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Dialog Semiconductor Plc | Annual report and accounts 2014
Leading through
innovation
Annual report and
accounts 2014
Contents
Overview
01 What we do
Strategic report
02 Group structure
03 Chairman’s statement
04 Highlights
06 Chief Executive’s review
08 The Dialog business model
10 Our markets
14 Strategic framework
16 Extending our product portfolio
18 Broader and deeper customer base
20 Continuous innovation
22 Strategic initiatives
24 Key performance indicators (KPI’s)
26 Financial review
32 Segment review
– 32 Mobile systems
– 34 Connectivity
– 36 Power conversion
– 38 Automotive and Industrial
40 Our people
42 Corporate responsibility
and sustainability
46 Managing risks and uncertainty
Introduction to governance
Leadership – Dialog Board of Directors
Leadership – Management team
Corporate Governance
51
52
54
56 Directors’ report
59 Corporate Governance statement
67 Directors’ remuneration report
68 Directors’ remuneration policy report
75 Annual report on remuneration
85 Statement of Directors’ responsibilities
85 Responsibility statement
88
89
90
Consolidated financial statements and notes
Independent Auditors’ report to the members
86
of Dialog Semiconductor Plc
Consolidated statement of financial position
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated financial statements
91
92
93
153 Company statement of financial position
154 Company statement of changes in equity
155 Company statement of cash flows
156 Notes to the Company financial statements
Additional information
157 Appendix to the Financial review
160 Glossary of terms – Technical
162 Glossary of terms – Financial
163 Advisers and corporate information
164 Group directory
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014 What we do
Overview
01
Dialog Semiconductor creates and markets highly integrated,
mixed signal integrated circuits (ICs), optimised for personal,
portable, hand-held devices, low energy short-range wireless,
LED solid-state lighting and automotive applications.
The Company provides customers with world-class innovation
combined with flexible and dynamic support, and the
assurance of dealing with an established business partner.
02
Group structure
Mobile systems
• Power management • Audio • Display
Revenue
of group revenue
US$943m
82%
Automotive
& Industrial
• Motor control ICs
• Control ASICs
Revenue
US$41m
of group revenue
3%
Consumer
applications
Personal
Portable
Connected
Connectivity
• Wireless audio
• Bluetooth® Smart™
• Voice over DECT
• VoIP
Revenue
US$92m
of group revenue
8%
Power conversion
• AC/DC converters
• Solid State Lighting LED drivers
Revenue
US$80m
of group revenue
7%
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report Chairman’s statement
03
Dear Shareholder,
I am very pleased to write to you following another
successful year for Dialog Semiconductor. In 2014 the
business continued to deliver strongly on our strategic
and operational targets and we maintained our track
record of out-performing the market and our peers.
We continue to develop and deliver industry-leading
products which make a difference to people’s lives
on a daily basis.
long-term strategy that has guided the
Company for the past decade, and he has
played a significant role in helping the CEO
build the strong management team that has
executed so well over the past years. Peter
joined the board in 2006 and his deep
semiconductor experience and broad
managerial expertise have enabled him
to provide significant and sustained
contributions to the Company during his
tenure. Both have played a key role in
helping the Company create substantial
value for shareholders.
I would also like to welcome Eamonn
O’Hare to the Board. Eamonn has a proven
track record in the consumer and technology
industries and has already made valued
contributions to the Board since his
appointment in May 2014.
2014 was my second year as Chairman
and I am personally excited to be part of
a growing and successful business. The
Board, the Executive Team and all of Dialog’s
employees made significant progress in
2014 and collectively, we are proud of the
business we are building, the customers we
are serving and the value we are creating
for our shareholders. We look forward to
another year of success in 2015 and thank
you for your continued support.
Richard Beyer
Chairman
The Company’s year-on-year revenue
growth in 2014 was an impressive 28%,
surpassing, for the first time in our history,
US$1 billion in revenue. This represents
a significant achievement and is a CAGR
of 40% in revenue over the past five years.
We also delivered increased profitability
and robust cash flow. This cash flow helps
us fund on going innovation and other
investment opportunities – setting the
foundations for future growth.
Alongside this impressive financial
performance, the Dialog team, led by our
CEO, Jalal Bagherli, made good progress
on our diversification strategy in 2014, with
tangible results on each of the four strategic
pillars, which are set out in this report.
In addition to growing and developing
our business, we also continue to enhance
our disclosure and corporate governance
practice. In this regard, we have built on
the increased disclosure of last year’s
Annual Report and we believe we have
made further progress this year.
I would like to record our appreciation to
John McMonigall and Peter Weber who
will retire as Directors at the 2015 AGM.
John joined the Company in 1998, and
he has been a pillar of wisdom and
professionalism throughout his service
on the Board. He has helped craft the
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 04
Highlights
2014 Performance highlights
Dialog delivered an exceptional set of financial results in 2014, with strong
revenue and earnings growth and robust cash generation. We brought exciting
innovation into the market and sustained our investment in R&D to underpin
future revenue growth.
We made good progress on the four key pillars of our strategy and continued to
build on the foundations for a more diversified business. We believe this will
deliver superior returns for our Shareholders over the medium term.
2014 Financial highlights
+28%
IFRS Revenue growth
(2013**: US$901m)
+65%
EBIT growth*
(2013: US$139.6m)
45.3%
Gross margin*
(2013: 40.5%)
US$2.56
Basic EPS*
(2013: US$1.49)
* Underlying
** Following a change in accounting policy the presentation of income from customer-specific research and development contracts has been adjusted retrospectively.
For further information please refer to note 2 to the consolidated financial statements.
Dialog is a growth business and has a track record of delivering profitable growth
which, in turn, is the basis for value creation for our Shareholders. In 2014, Dialog has
delivered against all of the key performance measures for the business.
To provide a more accurate reflection of business performance, measurement is on
an underlying basis, eliminating the impact from accounting adjustments including
those arising from the acquisition of iWatt in July 2013. Full reconciliation of reported
underlying performance is set out on a table included in the Financial Review on
page 26.
Our performance against each of these key financial metrics, together with a range
of other performance measures, is set out in greater detail under our performance
in 2014 on page 24.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 05
Strategic highlights
Extending our product portfolio for portable platforms
Development of AC/DC adapter interface IC for Qualcomm® Quick Charge 2.0
power supplies and the world’s first AC/DC rapid charge controllers compatible
with MediaTek’s Pump Express™ and Pump Express™ Plus fast charge protocols.
New low power audio CODEC with unsurpassed always-on power consumption to
enable “voice trigger” activated applications.
New Solid State Lighting LED driver platform developed in 2014 providing
compatibility with more dimmers than ever before and significantly reducing the
cost of LED bulbs.
Broader and deeper customer base
Xiaomi included our Bluetooth ultra-low-power SmartBond™ SoC (System on a
Chip) in its new Mi Band fitness tracking wrist band.
Further expansion into the Smart Home and Human Interface Device market with a
design win that will feature SmartBond™ in a number of OEM wireless Remote
Control Units for Smart TVs and set-top boxes from SMK Corporation.
Lenovo and Meizu implemented the DA9210 power management IC in their latest
smartphone models, the Vibe X2 and the MX4.
LG adopted the configurable D2260 IC PMIC to power its recently launched
NUCLUN Octa-Core application processor. The first LG smartphone platform also
includes Dialog’s DA9210 sub-PMIC.
Continuous innovation
Bringing innovation to Smart Home and Wearables by combining Bluetooth®
Smart™ with other Dialog’s technologies, such as audio, power management and
energy harvesting.
True wire-free charging and lowest power Bluetooth® Smart™ to wearable Internet
of Things (IoT) devices in collaboration with Energeous.
New high efficiency USB switching charger IC with integrated high accuracy
battery fuel gauge.
Sensors and sensor related technology development, including our multi-touch
capability, to broaden our offering to Smart Home and Wearables applications.
Taking forward our SSL LED technology for commercial and industrial lighting,
including wireless control and digital profile download.
Strategic focus on fast-growing China consumer electronics market
Our collaboration with MediaTek: delivering intelligent, precision control of power
to their latest LTE platform.
Collaboration with other China based OEMs in areas such as beacons, wireless
charging and smart tags with our advanced Bluetooth® Smart™ technology.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report
06
Chief Executive’s review
“ We are building a vibrant and innovative
mixed signal business which is well positioned
for future growth.”
Jalal Bagherli
CEO
Dear Shareholder,
2014 was another great year for Dialog.
I am extremely pleased with what we have
accomplished in the last twelve months.
Our performance, in what is a landmark year
for Dialog, reflects our focused delivery on
competitive and differentiated products in
high growth consumer electronics markets
through the hard work and dedication of
all our employees.
Financial performance
In the last twelve months, the Company has
gone from strength to strength. In particular
we have:
• delivered 28% year on year growth in
revenue and surpassed US$1 billion of
revenue a year earlier than originally
anticipated;
• we have improved IFRS gross margin by
550bps and increased profitability while
maintaining a sustainable level of
investment in innovation; and
• generated US$213 million free cash flow.
In summary, we have – once again –
delivered on our promise of high growth
together with a solid financial performance
in terms of revenue, earnings and cash
generation.
The improving financial performance
throughout 2014 resulted in significant stock
market appreciation of our share price and
enabled Dialog to become a member of
Euro STOXX600 index.
Leading through innovation and
customer diversification
Innovation and customer diversification
remain key elements of our strategy. We
have launched new product categories,
opened up new markets and made
significant progress in this area. We set out
our achievements in greater detail within
the strategic report section of this report
(see page 14).
The potential market outlook for our
products is robust. Emerging market themes
such as the Internet of Things, Wearables,
and Smart Home are generating new
opportunities for our business, allowing us
to open up new addressable markets and
expand our customer base.
Customer concentration is a feature of our
business operation which reflects the highly
concentrated mobile market. We are
delighted to maintain and grow strong
relationships with our main customers and
during 2014 we broadened and deepened
those relationships with multiple new
products. However, we consider the
diversification of our customer base a key
strategic objective. In line with our customer
diversification strategy, I want to highlight
three key areas where there have been
significant developments and which position
us well for 2015 and beyond.
Our Bluetooth® Smart™ solution,
SmartBond™, remains the world’s lowest
power and smallest Bluetooth® Smart™
system-on-chip. During 2014 the wearables
segment gained further traction, particularly
in two product segments, smart watches
and fitness bands. Dialog announced its first
design win in this segment with Xiaomi.
Pervasive connectivity is evolving around
us and we will soon see a new array of
products in exciting segments such as home
automation. During 2014 SmartBondTM
product family achieved significant traction
with over 100 customers in all regions of
the world and a variety of Internet of Things
applications. We believe we have quickly
established a market leadership position in
short range Connectivity.
As part of our initiatives to expand business
footprint in Asia, we began our collaboration
with MediaTek in 2014 to power the fast
growing China LTE smartphone market.
Our new range of highly differentiated
multi-phase sub-PMICs deliver precision
power to MediaTek’s LTE platforms. Lenovo
and Meizu were early adopters in selecting
our products to power their latest high
specification smartphones and improve their
users’ experience. We expect significant
expansion of our business with China
customer base through this partnership.
Our Power conversion business is well
positioned to benefit from the development
of intelligent rapid charging solutions
which enable consumers to charge their
devices faster than ever before. In the last
12 months we launched new AC/DC
adapter ICs compatible with MediaTek
and Qualcomm fast charging protocols.
Our unique intelligent digital technology
supports more efficient and cost-effective
solutions that customers demand.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 07
People are using their smartphones,
tablets and other devices more often,
and more intensively. Ensuring long battery
life and fast charging is becoming more
and more important to both OEMs and
end users. Our sustained investment in R&D
and focused partnerships should continue
to enable the development of world
leading products in this area, including
advanced power management, intelligent
power conversion and wireless charging.
2014 was also a period during which
we made significant advances in our lighting
segment, with a new range of dimmable
LED drivers and substantial volume
shipment to the fast growing residential
solid state lighting market. I look forward t
o more progress in this area in 2015.
Around the Company
We rely on the best global talent to help
us innovate and develop new products.
To give us a competitive advantage in the
employment market place, we have a
deliberate strategy of opening new
design centres in places where there is
strong engineering expertise. This allows
us to recruit and retain the best global
talent we can access, and build our
technical base.
In the last 12 months we have opened new
design centres in Asia and the US.
There are around 1,400 people working
in Dialog today. In the last three years we
believe we have built one of the biggest
pool of talented mixed signal engineers in
the world, focused on power management,
power conversion and other power efficient
connectivity and lighting solutions for
mobile and consumer applications.
All the achievements in 2014 are largely
due to our talented people. On behalf of
the Board and the Executive Team I want to
thank them for their efforts and dedication
and I look forward to their continued
support in 2015.
Twelve months ago, in my letter to you
in last year’s annual report, I wrote
“we consider our growth prospects to
be very strong and we have now many
more business opportunities ahead”.
Our ambitions remain to continue with our
above-industry track record. I hope you will
agree that 2014 results showed we delivered
on that prediction. I look forward to another
year of success in 2015 by continuing on this
journey. We appreciate your continuing
support as shareholders.
We are building a truly vibrant global and
diverse mixed signal business which is
uniquely positioned to be at the core of
a new generation of ultra-portable devices
and low-power connected consumer
electronics. Our future growth story
has only just begun!
Jalal Bagherli
CEO
2014 - The one year view
150.00%
130.00%
110.00%
90.00%
70.00%
50.00%
30.00%
10.00%
-10.00%
-30.00%
-50.00%
Dialog Semiconductor Plc (XTRA:DLG) - Share Pricing
PHLX Semiconductor Sector Index (^SOX) - Index Value
Germany TECDAX (Total Return) Index - Index Value
NASDAQ Composite Index (^COMP) - Index Value
January 2015 – Full Year 2014 share price performance
+88.0%
+30.2%
+17.5%
+14.3%
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report
08
The Dialog business model
Our business model is aligned with the requirements of our customers
in the markets in which we operate.
We design and market highly integrated
semiconductors and use best-in-class
manufacturing and packaging technologies
to deliver steep production ramps of new
products. Our partnership approach,
operational flexibility and the quality of
our products are key sources of value to
our customers.
Dialog has one of the biggest R&D
engineering teams in the world focused
on power management and mixed signal
know-how for mobile and connected
consumer applications. We believe the
size and focus of our engineering talent
has become a sustainable source of
competitive advantage.
Innovation is at the core of our business.
Our highly skilled engineers, their know-
how and our intellectual property (IP) are
our key assets. We have implemented a
“high-touch” fabless model – meaning we
have outsourced production – which allows
us to remain flexible and maintain a low
capital-intensive business while retaining
some core manufacturing and advanced
packaging competencies in-house.
Our business model has three
dimensions built on innovation:
1 Short design cycle.
2 High-touch fabless model with strong
production partnerships.
3 Market-leading products.
1. Short design cycle
Dialog has decades of experience in the
rapid development of integrated circuits
(ICs) over which time we have amassed
significant IP. For our customers, and in
particular those in the consumer devices
market, product development times are
short due to rapidly evolving consumer
requirements and competition in a vibrant
and changing market.
The design of our customised solutions
(Application Specific ICs) is well embedded
in our customers’ design cycle. We engage
with our largest customers as an “extended
R&D team”, delivering differentiation in
short design cycles.
Our integrated design approach helps to
reduce component size and number which,
in turn, helps our customers to reduce the
overall cost of their products and maximise
performance.
We recruit globally the best talent we
can and continually invest in our people.
We have a decentralised approach to
research and development with teams in
15 countries. In a highly competitive talent
market we believe this flexible, decentralised
approach is advantageous.
2. High touch fabless model with strong
production partnerships
While we design and manage the
production of semiconductors in-house,
we outsource production to industry leading
wafer foundries such as TSMC, UMC and
Global Foundries. This approach enables the
flexibility to deploy the most advanced
production processes and meet market
demand and low capital intensity. Some of
our teams within Dialog’s Global Operations
and Quality organisation are based at our
partners’ manufacturing sites, enabling a
continuous quality improvement process.
Our assembly and test partners are leading
companies such as SPIL, ASE and UTAC.
We maintain deep expertise on advanced
processes, test and packaging development
through our own teams. These areas of
expertise are fundamental to remaining
ahead of our competitors and supporting
our customers’ development of products
which are thin and light – features which
consumers value highly in portable devices.
In order to meet our stringent product
quality and qualification requirements,
all test programmes are developed and
maintained by Dialog’s Test and Product
engineering and deployed to our
back-end partners.
Our foundry, test and packaging partners are
the leading companies in their field and we
have developed a strong collaboration with
them based on years of working
together. Dialog has built a robust
supply chain management approach
which seeks to ensure the delivery of
steep ramps of new products to our
customers. This is particularly well suited
to meet the requirement of simultaneous
high-volume and global product
launches in consumer electronics.
3. Market-leading products
Dialog’s focus and expertise in power
management and power efficiency
semiconductors contributes to power
efficiency and lower power consumption
for a range of personal portable devices and
applications in the consumer products market.
Our customers include the leading brands in
each of our markets. They are attracted by
the quality and performance of our products
– evidenced by our inherent design expertise,
leading technology and ability to innovate
– and our focus on high-growth portable
platforms and consumer devices. A business
model based on high Tier 1 customer
penetration results in high volumes,
and strong cash generation. Examples
of a range of market-leading innovative
products, launched in 2014, are set out in
the strategic report on pages 16 to 23.
Corporate responsibility and a commitment
to sustainable business practices are
important to Dialog. Dialog’s commitment
to sustainability is outlined in greater detail
on page 42 and also in our annual
sustainability report, which is available
on our website.
Aligned interests
Dialog is committed to the continuing
development of market-leading innovative
products which we believe in turn create
value for our Shareholders. We achieve this
by setting stretching performance targets,
which align with Shareholders’ interests
and then motivating our executives to
achieve those targets with appropriate
incentive arrangements. Dialog’s
remuneration policy is set out in greater
detail within the Directors’ remuneration
policy report on page 68.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 09
> S e l e c t
i o n o f b est-in-class technologies >
Customers
OEMs/ODMs
Suppliers
Partners
IP
IP
Design
cycle
6-18 months
Manufacturing
cycle
3 months
Expert
engineering
talent
<
E
x
p
e
rt
e
n
gin
e
erin
g talent <
Innovation in
Mixed signal
analog
Expert
engineering
talent
Product
cycle
1-5 years
Customers
OEMs/ODMs
b
o
< R
nt <
e
u st s u p ply chain managem
Value creation
Partnerships
1 Reciprocal cooperation with
customers and partners enhances
our innovation capacity.
Operational flexibility
1 Rapid new product development.
2 Decentralised R&D with 21 hubs.
3 Fabless model provides flexibility on
process and capacity.
Quality
1 Inherent design expertise,
world-class engineering talent.
2 Best-in-class technology.
3 Highly integrated and power
efficient ICs.
4 Fabless model allows us to deploy
the most advanced production
processes available.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report
10
Our markets
Dialog Semiconductor Plc | Annual report and accounts 2014
Strategic report 11
Wearable technology
is ripe for growth
Wearable technology is the new wave of product innovation in mobile
computing. Shipments of wearable devices are forecast to rise from
19 million units in 2014 to almost 112 million units in 2018, according to
research from IDC*.
The technological foundations of this
new wave of ultra-portable devices are
power management and low power
electronics, pervasive connectivity and
sensor technology.
The analog aspect in wearables technology
is increasingly important and we are
positioning Dialog’s to be the mixed signal
core supplier in this segment. We are
combining Dialog’s leading technologies
in power management, low energy
Bluetooth®, charging and advanced
packaging with strategic partnerships in
sensors and wireless charging to provide our
customers lowest power, smallest footprint,
feature-rich mixed signal IC solutions.
From a consumer perspective, personal
connectivity devices will have to fulfil
three major criteria:
First and foremost, they will have to
virtually “last forever”, offer a battery
lifetime that does not frustrate users.
Second, personal connectivity wireless
sensors will have to be unobtrusive.
Consumers will be looking at devices they
can enjoy wearing or even forget they are
wearing until they need them.
Third, consumers will want products
that are intuitive and easy to use.
Personal connectivity devices are helping all
of us to improve our lives. During 2014 we
have seen increasing traction in the market
for fitness bands and a number of OEMs are
exploring different applications ranging
from smartwatches and medical
to athletic apparel.
* Source: Worldwide Wearable Computing Device
2014-2018 Forecast and Analysis (IDC #247318)
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report
12
Our markets
Effective power management and increasing energy efficiency remain
at the core of the consumer electronics market. Pervasive connectivity,
sensor technology and increasing data processing are enabling a new
wave of ultraportable devices which interact with our environment.
Dialog Semiconductor has been at the
centre of the mobile computing revolution,
enabling our customers to produce lighter
and thinner portable applications with
higher power efficiency and longer battery
life. Consumer demand for better power
management and more power-efficient
products continues to rise.
In the period 2014-2016, units of
smartphones and tablets are estimated
to grow to 4% CAGR and 10% CAGR
respectively. Smartphone shipments within
key emerging markets are predicted to
more than double1 by 2018.
Increasing processing capabilities in mobile
devices coupled with more powerful
telecommunications networks like 4G being
rolled out across the world are enabling
consumers to increase the intensity of use
of their mobile devices and the volume of
data processed. This increase in data
processing has an energy cost. In this
context, the need to increase the power
efficiency of portable devices will continue
to be at the core of consumer electronics.
Bluetooth® Smart™ (low energy Bluetooth)
was specifically developed to target low
bit-rate, low power, battery-operated
Our key customers
Our customers want our outcome-driven
innovation, technical expertise, high
integration and fast product
development and support. Given the
speed of technological change in our
markets our focus is to develop and
retain long-term relationships with all
our major customers, adopting a true
partnership approach.
wireless devices, which makes it a prime
candidate for personal connectivity. From a
customer perspective, personal connectivity
devices will have to virtually “last forever”,
requiring a long battery life. A new wave of
wearables or ultraportable computing that
sense and interact with the environment will
help us to improve our lives and allow us to
make a better use of our natural resources.
The Bluetooth® Smart™ segment is expected
to grow 64% CAGR in the period 2014-
2016 and managing electronics at low
power in this market is vital.
A key fast growing market for wireless
headsets is Unified Communication (UC).
New generation headsets support Hi-Fi
audio music listening with low-latency
microphone features. Dialog is a leading
supplier into wired and wireless headsets
in the UC market. The 1.9GHz wireless link
is allowing for high density wireless
networks in the enterprise environment
without the risk of interference with the
over crowded 2.4GHz frequency space.
Our products excel in audio performance,
integrated power management and
interfacing to the various UC devices.
The vast majority of the world’s electronic
devices that plug into an electric wall outlet
require the conversion of high voltage AC
power to low voltage DC. Robust growth
in portable device markets including
smartphones, tablets and other portable
devices continues to drive the need for new
generations of intelligent, smaller and more
power efficient AC/DC adapters that can
charge much faster and more safely.
With stringent government regulations in
place across the globe to phase out
low-efficiency incandescent bulbs, LED
replacement lighting is moving to
mainstream adoption. According to
McKinsey, total LED SSL global shipments
are expected to grow from 440 million
units in 2012 to 2.7 billion units by 2016.
Challenges such as SSL dimmer compatibility,
dimming performance and price, demand
innovative LED driver solutions with ultra-low
bill-of-materials costs.
The influence of consumer electronics in the
development of the traditional computing
products is pervasive. The market continues
to evolve towards a convergence of features
between the next generation of computing
devices such as all-in-one PCs, hybrids and
Ultrabooks™ and consumer electronics.
Customers with a significant contribution
to revenue include Apple, Panasonic,
Samsung, Bosch and Gigaset.
These top five customers represented
87% of Dialog revenue in 2014. We
recognise there is a risk associated with
this level of customer concentration (see
details on page 47 Risk Section) and the
revenue derived from our largest
customer is shown on page 144 note 28.
We are delighted to have such a strong
relationship and during 2014 we have
broadened and deepened our interactions
based upon our innovative products,
excellent programme execution and
product delivery. The diversification of our
business is a key strategic objective. In
2014 we have welcomed new customers
across multiple business segments.
