Dialog Semiconductor Plc | Annual report and accounts 2011
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Annual report and accounts | 2011
The power to be...
1173.2
Read by
...personal
...portable
...connected
Section 1 | Overview
02 Dialog at a glance
03 Our markets
06 Chairman’s statement
07 Dialog Semiconductor shares in 2011
Section 2 | Business review
12 Business review and strategy
13 Chief Executive’s review
15 Product technology and key customers
20 Financial review
25 Risks and their management
26 Sustainability
Section 3 | Management and governance
30 Executive management
32 Board of Directors
34 Directors’ report
36 Corporate Governance
38 Directors’ remuneration report
41 Statement of Directors’ responsibilities
41 Responsibility statement
Section 4 | Consolidated financial statements and notes
Independent Auditors’ report to the members
42
of Dialog Semiconductor Plc
43 Consolidated statement of financial position
44 Consolidated income statement
45 Statement of comprehensive income
46 Consolidated statement of cash flows
47 Consolidated statement of changes in
Shareholders’ equity
48 Notes to the consolidated financial statements
Section 5 | Company financial statements and notes
98 Company statement of financial position
99 Company statement of changes in equity
100 Company statement of cash flows
101 Notes to the Company financial statements
Section 6 | Additional information
102 Glossary
104 Advisers and corporate information
105 Group directory
P04-05
...personal
P10-11
...portable
P16-17
...connected
The power to be...
Dialog Semiconductor creates highly integrated, mixed signal integrated circuits (ICs)
optimised for personal portable, short-range wireless, 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 focus and expertise in energy-efficient system power management, and
the addition during 2011 of low energy short-range wireless and VoIP technology
to the portfolio, Dialog brings decades of experience to the rapid development of ICs
for personal portable applications, including smartphones, tablet PCs, digital cordless
phones and gaming applications.
Dialog’s power management processor companion chips are essential for enhancing
both the performance in terms of extended battery lifetime 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 2011, it had US$527 million in revenue and is one
of the fastest growing European public semiconductor companies. At 31 December
2011, the Company had 635 employees. The Company is listed on the Frankfurt
(FWB: DLG) stock exchange and is a member of the German TecDax index.
02
Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 1 | Overview
Dialog at a glance
HIGHLIGHTS
TOTAL REVENUE (US$m)
OPERATING PROFIT (US$m)
NET PROFIT (US$m)
BASIC EPS (US$)
+78%*
+36%*
+32%*
+27%*
600
500
400
300
200
100
0
07
08
09
10
11
* Year-on-year growth 2010-2011
70
60
50
40
30
20
10
0
-10
-20
60
50
40
30
20
10
0
-10
-20
07
08
09
10
11
07
08
09
10
11
1.00
0.75
0.50
0.25
0
-0.25
-0.50
07
08
09
10
11
2011 FINANCIAL HIGHLIGHTS – A RECORD YEAR
● US$527 million revenue in 2011 (78% over 2010
(excluding SiTel 41%))
2011 OPERATIONAL HIGHLIGHTS
● Continued success for power management and audio technologies
with the leading trendsetting smartphone manufacturers
● Full-year 2011 net profit of US$55.9 million or 10.6% of sales,
● Emergence of the tablet PC market as a significant market for
completing five years of successive profitability
Dialog’s power management ICs, with leadership position established
● Annual gross margin of 39.5%
● Acquisition of SiTel Semiconductor early in the year, targeting
short-range wireless applications
● Closing year cash balance of US$113.6 million
● Dialog remains debt free as at 31 December 2011
● Basic and diluted 2011 IFRS earnings per share (EPS) of 89 cents
and 84 cents respectively
● Continuous innovation on standard product (ASSP) portfolio and
custom products (ASIC):
– ARM multicore support added to new generation of system-
–
level PMICs
Transitioning to BCD technology enabling higher integration
of high-voltage functionality
– A new generation of energy-saving green VoIP ICs
– New low power audio codecs, including addition of dsp processor
for voice processing
– Advanced packaging, including stacking of audio and PMIC
functionality in a single package
● Freescale announced as the latest member of Dialog’s Processor
Partner Programme Initiative
2011 saw Dialog breaking through the US$500 million revenue barrier. The customer base
was further diversified with the addition of Samsung for custom PMICs with many other
customers in a broad range of applications added through the success of our Processor
Partner Initiative with the leading application processor vendors, including Freescale,
around their popular i.MX53 processor. In addition, through the acquisition of SiTel
our technology was broadened to include short-range wireless connectivity and
VoIP technology, adding leading customers including Microsoft for gaming,
Panasonic for digital cordless and home security and GN Netcomm and
Plantronics for professional audio headsets.
Q1
Acquisition of SiTel Semiconductor
in The Netherlands, adding short-
range wireless connectivity to
Dialog’s technology portfolio
03
Our markets
SMARTPHONE MARKET
(billion units)
TABLET PC MARKET
(million units)
1.2
1.0
0.8
0.6
0.4
0.2
0
11
12
13
14
15
200
150
100
50
0
11
12
13
14
15
WORLD MARKET FOR
SHORT-RANGE WIRELESS ICs
(billion units)
4.5
3.0
1.5
0
11
12
13
14
15
Source: Gartner/Dialog 2011
Source: Arete Research/Dialog Marketing 2011
Source: IMS research 2011
With continuous innovation around power management and an
expanding IP portfolio, Dialog is raising the bar for PMIC integration.
In just three years, Dialog PMICs are offering up to approximately five
times the functionality of earlier generations, enabling longer battery
lifetime for our customers’ portable products.
Dialog replaces discrete power management components with high
integrated single chip solutions that provide improved reliability, design
simplicity as well as space-saving, power and cost advantages. Through
innovative package technology, Dialog can offer multiple chip dies in
a single chip package, saving board space and costs for their customers.
Dialog is a fabless semiconductor company outsourcing the capital
intensive production of silicon wafers, packaging and testing of
integrated circuits to leading Asian suppliers.
MOBILE SOLUTIONS
Our mobile solutions power management, audio and display
semiconductor solutions are designed to meet the needs of a broad
range of portable devices including smartphones, tablet PCs, ebooks,
MP3 and other media players.
CONNECTIVITY
Our connectivity product portfolio offers both proprietary and standard-
based products. We address a wide range of applications like digital
cordless and professional headsets with single chip DECT solutions, Xbox
gaming controllers with a proprietary technology, and now wireless sensor
networks within the home with our SmartPulse™ DECT ultra low energy
technology. Additionally, we offer SOCs for VoIP telephony connectivity.
AUTOMOTIVE AND INDUSTRIAL
Infotainment in cars is rapidly changing as multimedia and wireless
technology enter the car environment. Dialog has partnered with Intel
to provide companion power management and clock ICs for the Atom
E6xx series of processors to address these next generation automotive
infotainment systems.
Dialog Semiconductor’s motor control ICs are custom-designed for
a range of automotive applications. Our current success is based
around an advanced system on chip solutions for wiper motor control.
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 retrofit bulb LED lighting solutions.
Q2
Start of first early production of
PMOLED ICs for Lenovo S800 phone,
offering a transparent colour display
Panasonic relationship extended
beyond digital cordless to also supply
PMICs for their latest feature-rich
portable media players
Launch of DA9053 and DA9021,
supporting the major ARM multicore
mobile graphics and application
processor families
Q3
Q4
Dialog’s Green VoIP ICs adopted by Gigaset
for their latest new pro range of phones
Adlink Technology in Taiwan adopt Dialog’s
Intel Atom Companion PMICs for their
nanoX-TC Industrial PC modules
Samsung announced as latest
customer using Dialog’s Power
Management and audio in a stacked
die single package, targeting Android-
based TD-SCDMA smartphones for
China Mobile operator
Launch of SmartPulse™ DECT Ultra low energy
wireless sensor modules for personal medical
and home automation applications
Panasonic announced as first customer utilising
SmartPulse™ technology for wireless home
security sensors
Dialog awarded the prestigious
Global Semiconductor European
Semiconductor Company of the
Year award for the third year
in succession
04
Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 1 | Overview
...personal
05
“With the recent addition of short-range
wireless technologies to our portfolio,
in addition to managing the power
budget of personal portable connected
devices, Dialog’s strategy in the future is
to also provide the wireless connectivity
part of the solution. This will help us
to continue to drive sales growth and
maintain our leadership position in
these markets through an expanding
product portfolio and broader
customer base.”
ANDREW AUSTIN
VICE PRESIDENT, SALES
WIRELESS PERSONAL PORTABLE INTERNET CONNECTED
DEVICES ARE BECOMING AN INCREASING PART OF
OUR DAILY LIVES. TODAY, IT IS NOT UNCOMMON
TO SEE FAMILIES COMMUNICATING WITH MULTIPLE
SMARTPHONES AND TABLET PCS, IN ADDITION TO
HAVING OTHER PORTABLE GAMING DEVICES. GOING
FORWARD, THIS TREND WILL FURTHER ACCELERATE AS
PERSONAL AREA NETWORKS (PANS) FURTHER EVOLVE
WITH THE ADDITION OF HEALTH MONITORING AND
FITNESS TYPE DEVICES.
Dialog’s advanced power management
ICs can be found at the heart of these
personal portable devices ensuring
consumers can work, play and
communicate whenever and wherever
life takes them without compromising
on battery life.
06
Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 1 | Overview
Chairman’s statement
2011 HAS BEEN ANOTHER GOOD YEAR FOR
DIALOG SEMICONDUCTOR PLC, WITH REVENUE
UP 78% YEAR-ON-YEAR TO US$527 MILLION
AND THE SUCCESSFUL INTEGRATION OF
SITEL SEMICONDUCTOR BV.
The Company continues its strategy of deeper
and broader relationships with existing customers
(more complex solutions sold into new and existing
applications) whilst at the same time increasing the
number of new customers. The SiTel acquisition has
undoubtedly helped the Company bring on board
new significant customers such as Microsoft, Gigaset
and Plantronics.
I believe the Company is firmly on the way to
achieving the goal of US$1 billion plus annual
revenues. The Company continues to work towards
ensuring it has the necessary infrastructure to support
a US$1 billion turnover business with global reach,
whilst at the same time maintaining best industry
metrics not only in terms of quality control but also
financially, where profitability has to be carefully
managed, given the competing pressures of the
price expectation of volume customers and
supply constraints.
As last year, despite the troubled economic
environment, I remain confident about the future
growth prospects of the Company in 2012 and
thank you for your continued support.
GREG REYES
CHAIRMAN
GREG REYES
CHAIRMAN
07
Dialog Semiconductor shares in 2011
DIALOG CONTINUES TO GAIN THE CONFIDENCE
OF THE MARKET, BOTH IN EUROPE AND THE
US, WITH MANY NEW LONG-TERM ORIENTED
INSTITUTIONAL SHAREHOLDERS ADDED.
SHARE PRICE DEVELOPMENT
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 below, in 2011 Dialog’s
share price performance was in line with the market,
following trends similar to that of TecDAX and SOX.
In spite of the tough market conditions, Dialog
managed to perform in line with its peer group*
when benchmarked against TecDax. In the last three
years, 2009-2011, Dialog has recorded remarkable
growth, outperforming TecDAX by over 1,700% and
SOX by more than 1,600%. During these years share
price grew by approximately 1,900% and share
liquidity increased by about 98%.
In 2011 Dialog’s share price started at €17.45
and reached a high of €19.85 on 12 January.
On 9 August it declined to a low of €9.82 but
recovered immediately, trading around €11 to
€15 for the remaining months and closing at
€12.58 on 30 December.
* Note: Peer group Index constituents: Wolfson Microelectronics plc,
Texas Instruments Inc., STMicroelectronics NV, Skyworks Solutions Inc.,
Nordic Semiconductor ASA, Microsemi Corp., Micrel Inc., Melexis NV,
MaxLinear, Inc., Maxim Integrated Products Inc., Linear Technology Corp.,
Intersil Corporation, Infineon Technologies, CSR plc, Cirrus Logic Inc.,
Broadcom Corp., Austriamicrosystems AG, Aixtron SE
2011 12-MONTH DIALOG SEMICONDUCTOR SHARE PRICE PERFORMANCE (%)JAN 11FEB 11MAR 11APR 11MAY 11JUN 11JUL 11AUG 11SEPT 11OCT 11NOV 11DEC 11DIALOG SEMICON. (XTRA: DLG)GERMAN TECDAX (PRICE RETURN) – INDEXPHILADELPHIA SE SEMICONDUCTOR SECTOR INDEX15.0010.005.000.00-5.00-10.00-15.00-20.00-25.00-30.00-35.00 08
Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 1 | Overview
Dialog Semiconductor shares in 2011 continued
2007-2011 DIALOG SEMICONDUCTOR SHARE PRICE PERFORMANCE (%)
1.80k
1.60k
1.40k
1.20k
1.00k
800.00
600.00
400.00
200.00
0.00
-200.00
Jul 2007
Jan 2008
Jul 2008
Jan 2009
Jul 2009
Jan 2010
Jul 2010
Jan 2011
Jul 2011
Jan 2012
DIALOG SEMICON. (XTRA: DLG)
GERMAN TECDAX (PRICE RETURN) – INDEX
PHILADELPHIA SE SEMICONDUCTOR SECTOR INDEX
SHARE FUNDAMENTALS FOR THE FINANCIAL YEAR 2011
Total number of shares outstanding and registered as at 31 December 2011
Weighted average number of shares during 2011 (basic)
Weighted average number of shares during 2011 (diluted)
Type
Par value (in £)
Bloomberg Symbol
Reuters Symbol
ISIN
KEY FIGURES FOR THE FINANCIAL YEAR 2011 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 at 31 December 2011 (in US$)
Accounting standards
MARKET DATA 2011
Exchange segment Germany
Designated sponsor
Market capitalisation as at 31 December 2011 (in millions of €)
Turnover of shares during 2011
65,068,930
62,872,726
66,710,864
Ordinary
0.1
DLG
DLGS.DE
GB0059822006
8.39
0.98
0.89
4.18
IAS/IFRS
Midcap, Prime All Share,
Prime Technology,
Technology All Share
Close Brothers Seydler
Cheuvreux
(as at 1.1.2012)
819
848,331 shares/day
09
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 by now 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 2011, the management
team continued its efforts to ensure that the market
was kept up to date with the effect the changing
macroenvironment was having on its business,
together with the important and exciting changes
under way at the Company. Dialog Semiconductor’s
shares are now followed by 13 independent financial
analysts representing both European and US banking
institutions. During 2011, we issued trading updates
and quarterly earnings reports, we held our annual
analyst conference, presented at several investor
conferences and international roadshows in both
Europe and the US and, in addition, kept in regular
contact with our investors and analysts. In September
2011, we held our first Analyst Day in London, giving
our investors and analysts an opportunity to meet
with executive management, see the latest product
demonstrations and to receive an update on our
strategic direction and engineering innovations.
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/investor_
relations_home.php
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.
FREE-FLOAT
Dialog’s free-float is 63,801,608 or 97.8% of the
outstanding shares. The free-float is calculated
by excluding the 1,267,322 shares held in the Dialog
Semiconductor Plc Employee Benefit Trust.
The free-float includes the following shares held on
behalf of discretionary clients as per the share register
on 31 December 2011.
Chase Nominees
Citigroup Global Markets
BNP Paribas Securities Services
State Street
Societe Generale
CACEIS Bank
Allianz Global Investors
5,906,963
4,690,186
4,442,968
4,241,936
1,729,656
1,632,582
1,616,645
9.1%
7.2%
6.8%
6.5%
2.7%
2.5%
2.5%
And 3,003,828 shares (4.6%) held by X-Fab
Semiconductor AG as per the share register
on 31 December 2011.
DISCLOSURE OF INTERESTS
The provisions of the DTR require that any person
or fund acquiring a direct or indirect 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%.
10
Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 1 | Overview
DIALOG IS EXTENDING ITS LEAD IN POWER
MANAGEMENT AND HIGH-QUALITY AUDIO ICS FOR
SMARTPHONES AND TABLET PCS BY BEING THE FIRST
COMPANY TO COMBINE HIGHLY COMPLEX, FULLY
CONFIGURABLE SYSTEM POWER MANAGEMENT WITH
LOW POWER CLASS D AUDIO CODECS STACKED IN A
SINGLE CHIP PACKAGE, INCLUDING A DSP PERFORMING
ADVANCED SIGNAL PROCESSING FOR IMPROVEMENT
OF AUDIO QUALITY.
“Dialog is leading the mixed signal
market in the use of state-of-the-art
packaging technologies. It has the
capability of stacking multiple
integrated circuit dies in a single high-
performance, small footprint package,
capable of meeting the ever-increasing
demands of today’s most advanced
smartphones and tablet PCs.”
GARY DUNCAN
VICE PRESIDENT, ENGINEERING
...portable
11
“Consumer electronic manufacturers in
personal, portable, connected markets
build products based on standard
application processor platforms.
Dialog is a leader in forging strategic
partnerships and supplying companion
power management ICs with the
world’s leading application processor
providers to deliver its customers fully
optimised system solutions.”
MARK TYNDALL
VICE PRESIDENT, BUSINESS DEVELOPMENT
AND CORPORATE STRATEGY
12
Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 2 | Business review
Business review and strategy
OUR STRATEGY WAS FURTHER VALIDATED IN 2011 WHEN WE
DELIVERED RECORD FINANCIAL AND OPERATIONAL RESULTS.
WE HAVE AGAIN ACHIEVED HIGH GROWTH – BEYOND THE
INDUSTRY AND OUR PEERS – AND EXITED THE YEAR WITH
A STRONG BALANCE SHEET WITH NO DEBT.
Major achievements from Dialog in the execution of its strategy
included the following:
ACCRETIVE ACQUISITION OF SITEL SEMICONDUCTOR
Adding US$109 million of revenue in 2011 through the addition of short-range
wireless technologies to the portfolio. The acquisition contributed positively to
Dialog’s earnings in the first quarter post the acquisition. Through an accelerated
integration programme, including a single corporate organisation for the major
functions, the products are now sold under the Dialog brand through a unified
sales force.
NEW CUSTOMERS ACROSS NEW APPLICATIONS AS A RESULT
OF OUR PROCESSOR PARTNER PROGRAMME INITIATIVE
A key element of Dialog’s success is to engage with application processor vendors
and develop power management companion chips for their processors.
This allows Dialog to become an integral
part of their promotional and
application ecosystem and reach a
much broader customer base without
the need for additional sales and
support investment. In 2011, Dialog
continued to support and expand
its relationships with the major
application processor vendors
within the portable space, including
announcing Freescale as the latest
processor company to join
the programme.
DEEPENED OUR RELATIONSHIPS WITH KEY INDUSTRY
TRENDSETTERS AND LEADERS
BROADENED OUR CUSTOMER BASE BY LEVERAGING OUR
PORTFOLIO OF STANDARD SOLUTIONS
Dialog has relationships with a number of high-volume customers, many of which
are considered trendsetters and key industry leaders in their respective sectors.
Dialog has in 2011 continued to focus efforts on these customers to increase
both the custom semiconductor content sold into the customers’ platform
and broaden the number of platforms addressed. In December 2011, Dialog
announced its first platform success at
Samsung for a smartphone platform,
which will form the basis for a series
of phones to be launched through
2012 for the Chinese TD-SCDMA
market. The first of these phones
has already started production and
is being distributed by China Mobile,
the largest cellular operator in China.
Dialog has increasingly adapted some
of its solutions to address multiple
customers’ needs, thereby transitioning
its portfolio to offer more standard
products. In 2011, new products were
launched including a third generation
of configurable system power
management ICs, new audio codecs,
low energy green VoIP ICs, a new
generation of digital cordless chips
as well as SmartPulse™ technology
enabling smart home sensor networks.
EXPANDED NORTH AMERICA AND ASIA OPERATIONS WITH
ALREADY INCREASED CUSTOMER SUCCESS DEMONSTRATED
PERFECTION OF THE FABLESS MODEL WHILE MAINTAINING
CLOSE CONTACT WITH OUR MANUFACTURING PARTNERS
Dialog expanded its recently opened office in Silicon Valley to support its growing
US customer base and application processor partners and continues to add
engineering and sales resources to
support local US customers. In Taiwan,
Christophe Chene has joined as a new
addition to the management team
with a charter to further increase the
Dialog brand and awareness together
with building out a greater footprint
for operational, sales and marketing
functions in the Greater China region.
Both these regions represent exciting
growth opportunities for Dialog
going forward.
