercise price
US$
2.56
6.58
1.88
1.74
2.08
5.33
3.27
2.26
Options
5,796,510
1,244,901
(1,558,152)
(115,157)
534,192
(1,098,952)
4,803,342
1,877,812
Weighted average
exercise price
US$
2.77
1.43
0.42
2.79
–
–
2.56
3.09
Options
5,372,006
997,776
(405,128)
(168,144)
–
–
5,796,510
3,329,250
The weighted average share price at the date of exercise of options was US$7.47 and US$1.12 in the years ended 31 December 2009 and 2008
respectively.
Liabilities from share option exercises to employees were US$614,000 at 31 December 2009 (2008: nil).
The following table summarises information on stock options outstanding at 31 December 2009:
Range of Exercise Prices
€0.00 - 2.98
€3.00 - 8.00
€0.00 - 8.00
Options outstanding
Weighted average
Options exercisable
Number
outstanding at 31
December 2009
remaining
contractual life
(in years)
Weighted average
exercise price
US$
Number exercisable
at 31 December 2009
Weighted average
exercise price
US$
3,769,800
1,033,542
4,803,342
5.0
6.2
5.3
1.85
8.46
3.27
1,652,686
225,126
1,877,812
1.89
5.00
2.26
b) Executives’ Long Term Incentive Plan (LTIP)
The Group also operates the Dialog Semiconductor Plc Long Term Incentive Plan (LTIP) which was approved by shareholders at the Annual General
Meeting in April 2008. Under the LTIP, key executives are eligible to share in a percentage of the value created for shareholders in excess of an annual
return hurdle measured over a three-year performance period. This value is delivered to a participant in the form of a series of so called nil-cost options
which can be exercised within five years of the date of grant. The first award under the LTIP was made on 8 May 2008.
At the Annual General Meeting in April 2009, the LTIP was extended by one year.
The fair value of the LTIP, where the number of nil-cost options granted to an individual is contingent upon the returns to Shareholders, was calculated
using a Monte Carlo simulation model. As a portion of each award is capable of vesting at three separate measurement dates each tranche has been
valued separately in accordance with IFRS2.
68 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
21. Share-based payments continued
The fair values used in the calculations are as follows:
Inputs
Share price at grant date
Exercise price
Expected life (years)
Expected volatility
Risk-free-interest-rate
Tranche 1
Tranche 2
Tranche 3
LTIP extension
€ 1.40
£ 0.10
0.64
40%
€ 1.40
£ 0.10
1.64
40%
€ 1.40
£ 0.10
2.64
40%
€ 4.077
£ 0.10
2.35
42%
4.8202%
4.8202%
4.8202%
1.4900%
Expected volatility has been determined on the same basis as the input into the fair value calculation for share options granted during the year.
Measurement date 31 January 2009
The measurement share price at 31 January 2009 (average share price over the prior 30 days) was €0.63. As this price was below the return hurdle for
January 2009 of €1.62 (initial price of €1.44 +12.5%), no share options were granted in 2009.
Measurement date 31 January 2010 (subsequent event)
The measurement share price at 31 January 2010 (average share price over the prior 30 days) was €9.8942. As this price was above the return hurdle
for January 2010 of €1.82 (prior year return hurdle of €1.62 +12.5%), 3,055,064 nil cost option grants were approved by the board on 4th February
2010, with 25% exercisable from February 22nd 2010 and the remaining 75% exercisable for 4 years from 21 February 2011.
c) ESOP Trust
The Group established an employee share option trust (the “Trust”). The Trust purchases shares in the Group for the benefit of employees under the
Group’s share option scheme. At 31 December 2009 the Trust held 2,663,318 shares (2008: 641,259).
Dialog Semiconductor Plc Annual report and accounts 2009 69
Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2009
22. Additional disclosures on financial instruments
Carrying amounts, amounts recognised and fair values by classes of financial assets and liabilities as well as by category:
Amounts recognised in the statement of financial position according to IAS 39
Category
in accordance
with IAS 39
Carrying
amount
31 December 2009
Amortised cost
US$000
US$000
Fair value
recognised
in equity
US$000
Fair value
recognised in
profit or loss
US$000
Fair value
31 December
2009
US$000
Cost
US$000
Assets
Cash at bank and short-term
deposits
Restricted cash
Deposits designated as a
hedging instrument
Trade accounts receivable and
other receivables
Other non-derivative financial
assets
Deposits for hedging
contracts
Derivative financial assets
Derivatives without
hedging relationship
Derivatives with hedging
relationship
Liabilities
Trade account payables
Other payables
Other financial liabilities
Derivative financial liabilities
Derivatives without
hedging relationship
Derivatives with hedging
relationship
LaR
LaR
n/a
LaR
LaR
n/a
n/a
FLAC
FLAC
FLAC
n/a
n/a
Of which aggregated by category in
accordance with IAS 39:
Loans and receivables (LaR)
Deposits designated as a hedging instrument
Held-to-maturity investments (HtM)
Available-for-sale financial assets (AfS)
Derivatives without hedging relationship
Derivatives with hedging relationship
73,602
3,000
46,546
73,602
3,000
–
17,486
17,486
–
–
–
292
–
–
15,074
2,230
1,379
15,074
2,230
1,379
–
–
–
–
94,088
46,546
–
–
–
–
94,380
–
–
–
–
–
Financial liabilities at amortised cost (FLAC)
(18,683)
(17,304)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
46,546
–
–
–
–
–
–
–
–
–
–
46,546
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
73,602
3,000
46,546
17,486
292
–
–
15,074
2,230
1,379
–
–
94,380
46,546
–
–
–
–
(17,304)
70 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
22. Additional disclosures on financial instruments continued
Amounts recognised in the statement of financial position according to IAS 39
Category
in accordance
with IAS 39
Carrying
amount
31 December 2008
Amortised cost
US$000
US$000
Fair value
recognised
in equity
US$000
Fair value
recognised in
profit or loss
US$000
Fair value
31 December 2008
US$000
Cost
US$000
Assets
Cash at bank and short-term
deposits
Trade accounts receivable and
other receivables
Other non-derivative financial
assets
Deposits for hedging
contracts
Derivative financial assets
Derivatives without
hedging relationship
Derivatives with hedging
relationship
Liabilities
Trade account payables
Other payables
Other financial liabilities
Derivative financial liabilities
Derivatives without
hedging relationship
Derivatives with hedging
relationship
LaR
LaR
36,915
36,915
7,455
7,455
LaR
1,079
1,079
n/a
n/a
FLAC
FLAC
FLAC
n/a
n/a
–
–
11,033
1,963
619
–
–
453
11,033
1,963
619
–
646
Of which aggregated by category in
accordance with IAS 39:
Loans and receivables (LaR)
45,449
45,449
Held-to-maturity investments (HtM)
Available-for-sale financial assets (AfS)
Derivatives without hedging relationship
Derivatives with hedging relationship
–
–
–
(193)
–
–
–
–
Financial liabilities at amortised cost (FLAC)
(13,615)
(12,996)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
453
–
–
–
646
–
–
–
–
(193)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
36,915
7,455
1,079
–
453
11,033
1,963
619
–
646
45,449
–
–
–
(193)
(12,996)
The fair value of derivatives has been determined with reference to available market information (Level 2). The carrying amounts of the loans and
receivables and financial liabilities approximate their fair values due to short-term maturities.