1 Source: IDC Worldwide Mobile Phone Tracker, May 28, 2014 http://www.idc.com/getdoc.jsp?containerId=prUS24857114
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 13
Million units
CAGR
1,838
1,969
0
250
500
750
1000 1250 1500 1750 2000
Source: Dialog, Gartner
4%
216
259
0
60
120
180
240
300
Source: Dialog, Gartner
10%
2014
2016
2014
2016
2014
2016
178
212
9%
0
50
100
150
200
250
Source: Dialog, Gartner
2014
2016
2014
2016
189
506
0
100
200
300
400
500
600
Source: Dialog, Gartner
64%
965
1,668
0
250
500
750
1000
1250
1500
1750
Source: Dialog,Gartner
31%
Market Trends
Product/device
Mobiles
Tablets
Notebooks,
ultrabooks
and convertibles
Bluetooth® Smart™ applications
LED SSL drivers
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 14
Strategic framework
“We made great progress in 2014 and continue to power ahead
with solid initiatives in each of our four pillars.”
Extending our
product portfolio for
portable platforms see pages 16-17
New SSL LED driver platform developed in 2014 providing compatibility with more dimmers
than ever before and significantly reducing the cost of LED bulbs.
Development of AC/DC adapter interface IC for Qualcomm® Quick Charge 2.0 power
supplies and the world’s first AC/DC rapid charge controllers compatible with
MediaTek’s Pump Express™ and Pump Express™ Plus fast charge protocols.
New low power audio CODEC with unsurpassed always-on power
consumption to enable ‘voice trigger’ activated applications.
Dialog Semiconductor Plc | Annual report and accounts 2014
Strategic report 15
Broader and deeper
customer base see pages 18-19
Xiaomi included the Company’s Bluetooth® ultra-low-power SmartBond™ SoC (System on a
Chip) in its new Mi Band fitness tracking wrist band.
Further expansion into the Smart Home and Human Interface Device (HID) market with
SmartBond™ featuring in a number of OEM wireless Remote Control Units (RCUs) for
Smart TVs and set-top boxes from SMK Corporation.
Lenovo and Meizu implemented the DA9210 power management IC (PMIC) in their
latest smartphone models, the Vibe X2 and the MX4.
LG adopted the configurable D2260 (PMIC) to power its recently launched NUCLUN
Octa-Core application processor. The first LG smartphone platform also includes
Dialog’s DA9210 sub-PMIC.
Continuous innovation see pages 20-21
Bringing innovation to Smart Home and Wearables by combining Bluetooth® Smart™ with
other Dialog’s technologies, such as audio, power management and energy harvesting.
True wire-free charging and lowest power Bluetooth® Smart™ to wearable Internet of Things
(IoT) devices in collaboration with Energeous.
New high efficiency USB switching charger IC with integrated high accuracy battery fuel gauge.
Sensors and sensor related technology development, including our multi-touch capability,
to broaden our offering to Smart Home and Wearables applications.
Taking forward our SSL LED technology for commercial and industrial lighting,
including wireless control and digital profile download.
Strategic initiatives see pages 22-23
Strategic focus on fast-growing China consumer electronics market.
Our collaboration with MediaTek delivers intelligent, precision control of power to
their latest LTE platform.
Dialog Semiconductor Plc | Annual report and accounts 2014
Strategic report 16
Extending our
product portfolio
Smart LED lighting at lower cost using digital technology.
With stringent government regulations across the globe to phase
out low-efficiency incandescent bulbs, LED replacement lighting
is moving to mainstream adoption.
The primary challenges in achieving the full
market potential of Solid State Lighting (SSL)
have been finding effective LED driver
solutions that provide high performance
dimming and seamless dimmer compatibility
at a low cost.
Digital intelligence enables stunning
dimming performance at lower cost
Our newest SSL LED driver platform
developed in 2014 provides compatibility
with more dimmers than ever before, while
significantly reducing the cost of LED bulbs.
This platform reduces system costs while
maximising Dialog’s dollar content by
eliminating over 20 external components.
A large portion of the market that we had
not previously addressed is low-voltage
dimmable lighting, characterised by
ubiquitous, small form-factor MR16 bulbs.
Our customers have experienced challenges
with conventional low-voltage dimmable
LED driver solutions for MR16 bulbs,
specifically poor compatibility with existing
transformers and dimmers.
So we expanded our market and developed
a new SSL LED driver platform in 2014 that
enables exceptional MR16 dimmer and
transformer compatibility at the lowest cost.
Dialog takes wireless lighting control
to the smartphone
The next growth driver for solid state
lighting is smart lighting, with digital
dimming and consumers able to control
lighting wirelessly via the Internet of
Things (IoT).
Dialog has taken wireless lighting control
to the smartphone with our smarteXite™
intelligent lighting platform. Our first
smarteXite™ SSL LED driver (iW6401)
is optimised for low energy Bluetooth®
Smart™, Wi-Fi and ZigBee® wireless
control. It is the first retrofit LED lamp
driver to support the LEDOTRON™/DLT
(IEC 62756-1) industry-standard digital
dimming protocol, gaining significant
customer interest during 2014.
What differentiates Dialog is our
digital control technology. Our newest
SSL LED driver platform developed in
2014 provides stunning, continual
dimming control to less than 1% of
light output – with no flicker or
shimmer – and enables compatibility
with the widest range of phase-cut
dimmers at the lowest cost.
Our served market expanded in 2014
to address the low-voltage dimmable
SSL market, characterised by
ubiquitous, small form-factor MR16
bulbs. Our new low-voltage SSL
platform developed in 2014 enables
exceptional MR16 dimmer and
transformer compatibility at the
lowest cost.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 17
Strategic report 18
Strategic report 19
Broader and deeper
customer base
Our new customer Xiaomi is one of China’s fastest growing electronics
companies. Xiaomi included Dialog’s Bluetooth® ultra-low-power
SmartBond™ SoC (System on a Chip) in its new Mi Band fitness tracking
wrist band. Xiaomi’s decision to incorporate our solution is a significant
breakthrough for us in the vitally important China market.
SmartBond™ enables the Xiaomi Mi
Band to deliver up to 30 days of battery
power from a single charge, more than
double the battery life of its closest
competitor, creating one of the most
energy-efficient connectivity solutions
available to consumers today. It provides
a real competitive advantage for
Xiaomi’s products because engineers
using Dialog Bluetooth® Smart SoC no
longer need to compromise on product
design due to limited battery capacity:
they can build slimmer and more
appealing devices equipped with industry-
leading energy efficiency that can still meet
users’ performance expectations. As a
result, consumers can rely on the Xiaomi Mi
Band to monitor their physical activity,
calorie intake and sleep patterns, without
the hassle of frequent charging.
With world-leading energy efficiency,
SmartBond™ is also perfectly positioned to
enable billions of Internet of Things
battery-powered devices without the need
for compromise in product design.
Since Xiaomi’s inception in 2010
with the launch of the Android-based
MIUI operating system, Xiaomi has designed
and developed an innovative range of
consumer electronics products including
smartphones, smart TVs, set-top boxes,
tablets, routers and, most recently,
wearable devices.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 20
Continuous
innovation
Over-the-air wireless charging, whenever, wherever.
Strategic report Continuous
innovation
21
By bringing together Dialog SmartBond™, our
existing lowest power, smallest footprint Bluetooth®
Smart™ IC with its energy harvesting support and
Energous’ over-the-air wireless charging technology
in a proof-of-concept reference design, both
companies plan to demonstrate the ability to charge
wearable devices without the need for power
connectors or charging mats.
We are focusing on wearable devices
and accessories. The collaboration
will provide consumer electronics
manufacturers with a superior technology
that will differentiate their products with
the freedom of charging without wires.
By optimising WattUp with Dialog’s
SmartBond™ connectivity and power
management technology, OEMs will be
able to seamlessly and rapidly integrate
wire-free charging and remote
management right into their devices.
WattUp is a disruptive wire-free charging
technology for electronic devices that
provides power at a distance with complete
mobility under full software control.
It delivers meaningful, useable power, at
a distance, while allowing users to charge
on the move. The result is a true wire-free
experience that saves users from having
to remember to plug in their devices or
place them on a mat.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 22
Strategic initiatives
One of our objectives is to establish regional engagements using
highly integrated analog and power technologies. As part of this,
we are building innovative partnerships with leading semiconductor
companies in Greater China to develop deeper customer
engagements in the region.
We are proud to collaborate with MediaTek,
delivering intelligent, precision control of
power to their latest LTE platform.
Our power management IC adapts
dynamically the output voltage to the
processor load. As a result, phone users
experience better multi-tasking and
extended battery life. It strengthens the
consumer appeal of the devices, making
it easier for users to use simultaneously
data-intensive applications.
The collaboration with MediaTek also
includes the support of their PumpExpress™
and PumpExpress™Plus fast charging
protocols by our AC/DC power conversion
product lines, thus reducing the charging
time of mobile devices by up to 50%.
The above programmes are early starts
in our collaboration with MediaTek; as
this collaboration continues and deepens,
a growing number and diversity of platforms
will be brought to market through the
months and years to come.
Strategic report “China will account for almost a
third of smartphones shipments
by 2018 according to IDC*.”
* Source: IDC Worldwide Mobile Phone Tracker, May 28, 2014
http://www.idc.com/getdoc.jsp?containerId=prUS24857114
Dialog Semiconductor Plc | Annual report and accounts 2014 24
Key performance indicators (KPIs)
The Board uses a range of indicators to assess performance, to ensure performance
is delivering on the strategy, and to ensure continued alignment with Shareholder
interests. The key performance indicators are set out below.
Revenue growth
Performance indicator
Definition and relevance
2014 performance
IFRS
+28%
Underlying
+27%
Actual and prior year’s full-year IFRS and
underlying revenue measured in our functional
currency, US dollars. Monitoring this revenue
trend provides a measure of business growth.
Underlying revenue is used in order to
provide a better reflection of business growth
by eliminating the impact of accounting
adjustments. In 2014 both IFRS and underlying
measures were basically in line due to the lack
of accounting adjustments in 2014.
Full-year IFRS revenue in 2014 was 28%
above 2013*. This growth is the result
of volume and ASP increase, reflecting
not just market volume trends but the
increased value we continue to bring to
our clients.
Gross margin
Performance indicator
Definition and relevance
2014 performance
IFRS
44%
Underlying
45%
Actual and prior year’s underlying gross
margin. Gross margin is gross profit expressed
as a percentage of revenue and shows the
economic substance of the Group’s products.
Monitoring this trend provides a measure of
our ability to increase the economic value of
our products over a period of time. Underlying
gross margin provides a better reflection of the
economic value of our products by eliminating
the impact of accounting adjustments.
Underlying gross margin in 2014 was
480 bps above 2013. This increase
reflects the higher economic value of
our products as a result of the high
level of innovation and integration of
our products and the level of efficiency
of our high-touch fabless model.
Operating expenses as a percentage of revenue
Performance indicator
Definition and relevance
2014 performance
IFRS
28%
Underlying
25%
Actual and prior year’s underlying operating
expenses (OpEx) expressed as a percentage
of underlying revenue. Underlying OpEx %
provides a measure of our effort in innovation
and the efficiency of our operating structure
over a period of time and it reflects the need
for current returns as well as an investment
in future revenue growth. Underlying OpEx
% provides a better reflection of the focus
and efficiency of our operating structure
by eliminating the impact of accounting
adjustments. OpEx include Selling & Marketing
expenses, General & Administrative expenses
and Research & Development expenses.
Underlying OpEx % in 2014 was 25%,
30 bps above 2013. This increase
reflects the strategic commitment to
innovation by increasing our Research and
Development efforts and our continuing
effort to improve the efficiency of our
General and Administrative function. It
is important to note that our Research
and Development effort is not directly
linked to the revenue of the same period.
Our R&D programmes represent an
investment in future revenue growth.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 25
To provide a more accurate reflection of performance in 2014, profitability
measurement is on an underlying basis, eliminating the impact of accounting
adjustments including those arising from acquisitions and other one-off events
and transactions which the Group does not consider representative of
underlying performance.
EBIT growth
Performance indicator
Definition and relevance
2014 performance
IFRS
+81%
Underlying
+65%
Actual and prior year’s full-year underlying
EBIT measured in US dollars. Monitoring this
EBIT trend provides a measure of the economic
value of our operating business. Underlying
EBIT is used in order to provide a better
reflection of economic value by eliminating the
impact of accounting adjustments.
Underlying EBIT in 2014 was 65% above
2013. This increase reflects the higher
economic value of our business which is
underpinned by the increasing economic
value of our products and the efficiencies
achieved in our SG&A structure.
EBIT margin
Performance indicator
Definition and relevance
2014 performance
IFRS
16%
Underlying
20%
Actual and prior year’s underlying EBIT margin.
Monitoring this trend provides a measure of
our ability to increase the economic value of
our operating activity over a period of time.
Underlying EBIT provides a link to our ability
to generate cash as we are a low capital
intensity business.
Underlying EBIT margin in 2014 was
450 bps above 2013. This increase
reflects the higher economic value of
our business which is underpinned by
the increasing economic value of our
products and the efficiencies achieved
in our SG&A structure.
Basic EPS (US$)
Performance indicator
Definition and relevance
2014 performance
IFRS
2.05
Underlying
2.56
Actual and prior year’s underlying basic EPS.
Monitoring this trend provides a measure of
our ability to increase the inherent value of
our business for our Shareholders over a
period of time. Underlying basic EPS provides
a better reflection of the inherent value of
the business by eliminating the impact of
accounting adjustments.
Basic underlying EPS was 72% up over
2013 to US$2.56 and includes a one-off
tax benefit of approximately 20 cents.
This increase reflects the higher inherent
value of our business as a whole.
Details of the reconciliation items between IFRS and underlying KPIs can be
found on page 158.
*
Following a change in accounting policy the presentation of income from customer-specific research and development contracts has been adjusted retrospectively.
For further information please refer to note 2 to the consolidated financial statements.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 26
Financial review
Reinvesting our cash in innovation is fundamental to
long-term sustainable and profitable growth. We have
a solid financial framework in place to fuel the future
expansion of our business.
Jean-Michel Richard, CFO, Senior Vice President Finance
The following tables detail the historical consolidated statements of the operations of Dialog Semiconductor for the years ended 31 December
2014 and 31 December 2013 both on an IFRS and underlying* basis.
Dialog Semiconductor’s IFRS and underlying financial performance for 2014 and 2013
US$000
Revenues
Gross profit
Operating profit (loss)
Result before income taxes
Income tax expense
Net profit
Earnings per share (in US$)
Basic
Diluted
EBITDA**
2014
2013 ***
IFRS Adjustments
Underlying*
IFRS
Adjustments
Underlying*
1,156,105
– 1,156,105
901,380
6,222
907,602
514,809
8,597
523,406
351,808
15,714
367,522
185,902
44,363
230,265
102,660
36,935
139,595
169,321
53,632
222,953
89,712
45,870
135,582
(31,242)
(19,542)
(50,784)
(27,508)
(10,459)
(37,967)
138,079
34,090
172,169
62,204
35,410
97,614
2.05
1.93
0.51
0.34
2.56
2.27
0.95
0.92
0.54
0.52
1.49
1.44
241,884
27,546
269,430
151,256
22,957
174,213
* 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,
** EBITDA is defined as operating profit excluding depreciation for property, plant and equipment (2014: US$22,1 million, 2013: US$18,6 million), amortisation for intangible assets
(2014: US$33,4 million, 2013: US$28,6 million) and losses on disposals and impairment of fixed assets (2014: US$0,4 million, 2013: US$1,4 million),
*** Following a change in accounting policy the presentation of income from customer-specific research and development contracts has been reclassified retrospectively, For further
information please refer to note 2 to the consolidated financial statements.
Please refer to the Appendix to the financial review for a full explanation of underlying adjustments made.
Dialog Semiconductor’s Revenue breakdown by Business Segment on an IFRS basis for 2014 and 2013
US$000
Mobile systems
Automotive/Industrial
Connectivity
Power conversion
Corporate sector
Total
2014
2013***
Revenue
EBIT
Revenue
EBIT
942,628
40,952
92,120
80,367
38
244,180
11,232
(2,163)
(21,135)
(46,212)
744,869
37,259
91,616
26,768
868
141,242
12,211
(2,121)
(22,533)
(26,139)
1,156,105
185,902
901,380
102,660
* Underlying results (net of tax) in 2014 are based on IFRS, adjusted to exclude share-based compensation charges and related charges for National Insurance of US$25.1 million,
excluding US$1.2 million of amortisation of intangibles associated with the acquisition of SiTel (now Dialog Semiconductor B.V.), excluding US$8.3 million non-cash effective
interest expense in connection with the convertible bond, excluding US$1.0 million non-cash effective interest expense related to a licensing agreement, US$1.3 million of
expenses associated with the merger discussions with ams AG, excluding US$3.2 million acquisition and integration expenses in connection with the purchase of iWatt, excluding
US$11.9 million of amortisation and depreciation expenses associated with the acquisition of iWatt and a US$17.8 million one-off tax impact of an intra-group reorganization of
certain Intellectual Property.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report
27
Results of operations
Segment reporting
Mobile Systems revenue was up 26.5%
on 2013 fuelled by the good performance
of those products launched in the second
half of 2013 and a number of high volume
product launches during the second half
of 2014 (see note 27 – Segment Reporting
included in the consolidated financial
statements). Our growing range of highly
integrated power management solutions
for portable devices continued to drive the
strong success of this division with both
existing and new customers. The IFRS
operating profit increased 72.9% from
2013 as a result of the strong revenue
performance, favourable mix and higher
product margins achieved through
continuous manufacturing yields
improvements and cost efficiency gains.
by growth in new markets such as DECT
based professional applications, i.e.
cordless headsets and microphones and
the emerging Bluetooth® Smart segment.
Connectivity generated an IFRS operating
loss of US$2.2 million in 2014, broadly in
line with the previous year (2013: operating
loss of US$2.1 million). This movement was
caused by lower fixed cost coverage due to
lower seasonal revenues in legacy products
and higher R&D expenses to support the
development of our Bluetooth® Smart™
business. Amortisation expenses relating to
the purchase price allocation (PPA)
decreased from US$5.1 million in 2013 to
US$1.6 million in 2014 as some assets were
fully amortised in 2013. Excluding the
impact from the PPA 2014 operating profit
almost reached break even point.
Automotive & Industrial Applications
revenue was up 9.9% on 2013, mostly as
a result of the strong performance of our
niche automotive range of products. This
business segment represented 3.5% of total
Company revenue (2013: 4.1%). The IFRS
operating profit decreased 8% from 2013
due to a slight increase in R&D investments.
Connectivity revenue in 2014 was up 0.6%
over 2013 and it represented 8.0% of the
total revenue of the Company (2013: 10.2%
of total revenue). See table 1. Connectivity
below. This modest increase in revenue
was the result of two underlying trends;
the continuous softness in the legacy DECT
cordless phone business, partly offset
Revenue from our Power Conversion
segment was up 200% to US$80.4 million,
representing 7.0% of the total company
revenue. This increase is largely due to the
fact that this segment was only consolidated
into Dialog from 16 July 2013.
The Power Conversion segment recorded
an IFRS operating loss of US$21.1 million in
2014 compared to an IFRS operating
loss of US$22.5 million in 2013. On
an underlying basis the operating loss
increased to US$2.3 million in 2014 (see
table 2.) as we continued to invest in
R&D and bring new products to market.
2014 underlying operating results do not
include depreciation and amortisation
1. Connectivity
Underlying*
Connectivity
2. Power Conversion
2014 US$000
2013*** US$000
Revenue
EBIT
Revenue
EBIT
92,120
(322)
91,616
3,061
Underlying*
Revenue
EBIT
Revenue
EBIT
2014 US$000
2013*** US$000
Power Conversion
80,367
(2.299)
33,841
(903)
expenses in the amount of US$15.2 million
and additional acquisition and integration
related costs of US$3.2 million. Furthermore
we posted in H2 2014 a one-off US$1.7
million inventory reserve for potential excess
and obsolescence ahead of the migration
from the former iWatt supply chain system
onto our SAP ERP system in early 2015.
Revenues
Total IFRS revenue for the full year 2014
was up 28% to US$1.156 million (2013:
US$901.4 million). This increase was mainly
attributable to higher sales volumes, an
increase in average selling prices (“ASPs”)
from our more complex devices in our
Mobile Systems Segment and the revenue
contribution from the Power Conversion
segment.
Cost of sales
Cost of sales consists of material costs,
the costs of outsourced production and
assembly, related personnel costs, applicable
overhead and depreciation of test and other
equipment. IFRS cost of sales for the period
ending 31 December 2014 was up 16.7% to
US$641.3 million (2013: US$549.6million).
The increase can largely be attributed to the
growth of our business.
As a percentage of revenue, cost of sales
decreased from 61.0% in 2013 to 55.5% in
2014. This year-on-year decrease was built
on our ability to manage product mix and
continuously improve the efficiency of the
manufacturing process.
On an underlying* basis, cost of sales in
2014 was US$632.7 million or 54.7% of
underlying revenues. This amount represents
a 17.1% increase on the previous year (2013:
US$540.1 million or 59.5% of total revenue).
* Underlying results (net of tax) in 2013 are based on IFRS, adjusted to exclude share-based compensation charges and related charges for National Insurance of US$7.8 million,
excluding US$3.8 million of amortisation of intangibles associated with the acquisition of SiTel (now Dialog Semiconductor B.V.), excluding US$7.8 million non-cash effective
interest expense in connection with the convertible bond, excluding US$0.8 million non-cash effective interest expense related to a licensing agreement entered into in Q3-2012,
excluding US$6.3 million acquisition and integration expenses in connection with the purchase of iWatt and US$10.3 million of amortisation and depreciation expenses
associated with the acquisition of iWatt, deferred sales and related cost of sales that were reversed in connection with the iWatt business integration of US$2.5 million were
brought back. Furthermore the gain of US$3.2 million from the release of an earn-out provision in relation to the iWatt acquisition was reversed and a recorded income related to
a payment the Company received in connection with the insolvency of BenQ of US$0.7 million was also taken out.
Dialog Semiconductor Plc | Annual report and accounts 2014
Strategic report 28
Financial review
“Total IFRS revenues
for 2014 were up
28% from 2013.”
Gross profit
Our IFRS gross margin increased 550 basis
points from 39.0% in 2013 to 44.5% of
revenue for the period ending 31 December
2014. On an underlying* basis, gross margin
also improved by 480 basis points to 45.3%
in 2014 (2013: 40.5%). IFRS gross margin
improved as a result of the following
three key elements:
• The realisation of the benefits of
manufacturing cost optimisation over
the year.
• Positive product mix contribution from
new products in Mobile Systems and the
Connectivity Segment.
• Higher revenue and the subsequent
lower allocation per unit of the fixed
component of Cost of Sales – or Cost
of Goods Sold (COGS).
IFRS gross profit for the period ending
31 December 2014 was US$514.8 million,
representing a year-on-year increase of
46.3% (2013: US$351.8 million.
Selling and marketing expenses
Selling and marketing expenses consist
primarily of salaries, travel expenses, sales
commissions, advertising and other
marketing costs. Also included are
amortisation expenses for intangible assets
such as customer relationships, key
customers and order backlog resulting from
the purchase price allocation related to the
acquisition of iWatt Inc. in the third quarter
of 2013 and SiTel BV in 2011.
IFRS selling and marketing expenses were up
22.6% to US$60.1 million and represented
5.2% of total revenue, a decrease of 20
basis points on 2013 (2013: 5.4% of total
IFRS revenue). This decrease was achieved
despite additional investments made
post acquisition in Power Conversion and
in Connectivity to support the launch
of our Bluetooth® Smart™ product.
The contribution to selling and marketing
expenses from the acquired iWatt business
was US$21.4 million, of which US$7.6
million were amortisation expenses
resulting from the purchase price allocation.
Excluding these amortisation expenses
and other adjustments for the integration
of iWatt as well as share option and
amortisation expenses relating to the
SiTel BV purchase price allocation, on an
underlying* basis selling and marketing
expenses were up 25.7% to US$48.7
million in 2014 (2013: US$38.8 million)
and represented 4.2% of total underlying*
revenues, 10 basis points below 2013
(2013: 4.3% of total underlying* revenues).
General and administrative expenses
General and administrative expenses consist
primarily of personnel and support costs for
our finance, human resources and other
management departments.