Dialog remained focused on its
existing business model, which
included fully outsourcing silicon wafer
production and test to Asian foundry
manufacturing plants and test houses,
and supplying ASICs and ASSPs using
mainstream CMOS and BCD-based
process technologies. During 2011,
a year of tight wafer capacity, while
growing our business to a level of
more than 300 million chips, we were
again commended by many of our
customers for our operational
excellence and support.
13
Chief Executive’s review
DEAR SHAREHOLDERS,
As we enter into the first half of 2012, it is worth
taking a look at the progress of Dialog in the last year.
As reported in our financial results, once again Dialog
continued to perform very strongly on the top line
with growth of 78% year-on-year, outpacing our
competitors worldwide, in a backdrop of semiconductor
industry growth of 2-3%. This constitutes our fourth
consecutive year of profitable and rapid growth,
something that our Board, our management team and
all our employees have contributed to and are justly
proud of. The impressive growth in 2011 was delivered
partly through our organic growth and partly through
the acquisition of SiTel Semiconductor in Q1 2011,
more of which I will discuss later in this letter.
However, as it is commonly known, 2011 at a
macro level was dominated by world macroeconomy
and financial crisis issues carried over from 2010,
compounded by some tragic natural disasters in
Japan and Thailand. The impact of all this on the
semiconductor industry, and supply chain in particular,
was insufficient manufacturing investment, periodic
uncertainty about capacity and shortage of certain
key essential raw materials and packaging components.
The effect of increasing costs in energy, raw material
and precious metals such as gold, together with the
tightness in the supply chain, had the undesirable
effect of impacting the cost base of our products and
thereby reducing our gross operating margins as a
percentage of revenue, relative to 2010. As we enter
2012, gross margin recovery is now an area where our
management team is currently focused on to bring
about improvements through cost reductions and
capacity planning as well as positioning the Company
to benefit from the prospects of a more balanced
supply and demand situation with the manufacturing
subcontractors in 2012.
Dialog market performance in 2011 was driven by the
major success of our lead customers in the smartphone
and tablet PC global markets. This market area is
expected to continue to perform strongly for several
years as a wider range of smartphones and tablets
from different vendors are launched into the market.
In line with our belief in the secular growth trends
of personal portable connected devices, we have
positioned the Company to develop the right
technologies such as system power management,
low power audio, low power display drivers and others
to benefit from this ongoing growth and expansion.
We believe that beyond the boom in media players,
smartphones, tablets and e-books there will be other
emerging portable devices such as ultra-books,
as well as personal medical, fitness and sport handheld
equipment that will drive further growth for years
to come. Following on from this we believe there
will be additional capabilities that Dialog must
develop or acquire to ensure it maintains its growing
leadership in the mixed signal semiconductor market
for mobile devices.
In light of the above, we believe competencies
in short-range connectivity is a key addition to
our portfolio of technology, allowing Dialog’s
DR JALAL BAGHERLI
CHIEF EXECUTIVE OFFICER
14
Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 2 | Business review
Chief Executive’s review continued
Test development is performed in Nabern Germany,
reproducing the same test environment and handling
interfaces that are used by our offshore test subcontractors.
participation in the upcoming opportunities in new and
emerging standards and applications for transmitting
data within a short range between, for example,
a smartphone device and other client devices or
smart sensor networks. In February 2011, we acquired
SiTel Semiconductor, a fabless semiconductor company,
based in The Netherlands and owned by a private
equity fund in the UK. We have been working hard
together as a team to achieve a fast and high-quality
integration of this company into Dialog, while
maintaining the integrity and continuity of operational
support for our customers. In addition to our established
customer base, we have welcomed new customers
from SiTel to our list, including Panasonic, Gigaset,
Microsoft and Plantronics amongst others. We expect
to increasingly benefit from this acquisition with
cross-selling opportunities of Dialog low power
products into the new customer base.
We are very pleased with our first acquisition, the
quality of the team and its fit within Dialog. We have
been able to accelerate and release several new
products which were already in the R&D pipeline
before the acquisition, such as a new generation of
digital cordless chips, low power VoIP products, as well
as SmartPulse™ technology enabling smart home sensor
networks. Going forward, the strategic positioning of
the R&D will increasingly target short-range wireless
emerging standards which could include low energy
bluetooth and wifi direct amongst others.
Going forward into 2012 and beyond, our focus will
remain on scaling our operation to tackle our next
mid-term target of US$ 1billion turnover with an
increasing portfolio of mixed signal low power products
for portable devices. Diversification of our product
portfolio and key customer base with a focus on
regional growth in Asia form the main pillars of
our strategy.
Achieving a larger scale per se, whilst very desirable,
is not a sufficient goal by itself. We believe we should
also turn our attention to our social obligations and
play our part as good corporate citizens. This means
that we will be fine-tuning and augmenting our
policies and actions with a conscious eye on the
impact on the environment, sustainability and positive
social contribution.
Of course, our employees and management team
remain the key essential ingredients of success
at Dialog and the Company will continue to invest
in their development and training, as well as career
development and succession planning, to ensure
our future is secured.
Dialog has established application
laboratories at our global sites
to allow our field application
engineers to work closely with
its customers during the critical
design-in phase of our products.
I look forward to the challenges of the year 2012 and
remain confident of Dialog’s prospects for continuing
growth and outperformance.
DR JALAL BAGHERLI
CHIEF EXECUTIVE OFFICER
15
Product technology and key customers
Teamwork with regular and open communication
is an inherent part of the Dialog culture.
A FOCUS ON HIGH-GROWTH EMERGING
APPLICATIONS. DIALOG HAS COMBINED
ITS POWER MANAGEMENT AND SHORT-RANGE
WIRELESS TECHNOLOGY LEADERSHIP,
DELIVERING FULLY OPTIMISED BOTH STANDARD
(ASSP) AND CUSTOM (ASIC) MIXED SIGNAL
INTEGRATED PRODUCTS.
solutions for applications, from cordless phones to
wireless headsets to its latest SmartPulse™ to control
home sensors. In the future, we expect personal
healthcare and fitness monitoring to require short-
range transmission to your smartphone for intelligent
apps processing and we currently adopt our technology
to offer optimised solutions for these markets.
OUR SOLUTIONS
Our solutions address four major markets: (i) portable
electronic devices, including smartphones and tablet
PCs, (ii) short-range wireless applications like digital
cordless, gaming, home automation, (iii) VoIP
applications, and (iv) automotive and industrial
electronics. The demand for an increased feature
set with improved displays in lithium-ion powered
portable devices, coupled with the expectation of
ever-increasing battery life, is a major driver in the
development of our power-saving technology solutions.
With the acceleration of social networking driving
increased adoption of smartphones, internet
connectivity, photo and video sharing, video streaming
and high-quality audio on portable devices 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.
As short-range connectivity becomes prevalent in our
society, Dialog provides both proprietary and standard
Because of the bandwidth efficiency and low costs by
allowing voice and data to run over a single network
that VoIP technology can provide, businesses are
migrating from traditional copper wire telephone
systems to VoIP systems. Dialog provides an energy-
efficient – Green VoIP – solution to address this
growing market and engages with the leading global
VoIP phone manufacturers from large enterprises to
the small to medium business (SMB) and growing
hotel market for VoIP.
Video must now be transmitted throughout the car,
captured outside the car and monitored with extremely
low latency to be able to react in real time to the
changing external environment. Hi-fi quality is also
demanded of the audio system and, of course, better
GPS support. Our power management and clock
companion ICs for the Intel Atom processor provide
an optimum solution for next generation multimedia
powered infotainment systems. Additionally,
automotive customers use our products in comfort
and safety sub-systems, and in the industrial market
our products are used in highly integrated smart-power
management systems such as intelligent electronic
ballasts for fluorescent lighting.
Launched in 2011, Gigaset’s IP
PRO VoIP desktop phone – DE900
– pictured above, combines VoIP
(either through ethernet or wifi)
with DECT and bluetooth
extensions, based on Dialog’s
leading Green VoIP technology.
Dialog supplies integrated
circuits with the highest quality,
achieving failure rates among
the lowest in the industry,
meeting stringent automotive
industry demands.
16
Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 2 | Business review
...connected
17
September 2011 – Dialog
Semiconductor launched SmartPulse™,
the industry’s first wireless smart
sensors based on DECT – ultra low
energy technology. The sensors can
be used for a broad range of home
automation applications.
“The rise of the smartphone and tablet
PC has led to a shift that enables ease
of control. By connecting SmartPulse™
devices to the web consumers can
seamlessly and securely control multiple
home systems simply from anywhere…
Dialog’s heritage in power efficiency,
combined with our acquired expertise
in DECT and IP communications,
puts us in a unique position to enable
these new consumer applications.”
DR ASMUND TIELENS
VICE PRESIDENT AND GENERAL MANAGER
CONNECTIVITY, AUTOMOTIVE AND INDUSTRIAL GROUP
SMARTPULSE™ IS A WIRELESS SENSOR NETWORK
CONNECTIVITY SOLUTION BASED ON THE ULTRA LOW
ENERGY DECT STANDARD FOR HOME AUTOMATION
APPLICATIONS. A SMARTPULSE™-BASED SENSOR CAN
LAST UP TO TEN YEARS WITH A SINGLE AAA BATTERY
PACK. APPLICATIONS INCLUDE WIRELESS LIGHT SWITCHES,
SMOKE OR GAS DETECTORS, SOLAR PANELS, HOME
SECURITY OR EVEN MEDICAL PENDANT APPLICATIONS
FOR THE ELDERLY.
SmartPulse™ is a low-cost solution that
may be very simply configured in a star
network configuration. With an already
existing connection to the internet via
DECT enabled Internet Access Devices
(IADs) which are common in Europe,
or the latest digital cordless phone,
it is very simple to control these sensors
remotely via smart applications on your
smartphone or tablet PC.
18
Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 2 | Business review
Product technology and key customers continued
DESIGN, DEVELOPMENT AND PRODUCTION
We are justifiably recognised for the quality and
feature-rich functionality of our mixed signal integrated
circuits, achieving integration levels which we believe
are the highest in the industry.
We nevertheless continually work to increase our
intellectual property and improve our engineering
skill base and technology portfolio.
During 2011, we invested US$90.0 million, or 17.1%
of our revenues, 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 analogue 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
deepen our expertise has resulted in increased levels
of integration and product innovation in all
business sectors.
POWER MANAGEMENT AND AUDIO ICS
Effective power management for ever-increasing
feature-rich portable devices such as tablet PCs
presents increasingly new design challenges. For
example, the introduction of dual or quad ARM
processor cores into the application processor which
needs to be powered up and down in a particular
sequence or operate in different sleep modes;
increased peak currents due to lower geometry
technologies; lithium-ion type batteries needing to
charge faster, safer and from a wider variety of sources
such as USB ports; changing chemical structures of
batteries; in addition to displays which are required to
be brighter, bigger and incorporate touch functionality
with the use of new organic substrate materials.
All 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 dropout 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
analogue functions, we are able to offer a selection of
differentiated power management and audio solutions.
The integration of more than 40 different functions on
a single chip delivers significant space, power and cost
savings to our customers.
Continuous innovation and perfection of our
power management IP portfolio allows our
customers to typically save 30% of the power
consumed in their portable devices.
In 2011, we launched a new class of power
management product – DA9053 – our third generation
of advanced system power management integrated
circuit (PMIC) and flagship product, targeting high-end
multicore-based applications, supporting the ARM
Cortex™ processor. Additionally, a second member
of the family – DA9021 – addresses lower power cost
sensitive applications.
DISPLAY DRIVERS AND RELATED-SYSTEM ICS
In 2011, Dialog provided the SmartXtend™ IC
technology together with TDK OLED glass module
(operations later in 2011 acquired by Futaba)
to the cellphone industry. Lenovo in China was the
first customer to bring a SmartXtend™ feature phone
– S800 – to the market incorporating a transparent
display based on SmartXtend™.
Dialog Semiconductor partners with Qualcomm
to exclusively supply driver ICs for their MEMs-based
Mirasol™ technology. 2011 saw the first design wins
of this technology in e-reader type applications.
Qualcomm’s Mirasol™ colour display (wide viewing
angle, readability in sunlight with very low power
consumption and fast response time) is seeing
increased adoption, with Qualcomm investing a
reported US$1 billion on a new manufacturing site
for mass production of Mirasol™ displays.
Testing and monitoring
integrated circuits first at
a wafer level, ensures Dialog
can reach optimum production
yields of a final packaged
integrated circuit.
19
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 beat 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.
PRINCIPAL CUSTOMERS
Many of Dialog’s principal customers are leading
portable device digital cordless, automotive and
industrial equipment manufacturers that purchase
both ASICs and ASSPs solutions. Customers with a
significant contribution to revenue include Apple,
Gigaset, Panasonic, RIM (Research in Motion) and
Bosch. These top five customers represented 83%
of revenue in 2011.
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 high integration,
innovation and technical expertise, while close working
relationships with customers provide Dialog with an
opportunity to develop and refine market-leading
products with recognised industry leaders.
AUTOMOTIVE AND INDUSTRIAL SYSTEM ICS
Dialog supplies motor control ASICs to a leading
European automotive supplier who in turn delivers
Dialog-based windscreen wiper motor products
addressing mid- to high-end European cars. Additionally,
our first product for a customer in Japan achieved
qualification in 2011 and will shortly start production.
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).
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. In 2011, in addition to CMOS,
through a close cooperation with TSMC we have seen
volume production of our first products using a BCD
process which enables higher voltage functionality
to be integrated efficiently into single chip power
management ICs.
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 in
Germany using the same type of test equipment and
handling interfaces that are used by our offshore test
subcontractors in order to speed up the volume ramp
and production transfer process. All production testing
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 a 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.
Dialog engages directly with
its customers during the product
definition stage, to ensure we
capture our customers’ required
features in our final integrated
circuit product.
20
Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 2 | Business review
Financial review
“Our guiding principles remain the same: robust platforms; tight controls; and sustained, profitable growth.”
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 2011 and 2010:
Revenues
Audio & Power Management
Display Systems
Automotive/Industrial
Connectivity
Reconciliation
Revenues
Cost of sales
Gross profit
Selling and marketing expenses
General and administrative expenses
Research and development expenses
Other operating income
Restructuring expenses
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 (expense)
Net profit
US$000
369,211
1,715
45,878
108,778
1,679
527,261
(319,073)
208,188
(32,370)
(24,442)
(90,046)
303
–
61,633
376
(235)
(352)
61,422
(5,559)
55,863
2011
Revenues
%
70.0
0.3
8.7
20.6
0.4
100.0
(60.5)
39.5
(6.1)
(4.6)
(17.1)
0.1
0.0
11.7
0.1
0.0
(0.1)
11.6
(1.1)
10.6
US$000
245,364
1,866
50,326
–
(959)
296,597
(159,334)
137,263
(17,391)
(17,471)
(56,465)
–
(595)
45,341
1,130
(120)
(2,088)
44,263
(1,784)
42,479
2010
Revenues
%
82.7
0.6
17.0
0.0
(0.3)
100.0
(53.7)
46.3
(5.9)
(5.9)
(19.0)
0.0
(0.2)
15.3
0.4
0.0
(0.8)
14.9
(0.6)
14.3
Change
%
50.5
(8.1)
(8.8)
–
(275.1)
77.8
100.3
51.7
86.1
39.9
59.5
–
–
35.9
(66.7)
95.8
(83.1)
38.8
211.6
31.5
RESULTS OF OPERATIONS
SEGMENT REPORTING
Revenues in the Audio & Power Management
segment for the year ended 31 December 2011 were
US$369.2 million compared to US$245.4 million in
2010, an increase of 50.5%. The increase in this sector
is primarily driven by the success of our growing range
of highly integrated power management solutions
for portable devices including portable media players,
smartphones and tablet PCs.
The operating profit in the Audio & Power
Management segment (see note 23 to the
consolidated financial statements) increased to
US$70.0 million compared to US$59.1 million
in the same period 2010, an increase of 18.4%.
Revenues in the Display Systems segment were
US$1.7 million for the year ended 31 December 2011
(2010: US$1.9 million). The decline in revenues
between 2010 and 2011 is primarily due to the
reduction in customer funded R&D activities which
contributed predominantly to the 2010 revenues.
The operating loss in this segment (see note 23 to
the consolidated financial statements) for year ended
31 December 2011 was US$10.1 million (2010:
US$11.2 million). These losses reflect our investment
in the emerging ultra-low power display technologies
such as PMOLED.
Revenues from our Automotive/Industrial
Applications segment were US$45.9 million for
the year ended 31 December 2011 (2010: US$50.3
million), representing 8.7% of our total revenues
(2010: 17.0%). Operating profit in the segment (see
note 23 to the consolidated financial statements) was
US$9.8 million for the year ended 31 December 2011
(2010: US$7.0 million). The 8.8% year-on-year revenue
decline reflects the fact that we benefited from sales
of last time buy products during 2010 for an amount
of US$6.4 million. These products were sold as a result
of last year’s notification of the phasing out of an
REVENUES FY 2011 (US$m)
600
500
400
300
200
100
0
10
11
21
older manufacturing process from one of our
foundry partners.
Revenues from our Connectivity segment were
US$108.8 million. These revenues are associated with
the SiTel business acquired in 2011. The operating
profit achieved in the connectivity segments (see note
23 to the consolidated financial statements) was
US$4.9 million.
REVENUES
Total revenues for the year ended 31 December 2011
were US$527.3 million (2010: US$296.6 million).
This increase of 77.8% results predominantly
from higher sales volumes in our Audio & Power
Management segment and the revenue from our
Connectivity segment as described above.
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 2011, cost of sales increased by
100.3% to US$319.1 million (2010: US$159.3 million),
resulting from increased revenues recorded during
the year. The newly acquired SiTel business contributed
US$63.5 million to the cost of sales of the Group.
As a percentage of total revenues, cost of sales in
the same periods increased from 53.7% to 60.5%.
The underlying* cost of sales for 2011 was
US$316.0 million (59.9% of revenues) compared
to US$158.9 million (53.6% of revenues) in 2010.
GROSS PROFIT
Gross profit for the year ended 31 December 2011 was
US$208.2 million (2010: US$137.3 million). Our gross
profit decreased from 46.3% of revenues in 2010 to
39.5% of revenues for the year ended 31 December
2011, driven by lower cost of sales as a percentage
of revenue and the accelerated introduction of new
products as prescribed above.
SELLING AND MARKETING EXPENSES
Selling and marketing expenses consist primarily
of salaries, sales commissions, travel expenses,
advertising and other marketing costs. In 2011,
selling and marketing expenses increased to
US$32.4 million (2010: US$17.4 million) mainly
as a result of the consolidation of the newly acquired
SiTel business which contributed, US$13.5 million of
selling and marketing expenses (including amortisation
expenses resulting from the purchase price allocation).
The increase is also in line with increased production
volume and is a result of the Company’s investment
in creating value by increasing staff in strategic
marketing functions.
Along with the increasing revenues, selling and
marketing expenses increased from 5.9% of total
revenues in 2010 to 6.1% of total revenues in the
year ended 31 December 2011.
Excluding the share-based compensation impact, and in
2011 the costs in connection with the SiTel acquisition,
the underlying* selling and marketing expenses for
2011 were US$25.9 million (4.9% of revenues)
compared to US$15.8 million or 5.3% in 2010.
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 2011,
general and administrative expenses increased to
US$24.4 million (2010: US$17.5 million). This increase
predominantly reflects the consolidation of the newly
acquired SiTel business which contributed US$4.2 million
of general and administrative expenses and the SiTel
transaction costs of US$3.3 million. For the year ended
31 December 2011, general and administrative expenses
as a percentage of revenues were 4.6% (2010: 5.9%).
The underlying* general and administrative expenses were
US$19.9 million or 3.8% of revenues in 2011. This
compares to US$12.2 million (4.1% of revenues) in 2010.
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$90.0 million in 2011 (2010: US$56.5 million). The
absolute US dollar increase in research and development
expenses was primarily due to an increased headcount
of our R&D personnel in support of our growth strategy.
A major part of this headcount increase comes from
the newly acquired SiTel business, which contributed
US$21.0 million of research and development expenses
(including amortisation expenses resulting from the
purchase price allocation). As a percentage of total
revenues research and development expenses decreased
from 19.0% (2010) to 17.1% (2011), resulting from a
higher revenue base in the latter period.