23. Commitments
Operating lease, software and service commitments
The Group leases all its office facilities and vehicles, and some of its office and test equipment, under operating leases. Future minimum lease payments
under rental and lease agreements, which have initial or remaining terms in excess of one year at 31 December 2009 and payments for other
commitments are as follows:
Dialog Semiconductor Plc Annual report and accounts 2009 71
Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2009
23. Commitments continued
Within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Thereafter
Total minimum payments
Operating leases and
software
commitments
Other commitments
Operating leases and
software commitments
Other commitments
2009
US$000
4,543
2,287
1,337
853
574
–
9,594
2009
US$000
2,429
2,497
2,411
1,173
150
–
8,660
2008
US$000
3,060
1,608
742
397
371
536
2008
US$000
1,411
205
69
–
–
–
6,714
1,685
Total payments for operating leases and software commitments, charged as an expense in the income statement, amounted to US$4,689,000 and
US$3,929,000 for the years ended 31 December 2009 and 2008 respectively.
Finance lease, hire purchase and software commitments
The Group has finance leases and hire purchase contracts for test and IT equipment and has software contracts. The leases have terms of renewal but
no purchase options and escalation clauses. Renewals are at the option of the specific entity that holds the lease. Future minimum payments under
finance leases and hire purchase and software contracts together with the present value of the net minimum payments are as follows:
Within one year
Between one and two years
Between two and three years
Between three and four years
Total minimum payments
Less amounts representing finance charges
Present value of minimum payments
Minimum payments
2009
US$000
793
364
341
113
1,611
(232)
1,379
2008
US$000
418
303
–
–
721
(50)
671
Capital commitments
The Group has contractual commitments for the acquisition of property, plant and equipment in 2009 of US$2,484,000 (2008: US$377,000) and for
the acquisition of intangible assets of US$614,000 (2008: US$181,000).
24. Segmental reporting
Since 2009 the Group applies IFRS 8 “Operating Segments”. Following the provisions of IFRS 8, reportable operating segments are identified based on
the “management approach”. The management approach requires external segment reporting based on the Group’s internal organisational and
management structure and on internal financial reporting to the chief operating decision maker, which considered the Group as being the Board of
Management.
72 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
24. Segmental reporting continued
In contrast to the former reporting structure, the Group reports on three operating segments, which are independently managed by bodies responsible
for the respective segments depending on the nature of products offered. The identification of Company components as business segments is based in
particular on the existence of business unit managers who report directly to the CEO of Dialog and who are responsible for the performance of the
segment under their charge. In accordance with IFRS 8, the former Wireless Segment was divided into the Audio and Power Management Segment and
the Display Systems Segment which are now reported separately as operating segments. Prior-year figures have been adjusted accordingly.
a) Operating segments
The Group’s operating segments are:
Audio and Power Management
This segment includes our power management and audio chips especially designed to meet the needs of the wireless systems markets.
Display Systems
The products in this segment include a range of advanced driver technologies for low power display applications – from PMOLEDs, to electronic paper
and MEMS displays.
Automotive and Industrial
In the automotive and industrial market our products address the safety, management and control of electronic systems in cars and for industrial
applications.
Revenues 1)
R&D expenses
Operating profit
(loss) 2)
Depreciation/
amortisation
Impairment and
disposal losses
Investments
Total assets
Liabilities
2009
2008
Audio & Power
Management
Display
Systems 3)/4)
Automotive/
Industrial
US$000
US$000
US$000
Corporate 5)
US$000
Total
US$000
Audio & Power
Management
Display
Systems 3)/4)
Automotive/
Industrial
US$000
US$000
US$000
Corporate
US$000
Total
US$000
176,569
24,383
5,987
8,312
33,531
9,513
1,526
217,613
121,355
413
42,621
19,816
5,149
7,025
35,193
9,453
133
427
161,830
36,721
47,048
(12,395)
(3,636)
(2,345)
28,672
21,892
(10,972)
(875)
(4,093)
5,952
3,535
1,490
1,594
–
6,619
3,769
2,060
1,909
–
7,738
1,076
5,447
43,605
16,025
179
2,296
4,308
6,756
441
2,457
At 31 Dec 2009
1,696
–
10,200
1,171
4,110
454
2,247
362
2,083
249
–
2,236
8,440
At 31 Dec 2008
13,366
131,032
192,311
28,410
7,227
5,324
35,332
9,367
4,679
5,121
10,349
4,746
36,915
914
80,353
20,148
[1] All revenues are from sales to external customers
[2] Certain overhead costs are allocated mainly based on sales and headcount.