IFRS general and administrative expenses
were up 34.3% to US$59.4 million and
represented 5.1% of total revenue in 2014,
(2013: US$44.3 million or 4.9% of total
revenue). This increase predominantly
reflects the growth our business and the
consolidation of the iWatt business
(Power Conversion), which contributed
US$3.9 million additional general and
administrative expenses. Furthermore,
general and administrative expenses in
2014 include US$3.2 million acquisition and
integration expenses related to the
acquisition of iWatt (see note 4 – Business
Combinations in the consolidated financial
statements).
Excluding the additional expenses relating to
the iWatt acquisition as well as share option
and amortisation expenses relating to the
SiTel BV purchase price allocation,
underlying* general and administrative
expenses were US$44.6 million and as a
percentage of underlying* revenue were
3.9%, representing a modest increase of
10 basis points on 2013. (2013: US$34.8
million or 3.8% of underlying* revenue).
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 29
Research and development expenses
Research and development expenses consist
principally of design and engineering-related
costs associated with the development of
new ASICs and Application Specific
Standard Products (ASSPs).
IFRS research and development expenses
were US$213.8 million in 2014 (2013:
US$160.8 million), representing a year-
on-year increase of 33.0%. As a percentage
of total revenues, IFRS research and
development expenses increased from
17.8% in 2013 to 18.5% in 2014. This
increase was largely attributed to a higher
R&D headcount to support our ongoing
growth strategy (our engineering headcount
has almost quadrupled since 2010) and the
consolidation of iWatt business (Power
Conversion segment) since July 2013.
Excluding iWatt, R&D expenses in 2014 were
US$26.5 million above 2013 to US$177.0
million. The increase was largely attributed
to a higher R&D headcount to support
continuous innovation, growth and our
diversification strategy. This increase was
partially reduced by capitalised research and
development expenses of US$6.7 million
(2013: US$5.9 million).
Other Operating income
Income in the period ending 31 December
2014 was US$4.4 million (2013: US$4.9
million). This amount includes US$0.9 million
which relates to a payment received from
an insurance claim and a gain of US$1.9
million from a further reduction of the
Earn-Out provision booked for a contingent
consideration in relation to the iWatt
acquisition (for further information please
refer to note 4 to the 2013 consolidated
financial statements and notes).
Operating profit
IFRS operating profit for the period ending
31 December 2014 was up 81.1% on 2013
to US$185.9 million.
On an underlying* basis, operating profit in
2014 was up 64.9% to US$230.3 million.
Underlying EBIT margin in 2014 was
19.9%, 450 basis points higher than 2013
(2013: 15.4%). This increase was driven by
improved product margins, positive product
mix contribution and efficiencies in Selling
and General Administrative expenses.
Interest income and other
financial income
Interest income and other financial income
from the Company’s investments (primarily
short-term deposits) were US$419 thousand
for 2014 (2013: US$565 thousand). The
decrease primarily resulted from a general
decrease of interest rates on deposits and
the short term nature of our investments.
Interest expense and other
financial expense
Interest expense and other financial expense
consist primarily of expenses from the
Group’s factoring arrangement, the interest
charges for the convertible bond starting
from the third quarter 2013 and the interest
charges for loan facilities totalling US$115
million in connection with the acquisition of
iWatt in 2013.
In 2014, interest and other financial
expenses were US$14.8 million (2013:
US$13.3 million). The amount in 2014 was
made up of two components related to the
convertible bond: US$2.0 million for a 1%
coupon payable on a semi-annual basis to
the bond holders and US$8.3 million
(non-cash) for the interest expense in
connection with the measurement of the
financial liability from the bond using the
effective interest method. The interest
expenses related to the debt facilities were
US$1.1 million.
Income tax expense
For the period ending 31 December 2014
a net IFRS income tax charge of US$31.2
million was recorded (2013: US$27.5 million)
which includes a one-off non-cash deferred
tax credit of US$17.8 million. This one-off
non-cash deferred tax credit arose during
the year resulting from of an intra-group
reorganisation of certain Intellectual
Property, which impacted the recorded
value of deferred tax liabilities. This intra-
group reorganisation took place in
Q1 2014 but the impact of the recorded
value of deferred tax liabilities was only
identified during the detailed preparation
of the year-end financial statements.
The one-off non-cash deferred tax credit
was therefore recorded in the full year
2014 results, giving an IFRS group
effective tax rate for the full year of
18.5% (2013: 30.7%). The group
tax rate excluding this one-off non-
cash deferred tax credit of 29.0%.
When reporting the 2015 IFRS results and to
facilitate quarterly comparisons, the
Company plans to adjust the previously
reported quarterly financial statements for
the first three, six and nine months of 2014.
Strategic report 30
Financial review
“At 31 December 2014,
we had cash and
cash equivalents of
US$324.3 million.”
For the first three months of 2014 an
adjusted IFRS total tax benefit of US$12.1
million will now be reported leading to an
adjusted IFRS net income of US$31.9 million
and IFRS basic EPS of US$0.48. For the first
six months of 2014 an adjusted IFRS total
tax benefit of US$8.5 million will now be
reported, leading to an adjusted IFRS net
income of US$40.9 million and IFRS basic
EPS of US$0.61. For the first nine months of
2014 an adjusted total IFRS tax expense of
US$2.1 million will now be reported, leading
to an adjusted IFRS net income of US$67.5
million and IFRS basic EPS of US$1.01.
The decrease in our group effective tax rate
(excluding the one-off non-cash deferred
tax credit) is driven by the ongoing exercise
to align our Intellectual Property ownership
with the commercial structure of the group.
This has allowed Dialog to utilise and to
further partially recognise previously
unrecognised UK loss carry forwards and
other UK tax attributes and to benefit from
the favourable UK tax regime for technology
companies. We believe the gradual decrease
is sustainable and will continue to drive
further reductions in our effective tax rate
in the years to come.
Net profit
For the reasons described above, we
reported a IFRS net profit of US$138.1
million for the period ending 31 December
2014 (2013: US$62.2 million), representing
a 122% year-on-year increase.
Underlying* net profit increased 76.4%
to US$172.2 million in 2014, representing
14.9% of total revenue (2013: 10.8% of
total revenue).
IFRS basic and diluted earnings per share in
the period ending 31 December 2014 were
up 116% and 110% respectively to US$2.05
and US$1.93 (2013: basic and diluted
earnings per share of US$0.95 and US$0.92.
Underlying* basic and diluted earnings per
share in 2014 increased by 72% and 58%
compared to 2013 and reached US$2.56
and US$2.27 respectively.
Liquidity and capital resources
Cash flows
Cash flow from operating activities was
US$270.5 million in 2014 (2013: 110.7
million). Cash inflow during 2014 was
US$266.4 million (2013: US$170.8 million)
and resulted from the Company’s net profit
adjusted by depreciation, amortisation and
other non-cash effective expenses. This cash
inflow also increased by changes in working
capital of US$37.9 million (2013: US$18.8
million cash outflows for investments in
working capital), demonstrating our capacity
to manage working capital tightly despite
the year-on-year revenue growth. In
addition, in 2014 the Company paid
US$33.9 million for income taxes (2013:
US$41.4 million). The amount paid in 2014
mainly represents advanced payments for
corporate income taxes.
Cash used for investing activities was
US$43.0 million for the period ending 31
December 2014 (2013: US$344.2 million).
Cash used for investing activities in 2014
consisted primarily of the purchase of
tooling (masks), laboratory equipment,
probe cards, load boards and other
advanced test equipment for a total of
US$23.8 million (2013: US$23.2 million).
The purchase of intangible assets was
US$12.1 million (2013: US$9.5 million) and
payments relating to capitalised
development costs were US$6.7 million
(2013: US$6.0 million). Cash used for
investing activities in 2013 consisted
primarily of the net cash outflow of
US$303.9 million in connection with the
iWatt acquisition in July 2013.
Cash flow used for financing activities was
US$89.1 million in 2014 compared to a cash
inflow of US$106.7 million in 2013. The cash
inflow in 2013 relates mainly to two debt
facilities (in total US$115 million) to finance
the iWatt acquisition of which US$10 million
was pre-paid in 2013 and US$105 million
was pre-paid in 2014. Cash inflows from
financing activities in 2014 resulted from
share option exercises in amount of
US$15.9 million (2013: US$3.1 million) in
connection with the Company’s employee
share option programme.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 31
Balance sheet
Assets
Cash and cash equivalents and restricted cash
All other current assets
Total current assets
Property, plant and equipment, net
Goodwill
Intangible assets
Investments
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
At 31
December
2014
US$000
At 31
December
2013
US$000
324,280
213,850
186,025
261,419
538,130
447,444
59,263
244,878
131,505
1,446
1,953
28,771
58,465
244,878
148,591
1,531
1,608
24,935
467,816
480,008
1,005,946
927,452
186,737
195,533
623,676
163,024
307,778
456,650
1,005,946
927,452
Liquidity
At 31 December 2014 we had cash and
cash equivalents of US$324.3million
(31 December 2013: US$186.0 million).
The working capital (defined as current
assets minus current liabilities) was
US$351.4 million (31 December 2013:
US$284.4 million).
In addition, the Company has two factoring
agreements which provide the Company
with up to US$92.0 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.
As of 31 December 2014, the Company
had a US$10.0 million revolving credit
line facility which remained untapped
(Q2 2014: US$25 million untapped). In
addition to this, in 2013 the Company
entered into a Base Currency Term Loan
facility with an aggregate amount equal
to US$100 million (payable by March
2017) of which US$35 million was pre-
paid by the end of Q2 2014. During H2
2014, the Company made further pre-
payments. As a result, there is no amount
outstanding as of 31 December 2014.
The balance sheet total was US$1,005.9
million at 31 December 2014 (31 December
2013: US$927.5 million). Cash and cash
equivalents increased by US$138.3 million or
74.3% to US$324.3 million at 31 December
2014 (31 December 2013: US$186.0 million).
This increase was mainly caused by the cash
inflows from operating activities (US$270.5
million) which were partially offset by cash
outflows from investing activities amounting
to US$43.0 million. The financing activities
contain a cash inflow of US$15.9 million in
relation to share option exercises which was
offset by the voluntary and scheduled term
loan repayments totalling US$105 million
related to the Company’s US$115 million
Term Loan.
Other current assets decreased by
US$47.6 million from US$261.4 million at
31 December 2013 to US$213.9 million
at 31 December 2014. The decrease of
18.2% is mainly driven by a US$26.8 million
reduction in trade accounts receivable
balances and by a US$18.4 million decrease
in inventories in comparison to 31 December
2013. Deferred tax assets increased 15.4%
from US$24.9 million at 31 December 2013
to US$28.8 million. The increase mainly
relates to the partial recognition of
previously unrecognized deferred tax assets
in the UK as a result of the ongoing exercise
to align our Intellectual Property ownership
with the commercial structure of the Group.
Current liabilities increased by net US$23.7
million to US$186.7 million of which
US$24.1 million relate to increased income
tax payables. Other financial liabilities
decreased by US$1.8 million to US$22.1
million of which US$17.5 million relate to
book losses from the revaluation of
outstanding foreign exchange hedges. Total
non-current liabilities as of 31 December
2014 were US$195.5 million (2013:
US$307.8 million) of which US$180.2 million
represents the book value of the liability
from the convertible bond (31 December
2013: US$172.0 million). The decrease of
non-current liabilities of US$112.2 million
is mainly the result of the loan repayments.
Net debt which is defined as short and
long-term financial liabilities less cash was
US$114.0 million (Net Cash) at 31 December
2014. This compares to a net debt position
(cash less financial liabilities) of US$103.6
million at 31 December 2013.
Shareholders’ equity increased to
US$623.7 million (US$456.7 million at
31 December 2013) which is mainly a
result of our net profit (adjusted by
expenses for share based payments).
The equity ratio increased to 62.0%
(49.2% at 31 December 2013).
Jean-Michel Richard
CFO, Senior Vice President Finance
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report
32
Segment review
Mobile Systems
Our power management, audio and display ICs are designed for
portable devices, including smartphones, tablets, Ultrabooks™ and
other ultra-mobile computing devices such as wearables.
Our products
Dialog’s Power Management Integrated
Circuits (PMICs) are fully configurable;
they can be programmed to meet the
exact voltage and current needs of
every component.
Udo Kratz, Senior Vice President
and General Manager Mobile Systems
Business Group
Dialog replaces discrete power management
components with highly integrated, single
chip solutions that reduce energy usage and
provide design simplicity at a lower cost.
Dialog’s solutions excel at handling this
power management complexity, enhancing
device performance and maximising the use
of available battery power.
In 2014, Dialog launched the second
generation of sub-PMICs for multi-core
processor design scalability. Such scalability
reduces time-to-market and enables our
customers to optimise the overall scheme
for cost, area and power.
Our markets
• System and battery management ICs
and audio CODECs for smartphones
and tablets.
• High voltage power management
for Ultrabooks™, Convertible tablets,
Ultraslims. Multitouch sensors
supporting the broader computing
market.
• Automotive grade PMICs for
in-vehicle infotainment, electronic
instrument cluster, driver assisted
displays.
• Power, DSP Audio and power
efficient display drivers for smart
wearable devices.
• Additionally, our products address
a range of secondary embedded
systems such as automotive
infotainment, wearable
technology and energy-efficient
microcontroller platforms.
Effective power management in many
portable devices presents an increasingly
complex array of design challenges.
Smartphones, tablets and Ultrabooks™ need
to be able to run high definition video,
games, GPS maps and audio content and
connect via high-speed 4G LTE and legacy
3G networks, Wi-Fi and short-range wireless
standards like Bluetooth® Smart™. At the
same time, consumers demand displays that
are brighter, bigger and incorporate touch
functionality and, in the future, tactile
feedback technology. Each of these features
is a major battery drain, creating a need for
effective power management technologies.
Our audio technology allows the capture
of speech and audio with high-quality and
low power consumption while at the other
end of the audio channel enables speaker
playback at maximum volume and power
efficiency while extending battery usage
time. Dialog’s audio CODECs provide
full-range, high-fidelity audio capture and
playback to a variety of portable devices
and audio accessories. They feature
programmable Digital Signal Processors
(DSPs) that offload audio software from
the host processor including DTS SRS™,
advanced echo cancellation and microphone
beamforming.
Multicore devices delegate simple tasks to
one core, while directing more complex,
power-hungry tasks to the other core. Each
of the quad- or octal-core application
processors needs to be powered up and
down into and out of sleep state in
particular sequences.
Dialog was one of the first companies to
combine a fully configurable PMIC with a
low power audio CODEC that is
monolithically integrated, or stacked, in a
single package to deliver significant board
space and cost savings to its customers.
This can involve the integration of over
40 different high-and low-voltage circuits
and analog functions on a single chip.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report
33
Power Management ICs
“Dialog remains at the forefront
of integrated power management
ICs. Our products reduce power
consumption, space and costs.”
Key drivers
• Increasing processing power of
smartphones and tablets demanding
higher performance power
management.
• Increasing battery drain of additional
new features and peripherals driving
improved efficiency.
• High-growth in China smartphone
manufacturers demanding “good
enough” performance at lower price
points.
• Integrated speech and voice
commands is increasingly being
accepted by consumers.
• Fast adoption of tablets and ultra
slims. Mobile computing trend for
thinner form factor continues.
2014 progress
• Announced MediaTek partnership
for flagship LTE platforms and
disclosed Lenovo and Meizu as early
customers.
• Launched our second generation of
sub-PMICs for multicore processor
design scalability.
• Announced LG mobile as new
smartphone PMIC customer.
• Launch of audio DSP codec with
built-in voice trigger with lowest
power consumption. This technology
improves the convenience for
consumers to access voice
recognition functionality.
• Smartwave Multi-touch display
sensor enters mass production
with major PC OEM.
Forward focus
• Expand our collaboration with
MediaTek.
• Develop new IP to enhance PMICs
for multi-cell battery market (tablets,
notebooks and ultraslims).
• Introduce novel architectures for fast
and intelligent charging.
• Power management for the Internet
of my Things.
• Leverage PMIC/Audio integration
strategy to deliver enhanced
“always- on” functionality with less
area and fewer components for smart
wearables.
• Support Flatfrog, our Smartwave™
systems partner, in their product and
market expansion.
• Sensors and sensor-related
technology development, including
our multi-touch capability, to
broaden our offering into Smart
Home and Wearable applications.
US$942.6m
Revenue
(2013: US$744.9m)
“Our second generation
sub-PMICs enable our customers
to design smartphones with
enhancing capabilities.”
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 34
Segment review
Connectivity
Dialog developed SmartBond™ in 2013 and during 2014 we have
successfully entered the Bluetooth® Smart market announcing a
number of design wins.
wearables, mobile banking, wireless
charging and a variety of other new
applications. The Bluetooth® Smart market
is forecast to experience strong growth in
the coming years. Dialog has leveraged its
expertise in power management and in
radio SoCs to enter the market with the
most integrated, lowest power and
smallest solution.
Dialog’s SmartBeat™ products can be
found in leading brands of semi-professional
wireless audio products. Leading headset
brands use our solution to bring products
on the market with best-in-class voice and
audio capabilities, excellent quality of
service and interference free radio links.
Our solutions can also be found in the new
generations of wireless microphones and
in wireless public address systems.
By enabling voice and data to run over
a single network Voice-over IP (VoIP)
technology can enable businesses to
increase bandwidth efficiencies, reduce
costs and migrate away from traditional
copper wire switched telephone systems.
Dialog works with the leading global VoIP
phone manufacturers with our energy-
efficient Green VoIP solution to address
the large enterprise, small to medium
business and hotel markets.
Dialog offers high-performance, energy-
saving VoIP chipsets that integrate the
building blocks for best-in-class audio,
security and graphics functionality.
They use acoustic echo cancellation and
active noise reduction to deliver crystal
clear conversations, with the option of
video calling or phone number directories
on a high resolution, colour touch screen
LCD, and banking-grade levels of
security authentication.
Sean McGrath, Senior Vice President
and General Manager, Connectivity,
Automotive & Industrial Business Group
Our products
The DA14580 is the first Bluetooth® Smart™
certified system-on-chip (SoC). Bluetooth®
Smart™ is a part of the Bluetooth® standard
that addresses peripheral and accessory
applications with lower power and lower
connection times than classic Bluetooth®.
These features are opening up new
applications in the areas of health and
fitness, proximity devices, human interface
devices for tablets and smartphones,
Our markets
• Single chip transceivers for
DECT-based cordless telephones,
wireless microphones, headsets and
gaming consoles.
• SmartBond™ single chip wireless ICs,
certified to the Bluetooth® Smart™
standard, for personal accessory and
peripheral applications.
• SmartPulse™ short-range wireless ICs,
based on the ultra-low energy DECT
standard, for smart home applications.
• Energy-efficient multicore Voice-over IP
(VoIP) processors, audio CODECs and
amplifiers, interfacing with Bluetooth®,
Wi-Fi and DECT, to enable headset and
handset connectivity.
• SmartBeat™ provides a platform for
robust, low-power Wireless Audio over
DECT. This platform offers a highly
integrated solution for high quality and
fixed low latency wireless audio
applications supporting sample
frequencies up to 48kHz. It supports
point-to-point, point-to-multipoint and
multipoint-to-point audio and data
channels, targeting wireless headsets
(Lync compliant), headphones, speakers,
subwoofers and microphones.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 35
SmartBond™
Bluetooth® Smart™; power,
size and system cost without
compromise.
Key drivers
• Rapid market acceptance of
Bluetooth® Smart™ following
adoption by iOS, Windows and
Android in smartphone and tablet
platforms.
• Increasing trend to use the
proven DECT standard in new
applications like smart home
and low latency audio.
• Maturity of DECT handset market as
volumes start to decline.
2014 progress
• Successfully entered the Bluetooth®
Smart™ market announcing a
number of design wins; Xiaomi
and SMK.
• Working with leading module
makers in Bluetooth® Smart™,
Murata, Semco, Panasonic Industrial,
ALPS and TDK.
• Launched the low latency
1.9GHz wireless Audio product in
Nintendo’s Wii U microphone.
Forward focus
• Continue to invest in the Bluetooth®
Smart™ platform: product roadmap
and application reference designs.
• Focusing on Wearables and Smart
Home.
• Expand our low latency wireless
audio activity towards microphones
and headset brands.
US$92.1m
Revenue
(2013: US$91.6m)
“Our second generation
Bluetooth® Smart™ IC will
position Dialog for further
revenue growth.”
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 36
Segment review
Power Conversion
A fast growing and highly competitive market where Dialog is
a leading player. We are helping consumers to reduce their
energy bills with our range of LED drivers.
Davin Lee, Senior Vice President
and General Manager of the Power
Conversion Business Group
Our markets
• AC/DC converter solutions –
digital intelligence for smaller, faster
charging power adapters for
smartphones and tablets.
• LED drivers for solid-state lighting –
innovating to solve our customers’
design challenges.
• LED drivers for display backlighting
for LED TVs.
Our products
AC/DC Power Conversion: Robust growth
in portable device markets including
smartphones, tablets and other portable
devices continues to drive the need for new
generations of intelligent, smaller and more
power-efficient AC/DC adapters that can
charge much faster and more safely.
In 2014, we established an early leadership
position in the smartphone fast charging
segment as the first supplier to ship
Qualcomm® Quick Charge™ 2.0 (iW620) and
MediaTek Pump Express™ Plus (iW1788)
Rapid Charge™ IC solutions in volume to
customers. We also provided rapid charging
ICs to meet the proprietary fast charge
protocol of another leading global
smartphone OEM.
We further expanded our power conversion
product portfolio in 2014 with a new
synchronous rectifier IC (iW671) that
enables higher power density without
increasing the adapter size, thereby doubling
our potential IC content per power adapter.
LED Solid-State Lighting (SSL):
With stringent government regulations
in place across the globe to phase out
low-efficiency incandescent bulbs, LED
replacement lighting is moving to
mainstream adoption. According to
McKinsey, total LED SSL global shipments
are expected to grow from 440 million
units in 2012 to 2.7 billion units by 2016.
Challenges such as SSL dimmer
compatibility, dimming performance
and price, demand innovative LED driver
solutions with ultra-low costs.
In 2014, we sampled parts based on our
new LED driver platform that addresses the
dimmable SSL market and provides
best-in-class dimmer compatibility while
eliminating the cost of over 20 external
components. We also developed a new SSL
LED driver platform to address the low-
voltage lighting market, including
ubiquitous, small MR16 bulbs.
The next market driver for SSL is smart
lighting, fuelled by the IoT. This trend will
expand the retrofit market with various
modes of wired digital dimming via the AC
supply line, such as toggle-switch dimming
and the emerging Ledotron®/IEC 62756-1
digital dimming standard. Smart lighting will
also encompass wireless lighting control,
such as Bluetooth® Smart™, ZigBee®, Wi-Fi
and others to control bulb brightness and
LED colour mixing for mood lighting.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 37
Key drivers
• Demand for faster mobile device
battery charging.
• More stringent global regulations for
high efficiency and low standby
power driving higher semiconductor
dollar content in power adapters in
order to pack more power (higher
power density) into the same space.
• Governmental regulations
worldwide fuelling high growth of
SSL by phasing out inefficient
incandescent, as well as CFL bulbs.
• Consumer demand for SSL bulbs
compatible with a wider range of
existing, installed dimmers,
eliminating light flicker and shimmer.
• Emerging smart lighting market
and IoT.
2014 Progress
• Established an early leadership
position in the fast charging segment
as the first supplier to ship
Qualcomm® Quick Charge™ 2.0 and
MediaTek Pump Express™ Rapid
Charge™ IC solutions in volume.
• Provided Rapid Charge ICs to meet
the proprietary fast charge protocol
of a leading global smartphone OEM.
• Expanded our power conversion
product portfolio with a new
synchronous rectifier that enables
higher power density without
increasing the adapter size, thereby
doubling our potential IC content per
power adapter.
• Sampled new platform dimmable SSL
LED drivers that provide best-in-class
dimmer compatibility and
performance while eliminating the
cost of over 20 external components.
• Sampled parts based on new digital
SSL LED driver platform addressing
customer need to solve MR16
dimmer and transformer
compatibility issues.
• iW6401 smarteXite SSL LED driver
platform took wireless lighting
control to the smartphone gaining
significant customer interest.