OTHER OPERATING INCOME,
RESTRUCTURING EXPENSES
Other operating income of US$0.3 million in the year
ended 31 December 2011 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 26
to the consolidated financial statements. Restructuring
expenses of US$0.6 million recorded in 2010 are
related to the closure of our Heidelberg (Germany)
Design Centre.
COST OF SALES AS %
OF REVENUE FY 2011
70
60
50
40
30
20
10
0
10
11
22
Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 2 | Business review
Financial review continued
OPERATING PROFIT
We reported an operating profit of US$61.6 million
for the year ended 31 December 2011 (2010:
US$45.3 million). The improvement primarily resulted
from increased revenues and gross profits recognised
in 2011. From the day of the acquisition our newly
acquired SiTel business contributed US$12.6 million
to the operating profit of the Group. Excluding the
share-based compensation impact, and in 2011 costs
in connection with the SiTel acquisition, the underlying*
operating profit achieved in 2011 was US$79.8 million
or 15.1% of revenue compared with the underlying*
operating profit of US$56.2 million or 18.9% in 2010.
INTEREST INCOME AND OTHER
FINANCIAL INCOME
For year ended 31 December 2011, interest income
and other financial income from the Company’s
investments (primarily short term) was US$0.4 million
compared to US$1.1 million in the previous year.
The decrease is primarily the result of decreased
liquidity and lower interest rates.
INTEREST EXPENSE AND OTHER
FINANCIAL EXPENSE
Interest expense and other financial expense consists
primarily of expenses from the Group’s factoring
arrangement. Interest and other financial expense
in 2011 was US$0.2 million (2010: US$0.1 million).
INCOME TAXES
For the year ended 31 December 2011 a net
income tax charge of US$5.6 million was recorded
(2010: US$1.8 million). The amount in 2011
consists of a current tax expense of US$7.0 million
(2010: US$5.3 million) and a deferred tax benefit
of US$1.4 million (2010: US$3.5 million). The tax
charge in 2011 continued to benefit from the
utilisation of brought-forward tax losses resulting
in a residual minimum level current tax charge.
Previously unrecognised deferred tax assets were
recognised during the year. This resulted in a
contribution of US$14.6 million (2010: US$10.6 million)
to the Company’s net profit (for further information
please refer to note 5 to the consolidated
financial statements).
NET PROFIT
For the reasons described above, in 2011 net profit
increased by US$13.4 million to US$55.9 million or
10.6% of total revenues (2010: US$42.5 million or
14.3% of total revenues). For year ended 31 December
2011, basic earnings per share were US$0.89 (2010:
US$0.70) and diluted earnings per share were US$0.84
(2010: US$0.66). The underlying* earnings per share
(diluted) were US$1.11 for financial year 2011.
This compares to US$0.82 for financial year 2010.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
Cash generated from operating activities was
US$69.6 million (2010: US$52.0 million). The cash
inflow in 2011 primarily resulted from the operating
income (before depreciation, amortisation and other
non-cash effective expenses), and an increase in trade
accounts payable. This cash inflow was partly offset
by cash used for the purchase of inventory and an
increase in trade accounts receivable. The cash inflow
in 2010 primarily resulted from the operating income
(before depreciation, amortisation and other non-cash
effective expenses), a decrease in trade accounts
receivable and higher trade accounts payable.
This cash inflow was partly offset by an increase in
inventory balances and a reduction in tax liabilities.
Cash used for investing activities in 2011 was
US$116.1 million (2010: cash used US$15.5 million).
Cash used for investing activities in 2011 consisted
mainly of the net cash outflow in connection with
the SiTel acquisition in the amount of US$84.2 million
(2010: nil), the purchase of tooling (masks), laboratory
equipment, probe cards, load boards and other
advanced test equipment for a total of US$21.2 million
(2010: US$9.8 million), the purchase of intangible
assets of US$5.4 million (2010: US$5.9 million) and
payments related to capitalised development costs
of US$5.2 million (2010: US$2.8 million).
LIQUIDITY
At 31 December 2011 we had cash and cash
equivalents of US$113.6 million (31 December 2010:
US$158.2 million). The decrease stands in connection
with the cash outflow relating to the SiTel acquisition.
The working capital (defined as current assets minus
current liabilities) was US$150.8 million (31 December
2010: US$169.2 million).
If necessary, we have available for use a multi-currency
3 years (2010-2013) revolving credit line facility of
£10.0 million at a rate of LIBOR +150bp and a 3 year
(2011-2014) revolving credit facility of US$35.0 million
that bears interest at a rate of LIBOR +140bp.
At 31 December 2011 and 2010 we had no amounts
outstanding under these facilities. In addition, we have
two factoring agreements which provide the Company
with up to US$42.0 million of readily available cash.
Accordingly, we believe the funding available from
these and other sources will be sufficient to satisfy
our working capital requirements in the near to
medium term if needed.
OPERATING PROFIT FY 2011
(US$m)
70
60
50
40
30
20
10
0
10
11
NET PROFIT FY 2011 (US$m)
60
50
40
30
20
10
0
10
11
23
Dialog Semiconductor’s financial performance for FY 2011 is summarised below:
2011
2010
US$000
Revenues
Cost of sales
Gross profit
Selling and
marketing expenses
General and
administrative expenses
Research and
development expenses
Other operating income
Restructuring expenses
Operating profit
(90,046)
303
–
61,633
Interest income and
other financial income
Interest expense and
other financial expense
Foreign currency exchange
gains and losses, net
376
(235)
(352)
IFRS
Share options
SiTel acquisition
Underlying*
IFRS
Adjustment
Underlying*
527,261
(319,073)
208,188
–
(499)
(499)
–
(2,552)
(2,552)
527,261
(316,022)
211,239
296,597
(159,334)
137,263
–
(460)
(460)
296,597
(158,874)
137,723
(32,370)
(1,115)
(5,428)
(25,827)
(17,391)
(1,603)
(15,788)
(24,442)
(1,211)
(3,291)
(19,940)
(17,471)
(5,305)
(12,166)
(3,410)
–
–
(6,235)
–
–
–
(679)
–
–
(11,950)
–
–
–
(85,957)
303
–
79,818
376
(235)
(352)
(56,465)
–
(595)
45,341
1,130
(120)
(2,088)
(3,485)
–
–
(10,853)
–
–
–
(52,980)
–
(595)
56,194
1,130
(120)
(2,088)
Result before
income taxes
Income tax
benefit (expense)
Net profit
Earnings per share
(in US$)
Basic
Diluted
61,422
(6,235)
(11,950)
79,607
44,263
(10,853)
55,116
(5,559)
55,863
–
–
(6,235)
(11,950)
(5,559)
74,048
(1,784)
42,479
–
(10,853)
(1,784)
53,332
0.89
0.84
(0.10)
(0.09)
(0.19)
(0.18)
1.18
1.11
0.70
0.66
(0.18)
(0.17)
0.88
0.82
*
Underlying results are based on IFRS, adjusted to exclude share-based compensation charges of US$6.2 million (2010: US$10.9 million), excluding one-time costs of US$3.3 million associated with the
acquisition of SiTel Semiconductor (“SiTel”) incurred during 2011, excluding US$6.4 million of amortisation of intangibles associated with the acquisition of SiTel and excluding amortisation expenses
of US$2.2 million in relation to previously capitalised R&D expenses for close to end of life products from SiTel. The term “underlying” is not defined in IFRS and therefore may not be comparable with
similarly titled measures reported by other companies. Underlying measures are not intended as a substitute for, or a superior measure to, IFRS measures.
24
Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 2 | Business review
Financial review continued
STATEMENT OF FINANCIAL POSITION
Assets
Cash and cash equivalents
All other current assets
Total current assets
Property, plant and equipment
Goodwill
Intangible assets
All other non-current assets
Deferred tax assets
Total non-current 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$344.5 million at
31 December 2011 (31 December 2010: US$253.4
million). Cash and cash equivalents decreased by
28.2% to US$113.6 million at 31 December 2011
(31 December 2010: US$158.2 million). This decrease
is predominantly related to a cash outflow from
investing activities in the amount of US$116.1 million
which was only partially offset by a cash inflow from
operating activities in the amount of US$69.6 million
and a cash inflow from the sale of shares in connection
with the share option programme in the amount of
US$2.3 million. Other current assets increased by
102.0% to US$117.7 million (31 December 2010:
US$58.3 million), mainly driven by higher inventory
and trade accounts receivable balances.
In 2011, total non-current assets increased by 206.6%
to US$113.2 million. This increase is primarily due to
the goodwill recorded in connection with the SiTel
acquisition, higher balances of property, plant and
equipment and intangible assets, again with an amount
of US$25.6 million, the major part of this increase
relates to the acquisition of SiTel. Also, in 2011,
additional net deferred tax assets in the amount of
US$6.6 million, principally relating to carried forward
losses, were recognised of which US$2.1 million
relate to SiTel.
2011
US$000
2010
US$000
Change
US$000
113,590
117,685
231,275
28,404
27,358
38,361
1,684
17,382
113,189
344,464
80,440
909
263,115
344,464
158,200
58,263
216,463
14,249
–
10,727
1,111
10,829
36,916
253,379
47,218
889
205,272
253,379
(44,610)
59,422
14,812
14,155
27,358
27,634
573
6,553
76,273
91,085
33,222
20
57,843
91,085
%
(28.2)
102.0
6.8
99.3
–
257.6
51.6
60.5
206.6
35.9
70.4
2.2
28.2
35.9
Based on the expected positive net result for the
near future, the management concluded that it was
appropriate to recognise deferred tax assets in an
amount of US$17.4 million (2010: US$10.8 million).
The assessment was based on the business plan for
2011 and beyond.
Non-current liabilities relate to provisions, capital lease
and hire purchase commitments and the fair value of
derivative financial instruments.
Shareholders’ equity increased to US$263.1 million
(US$205.3 million at 31 December 2010) which is
predominantly the result of our net profit. The equity
ratio (equity over total assets) was 76.4% (81.0% at
31 December 2010).
25
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 slowdown in the wireless communicat-
ions market by winning customers in other sectors.
THIRD-PARTY COSTS AND SUPPLIER RISK
Since 2007, we have outsourced our manufacturing
and testing to lower-cost environments, mainly in Asia,
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. The tightness in the industry supply
chain that we have experienced during most of 2011,
and with increased demand due to our rapid growth,
has impacted our ability to extract price reductions from
our suppliers. We believe now as we enter the first quarter
of 2012, the situation is stabilising due to investments
that most of our suppliers made in extra manufacturing
capacity in 2011 and we expect to see a gradual
improvement in the supply chain situation from the
end of the first quarter of 2012. We remain confident
that we will continue to meet our revenue plans with the
capacity we have secured with our suppliers. 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.
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 2011 (2010: 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 24 on
page 91 for further information).
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 order to finance our growth we entered into
two factoring agreements with reputable financial
institutions. The maximum amount of cash that can
be received under these factoring agreements is
US$42 million (2010: US$25 million). Since the financial
institutions assume all risks associated with the collection
of receivables from selected customers, the agreements
significantly reduce our risks associated with their collection.
CUSTOMER CONCENTRATION RISK
We refer to note 24 to the consolidated financial
statements section “vulnerability due to certain
significant risk concentration”.
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.
26
Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 2 | Business review
Sustainability
In 2011, Dialog sponsored energy saving projects through a donation of $10,000 to the Los
Altos school district, with active participation from the students in the project. Mark Tyndall,
VP Business Development and Corporate Strategy presenting the cheque to Kimberly Attell,
the principal of Loyola School.
CORPORATE RESPONSIBILITY
Dialog considers that the social challenges of corporate
responsibility should be based on fair wages, healthy
and safe working conditions, respect for human and
labour rights, and 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 requires its suppliers to do the same – in order
to ensure that all manufacturing processes are
environmentally compliant.
We are currently undertaking a complete audit of our
business operations; benchmarking, revising policies
and setting targets for improvement on all areas of
sustainability, including our: environmental impact,
supply chain, employee development, community
investment and corporate governance. Our objective
is to become an industry leader in sustainability and
corporate responsibility.
ENVIRONMENTAL
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 ISO 14001 certification.
RAW MATERIALS
We take the scarcity of natural resources very seriously
and consider the conservation of raw materials, such
as metals, to be a top priority. Dialog is continually
identifying potential methods to improve existing
technologies and substitute alternatives, such as
copper, for precious metals without sacrificing quality
and performance. We have also implemented a rigorous
recycling of precious metals, such as gold and silver,
from our waste and damaged product. We have increased
the quantity of recovered gold by 300% and recovered
silver by 200%. In addition, we are actively reducing
the quantity of hazardous substances used in our labs.
ENERGY AND CLIMATE
Dialog is working to systematically reduce CO2 emissions
to minimise the Company’s carbon footprint. The Carbon
Disclosure Project recognised Dialog Semiconductor Plc
as one of the 10 successful companies achieving the
“Scope-2-Indirect CO2 Emission Reduction” with a
reduction of 26.3%, and have set a target of 30% by 2014.
PACKING AND RECYCLING
Dialog only uses packing material qualified as “green
packing”, implementing a “non-wood packing”
27
delivery policy in 2011. We believe that reusing and
recycling packing material and waste (inclusive PET
and glass bottles used in our working areas) can
contribute to the effectiveness of our resource
management and sustainability. Our five design
locations currently recycle 91% of packing and
waste; we are striving for 95% by 2013.
SUPPLIER ENGAGEMENT
We firmly believe that sustainable development can
be secured only if we safeguard our valuable resources;
therefore, we deal only with suppliers that have similar
environmental goals and are also accredited to the
ISO 14001 standard. Within our supply chain, we
continually emphasis that environmental issues should be
an instinctive part of any decision-making process, and
suppliers should use environmentally friendly
technology to:
● reduce and eliminate emissions of ozone-depleting
and other volatile organic chemicals (VOC);
● design and manufacture only environmentally
friendly products;
● manage, reduce and dispose of hazardous
substances safely;
● monitor and control waste water and solid waste
emissions;
● reduce and eliminate all types of waste, including
water and energy;
● reduce waste by maximising product yields; and
● ensure all environmental permits are obtained,
maintained and kept current.
As a fabless semiconductor company, it is important that
all of our manufacturing partners are equally committed
to respecting the environment. All Dialog’s major suppliers
have committed to our “Code of Conduct”, which
reflects our commitment to the Electronics Industry Code
of Conduct (EICC). Compliance is monitored through
a two-pronged approach: every supplier is required
to complete a self-audit questionnaire to identify and
document compliance as well as regular on-site audits
of all of our major suppliers. In addition, 91% of our
major suppliers have their own documented corporate
social responsibility policy, which we aim to increase
to 100% by the end of 2013.
We are continually working with our suppliers to develop
recovery processes, resource-substitution technologies
and methods to reduce CO2 emissions throughout the
supply chain. We are assessing and developing an
all-suppliers policy related to conflict minerals.
Jalal Bagherli, Dialog Semiconductor CEO, at a Silicon Valley event in December 2011,
being presented with the prestigious Global Semiconductor Award for the top European
Semiconductor company for the third successive year.
SOCIAL
EMPLOYEE DEVELOPMENT
Dialog aims to attract and retain the best people
by ensuring that all employees receive comprehensive
on-the-job formal training, coaching and mentoring.
Employees work in a peer group that challenges,
motivates, inspires and stretches the imagination –
helping individuals to continue to grow and learn
in their chosen field. Working in such an innovative
environment means the opportunity to continue to
learn happens on a daily basis. In parallel, Dialog has
a range of specific learning and development initiatives,
designed to enable all to develop to their full potential.
Dialog is committed to the training and development
of all employees, at all levels of the organisation. Our
vision is to develop a positive learning culture which
fully supports the development of the individual and
the growth of the business. We have a global learning
and development strategy that has been written in order
to support both the development of the organisation and
the individuals within it. Everyone within the organisation
has the opportunity to participate in a variety of career
advancing training and development programmes.
As well as the wide range of development programmes
provided to employees, Dialog has created a Technical
Ladder which provides promotional opportunities for
those who bring great value to the Company through
their technical expertise and want to focus their careers
on that know-how rather than on management and
leadership. Employees who are successful in gaining
a place on the Ladder spend around 20% of their
28
Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 2 | Business review
Sustainability continued
Dialog are proud to be associated with Advanced Sports Coaching, who
provide sports coaching in safe, happy environments in South West
England. Dialog UK also donated a new kit for the under-8 team.
Dialog donated €2,000 in total to help to fund a film competition for
young people in Kirchheim, Germany to raise awareness of alcohol abuse
in children.
time on Technical Ladder activities such as researching
new initiatives, university relationships, speaking at
conferences, internal communication and training.
Clear and consistent communication is achieved through
regular Company-wide information sessions, led by
the CEO; 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.
EMPLOYEE WELL-BEING
Dialog has been implementing a programme of growth
and investment in many of our locations, expanding
facilities and work space. When we expand or refurbish
a site, employee suggestions are incorporated to create
an environment that both meets the Company’s business
needs while also being a pleasant place in which to work.
Dialog is committed to supporting the health and
well-being of its employees. Employees and their
families are eligible to participate in non-contributory
medical plans where local culture and practice supports
this. Additionally, Dialog currently offers a selection of
“well-being” initiatives across a variety of locations,
including an on-site, free flu vaccination programme,
cycle to work schemes and an on-site gym.
Furthermore, a key element of Dialog’s 2012 employee
engagement plans is to define and implement further
local initiatives that build upon the current health and
well-being programmes in place and support the needs
of our employees.
“GIVING BACK” – COMMUNITY DEVELOPMENT
Dialog is committed to being a responsible member of
the community and increased corporate giving by 41%
in 2011. A plan has been put in place to continue to
do more by setting a target of giving 1% of pre-tax
profit by 2015.
During 2011, Dialog significantly ramped up its
relations with key universities throughout the UK and
Europe. As well as giving the Company access to the
brightest graduate talent, it has also afforded us the
opportunity to give something back to the community.
During 2011 Dialog sponsored three electronics
engineering students from UK universities through the
UK Electronic Skills Foundation, an organisation that
aims to attract students of school and university age
into the electronics industry. We have committed
to a further three for 2012, and have an ongoing
commitment for an additional three per year.
Dialog has also kicked off a programme of industrial
scholarships within European universities, notably
Karlsruhe and Aalen universities in Germany. During
2011 we sponsored one scholar at each university
who received a laptop, an annual bursary, paid work
placements, an opportunity for a summer job and an
industrial mentor. The target is to add a further four
scholars during 2012 at other universities.
In 2011, Dialog implemented a programme to provide
prizes and bursaries for various degree programmes,
such as two “access bursaries” of £1,000 each at the
University of Edinburgh to assist low-income engineering
29
students; and giving cash prizes for best second year
project of £800 at Imperial College London.
audits and inspections are performed regularly by
Dialog to verify its continuing maintenance.
The range of other activities the Company has been
involved in during 2011 includes careers counselling
for students, lectures from Dialog engineers as part of
university curriculum content, presentations to schools
from engineers and employees about electronics as an
industry, an active work experience programme, visits
to Dialog sites and participation in schools careers days.
In addition, we are undertaking a Company-wide
employee volunteerism initiative, and have a formal
policy to match all employee contributions or funds
raised for charitable causes that are important to our
employees and the community. Donations in 2011
included Children in Need (UK), Cancer Research (UK),
Welcome Home Ministries Africa (Orphanage in Uganda
sponsored by our employees in The Netherlands),
The Red Cross Japan (Earthquake/Tsunami appeal), Japan
Guide Dog Association, a local charity for children with
mental and physical handicaps (Dettingen – Germany),
Taiwan Fund for Children and Families (for orphans
and needy children), UNICEF (Korea), National Kidney
Foundation (Singapore), Children Protection against
alcohol abuse campaign (Kirchheim – Germany), local
community brass band and youth football club (UK),
local Royal Air Force cadets (UK), ORBIS Hong-Kong
(fight against preventable blindness), “Steirer helfen
Steirern” (Help for the disadvantaged – Austria) and
the local fire brigade (Swindon – UK).
GOVERNANCE
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,
including a detailed code of conduct for them to
review and implement. Detailed self-audits have been
performed by all of our suppliers in order to verify the
implementation of this code of conduct, and on-site
HEALTH AND SAFETY
Dialog considers a safe and healthy working
environment to be essential in the maintenance of
employees’ morale and in the production of high-
quality and innovative products. As a result, we require
our major suppliers to be committed to ensuring the
creation of safe and healthy 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.