[3] Revenue is partially generated from funded research and development activity.
[4] The operating loss reflects the investment in the emerging display technology.
[5] Corporate revenue in 2009 includes US$ 1.961,000 relating to the BenQ Cash settlement (see note 27).
Corporate expenses and income include sales discounts on early payment, the holding company, stock option expenses, expenses for the Management
Long Term Incentive Plan (LTIP), the restructuring expenses and income and other expenses not specifically attributable to the operating segments.
Corporate assets include certain financial assets such as cash and cash equivalents, and marketable securities. Corporate liabilities include liabilities of
the holding company and other liabilities not specifically attributable to operating segments.
Segment assets and liabilities comprise all assets and liabilities employed by the relevant business segment to generate the operating segment’s profit
or loss.
Investments comprise additions to property, plant and equipment, and intangible assets.
In 2009 and 2008 the Group had no inter-segment sales, income, expenses, receivables, payables or provisions.
Dialog Semiconductor Plc Annual report and accounts 2009 73
Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2009
24. Segmental reporting continued
There are no differences between the measurements of the reportable segments profits and losses, assets and liabilities and the entities profit and losses,
assets and liabilities.
b) Geographic information – Revenues by shipment destination
Revenues
United Kingdom
Hungary
Other European countries
China
Other Asian countries
Other countries
Total revenues
Investments
Germany
Japan
United Kingdom
Other
Total investments
Assets
Germany
Japan
United Kingdom
Other
Total assets
2009
US$000
2008
US$000
434
17,444
20,600
145,986
23,047
10,102
217,613
7,809
350
2,022
19
10,200
1,222
17,056
9,205
100,323
12,546
21,478
161,830
7,658
32
749
1
8,440
At 31 December 2009
US$000
At 31 December 2008
US$000
185,656
854
5,577
224
192,311
77,359
736
2,083
175
80,353
Revenues are allocated to countries based on the location of the shipment destination. Segmental investments and assets are allocated based on the
geographic location of the asset.
25. Financial risk management objectives and policies
Vulnerability due to certain significant risk concentrations
The Group’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Group’s future operating results and
cause actual results to vary materially from historical results include, but are not limited to, the highly cyclical nature of both the semiconductor and
wireless communications industries, dependence on certain customers and the ability to obtain adequate supply of sub-micron wafers.
The Group's products are generally utilised in the wireless and automotive industries. The Group generates a substantial portion of its revenue from the
wireless communications market, which accounted for 84% and 78% of its total revenue for the years ended 31 December 2009 and 2008,
respectively.
The Group’s revenue base is diversified by geographic region and by individual customer. Changes in foreign currency exchange rates influence the
Group’s results of operations. The Group’s sales, purchases of raw materials and manufacturing services are primarily denominated in US$. The Group
also has foreign currency exchange risks with respect to its net investments in foreign subsidiaries and branches in the United Kingdom, Japan, Taiwan,
Hong Kong and Korea. Fluctuations in these currencies could have a significant impact on the Group’s reported results from operations.
74 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
25. Financial risk management objectives and policies continued
The Group depends on a relatively small number of customers for a substantial portion of its revenues, and the loss of one or more of these customers
may result in a significant decline in future revenue. During 2009 two customers individually accounted for more than 10% of the Group's revenues.
Total revenues from these two customers were US$145,271,000. Net receivables from these two customers were US$9,342,000 at 31 December 2009.
During 2008 two customers individually accounted for more than 10% of the Group's revenues. Total revenues from these two customers were
US$104,227,000 or 64%. Net receivables from these two customers were US$344,000 at 31 December 2008. The Group performs ongoing credit
evaluations of its customers' financial condition. Both customers are part of the Audio & Power Management Segment.
Financial risk management objectives and policies
The Group’s principal financial instruments, other than derivatives, comprise cash, cash equivalents, restricted cash and short-term deposits. The main
purpose of these financial instruments is to raise finance for the Group’s operations. The Group has other financial instruments which mainly comprise
trade receivables and trade payables which arise directly from its operations.
The Group also entered into derivative transactions (forward currency contracts). The purpose is to manage the currency risks arising from the Group’s
operations.
It is, and has been throughout 2009 and 2008, the Group’s policy that no trading in derivatives shall be undertaken.
Exposure to market risk, credit risk and liquidity risk arises in the normal course of the Group’s business. The Board of Directors reviews and agrees
policies for managing each of these risks which are summarised below:
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices
comprise three types of risk: interest rate risk, currency risk and other price risk, such as equity risk. Financial instruments affected by market risk include
loans and borrowings, deposits, available-for-sale investments, and derivative financial instruments.
Interest risk
The Group earns interest from deposits and uses money market deposits with highly rated financial institutions. During the year, the Group has held
cash on deposit with a range of maturities from one week to one month. This can vary in view of changes in the underlying currency’s interest rates and
the Group’s cash requirements.
The Group spends interest on amounts received in connection with the factoring agreement as prescribed below.
The Group has no long-term debt and no amounts outstanding under short-term credit facilities as at 31 December 2009 (2008: US$nil).
The Group’s policy is to manage its interest income using a mix of fixed and variable interest rate debts. In order to achieve this policy, the Group invests
in highly liquid funds having a matching investment strategy. Once the operating business has been financed, short-term excess funds are invested in
floating interest rate securities. Only short-term deposits bear fixed interest rates.