Forward focus
• Continue to invest in Rapid Charge™
adapter solutions for the
smartphone, tablet and Ultrabook™
markets, including ICs to meet
customers’ new proprietary
protocols.
• Expand AC/DC adapter product line
to enable smaller and cheaper
higher power density power
adapters.
• Address the emerging wireless
charging market.
• Continue to address the LED driver
market for mainstream retrofit SSL
bulbs and expand our focus to
include commercial and professional
LED lighting.
• Focus on SSL LED driver solutions for
the emerging IoT market space.
US$80.4m
Revenue
(2013: US$26.8m)
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 38
Segment review
Automotive and Industrial
Dialog is an automotive-certified company addressing the
mid-to-high-end European segment. In 2014, revenue from our
Automotive and Industrial segment grew by 10%.
Our products
Dialog supplies motor control ICs to a
leading European automotive supplier who
in turn delivers Dialog-based windscreen
wiper motor products addressing mid-to-
high-end European cars. Our first product
for a customer in Japan went into
production in 2012, and is currently being
rolled-out further to new car models.
These devices capitalise on Dialog’s expertise
and knowledge of technologies 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 for conventional
light sources, such as fluorescent or
High-Intensity Discharge (“HID”) lamps,
and for other industrial applications. Our
future development focus is on energy-
efficient controllers for LED lighting
solutions. 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.
Sean McGrath, Senior Vice President
and General Manager, Connectivity,
Automotive & Industrial Business Group
Our markets
• Custom motor control ICs for
windscreen wipers and companion
processor integrated power
management and clock ICs for
automotive infotainment systems.
• Electronic ballasts for fluorescent or
high-intensity industrial lighting and
energy-efficient controllers for LED
lighting solutions.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 39
Key drivers
• Increasing market for reverse wipers
and LED lighting solutions.
2014 progress
• Successful ramp up of new
derivative of intelligent motor
controller.
• Faster ramp of new custom
products.
Forward focus
• Supporting our customers to
remain competitive.
• Follow this market with
appropriate investments.
US$41.0m
Revenue
(2013: US$37.3m)
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 40
Strategic report
Our people – Engaged, motivated and skilled
95% extra effort
In the 2014 employee engagement survey, 95% of the respondents said
that when needed, they are willing to put in the extra effort to get a job done.
Martin Powell, Senior Vice President,
Human Resources
Employees by region
North America
144
Asia
241
Europe
988
Our performance
Employee retention (%)
2014
2013
Manager retention rate
93.3 92.1
Overall employee
retention rate
Diversity (%)
Women overall
Part-time employees
94.3 94.8
15.8 15.0
3.2
3.9
Number of nationalities
58
50
Engaging our employees –
the voice of Dialog
Listening to and involving our people in
shaping the business contributes to the
performance and success of the Company.
Our employees are highly engaged and are
the key contributors to our success. In 2014
we carried out a global engagement survey
measuring levels of engagement,
commitment, intent to stay, discretionary
effort and job satisfaction. 74% of our
employees participated in the survey and
our overall engagement score was 64%
favourable, placing us above our survey
partners’ external benchmark. Our people
also show higher intent to stay and higher
exceptional effort than average benchmarks.
We are now working on local and global
initiatives resulting from the Voice of Dialog
to maintain and further increase the
engagement of our people.
Recognising and rewarding
performance
We maintain a clear and consistent
approach to rewarding our people
with base salaries linked to their role,
contribution and performance. Global
short-term and long-term incentive
plans ensure that the performance of
our people is linked to and contributes
to the company’s success and our
Shareholders’ interests. We also
recognise the exceptional contributions
our people make.
Developing our employees
We help our employees to achieve their full
potential through training and development.
They are actively encouraged to take up
learning opportunities in the form of
technical and professional training,
management and leadership training,
on-the-job learning, virtual learning
environments and mentoring. In 2014 we
launched our first Learning Management
System allowing us to globally deploy
training content and measure all training
and development effectively. During the
year we have also refreshed our non-
technical training portfolio with new
management and leadership courses and
launched the Dialog Graduate Development
Programme which aims to give focused
development to our Graduate employees.
The average training spend per employee
in 2014 was US$1,377.
Valuing diversity
At the end of the year we employed 1,373
people worldwide; a 24.8% increase on
the prior year. We now operate from
30 locations in 15 countries and our
global workforce continues to increase
in diversity. Dialog employees come from
58 nationalities. We continue to recruit
globally for the most talented people,
identify centres of engineering talent
and build our business around them.
In 2014, we opened two new design
centres – in Taiwan and in the US – and
continued expanding our existing design
centres in Europe and North America.
Women now comprise 15.8% of the
overall workforce, an increase from
15.0% in 2013. The Company continues
to support STEM (Science, Technology,
Engineering and Mathematics) education
to increase opportunities for women in
engineering. There is currently no female
representation on our Board or Senior
Management team. We are committed to
creating an inclusive working environment
that attracts and retains the best talent
and take equality and equal opportunity
for all employees very seriously.
Our people play an important role in the
Company’s governance and sustainability
efforts and engage actively within the
communities in which they work. Further
details are set out on pages and in our
annual Sustainability Report.
Dialog Semiconductor Plc | Annual report and accounts 2014
Strategic report
41
42
Corporate responsibility and sustainability
Our CSR vision
To embed sustainable and responsible practices into
the way we act internally and engage externally.
Our CSR Values
Connecting
Acting as a conduit for
building bridges and
connecting people
internally through
CSR activities.
Giving
Giving of both money
and time to local and
global communities.
Engaging
Engaging our employees
to be happy at work,
and engaging with our
local communities and
stakeholders.
Strengthening
Strengthening the
position of Dialog as
being different from
our competitors through
our commitment to
CSR and sustainability.
Caring
Caring for people,
the environment and
communities, and
making a positive
impact on all three.
Community investment
People
Well-being
Equal
opportunities
Learning and Development
Our people
University
engagements
Future pool
of talent
Governance
Clean
Tech
Power
management
and power
efficient
products
Innovation
R&D
Investment
Redesign
Reduce
Recycle
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 43
Women in Engineering
In 2013, Dialog launched our “Gary Duncan
Women in Engineering Scholarship”.
In 2013, Dialog launched our “Gary Duncan Women in Engineering Scholarship”,
named after the former VP of Engineering who had always championed encouraging
women into electronics. Our first scholar that year was from Imperial College London.
This year our female scholar is from The National University of Science and Technology
in Taipei, and is studying electronic engineering. Dialog pays her an annual bursary
and provides guaranteed paid work placements and industrial mentoring. We also
sponsored the Women in Engineering Society in 2014 and are planning a programme
of events during 2015 designed to encourage girls to take
up STEM subjects.
“We sincerely believe
in making a positive
contribution to society.”
Last year we reported on our sustainability
journey and we are pleased to be able to
report that this has continued significantly in
2014. We want sustainability to be part of
our DNA, to be a part of the Dialog “fire in
the belly” – to not just be something we do,
but the way we do business.
Our 2014 Sustainability Report highlights
our commitment in key areas such as ethical
governance, product innovation, diversity
and inclusion, community involvement and
giving, education, and environmental
stewardship. We believe that striving to have
a positive impact in everything we do and
ensuring the long-term sustainable success
of Dialog are, in effect, the same goal.
Across our three key areas of making a
positive contribution we have had
substantial impacts:
• Innovation – our primary focus and
expertise is energy-efficient system
power management. As well as
enhancing user experience, our power
management processor companion chips
increase the performance of portable
devices by extending battery lifetime and
enabling faster charging, thus reducing
the effect of usage on the environment.
2014 has seen us develop further energy
solutions within low-energy Bluetooth®,
low power charging and energy efficient
LED solid state lighting.
• Our people and our communities
continued development of our
communities and young people.
• Our environment – we are continually
committed to ensuring that everything
we do has a low (or zero) impact on the
environment. As we do not manufacture
our products, we do not have a large
adverse effect on the environment,
however we operate responsible
practices within our own business, as
well as ensuring them across our supply
chain. We are proud that our business is
based around a range of green IC
solutions, and further to that we have
taken further steps during 2014 to
minimise the carbon footprint of our
business, and recycling precious materials
from waste and damaged goods.
Ethics and human rights
Dialog is committed to fair wages, healthy
and safe working conditions, respect for
human labour rights, and honest
relationships. We have adopted the
Electronics Industry Code of Conduct (EICC)
standard as the model for our own Code of
Conduct to ensure that working conditions
for both employees and external suppliers
are safe and that all workers are treated
with respect and dignity. In 2012 we signed
the UN Global Compact, an expression of
our commitment to human and labour
rights, the environment, and anti-corruption
and continue to be committed to, and
report on, the Ten Principles of the UNGC.
drive our innovation and therefore our
success and long-term sustainable future.
We invest time and money not just into
attracting and retaining the best talent
for us, but also in ensuring the future
pipeline of talent into the engineering
industry as a whole. We sincerely believe
in making a positive contribution to
society, and we have continued to fund
local and global projects to ensure the
We take the issue of conflict minerals very
seriously, and support ending the violence
and human rights violations in the mining of
certain minerals from a location in Africa
described as the “Conflict Region”. We have
achieved full compliance with the Dodd
Frank Wall Street Reform Act concerning the
sourcing of conflict minerals that originate in
the Democratic Republic of Congo or
adjacent countries.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 44
Corporate responsibility and sustainability
“Dialog is working to
sytematically reduce
CO2 emissions and
minimise the carbon
footprint of our
business.”
Environment
Dialog’s environmentally responsible
approach to business underpins everything
that we do. We aim to minimise our use of
natural resources and reduce and eliminate
all types of waste, following the principles
of redesign, reduce and recycle. We are ISO
14001 certificated and require all our
suppliers to be accredited to, and comply
with, this environmental standard.
Redesign
Dialog offers a range of green IC solutions
that minimise the number of components
required within consumer electronic
products, the energy they consume,
and extend to their overall lifespan to
reduce waste. In power management,
our single-chip solutions reduce the
number of discrete components that
need to be used within mobile devices,
while delivering energy savings.
Acquiring iWatt in 2013, Dialog established
itself as a leader in high efficiency AC/DC
converters and LED drivers for power
adapters, portable chargers and solid-state
lighting (SSL) applications. These ICs are
designed to cost-effectively reduce energy
consumption by maximising power
conversion efficiency with digital technology
that uses fewer components. This leads to
lower consumption of fossil fuels, less
energy spent manufacturing unneeded
components and lower total system cost for
customers.
Dialog was the first company to introduce a
zero-standby power AC/DC pulse width
modulation (PWM) controller, the iW1700
that reduces no-load power consumption to
less than 5 milliwatts, or effectively zero1,
for cell phones, cordless phones, tablets and
other portable devices. We also offer a wide
range of dimmable and non-dimmable SSL
LED drivers for lighting applications up to
45W, equivalent in brightness to a 200W
incandescent bulb. These LED drivers enable
very high efficiency SSL bulbs, significantly
reducing energy usage and enabling
consumers to benefit from LED bulbs with
an average lifespan of ten years or more in
comparison to just three to four years with
Compact Fluorescent (CFL) bulbs.
Reduce
Dialog is working to systematically reduce
CO2 emissions and minimise the carbon
footprint of our business, focusing on the
impact of our design centres. The calculation
of the CO2 emissions is in compliance with
§42 Energiewirtschaftgesetz (Energy Law).
The Carbon Disclosure Project recognised
Dialog as one of ten successful companies
achieving the “Scope-2- Indirect CO2
Emission Reduction”, with a reduction of
emissions of 44.5% in our design centres
in 2014, which equates to 682 tonnes of
CO2 emissions. In 2014 we offset 100%
of carbon emissions from our air travel
as well as 100% of emissions from our
largest design centre in Nabern. This
equated to offsetting 4,682 tonnes of
emissions. Our targets for 2015 will be:
• offset 100% CO2 emissions from our
air travel;
• offset 100% CO2 emissions from
rental and private cars used for business
travel purposes; and
• measure and offset emissions from our
second largest design centre in Swindon.
1 The International Electrotechnical Commission IEC 62301 standard for measuring standby power rounds power
usage of 5mW or less to zero.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 45
Innovative Education – UTC, Swindon
Dialog is a key sponsor of the Swindon UTC
(University Technical College).
A UTC is a college for students aged 14 to 18 which specialises in technical studies and is sponsored by a university.
Swindon UTC’s speciality is engineering, and offers full time courses which combine practical and academic studies.
Dialog have provided financial support for the college in preparation for its opening in 2014, as well as having high
involvement in shaping the curriculum, designing project opportunities, and assisting with the selection of staff. Swindon
has always been at the heart of engineering since the age of steam railways, and Dialog wants to be a part
of encouraging engineering back to the town and assisting young people to have careers in this industry.
We take the scarcity of natural resources
seriously and consider the conservation of
raw materials, such as metals, to be a
priority. Dialog continues to identify
potential methods to improve existing
technologies and substitute alternatives,
such as copper for precious metals, to
minimise our impact on the environment,
and reduce costs without sacrificing quality
and performance.
Recycle
We have also implemented a rigorous
recycling of precious metals, such as gold,
silver and copper from waste and damaged
products. In 2014 we increased the quantity
of recovered copper by 164% and recovered
silver by 332%. We believe that reusing and
recycling packing material and waste
(including the PET and glass bottles used in
our work areas) can contribute to the
effectiveness of our resource management
and sustainability. During 2014 we
implemented Waste Concept CEP1001-E04
into our major design locations.
Community investment
We have an active programme of engaging
with our local communities, and we know
that our employees, and future talent, value
this, whether through fundraising, charitable
donations or volunteering.
Corporate Giving
Dialog launched the Corporate Giving
programme in 2012, focusing on the
communities local to the areas around our
business operations:
Charitable giving – we give financial
donations to local charities and groups
where employees are actively involved.
In 2014 these included children’s charities,
charities for those with disabilities, youth
education programmes, hospitals,
environmental charities, local foodbanks,
and local youth sports groups.
Fund-matching – if employees are raising
money for charitable causes, then Dialog
will match those funds. Examples for 2014
included funds raised through sponsored
walks, runs and cycle rides; organising
raffles, cake and craft stands; wearing
Christmas jumpers and “jeans for genes”,
growing moustaches for Movember, and
organising a global football tournament.
Volunteering – as well as monetary
donations, we actively encourage employees
to participate in volunteering activities with
charities and educational groups within their
local communities. During 2014, employees
were involved in giving presentations and
offering mentoring to schools; working with
disadvantaged children; and organising
office family days which serve as events
both to give something back to families and
other local stakeholders and to raise further
money for charity.
In 2014 Dialog made charitable
contributions of US$500,282 to local
community projects (2013: US$485,300).
Organisations supported by
Dialog during 2014
2
4
5
22
7
8
14
21
17
n Children’s
n Education
n Medical
n Local Outreach
n Sports
n Environment
n Global Disasters
n Artistic
n Other
Partnerships with educational
institutions
We are concerned with encouraging young
people into electronics, not just to attract
the best and brightest talent to Dialog, but
to ensure the future pipeline for the
engineering industry as a whole. We have a
number of global programmes within
schools, colleges and universities, including
the sponsorship of students at leading
universities, the provision of access bursaries
for low income students, donation of
academic prizes, mentoring and lecturing to
young people of both school and university
age, and the sponsorship of electronic
engineering societies. We also provide
industrial placements and work experience,
and provide assistance with job-finding skills
such as CV writing and interview skills.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report
46
Managing risk and uncertainty
This section sets out a description of the principal risks and uncertainties
that could have a material adverse effect on the achievement of Dialog’s
three year mid-range strategy. Any of these risks could adversely impact
the Company’s financial situation or reputation and therefore its ability
to execute on one or more of the four strategic pillars.
In 2014, the Company established a
Risk Management Office, to improve
the identification of risk, assessment of
probability and impact, and assignment
of owners to manage mitigation activities.
The Executive Team along with the Board
has overall responsibility and oversight
of the Risk Management Office. The Risk
Management Office comprises members
from internal control, purchasing, finance
and legal and is chaired by the Chief
Financial Officer. The Risk Management
Office meets on a quarterly basis.
The Company has delegated its coordination
to the Risk Management Office which
interacts with the executive management,
based on the gathered input from the
business, internal and external auditors. The
Risk Management Office has accountability
for reporting the key risks that the
Company faces, and reporting the status
of any mitigating actions or controls to the
Executive Team and the Audit Committee.
Key risks are formally identified and
recorded in a risk register that is
reviewed quarterly by the Executive
Team and the Audit Committee. The
risk register is used to plan the internal
audit activity and assess any potential
impact to the Company’s strategy.
Principal risks
The Group is affected by a number of risk factors, some of which, including macro-economic and industry specific cyclical risks,
are outside Dialog’s control.
The Company recognises 4 categories of risks: Strategic, Operational, Financial, and Legal and Compliance.
Strategic risks
Dialog management is focused on executing on its 4 strategic pillars in order to mitigate the current dependencies on key markets
and customers.
Risk
Actions
Progress in 2014
Dependency on Mobile and Consumer
Electronics – Dialog’s product portfolio
is heavily focused upon the Mobile and
Consumer Electronics Marketplace.
The end device manufacturers demand
from their suppliers the best quality
product at the lowest price, high degrees
of innovation and fast time to market.
There is a high level of competition in
terms of product offering or price that
could persuade a customer of Dialog
to switch suppliers.
Dialog invests in research and
development (R&D) to anticipate
and respond to new market trends.
The Company, rapidly implements new
designs to meet customer needs and
to keep abreast of technological trends.
Quick charge AC/DC converters;
Design with Smartwave™ SmartBond™
Bluetooth® Smart™).
Dialog invested US$214m or 18.5% of
revenue in R&D in 2014 across a range of
highly targeted areas. This is an increase
of 33% over 2013.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 47
Risk
Actions
Progress in 2014
Dependency on key customers within the
wireless communication sector – Dialog
relies on a relatively small number of
customers for a substantial proportion of
its revenue. The loss of one or more of
these customers would be likely to have a
material effect on its short term revenue
and profitability.
Dialog is seeking to reduce the risk of its
revenues, profitability and growth being
affected by a slowdown in those key
customers and the wireless communications
sector (within mobile and consumer
electronics market) by winning customers
in other sectors and broadening its product
offering to existing and new customers.
While continuing to provide world-class
products and services to its existing key
customers. Dialog has embarked on a
Greater China strategy and has already
reported design wins with MediaTek
and Xiaomi. Dialog continues to make
significant progress in introducing new highly
differentiated products in AC/DC quick
charging, Solid State lighting LED
and Bluetooth® Smart™.
Human Capital – In order to successfully
execute its current and future business
commitments, Dialog needs to
continue to build its organisational
capability in two key areas:
• continuous innovation in product
development, manufacturing and
packaging technologies.
• leadership skills in an expanding and
increasingly complex global operation.
Dialog seeks to create a positive working
environment that results in low levels of staff
turnover.
In 2014, the number of engineers increased
by approximately 26%.
Dialog has developed an effective
recruitment process to attract high calibre
staff.
Dialog has dedicated human resource
managers to drive further development of its
personnel and benchmark its employment
terms to match industry top performers.
Dialog has a decentralised approach to
research & development with teams in 12
countries. In a highly competitive talent
market we believe this flexible approach is
advantageous, allowing us to recruit talent
where it resides and as a defence mechanism
to stop large scale ‘poaching’ by competition.
In December 2014, Dialog opened new
design centres in Taiwan and the US.
Staff turnover was 5.7% (2013: 5.2%)
Dialog has extended its global Training
& Development programmes with the
introduction of the Technical Ladder and
Speciality Academies.
The Company also has a global learning and
development strategy and runs an active
University partnership programme to attract
the brightest and best university graduates to
the electronics industry and our Company.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 48
Managing risk and uncertainty
Operational risks
Dialog recognises that Time to Market is a critical factor for the success of its customers. The efficiency of its internal operation is a relevant
factor to its performance. We run programmes to drive continuous improvement through all facets of the value chain from design to order
fulfilment. Dialog also tests and evaluates the quality of the supporting business functions.
Risk
Actions
Progress in 2014
Dialog has forged close partnerships with all
our suppliers, which help the planning and
management of capacity. Dialog’s suppliers
are mainly highly respected large scale
operations.
Dialog strives to source its large volume
components via a dual sourcing strategy
where applicable and supported by its
customers to mitigate the risk of disruption
to supply.
Dialog runs a “High-touch Fabless”
business model and so outsources the
capital intensive production of silicon
wafers, packaging and testing of
integrated circuits to leading third-party
suppliers, mainly in Asia.
The manufacturing of products runs over
multiple stages with multiple suppliers.
The failure of any of these third-party
vendors to deliver products or otherwise
perform as required could damage
the relationships with our customers,
decreasing our revenue and limiting
our growth.
Supplier delivery performance can be
adversely affected by multiple issues.
For example, if increased demand for
these suppliers’ products exceeds their
production capacity.
Dialog is heavily dependent upon the
quality, resilience and security of its
information systems. As a global business,
operating continuously (24/7) throughout
the year, with two key processes:
• product design activities using third-
party tool and support contracts. These
tools require an infrastructure that is
resilient and secure.
• the Semiconductor Supply Chain,
which by nature is very complex given
the multiple processes and plants
being utilised.
Dialog’s IT systems are managed on a global
basis to ensure a unified approach.
Dialog continues to invest in state-of-the-art
systems, especially its integrated Enterprise
Resource System to efficiently manage and
scale its global operation.
In addition, Dialog is continuously
strengthening its internal controls, general IT
controls and applying best practice to ensure
a robust and secure IT environment.
Dialog works with a range of foundries
and back-end vendors, mainly in Taiwan,
China and Singapore to mitigate the risk of
Supply Chain disruption and constraints. The
geographical spread also helps with disaster
recovery planning.
Dialog’s Mobile Systems, Automotive and
Connectivity businesses achieved an ‘On
Time Delivery’ performance of 97% (in 2014)
vs 95% in 2013. This measures performance
against delivery dates confirmed by Dialog at
date of order.
In 2014, Dialog carried out 30 vendor audits
vs 33 in 2013. These audits cover a wide
range of topics including compliance and
product quality (ISO9000 & ISO14000)
reviews.
This is supported by regular Business
Reviews when Dialog management meets its
suppliers to discuss supplier performance and
future capabilities.
In early 2014, Dialog updated its global
IT security strategy which drives specific
security and business continuity actions for
the next three-year period.
Within the engineering teams Dialog
expanded regional server farms and
moved away from standalone machines for
individual engineers. As data is stored in
multiple locations it significantly reduces the
risk of downtime or loss of data.
In addition, Dialog continues to invest in
gaining real-time information by automating
data transfer with its customers and
suppliers.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report
49
Risk
Actions
Progress in 2014
Given the timetables for some key product
introductions, Dialog must ensure tight
control over the New Product Introduction
process and in particular quality assurance
in high volume product ramps.
Dialog needs to avoid releasing faulty
products or putting customers on line
stop.
Dialog operates a “high-touch” fabless
model, with engineers located at supplier
locations.
In 2014 Dialog made significant investments
in internal capabilities (test development,
failure analysis etc).
Dialog places a high importance to quality
assurance, product validation prior to mass
productions, in line controls and monitoring
of yields with real time feed from offshore
manufacturing.
Dialog continues to evolve its internal
processes and procedures to ensure new
requirements are assessed and appropriate
resources applied to satisfy these
requirements.
Dialog seeks to exceed industry standard
yields based upon typical defect density
limitation.
This activity is strengthened by a clear focus
on operating a full closed loop model with
all key suppliers to ensure issues found are
resolved in a timely manner. To support
this Dialog has, in total, approximately 30
engineers located at key vendors.
Yield performance on key products
is monitored monthly during internal
operational reviews.
Financial risks
Our business model is highly cash generative over which we must show strong financial stewardship by maximising efficiency of working
capital and surplus funds. Dialog seeks to ensure we have sufficient free cash flow to invest in growing our business and to select the right
financial service providers and products. We realise that our financial transactions bring the risk of currency and interest rate fluctuations and
bad debts.
Risk
Actions
Progress in 2014
Financial Liquidity – As a high growth
company, the Company needs to ensure
access to funds from tier 1 financial
institutions at competitive interest rates.