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. Dialog’s management
system complies with the EICC code. It is certified to
the ISO 9001 and ISO 14001 international standard as
a formal implementation of the code, is committed to
implementing and facilitating continuous improvements
and to mitigating operations-related risks. To enable
us to comply with all applicable laws, regulations and
customer requirements, as required by the code, we
also ensure that all our major supply chain partners are
accredited to at least the same standard. To ensure that
we constantly improve our management systems we
regularly review and audit internal and supply chain
management systems.
Dialog opened its own fitness
room at the start of the year
in a further step to promote a
healthy lifestyle for its employees.
30
Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 3 | Management and governance
Executive management
DR JALAL BAGHERLI
CHIEF EXECUTIVE OFFICER
ANDREW AUSTIN
VICE PRESIDENT, SALES
MOHAMED DJADOUDI
VICE PRESIDENT,
GLOBAL MANUFACTURING
OPERATIONS AND QUALITY
GARY DUNCAN
VICE PRESIDENT,
ENGINEERING
CHRISTOPHE CHENE
VICE PRESIDENT, ASIA
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.
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.
ANDREW AUSTIN
VICE PRESIDENT, SALES
Andrew joined Dialog in April 2009. He was previously
a Sales and Marketing consultant specialising in the
semiconductor and high-performance sports industries.
He has extensive experience of the semiconductor
industry through his previous professional positions
at Texas Instruments and Raytheon Systems.
Andrew holds a degree in Electrical and Electronics
from Hertford University.
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 more than 25 years’ experience
in the field of semiconductor manufacturing
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.
CHRISTOPHE CHENE
VICE PRESIDENT, ASIA
Christophe joined Dialog in 2011 as Vice President Asia.
He has over 20 years of experience in the semiconductor
industry focused on building international businesses
and organisations with a strong Asian footprint.
Previously based in Taiwan, he served as Senior Vice
President and General Manager of the TV Business Unit
as well as Senior Vice President of worldwide sales for
Trident Microsystems. Prior to that, Christophe served in
various international executive and managerial positions
at Texas Instruments, Sharp and Xilinx. Christophe holds
an electronics engineering degree from INSA, Toulouse.
31
DR ASMUND TIELENS
VICE PRESIDENT AND
GENERAL MANAGER
CONNECTIVITY, AUTOMOTIVE
AND INDUSTRIAL GROUP
UDO KRATZ
SENIOR VICE PRESIDENT,
GENERAL MANAGER AUDIO
AND POWER MANAGEMENT
BUSINESS GROUP
MARTIN POWELL
VICE PRESIDENT,
HUMAN RESOURCES
JEAN-MICHEL RICHARD
CFO, VICE PRESIDENT
FINANCE
MARK TYNDALL
VICE PRESIDENT, BUSINESS
DEVELOPMENT AND
CORPORATE STRATEGY
DR ASMUND TIELENS
VICE PRESIDENT AND GENERAL MANAGER
CONNECTIVITY, AUTOMOTIVE AND INDUSTRIAL GROUP
Asmund is Vice President and General Manager of
Dialog’s “Connectivity and Automotive and Industrial
Business Group”. He joined Dialog in February 2011
through the acquisition of SiTel Semiconductor, where
he was CEO and founder. Prior to SiTel, Asmund worked
at National Semiconductor as product line director, PMC
Sierra as marketing director for ATM chips, and Philips
Semiconductor (now NXP) as marketing manager for
its digital TV circuits and later for all of its custom/asic
products. Asmund obtained his masters degree in
Physics (summa cum laude) at Hamburg University
and his PhD at the University of Utrecht.
UDO KRATZ
SENIOR VICE PRESIDENT, GENERAL MANAGER AUDIO
AND POWER MANAGEMENT BUSINESS GROUP
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.
MARTIN POWELL
VICE PRESIDENT, HUMAN RESOURCES
Martin joined the Company in 2010 and is responsible
for developing and driving people strategies in support
of Dialog’s business goals and initiatives worldwide,
including fostering an environment where Dialog’s
teams can thrive. Prior to Dialog Martin has held a
variety of senior and executive HR roles with Medtronic
Inc, General Electric (GE) and the Dell Corporation,
and most recently was a member of the executive team
at C-MAC MicroTechnology, a private equity-backed
leader in the high reliability electronics sector. During
his career Martin has been located in Asia, continental
Europe as well as the United Kingdom.
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.
MARK TYNDALL
VICE PRESIDENT, 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.
32
Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 3 | Management and governance
Board of Directors
GREGORIO REYES
CHAIRMAN
DR JALAL BAGHERLI
CHIEF EXECUTIVE OFFICER
CHRIS BURKE
NON-EXECUTIVE DIRECTOR
AIDAN HUGHES
NON-EXECUTIVE DIRECTOR
CHAIR OF AUDIT COMMITTEE
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. He has a career
of 30 years in Telecoms and Technology. Post his degree
in Computer Science in 1982, he spent 15 years in Nortel
Research and Development. Followed by Technology
Business Leadership roles as Chief Technology Officer
(CTO) in Energis Communications (at time of IPO into
the London Stock Exchange), then CTO at Vodafone
UK Ltd. Post-Vodafone Chris has made over 20
technology investments from his own investment fund,
founded/co-founded a number of start-up companies,
and provides a Strategy and Technology Advisory service
for some of the biggest technology manufacturers in
the industry as well both private and venture investors.
Presently Chris serves on the public company boards
of Kontron, Tranzeo Wireless, as well as the private
company boards of Aicent, Pay Liquid, One Access,
Navmii, and Muzicall.
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.
33
JOHN MCMONIGALL
NON-EXECUTIVE DIRECTOR
RUSS SHAW
NON-EXECUTIVE DIRECTOR
CHAIR OF REMUNERATION AND
NOMINATION COMMITTEE
PETER TAN
NON-EXECUTIVE DIRECTOR
PETER WEBER
NON-EXECUTIVE DIRECTOR
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 Apple Computer, Molex and
Flextronics. During more than 30 years’ experience of
operating in the Far East he has built up expertise in
world-class manufacturing and technology companies.
Today, Peter is the Managing Partner of JP Asia Capital,
a private equity fund in Singapore. He is also Chairman
of SMRT Road Holdings and a director of SMRT
Corporation and Innotek.
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.
JOHN MCMONIGALL
NON-EXECUTIVE DIRECTOR
John joined the Board in March 1998. He joined
Apax Partners Worldwide LLP in 1990 and was
responsible for investments in telecommunications,
electronics and software. After leaving Apax he
remained on the boards of several companies,
including Autonomy Corporation, which was
successfully sold in 2011. He currently serves
on the boards of several private companies.
RUSS SHAW
NON-EXECUTIVE DIRECTOR, CHAIR OF
REMUNERATION AND NOMINATION COMMITTEE
Russell joined the Board in July 2006 and is currently
a non-executive director for Unwire A.p.S. and GAME
Group plc; he is also the current Chairman of the
Marketing Group of Great Britain and an investor in
Ariadne Capital’s ACE Fund. Until recently, Russell was
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 20+ years’
senior marketing and brand management experience
in the technology, telecoms and financial services
areas has enabled him to bring an excellent level of
knowledge to Dialog.
34
Dialog Semiconductor Plc | Annual report and accounts 2011 | 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 2011. These accounts have been prepared under IFRS
for UK reporting purposes and are available on the Company’s Website:
www.dialog-semiconductor.com.
GOING CONCERN
After reviewing the 2012 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.
PRINCIPAL ACTIVITIES AND REVIEW OF THE BUSINESS
Dialog Semiconductor creates highly integrated, mixed signal integrated
circuits (ICs) optimised for personal portable, low energy short-range
wireless, lighting, display and automotive applications. The Company
provides flexible and dynamic support, innovation and the assurance
of dealing with an established business partner.
With its focus and expertise in energy-efficient system power management,
and now with the recent addition of low energy short-range wireless and
VoIP technology to the portfolio, Dialog brings decades of experience to
the rapid development of ICs for personal portable applications, including
smartphones, tablet PCs, digital cordless phones and gaming applications.
DIVIDENDS
The Directors do not recommend the payment of a dividend (2010: 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 Benefit Trust which purchases shares
in the Company for the benefit of employees under the Company’s share
option scheme, Long Term Incentive Plan and Executive Incentive Plan.
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 2011, the Trust held 1,267,322 shares, which represented
1.95% of the total called-up share capital, at a nominal value of £126,732.
Dialog’s power management processor companion chips enhance the
performance in terms of extended battery lifetime and the consumers’
multimedia experience. With world-class manufacturing partners, Dialog
operates a fabless business model.
SHARE CAPITAL
Details of the share capital are set out in note 18 to the consolidated
financial statements.
Dialog Semiconductor Plc is headquartered near Stuttgart, with a global
sales, R&D and marketing organisation. In 2011, it had approximately
US$527 million in revenue and is one of the fastest growing European
public semiconductor companies. It currently has approximately
650 employees. The Company is listed on the Frankfurt (FWB: DLG)
stock exchange and is a member of the German TecDax index.
More information about the business is set out in the CEO’s statement,
on pages 13 and 14, and in the Business review, on page 12.
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 standalone 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.
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.
SUBSTANTIAL SHAREHOLDINGS
Details of substantial shareholdings are on page 9 of this annual report.
DIRECTORS
The Directors, together with their biographies, are listed on pages 32
and 33 of this annual report.
DIRECTORS’ REMUNERATION AND INTERESTS
Directors’ remuneration and interests are detailed in the Directors’
remuneration report on pages 38 to 40 of this annual report. No Director
had a material interest during the year ended 31 December 2011 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.
ELECTION AND RE-ELECTION OF DIRECTORS
In accordance with the Company’s Articles of Association, one-third of
the Directors have to stand for re-election at the Annual General Meeting.
The next Annual General Meeting will be held on 24 April 2012 at 9am.
CORPORATE GOVERNANCE
The Company’s Corporate Governance statement is set out on pages 36
and 37 of this annual report.
35
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 2011 was 58 days (2010: 65 days).
RESPONSIBILITY STATEMENT UNDER THE DISCLOSURE
AND TRANSPARENCY RULES
Each of the Directors listed on pages 32 and 33 confirm that to the best
of their knowledge:
● the financial statements, prepared in accordance with IFRS as adopted
FINANCIAL INSTRUMENTS
The Group’s financial risk management and policies, and exposure to risks,
are set out on pages 24 and 25.
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
● 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 24 April 2012 at 9am.
AUDITORS
In accordance with Section 384 of the Companies Act 2006, a resolution
for the reappointment 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
16 February 2012
POLITICAL AND CHARITABLE CONTRIBUTIONS
The Group made no political contributions during the period. We made
charitable contributions of US$23,813 to local community projects
(2010: US$16,875).
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 pages 32 and 33. Having made enquiries
of fellow Directors and of the Company’s auditors, each of the Directors
affirms that:
● 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
● 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.
36
Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 3 | Management and governance
Corporate Governance
GOVERNANCE STANDARDS
Dialog Semiconductor Plc is committed to implementing high levels of
governance. Accordingly, Dialog (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 38 to 40. The executive Director’s remuneration is largely
performance related and is connected to a set of goals determined by
the Board.
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 of, or the day before, each Board meeting.
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.
Our shares are listed with Clearstream Germany as legal owner. As far as
we are aware, those holding a significant beneficial interest (>3%) in our
Company as of 31 December 2011 were:
The Dialog Employee Benefit Trust (1.95%); Robert Citrone and Discovery
Capital Management LLC (5.61%) as notified on 8 December 2010;
JP Morgan (4.86%) as notified on 4 May 2010; X-FAB Semiconductor
Foundries AG (4.62%) as notified by email on 19 January 2012; Allianz
Global Investors Kapitalanlagegesellschaft mbH (3.64%) as notified on
2 October 2009.
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 2011, 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 18 to the 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 by presence in person or by proxy in relation to resolutions to be
passed at a general meeting. All proxy votes are counted and the numbers
for, against or withheld in relation to each resolution are announced at
the AGM and published on the Company’s Website after the meeting.
37
There are no restrictions on the transfer of ordinary shares in the Company
other than:
● certain restrictions may from time to time be imposed by laws and
regulations (for example, insider trading laws);
● 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).
Details of changes in share capital can be found in note 18 to the
consolidated financial statements. Besides that, the Company did not
purchase its 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.
Dialog has an Employee Benefit Trust which holds Dialog shares for the
benefit of employees, including for the purpose of satisfying awards made
under the various employee and executive share plans. The trustee may
vote the shares as it sees fit, and if there is an offer for the shares the
trustee is not obliged to accept or reject the offer but will have regard
to the interests of the employees and may consult them to obtain their
views on the offer and may otherwise take action with respect to the
offer it thinks fair.
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
occur 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 38.
The Company’s Articles of Association may only be amended by a special
resolution at a general meeting of Shareholders.
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 2011 and up to the date of the approval of the 2011 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.
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 30 to the consolidated financial statements on
pages 65 and 101.
The Company’s audited financial statements for the year ended
31 December 2010, 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 21 April 2011. E&Y, the Company’s
independent auditors, were reappointed until the following AGM.
Given the acquisition of SiTel Semiconductor B.V. (“SiTel”) on 10 February
2011, the Board has requested that Kevin Harkin, the Senior Statutory
Auditor, extend his period of service from five years to seven years (to end
with audit of the 31 December 2012 annual report). The Board believes
that this will give the Group greater stability and more comfort over audit
quality over the next two years as SiTel is integrated into the Group. After
due consideration, Kevin Harkin and Ernst & Young LLP have accepted
this request and have advised that they will implement additional review
procedures in order to mitigate any potential risk of familiarity impairing
their independence.
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
16 February 2012
38
Dialog Semiconductor Plc | Annual report and accounts 2011 | 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.
COMPENSATION OF NON-EXECUTIVE DIRECTORS
Non-executive Directors 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 and the Chairman are all reimbursed for any reasonable
travel expenses incurred in connection with their attendance at Board
meetings or Board committees.
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, inter alia, is 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; and
3. Share options – details are set out in note 20 to the consolidated
financial statements.
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 (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 annual report.
SHARE OPTIONS
Details are set out in note 20 to the consolidated financial statements,
on pages 80 to 83.
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 20a,
on page 80, in the notes to the consolidated financial statements.
DIRECTORS’ PENSION ARRANGEMENTS
The Company contributes 9% of the executive Director’s basic salary to a
defined contribution pension scheme. There are no pension arrangements
for non-executive Directors.
39
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
re-election as required by the Articles of Association (one-third of the
Directors must stand for re-election at each AGM) and subject to further
periods of renewal.
The compensation of the members of the Board of Directors is as follows:
Base salary
US$
Bonus
US$
Pensions
contribution
US$
Other
US$
2011 Total
US$
2010 Total
US$
Directors’ holdings
at 31 December 2011
Shares
Options
474,545
325,519
42,289
26,390
868,743
879,479
270,676
1,012,352
Name and position
Dr Jalal Bagherli
Executive Director and CEO
Chris Burke
Non-executive Director
Aidan Hughes
Non-executive Director
and Chairman of the
Audit Committee
John McMonigall
Non-executive Director
83,713
96,023
83,713
Gregorio Reyes
Non-executive Chairman
118,182
Russ Shaw
Non-executive Director and
Chairman of the Remuneration
and Nomination Committee
96,023
Peter Tan
Non-executive Director
Peter Weber
Non-executive Director
83,713
83,713
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
83,713
66,809
15,493
25,796
96,023
79,627
25,000
46,461
83,713
66,809
100,000
10,589
118,182
94,770
20,000
2,803
96,023
79,627
19,891
42,293
83,713
66,809
40,000
2,039
83,713
66,809
33,000
2,039
1,119,625
325,519
42,289
26,390
1,513,823
1,400,739
524,060
1,144,372
40
Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 3 | Management and governance
Directors’ remuneration report continued
SHARE OPTIONS GRANTED TO THE EXECUTIVE DIRECTOR
As at 31 December 2011, Jalal Bagherli, executive Director, held 1,012,352
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 2010
Granted
Exercised 31 December 2011
Market price of
Gain on the
exercised options¹) exercise of options
€
€
€1.52
£0.10
£0.10
13.05.2009
21.02.2010
18.02.2011
12.05.2016 1-44 months
12 months
03.02.2015
Immediately
10.02.2021
75,712
799,290
–
–
–
508,170
(16,820)
(354,000)
–
58,892
445,290
508,170
14.32
14.15
–
875,002
508,170
(370,820)
1,012,352
215,296
4,969,566
–
5,184,862
1) The market price as a weighted average price
SHARE OPTIONS GRANTED TO THE NON-EXECUTIVE DIRECTORS
Each non-executive Director was previously entitled to an initial grant
of 50,000 options vesting monthly in 48 equal tranches. At each AGM
(ending with the 2009 AGM), non-executive Directors received 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. At the 2010 AGM the
Shareholders voted against the continuance of this share option plan.
At the 2011 AGM Shareholders resolved that one-third of the non-
executive Directors’ remuneration should be satisfied in shares in the
Company. These shares are issued through the mechanism of options
(with an exercise value of Euro 15 cents) the exercise of which, subject
to certain exceptions, is conditional on the Director still being a member
of the Board immediately before the third AGM following grant.
The share option grants to non-executive Directors are as follows:
Director
Exercise price
€
Date of grant
Expiry date
Vesting period
Chris Burke
Aidan Hughes
1.40 12.07.2006 11.07.2013 48 months
1.17 22.04.2009 21.04.2016 12 months
0.15 21.07.2011 21.07.2018 48 months
1.27 19.06.2006 18.06.2013 48 months
1.35 30.04.2008 29.04.2015 12 months
1.17 22.04.2009 21.04.2016 12 months
0.15 21.07.2011 21.07.2018 48 months
John McMonigall 1.27 19.06.2006 18.06.2013 48 months
1.17 22.04.2009 21.04.2016 12 months
0.15 21.07.2011 21.07.2018 48 months
Gregorio Reyes
Russ Shaw
1.27 19.06.2006 18.06.2013 48 months
1.17 22.04.2009 21.04.2016 12 months
0.15 21.07.2011 21.07.2018 48 months
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
0.15 21.07.2011 21.07.2018 48 months
Peter Tan
0.15 21.07.2011 21.07.2018 48 months
Peter Weber
0.15 21.07.2011 21.07.2018 48 months
Total
1) The market price as a weighted average price
Approved by the Board of Directors and signed on its behalf by:
31
December
2010
5,210
18,547
–
4,168
20,000
20,000
–
5,210
3,340
–
6,252
17,088
–
5,210
20,000
20,000
20,000
–
–
–
165,025
TIM ANDERSON
SECRETARY
16 February 2012
Forfeited
Granted
Exercised
Market price
of exercised
31
December
2011
Gain on
the exercise
of options
€
–
–
–
–
–
–
–
–
–
–
options¹)
€
–
–
–
–
–
–
–
–
–
–
15.03
15.03
–
12.75
12.75
–
–
–
–
–
86,049
236,898
–
59,134
279,000
–
–
–
–
–
–
–
2,039
–
–
–
2,293
–
–
2,039
–
–
2,803
–
–
–
–
2,293
2,039
2,039
–
–
–
–
–
–
–
–
–
–
(6,252)
(17,088)
–
(5,210)
(20,000)
–
–
–
–
–
5,210
18,547
2,039
4,168
20,000
20,000
2,293
5,210
3,340
2,039
–
–
2,803
–
–
20,000
20,000
2,293
2,039
2,039
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
15,545
(48,550) 132,020
601,081
41
Statement of Directors’ responsibilities
The Directors are responsible for preparing the IFRS report and accounts
2011 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.
● 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.
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:
● select suitable accounting policies and then apply them consistently;
● make judgements and estimates that are reasonable and prudent;
● state whether they have been prepared in accordance with IFRS
as adopted by the EU; and
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
16 February 2012
JEAN-MICHEL RICHARD
CFO, VICE PRESIDENT FINANCE
42
Dialog Semiconductor Plc | Annual report and accounts 2011 | 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 2011 which comprise the Group and
Parent Company Statements of Financial Position, the Group Statement
of Comprehensive Income, the Group and Parent Company Statements
of Cash Flow, the Group and Parent Company Statements of Changes
in Equity and the related notes 1 to 33. 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
OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES
ACT 2006
In our opinion:
•
•
•
The part of the Directors’ remuneration report to be audited has been
properly prepared in accordance with the Companies Act 2006;
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
The information given in the Corporate Governance statement set out
on pages 36 and 37 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:
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITOR
As explained more fully in the Directors’ Responsibilities Statement set
out on page 38, 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 and express an opinion on 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 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.