Dialog Semiconductor Plc Annual report and accounts 2009 75
Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2009
25. Financial risk management objectives and policies continued
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s
profit before tax as well as the Group’s equity:
2009
2008
Currency risk
Increase/decrease in
basis points
Effect on profit
US$000
Effect on equity
US$000
17
(17)
12
(12)
137
(137)
29
(29)
137
(137)
29
(29)
The main functional currency within the Group and the presentation currency for the consolidated financial statements is the US$. Accordingly, foreign
exchange risks arise from transactions, and recognised assets and liabilities, the functional currency of which is not the US$. The currencies giving rise to
these exposure risks are primarily the euro and pound sterling. The majority of the Group’s revenue and material expenses are denominated in US$. The
majority of other operating expenses are denominated in euros and pounds sterling. The Group has transactional currency exposures. Such exposure
arises from the sales or purchases by an operating unit in currencies other than the unit’s functional currency. In 2009 and 2008 nearly all the Group’s
sales were denominated in US$.
The Group uses forward currency contracts as well as certain deposits (together referred to as the “hedging instruments”) to eliminate the currency
exposure of recurring expected payments, such as salaries, wages and office rents non-US$ denominated. The hedging instruments must be the same
currency as the hedged item.
It is the Group’s policy not to enter into forward contracts nor classify deposits as non-derivative hedging instruments until a firm commitment is in
place and to maximise hedge effectiveness by negotiating the terms of hedge instruments to match the terms of the hedged item.
The following table demonstrates the sensitivity to a reasonably possible change in the US dollar exchange rate, with all other variables held constant,
of the Group’s profit before tax (resulting from changes in the fair value of monetary assets, excluding securities, and liabilities) and the Group’s equity
(resulting from changes in the fair value of deposits designated as cash flow hedges and in 2008 from the fair value of exchange contracts).
2009
Euro
Pound sterling
Euro
Pound sterling
2008
Euro
Pound sterling
Euro
Pound sterling
Increase/decrease
against US$
Effect on profit
US$000
Effect on equity
US$000
7%
12%
(12%)
(7%)
12%
2%
(12%)
(2%)
1,373
1,909
(2,354)
(1,113)
161
35
(161)
(35)
2,848
3,109
(4,883)
(1,813)
1,621
151
(1,621)
(151)
76 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
25. Financial risk management objectives and policies continued
Credit risk
The Group is exposed to credit risk from its operating activities and certain financing activities. The Group trades only with recognised, creditworthy
third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition,
receivable balances are monitored on an ongoing basis, with the result that the Group’s exposure to bad debts is not significant. The maximum
exposure is the carrying amount as disclosed in note 6. Regarding the risk concentration please see above, “vulnerability due to certain significant
considerations”.
In order to finance its growth, in August 2007 the Group entered into a factoring agreement with a reputable German financial institution.
Initially the maximum amount of cash that can be received under this agreement was €10.0 million (or US$ equivalent). In 2008 the amount was
increased to US$30.0 million. The agreement, which comprises receivables from selective customers, significantly reduces the underlying credit risk
because the financial institution assumes all credit risks associated with the collection of the receivables financed under the programme.
As part of the factoring agreement, the Group has pledged US$6.5 million of cash to the factoring institution in the first quarter of 2009. The
institution would draw down on these only if a commercial action by Dialog were to invalidate – partly or completely – the claim on a receivable
financed by the factoring program. In the second quarter of 2009, the factoring bank decreased the pledged amount to US$3.0 million. In the
statement of financial position the amount is shown under restricted cash.
The Group’s exposure to credit risk arising from other financial assets of the Group, which comprise cash, cash equivalents and restricted cash, would
arise from default by a counterparty. The maximum exposure is equal to the carrying amount of the instruments.
Liquidity risk
The Group uses quarterly cash flow forecasts to monitor its liquidity risk. It takes financial investments and financial assets (e.g. trade accounts
receivables and other financial assets) into consideration, as well as projected cash flows from operations. The Group’s objective is to minimise interest
expense by avoiding the use of short-term bank liabilities or bank overdrafts within the Group.
At 31 December 2009, the Group had cash, cash equivalents and restricted cash of US$123,148,000 (2008: US$36,915,000).
The Group’s policy is to structure its maturities of current financial assets within the Group to meet 100% of the respective maturities of the liabilities.
The table below summarises the maturity profile of the Group’s financial liabilities at 31 December 2009, based on contractual undiscounted payments:
Financial year ended 2009
Trade accounts payable
Other payables
Other financial liabilities 1)
Financial year ended 2008
Trade accounts payable
Other payables
Other financial liabilities 1)
Less than 3 months
US$000
3 to 12 months
US$000
1 to 5 years
US$000
15,074
2,230
679
17,983
11,019
1,395
956
13,370
–
–
–
–
14
568
38
620
–
–
–
–
–
–
–
–
Total
US$000
15,074
2,230
679
17,983
11,033
1,963
994
13,990
1) Other financial liabilities consist of derivative financial instruments
At 31 December 2009, the Group had unused short-term credit lines of US$14,200,000 (2008: US$8,945,000 (€6.4 million)). There were no amounts
outstanding under these credit lines at 31 December 2009 (2008: nil).
Dialog Semiconductor Plc Annual report and accounts 2009 77
Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2009
25. Financial risk management objectives and policies continued
Capital management
The primary objective of the Group’s capital management is to ensure that it maintains healthy capital ratios in order to support its business and
strategies for growth.
The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions. To maintain or adjust its capital
structure, the Group may generally issue new shares. No changes were made in the objectives, policies or processes during the years ending 31
December 2009 and 31 December 2008.