Dialog needs to show sound
financial stewardship of funds
held ensuring minimal debt.
During 2014, the Company paid off the
$105m of the bank debt raised for the
acquisition of iWatt Inc. in 2013.
The Company monitors its liquidity on
a quarterly basis, with the objective of
minimising bank debt interest charges.
Free cash flow generated in 2014
was US$213 million (2013: outflow
of US$226 million)
Foreign Exchange – The majority of
Dialog’s revenue and expenses are
denominated in US Dollar. However,
Dialog has exposure to other currencies,
such as Euro and GB Sterling.
The Company uses forward currency
contracts to seek to limit its exposure
associated with the payment of salaries and
other operating expenses in non
US$ currencies.
During 2014, Dialog executed forward
contracts for €97 million at an average
of 1.3664 for EUR to USD. The average
market rate was 1.3297.
Dialog seeks to maximise the effectiveness
of hedge derivatives by matching the terms
and conditions of the hedge to those of
the underlying obligation up to 12 months
forward which supports the realisation of
its annual business plan.
Dialog executed forward contracts for
£40.7 million at an average of 1.6014
for GBP to USD. The average market rate
was 1.6484.
Dialog executed forward contracts for
£6.1 million at an average of 1.2759 for
GBP to EUR. The average market rate
was 1.2452.
Total of forward transactions resulted in
a negative impact of US$2.875 million
compared to spot transactions.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report 50
Managing risk and uncertainty
Risk
Actions
Progress in 2014
Dialog trades with selected customers on
credit terms and receivable balances, which
could create a risk of bad debt.
Dialog views all its customers as having high
creditworthiness. However, the Company
has factoring agreements with two reputable
financial institutions who assume a major
part of the risks associated with the control
of receivables from selected customers.
Dialog booked additional bad debt provision
of $15k. The total bad debt provision is $96k
relating to six customers. This represents
0.095% of total accounts receivables at year
end.
Interest earned from bank and money
market deposits can vary according to
market fluctuations and Dialog's cash
requirements.
A new policy for Credit Control has been
implemented in 2014. In response to a
broader customer base and increased
revenue generated from distributors.
Dialog manages its interest income using
a matched investment strategy with a mix
of fixed and variable interest rate facilities
in highly liquid funds, which are offered
by highly reputable and rated financial
institutions. This includes investing excess
funds, even over short term, once the
operating business has been financed.
During the year the Group has held cash
deposit with a range of maturities from one
week to three months.
Dialog has long-term debt (convertible
bond) of US$201 million and no amounts
outstanding under short-term credit
facilities as at 31 December 2014.
Pay down debt – no exposure to fluctuations
in 2015.
Legal and compliance risks
As Dialog has an increasing global presence the focus on governance and ensuring compliance to local requirements also needs to be
enhanced. Dialog recognises the importance of behaving as a good corporate citizen across the globe.
In addition, the Company seeks to utilise the legal protection offered across the globe to protect our assets, specifically our intellectual
property rights.
Risk
Actions
Progress in 2014
Compliance to laws & regulations – Given
Dialog’s growth strategy it needs to ensure
that it understands and complies with the
local law and customs wherever it operates.
Dialog continues to monitor the legislative
changes across key countries to ensure
it stays abreast of both global and local
legislative changes.
Appointed in-house Assistant Company
Secretary, who also acts within the Risk
Management Office.
Environmental regulations – As Dialog does
not manufacture, assemble or freight any
of its products it seeks to ensure that its
partners act within the law.
Intellectual Property (IP) Protection – As
a highly innovative company Dialog has
IP that is attractive to others. Dialog must
ensure that this IP is sufficiently protected
both legally (via patents) or physically (via
security processes).
In 2014 Dialog introduced on-line training
for global compliance issues.
Dialog carefully selects its suppliers and
regularly audits their activities.
In 2014, we continued our supplier audit
programme to fully cover all aspects of their
performance in key areas.
We seek to protect our current business and
our IP from being copied or used by others
by appropriate use of patents, copyrights and
trademarks on a global basis.
Dialog holds in excess of 540 patent families.
In order to strengthen its governance
processes, the Patent Committee was
established in 2014.
The Company strengthened its IT security
especially in the Data Leakage Protection area.
By selecting a new IT system in 2014 for
rollout in 2015.
Dialog also improved control over access
granted to specific project data for
employees and external third parties.
Dialog Semiconductor Plc | Annual report and accounts 2014Strategic report
Introduction to Governance
51
Dear Shareholder,
2014 has been another year of progress for
Dialog. As the business has grown and
evolved, so too has the Board and the
oversight with which we govern the Company.
Good governance practice means continually
reviewing existing principles and practices and
continually challenging what we do and how
we do them. Equally, just because practices
have existed for a long period does not mean
they cease to be effective.
Over the past number of years, as the
business has grown to become an industry
leader, we have evaluated our corporate
governance framework and made further
changes to our disclosure and practice to
ensure we align with evolving best practice.
During 2014, we have continued to enhance
our oversight and Corporate Governance
framework including: the continuing review
of the skills and experience of the Board; and,
the development of the Company’s Corporate
Governance policies. We publish, on our
website, our own Corporate Governance
principles which have regard to the UK
Corporate Governance Code and other best
practice corporate governance policies.
These have been reviewed as of December
2014 and are reviewed on an ongoing basis.
We have complied with these principles
during the year ended 31 December 2014.
During 2014, as part of the process of
ongoing Board refreshment and renewal
–and to ensure that the Company has a Board
which comprises the appropriate skills and
expertise to drive the business through its
next stage of development – Eamonn O’Hare
was appointed as an independent, non-
executive Director. Eamonn’s appointment
follows the appointment of two Directors in
2013, Mike Cannon and Rich Beyer.
Eamonn has a long and proven track record
in the consumer and technology industries
and has made a significant and valued
contribution to the Board since his
appointment. He has spent over two decades
as CFO of some of the world’s fastest
growing consumer and technology
businesses. He was formerly the CFO and a
board member of the UK’s leading
entertainment and communications business,
Virgin Media. Prior to this he was CFO of the
UK Operations of one of the world’s
largest retailers, Tesco plc. He was previously
CFO and a Board Director at Energis
Communications and also spent ten years at
PepsiCo Inc., where he held a series of senior
executive roles in Europe, Asia and the
Middle East. Eamonn assumed the role of
Chairman of our Audit Committee in
December 2014.
At the time of the AGM in May 2014, when
Eamonn was formally elected to the Board,
Gregorio Reyes, our former Chairman, also
retired from the Board. Greg served as
Chairman of Dialog for seven years up to July
2013 and remained on the Board for a further
ten months as a Director. Greg’s leadership,
talent and expertise was a great asset to
Dialog and we valued his guidance and
stewardship of the Company during a period
of significant transformation.
Two further Directors, John McMonigall and
Peter Weber, have also indicated to the Board
that they will not seek re-election to the
Board at the April 2015 AGM. John and Peter
are long-standing members of the Board and
they have both made a significant
contribution to the growth and development
of Dialog during their tenure.It is our
objective to appoint additional independent
Directors in the period ahead who will
succeed John and Peter.
During 2013, we increased the number of
Board sub-committees from three to four. In
2014, we had an Audit; Remuneration;
Nomination; and a Strategic Transaction and
Technology Committee. Each of these
Committees functioned well during 2014 and
the separation of the Remuneration and
Nomination Committee into two separate
committees has enabled the Board to better
allocate time to the important and distinct
work of these two committees. In particular,
it enables the Remuneration Committee to
better manage the increased burden of work
due to evolving regulation and disclosure
requirements. During the course of 2014,
however, it was decided that the matters
considered by the Strategic Transaction and
Technology Committee are capable of being
considered by the Board as a whole.
Consequently, while the Committee
functioned well, the Board has decided to
abolish this committee from 2015 onwards.
As Chairman of the Remuneration Committee,
Mike Cannon has set out a letter to
shareholders on page 67 of this report.
Our Audit Committee continues to operate
effectively and Eamonn O’Hare assumed the
role of Chairman of this key committee in
December 2014. On the Nomination
Committee, we continue to review the
composition of the Board as a whole to ensure
we have the appropriate mix of skills and
experience at Board level to guide the Company
in Shareholders’ best interest; and, to ensure we
are appropriately equipped with the necessary
skills and expertise to balance and manage
corporate and financial risk. We also review and
ensure there are appropriate succession plans in
place for all key executive positions within the
Company to minimise “key-man” risk.
We have advised the Board that a number of
changes to the composition of Board sub-
committees are required in 2015 to reflect
changes to the composition of the Board and
to ensure each committee complies with
relevant independence criteria. The composition
of the Board sub-committees will be reviewed
ahead of the AGM in April 2015 and changes
will be made consequent on the retirement of
John McMonigall and Peter Weber.
In line with a recommendation of the UK
Corporate Governance Code, during 2014,
we appointed an independent third party to
conduct an external evaluation of the Board.
Findings and recommendations were
presented to the Board in February 2015. In
addition, in line with our updated Corporate
Governance guidelines, the non-executive
Directors met during 2014 to review the
performance of the Chairman. This is now an
annual process.
Finally, as we have outlined before, as a
Board, we are open to feedback from
Shareholders. John McMonigall is currently
our Senior Independent Director and is
available to Shareholders as are the Chairman
and Chief Executive. All Directors are also
available at the Group’s Annual General
Meeting and we encourage you to take
advantage of this opportunity should you
wish to meet with and engage in discussion
with any member of your Board.
Russ Shaw
Chairman, Nomination Committee
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 52
Leadership – Dialog Board of Directors
The Board of Dialog currently comprises nine Directors. This includes
one executive Director, and eight independent non-executive Directors
(including the Chairman).
From left: Eamonn O’Hare, Russ Shaw, Dr Jalal Bagherli, John McMonigall, Rich Beyer, Aidan Hughes, Chris Burke, Mike Cannon and Peter Weber.
The Board of Directors comprises a mix of the
necessary skills, knowledge and experience
required to provide leadership, control and
oversight of the management of the Company
and to contribute to the development and
implementation of the Company’s strategy.
Department of Commerce’s Manufacturing
Council. He currently serves on the Boards of
Analog Devices and Micron Technology Inc and
previously served on the Boards of Credence
Systems Corporation (now LTX-Credence),
XCeive Corporation and Signet Solar.
In particular, the Board combines a group of
Directors with diverse backgrounds within the
technology sector, in both public and private
companies, which combine to provide the
Board with a rich resource and expertise to
drive the continuing development of Dialog
and advance the Company’s commercial
objectives.
Director biographies are set out below
and further details on the composition of the
Board, and the Board’s sub-committees are
detailed on pages 61 and 62.
Rich Beyer
Chairman
Rich joined the Board in February 2013 as an
independent non-executive Director and was
appointed Chairman in July 2013. Rich has a
long-standing career in the technology sector.
He was the Chairman and CEO of Freescale
Semiconductor from 2008 to 2012. Prior
to this, he held successive positions as CEO
and Director of Intersil Corporation, Elantec
Semiconductor and FVC.com. He has also held
senior leadership positions at VLSI Technology
and National Semiconductor Corporation. In
2012, he was Chairman of the Semiconductor
Industry Association Board of Directors and
served for three years as a member of the US
Rich served three years as an officer in the
United States Marine Corps. He earned
Bachelor’s and Master’s degrees in Russian
from Georgetown University, and an MBA
in marketing and international business
from Columbia University Graduate School
of Business.
External appointments
Rich currently serves on the Boards of Micron
Technology Inc and Analog Devices Inc.
Board experience ●¨
Dr Jalal Bagherli
Executive Director
(Chief Executive Officer)
Jalal joined Dialog as CEO and an executive
Board Director in September 2005. He was
previously Vice President & General Manager
of the Mobile Multimedia business unit for
Broadcom Corporation. Prior to that Jalal was
the CEO of Alphamosaic, a venture-funded
silicon start-up company in Cambridge,
focusing on video processing chips for mobile
applications. He has extensive experience
of the semiconductor industry, through his
previous professional and executive positions
at Sony Semiconductor and Texas Instruments,
managing semiconductor product businesses
and working with customers in the Far East,
Europe and North America.
Jalal has a BSc (Hons) in Electronics Engineering
from Essex University, and holds a PhD in
Electronics from Kent University, UK.
External appointments
Jalal is a non-executive director of Lime
Microsystems Ltd since 2005 and was the
Chairman of the Global Semiconductor
Association Europe from 2011 to 2013.
Board experience ●¨
Chris Burke
Independent 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. He was then
Chief Technology Officer (CTO) in Energis
Communications (at the 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.
External appointments
Chris serves on the private company boards of
Fly Victor, One Access, MusicQubed, Premium
Credit and Navmii.
Committee membership S* R
Board experience ●¨
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 53
John McMonigall
Independent 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.
In 2012, John was appointed the Senior
Independent Director at Dialog.
External appointments
John is a Chairman of three private companies
and is a Trustee of two charities.
Committee membership A N
Board experience ●n¨
Eamonn O’Hare
Independent non-executive Director
Eamonn joined the Board in May 2014 as
an independent non-executive director and
was appointed as Chairman of the Audit
Committee in December 2014. Eamonn has
spent over two decades as CFO of some of
the world’s fastest growing consumer and
technology businesses. From 2009 to 2013, he
was CFO and main board member of the UK’s
leading entertainment and communications
business, Virgin Media Inc. and led its
successful sale to Liberty Global Inc. in 2013.
From 2005 to 2009, he served as CFO of the
UK operations of one of the world’s largest
retailers, Tesco plc. Before joining Tesco
he was CFO and Board Director at Energis
Communications and led the successful
turnaround of this high profile UK telecoms
company. Prior to this Eamonn spent ten years
at PepsiCo Inc. in a series of senior executive
roles in Europe, Asia and the Middle East.
Eamonn spent the early part of his career in
the Aerospace industry with companies that
included Rolls-Royce PLC and BAE Systems PLC.
External appointments
Eamonn’s 20 years of experience as a Chief
Financial Officer and Board Director in many
leading consumer facing and technology
orientated businesses, brings a wealth of
relevant business and financial expertise as
well as extensive knowledge of financial
management and accounting principles.
Committee membership A*
Board experience n¨
Mike Cannon
Independent non-executive Director
Mike joined the Board in February 2013. His
career in the high-tech industry spans 30 years,
including over ten years as CEO of two Fortune
500 companies. He was President, Global
Operations of Dell from February 2007 until
his retirement in 2009. Prior to joining Dell,
Mike was the CEO of Solectron Corporation,
an electronic manufacturing services company,
which he joined as CEO in 2003. From
1996 until 2003 Mike was CEO of Maxtor
Corporation, a disk drive and storage systems
manufacturer. He successfully led the NASDAQ
IPO of Maxtor in 1998. Mike previously held
senior management positions at IBM and
Control Data Corporation.
Mike studied Mechanical Engineering at
Michigan State University and completed the
Advanced Management Program at Harvard
Business School.
External appointments
Mike currently serves on the Boards of Adobe
Systems Inc., Seagate Technology and Lam
Research. He is a member of Adobe’s Audit
Committee and previously served for five years
as Chairman of the Compensation Committee.
He is also a member of both the Finance
Committee and Nominating & Governance
Committee at Seagate; and, a member of
the Nominating & Governance and Audit
Committees at Lam Research.
Committee membership R* N
Board experience ●¨
Aidan Hughes
Independent non-executive Director
Aidan joined the Board in October 2004.
He is a Fellow of the Institute of Chartered
Accountants in England and Wales and
qualified as a chartered accountant with
PriceWaterhouse in the 1980s. He has held
senior finance roles at Lex Service Plc and
Carlton Communications Plc. He was a FTSE
100 finance director, having held that position
at the Sage Group Plc from 1993 to 2000.
From December 2001 to August 2004, he was
a Director of Communisis Plc.
External appointments
Aidan is a non-executive director and Chair of
Audit Committee for Ceres Power Holdings Plc
and has a part-time executive role in leading
UK software company Corelogic Limited. He
is also an investor and adviser to a number of
international private technology companies.
Committee membership A N S
Board experience ●n¨
Russ Shaw
Independent non-executive Director
Russ joined the Board in July 2006 and has
over 20 years’ senior marketing and brand
management experience in the technology,
telecoms and financial services sectors.
Russ most recently served as the Vice
President & General Manager for Skype,
with responsibilities for its Mobile Division as
well as Europe, the 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. Russ is a past Chairman of
the Marketing Group of Great Britain, is senior
adviser to Ariadne Capital and Founder and
Chairman of Tech London Advocates.
External appointments
Russ is currently a non-executive Director for
Unwire A.p.S. and LetterOne Telecom.
Committee membership N* R
Board experience ●¨
Peter Weber
Independent non-executive Director
Peter joined Dialog in February 2006. He
has 35 years’ experience, gained at a broad
range of companies in the semiconductor
and communication sectors, 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, the US and Asia. Peter holds an MSEE
degree in Communications Engineering.
External appointments
Peter is a Director of a number of private
companies.
Committee membership A R S
Board experience ●n
Committee Membership
A = Audit Committee
N = Nomination Committee
R = Remuneration Committee
S = Strategic Transaction and
Technology Committee
* denotes Chair of the committee
Board experience
● Technology
Telecommunications
n Finance
¨ Governance
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance
54
Leadership – Management team
Back row from left: Udo Kratz, Christophe Chene, Jean-Michel Richard, Andrew Austin, Davin Lee and Mark Tyndall.
Front row from left: Vivek Bhan, Mohamed Djadoudi, Dr Jalal Bagherli, Sean McGrath and Martin Powell.
Dr Jalal Bagherli
Chief Executive Officer
Jalal joined Dialog as CEO and an executive
Board Director in September 2005. He was
previously Vice President & General Manager
of the Mobile Multimedia business unit for
Broadcom Corporation. Prior to that Jalal was
the CEO of Alphamosaic, a venture-funded
silicon start-up company in Cambridge,
focusing on video processing chips for mobile
applications. He has extensive experience
of the semiconductor industry, through his
previous professional and executive positions
at Sony Semiconductor and Texas Instruments,
managing semiconductor product businesses
and working with customers in the Far East,
Europe and North America.
Jalal is a non-executive Director of Lime
Microsystems Ltd since 2005 and was the
Chairman of Global Semiconductor Association
Europe from 2011 to 2013. He has a BSc
(Hons) in Electronics Engineering from Essex
University, and holds a PhD in Electronics from
Kent University, UK.
Andrew Austin
Senior 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.
Vivek Bhan
Senior Vice President, Engineering
Vivek joined Dialog in November 2013 and
is responsible for the overall engineering
and technology direction, including design
and product development across the various
business groups within Dialog. He brings a
wealth of engineering leadership experience
in the semiconductor industry including
technology and products for advanced cellular
systems, connectivity and medical applications
within RF, mixed signal and SOC space. He
has held senior positions at Freescale, Fujitsu
Semiconductor and Motorola. Vivek holds a
MS in Electrical Engineering and MBA from
Arizona State University.
Christophe Chene
Senior Vice President, Asia
Christophe joined Dialog in November 2011
as Vice President, Asia and is based in Taiwan.
He has over 20 years of experience in the
semiconductor industry, focusing on building
international businesses with a strong Asian
footprint. Previously 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.
Mohamed Djadoudi
Senior 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 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 (Atlantis Technology), based in Hong
Kong, before becoming one of the original
members of the management buy-out team
of ASAT UK, where he served as the Technical
Director. Mohamed holds an Electronic and
Electrotechnic degree from the Paris University
of Technology.
Udo Kratz
Senior Vice President and General
Manager, Mobile Systems Business Group
Udo joined Dialog in May 2006. He is
responsible for the Audio and Power
Management Business Unit. He has over
20 years’ experience in the semiconductor
industry, 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.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 55
Davin Lee
Senior Vice President and
General Manager Power Conversion
Business Group
Davin joined Dialog in July 2014. He was
previously CEO of Scintera Networks. Prior
to that Davin was the Vice-President and
General Manager of the Consumer Business
Unit at Intersil Corporation. Prior to that Davin
was Vice-President of Marketing at Xicor.
He previously held senior positions within
Altera and National Semiconductor. Davin
holds a BSEE from The University of Texas at
Austin and an MBA from Kellogg School of
Management at Northwestern University.
Sean McGrath
Senior Vice President and General
Manager, Connectivity, Automotive and
Industrial Business Group
Sean joined Dialog in November 2012.
Sean has more than 15 years’ experience in
RF semiconductor businesses, introducing
innovative business models and leading
organisations to rapid growth. Prior to Dialog
he was General Manager of the Smart Home
& Energy group at NXP and General Manager
of the RF Power and Base Stations business
at NXP/Philips Semiconductors. He previously
held senior roles at Philips Semiconductors
and Mikron Austria GmbH, focusing on the
RFID and connectivity markets. Sean holds an
honours degree in Geophysics and Geology
from Harvard University and an MBA with
distinction from INSEAD.
Mark Tyndall
Senior Vice President, Corporate
Development and Strategy and
General Manager Emerging Products
Business Group
Mark joined Dialog Semiconductor in
September 2008. Prior to this, 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.
Martin Powell
Senior Vice President, Human Resources
Martin joined the Company in July 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. Most recently he 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 and continental Europe as well as the UK.
Jean-Michel Richard
CFO, Senior 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.
“Dialog has a strong and
effective management team
led by Chief Executive
Officer, Dr Jalal Bagherli.”
Management team
Name
Role
Dr Jalal Bagherli
Chief Executive Officer
Andrew Austin
Senior Vice President, Sales
Vivek Bhan
Senior Vice President, Engineering
Christophe Chene
Senior Vice President, Asia
Mohamed Djadoudi
Senior Vice President, Global Manufacturing Operations and Quality
Udo Kratz
Senior Vice President and General Manager, Business Group Mobile Systems
Davin Lee
Sean McGrath
Senior Vice President and General Manager Power Conversion Business Group
Senior Vice President and General Manager, Connectivity,
Automotive and Industrial Business Group
Martin Powell
Senior Vice President, Human Resources
Jean-Michel Richard
Mark Tyndall
CFO, Senior Vice President Finance
Senior Vice President, Corporate Development and Strategy
and General Manager Emerging Products Business Group
Tenure with Dialog (years)
9
5
1
3
7
8
1
2
4
8
6
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 56
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 2014. These accounts have been prepared
under IFRS and are available on the Company’s website:
www.dialog-semiconductor.com
Principal activities and review
of the business
Dialog Semiconductor creates and
markets highly integrated, mixed signal
ICs, optimised for personal portable, low
energy short-range wireless, LED solid-state
lighting and automotive applications. The
Company provides customers with world-
class innovation combined with flexible
and dynamic support, and the assurance of
dealing with an established business partner.
The Company is listed on the Frankfurt
(FWB: DLG) Stock Exchange (Regulated
Market, Prime Standard, ISIN
GB0059822006) and is a member of the
German TecDax index. It also has convertible
bonds listed on the Euro MTF Market on the
Luxemburg Stock Exchange
(ISIN XS0757015606). The Company is
registered in the UK and the registered
number is 3505161.
Further information on the principal
activities of the business and the factors
affecting future developments are detailed
in the Group’s Strategic report set out on
pages 02 to 50. Information on treasury
policies and objectives is included in note 2
to these financial statements.
Future developments
The Group’s stated objective is to be the
leading global supplier of highly integrated,
mixed signal ICs, optimised for personal
portable, low energy short-range wireless,
LED solid-state lighting and automotive
applications. The key aspects of the Group’s
strategy are set out in the Strategic report
on pages 14 to 23.
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
research and development (R&D) of 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 custom ASICs, and for
the development of ASSPs. The Company
does not expect any material change to this
approach in the foreseeable future.
Greenhouse gases
Corporate responsibility and a commitment
to sustainable business practices are
important to the Dialog business model and
a component of Dialog’s strategy to deliver
long-term profitable growth. Our
commitment to environmentally oriented,
sustainable business practices is evidenced
in our commitment to continue to reduce
CO2 emissions and minimise the carbon
footprint of our business. We achieved a
reduction of CO2 emissions of 44% in our
design centres in 2014 and this follows a
40% reduction in 2013 and a 34%
reduction in 2012. Further details on the
Group’s commitment to sustainable and
environmentally friendly business practices
are set out on pages 42 to 45.