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
•
•
•
•
•
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
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
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; or
A Corporate Governance statement has not been prepared by the
Company.
KEVIN HARKIN
(SENIOR STATUTORY AUDITOR)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Reading
16 February 2012
OPINION ON FINANCIAL STATEMENTS
In our opinion:
•
•
•
•
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 2011
and of the Group’s profit for the year then ended;
The Group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
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
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.
43
Consolidated statement of financial position
As at 31 December 2011
Assets
Cash and cash equivalents
Trade accounts receivable and other receivable
Inventories
Income tax receivables
Other financial assets
Other current assets
Total current assets
Property, plant and equipment
Goodwill
Other 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
Retained earnings (Accumulated deficit)
Other reserves
Employee stock purchase plan shares
Net Shareholders´ equity
Total liabilities and Shareholders´ equity
Notes
At 31 December
At 31 December
2011
US$000
2010
US$000
6
7
8
5
9
10
11
4, 12
12
5
5
13
14
15
16
15
17
113,590
46,729
62,637
58
25
8,236
231,275
28,404
27,358
38,361
1,445
239
17,382
113,189
158,200
12,556
40,733
60
836
4,078
216,463
14,249
–
10,727
741
370
10,829
36,916
344,464
253,379
50,457
7,213
1,040
5,178
16,552
80,440
536
373
909
12,380
203,911
58,233
(8,251)
(3,158)
28,413
845
877
1,208
15,875
47,218
428
461
889
12,380
202,416
(3,961)
(1,648)
(3,915)
18
263,115
205,272
344,464
253,379
These financial statements were approved by the Board of Directors on 16 February 2012 and were signed on its behalf by:
Dr Jalal Bagherli
Director
44 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Consolidated income statement
For the year ended 31 December 2011
Revenue
Cost of sales
Gross profit
Selling and marketing expenses
General and administrative expenses
Research and development expenses
Other operating income
Restructuring expenses
Operating profit
Interest income
Interest expense
Foreign currency exchange gains (losses), net
Result before income taxes
Income tax expense
Net profit
Earnings per share (in US$)
Basic
Diluted
Weighted average number of shares (in thousands)
Basic
Diluted
Notes
3, 23, 26
23
3, 26
3
3
3
5
2
2011
US$000
527,261
(319,073)
2010
US$000
296,597
(159,334)
208,188
137,263
(32,370)
(24,442)
(90,046)
303
–
61,633
376
(235)
(352)
61,422
(5,559)
55,863
(17,391)
(17,471)
(56,465)
–
(595)
45,341
1,130
(120)
(2,088)
44,263
(1,784)
42,479
2011
2010
0.89
0.84
0.70
0.66
62,873
66,711
60,313
64,841
Statement of comprehensive income
For the year ended 31 December 2011
Net profit
Exchange differences on translating foreign operations
Cash flow hedges
Income tax relating to components of other comprehensive income
Other comprehensive income (loss) for the year, net of tax
45
2011
US$000
55,863
(92)
(6,825)
314
(6,603)
2010
US$000
42,479
188
441
(175)
454
Total comprehensive income for the year
49,260
42,933
46 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Consolidated statement of cash flows
For the year ended 31 December 2011
Cash flows from operating activities:
Net profit
Adjustments to reconcile net profit to net cash used for operating activities:
Interest income, net
Income tax expense
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, other receivables and 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 from restricted cash
Purchase of property, plant and equipment
Purchase of intangible assets
Payments for capitalised development costs
Purchase of SiTel Semiconductor B.V.
Deposits made
Cash flow used for investing activities
Cash flows from financing activities:
Cash flow used for capital increase
Purchase of employee stock purchase plan shares
Sale of employee stock purchase plan shares
Cash flow from financing activities
Cash flow from (used for) operating, investing and financing activities
Net foreign exchange difference
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Notes
2011
US$000
2010
US$000
55,863
42,479
3
5
11
12
20
7
24
11
12
12
4
(141)
5,559
3,660
8,801
16,030
1,106
6,329
(21,451)
(10,716)
(967)
11,958
(334)
(3,336)
72,361
(109)
381
(3,078)
69,555
–
(21,161)
(5,414)
(5,165)
(84,166)
(157)
(1,010)
1,784
1,121
4,880
2,678
240
4,227
4,930
(15,661)
(1,475)
11,157
(665)
3,641
58,326
(3)
1,005
(7,378)
51,950
3,000
(9,768)
(5,883)
(2,823)
–
–
(116,063)
(15,474)
–
–
2,254
2,254
(36)
(2,844)
4,013
1,133
(44,254)
37,609
(356)
443
(44,610)
38,052
158,200
120,148
Cash and cash equivalents at end of period
6
113,590
158,200
47
Consolidated statement of changes in Shareholders´ equity
For the year ended 31 December 2011
Retained earnings
Additional paid-in
(Accumulated
Ordinary Shares
US$000
capital
US$000
deficit)
US$000
Currency
translation
adjustment
US$000
Balance at 1 January 2010
11,825
283,733
(135,667)
(1,730)
Total comprehensive income
Reduction of additional paid-in capital
Capital increase for employee share option
plan (gross proceeds)
Transaction costs of capital increase -
employee share option plan
Purchase of employee stock purchase plan
shares
Sale of employee stock purchase plan shares
Equity settled transactions, net of tax
–
–
555
–
–
–
–
–
(85,000)
42,479
85,000
414
(36)
–
3,305
–
–
–
–
–
4,227
13
–
–
–
–
–
–
Other reserves
Hedges
US$000
(372)
441
–
–
–
–
–
–
Employee stock
purchase plan
shares
US$000
Total
US$000
(810)
156,979
–
–
(969)
42,933
–
–
–
(36)
(2,844)
(2,844)
708
–
4,013
4,227
Changes in Equity total
555
(81,317)
131,706
13
441
(3,105)
48,293
Balance at 31 December 2010 / 1 January
2011
Total comprehensive income
Sale of employee stock purchase plan shares
Equity settled transactions, net of tax
Changes in Equity total
12,380
202,416
(3,961)
(1,717)
69
(3,915)
205,272
–
–
–
–
–
55,863
(162)
(6,441)
1,495
–
–
6,331
–
–
–
–
1,495
62,194
(162)
(6,441)
–
757
–
757
49,260
2,252
6,331
57,843
Balance at 31 December 2011
12,380
203,911
58,233
(1,879)
(6,372)
(3,158)
263,115
For further details, please refer to note 18.
48 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
Notes to the consolidated financial statements
For the year ended 31 December 2011
For the year ended 31 December 2011
1. GENERAL
The consolidated financial statements of Dialog Semiconductor Plc (“Dialog or the Group”) for the year ended 31 December 2011 were authorised for
issue in accordance with a resolution of the Directors on 16 February 2012. Dialog Semiconductor Plc is a company incorporated in the UK, whose
shares are publicly traded. The principal activities of the Group are set out in the segment reporting (note 23).
COMPANY NAME AND REGISTERED OFFICE
Dialog Semiconductor Plc
Tower Bridge House
St Katharine’s Way
London E1W 1AA
United Kingdom
BASIS OF PRESENTATION
The consolidated financial statements are prepared on the historical cost basis except that derivative financial instruments are stated at their fair value.
The consolidated financial statements are presented in US dollars (“US$”) 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
amended, revised and new Standards and new IFRIC interpretations during the year:
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 did not have an impact on the
disclosures regarding related party transactions.
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 May 2010. This includes amendments to various
existing IFRSs. The amendments have no impact on the financial position nor the financial performance of Dialog, however, disclosures for financial
instruments have been adjusted accordingly.
All following amended or new interpretations did not result in changes to the accounting policies and did not have a material effect on the financial
statements, as they currently do not apply to Dialog:
Interpretation
Title
IFRIC 14
IFRIC 19
Amendment to IFRIC 14 Prepayments of a minimum funding requirement
Extinguishing financial liabilities with equity instruments
Effective date
1 January 2011
1 July 2010
49
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED (STANDARDS AND INTERPRETATIONS ARE ENDORSED BY THE EU EXCEPT
AS NOTED OTHERWISE)
IFRS 7 FINANCIAL INSTRUMENTS: DISCLOSURES (AMENDED)
The amendment was issued in October 2010 and is effective for annual periods beginning on or after 1 July 2011. The amendments will allow users of
financial statements to improve their understanding of transfer transactions of financial assets (for example, securitisations), including understanding the
possible effects of any risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if a
disproportionate amount of transfer transactions are undertaken around the end of a reporting period.
IFRS 7 FINANCIAL INSTRUMENTS: DISCLOSURES (AMENDED / IAS 32 FINANCIAL INSTRUMENTS: PRESENTATION (AMENDED)
The amended IFRS 7 / IAS 32 were issued in December 2011 and are effective for periods beginning on or after 1 January 2013. The amendment
standards comprise disclosure requirements to assess the effect or potential effect of offsetting arrangements on a company’s financial position. The
new disclosure requirements also improve transparency in the reporting of how companies mitigate credit risk, including disclosure of related collateral
pledged or received. The amended standards have not yet been endorsed by the EU.
IFRS 9 FINANCIAL INSTRUMENTS
The new IFRS 9 was issued in November 2009. 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.
In October 2010 additions to IFRS 9 Financial instruments were issued. The additions outline the requirements on the accounting for financial liabilities.
The new requirements address the problem of volatility in profit or loss (P&L) arising from an issuer choosing to measure its own debt at fair value (often
referred to as the ‘own credit’ problem). The IASB decided to maintain the existing amortised cost measurement for most liabilities, limiting change to
that required to address the own credit problem. With the new requirements, an entity choosing to measure a liability at fair value will present the
portion of the change in its fair value due to changes in the entity’s own credit risk in the other comprehensive income (OCI) section of the income
statement, rather than within profit or loss. The revised standard has not yet been endorsed by the EU.
The new IFRS 9 is effective for periods beginning on or after 1 January 2015 (as amended in December 2011). The impact will be further analysed in the
future when the project is complete.
IFRS 10 CONSOLIDATED FINANCIAL STATEMENTS, IFRS 11 JOINT ARRANGEMENTS, IFRS 12 DISCLOSURES OF INTERESTS IN OTHER ENTITIES, IAS 27
(REVISED) SEPARATE FINANCIAL STATEMENTS, IAS 28 (REVISED) INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
The International Accounting Standards Board (IASB) completed in May 2011 its improvements to the accounting requirements for off balance sheet
activities and joint arrangements by issuing IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in
Other Entities. The new and revised standards are effective for periods beginning on 1 January 2013:
IFRS 10 builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within
the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control
where this is difficult to assess.
The Group does not expect a material effect on its financial statements resulting from this new standard.
IFRS 11 provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its
legal form (as is currently the case). The standard addresses inconsistencies in the reporting of joint arrangements by requiring a single method to
account for interests in jointly controlled entities.
The Group does not expect a material effect on its financial statements resulting from this new standard, as the group is not engaged in joint
arrangements.
50 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
IFRS 12 is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements,
associates, special purpose vehicles and other off balance sheet vehicles.
The Group expects additional disclosures from this new standard.
IAS 27 (revised) now includes the provisions on separate financial statements that are left after the control provisions of IAS 27 have been included
in the new IFRS 10.
IAS 28 (revised) now includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11.
IFRS 13 FAIR VALUE MEASUREMENT
The new IFRS 13 was issued in May 2011 and is effective for periods beginning on or after 1 January 2013. The requirements of IFRS 13 do not extend
the use of fair value accounting, but provide guidance on how it should be applied where its use is already required or permitted by other standards
within IFRSs. The impact will be further analysed in the future not expect a material effect on its financial statements resulting from this new statement.
IAS 1 PRESENTATION OF FINANCIAL STATEMENTS
The amendments to IAS 1 were issued in June 2011 and are effective for annual periods beginning on or after 1 July 2012. The amendments require
companies preparing financial statements in accordance with IFRSs to group together items within Other Comprehensive Income (“OCI”) that may be
reclassified to the profit or loss section of the income statement. The amendments also reaffirm existing requirements that items in OCI and profit or loss
should be presented as either a single statement or two consecutive statements. The Group does not expect a material effect on its financial statements
resulting from this amendment.
IAS 12 INCOME TAXES (AMENDED)
The amendments to IAS 12 Income Taxes were issued in December 2010 and are effective for annual periods beginning on or after 1 January 2012. IAS
12 requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the
asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured
using the fair value model in IAS 40 Investment Property. The amendment provides a practical solution to the problem by introducing a presumption that
recovery of the carrying amount will, normally be , be through sale. As a result of the amendments, SIC-21 Income Taxes—Recovery of Revalued Non-
Depreciable Assets would no longer apply to investment properties carried at fair value. The amendments also incorporate into IAS 12 the remaining
guidance previously contained in SIC-21, which is accordingly withdrawn. The amended standard has not yet been endorsed by the EU.
The impact will be further analysed in the future and cannot be measured at the moment.
IAS 19 EMPLOYEE BENEFITS (AMENDED)
The amendments to IAS 19 Employee Benefits were issued in December 2010 and are effective for annual periods beginning on or after 1 January 2013.
The amendments especially relate to:
eliminating an option to defer the recognition of gains and losses, known as the ‘corridor method’, improving comparability and faithfulness of
presentation.
streamlining the presentation of changes in assets and liabilities arising from defined benefit plans, including requiring remeasurements to be
presented in other comprehensive income (OCI), thereby separating those changes from changes that many perceive to be the result of an entity’s
day-to-day operations.
enhancing the disclosure requirements for defined benefit plans, providing better information about the characteristics of defined benefit plans
and the risks that entities are exposed to through participation in those plans.
Since the group does not operate any defined benefit plan, the Group does not expect a material effect on its financial statements resulting from this
amendment.
51
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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.
In addition, the following interpretations and amendments to interpretations have been issued:
Interpretation
Title
IFRIC 14
IFRIC 19
IFRIC 20
Amendment to IFRIC 14 Prepayments of a minimum funding requirement
Extinguishing financial liabilities with equity instruments
Stripping Costs in the Production Phase of a Surface Mine (The Interpretation has not yet been endorsed by the
EU)
Effective date
1 January 2011
1 July 2010
1 January 2013
The Group does not intend to make early application of the amended or revised Standards and Interpretation listed above.
PRINCIPLES OF CONSOLIDATION AND INVESTMENTS IN AFFILIATED COMPANIES
The consolidated financial statements include Dialog Semiconductor Plc and its subsidiaries as at 31 December each year:
Name
Dialog Semiconductor GmbH
Dialog Semiconductor B.V.
Registered office
Kirchheim/Teck, Germany
’s-Hertogenbosch, The Netherlands
Dialog Semiconductor (UK) Limited
Swindon, UK
Dialog Semiconductor Inc.
Dialog Semiconductor KK
Wilmington, Delaware, USA
Tokyo, Japan
Participation
100%
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, transactions, unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction for changes incurred since
1 January 2010. No changes in ownership interest of a subsidiary incurred prior to 2010. If Dialog loses control over a subsidiary, it:
Derecognises the assets (including goodwill) and liabilities of the subsidiary
Derecognises the carrying amount of any non-controlling interest
Derecognises the cumulative translation differences, recorded in equity
Recognises the fair value of the consideration received
52 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Recognises the fair value of any investment retained
Recognises any surplus or deficit in profit or loss
Reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss or retained earnings, as
appropriate.
The above-mentioned requirements were applied on a prospective basis.
BUSINESS COMBINATIONS
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration
transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the
Group measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets.
Acquisition costs incurred are expensed and included in administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance
with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded
derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is
remeasured to fair value at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair
value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with IAS 39 either in profit or loss or as
a change to other comprehensive income. If the contingent consideration is classified as equity, it should not be remeasured until it is finally settled
within equity.
Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling
interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the
subsidiary acquired, the difference is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired
in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the
combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash-
generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the
carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured
based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.
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).
53
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 2011
31 December 2010
US$1 =
0.65
77.37
0.77
US$1 =
0.64
81.29
0.75
2011
US$1 =
0.62
79.71
0.72
2010
US$1 =
0.65
87.69
0.76
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, held-to-maturity investments, loans and receivables
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.
54 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair
value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near
term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge
relationships as defined by IAS 39. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are
designated as effective hedging instruments. Financial assets at fair value through profit and loss are carried in the statement of financial position at fair
value with changes in fair value recognised in finance income or finance costs in the income statement.
Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are
not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value though profit or loss. These
embedded derivatives are measured at fair value with changes in fair value recognised in the income statement. Reassessment only occurs if there is a
change in the terms of the contract that significantly modifies the cash flows that would otherwise be required.
The Group has not entered into trading actions nor designated financial asset as financial asset through profit or loss in 2011 and 2010.
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.
The Group has not entered into trading actions nor designated financial asset as financial asset held to maturity in 2011 and 2010.
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
accounts receivable. Loans and receivables are recorded initially at fair value and do not bear interest. As of 31 December 2011 as well as 31 December
2010, loans and receivables of the Group comprise trade accounts receivable from customers, cash and cash equivalents (except for deposits designated
as hedging instruments). 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.
55
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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 accounts
receivable and other receivables” and are disclosed in the notes respectively.
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 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 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).
56 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
The Group has not entered into trading actions nor designated financial asset as available-for-sale financial asset in 2011 and 2010.
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 2011 and 2010 the Group did not classify any financial liabilities as financial liabilities at fair value through profit or loss.
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 designated certain deposits as hedging instruments in order to hedge foreign
currency risks as well. Such derivative financial instruments and deposits were initially recognised at fair value on the date on which a derivative contract
was entered into or the cash deposit was designated as a hedging instrument and was 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 (only in 2010) during the year that do not qualify for hedge
accounting are taken directly to profit or loss.
The fair value of 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 in 2010 was measured based on foreign
currency market rates at each reporting date.
57
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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 (only in 2010) 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 2011 and 2010.
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 on-going 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.
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 in 2010 also included 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.
58 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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
Intangible assets acquired separately (primarily licences, software and patents) are measured on initial recognition at cost. The cost of intangible assets
acquired in a business combination (primarily customer based intangible assets, technology) is its fair value as at the date of acquisition. Intangible assets
with finite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses, if any. The amortisation period and the
amortisation method for an intangible asset with a finite useful life is reviewed at least at the end of each reporting period. Changes in the expected
useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation
period or method, as appropriate, and are treated as changes in accounting estimates.
Intangible assets are amortised on a straight-line basis over the estimated useful lives as follows:
Intangible asset
Customer relationships and order backlog
Brand / base technology
Particular software
Other intangible assets
Useful life
1.5 years
2 to 4.5 years
10 years
3 to 5 years
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.
59
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.
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.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that Dialog will obtain ownership by the end of
the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
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 or receivable, excluding discounts, rebates, and other sales taxes or duty. The Group
assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The Group has concluded that it is
acting as a principal in all of its revenue arrangements. 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.
60 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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
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.
61
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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.
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.
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. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable
that sufficient taxable profit will be available to allow all or part of the deferred tax asset to 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 being reduced in the past are presented in the notes gross less respective provisions. If in future periods it becomes
probable that taxable profits will be available against which the unused tax losses can be utilized, it is assumed that tax losses incurred first will be
utilized first and the respective provision will be reversed.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the
underlying transaction either in other comprehensive income or directly in equity.
62 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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.
SALES TAX
Revenues, expenses and assets are recognised net of the amount of sales tax, except:
Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is
recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable.
Receivables and payables that are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of
financial position.
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 four 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 BENEFIT TRUST – TREASURY SHARES
The Group has established an employee benefit trust. The employee benefit 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.
63
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
2011
000
62,873
3,838
66,711
2010
000
60,313
4,528
64,841
The number of anti-dilutive share options outstanding was 615,744 (2010: 288,114).
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.
The significant accounting estimates and assumptions are outlined below:
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 2011 was US$156,760,000 (2010:
US$65,709,000).
ESTIMATION OF USEFUL LIVES
Although the estimates of the useful lives of certain assets, assumptions concerning the macroeconomic environment and developments in the industry
in which the Group operate, and estimates of the discounted future cash flows are believed to be appropriate, changes in assumptions or circumstances
could require changes in the analysis. This could lead to impairment losses in the future or – except in the case of goodwill – to reversals of impairment
losses.