The Group monitors capital using an equity ratio (total equity divided by total assets). The equity ratio as of 31 December 2009 was 81.6% (2008:
75.0%). Capital includes net Shareholders’ equity. The Group’s policy is to finance business development and growth with equity rather than long-term
liabilities. It is, therefore, also its policy to keep a strong equity ratio. This policy will be reconsidered as soon as sustainable profits are earned in order to
achieve leverage.
Hedging activities
At 31 December 2009, the Group held deposits (referred to as the “hedging instruments”) designated as hedges of firm commitments and forecast
transactions in euros and pounds sterling.
The hedging instruments are being used to hedge the foreign currency risk of contractual cash flows, principally resulting from wages and salaries, and
rental payments with the aim of eliminating the currency risk by transforming these cash flows from euros or pounds sterling into US dollars. The fair
values of the deposits and forward exchange contracts which equal the book values are as follows:
Fair values
Forward exchange contracts
Deposits
At 31 Dec 2009
At 31 Dec 2008
Assets
US$000
Liabilities
US$000
–
46,546
–
–
Assets
US$000
453
–
Liabilities
US$000
646
–
The critical terms of the deposits have been set to match the terms of the hedged cash flows.
The cash flow hedges of the expected future cash flows in each month from January 2010 to December 2010 and January 2009 to May 2009
respectively were assessed to be highly effective and, at 31 December 2009, a net unrealised loss of US$372,000 was included in equity in respect of
these cash flows (2008: loss of US$193,000). During the financial year 2009 a profit of US$197,000 (2008: loss of US$2,026,000) was recognised in
equity and a profit of US$376,000 (2008: loss of US$1,744,000) was removed from equity and recognised in profit and loss. The months of occurrence
of the cash flows are the same as the month when the income statement is affected.
78 Dialog Semiconductor Plc Annual report and accounts 2009
Section 4 | Consolidated financial statements and notes
25. Financial risk management objectives and policies continued
The following tables show the contractual maturities of the payments for which deposits are used as hedging instruments, i.e., when the hedged item
will be recognised in profit or loss:
Maturity
2009
January 2010
February 2010
March 2010
April 2010
May 2010
June 2010
July 2010
August 2010
September 2010
October 2010
November 2010
December 2010
2008
January 2009
February 2009
March 2009
April 2009
May 2009
Maturity
2009
January 2010
February 2010
March 2010
April 2010
May 2010
June 2010
July 2010
August 2010
September 2010
October 2010
November 2010
December 2010
2008
January 2009
February 2009
March 2009
April 2009
May 2009
Nominal amount €000
Forward rate
Nominal amount €000
Spot rate
Derivatives
Deposits
–
–
–
–
–
–
–
–
–
–
–
–
2,000
2,000
2,000
2,000
1,000
–
–
–
–
–
–
–
–
–
–
–
–
1.3889
1.3891
1.3575
1.2591
1.3780
1,725
1,725
2,325
1,700
1,700
1,700
1,700
1,700
1,700
1,700
1,700
1,700
–
–
–
–
–
1.4750–1.4765
1.4750–1.4765
1.4750–1.4765
1.4750–1.4765
1.4750–1.4765
1.4750–1.4765
1.4750–1.4765
1.4750–1.4765
1.4750–1.4765
1.4750–1.4765
1.4750–1.4765
1.4750–1.4765
-
-
-
-
-
Nominal amount £000
Forward rate
Nominal amount £000
Spot rate
Derivatives
Deposits
–
–
–
–
–
–
–
–
–
–
–
–
915
700
700
800
400
–
–
–
–
–
–
–
–
–
–
–
–
1.7645
1.7626
1.6352
1.4849
1.5399
833
833
1,283
783
783
783
783
783
783
783
783
783
–
–
–
–
–
1.5807
1.5807
1.5807
1.5807
1.5807
1.5807
1.5807
1.5807
1.5807
1.5807
1.5807
1.5807
–
–
–
–
–
Dialog Semiconductor Plc Annual report and accounts 2009 79
Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2009
26. Transactions with related parties
For the relationship between the parent company, Dialog Semiconductor Plc, and its subsidiaries please see note 2.
Related parties are comprised of eight non-executive members of the Board of Directors and nine members of the executive management which are
named in the management and governance section. These are the only related parties of the Group.
Compensation of key management personnel of the Group
For the composition of our key management please see management and governance beginning on page 25. Compensation of key management
personnel of the Group is as follows:
Short term employee benefits
Post-employment benefits 1)
Share-based payments
1) The amounts include payments for defined contribution plans.
2009
US$000
3,499
137
635
4,272
2008
US$000
2,391
147
608
3,146
Compensation of Non-executive Directors
The compensation of Non-executive Directors was US$307,000 (2008: US$316,000). As at 31 December 2009 the amount of US$55,000 for Board
member fees was outstanding (2008: US$38,000). For further information please see the Directors’ remuneration report within the management and
governance section on pages 32 to 34.
Other related party transactions
In 2009 and 2008 there were no other transactions with related parties.
27. BenQ settlement
In the second quarter 2009 the Company received an unexpected cash settlement of US$2.3 million. This cash settlement was against receivables which
had previously been written down and revenues that had not been recognised in 2006 as a result of the insolvency of BenQ Mobile. The amount
represents 35% of the original claim to BenQ Mobile. Of this amount US$2.0 million was classified as revenue and US$0.3 million was classified as
other operating income. The amount shown as revenue represents prior period revenue. As one of the criteria for revenue recognition under IFRS was
not met, for this amount the related revenue was not accounted for in 2006. The amount shown under other operating income was previously
recognised as revenue in the periods preceding the insolvency but the underlying receivables were written down against other operating expenses.
28. Subsequent event
No subsequent events of material impact occurred after the reporting date.