Going concern
The Directors have formed a judgement
at the time of approving the financial
statements that there is a reasonable
expectation that the Group has adequate
resources to continue for the foreseeable
future. The Group holds US$324 million
of cash at the year end (2013: US$186
million) and has continued access to a
US$10 million borrowing facility. The
Group expects to continue to deliver
revenue and profit growth in the period
ahead. For these reasons, the Directors
have adopted the going concern basis
in preparing the financial statements.
Dividends
The Directors do not recommend the
payment of a dividend for 2014 (2013: nil).
They are committed to reinvesting all profits
into the business and believe that this policy
is currently 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,
Executive Incentive Plan and Employee
Share 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
2014, the Trust held 2,787,214 shares,
which represented 3.92% of the total
called-up share capital, at a nominal
value of £278,721.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance
57
Share capital
The Company’s issued share capital
comprised a single class of shares referred to
as ordinary shares.
is subject to annual re-election. The next
Annual General Meeting will be held on 30
April 2015 at 9am at Tower Bridge House,
St Katharine’s Way, London E1W 1AA.
Details of the share capital are set out in
note 22 to the consolidated financial
statements.
Substantial shareholdings
Details of substantial shareholdings are on
page 63 of this annual report.
Directors
The Directors, together with their
biographies, are listed on pages 52 and
53 of this report.
Powers of Directors
The Directors are authorised to issue the
nominal amount of securities representing
the aggregate of approximately one third of
the issued share capital of the Company; of
that one third they can issue an amount
equal to 5% of the issued share capital on a
non-pre-emptive basis. The Directors have
additional power to issue up to a further
third of the issued share capital of the
Company, provided it is only applied on
the basis of a rights issue.
Directors’ remuneration and interests
Directors’ remuneration and interests are
detailed in the Directors’ remuneration
policy report on pages 68 to 74 of this
report. No Director had a material interest
during the year ended 31 December 2014
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. Any Director who has
been on the Board for more than nine years
Corporate Governance
The Company’s Corporate governance
statement is set out on pages 59 to 66 of
this report. We also publish, on our website,
our own Corporate Governance principles
which have regard to the UK Corporate
Governance Code and other best practice
corporate governance policies.
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
2014 were 51 days (2013: 65 days).
Principal risks and uncertainties
The Company is exposed to a number of
risks and uncertainties that could affect the
performance of the Company and its
prospects. The Board of Directors and Audit
Committee are responsible for the
Company’s process of internal control and
risk management and for reviewing its
continuing effectiveness. The Board ensures,
to the extent possible, that the system of
internal procedures and controls is
appropriate to the nature and scale of the
Company’s activities and that appropriate
processes and controls are in place to
effectively manage and mitigate strategic,
operational, financial and other risks facing
the Company. A detailed list of risks and
their management are set out on pages
46 to 50 of this report.
Financial instruments
The Group’s financial risk management and
policies, and exposure to risks, are set out
on pages 49 to 50 of this report.
Political and charitable contributions
The Group made no political contributions
during the period. Dialog made charitable
contributions of US$500,282 to local
community projects (2013: US$485,300).
Further details of the Group’s commitment
to corporate and social responsibility are set
out on pages 42 to 45 of this report.
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 that 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.
Diversity and equal opportunity
In 2014, Dialog operated from 30 locations
in 15 countries with a highly diverse
workforce, incorporating employees from
58 nationalities.
Dialog takes equality and equal opportunity
for all employees very seriously. We believe
diversity among an employee base is an
important attribute to a well-functioning
business. Diversity spans a range of factors
including diversity in terms of geographic
origin, background, gender, race, faith,
education, experience, viewpoint, interests
and technical and interpersonal skills.
We also ensure that we offer equal
opportunities in all aspects of employment
and advancement regardless of age,
disability, gender, marital status, nationality,
race, religious or political beliefs or sexual
orientation.
Where existing employees become disabled,
it is the Group’s policy to provide continuing
employment wherever practicable in the
same or alternative position and to provide
appropriate training to achieve this aim.
Gender diversity is of particular importance.
Women comprise 15.8% of the overall
workforce of 1,373 employees and further
details are set out on page 40 of this report.
Although this is in line with the industry
standard, the Company is supporting various
initiatives in the areas of STEM education for
young women in the UK, US and Taiwan to
encourage more women to pursue careers
in engineering and electronic engineering.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance
58
Directors’ report
Company, the CEO’s contract is extendable
to 12 months’ notice. Ordinarily, the CEO’s
contract provides for six months’ notice on
either side during which only basic pay and
benefits are payable. There is no
acceleration of bonus on a change of
control. In this case he is entitled to a pro
rata bonus for that year. Other factors
impacted by a change in control, such as the
redemption rights of bondholders and the
impact on share options are disclosed in the
relevant section to these financial
statements.
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 agreement between the Company
and its Directors for compensation for loss
of office are given in the Director’s
remuneration policy report on page 68
of this report.
The Company’s Articles of Association may
only be amended by a special resolution at a
general meeting of Shareholders.
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 Katharine’s Way, London E1W
1AA on 30 April 2015 at 9am.
By order of the Board
Dr Jalal Bagherli
Director
19 February 2015
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. We offer equal
opportunities in all aspects of employment
and advancement regardless of any disability.
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 52 and
53 of this report. 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.
Responsibility statement under the
disclosure and transparency rules
Each of the Directors listed on pages 52
and 53 of this report confirm that to the
best of their knowledge:
• the financial statements, prepared in
accordance with IFRS as adopted by the
European Union, give a true and fair view
of the assets, liabilities, financial position
and profit of the Company and the
undertakings included in the
consolidation taken as a whole; and
• the Strategic report and the Directors’
report include a fair, balanced and
understandable 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.
Takeovers directive
At 31 December 2014, 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 22 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. There are no securities
carrying special rights, nor are there any
restrictions on voting rights attached to the
ordinary shares. There are no restrictions
on the transfer of shares in the Company
other than:
• certain restrictions may from time to time
be imposed by laws and regulations (for
example, insider trading laws); and
• 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 22 to the
consolidated financial statements.
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 otherwise take action
with respect to the offer it thinks fair.
In the case of a change of control of the
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance Corporate Governance statement
59
The Board of Dialog Semiconductor is
committed to maintaining high corporate
governance standards to protect the
interests of all stakeholders. Such principles
reflect a range of guidelines which apply to
the Company given its status as a UK
incorporated, Frankfurt Stock Exchange
listed company. In this context the Company
has published on its website its Corporate
Governance principles which have regard to
the UK Corporate Governance Code and
other best practice corporate governance
policies. These have been updated as of
December 2014 and are reviewed on an
ongoing basis.
Board of Directors – role and
responsibilities
As Dialog is incorporated in the UK and
follows governance principles which have
regard to the UK Corporate Governance and
other best practice governance principles,
it maintains a single Board structure. The
Board has overall responsibility for the
leadership, control and oversight of the
Company. The day-to-day responsibility
for the management of the Company
has been delegated by the Board to
the Chief Executive Officer (CEO), who
is accountable to the Board. The CEO
executes this authority through an executive
management team outlined on pages
54 and 55 of this report. In addition, a
number of responsibilities of the Board
are delegated to sub-committees of the
Board; details of which are set out below.
Matters reserved for the Board
While the Board has delegated day-to-
day responsibility for the management of
the Company to the CEO, certain matters
are formally reserved for the Board.
The Board has overall responsibility for:
Company objectives; strategy; annual
budgets; risk management; acquisitions
or major capital projects; remuneration
policy; and, Corporate Governance. It
defines the roles and responsibilities of
the Chairman, CEO, other Directors and
the Board sub-committees. In addition,
the Board approves the quarterly financial
statements and reviews the Company’s
systems of internal control. It approves all
resolutions and related documentation put
before Shareholders at general meetings.
Chairman
Mr Rich Beyer is Chairman of the Board.
Rich was appointed on 23 July 2013 and
was determined by the Board to be
independent on his appointment to the
Board. The Chairman is responsible for the
effective working of the Board while the
CEO, together with the executive
management team, is responsible for the
day-to-day running of the Company. The
functions of Chairman and CEO are not
combined and both roles’ responsibilities are
clearly divided.
The Chairman, CEO and the Company
Secretary work together in planning a
forward programme of Board meetings and
meeting agendas. As part of this process the
Chairman ensures that the Board is supplied,
in a timely manner, with information in a
form and of a quality to enable it to discharge
its duties. The Chairman encourages
openness, debate and challenge at Board
meetings. The Chairman holds a number of
other directorships and the Board considers
that these do not interfere with the discharge
of his duties to the Company. The Chairman
is available to meet Shareholders on request.
Board composition
The Board currently comprises nine Directors
who are listed below. During 2014, Eamonn
O’Hare was appointed to the Board as an
independent non-executive Director. Details
on his recruitment are set out below.
Gregorio Reyes also served as a Director on
the Board during 2014 up until his
retirement on 1 May 2014.
The Board of Directors comprises a mix of
the necessary skills, knowledge and
experience required to provide leadership,
control and oversight of the management of
the Company and to contribute to the
development and implementation of the
Company’s strategy. In particular, the Board
combines a group of Directors with diverse
backgrounds within the technology sector,
in both public and private companies, which
combine to provide the Board with a rich
resource and expertise to drive the
continuing development of Dialog and
advance the Company’s commercial
objectives. In addition, the geographic
background of the Board is diverse and it
includes Directors who have worked in
North America, Europe and Asia. Director
biographies are set out on pages 52 and 53.
Board refreshment and renewal
The Board is committed to a policy of
ongoing Board refreshment and renewal.
The Nomination Committee continually
reviews the composition and diversity,
including gender diversity, of the Board; and
the skills and experience of each of the
Directors. The relevant skills and experience
of each Director are set out under individual
biographies, which are detailed on pages
52 and 53.
Board composition
Director
Rich Beyer
Status
Independent/Non-independent
Current
Independent (Chairman)
Dr Jalal Bagherli
Current
Non-independent (Executive)
Chris Burke
Current
Independent
Mike Cannon
Current
Independent
Aidan Hughes
Current
Independent
John McMonigall
Current
Independent
Eamonn O’Hare
Current
Independent
Russ Shaw
Current
Independent
Gregorio Reyes
Retired
Non-independent
Peter Weber
Current
Independent
Tenure
(years)
Concurrent
tenure* (years)
2
9
8
2
10
17
1
8
–
9
2
N/A
8
2
9
9
1
8
–
9
*Note: Concurrent tenure means tenure on the Board concurrently with the Company’s CEO.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 60
Corporate Governance statement
Subject to approval at the Annual General
Meeting by Shareholders, Directors are
appointed for a term of three years. Any
Director who has been on the Board for
more than nine years is subject to annual
re-election. The standard terms of the letter
of appointment of non-executive Directors
are available, on request, from the Company
Secretary. Directors seeking re-election are
subject to a performance appraisal, which is
overseen by the Nomination Committee. In
accordance with its Articles of Association a
third of Directors stand for re-election at
each Annual General Meeting.
Consistent with a commitment to ongoing
Board refreshment and renewal, one
new Director was appointed to the Board
in 2014. The Nomination Committee
engaged in a process to appoint a new
Director who would bring specific industry
experience to the Board. Candidates were
identified through a variety of methods.
The Nomination Committee engaged an
external search and recruitment agent
to identify potential candidates and to
assist in selecting and recommending
candidates. The recruitment agent
has no other relationship with Dialog
other than in the role to assist in the
identification and recruitment of Board
Directors. Informal industry contacts
were also used. The Committee, which is
committed to achieving a greater level of
gender diversity on the Board over time,
made considerable effort to ensure that
gender was a significant consideration
factor in the identification of potential
candidates in addition to relevant industry
and public company board experience.
Following a thorough process, candidates
met with Committee members and the
Chairman prior to appointment. Eamonn
O’Hare was appointed to the Board
on the strength of industry experience
and skills he can bring to the Board of
Directors as a whole for the benefit
of all Dialog Shareholders. Eamonn
also joined the Audit Committee and
assumed the role of Chairman of the
Audit Committee in December 2014.
During the year, Gregorio Reyes retired from
the Board having served as a Director since
2003 and as Chairman from 2006 to 2013.
Two further Directors, John McMonigall and
Peter Weber, have also indicated to the
Board that they will not seek re-election to
the Board at the April 2015 AGM. John and
Peter are long-standing members of the
Board, having served for 17 and nine years
respectively, and they have both made a
significant contribution to the growth and
development of Dialog during their tenure.
Board size
At the end of 2014, the Board comprised
nine Directors. A maximum of ten Directors
is allowable under Dialog’s Articles of
Association. The nine members of the
Dialog Board includes one Executive Director
and eight independent, non-executive
Directors (including the Chairman). The
Nomination Committee has reviewed the
size and performance of the Board during
the year. A Board of nine Directors has and
continues to function effectively; comprises
the skills, knowledge and experience
required by Dialog; is not so large as to be
unwieldy; and meets Corporate Governance
best-practice guidelines on independence.
Board independence
Corporate Governance best practice
states that at least half the Board,
excluding the Chairman, should comprise
non-executive Directors determined
by the Board to be independent.
The Company has determined that Chris
Burke, Mike Cannon, Aidan Hughes,
John McMonigall, Eamonn O’Hare,
Russ Shaw and Peter Weber and are
independent. The Chairman, Rich Beyer,
was independent on his appointment
to the Board. The Company’s Chief
Executive Officer, Dr Jalal Bagherli, is the
only Executive Director on the Board.
Excluding the Chairman, the Board currently
comprises seven independent non-executive
Directors and one Executive Director and is,
therefore, compliant with the principle that
at least half the Board, excluding the
Chairman, should comprise Directors
determined by the Board to be independent.
As part of its annual review in 2014, the
Board specifically considered the
independence of Mr John McMonigall given
his tenure on the Board. When assessing the
potential impact of tenure on any Director’s
independence, the Board views the issues of
concurrency with Executive Directors as
central to that process. The Board’s
unanimous view is that Mr McMonigall’s
independence and objectivity, as evidenced
by his continuing valuable contribution at
Board meetings, has, in no way, been
compromised by his length of tenure on the
Board. The Board also believes that his
industry experience and contribution to the
continuing development of Dialog has been
of significant benefit to the Board as a whole.
Despite his continuing valued contribution
to the Board, Mr McMonigall will retire,
together with Peter Weber from the Board
in 2015 and will not seek re-election at the
2015 AGM.
Following the retirement of John
McMonigall and Peter Weber at the AGM,
the Board will, excluding the Chairman,
comprise five independent non-executive
Directors and one Executive Director and
will, therefore, remain compliant with
best-practice independence guidelines.
Senior Independent Director
John McMonigall is currently the Senior
Independent Director. He is available to
Shareholders who have concerns for which
contact through the normal channels of
Chairman or Chief Executive Officer has
failed to resolve or for which such contact is
inappropriate. He is available to meet
Shareholders on request.
Audit Committee Financial Expert
Dialog’s Audit Committee is comprised of a
number of Directors who have recent and
relevant financial experience.
Aidan Hughes, the former Chairman of the
Audit Committee is a qualified chartered
accountant; a Fellow of the Institute of
Chartered Accountants in England and
Wales; and has significant experience as a
senior accountant and Finance Director at a
number of public companies. His biography
is set out on page 53.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 61
2014 Board and sub-committees
Director
Board
Audit
Remuneration
Nomination
Number of meetings in 2014
Meetings attended
Richard Beyer
Dr Jalal Bagherli
Chris Burke
Michael Cannon
Aidan Hughes
John McMonigall
Eamonn O’Hare
Russ Shaw
Gregorio Reyes
Peter Weber
5
5
5
5
5
5
4
4
5
1
4
5
5
4
3
4
5
5
5
5
5
5
5
5
4
5
Aidan Hughes, former Chairman of the Audit Committee, Eamonn O’Hare current Chairman of the Audit Committee,
Russ Shaw, Chairman of the Nomination Committee; and, Mike Cannon, Chairman of the Remuneration Committee
are also available to Shareholders should they have specific concerns or issues relevant to their respective Committees.
The Strategic Transaction and Technology Committee has been abolished and matters previously reserved for this
Committee are now considered by the Board as a whole.
In addition, Eamonn O’Hare, the incoming
Chairman of the Audit Committee, also has
two decades experience as CFO at some of
the world’s fastest growing consumer and
technology businesses.
Company Secretary
All Directors have access to the advice and
services of the Company Secretary, who is
responsible to the Board for ensuring that
Board procedures are complied with. The
Company Secretary seeks to ensure that the
Board members receive appropriate
induction and ongoing training and
development to enable them to discharge
their duties. The Company Secretary is also
responsible for advising the Board on all
Corporate Governance matters.
Board meetings
The Board holds at least five Board meetings
each year. The Board may meet more
frequently as required. The number of
meetings of Board sub-committees each
year varies by Committee. There were five
Board meetings in 2014. The attendance at
Board and sub-committee meetings by the
Directors who held office in 2014 is set out
above. The Board places considerable
importance on attendance at both
scheduled Board and sub-committee
meetings. During the year, no Director
attended less than 75% of scheduled Board
or Board sub-committee meetings to which
they were entitled to attend. At scheduled
Board meetings, the Board also meets
without the Executive Director present.
Director induction and
continuing development
Following appointment to the Board,
new Directors are provided with
induction materials and are briefed on
the Company, its structure, strategy,
technologies, operations, Corporate
Governance practice, and their duties
and responsibilities as a Director.
Briefings for all non-executive Directors
are held with the executive management
at Board meetings. Throughout the
year, Directors are also provided with
detailed briefing materials on the
performance of the Company and
market analysis on the performance
of, and prospects for, the business.
Director training and development
The Board is committed to a programme
of periodic training and development
of its Directors. As part of this process,
at least one Board meeting is held at
the location of one of the Company’s
international offices each year. During
2014 one Board meeting was held at Los
Gatos, California and another meeting
at the Company’s office in Den Bosch.
The Company has also put in place a
process of periodic training sessions for
Directors which are facilitated by a third
party. In 2014, the Board received a
training session on Crisis Management.
Performance evaluation
The Board recognises the importance of
continuing evaluation of the performance
of the Board and its Committees
and a review of the operation and
performance of the Board and its
Committees is undertaken annually.
The appointment and removal of the
Company Secretary is a matter for the Board.
Tim Anderson of Reynolds Porter
Chamberlain LLP is the Company Secretary
and has served in this role for over 15 years.
In addition, in line with our updated
Corporate Governance guidelines, the
non-executive Directors meet annually to
review the performance of the Chairman.
This process, which commenced in 2014,
is now an annual process.
An annual, internal review was conducted
in 2012 and 2013. For 2014, however,
consistent with corporate governance
best-practice, the Board engaged
an independent third party to
conduct an evaluation.
All of the Company’s non-executive
Directors attended this meeting.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 62
Corporate Governance statement
The evaluation was conducted in 2014 by
Equity Communications Ltd, a company
which has no other connection with Dialog.
The findings of the evaluation were
presented to the Board in February 2015
and the Board is considering ways to best
implement its recommendations.
As referenced previously, the non-executive
Directors also met in 2014 to review the
performance of the Chairman. All of the
Company’s non-executive Directors
attended this meeting.
External non-executive directorships
The Board believes that a broadening of
the skills, knowledge and experience of
non-executive Directors is of benefit to
the Company. The Company welcomes
the participation of the non-executives on
the Boards of other companies. To avoid
potential conflicts of interest, non-executive
Directors inform the Chairman of the
Nomination Committee before taking up
any external appointments. Details of the
non-executive positions of each Director
are set out under individual biographies
which are detailed on pages 52 and 53.
Directors’ fees
The annual fee for non-executive Directors
is £80,000. The annual fee for the Chairman
is £110,000. The Chair of the Audit
Committee, the Remuneration Committee,
the Nomination Committee and the
Strategic Transaction and Technology
Committee received an additional fee of
£10,000 for their role on that Committee.
The other Committee members receive
no additional fee for serving on those
Committees. Details of the activities
of these Committees during 2014
are set out on pages 64 to 66.
Directors’ fees are paid in cash. Non-
executive Directors are not eligible to
participate in the Company’s bonus or
share award schemes. In the past,
non-executive Directors were awarded
share options. This is no longer the
practice at Dialog and it is not intended
that share options will be awarded to
non-executive Directors in the future.
None of the remuneration of the non-
executive Directors is performance related.
Non-executive Directors’ fees are not
pensionable and non-executive Directors
are not eligible to join any Company
pension plans. Non-executive Directors
are reimbursed for their reasonable travel
and accommodation expenses incurred
in connection with attending meetings
of the Board or related committees.
The compensation of the executive Director
comprises a base salary and variable
components. Variable compensation
includes an annual bonus linked to, and
dependent on, certain business targets as
well as long-term incentives. The executive
Director’s remuneration is inclusive of any
Director’s fee. Further details are set out in
the Directors’ report on remuneration which
begins on page 67.
Committee members
Audit
Committee
Nomination Committee
Remuneration Committee
Eammon O’Hare (Chair)
Russ Shaw (Chair)
Mike Cannon (Chair)
Aidan Hughes
John McMonigall
Peter Weber
John McMonigall
Aidan Hughes
Mike Cannon
Chris Burke
Russ Shaw
Peter Weber
100% independent (4 of 4)
100% independent (4 of 4)
100% independent (4 of 4)
The composition of the Board sub-committees will be reviewed ahead of the AGM in April 2015 and changes will be
made consequent on the retirement of John McMonigall and Peter Weber.
Share ownership and dealing
Details of Directors’ shareholdings are set
out on page 78. The Company has a policy
on dealing in shares that applies to all
Directors and senior management. Under
this policy, Directors are required to obtain
clearance from the Chief Executive Officer
(or in the case of the Chief Executive Officer
himself, from the Chairman) before dealing.
Directors and senior management are
prohibited from dealing in the Company’s
shares during designated close periods
and at any other time when the individual
is in possession of Inside Information
as defined by the Market Abuse
(Directive 2003/6/EC) Regulations.
Transactions in securities of the
Company’s own shares carried out by
members of the Board of Directors and
of their family members will be reported
within five business days and published
without delay, if the total value of such
transactions in any one year exceeds
€5,000, pursuant to and in accordance
with section 15a of the German Securities
Trading Act (Wertpapierhandelsgesetz).
Loans to Directors or senior executives
The Company will not provide or guarantee
any loans to Directors or senior executives.
Board sub-committees
The Board has established a number of
sub-committees to assist in the execution of
its responsibilities. During 2014, these were:
Audit Committee, Remuneration
Committee, Nomination Committee and
Strategic Transaction and Technology
Committee. Ad hoc committees are formed
from time to time to deal with specific
matters.
During the course of 2014, however, it was
decided that the matters considered by the
Strategic Transaction and Technology
Committee are capable of being considered
by the Board as a whole. Consequently,
while the Committee functioned well, the
Board has decided to abolish this committee
from 2015 onwards.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 63
The composition of the Board sub-
committees, as at 19 February 2015, is set
out on page 62. Attendance at meetings
held in 2014 is set out in the table on
page 61. The composition of the Board
sub-committees, will be reviewed ahead
of the AGM in April 2015 and changes will
be made consequent on the retirement of
John McMonigall and Peter Weber.
Each of the permanent Board Committees
has terms of reference under which
authority is delegated to them by the Board.
These terms of reference are available on
the Company’s website. The Chairman of
each sub-committee attends the Annual
General Meeting and is available to answer
Shareholder questions. The reports of each
of the Board sub-committees are set out on
pages 64 to 66 of this report.
Relations with Shareholders
The Company is committed to ongoing and
active communication with its Shareholders.
Dialog has a Head of Investor Relations who
manages communication between the
Company, its Shareholders and the broader
financial community. The Company also
retains independent advisers in the UK and
Germany to help manage communication
with both English and German speaking
Shareholders. Dialog prepares annual and
quarterly consolidated financial statements
in accordance with generally accepted
accounting principles in accordance with
International Financial Reporting Standards.
The Company maintains an investor
relations section on its website:
dialog-semiconductor.com/investor-relations.
This contains copies of investor
presentations and annual reports as well as
providing other financial statements and
corporate press releases.
There is regular discussion between
Company management and analysts,
brokers and institutional Shareholders,
ensuring that the market is appropriately
informed on business activities.
In June 2014, Dialog hosted a day of
presentations and product displays,
for institutional investors and analysts.