BUSINESS COMBINATIONS
In accordance with business combination accounting, we allocate the purchase price of acquired companies to the tangible and intangible assets
acquired and liabilities assumed, based on their estimated fair values. We engage third-party appraisal firms to assist management in determining the
fair values of certain assets acquired and liabilities assumed. Such valuations require management to make significant estimates and assumptions,
especially with respect to intangible assets.
Management makes estimates of fair value based upon assumptions believed to be reasonable. These estimates are based on historical experience and
information obtained from the management of the acquired companies and are inherently uncertain. Critical estimates in valuing certain assets acquired
and liabilities assumed include but are not limited to: future expected cash flows from the sale of products, and engineering service sales, the acquired
company’s brand awareness and discount rate. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such
assumptions, estimates or actual results. Subject to these estimates are the fair values recorded as shown in Note 4 (Business Combinations).
64 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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 yearend 2011, net deferred tax assets amounting to US$17,382,000 were
recognised (2010: US$10,829,000). Impaired deferred tax assets at 31 December 2011 were nil (2010: US$2,079,000).
Further information regarding the assessment of future taxable income is disclosed in note 5.
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, dividend yield, expected life and fluctuation. Due to the nature of these assumptions, such estimates are subject to significant
uncertainty. In 2011, the expense related to stock options was US$5,279,000 (2010: US$2,823,000). For further information on stock options
please refer to note 20a and 20c.
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, and volatility of the Company’s share
price, dividend yield and expected life. Due to the nature of these assumptions, such estimates are subject to significant uncertainty. In 2011, an
expense of US$1,050,000 was booked (2010: US$1,404,000). Further information regarding LTIP is provided in note 20b and 20c.
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 2011 no receivables or liabilities
from constructions contracts were outstanding (2010: 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 2011, the carrying amount of capitalised development costs was
US$16,041,000 (2010: US$3,235,000).
Actual results may differ from all of the above judgements and estimates.
65
2011
US$000
2010
US$000
(371)
(67)
(69)
(507)
(226)
(86)
(238)
(550)
3. OTHER DISCLOSURES TO THE INCOME STATEMENT
A) OPERATING EXPENSES AND REVENUES
The operating result before income taxes is stated after charging:
Auditors' remuneration
for the audit
for other audit related services
for other services
Depreciation of property, plant and equipment
(8,801)
(4,880)
Amortisation of intangible assets
thereof included in cost of sales
thereof included in selling and marketing expenses
thereof included in general and administrative expenses
thereof included in research and development expenses
Personnel costs
Wages and salaries
Social and security costs
Share-based payment
Pension costs from defined contribution plans1)
Included in revenues
Revenue from the sale of goods
Revenue from customer specific research and development contracts
Included in revenue from sale of goods income attributable to prior periods from BenQ cash settlement
(see note 26)
Included in cost of sales:
Costs in relation to customer specific research and development contracts
Amount of inventory recognised as expense
Impairment of inventories recognised as an expense
Included in other operating income
(2,120)
(5,810)
(300)
(7,800)
(16,030)
(68,585)
(6,976)
(6,331)
(5,685)
(87,577)
524,114
1,362
(1,395)
(75)
(156)
(1,052)
(2,678)
(43,634)
(10,259)
(4,227)
(3,000)
(61,120)
293,727
2,870
1,785
–
(1,362)
(286,396)
(3,660)
(2,870)
(140,733)
(1,121)
Income from recoveries on trade accounts receivable impaired in prior periods
303
106
[1] The pension costs from defined contribution plans include costs for the state funded pension plan In Germany of US$1,999,000 (2010: US$1,640,000).
66 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
3. OTHER DISCLOSURES TO THE INCOME STATEMENT CONTINUED
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
Of which pension contribution for the year
The highest paid director exercised 370,820 (2010: 293,342) share options during the year.
C) 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
2011
US$000
1,514
2011
No.
8
3
2011
US$000
869
42
2011
US$000
376
(235)
141
239
(98)
141
D) 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
2011
367
69
76
41
20
573
2010
US$000
1,401
2010
No.
1
8
2010
US$000
879
30
2010
US$000
1,130
(120)
1,010
1,115
(105)
1,010
2010
234
52
45
25
13
369
67
4. BUSINESS COMBINATION
ACQUISITIONS IN 2011
On 10 February 2011, Dialog Semiconductor Plc acquired 100% of the voting shares of SiTel Semiconductor B.V. (“SiTel”) (now Dialog Semiconductor
B.V.), an unlisted company headquartered and incorporated in the Netherlands and a leader in short-range wireless, digital cordless and VoIP technology.
Dialog acquired SiTel in order to expand its product portfolio with short-range wireless and VoIP based internet connectivity products. This will allow
Dialog to develop new products for these markets as well as to cross-sell Dialog’s existing Power Management technology to SiTel’s customer base. The
acquisition significantly expands Dialog’s addressable market targeting high growth wireless personal devices.
ASSETS ACQUIRED AND LIABILITIES MEASURED
Assets
Cash and cash equivalents
Trade accounts receivable and other receivable
Inventories
Other current assets
Property, plant and equipment
Intangible assets 1)
Income tax receivables
Deferred tax assets
Other non-current assets
Total assets
Liabilities
Trade and other payables
Provisions
Income taxes payable
Other current liabilities
Total liabilities
Total identifiable net assets at fair value
Goodwill arising on acquisition
Purchase consideration transferred
[1] For further information please refer to note 12.
Fair value recognised
on acquisition
US$000
5,052
12,722
14,849
1,798
2,886
32,975
788
4,776
411
76,257
(10,106)
(606)
(40)
(3,645)
(14,397)
61,860
27,358
89,218
The fair value of the trade receivables and other receivables amounts to US$12,722,000. None of the trade receivables have been impaired and it is
expected that the full contractual amounts can be collected.
68 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
4. BUSINESS COMBINATION CONTINUED
The goodwill of US$27,358,000 comprises the value of expected synergies arising from the acquisition. Furthermore, we expect additional value from
the acquisition in respect of entry to new markets, internationalisation, cross-selling opportunities and customer diversification. We were not able to
allocate the goodwill to our Cash Generating Units which consists of our four operating segments as the synergies and other effects described above
cannot be measured yet, as due to the timing and volatile business environment no reliable and sufficient information was available at year end 2011.
As a result, no goodwill impairment test was prepared for the year ended 31 December 2011. No indications of goodwill impairment were apparent at
year end.
The goodwill recognised is not expected to be deductible for income tax purposes.
From the date of the acquisition, SiTel has contributed US$108,780,000 of revenue and US$8,997,000 of net profit after tax to the Group. If the
combination had taken place at the beginning of the year, revenues would have been US$120,197,000 and the profit after tax would have been
US$6,550,000.
PURCHASE CONSIDERATION
The total purchase considerations amounted to US$89,218,000.
ANALYSIS OF CASH FLOWS FROM ACQUISITION
Transaction costs of the acquisition (included in cash flows from operating activities)
Total cash outflow for acquisition (included in cash flows from investing activities)
Net cash acquired with the subsidiary (included in cash flows from investing activities)
Net cash flow on acquisition
Transaction costs of US$3,291,000 have been expensed and are included in administrative expenses.
US$000
(3,291)
(89,218)
5,052
(87,457)
69
2010
US$000
52,470
(8,207)
44,263
2010
US$000
(4,880)
(372)
3,036
432
(1,784)
2010
US$000
(5,252)
–
(7,082)
10,550
(1,784)
2011
US$000
60,673
749
61,422
2011
US$000
(6,682)
(273)
4,282
(2,886)
(5,559)
2011
US$000
(6,876)
(79)
(13,211)
14,607
(5,559)
5. INCOME TAXES
Income (loss) before income taxes consists of the following:
Germany
Foreign
Income tax benefit (expense) is comprised of the following components:
Current taxes:
Germany
Foreign
Deferred taxes:
Germany
Foreign
Income tax expense
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 a reversal of a previous write-down of a deferred tax asset
Income tax expense
Although Dialog is a UK company, its principal operations are located in Germany. Accordingly, the following information is based on German corporate
tax law.
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%.
70 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
5. INCOME TAXES CONTINUED
A reconciliation of income taxes determined using the combined German income tax rate of 28.376% (2010: 28.376%), is as follows:
Expected income tax expense
Tax rate differential
Non-deductible portion of share based payments
Tax benefit from share based payments
Tax free income (non-deductible expenses)
Recognized deferred tax assets relating to a reversal of a previous write-down of deferred tax assets and first time
recognition of deferred tax assets relating to prior years.
Benefit from previously unrecognised deferred tax assets that is used to reduce current tax expense
Additional losses for which no deferred tax asset is recognised
Adjustments recognised for tax of prior periods
Temporary differences arising from differences between functional currency and tax currency
Other
Actual income tax expense
Deferred income tax assets and liabilities are summarised as follows:
Temporary differences relating to intangible assets
Other temporary differences
Deferred taxes in relation to tax credits
Net operating loss carryforwards
Total net deferred tax assets
Impaired deferred tax assets1)
Recognised net deferred tax assets
[1] Impaired in FY 2005. In 2011 an impairment of US$2,079,000 (2010: US$10,550,000) was reversed
2011
US$000
(17,429)
158
(1,668)
(398)
(2,703)
14,607
1,295
–
144
462
(27)
2010
US$000
(12,560)
(69)
(1,216)
13,564
(746)
10,550
3,308
(14,482)
134
(276)
9
(5,559)
(1,784)
At 31 December 2011
At 31 December 2010
US$000
(3,432)
361
1,105
19,348
17,382
–
US$000
(545)
279
1,156
12,018
12,908
2,079
17,382
10,829
71
5. INCOME TAXES CONTINUED
Tax loss carryforwards, temporary differences and net deferred tax assets are summarised as follows:
31 December 2011
31 December 2010
Tax loss
carryforwards
US$000
67,161
51,387
17,184
4,290
20
Temporary
Differences
US$000
(4,673)
25,588
(8,772)
–
1,061
Tax credits
US$000
–
4,420
–
–
–
Net deferred tax
Tax loss
assets
US$000
13,726
1,105
2,103
–
448
carryforwards
US$000
106,825
33,419
–
4,317
33
Temporary
Differences
US$000
(3,203)
46,975
–
–
661
Tax credits
US$000
–
4,280
–
–
–
Net deferred tax
assets
US$000
11,473
1,156
–
–
279
140,042
13,204
4,420
17,382
144,594
44,433
4,280
12,9082)
Germany
UK
Netherlands
US1)
Other
Total
[1] Including an amount of US$2,910,000 (2010: US$3,126,000) for state tax loss carryforwards
[2] The amount consists of US$10,829,000) recognised deferred tax assets and US$2,079,000 deferred tax assets impaired in 2005
The amount of deductible temporary differences and unused tax loss carryforwards for which no deferred tax asset is recognised in the balance sheet is
US$95,382,000 (2010: US$155,434,000).
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 utilization 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 fourth consecutive year of positive net income in 2011. Therefore, based on the expected positive net result for the near future,
the management concluded to recognise deferred tax assets in an amount of US$17,382,000 (2010: US$10,829,000). The assessment was based on
the business plan for 2012 and beyond.
The utilization of further tax loss carryforwards and temporary differences is subject to the achievement of positive income in periods which are beyond
the company’s current business plan and therefore this utilization is uncertain. Consequently no deferred tax assets were recognised for these losses and
temporary differences.
The state tax loss carryforwards in the US will expire between 2012 and 2024; other tax loss carryforwards have no expiration date.
Included in impaired deferred tax assets is an amount of US$1,105,000 (2010: US$1,156,000) (the increase results from foreign currency adjustments
and the change of the corporation tax rate in the UK) 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 €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 2012. The amount that will be paid
in 2012 is shown within the current assets.
72 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
6. CASH AND CASH EQUIVALENTS
Cash at bank
Short-term deposits
Deposits designated as a hedging instrument
Cash & cash equivalents
At 31 December
At 31 December
2011
US$000
91,010
20,381
2,199
2010
US$000
80,398
70,172
7,630
113,590
158,200
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, Pound
Sterling and Japanese Yen.
7. TRADE ACCOUNTS RECEIVABLE AND OTHER RECEIVABLE
Trade accounts receivable
Receivables from factoring agreement
At 31 December
At 31 December
2011
US$000
38,929
7,800
46,729
2010
US$000
8,424
4,132
12,556
Trade receivables are non-interest bearing and are generally on 30-60-day terms.
As described in note 24, 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$1,180,000 and US$1,410,000 at 31 December 2011 and
2010, respectively. The related allowance for doubtful accounts was US$1,180,000 and US$1,410,000 at 31 December 2011 and 2010, respectively.
73
At 31 December
At 31 December
2011
US$000
1,410
(303)
73
1,180
2010
US$000
1,406
(106)
110
1,410
At 31 December
At 31 December
2011
US$000
35,969
–
2,780
171
–
9
2010
US$000
7,310
–
1,114
–
–
–
38,929
8,424
7. TRADE ACCOUNTS RECEIVABLE AND OTHER RECEIVABLE CONTINUED
The allowance for doubtful accounts developed as follows:
Allowance for doubtful accounts at beginning of year
Reductions credited to income
Effect of movements in foreign currency
Allowance for doubtful accounts at end of year
As at 31 December 2011 and 2010, the aging analysis of trade account receivable 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 130 days
Total
74 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
8. INVENTORIES
Inventories are comprised of the following:
Raw materials
Work-in-process
Finished goods
9. OTHER FINANCIAL ASSETS
Other financial assets comprise:
Deposits for hedging contracts
Hedging instruments
At 31 December 2011
At 31 December 2010
US$000
4,031
22,496
36,110
62,637
US$000
8,298
7,238
25,197
40,733
At 31 December 2011
At 31 December 2010
US$000
US$000
–
25
25
395
441
836
The deposits for hedging contracts are 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 24.
10. OTHER CURRENT ASSETS
Other current assets comprise:
Prepaid expenses
Other tax receivables
Other
At 31 December 2011
At 31 December 2010
US$000
5,400
1,448
1,388
8,236
US$000
2,650
1,014
414
4,078
11. PROPERTY, PLANT AND EQUIPMENT, NET
A summary of activity for property, plant and equipment for the years ended 31 December 2011 and 2010 is as follows:
Test equipment
US$000
Leasehold
improvements
US$000
Office and other
equipment
US$000
Construction in
progress
US$000
Cost
Balance at 1 January 2010
Effect of movements in foreign currency
Additions
Reclassifications
Disposals
Balance at 31 December 2010 / 1 January 2011
Additions of fair value relating to the SiTel acquisition
Effect of movements in foreign currency
Additions
Reclassifications
Disposals
Balance at 31 December 2011
Depreciation and impairment losses
Balance at 1 January 2010
Effect of movements in foreign currency
Depreciation charge for the year
Disposals
Balance at 31 December 2010 / 1 January 2011
Effect of movements in foreign currency
Depreciation charge for the year
Disposals
74,189
3
3,538
215
(13)
77,932
1,711
(8)
7,290
–
(1,193)
85,732
(69,813)
(3)
(2,192)
11
(71,997)
8
(3,846)
1,151
1,694
(11)
834
–
(30)
2,487
757
(47)
4,467
207
(254)
7,617
(392)
(4)
(178)
3
(571)
37
(983)
107
21,322
(17)
4,983
156
(2,667)
23,777
418
(89)
8,844
34
(8,323)
24,661
(17,542)
7
(2,510)
2,456
(17,589)
65
(3,972)
7,717
Balance at 31 December 2011
(74,684)
(1,410)
(13,779)
Net book value
At 1 January 2010
At 31 December 2010 / 1 January 2011
At 31 December 2011
4,376
5,935
11,048
1,302
1,916
6,207
3,780
6,188
10,882
349
(1)
233
(371)
–
210
–
(3)
301
(241)
–
267
–
–
–
–
–
–
–
–
–
349
210
267
75
Total
US$000
97,554
(26)
9,588
–
(2,710)
104,406
2,886
(147)
20,902
–
(9,770)
118,277
(87,747)
–
(4,880)
2,470
(90,157)
110
(8,801)
8,975
(89,873)
9,807
14,249
28,404
FINANCE LEASES
The carrying value of property, plant and equipment held under finance leases at 31 December 2011 was US$606,000 (31 December 2010:
US$956,000). Additions during the year were nil (2010: US$299,000). As of the reporting date future minimum lease payments under those finance
lease contracts were US$457,000 (2010: US$880,000). The present value of the net minimum lease payments was US$431,000 (2010: US$794,000).
76 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
12. GOODWILL AND OTHER INTANGIBLE ASSETS
A summary of activity for intangible assets for the years ended 31 December 2011 and 2010 is as follows:
Goodwill
Other intangible assets
Customer related
Purchased software,
Intangible assets from
intangible assets
licenses and other
Patents
internal development
US$000
US$000
US$000
US$000
US$000
Total
US$000
Cost
Balance at 1 January 2010
Effect of movements in foreign
currency
Additions
Disposals
Balance at 31 December 2010 /
1 January 2011
Additions of fair value relating to the
SiTel acquisition
Effect of movements in foreign
currency
Additions
Reclassifications
Disposals
–
–
–
–
–
–
–
–
–
–
16,263
(6)
5,068
(176)
21,149
27,358
14,100
525
–
–
–
–
–
–
–
–
(58)
5,175
–
(554)
768
2
541
(2)
1,309
3,696
–
759
–
(10)
3,127
20,158
1
2,823
–
(3)
8,432
(178)
5,951
28,409
14,654
32,975
(30)
5,165
–
(210)
(88)
11,099
–
(774)
71,621
Balance at 31 December 2011
27,358
14,100
26,237
5,754
25,530
Amortisation and impairment
losses
Balance at 1 January 2010
Effect of movements in foreign
currency
Amortisation charge for the year
Impairment charges
Disposals
Balance at 31 December 2010 /
1 January 2011
Effect of movements in foreign
currency
Amortisation charge for the year
Impairment charges
Disposals
Balance at 31 December 2011
Net book value
At 1 January 2010
At December 31, 2010 /
1 January 2011
At 31 December 2011
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(5,428)
–
–
(13,259)
3
(1,676)
–
149
(14,783)
48
(2,650)
–
158
(72)
(2)
(109)
–
–
(183)
–
(939)
–
6
(1,822)
(15,153)
(1)
(893)
–
–
–
(2,678)
–
149
(2,716)
(17,682)
30
(7,013)
–
210
78
(16,030)
–
374
(5,428)
(17,227)
(1,116)
(9,489)
(33,260)
–
–
3,004
6,366
9,010
696
1,305
5,005
1,126
4,638
3,235
16,041
10,727
38,361
27,358
8,672
77
12. GOODWILL AND OTHER INTANGIBLE ASSETS CONTINUED
A key element of the additions in 2010 was the purchase of power management technology through an asset transaction from Diodes Zetex GmbH. As
part of this transaction, Dialog has acquired specific Diodes intellectual property rights. The expected weighted average useful life of the acquired
intangible assets is four years. A key element of the 2011 additions was the acquisition of SiTel Semiconductor B.V. In connection with this acquisition
the company acquired goodwill, internally developed intangible assets, patents and customer related intangible assets, such customer relationship and
order backlog. For further information, please refer to Note 4.
HIRE PURCHASE
The carrying value of intangible assets held under hire purchase leases at 31 December 2011 was US$851,000 (31 December 2010: US$195,000).
Additions during the year were US$668,000 (2010: nil). As of the reporting date future minimum payments under those hire purchase contracts were
US$662,000 (2010: US$67,000). The present value of the net minimum payments was US$602,000 (2010: US$63,000).
13. TRADE AND OTHER PAYABLES
Trade and other payables comprise:
Trade accounts payable
Other payables
Terms and conditions of the above trade and other payables:
trade payables are non-interest bearing and are normally settled on 30-60-day terms; and
other payables are non-interest bearing and have a term of less than three months.
14. OTHER FINANCIAL LIABILITIES
Other financial liabilities comprise:
Hire purchase agreements and finance lease obligations
Fair value of derivative financial instruments
At 31 December 2011
At 31 December 2010
US$000
46,567
3,890
50,457
US$000
24,984
3,429
28,413
At 31 December 2011
At 31 December 2010
US$000
661
6,552
7,213
US$000
396
449
845
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.