80 Dialog Semiconductor Plc Annual report and accounts 2009
Section 5 | Company financial statements and notes
Company financial statements
On the following pages information regarding the holding company Dialog Semiconductor Plc is given.
Company statement of financial position
For the year ended 31 December 2009
Assets
Cash and cash equivalents
Amounts owed by Group undertakings
Prepaid expenses
Other current assets
Total current assets
Investments
Amounts owed by Group undertakings (due after more than one year)
Total non-current assets
Total assets
Trade accounts payables
Other payables
Total current liabilities
Ordinary shares
Share premium
Retained deficit
Other reserves
Employee stock purchase plan shares
Total Shareholders’ equity
Total liabilities and Shareholders´ equity
Notes At 31 December 2009
US$000
At 31 December 2008
US$000
29
71,924
44,542
67
296
116,829
97,521
–
97,521
21,630
33,533
67
–
55,230
97,521
1,278
98,799
214,350
154,029
475
471
946
11,825
283,733
(80,972)
(372)
(810)
28
330
358
9,328
223,005
(78,523)
–
(139)
32
213,404
153,671
214,350
154,029
Profit for the financial year
As permitted by Section 408 of the Companies Act 2006, the parent company’s profit and loss account has not been included in these financial
statements. The parent company’s loss after taxation was US$2,449,000 (2008: profit of US$3,163,000).
These financial statements were approved by the Board of Directors on 11 February 2010 and were signed on its behalf by:
Dr Jalal Bagherli
Director
Dialog Semiconductor Plc Annual report and accounts 2009 81
Section 5 | Company financial statements and notes
Company financial statements
Company statement of changes in equity
For the year ended 31 December 2009
Other reserves
Ordinary Shares
US$000
Additional paid-in
capital
US$000
Accumulated deficit
US$000
Cash flow
hedges
US$000
Available-for-sale
securities
Employee stock
purchase plan shares
US$000
312
(312)
–
(312)
–
–
–
–
–
–
–
–
–
US$000
Total
US$000
(205)
150,663
–
66
66
2,851
157
3,008
(139)
153,671
–
–
(2,821)
64,343
(1,048)
(5,733)
–
–
377
(671)
1,048
(41)
2,937
59,733
(810)
213,404
Balance at 1 January 2008
Total comprehensive income
(loss)
Sale of employee stock
purchase plan shares
Changes in Equity total
Balance at 31 December
2008 / 1 January 2009
Total comprehensive income
(loss)
Capital increase public
offering (gross proceeds)
Transaction costs of capital
increase – public offering
Capital increase for
employee share option plan
(gross proceeds)
Transaction costs of capital
increase – employee share
option plan
Sale of employee stock
purchase plan shares
9,328
222,914
(81,686)
–
–
–
–
91
91
3,163
–
3,163
9,328
223,005
(78,523)
–
–
(2,449)
1,922
62,421
–
(4,685)
575
473
–
–
(41)
2,560
60,728
–
–
–
–
–
–
–
–
–
–
(372)
–
–
–
–
–
Changes in Equity total
2,497
(2,449)
(372)
Balance at 31 December
2009
11,825
283,733
(80,972)
(372)
82 Dialog Semiconductor Plc Annual report and accounts 2009
Section 5 | Company financial statements and notes
Company statement of cash flows
For the year ended 31 December 2009
Cash flows from operating activities:
Net profit (loss)
Adjustments to reconcile net profit (loss) to net cash provided by (used for) operating activities:
Interest income, net
Hedging
Losses on disposals financial assets
Changes in working capital:
Trade accounts payable
Other assets and liabilities
Cash generated from (used for) operations
Interest received
Cash flow from (used for) operating activities
Cash flows from investing activities:
Loans made to other group companies
Purchase of securities
Sale of Securities
Cash flow from (used for) investing activities
Cash flows from financing activities:
Cash flow from capital increase
Sale of employee stock purchase plan shares
Cash flow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
2009
US$000
2008
US$000
(2,449)
3,163
(713)
(372)
–
415
(122)
(3,241)
165
(3,076)
(9,184)
–
–
(9,184)
59,617
2,937
62,554
50,294
21,630
(3,267)
–
147
(218)
(10)
(185)
1,002
817
240
(3,050)
22,758
19,948
–
157
157
20,922
708
Cash and cash equivalents at end of period
71,924
21,630
Dialog Semiconductor Plc Annual report and accounts 2009 83
Section 5 | Company financial statements and notes
Company financial statements
Notes to the Company financial statements
For the year ended 31 December 2009
29. Investments
This represents the investment of the Company in Dialog Semiconductor GmbH. Investments in subsidiaries are stated at cost less any provision for
impairment in value.
The aggregate amount of capital and reserves and the results of this undertaking were as follows:
2009
US$0001
(28,226)
25,889
2008
US$000
(3,068)
3,938
At 31 December 2009
US$000
At 31 December 2008
US$000
1,732
1,250
(104)
2,878
–
2,878
173
1,049
–
1,222
–
1,222
2009
US$000
2008
US$000
388
287
675
355
–
355
Capital and reserves
Profit (loss) for the year
1) Based on preliminary unaudited results.
30. Deferred tax
Net operating loss carryforwards
Deferred taxes in relation to tax credits
Other
Net deferred tax assets
Recognised net deferred tax assets
Unrecognised deferred tax assets
For further information on deferred taxes see note 4.
31. Auditors’ remuneration
Auditors' remuneration
audit
in relation to capital increase
32. Share capital and share options
Details of the Company’s share capital and share options are set out in notes 19 and 21.
33. Headcount and costs
The Company does not have any employees.
34. Events after the reporting period
No subsequent events of material impact occurred after the reporting period.
84 Dialog Semiconductor Plc Annual report and accounts 2009
Section 6 | Additional information
Glossary
Technical glossary
Analog A type of signal in an electronic circuit that takes on a
continuous range of values rather than only a few discrete values.