The event was attended by some of
Dialog’s senior management team.
Dialog promptly discloses price
sensitive information to all market
participants. Notifications are first
sent to the Frankfurt Stock Exchange
and the Federal Financial Supervisory
Authority in Germany (Bundesanstalt
für Finanzdienstleistungsaufsicht
– BaFin) and then published via an
electronic information system.
Significant Shareholders
The provisions of the UK Disclosure Rules
and Transparency Rules (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.
In accordance with DTR 5.1.5 with respect to
voting rights attached to shares held by
investment managers (on behalf of clients),
by scheme operators and ICVCs, the first
threshold for disclosure is set at 5%, with
the next level set at 10% and every
percentage above 10%.
Once Dialog is notified, the Company
must then notify BaFin and the
Frankfurt Stock Exchange. Under S.15a
of the German Securities Trading Act
(Wertpapierhandelgesetz) 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.
Dialog’s shares are listed with Clearstream
Germany as legal owner. As far as the
Company is aware, based on TR-1
notifications received, those holding a
significant beneficial interest (i.e. greater
than 3%) in the Company as of 31
December 2014 were:
6.18%
3.98%
3.01%
Waddell & Reed
Kleinwort Benson
(Jersey) Trustees 2011
Limited as Trustee of the
Dialog Semiconductor plc
Employee Benefit Trust
BNP Paribas Investment Partners
S.A.
As of 10 February 2015, the Company was
aware of the following holdings:
4.34%
4.04%
3.84%
Kleinwort Benson (Jersey)
Trustees (2011) Limited as
Trustee of the Dialog
Semiconductor plc Employee
Benefit Trust
BNP Paribas Investment Partners
S.A.
Waddell & Reed
Dialog’s free-float is 67,983,136 or 95.7
of the outstanding shares. The free-float is
calculated by excluding the 3,085,794
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 2014:
The Bank of New York
Mellon SA/NV
Citigroup Global Markets
BNP Paribas Securities Services
State Street
Clearstream Banking S.A.
Chase Nominees Ltd
Nortrust Nominees Limited
CACEIS Bank Deutschland
RBC Investor Services Trust
9,668,171
7,349,240
4,688,073
4,610,163
3,309,883
3,191,294
2,950,040
2,495,640
2,257,177
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance
64
Corporate Governance statement
Internal control and risk management
In accordance with the EU Transparency
Directive (DTR 7.2.5), the Board of Directors
and Audit Committee acknowledge that
they are responsible for the Company’s
process of internal control and risk
management and for reviewing its
continuing effectiveness. Such processes are
designed to manage rather than eliminate
the risk of failure and can only provide
reasonable and not absolute assurance
against material misstatement or loss.
The Board ensures, to the extent possible,
that the system of internal procedures
and controls is appropriate to the nature
and scale of the Company’s activities and
that appropriate processes and controls
are in place to effectively manage and
mitigate strategic, operational, financial
and other risks facing the Company.
A detailed list of risks and their management
is set out on pages 46 to 50.
The Company has an ongoing process of
identifying, evaluating and managing risk.
This process is reviewed in accordance with
the EU Transparency Directive. The process
was in place during 2014 and up to the date
of the approval of the 2014 annual report
and financial statements. The Board and
Audit Committee can confirm that necessary
actions are being undertaken to remedy any
perceived failings or weakness identified
from these ongoing process reviews.
Dialog Board sub-committees
As set out in the Corporate Governance
Report, the Board has established a
number of sub-committees to assist in the
execution of its responsibilities. During
2014, these were: Audit Committee,
Remuneration Committee, Nomination
Committee and Strategic Transaction
and Technology Committee. Reports on
the activity of these committees during
2014 are set out on the following pages.
There is a standalone report for the
Remuneration Committee on page 66.
Audit Committee
The Board of Directors has established
an Audit Committee and has delegated
authority to the Committee to consider
and report to the Board on the Company’s
financial reporting, internal control and risk
management procedures, and the work
of the internal and external auditors.
During 2014, the Audit Committee
comprised only independent non-
executive Directors: Aidan Hughes, John
McMonigall and Peter Weber. Eamonn
O’Hare also joined the Committee
following his appointment to the Board.
As set out on page 60, the Board has
determined that both Eamonn O’Hare and
Aidan Hughes have recent and relevant
financial experience.
The Audit Committee meets a minimum of
four times a year. In 2014, the Committee
met five times. Attendance at meetings held
is set out in the table on page 61. The
Committee also meets privately with the
internal and external auditors and separately
with the executive management and
executive Director.
Aidan Hughes stepped down as Chairman
of the Committee at the December 2014
Board meeting. Aidan Hughes has served in
this role for nine years. Eamonn O’Hare has
succeeded Aidan Hughes as Chairman.
The Audit Committee’s main responsibilities
include to:
• review and advise the Board on the
integrity of the financial statements of
the Company, including the annual
report, quarterly financial statements and
other formal announcements relating to
the Company’s financial performance;
• review and advise the Board on the
effectiveness of the Company’s
internal controls;
• review the nature and scope of the
work performed by the external and
internal auditors, the results of their
audit work and the response of the
management team;
• make recommendations on the
appointment and remuneration of
external auditors and to monitor their
performance and independence; and
• approve and monitor the policy for
non-audit services provided by the
external auditors to ensure that the
independence and objectivity of the
auditors is not compromised.
In order to fulfil its duties, the Committee
receives sufficient, reliable and timely
information from the Dialog management
team.
The full terms of reference of the Committee
are available on our website under the
Corporate Governance section of the
Investor Relations section.
Activity in 2014
The Audit Committee discharged its
obligations during the year as follows:
• the Audit Committee reviewed the 2013
full-year results announcement issued in
February 2014.
• the Audit Committee reviewed the
annual report and financial statements
– including the report of the external
auditor – for the year ended 31
December 2013 issued in February 2014.
• the Audit Committee reviewed the
quarterly financial statements issued in
May, July and October 2014.
• the Audit Committee considered whether
or not to recommend the reappointment
of the external auditor.
• the Audit Committee reviewed the
external audit plan presented by the
external auditor in advance of the audit
for the year ended 31 December 2014.
• the Audit Committee approved the
annual internal audit plan and received
and reviewed internal audit reports
including the annual assessment and
review of internal controls.
• the Audit Committee reviewed and
monitored the effectiveness of the
Group’s risk management process.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance
65
External auditor
The Committee is responsible for the
development, implementation and
monitoring of the Group’s policy on external
audit. This policy assigns oversight
responsibility for monitoring the
independence, objectivity and compliance
with ethical and regulatory requirements to
the Audit Committee and day-to-day
responsibility to the Chief Financial Officer.
The external auditor audits the Group’s
consolidated financial statements. Prior to
the Audit Committee proposing the
appointment or reappointment of the
external auditor, the proposed auditor
provides details of any professional, financial
and other relationship which may exist
between the auditor and the Company that
could call its independence into question.
This includes the extent to which other
(non-audit) services were performed for the
Company in the past year or which are
contracted for the following year.
The external auditor has committed to inform
the Chairman of the Audit Committee of any
grounds for disqualification or impartiality of
the auditor occurring during the audit, unless
such grounds are eliminated.
The external auditor has committed
to report to the Audit Committee,
without delay, on all facts and events
of importance that should be brought
to the attention of the Board of
Directors, which come to light during
the performance of the audit, including
the Company’s financial performance
and compliance with the Company’s
Corporate Governance principles.
The external auditor takes part in Audit
Committee meetings on the annual
consolidated financial statements and
reports on the essential results of its audit.
External auditor and non-audit work
The Company has a policy in place
governing the conduct of non-audit
work by the external auditor. Under this
policy the auditor is prohibited from
performing services where the auditor:
• may be required to audit his/her
own work;
• would participate in activities that
would normally be undertaken by
management;
• is remunerated through a “success fee”
structure; and
• acts in an advocacy role for
the Company.
Other than the above, the Company
does not impose an automatic ban on
the external auditor undertaking
non-audit work. The external auditor is
permitted to provide non-audit services
that are not, or are not perceived to be,
in conflict with auditor independence,
provided it has the skill, competence
and integrity to carry out the work.
Details of the amounts paid to the external
auditor during the year for audit and other
services are set out on page 113. The Audit
Committee has adopted a policy that except
in exceptional circumstances with the prior
approval of the Audit Committee non-audit
fees paid to the Company’s auditor should
be capped at a maximum of 100% of audit
fees in any one year.
During 2014, the non-audit fees paid to
the external auditor represented over
100% of the audit fee. Dialog has a policy
that non-audit fees should not exceed audit
fees save in exceptional circumstances.
The majority of fees paid for non-audit
services in 2014 relate to due diligence and
other work on a potential merger and other
M&A activities and the advice relating to the
tax implications of the on going exercise to
align our IP ownership with the commercial
structure of the Group which started in
2013. The appointment of tax advisers in
relation to this tax planning exercise was
the subject of the formal tendering
process during 2013 which included
three leading tax firms.
EY was commissioned to perform an IP
valuation which was completed in Q1 2014.
Subsequently, the Audit Committee was
informed by EY that they had breached their
auditor independence regulations by
carrying out this work and, accordingly, this
valuation could not be used for audit
purposes. This situation has been resolved
by management, with the support of
external advisors KPMG, performing
additional works and procedures which have
been used for 2014 year end purposes.
The Company’s existing external auditor,
Ernst & Young, was appointed in 2006.
As part of good governance practice,
the lead audit partner was rotated in 2011
after a period of five years. As set out in
the Company’s Corporate Governance
principles, Dialog is committed to putting
out the statutory audit to tender every
ten years and will commence this process
in 2015.
Nomination Committee
The Board of Directors has established a
Nomination Committee to review Board
structure, size and composition and make
recommendations to the Board, and to
identify and nominate Board candidates
for approval by the Board. The Committee
is responsible for succession planning
for Directors, and, ensuring there are
appropriate succession plans in place
for all key executive positions within the
company to minimise ‘key-man’ risk.
The full terms of reference of the Committee
are available on our website under the
Corporate Governance section of the
Investor Relations section.
During 2014, the Nomination
Committee comprised Russ Shaw
(Chair), John McMonigall, Aidan Hughes
and Mike Cannon. The Committee
comprised only independent non-
executive Directors. By invitation, other
members of the Board may attend the
Committee’s meetings. The Committee
is free to seek its own advice free from
management as it deems appropriate.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance
66
Corporate Governance statement
During the year the Committee used
the services of an external search
and recruitment agency to assist with
the recruitment of new Directors.
The firm, Russell Reynolds, is an
independent third party and has no
other connection with Dialog.
During the year the Committee met
formally on five occasions. Attendance at
scheduled meetings is set out on page 61.
Activity in 2014
The key activities of the Nomination
Committee during the year were to:
• review the composition of the Board
to ensure the Directors have the skills
and expertise to effectively oversee
the implementation of the Group’s
stated strategy;
• identify and recruit new Directors to
the Board: one new Director, Eamonn
O’Hare was recruited during the course
of 2014; and
• review succession arrangements for
all key executive positions.
During the year the Committee sought and
received general advice relating to
remuneration from two independent
advisers: Towers Watson and New Bridge
Street. Both companies are signatories to the
Remuneration Consultants Group Code of
Conduct and any advice was provided in
accordance with this code. Neither Towers
Watson or New Bridge Street provided any
other services to Dialog during 2014 and
neither firm has any other connection with
the Company other than as adviser on issues
relating to remuneration. Remuneration
advice was also provided in 2012 and 2013
by Towers Watson.
In 2014, the Committee met formally on five
occasions. In addition, the Committee
Chairman held a number of meetings with
advisers. Attendance at scheduled meetings
is set out on page 61.
During the year the Committee met at
various times and on an ad-hoc basis
generally by telephone.
The Strategic Transaction and Technology
Committee has been abolished and matters
previously reserved for this Committee are
now considered by the Board as a whole.
Activity in 2014
During the year, the Committee reviewed
and determined the criteria and focus of
the Company in terms of technology
enhancement and potential M&A activity.
This includes a particular focus on sensor
technology. This technology focus led
to discussions with a potential partner,
ams AG. While these discussions did not
lead to a transaction, Dialog remains
focused on ways in which it can add sensor
technology capability to its business.
The full terms of reference of the Committee
are available on our website under the
Corporate Governance section of the
Investor Relations section.
Jalal Bagherli
CEO
The Remuneration Committee
The Board of Directors has established a
Remuneration Committee to determine the
salaries and incentive compensation of the
officers of the Company and its subsidiaries;
and, provide recommendations for other
employees and consultants as appropriate.
During 2014, the Remuneration Committee
comprised Mike Cannon (Chair) Chris Burke,
Russ Shaw and Peter Weber. The Committee
comprised only independent non-executive
Directors. By invitation, other members
of the Board may attend the Committee’s
meetings. The CEO and the Senior Vice
President, Human Resources, may also
attend by invitation but take no part in
discussions or decisions on matters relating
to their own remuneration. The Committee
is free to seek its own advice free from
management as it deems appropriate.
A detailed report on the work of the
Remuneration Committee, during 2014,
is set out on pages 67 to 84.
Strategic Transaction and Technology
Committee
The Board has established a Strategic
Transaction and Technology Committee and
has delegated authority to this Committee
to review, evaluate and make
recommendations in relation to strategic
transactions (such as acquisitions, disposals
or licensing arrangements) and the
Company’s technology and the
technological market in which it operates.
During 2014, the Strategic Transaction and
Technology Committee comprised only
independent non-executive Directors. The
members during the year were Chris Burke
(Chair), Aidan Hughes and Peter Weber.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance Directors’ remuneration report
67
Annual statement from Mike Cannon,
Chairman of the Remuneration
Committee
Dear Shareholder,
On behalf of the Remuneration Committee
I am pleased to present the Directors’
Remuneration Report for 2014. The report
is in two parts: the Directors’ Remuneration
Policy which describes the policy for the
remuneration of executive and non-
executive Directors, and the Annual Report
on Remuneration which sets out the details
of and basis for remuneration during 2014.
Performance and remuneration for 2014
Dialog recorded another year of strong
financial performance in 2014 which is set
out in detail in this Annual Report. The
strong financial performance and continued
execution of the Group’s stated strategy
has also delivered substantial value for
shareholders. Total Shareholder Return
(TSR) for 2014 was 88%. In the 10 years
since the beginning of 2005, the year the
current CEO was appointed, Dialog’s TSR
exceeded 1,500%. €1,000 invested in the
company in January 2005 grew in value to
over €16,000 at the beginning of 2015.
Based on the performance delivered for
2014, an annual bonus award of 178%
of base salary has been achieved by the
CEO for 2014. The portion of bonus above
the target level (1x base salary) is deferred
into shares for 3 years. The Executive
Incentive Plan (EIP) for the period 2012-14
had a vesting level of 78%, driven by
relevant performance metrics.
Base salary
The CEO’s base salary, following review in
July 2013, was set at £381,570 per annum.
As the Committee set out in last year’s
Remuneration Report, this salary
was significantly below market median
for a company of Dialog’s size, and as such,
was not sustainable – particularly in view
of Dialog’s excellent performance and the
growing scale of the business under the
CEO’s stewardship.
We indicated in last year’s report our
intention to apply an above-inflation
increase to bring the salary to a mid-market
level. The Committee has therefore awarded
an increase of 10% effective 1 July 2014,
bringing the CEO’s annual salary to just
under £420,000. The Committee considers
this new level to be competitive relative to
other semiconductor companies, and
therefore any increase at the 1 July 2015
review date will be in line with the general
rate of salary inflation.
Changes proposed for 2015
As the existing long-term incentive plan
(LTIP) , the Executive Incentive Plan (EIP),
expires in May 2015, we are proposing a
replacement LTIP plan, for shareholder
approval at the 2015 AGM. The new LTIP is
designed to better align remuneration with
shareholders and to continue to support
Dialog’s strategy and the ongoing success of
the business. The new plan will measure
performance relative to the TSR of Dialog’s
peers; and the performance of the business
based on two key financial metrics. There
will be a cap on the vesting percentage
under the relative TSR metric, in the event
that Dialog’s relative TSR outperforms peers
but the absolute TSR is negative.
In proposing a new LTIP, we have also taken
the opportunity to review and substantially
simplify the CEO’s remuneration package.
The Committee proposes to remove
elements of the package that are no
longer appropriate at Dialog’s current
stage of business development. We plan
to remove three existing components (ie.
the EIP, the share matching plan, and an
uncapped annual profit sharing bonus),
and replace those three elements with
performance-related annual awards
under the new LTIP. The shareholding
requirement for the Chief Executive
will also be increased to a minimum of
300% of base salary from the previous
requirement of 200% of base salary.
The replacement of the EIP, and
simplification of the Chief Executive’s
package, will result in some amendments
to the Directors’ Remuneration Policy.
A new policy is therefore being submitted
for approval at the AGM.
Conclusions
Remuneration earned by Dialog executives in
2014 reflects the outstanding performance
achieved. The changes proposed to
the Directors’ Remuneration Policy will
simplify remuneration, and place it on a
more sustainable basis for future years.
Mike Cannon
Chairman, Remuneration Committee
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 68
Directors’ remuneration policy report
Our policy on remuneration
Following a review of remuneration in 2014, we are submitting a new policy for shareholder approval at the 2015 AGM. For the Chief
Executive, the new policy will substantially simplify the remuneration package by replacing three elements of remuneration (the further profit
sharing bonus, the matching plan, and the Executive Incentive Plan) with a single new LTIP award. The vesting of this new annual LTIP award
will depend on Dialog’s total shareholder return (TSR) relative to other semiconductor companies, which is a new performance metric, and
two key financial metrics. There will also be a cap on the vesting percentage under the relative TSR metric, in the event that Dialog’s relative
TSR is good but its absolute TSR is negative. In addition, the previous defined benefit pension arrangement will be replaced with a simpler
defined contribution policy.
Dialog’s remuneration policy for Executive Directors is set by the Remuneration Committee. The Committee’s primary objective is to ensure
that remuneration is structured so as to attract and retain Executive Directors of a high calibre, with the skills and experience necessary to
develop and grow the Company successfully. Executives should be rewarded in a way that aligns with Shareholder interests and promotes
the creation of sustained value for the Company’s Shareholders.
The Committee believes that a simple approach is most effective and the elements of executive remuneration are fixed pay (base salary,
benefits and pensions), annual bonus and a long-term incentive. A significant portion of remuneration is linked to, and paid in, Company
shares, which enables alignment with Shareholder interests and reinforces our pay-for-performance philosophy. The Committee believes that
executives should hold a meaningful number of shares personally. The individual remuneration elements operated for executives are
described in more detail in the policy table below. Since there is currently only one Executive Director – the CEO – we refer to remuneration
for the Executive Director, Executive Directors and the CEO interchangeably throughout this report.
The Committee reviews the CEO’s remuneration package annually both in the context of Company performance and against a range of peer
companies. In reviewing the CEO’s pay arrangements the Committee takes into account:
• the history and growth profile of the Company;
• the Company’s UK incorporation and associated corporate governance expectations;
• the Company’s international focus, operations and talent market;
• the general external environment and the market context for executive pay; and
• the pay and employment practices of Dialog employees generally.
Directors’ remuneration policy table
The table below summarises Dialog’s remuneration policy for Executive Directors and, where indicated, for non-executive Directors. It is
designed to give the Remuneration Committee the ability over the life of the policy – expected to be three years – to make decisions without
the need to seek Shareholders’ approval on an annual basis. The policy is intended to take formal effect from the 2015 AGM, although the
Remuneration Committee proposes that in practice the policy framework described will apply from 1 January 2015 subject to approval by
Shareholders at the 2015 AGM.
Base salary
Executive Directors
Purpose and link to strategy
Facilitate recruitment and retention of the best executive talent globally – executives
with the experience and expertise to deliver our strategic objectives at an appropriate level of
cost.
Maximum opportunity
Base salary increases will not ordinarily exceed the percentage increases awarded for other UK-based
Dialog employees with comparable levels of individual performance and potential.
In cases where an Executive Director’s base salary lies materially below the appropriate market
competitive level and where such positioning is not sustainable in the view of the Remuneration
Committee, annual increases may exceed those for other employees described above. The
rationale for any such increase will be described in the annual report on remuneration for the
relevant year.
Operation
Salary is reviewed annually, with any increases normally taking effect in July. A number of factors
are considered including but not limited to market pay levels among international industry peers
of comparable size, and base salary increases for other Dialog employees.
Performance framework
n/a
Changes in policy since 2014
No change.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 69
Retirement benefits
Executive Directors
Purpose and link to strategy
Provide market competitive retirement benefits which help foster loyalty and retention.
Maximum opportunity
Employer contribution of 15% of base salary.
Operation
Executive Directors are provided with a defined contribution to pension or equivalent cash
allowance arrangement.
Performance framework
n/a
Changes in policy since 2014
Employer contributions to the defined benefit plan were 9% of base salary.
Other benefits
Executive Directors
Purpose and link to strategy
Provide market competitive benefits at an appropriate cost which help foster loyalty
and retention.
Relocation benefits may also be provided based on business need, individual circumstances and
location of employment.
Maximum opportunity
There is no maximum for benefits, but they represent a small percentage of remuneration.
Operation
In the case of relocation, additional benefits may be provided, including but not limited to the
cost of relocation expenses, real estate fees, tax equalisation to home country and tax return
filing assistance, temporary housing and schooling. The Remuneration Committee has discretion
to determine the value of such benefits and details of any such benefits provided will be disclosed
in the annual report on remuneration covering the year in which they were provided.
Executive Directors are eligible to receive benefits including but not limited to a cash allowance in
lieu of a company car, medical insurance for the Executive Director and his/her immediate family
members, life and disability insurance, holiday (25-30 days a year, based on length of service)
and pay in lieu thereof where applicable, and services to assist with preparation of a tax return or
returns where necessary due to the international nature of work completed.
Performance framework
n/a
Changes in policy since 2014
No change.
Annual bonus plan
Executive Directors
Purpose and link to strategy
Motivate Executive Directors to achieve stretching financial and commercial objectives consistent
with and supportive of Dialog’s growth plans.
Create a tangible link between annual performance and individual pay opportunity.
Maximum opportunity
Annual opportunity of up to 200% of base salary.
The Committee retains discretion to adjust the overall bonus outcome to take account of
performance outside the normal bounds. This discretion cannot be used to raise the bonus
outcome above 200% of base salary.
Operation
The portion of any award up to 100% of base salary is paid in cash, and the portion of any award
above 100% of base salary is awarded in deferred shares.
Deferred shares vest after three years.
The Committee may vary the performance measures and mix used to adapt to changing Company
circumstances. Financial measures will be a significant portion of the total scorecard.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance
70
Directors’ remuneration policy report
Annual bonus plan
Executive Directors
Performance framework
Changes since 2014
Performance metrics include:
• financial goals (which determine a significant portion of bonus every year);
• commercial goals, and
• organisational and employee-related goals.
For financial metrics, performance is set in line with the stretch annual budget.
The additional profit sharing bonus, which was uncapped, has been removed. This bonus was
equivalent to 1% of the Group’s annual consolidated profit after tax and interest but before
extraordinary items, less the value of the maximum base bonus described above (i.e. 200% of
salary). In addition, the matching award on deferred bonus has been removed for bonus deferral
in relation to the 2015 bonus or any future years.
Long term incentive plan (“LTIP”) Executive Directors
Purpose and link to strategy
Motivate Executive Directors to deliver sustainable long-term Shareholder value through long-term
profitability and share price growth.
Maximum opportunity
Operation
The maximum face value of an annual award is £4 million at the date of grant. This is equivalent to
a target award of £2 million. However, the first award in 2015 will have a maximum face value of
£3 million at the date of grant, equivalent to a target award of £1.5 million.
Annual award of performance shares (which may also be in the form of nominal/nil-cost options).
Performance is measured over three years, based on performance metrics selected by the
Remuneration Committee to support the Company’s business strategy.
Vesting is dependent on continued employment with the Company at the time of vesting.
Certain “leaver” provisions apply and are described in the section headed “Termination
Arrangements” below.
Performance framework
Performance metrics include suitable Company financial performance metrics and at least one-
third on a relative TSR condition measured versus a comparator group. The Committee reviews and
selects appropriate measures and their weightings in advance of each award.