78 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
15. 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 changes in the provision are summarised as follows:
Obligations for product warranties
Dilapidation
Pending legal claims
Other
Total current
Dilapidation
Total non-current
Total
At 1 January 2011
US$000
Currency change
US$000
Discount
000US$
Additions
US$000
Used
US$000
Released
US$000
2011
US$000
At 31 December
437
110
311
19
877
428
428
1,305
–
–
(10)
–
(10)
(6)
(6)
(16)
–
–
–
–
–
32
32
32
573
–
–
150
723
82
82
805
(437)
(61)
–
(19)
(517)
–
–
–
(33)
–
–
573
16
301
150
(33)
1,040
–
–
536
536
(517)
(33)
1,576
16. 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 2011
At 31 December 2010
US$000
12,206
721
3,625
16,552
US$000
12,400
742
2,733
15,875
Terms and conditions of the above other current liabilities:
obligations for personnel and social expenses have an average term of three months (2010: three months); and
other payables are non-interest bearing and are normally settled on 30 day terms.
17. OTHER NON-CURRENT FINANCIAL LIABILITIES
Other non-current financial liabilities include hire purchase agreements and finance lease obligations.
79
18. SHAREHOLDERS’ EQUITY AND OTHER RESERVES
CAPITAL INCREASE
On 4 February 2010, the Company completed an offering of 3,500,000 previously unissued ordinary shares at £0.10 per share to its employee benefit
trust (“Trust”) at a price of €0.20 per share, to make such shares available for the exercise of stock option rights that had previously been granted to
employees.
ORDINARY SHARES
The amount of authorized shares at 31 December 2011 was 104,311,860 (2010: 104,311,860) with a par value of £0.10 per share, of which
65,068,930 (2010: 65,068,930) shares were issued and outstanding.
At 1 January 2010
Issued on 4 February 2010
At 31 December 2010 / 2011
Dialog’s stock is issued in the form of registered shares. All shares are fully paid.
ADDITIONAL PAID-IN CAPITAL
The account comprises additional paid-in capital in connection with the issue of shares.
RETAINED EARNINGS
Retained earnings comprise losses and non-distributed earnings of consolidated Group companies.
Amount of shares
61,568,930
3,500,000
65,068,930
US$000
11,825
555
12,380
In order to reduce the Company’s accumulated deficit, on 5 May 2010 the board of Directors of Dialog Semiconductor Plc decided to reduce the
Company’s additional paid in capital in an amount of US$85,000,000 effective 2 June 2010. The reduction of the additional paid in capital was
registered with the UK Companies House on 2 June 2010. The amount was then reclassified to retained earnings.
OTHER RESERVES
CURRENCY TRANSLATION RESERVE
The currency translation reserve is used to record exchange differences arising from the translation of the financial statements of subsidiaries and
branches whose functional currency is not the US$. At 31 December 2011 and 2010, the negative currency translation reserve was US$ 1,879,000
and US$ 1,717,000 respectively.
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. At 31 December 2011 and 2010, the cash flow hedge reserve was US$-6,372,000 and US$69,000 respectively.
80 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
18. SHAREHOLDERS’ EQUITY AND OTHER RESERVES CONTINUED
The related tax effects allocated to each component of other reserves for the years ended 31 December 2011 and 2010 are as follows:
Currency translation adjustment
Hedges
Other comprehensive income (loss)
Pre-tax
US$000
(92)
(6,825)
(6,917)
2011
Tax effect
US$000
(70)
384
314
Net
US$000
(162)
(6,441)
(6,603)
2010
Tax effect
US$000
(175)
–
(175)
Pre-tax
US$000
188
441
629
Net
US$000
13
441
454
EMPLOYEE STOCK PURCHASE PLAN SHARES
The employee stock purchase plan shares contain the acquisition cost of the shares held by the employee benefit trust (the “Trust”). Please refer to note
20. At 31 December 2011 and 31 December 2010, the Trust held 1,267,322 and 3,995,031 shares respectively. These 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.
19. 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$3,686,000 (2010: US$1,360,000). At 31 December 2011, contributions amounting to US$78,000 (2010: US$52,000) 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$1,999,000 (2010: US$1,640,000).
20. 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 unexercised stock
options which may be granted by the Group at any time, to 15% of Dialog’s issued share capital, from time to time on a diluted basis. At 31 December
2011, 11,482,752 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 2008 to expire 6 August 2018.
At the 2006 Annual General Meeting, Shareholders approved a stock option plan for Non-Executive Directors. Each Non-Executive Director was 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 were granted. Options are exercisable at the market price prevailing at the date of grant. At the 2010 Annual General
Meeting the Shareholders voted against the continuance of this share option plan. Consequently, no share options were granted to the Non-Executive
Directors in 2010.
81
20. SHARE-BASED PAYMENTS CONTINUED
At the 2011 Annual General Meeting, Shareholders approved a change of the fee structure for Non-Executive Directors. According to the new structure
2/3 of the total fees will be delivered in cash with 1/3 of the Chairman and Non-Executive Directors’ annual total fees will be delivered in Company
equity. The number of shares will be calculated using the average 30 day share price preceding the date of allocation. Shares will be delivered in the
form of conditional shares or options (an exercise price has been attached at Euro 15 cents). Each individual shall be entitled to sell their shares, or
exercise their options, if any, no earlier than the day preceding the third AGM following the grant (unless specific circumstances such as a change of
control apply).
The fair value of all grants in the two-year period ended 31 December 2011 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 the
volatility of the Dialog Semiconductor Plc share 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 2011 and 2010:
Expected dividend yield
Expected volatility
Risk free interest rate
Expected life (in years)
Weighted average share price during the year (in €)
Weighted average share price for Option grants (in €)
Weighted average exercise price (in €)
Weighted-average fair value (in €)
2011
0%
2010
0%
39% - 46%
41% - 49%
4.0%
2.0 - 6.0
14.36
13.71
13.55
4.80
2.3%
2.0 - 6.0
10.87
9.06
9.06
3.39
82 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
20. SHARE-BASED PAYMENTS CONTINUED
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 four-year performance period (this was originally a three-year period, extended by one year at the Annual General
Meeting in April 2009). This value is delivered to a participant in the form of a series of 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.
In 2010 a new award under LTIP was made to selected new and existing members of the executive management. These awards are shown under
“Second award” in the table below. In 2011, no further awards under the LTIP plan were made.
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.
The fair values used in the calculations are as follows:
First award
Second award
Inputs
Tranche 1
Tranche 2
Tranche 3
LTIP extension
Tranche 1
Tranche 2
Share price at grant date
Exercise price
Expected life (years)
Expected volatility
€1.40
£0.10
0.64
40%
€1.40
£0.10
1.64
40%
€1.40
£0.10
2.64
40%
€4.08
£0.10
2.35
42%
€10.51
£0.10
0.54
42%
€10.51
£0.10
1.54
42%
Risk-free-interest-rate
4.8202%
4.8202%
4.8202%
1.4900%
0.4820%
0.7040%
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 2010
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 22 February 2010 and the remaining 75% exercisable for 4 years from 21 February 2011.
MEASUREMENT DATE 31 JANUARY 2011
The measurement share price at 31 January 2011 (average share price over the prior 30 days) was €17.6632. As this price was above the return hurdle
for January 2010 of €11.1310 (prior year measurement share price of €9.8942+12.5%), 1,575,327 nil cost option grants were approved by the board
on 18 February 2011, all exercisable for 5 years from 18 February 2011.
83
20. SHARE-BASED PAYMENTS CONTINUED
C) DEVELOPMENT OF PLANS
Stock option plan activity (including stock options granted under the LTIP) for the years ended 31 December 2011 and 2010 was as follows:
Outstanding at beginning of year
Granted
Exercised
Forfeited
Outstanding at end of year
Options exercisable at year end
2011
2010
Weighted average
exercise price
Weighted average
exercise price
Options
6,098,193
2,975,730
(2,727,709)
(185,635)
6,160,579
3,532,169
€
2.88
6.45
0.60
7.35
5.48
1.90
Options
4,803,342
3,979,392
(2,364,603)
(319,938)
6,098,193
1,644,626
€
2.27
2.49
1.13
1.80
2.88
1.89
The weighted average share price at the date of exercise of options was €14.04 and €13.61 in the years ended 31 December 2011 and 2010 respectively.
Liabilities from share option exercises to employees were US$135,000 at 31 December 2011 (2010: US$920,000).
The following table summarises information on stock options outstanding (including stock options granted under the LTIP) at 31 December 2011:
Options outstanding
Weighted average
Options exercisable
Number
remaining
Weighted average
Weighted average
outstanding at 31
contractual life
exercise price
Number exercisable
exercise price
Range of Exercise Prices
December 2011
(in years)
€
at 31 December 2011
€0.11 - 2.99
€3.00 - 8.00
€8.00 - 15.50
€0.11 - 15.50
3,247,740
745,949
2,166,890
6,160,579
6.2
4.4
6.0
3.8
0.67
6.23
12.42
2,878,827
387,356
265,986
5.48
3,532,169
€
0.61
5.75
10.32
1.90
D) EMPLOYEE BENEFIT TRUST
The Group established an employee benefit 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 2011 the Trust held 1,267,322 shares (2010: 3,995,031).
84 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
21. ADDITIONAL DISCLOSURES ON FINANCIAL INSTRUMENTS
Amount categorised in accordance with IAS 39:
Amounts recognised in the statement of financial position according to IAS 39
Category
Carrying
amount
in accordance
31 December 2011
Amortised cost
with IAS 39
US$000
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 receivable
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
Financial liabilities at amortised cost (FLAC)
111,391
111,391
–
2,199
–
–
46,729
46,729
–
–
25
46,567
3,890
1,034
–
6,552
158,120
2,199
–
–
–
(6,527)
(51,491)
–
–
–
46,567
3,890
1,034
–
–
158,120
–
–
–
–
–
(51,491)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Fair value
recognised
in other
comprehensive
income
US$000
–
–
2,199
–
–
–
25
–
–
–
6,552
–
2,199
–
–
–
(6,527)
–
Fair value
recognised in
profit or loss
US$000
Fair value
31 December
2011
US$000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
111,391
–
2,199
46,729
–
–
25
46,567
3,890
1,034
–
6,552
158,120
2,199
–
–
–
(6,527)
(51,491)
85
21. ADDITIONAL DISCLOSURES ON FINANCIAL INSTRUMENTS CONTINUED
Amounts recognised in the statement of financial position according to IAS 39
Category
Carrying
amount
in accordance
31 December 2010
Amortised cost
with IAS 39
US$000
US$000
Cost
US$000
Fair value
recognised
in other
comprehensive
income
US$000
Fair value
recognised in
profit or loss
US$000
Fair value
31 December
2010
US$000
Assets
Cash at bank and Short-term
deposits
Restricted cash
Deposits designated as a
hedging instrument
Trade accounts receivable and
other receivable
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
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
LaR
LaR
n/a
LaR
150,570
150,570
–
7,630
–
–
12,556
12,556
LaR
395
395
n/a
n/a
FLAC
FLAC
FLAC
n/a
n/a
–
441
24,984
3,429
857
–
449
163,521
7,630
–
–
–
(8)
–
–
24,984
3,429
857
–
–
163,521
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,630
–
–
–
441
–
–
–
–
449
–
7,630
–
–
–
(8)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
150,570
–
7,630
12,556
395
–
441
24,984
3,429
857
–
449
163,521
7,630
–
–
–
(8)
(29,270)
Financial liabilities at amortised cost (FLAC)
(29,270)
(29,270)
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.
86 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
22. 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 non-cancellable operating rental and lease agreements and payments for other commitments are as follows:
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
Other commitments
Operating leases and
Other commitments
software
commitments
software
commitments
2011
US$000
7,682
7,078
4,565
2,490
2,332
8,266
2011
US$000
3,034
1,528
188
–
–
–
32,413
4,750
2010
US$000
5,724
4,388
3,453
2,750
2,052
11,934
30,301
2010
US$000
2,689
2,567
1,019
130
–
–
6,405
Total payments for operating leases and software commitments, charged as an expense in the income statement, amounted to US$9,219,361 and
US$5,313,000 for the years ended 31 December 2011 and 2010 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
Total minimum payments
Less amounts representing finance charges
Present value of minimum payments
Minimum payments
2011
US$000
700
418
–
1,118
(84)
1,034
2010
US$000
445
397
105
947
(90)
857
CAPITAL COMMITMENTS
The Group has contractual commitments for the acquisition of property, plant and equipment in 2011of US$2,264,000 (2010: US$2,485,000) and for
the acquisition of intangible assets of US$2,501,000 (2010: US$3,110,000).
In addition the company has a contingent liability of US$400,000 in connection with the purchase of intangible assets. This liability is contingent to
certain shipping volumes, relating to the acquired technology, being met. We expect to reach these shipping volumes in 2012.
87
23. SEGMENTAL REPORTING
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.
The Group reports on four 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 operating segments is based in particular on the existence of business unit
managers who report directly to the Board of Management of Dialog and who are responsible for the performance of the segment under their charge.
Following the change in IFRS 8.23, the Group does no longer report assets and liabilities as only inventories are reported to the chief operating decision
maker. 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.
CONNECTIVITY
The activities of this segment include short-range wireless, digital cordless and VoIP technology. The new Connectivity segment includes the operating
segment of our newly acquired subsidiary SiTel Semiconductor B.V. SiTel was acquired on 10 February 2011; therefore its results are consolidated from
this date.
88 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
23. SEGMENTAL REPORTING CONTINUED
2011
Audio & Power
Management
US$000
Display
Systems 3) 4)
US$000
Automotive/
Connectivity
Industrial
US$000
US$000 Reconciliation
US$000
Audio & Power
Total
Management
US$000
US$000
Display
Systems 3) 4)
US$000
2010
Automotive/
Industrial
Reconciliation
US$000
US$000
Total
US$000
Revenues 1)
369,211
R&D expenses
56,763
1,715
5,302
45,878
108,778
1,679 5)
527,261
245,364
4,527
20,012
3,442
90,046
40,711
1,866
5,121
50,326
(959)
296,597
8,510
2,123
56,465
69,960
(10,146)
9,844
4,853
(12,878)
61,633
59,078
(11,205)
6,987
(9,519)
45,341
Operating
profit (loss) 2)
Depreciation/
amortisation
Inventory
impairment
and fixed
asset disposal
losses
16,915
1,556
1,353
5,007
3,876
156
661
73
Investments
21,907
2,015
1,752
6,484
Inventories
45,505
296
5,957
10,879
[1] All revenues are from sales to external customers
[2] Certain overhead costs are predominantly allocated 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.
–
–
–
–
24,831
4,878
1,227
1,453
4,766
4,880
1,229
1,455
32,158
11,629
2,926
3,465
At 31 Dec 2011
62,637
33,659
500
6,574
–
2
–
–
7,558
7,560
18,020
At 31 Dec 2010
40,733
[5] The revenue in the reconciliation column include mainly the BenQ settlement please refer to note 26 and sales discounts
Revenues in the reconciliation column include the BenQ Cash settlement of US$1,785,000 (2010: nil) and sales discounts on early payment of
US$107,000 (2010: US$959,000). R&D expenses in the reconciliation column predominantly include stock option expenses and expenses for the
Management Long Term Incentive Plan (LTIP) of US$3,442,000 (2010: US$2,123,000).
The operating losses recorded in the reconciliation column for the year ended 31 December 2011of US$12,112,000 (2010: US$9,519,000) are primarily
resulting from stock option expenses, bonus payments for employees, expenses in relation to the Long Term Incentive Plan introduced in 2008, sales
discounts for early payments and the costs of the holding company. Additionally in 2011 the BenQ cash settlement in the amount of US$2.1 million was
included.
Investments comprise additions to property, plant and equipment, and intangible assets.
In 2011 and 2010 the Group had no inter-segment sales, income, expenses, receivables, payables or provisions.
There are no differences between the measurements of the reportable segments profits and losses, assets and liabilities and the entity’s profit and losses,
assets and liabilities.
89
2011
US$000
2010
US$000
29,159
3,499
54,240
336,910
83,941
19,512
527,261
25,371
785
3,034
2,612
356
38,171
518
24,328
182,300
26,472
24,808
296,597
15,122
147
2,615
–
136
32,158
18,020
At 31 December 2011
At 31 December 2010
US$000
US$000
236,561
245,828
2,925
8,052
93,763
3,163
1,455
5,503
–
593
344,464
253,379
23. SEGMENTAL REPORTING CONTINUED
B) GEOGRAPHIC INFORMATION – REVENUES BY SHIPMENT DESTINATION
Revenues
Hungary
United Kingdom
Other European countries
China
Other Asian countries
Other countries
Total revenues
Investments
Germany
Japan
United Kingdom
Netherlands
Other
Total investments
Assets
Germany
Japan
United Kingdom
Netherlands
Other
Total assets
Revenues are allocated to countries based on the location of the shipment destination. Segmental investments and assets are allocated based on the
geographic location of the asset.
90 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
24. FINANCIAL RISK MANAGEMENT OBJECTS AND POLICIES
VULNERABILITY DUE TO CERTAIN SIGNIFICANT RISK CONCENTRATIONS
The Group’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Group’s future operating results and
cause actual results to vary materially from historical results include, but are not limited to, the highly cyclical nature of both the semiconductor and
wireless communications industries, dependence on certain customers and the ability to obtain an adequate supply of sub-micron wafers.
The Group's products are generally utilised in the wireless and automotive industries. The Group generates a substantial portion of its revenue from the
wireless communications market, which accounted for 70% and 83% of its total revenue for the years ended 31 December 2011 and 2010,
respectively.
The Group’s revenue base is diversified by geographic region and by individual customer. Changes in foreign currency exchange rates influence the
Group’s results of operations. The Group’s sales, purchases of raw materials and manufacturing services are primarily denominated in US$. 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, Korea and Singapore. Fluctuations in the currencies of these countries could have a significant impact on the Group’s reported results from
operations.
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 2011, one customer individually accounted for more than 10% of the Group's revenues. Total revenues from this customer were
US$321,367,000. Net receivables from this customer were US$28,311,000 at 31 December 2011. This customer is part of the Audio & Power
Management Segment.
During 2010, three customers individually accounted for more than 10% of the Group's revenues. Total revenues from these three customers were
US$222,550,000. Net receivables from these three customers were US$7,051,000 at 31 December 2010. The three customers are part of the Audio &
Power Management Segment (for further information please see Section 2 – Principal customers).
The Group is performing on-going credit evaluations of its customers' financial condition.
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 2011 and 2010, the Group’s policy that no trading in derivatives shall be undertaken.
91
24. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONTINUED
Exposure to currency, interest rate and credit 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 pays interest on amounts received in connection with the factoring agreement as prescribed below.
The Group has no long-term debt outstanding under short-term credit facilities as at 31 December 2011 (2010: 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.
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:
2011
2010
Increase/decrease in
Effect on profit
Effect on equity
basis points
US$000
US$000
34
(34)
65
(65)
129
(129)
881
(881)
129
(129)
881
(881)
CURRENCY RISK
The main functional currency within the Group and the presentation currency for the consolidated financial statements is the US$. 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 2011 and 2010 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).
92 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
24. FINANCIAL RISK MANAGEMENT OBJECTS AND POLICIES CONTINUED
2011
Euro
Pound Sterling
Euro
Pound Sterling
2010
Euro
Pound Sterling
Euro
Pound Sterling
[1] Categories according to IAS 39
Loans and receivables (LaR) 1)
Financial liabilities at amortised cost (FLAC) 1)
Increase/decrease
Effect on profit
Effect on equity
Effect on profit
Effect on equity
against US$
US$000
US$000
US$000
US$000
3%
0.5%
(3%)
(0.5%)
7%
4%
(7%)
(4%)
300
8
(300)
(8)
514
4
(514)
(4)
374
8
(374)
(8)
913
4
(913)
(4)
(33)
(5)
33
5
(145)
(36)
145
36
(33)
(5)
33
5
(145)
(36)
145
36
A risk analysis for the Group’s securities was done separately, based on the inherent historic volatility of the specific securities, see below.
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 on-going basis, with the result that the Group’s exposure to bad debts is not significant. Regarding the risk concentration
please see above, “vulnerability due to certain significant considerations”.
In order to finance its growth the Group entered into two factoring agreements with reputable financial institutions. The maximum amount of cash that
can be received under these agreements is US$42,000,000 (2010: US$25,000,000), the increase represents a newly signed agreement for Dialog B.V.,
the company acquired in 2011. The agreements, which comprise receivables from selective customers, significantly reduce the underlying credit risk
because the financial institutions assume all credit risks associated with the collection of the receivables financed under the programmes.