ASIC Application Specific Integrated Circuit: an integrated chip,
custom designed for a specific application.
ASSP Application Specific Standard Product: a semiconductor
device integrated circuit (IC) dedicated to a specific application
and sold to more than one user.
Audio CODEC The interface between analog signals (such as the
human voice) and the digital data processing inside a mobile
phone, determining voice quality.
CAD Computer Aided Design: usually refers to a software tool
used for designing electronics hardware or software systems.
CDMA Code Division Multiple Access: an alternative to GSM
technology for mobile wireless networks.
Chips Electronic integrated circuits.
CMOS Complimentary Metal Oxide Semiconductor: the most
popular class of semiconductor manufacturing technology.
DC-DC A DC-to-DC converter accepts a direct current input
voltage and produces a direct current output voltage. The output
is typically at a different voltage level than the input, and often
the component provides power bus regulation.
Digital A type of signal used to transmit information that has only
discrete levels of some parameter (usually voltage).
Fabless A company that designs and delivers semiconductors
by outsourcing the fabrication (manufacturing) process.
Foundry A manufacturing plant where silicon wafers are produced.
HiFi High-Fidelity: the reproduction of sound with little or
no distortion.
IC Integrated Circuit: an electronic device with numerous
components on a single chip.
Imaging The capture and processing of images via an image
sensor for use by an electronic device to send to a display for
viewing by a user.
Liquid Crystal Display (LCD) A display technology found in many
portable electronics products, including personal organisers,
cellular handsets and notebook computers.
LDO Low Dropout voltage regulators are used in battery operated
systems, where the output voltage is typically lower than the
input voltage.
LED Light Emitting Diode: a semiconductor device that emits light
when charged with electricity, often used for LCD display backlights.
Mixed signal A combination of analog and digital signals being
generated, controlled or modified on the same chip.
MP3 (MPEG-1 Audio Layer-3): a standard technology format
for compression of sound sequences into very small files,
while preserving the original level of sound quality.
OEM Original Equipment Manufacturer: a company that builds
products or components that are used in products sold by
another company.
OLED Organic Light Emitting Diode.
Passive Matrix OLED or PMOLED Passive Matrix OLED a display
type formed by creating an array of OLED pixels which are driven
by row and column (x-y) coordinates.
Power Management The management of the power requirements
of various subsystems, important in hand-held and portable
electronics equipment.
PMIC Power Management IC.
Semiconductor A base material halfway between a conductor and
an insulator, which can be physically altered by mixing in certain
atoms. Semiconductors form the basis for present-day electronics.
Silicon A semi-metallic element used to create a wafer, and the
most common semiconductor material – in about 95% of all
manufactured chips.
Smartphone A mobile phone offering advanced capabilities,
often with pc-like functionality (PC-mobile handset convergence).
A smartphone runs complete operating system software providing
a standardised interface and platform for application developers.
Smart Mirror™ A technology patented by Dialog Semiconductor
which simplifies circuit design and provides very low current
consumption in Power Management circuits.
SmartXtend™ A technology patented by Dialog Semiconductor
that extends the life and reduces power consumption of high-
resolution, passive matrix OLED displays.
Subcontractor A business that signs a contract to perform part
or all of the obligations of another’s contract.
TAM Total addressable market TAM measures the potential
market for your product – and your product only – assuming
you could reach 100% of your customers.
USB Universal Serial Bus: a universal interface standard to connect
different electronics devices.
Wafer A slice of silicon from a 4, 5, 6 or 8 inch diameter
silicon bar and used as the foundation on which to build
semiconductor products.
Dialog Semiconductor Plc Annual report and accounts 2009 85
Section 6 | Additional information
Glossary
Financial glossary
AGM Annual General Meeting.
EURIBOR (Euro Interbank Offered Rate) is the rate at which euro interbank
term deposits within the euro zone are offered by one prime bank to
CAGR Compound Annual Growth Rate: a method of assessing the average
another prime bank.
growth of a value over time.
Freefloat the proportion of an issuer’s share capital that is available for
Cash flow The primary purpose of a statement of cash flow is to provide
purchase in the public equity markets by investors.
relevant information about the cash receipts and cash payments of an
Gross margin equals the difference between revenues and cost of sales
enterprise during a period. It helps to assess the enterprise’s ability to
as presented in the statement of operations.
generate positive future net cash flows. A statement of cash flows shall
Impairment is the condition that exists when the carrying amount of a
explain the change in cash and cash equivalents during the period by
long-lived asset exceeds its fair value (the sum of the undiscounted cash
classifying cash receipts and payments according to whether they stem
flows expected to result from the use and eventual disposition of the asset).
from operating, investing, or financing activities.
IFRS (International Financial Reporting Standards) accounting standards
Cash flow from operating activities includes all transactions and other
generally to be used for financial years commencing on or after 1 January
events that are not defined as investing or financing activities in paragraphs.
2005 by all publicly-listed European Union companies in compliance with
Operating activities generally involve producing and delivering goods and
the European Parliament and Council Regulation adopted in July 2002.
providing services. Cash flows from operating activities are generally the
Prime Standard The new segmentation of the equity market of the
cash effects of transactions and other events that enter into the
German Stock Exchange comprises a Prime Standard segment in addition
determination of net income.
Comprehensive Income The purpose of reporting comprehensive income
to the General Standard segment that applies the statutory minimum
requirements. The Prime Standard segment addresses companies that wish
is to report a measure of all changes in equity of an enterprise that result
to target international investors. These companies are required to meet high
from recognised transactions and other economic events of
international transparency criteria, over and above those set out by the
the period other than transactions with owners such as capital increases
General Standard.
or dividends. An example of items effecting comprehensive income is
Restructuring charges Costs associated with an exit or disposal
foreign currency translation adjustments resulting from the process of
activity, e.g. termination benefits provided to employees that are
translating an entity’s financial statements in a foreign currency into the
involuntarily terminated.
reporting currency.
Securities Debt securities are instruments representing a creditor
Corporate governance is the system by which business corporations are
relationship with an enterprise and include government securities,
directed and controlled. The corporate governance structure specifies the
corporate bonds, commercial paper, and all securitised debt instruments.
distribution of rights and responsibilities among different participants in
Available-for-sale securities are debt securities not classified as held
the corporation, such as the Board, managers, shareholders and other
to maturity or trading securities.
stakeholders, and spells out the rules and procedures for making decisions
Shareholders’ equity reflects the investment of shareholders in a company.
on corporate affairs. By doing this, it also provides the structure through
Shareholders’ equity comprises ordinary shares, additional paid-in capital,
which the company’s objectives are set, and the means of attaining those
retained earnings and accumulated other comprehensive income.
objectives and monitoring performance.
Stock option plans include all agreements by an entity to issue shares of
Deferred taxes Deferred tax assets or liabilities are temporary differences
stock or other equity instruments to employees. Stock option plans provide
between the tax basis of an asset or liability and its reported amount in the
employees the opportunity to receive stock resulting in an additional
financial statements that will result in taxable or deductible amounts in
compensation based on future share price performance. The purpose of
future years when the reported amount of the asset or liability is recovered
stock option plans is to motivate employees to increase Shareholder value
or settled, respectively.
on a long-term basis.
Derivative financial instruments A financial instrument that derives its
Total assets include all current and non-current assets. Total assets equal
value from the price or expected price of an underlying asset (e.g. a security,
total liabilities and shareholders’ equity.
currency or bond).
Working capital is represented by the excess of current assets over current
Dividends are payments made by a company to its shareholders.
liabilities and identifies the relatively liquid portion of total enterprise capital
When a company earns a profit, that money can be put to two uses:
that constitutes a margin or buffer for meeting obligations within the
it can either be re-invested in the business (called retained earnings),
ordinary operating cycle of the business.
or it can be paid to the shareholders of the company as a dividend.
86 Dialog Semiconductor Plc Annual report and accounts 2009
Section 6 | Additional information
Advisers and corporate information
Public relations
FD
Holborn Gate
26 Southampton Buildings
London EC4R 9HA
UK
FD GmbH
Park Tower
Bockenheimer Anlage 44
60322 Frankfurt am Main
Germany
Registered office
Dialog Semiconductor Plc
Tower Bridge House
St Katharine’s Way
London E1W 1AA
UK
Website: www.dialog-semiconductor.com
Registered number
3505161
Financial calendar
Annual General Meeting
Q1 2010 Results
Q2 2010 Results
Q3 2010 Results
Preliminary results for 2010
5 May 2010
10 May 2010
20 July 2010
26 October 2010
February 2011
Legal adviser
Reynolds Porter Chamberlain LLP
Tower Bridge House
St Katharine’s Way
London E1W 1AA
UK
Auditors
Ernst & Young LLP
Apax Plaza
Reading
Berkshire RG1 1YE
UK
Principal banker
Deutsche Bank AG
Global Banking
Am Hafenmarkt
D-73728 Esslingen
Germany
Designated sponsor
Close Brothers Seydler
Schillerstrasse 27-29
D-60313 Frankfurt
Germany
Shares
Information on the Company’s shares and on significant
shareholdings can be found on pages 7 to 9.
Dialog Semiconductor Plc Annual report and accounts 2009 87
Section 6 | Additional information
Group directory
Germany
Dialog Semiconductor GmbH
Neue Strasse 95
D-73230 Kirchheim/Teck-Nabern
Germany
Phone: (+49) 7021 805-0
Fax: (+49) 7021 805-100
Email: dialog.nabern@diasemi.com
United Kingdom
Dialog Semiconductor (UK) Ltd
Delta 200
Delta Business Park
Welton Road
Swindon, Wiltshire
SN5 7XB,UK
Phone: (+44) 1793 757700
Fax: (+44) 1793 757800
Email: dialog.swindon@diasemi.com
North America
Dialog North America
440 Oakmead Parkway
Sunnyvale, CA 94085
USA
Phone: (+1) 888-809-3816
Fax: (+1) 408-328-9275
Email: NA_sales_enquiries@diasemi.com
Japan
Dialog Semiconductor K.K.
Mita Kokusai Bldg 16F
1-4-28, Mita, Minato-ku
Tokyo, 108-0073
Japan
Phone: (+81) 3 3769 8123
Fax: (+81) 3 3769 8124
Email: dialog.tokyo@diasemi.com
Taiwan & Greater China
Dialog Semiconductor GmbH
Taiwan Branch
Chu-Nan 3rd Factory No. 118
Chung-Hua Road
Chu-Nan, Miao-Li 350
Taiwan R.O.C.
Tel: (+852) 9055 3888
Tel: (+886) 22542 1579
Email: dialog.taiwan@diasemi.com
Korea
Dialog Semiconductor (UK) Ltd Korea Branch
#3010, 30th Floor, Trade Tower
159-1, Samsung-Dong,
Gangnam-gu, Seoul, 135-729, Korea
Phone: (+82) 2 6007 2303
Fax: (+82) 2 6007 2723
Email: dialog.korea@diasemi.com
88 Dialog Semiconductor Plc Annual report and accounts 2009
Designed and produced by 85FOUR.
Printed in England by Cousin, environmentally accredited printers, ISO 14001.
Dialog Semiconductor Plc
Tower Bridge House
St Katherine’s Way
London E1W 1AA
UK
www.dialog-semiconductor.com
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