The Group’s exposure to credit risk arising from other financial assets of the Group, which comprise cash, cash equivalents and restricted, would arise
from default by counterparty.
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 receivable
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 2011, the Group had cash and cash equivalents of US$113,590,000 (2010: US$158,200,000).
93
24. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONTINUED
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 2011, based on contractual undiscounted payments:
Financial year ended 2011
Trade accounts payable
Other payables
Other financial liabilities
Financial year ended 2010
Trade accounts payable
Other payables
Other financial liabilities
Less than 3 months
3 to 12 months
US$000
US$000
1 to 5 years
US$000
46,567
3,890
7,213
57,670
24,984
3,429
248
28,661
–
–
–
–
–
–
597
597
–
–
373
373
–
–
461
461
Total
US$000
46,567
3,890
7,586
58,043
24,984
3,429
1,306
29,719
At 31 December 2011, the Group had unused short-term credit lines of US$5 million (2010: US$5 million) and a multi-currency revolving credit line
facility of £10 million (2010: £10 million) There were no amounts outstanding under these credit lines at 31 December 2011 (2010: nil).
CAPITAL MANAGEMENT
The primary objective of the Group’s capital management is to ensure that it maintains healthy and strong capital ratios in order to support its business
and strategies for growth. The company is considering its total equity as capital.
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 2011 and 31 December 2010.
The Group monitors capital using an equity ratio (total equity divided by total assets). The equity ratio as of 31 December 2011 was 76.4% (2010:
81.1%). Capital includes net Shareholders’ equity. The Group’s policy is to finance business development and growth if at all possible 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.
94 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
24. FINANCIAL RISK MANAGEMENT OBJECTS AND POLICIES CONTINUED
HEDGING ACTIVITIES
At 31 December 2011, the Group held deposits (referred to as the “hedging instruments”) designated as hedges of firm commitments in Euros. At 31
December 2010, the Group held deposits (referred to as the “hedging instruments”) designated as hedges of firm commitments and forecast
transactions in Euros and Pound Sterling and Japanese Yen.
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 or Japanese Yen into US
dollars. The fair values of the forward exchange contracts which equal the book values are as follows:
Fair values
Forward exchange contracts
Deposits
At 31 December 2011
At 31 December 2010
Assets
US$000
25
2,199
Liabilities
US$000
6,552
–
Assets
US$000
441
7,630
Liabilities
US$000
449
–
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 2012 to December 2012 and January 2011 to December 2011
respectively were assessed to be highly effective and, at 31 December 2011, a net unrealised loss of US$6,372,000 was included in other comprehensive
income in respect of these cash flows (2010: gain of US$69,000). During the financial year 2011 a net loss of US$3,768,000 (2010: loss of
US$2,390,000) was recognised in other comprehensive income and a net gain of US$3,058,000 (2010: loss of US$2,831,000) was reclassified from
other comprehensive income 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.
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.
95
24. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONTINUED
Hedging instruments for Euro commitments:
Maturity
2011
January 2012
February 2012
March 2012
April 2012
May 2012
June 2012
July 2012
August 2012
September 2012
October 2012
November 2012
December 2012
2010
January 2011
February 2011
March 2011
April 2011
May 2011
June 2011
July 2011
August 2011
September 2011
October 2011
November 2011
December 2011
Nominal amount €000
Forward rate
Nominal amount €000
Spot rate
Derivatives
Deposits
9,000
5,000
9,400
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
3,000
1,600
1,600
3,100
3,300
3,300
3,000
3,000
3,000
3,000
–
–
1.3622
1.3823
1.3505
1.3915
1.3907
1.3901
1.3768
1.3994
1.3985
1.3654
1.3654
1.3654
1.3443
1.3500
1.3497
1.3097
1.3106
1.3104
1.3300
1.3297
1.3293
1.3289
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,700
1.4293
–
–
–
–
–
–
–
–
1,667
1.3409
1,667
1.3409
1,667
1.3409
700
1.2124
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
96 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 4 | Consolidated financial statements and notes
Notes to the consolidated financial statements
For the year ended 31 December 2011
24. FINANCIAL RISK MANAGEMENT OBJECTS AND POLICIES CONTINUED
Hedging instruments for Pound Sterling commitments:
Maturity
2011
January 2012
February 2012
March 2012
April 2012
May 2012
June 2012
July 2012
August 2012
September 2012
October 2012
November 2012
December 2012
2010
January 2011
February 2011
March 2011
April 2011
May 2011
June 2011
July 2011
August 2011
September 2011
October 2011
November 2011
December 2011
Nominal amount £000
Derivatives
Forward rate
1,900
1,900
2,600
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,550
2,050
2,350
1,450
1,750
1,750
1,600
1,700
1,700
1,500
1,700
–
1.5951
1.5945
1.5897
1.5944
1.5947
1.5908
1.6005
1.6005
1.6001
1.5827
1.5827
1.5827
1.5435
1.5513
1.5606
1.5770
1.5769
1.5766
1.5775
1.5770
1.5764
1.5759
1.5754
–
Hedging instruments for Japanese Yen commitments:
Maturity
2011
January 2012
February 2012
March 2012
Nominal amount ¥000
Forward rate
Derivatives
60,000
64,000
75,000
0.0129
0.0129
0.0129
97
25. 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 seven (2010: seven) non-executive members of the Board of Directors and ten (2010: ten) members of the executive
management which are named in the management and governance section. These are the only related parties of the Group.
All transactions with related parties are carried out at arm´s length.
COMPENSATION OF KEY MANAGEMENT PERSONNEL OF THE GROUP
For the composition of our key management please see management and governance beginning on page 29. Compensation of key management
personnel of the Group is as follows:
Short term employee benefits
Post-employment benefits1)
Share based payments
[1] The amounts include payments for defined contribution plans.
2011
US$000
4,129
170
1,180
5,479
2010
US$000
4,319
165
1,439
5,923
COMPENSATION OF NON-EXECUTIVE DIRECTORS
The compensation of Non-Executive Directors was US$645,080 (2010: US$521,000). As at 31 December 2011 the amount of US$67,000 for Board
member fees was outstanding (2010: US$23,000). For further information please see the Directors’ remuneration report within the management and
governance section on pages 35 to 37.
OTHER RELATED PARTY TRANSACTIONS
In 2011 and 2010 there were no other transactions with related parties. None of the related parties has a major influence in one of the Group’s major
suppliers or customers.
26. BENQ SETTLEMENT
In the second quarter of 2011, the company received an unexpected cash settlement of US$2.1 million. As the allocation of the payment was not
confirmed by the paying party, we were only able to allocate it in Q3 to receivables which had been previously written down and revenues that had not
been recognised in 2006 as a result of the insolvency of BenQ Mobile. The amount represents 30% of the original claim to BenQ Mobile. Of this
amount, US$1.8 million were classified as revenue and US$0.3 million were 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 as 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.
27. SUBSEQUENT EVENT
There are no known events after the date of the Statement of Financial Position that require disclosure.
98 Dialog Semiconductor Plc | Annual report and accounts 2011 | 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 2011
Assets
Cash and cash equivalents
Amounts owed by group undertakings
Prepaid expenses
Other financial assets
Other current assets
Total current assets
Investments
Total non-current assets
Total assets
Trade and other 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 2011
US$000
At 31 December 2010
US$000
28
27,429
14,599
371
–
180
80,307
30,580
91
507
195
42,579
111,680
161,855
161,855
97,521
97,521
204,434
209,201
684
367
1,051
12,380
203,911
(9,519)
(231)
(3,158)
1,119
124
1,243
12,380
202,416
(2,992)
69
(3,915)
31
203,383
207,958
204,434
209,201
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$6,629,000 (2010: US$7,030,000).
These financial statements were approved by the Board of Directors on 16 February 2012 and were signed on its behalf by:
Dr Jalal Bagherli
Director
Company statement of changes in equity
For the year ended 31 December 2011
Ordinary Shares
capital
(Accumulated deficit)
Hedges
purchase plan shares
Additional paid-in
Retained earnings
Employee stock
Other reserves
Balance at 1 January 2010
Total comprehensive loss
Reduction of additional paid-in capital
Capital increase for employee share
option plan (gross proceeds)
Transaction costs of capital increase -
employee share option plan
Purchase of employee stock purchase
plan shares
Sale of employee stock purchase plan
shares
Equity settled transactions, net of tax
US$000
11,825
–
–
555
–
–
–
–
US$000
US$000
US$000
283,733
–
(85,000)
(80,972)
(7,030)
85,000
414
(36)
–
3,305
–
–
–
–
–
10
(372)
441
–
–
–
–
–
–
US$000
(810)
–
–
(969)
–
708
–
Changes in Equity total
555
(81,317)
77,980
441
(3,105)
(2,844)
(2,844)
99
Total
US$000
213,404
(6,589)
–
–
(36)
4,013
10
(5,446)
Balance at 31 December 2010 /
1 January 2011
12,380
202,416
Total comprehensive income (loss)
Sale of employee stock purchase plan
shares
Equity settled transactions, net of tax
Changes in Equity total
–
–
–
–
–
1,495
–
1,495
Balance at 31 December 2011
12,380
203,911
(2,992)
(6,629)
–
102
(6,527)
(9,519)
69
(300)
–
–
(300)
(231)
(3,915)
207,958
–
757
–
757
(6,929)
2,252
102
(4,575)
(3,158)
203,383
100 Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 5 | Company financial statements and notes
Company financial statements
Company statement of cash flows
For the year ended 31 December 2011
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Interest income, net
Expense related to share-based payments
Changes in working capital:
Trade accounts payable
Other assets and liabilities
Cash used for operations
Interest received
Cash flow used for operating activities
Cash flows from investing activities:
Purchase of SiTel Semiconductor B.V.
Loans repaid by other group companies
Cash flow from (used for) investing activities
Cash flows from financing activities:
Cash flow used for capital increase
Purchase of employee stock purchase plan shares
Sale of employee stock purchase plan shares
Cash flow from financing activities
Net foreign exchange difference
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
2011
US$000
2010
US$000
(6,629)
(7,030)
(940)
102
(435)
447
(7,455)
258
(7,197)
(89,218)
41,577
(47,641)
–
–
2,254
2,254
(294)
(52,878)
80,307
27,429
(1,567)
8
346
(402)
(8,645)
898
(7,747)
–
14,547
14,547
(36)
(2,844)
4,013
1,133
450
8,383
71,924
80,307
101
Notes to the Company financial statements
For the year ended 31 December 2011
28. INVESTMENTS
This represents the investment of the Company in Dialog Semiconductor GmbH and in 2011 also Dialog Semiconductor BV. 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:
Capital and reserves
Profit for the year
Based on preliminary unaudited results.
2011
US$000
147,048
65,145
2010
US$000
70,583
48,455
29. DEFERRED TAX
The utilization of tax loss carryforwards and temporary differences of the holding company is subject to the achievement of positive income in periods
which are beyond the company’s current business plan and therefore this utilization is uncertain. Consequently no deferred tax assets were recognised
for these losses and temporary differences.
For further information on deferred taxes see note 5 to the consolidated financial statements as at 31 December 2011.
30. AUDITORS’ REMUNERATION
Auditors' remuneration
for the audit
for other audit related services
for other services
2011
US$000
2010
US$000
310
67
69
446
185
78
230
493
31. SHARE CAPITAL AND SHARE OPTIONS
Details of the Company’s share capital and share options are set out in notes 18 and 20 to the consolidated financial statements as at 31 December
2011. Because of the accumulated deficit, the Company cannot pay a dividend and does not plan to pay dividends in the foreseeable future.
32. HEADCOUNT AND COSTS
The Company does not have any employees.
33. EVENTS AFTER THE REPORTING PERIOD
There are no known events after the date of the Statement of Financial Position that require disclosure.
102
Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 6 | Additional information
Glossary
TECHNICAL GLOSSARY
Analogue 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.
Mixed signal A combination of analogue 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.
ASSP Application Specific Standard Product: a semiconductor device
integrated circuit (IC) dedicated to a specific application and sold to more
than one user.
OEM Original Equipment Manufacturer: a company that builds products or
components that are used in products sold by another company.
Audio CODEC The interface between analogue 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.
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) co-ordinates.
Power Management The management of the power requirements of various
subsystems, important in handheld and portable electronics equipment.
CDMA Code Division Multiple Access: an alternative to GSM technology
for mobile wireless networks.
PMIC Power Management IC.
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.
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.
SmartPulse™ A wireless sensor network connectivity solution based on
the ultra low energy DECT standard for home automation applications
SmartXtend™ A technology patented by Dialog Semiconductor that
extends the life and reduces power consumption of high-resolution,
passive matrix OLED displays.
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.
Subcontractor A business that signs a contract to perform part or all
of the obligations of another’s contract.
Liquid Crystal Display (LCD) A display technology found in many
portable electronics products, including personal organisers, cellular
handsets and notebook computers.
Tablet PC A Tablet PC refers to a slate- or tablet-shaped mobile computer
device, equipped with a touchscreen or stylus.
LDO Low dropout voltage regulators are used in battery operated systems,
where the output voltage is typically lower than the input voltage.
TAM Total addressable market, TAM measures the potential market for
your product – and your product only – assuming you could reach 100%
of your customers.
LED Light Emitting Diode: a semiconductor device that emits light when
charged with electricity, often used for LCD display backlights.
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.
103
FINANCIAL GLOSSARY
AGM Annual General Meeting.
CAGR Compound Annual Growth Rate: a method of assessing the
average growth of a value over time.
Cash flow The primary purpose of a statement of cash flow is to provide
relevant information about the cash receipts and cash payments of an
enterprise during a period. It helps to assess the enterprise’s ability to
generate positive future net cash flows. A statement of cash flows shall
explain the change in cash and cash equivalents during the period by
classifying cash receipts and payments according to whether they stem
from operating, investing or financing activities.
Cash flow from operating activities includes all transactions and other
events that are not defined as investing or financing activities in paragraphs.
Operating activities generally involve producing and delivering goods and
providing services. Cash flows from operating activities are generally the
cash effects of transactions and other events that enter into the
determination of net income.
Comprehensive income The purpose of reporting comprehensive income
is to report a measure of all changes in equity of an enterprise that results
from recognised transactions and other economic events of the period
other than transactions with owners such as capital increases or dividends.
An example of items affecting comprehensive income is foreign currency
translation adjustments resulting from the process of translating an entity’s
financial statements in a foreign currency into the reporting currency.
Corporate Governance is the system by which business corporations are
directed and controlled. The Corporate Governance structure specifies the
distribution of rights and responsibilities among different participants in
the corporation, such as the Board, managers, shareholders and other
stakeholders, and spells out the rules and procedures for making decisions
on corporate affairs. By doing this, it also provides the structure through
which the company’s objectives are set, and the means of attaining those
objectives and monitoring performance.
Deferred taxes Deferred tax assets or liabilities are temporary differences
between the tax basis of an asset or liability and its reported amount in the
financial statements that will result in taxable or deductible amounts in future
years when the reported amount of the asset or liability is recovered or
settled, respectively.
Derivative financial instruments A financial instrument that derives its
value from the price or expected price of an underlying asset (e.g. a security,
currency or bond).
Dividends are payments made by a company to its shareholders. When
a company earns a profit, that money can be put to two uses: it can either
be reinvested in the business (called retained earnings) or it can be paid
to the shareholders of the company as a dividend.
DTR The United Kingdom Disclosure and Transparency Rules implementing
the provisions of the Transparency Directive.
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
another prime bank.
Free-float the proportion of an issuer’s share capital that is available for
purchase in the public equity markets by investors.
Gross margin equals the difference between revenues and cost of sales
as presented in the statement of operations.
Impairment is the condition that exists when the carrying amount of a
long-lived asset exceeds its fair value (the sum of the undiscounted cash
flows expected to result from the use and eventual disposition of the asset).
IFRS (International Financial Reporting Standards) accounting standards
generally to be used for financial years commencing on or after 1 January
2005 by all publicly listed European Union companies in compliance with
the European Parliament and Council Regulation adopted in July 2002.
Prime Standard The new segmentation of the equity market of the German
Stock Exchange comprises a Prime Standard segment in addition to the
General Standard segment that applies the statutory minimum requirements.
The Prime Standard segment addresses companies that wish to target
international investors. These companies are required to meet high
international transparency criteria, over and above those set out by the
General Standard.
Restructuring charges Costs associated with an exit or disposal activity, e.g.
termination benefits provided to employees that are involuntarily terminated.
Securities Debt securities are instruments representing a creditor
relationship with an enterprise and includes government securities,
corporate bonds, commercial paper and all securitised debt instruments.
Available-for-sale securities are debt securities not classified as held to
maturity or trading securities.
Shareholders’ equity reflects the investment of shareholders in a company.
Shareholders’ equity comprises ordinary shares, additional paid-in capital,
retained earnings and accumulated other comprehensive income.
Stock option plans include all agreements by an entity to issue shares
of stock or other equity instruments to employees. Stock option plans provide
employees the opportunity to receive stock resulting in an additional
compensation based on future share price performance. The purpose of
stock option plans is to motivate employees to increase shareholder value
on a long-term basis.
Total assets include all current and non-current assets. Total assets equal
total liabilities and shareholders’ equity.
Working capital is represented by the excess of current assets over
current liabilities and identifies the relatively liquid portion of total
enterprise capital that constitutes a margin or buffer for meeting
obligations within the ordinary operating cycle of the business.
104
Dialog Semiconductor Plc | Annual report and accounts 2011 | Section 6 | Additional information
Advisers and corporate information
PUBLIC RELATIONS
FTI Consulting
Holborn Gate
26 Southampton Buildings
London EC4R 9HA
UK
FTI Consulting
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
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
Website: www.dialog-semiconductor.com
REGISTERED NUMBER
3505161
FINANCIAL CALENDAR
Annual General Meeting
Q1 2012 Results
Q2 2012 Results
Q3 2012 Results
Preliminary results for 2012
24 April 2012
2 May 2012
24 July 2012
31 October 2012
February 2013
PRINCIPAL BANKERS
HSBC Bank Plc
Thames Valley Corporate Banking Centre Global Banking
Am Hafenmarkt
Apex Plaza
D-73728 Esslingen
Reading
Berkshire RG1 1AX
Germany
UK
Deutsche Bank AG
DESIGNATED SPONSOR
Close Brothers Seydler
Schillerstrasse 27-29
D-60313 Frankfurt
Germany
Credit Agricole Cheuvreux (as of January 2012)
Tatnnusarlage 14
D-60325 Fankfurt
Germany
SHARES
Information on the Company’s shares and on significant shareholdings
can be found on page 9.
105
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
THE NETHERLANDS
DIALOG SEMICONDUCTOR B.V.
Het Zuiderkruis 53
5215 MV ‘s-Hertogenbosch
The Netherlands
Phone:+31(0)73 640 88 22
Fax:+31(0)73 640 88 23
Email: dialog.nl@diasemi.com
NORTH AMERICA
DIALOG NORTH AMERICA
2560 Mission College Boulevard
Santa Clara, California 95054
USA
Phone: (+1) 408 727 3200
Fax: (+1) 408 727 3205
Email: NA_sales_enquiries@diasemi.com
JAPAN
DIALOG SEMICONDUCTOR K.K.
Kamiyacho MT Bldg. 16F
4-3-20 Toranomon, Minato-ku
Tokyo 105-0001
Japan
Phone: (+81) 3 5425 4567
Fax: (+81) 3 5425 4568
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.
Phone: (+852) 9055 3888
Phone: (+886) 22542 1579
Email: dialog.taiwan@diasemi.com
SINGAPORE
DIALOG SEMICONDUCTOR GMBH
Singapore branch
10 Ang Mo Kio . Street 65.
Unit # 03-11A Techpoint
Singapore 569059
Phone:+65 64849929
Fax:+65 64843455
Email: dialog.singapore@diasemi.com
KOREA
DIALOG SEMICONDUCTOR (UK) LTD
KOREA BRANCH
#501, Dongsung B/D,
158-9, Samsung-Dong,
Kangnam-Ku, Seoul
Korea, 135-830
Phone: (+82) 2 569 2301
Fax: (+82) 2 569 2302
Email: dialog.korea@diasemi.com
Designed and produced by FTI Consulting www.fticonsulting.com
Sections 4 and 5 produced in-house with FIRE.sys
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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