25% of the maximum award vests for threshold performance, 50% of the maximum award vests
for target performance and 100% of the maximum award vests for maximum performance as
defined by the Remuneration Committee under the plan.
For the relative TSR condition, Dialog Semiconductor TSR is measured over the three-year
performance period and compared to the companies in the comparator group. If Dialog TSR is at
the median of the comparator group then 25% of the maximum award vests. If Dialog TSR is
at the 60th percentile of the comparator group then 50% of the maximum award will vest. If
Dialog TSR is at or above the 75th percentile of the comparator group then 100% of the maximum
award will vest. For performance in between these levels vesting is determined on
a straight-line basis.
If Dialog TSR is negative over the 3-year performance period, then the maximum number of shares
which can vest subject to the relative TSR condition will be capped at 50% of the maximum award,
even if relative TSR is above 60th percentile.
For the Company financial performance component, targets are normally set annually over the
three-year performance period.
The new LTIP replaces the previous Executive Incentive Plan, the uncapped ‘further profit sharing
bonus’, and the share matching plan. The maximum for the LTIP has been set to take account of the
removal of these three elements and market median long-term incentive award levels for the other
international semiconductor companies of similar size to Dialog, which are US-listed companies.
The share price performance metric previously used has been replaced with a relative TSR metric.
Changes in policy since 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 71
Termination arrangements
Executive Directors
Purpose and link to strategy
To limit the Company’s liability for payments in cases of termination, and to provide a fair and
equitable settlement where appropriate.
Maximum opportunity
The Company will provide six months’ notice of termination or payment in lieu of notice. Payment
in lieu of notice will be limited to the pro rata value of base salary and the other benefits described
under the retirement benefits and other benefits sections above.
The notice period provided will extend to 12 months on a change of control of Dialog.
Where applicable, Executive Directors are also entitled to receive payment on termination in lieu of
holiday accrued but not used.
In the event that an Executive Director’s contract is terminated during a financial year, a time
pro-rated bonus award may be paid following the end of the year and subject to the full-year
performance against targets.
Termination provisions for the LTIP are as follows:
• If an executive Director is not employed by the Company at the time of vesting, the award will
lapse, except in certain circumstances as determined by the Board including death, disability,
retirement and any other circumstance as decided by the Board. The portion of any award which
vests will be determined by the Board based on a number of factors including performance
against targets. Alternatively, the Board may decide that outstanding awards will vest in
accordance with the normal vesting schedule. Unless the Board decides otherwise, in all cases the
vesting level will be reduced in accordance with the period of service.
• In the event of a change in control of the Company, awards will be subject to the relevant
provisions of the plan rules which provide for either early vesting at the time of change in control
or roll-over into shares of the new entity. In the event that early vesting at the point of change in
control occurs, the normal approach will be to apply pro-ration of awards for time and the vesting
level will be subject to performance. In the event of roll over into shares of the new entity, the
Board will determine the terms to apply to the rolled-over awards taking account of the
circumstances including performance. All deferred bonus shares shall vest and be released.
Non-executive Directors
Purpose and link to strategy
Supports recruitment and retention of a non-executive Director with the experience and skills that
will make a major contribution to the Dialog Board.
Maximum opportunity
Aggregate fees are subject to the limit set out in the Articles of Association or any such higher
amount as determined by ordinary resolution.
Operation
Fees are normally reviewed annually. Fees may be paid in a combination of cash and shares
subject to any requirements of the Articles of Association of the Company or shareholder resolution.
Non-executive Directors’ fees are not eligible for any incentive awards or share options.
The Chairman’s fee is determined by the executive Directors with input from the Remuneration
Committee. Other non-executive Directors may be reviewed annually by the Chairman and
executive Directors.
Non-executive Directors may also receive tax advice.
In addition to the fees referred to above, non-executive Directors are also reimbursed for the costs
of travel relating to the performance of their duties, and these costs may be grossed-up if treated as
a taxable benefit in the applicable jurisdiction.
Performance framework
Fee reviews take account of individual performance and contribution, company size, growth and
complexity, level of experience and market profile and time committed.
Note: In approving this policy, authority is given to the Company to honour any existing commitments entered into with current or former Directors. For example, historical EIP
awards and share option awards will be allowed to vest in line with the policy in place at the date of grant. Details of any payments will be set out in the Annual Report on
Remuneration as they arise.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance
72
Directors’ remuneration policy report
Remuneration of Directors on recruitment and appointment
Dialog is an international company and competes for executive talent on a global basis. In order to recruit and retain Directors of the calibre
needed to execute the Company’s growth objectives it may be necessary to provide remuneration and benefits consistent with practice
among other global semiconductor companies.
The following principles apply in the case of the external recruitment of Directors and the appointment of internal candidates who may be
promoted to the Board:
• as far as possible, the remuneration of new Directors will be set in accordance with the existing Directors’ remuneration policy described
in this report;
• the Remuneration Committee will seek to pay no more than is necessary while ensuring that it can attract the best candidates on
a global basis;
• the remuneration package provided will take account of a range of factors including but not limited to the calibre of a candidate,
the level of existing remuneration, the jurisdiction the candidate is recruited from, and the individual’s skills and experience;
• the remuneration package will take account of internal relativities and appropriate international market comparisons;
• the Remuneration Committee has the discretion to determine the fixed elements of a remuneration package (comprising base salary,
retirement and other benefits) as it deems necessary and in shareholders’ interests. Exercise of such discretion may be necessary for
example in the event of a new appointment to the Board following an acquisition or where commitments have been made as part
of a transaction;
• the Remuneration Committee will in all cases be guided by reasonable market practice and will take appropriate advice where necessary.
The table below outlines policy in respect of recruitment where it differs from that outlined above. Policy in respect of other components of
pay is unchanged in recruitment situations from that outlined above. Note that only the references to fees apply to non-executive Directors.
Pay component
Approach in application to recruitment situations
Annual base salary or fee
Other benefits
Long-term incentive
The following factors will be taken into account when determining appropriate base
salary/fee:
• the candidate’s existing salary/fee, location of employment, skills and experience and
expected contribution to the new role;
• the previous incumbent’s salary/fee for the same role;
• the current salaries/fees of other Dialog Directors;
• current relevant market pay data for the role; and
• the value of other elements of remuneration to be provided and the combined value
of the total package.
The Company recruits executives on a global basis and recruitment is a case in which the
Remuneration Committee may choose to exercise the discretion described in the policy
table above to provide relocation benefits. In cases where the Committee believes that
the Company and its Shareholders’ interests will be served best by provision of relocation
benefits the Committee will seek to limit these benefits both in terms of their value
and the period over which they are provided. Benefits provided may include relocation
allowances and global mobility benefits such as housing or schooling as described in the
policy table, which may be provided on consideration of family size and business need.
The Committee has discretion to provide awards under the LTIP which exceed the
maximum outlined in the policy table above in cases where it considers it necessary in
order to facilitate recruitment of high-calibre executives. Such awards may be provided as
compensation for remuneration foregone at a previous employer as described in the row
below. The Committee also has discretion to provide such awards in other circumstances
where it considers them necessary to secure an executive’s appointment. In cases other
than compensation for or “buy-out” of previous awards, LTIP target awards in addition to
normal policy levels will be limited to 100% of a target executive’s Dialog salary.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 73
Pay component
Approach in application to recruitment situations
Compensation for forfeited remuneration
The Committee may choose to compensate for forfeited remuneration when recruiting
an external candidate by providing replacement awards.
Where a replacement award is deemed to be necessary, the structure and level will be
carefully designed in accordance with the recruitment principles above. Such awards
would be designed to take account of the vesting period and where applicable, the
performance conditions of the awards they replace. They may include “clawback”
provisions. An explanation of the basis of any “buy-out” will be provided as soon as
practicably possible after appointment.
Service contracts
Notice periods offered to new Executive Directors will not exceed 12 months.
Clawback and malus policy
Under the rules of the deferred bonus plan, the LTIP and the previous EIP, the Remuneration Committee is entitled to cancel or clawback
some or all of a participant’s awards in the event that the Audit Committee of the Company determines that the financial accounts of the
Company were misstated to a material extent (such determination must be made within two years of the award date or six years if in relation
to fraud or reckless behaviour by an executive). Such clawback may be applied through direct repayment or a reduction in unvested awards
or future grants, or a reduction in such other payments as might otherwise be due from the Company to the individual.
Shareholding requirement
The Committee will set a shareholding requirement for Executive Directors. The requirement for the current CEO has been increased from
200% to 300% of base salary with effect from 2015, subject to approval of the new Directors’ Remuneration Policy. The Committee reviews
the level of shareholding requirement from time to time and has authority to amend it as necessary.
Contract terms
Contracts for Executive Directors provide for notice periods no longer than 12 months on either side. The current CEO’s contract provides for
six months’ notice on either side (which is extendable to 12 months’ notice in the case of a change of control), during which only base salary
and benefits are payable, and a time pro-rated bonus award may be paid following the end of the year and in accordance with the full-year
performance against targets as described in the termination arrangements section on page 71.
Share options for non-executive Directors
Until 2012, non-executive Directors received part of their fees in the form of options over Dialog shares. This practice was felt to align their
interests with those of Shareholders. Use of options was stopped ahead of the 2013 financial year and the last awards made (in 2012) will
vest in 2015. No further options have been awarded since 2012 and none will be awarded in future years. Provision of share options is not
included in the policy table above as options are not part of the Company’s forward-looking remuneration policy. According to UK
regulations however, reference to options must be made in the policy section of the Directors’ remuneration report, in order to permit
payments under outstanding awards, hence the inclusion of this section here.
Remuneration policy for executive Directors compared to that for other employees
The Company’s remuneration policy for Executive Directors is similar to that for all other Dialog employees.
Differences in policy are outlined below:
• annual bonus – All Dialog employees participate in annual bonus plans. The nature of those plans varies somewhat by location and
employee category. Most employees participate in a profit-sharing plan; a smaller group participates in a plan based on performance
against individual objectives.
• LTIP – Participation in the LTIP is limited to employees in senior roles and executives which currently comprise around 30 Dialog
employees. This number may increase over time as the business grows.
• notice periods – Most other UK employees’ contracts of employment include three-month notice periods.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 74
Directors’ remuneration policy report
Indicative remuneration levels resulting from policy
The charts below represent for the 2015 year the pay mix between the different elements of remuneration for the CEO, assuming threshold,
target and maximum performance. Amounts are shown in GBP (000s).
6000
5000
4000
3000
2000
1000
0
£2,402
62%
17%
20%
Target
£483
100%
Minimum
Fixed pay
Annual Bonus
LTIP
£4,322
69%
19%
11%
Max
The scenarios shown above are based on the following assumptions:
• minimum performance: fixed pay only (base salary, benefits and pension);
• Target performance: fixed pay, annual bonus of half maximum opportunity (100% of salary) and 50% of the face value of the LTIP award
vesting; and
• Maximum performance: fixed pay, maximum annual bonus of 200% of salary and 100% of the face value of the LTIP award vesting.
We have assumed that the first grant in 2015 under the LTIP will have a face value of £3m (target award of £1.5m). The maximum face value
permitted under the policy is £4m (target award of £2m).
Stakeholder views
Shareholder proxy advisory groups are engaged when the Company is considering material changes to policy, including approval of any new
share plans, as was the case in 2014 in respect of the introduction of the new LTIP. In 2014, such groups were also informed of changes to
the CEO’s base salary, as explained in last year’s Directors’ remuneration report.
There is no formal engagement with employees on matters of executive remuneration but employees are encouraged to provide their view
on any aspect of the Company’s operations through the Company’s intranet-based feedback system VP Blog.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance Annual report on remuneration
75
Audited information
Incumbent
Dr Jalal Bagherli
Dr Jalal Bagherli
Year
2014
2013
Total
salary
US$1
620,838
501,631
Benefits
US$
22,390
26,767
Pension
US$
Total
fixed pay
US$2
Annual
bonus
US$3
LTI award
US$4
Total
variable pay
US$5
Total excluding
LTI awards
US$6
Total
US$7
0
643,227
1,167,616 2,119,061
3,286,677
1,810,843
3,929,904
36,636
565,034
1,097,104
384,417
1,481,521
1,662,139
2,046,555
Incumbent
Chris Burke
Chris Burke8
Aidan Hughes
Aidan Hughes
John McMonigall
John McMonigall
Gregorio Reyes
Gregorio Reyes9
Russ Shaw
Russ Shaw
Peter Weber
Peter Weber
Chang-Bun Yoon
Chang-Bun Yoon11
Richard Beyer
Richard Beyer10
Michael Cannon
Michael Cannon
Eamonn O’Hare12
Eamonn O’Hare
Notes:
Year
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
Total fees
US$
140,466
48,190
140,466
128,945
128,858
114,618
32,255
137,085
140,466
128,945
124,858
114,618
N/A
70,107
171,680
114,292
124,858
93,778
101,808
N/A
Benefits
US$
Other
remuneration
US$
–
–
–
–
–
–
–
–
–
–
–
–
N/A
–
–
–
–
–
–
N/A
–
–
–
–
–
–
–
–
–
–
–
–
N/A
–
–
–
–
–
–
N/A
Shares
vested13
42,864
–
48,204
–
42,864
–
114,718
–
48,204
–
42,864
–
N/A
–
–
–
–
–
–
N/A
Total
US$
183,330
48,190
188,670
128,945
171,722
114,618
146,973
137,085
188,670
128,945
167,722
114,618
N/A
70,107
171,680
114,292
124,858
93,778
101,808
N/A
1 Base salary earned during the financial year ending 31 December and excludes amounts sacrificed into pension (2014: US$4,466; 2013: US$55,857).
2 The sum of basic salary, benefits and pension.
3 Annual bonus cash element and deferred share element awarded in relation to the financial year ending 31 December.
4
LTI reflects the gain on options and EIP awards which vested for the performance year. For the 2013 performance year, 10,931 EIP options vested valued at a price of €15.73.
For the 2014 performance year 65,332 EIP options vested valued at a price of €26.80.
5 The sum of annual bonus (cash and deferred share element) and long-term incentives.
6 The sum of basic salary, benefits, pension and annual bonus (cash and deferred share element).
7 The sum of basic salary, benefits, pension, annual bonus (cash and deferred share element) and long-term incentives which vested during the year.
8
In 2013 Chris Burke waived £50,000 in fees. The figure presented here is the figure after the waiver.
9 Gregorio Reyes stepped down as Chairman of the Board on 23 July 2013 and retired from the Board on 1 May 2014.
10 Richard Beyer became Chairman of the Board on 23 July 2013.
11 Chung-Bun Yoon resigned from the Board on 22 August 2013.
12 Eamonn O’Hare joined the Board on 7 March 2014.
13 Shares vested shows the value of the number of shares vested in 2014 at the closing share price on the day of vesting.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 76
Annual report on remuneration
Executive Director
Fixed remuneration
Base salary
As highlighted in last year’s annual report on remuneration, the Remuneration Committee considered that the CEO’s base salary was
too far behind market median to be sustainable and wanted to mitigate the risk to the Company and its Shareholders of him leaving.
As a result, the CEO was awarded a 10% increase in annual base salary with effect from 1 July 2014. His salary from 1 July 2014 is
£419,727 (US$655,081) which is consistent with the current median of the industry peer group. This increase was in the context of very
strong Company performance. The Committee will monitor market conditions carefully to ensure that salary does not exceed mid-market
levels and continues to represent good value for money for Shareholders.
Other benefits
The CEO received a cash allowance in lieu of a company car, medical insurance for himself and his spouse and group life and income
protection insurance. The total value of taxable benefits provided was US$22,390 equivalent to 3.42% of his current salary.
Pension
From April 2014 to 31 December 2014, no pension benefit was provided for the executive.
Prior to April 2014, the executive participated in a defined benefit pension arrangement, through a Defined Benefit Small Self-Administered
Scheme. Contributions to this arrangement commenced in May 2012 and ceased in March 2014.
While in operation, a fixed amount of pension was accrued annually from the Scheme by the payment of contributions, with the employer
paying part of the cost as a contribution equivalent to 9% of salary, and any balance being met by the executive through a salary sacrifice
arrangement. The amount of pension accrued each year was set by the Actuary to be funded in full by the contributions, so that there is no
funding shortfall and the assets are always sufficient to meet the liabilities (the intention is that no further funding will be required by the
Company).
During 2014, the employer contribution was £8,783 and the employee’s contribution through salary sacrifice was £2,862. However, for the
purposes of the single figure included in the table on page 75, a value of $0 is disclosed, because all pension was deemed to have been
accrued prior to the beginning of the financial year, and the contributions made during 2014 were in respect of 2013 accrual.
Variable compensation
Annual bonus
For 2014, the CEO was eligible for annual bonus of up to 200% of base salary for maximum performance, with 100% of base salary being
paid for target performance and no awards payable if profit was below threshold. Any bonus awarded above target is deferred into shares
and any additional voluntary deferral into shares. The total deferred bonus is matched 1:1 with additional shares subject to the LTI
performance conditions. If the new Directors’ Remuneration Policy and LTI are approved by shareholders at the 2015 AGM, the share match
will cease to apply to deferred bonus in respect of the 2015 performance year or subsequent years.
Performance measures used were:
• financial goals (30%) comprising revenue (10%), gross margin (7.5%), EBIT (12.5%);
• commercial goals (40%) comprising product-related measures (30%) and customer-related measures (10%); and
• organisational and employee-related goals (30%).
Performance against targets set in these areas was as shown in the table below. Performance under gross margin, product-related,
customer-related, organisational and employee-related measures is considered by the Board to be commercially sensitive and will be
disclosed in the annual report in a future year if it is considered no longer to be commercially sensitive.
Measure
Revenue
EBIT%
Outcome
Below target
On target
Above target
US$1,156 million
17.4%
X
X
Revenue is defined as Total Dialog 2014 IFRS Revenue (US$1,156 million). EBIT is defined as Total Dialog 2014 IFRS EBIT including acquisition
related accounting adjustments (Purchase Price Allocation) (US$200.8 million).
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 77
Accordingly, the Committee determined that a bonus equivalent to 178.24% of base salary should be paid. The amount over 100% will be
deferred into shares. In addition the CEO has elected to defer all of the bonus that he could have received in cash (amount up to 100%) into
shares, which will be matched 1:1 with further shares, with vesting subject to the LTI performance conditions.
Long-term incentive plans
Awards granted under the 2012 EIP were capable of vesting in 2014 and 2015 subject to the satisfaction of Revenue, EBIT and Share Price
performance measures. Following the completion of the final performance period, the Committee has assessed performance against the
performance targets set over the performance period and has determined that 78.1% of the share options awarded will vest to participants.
This vesting percentage was calculated as follows:
Measure
Revenue
EBIT
Share price
Total
Maximum capable
of vesting
(% of award)
37.5%
37.5%
25%
100%
Actual vesting
outcome
(% of award)
32.3%
37.5%
8.3%
78.1%
As a result, 76,236 of the 97,603 share options awarded to the Chief Executive (i.e. 78%) will vest. This final vesting outcome reflects
Dialog’s strong performance over the three year performance period. The Remuneration Committee believes that the financial targets for the
EIP award are commercially sensitive, and as such has not disclosed them in this report.
As set out in the terms of the 2012 EIP award at grant, 25% of the options which met performance conditions after the first two
performance years were capable of vesting in February 2014, whilst the remainder could vest in February 2015. As a result, 10,931 share
options vested in February 2014 and had a value at vest of US$226,532. This amount is included in the 2013 single figure of remuneration.
The remaining 65,332 share options meeting performance conditions will vest in February 2015 and are included in the 2014 single figure of
remuneration. As the share price at the date of vesting for the 65,332 share options was not known at the date of publication, they have
been valued for the purpose of the single figure using Dialog’s average share price over October, November and December 2014 of EUR
26.80. This results in a value of US$2,119,061 as shown in the LTI column of the 2014 single figure table. This figure will be updated next
year when the actual share price at the date of vesting is known.
Share awards made during the year
As noted in the policy section, shares awarded are structured as nominal priced options, hence the reference to options throughout.
Deferred share and EIP awards were made in line with the policy in force during 2014.
Awarded during the year
EIP – performance shares
Dr Jalal Bagherli
Deferred shares
Dr Jalal Bagherli
EIP – invested shares
Dr Jalal Bagherli
Date of
award
Granted
number
Market price at
date of grant
Face value
of award
% of award that will
vest at threshold
performance
Performance
period
16/02/2014
98,957
€15.73
€1,556,594
15% 01/01/2014–31/12/2016
18/02/2014
40,153
€15.71
€630,603
conditions 18/02/2014–18/02/2017
18/02/2014
40,153
€15.71
€630,603
15% 01/01/2014–31/12/2016
n/a
No performance
Notes: Face value is calculated as the number of shares, multiplied by the market price at the date of grant.
Dates reflect the service period which must be completed for the award to vest, there are no further performance conditions attached to the deferred bonus.
In 2014, the CEO was awarded 98,957 EIP shares (in the form of nominal price options), which at the date of grant (16 February 2014) had a value of €1,556,594. Receipt of these
shares is subject to achievement of performance conditions as outlined on page 70.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 78
Annual report on remuneration
Of his 2013 annual bonus (paid in 2014), the CEO deferred 50% of the bonus paid which at the share price on the date of award (€15.71)
was equivalent to 40,153 shares. These shares were matched on a one-for-one basis under the EIP, meaning his total EIP award in 2014 was
179,263 shares with total value of €2,817,799. As noted above, receipt of these shares is subject to achievement of performance conditions
as outlined on page 70.
Performance metrics attached were:
• 75% EBIT and revenue, equally weighted; and
• 25% share price growth.
EBIT and revenue targets are set annually over the three-year performance period of the award. For each annual period a third of this part of
the award is accrued based on actual Dialog performance against targets set at the beginning of each year.
Share price growth is measured at the anniversary date of the award over the three-year performance period. Shares subject to share price
growth conditions are accrued based on annual share price performance.
Shares accrued during the performance period are released to Executive Directors as soon as practicable after the third anniversary of the
award.
As disclosed in the 2012 annual report, share dilution as a result of equity-based incentive awards to all Dialog employees is managed to an
average 1% flow rate in order to ensure that it moves over time towards a rolling 10% in ten years.
Non-executive Directors’ fees
In 2014, the Chairman’s fee was £110,000. Fees for non-executive Directors were £80,000, with an additional £10,000 paid for chairmanship
of Board Committees.
Directors’ interests in shares
The CEO is expected to establish and hold a shareholding of at least 200% of salary excluding unvested EIP awards. The CEO currently
complies with this requirement. Following approval of the new policy, the shareholding requirement for the current CEO will be increased to
300% of base salary from the previous requirement of 200% of base salary.
Number at
31 December 2014
10 pence
ordinary
shares
EIP
– performance
shares
Deferred
shares
EIP
– unvested
shares
Share
options
– unvested
Share options
– vested
(unexercised)
Share options
– exercised
in year
Total
Dr Jalal Bagherli
268,676
257,274
82,764
80,548
–
250,000
443,343
1,382,605
Chris Burke
Aidan Hughes
John McMonigall
Gregorio Reyes
Russ Shaw
Peter Weber
Richard Beyer
Michael Cannon
Eamonn O’Hare
12,000
25,000
76,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,850
2,081
1,850
–
2,081
1,850
–
–
–
2,039
2,293
2,039
–
–
–
–
5,347
2,293
2,039
–
–
–
–
–
–
–
–
15,889
29,374
79,889
5,347
4,374
3,889
–
–
–
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 79
Share Plan
Grant Date
Final
Vesting
Date
Lapse Date
Exercise
Price
(EUR)
Holding
at 31st
December
2013
Granted
Exercised
Lapsed
Holding
at 31
December
2014
Dialog share
unapproved - 7yr
Dialog share
approved - 7yr
Long-term
incentive plan
Long-term
incentive plan
Executive
incentive plan
Executive
incentive plan
Deferred bonus
plan 2013
Executive
incentive plan
Executive
incentive plan
Deferred bonus
plan 2013
Executive
incentive plan
Non exec dir 6yr
share option
Non exec dir 6yr
share option
Non exec dir 6yr
share option
Non exec dir 6yr
share option
Non exec dir 11yr
share option
Non exec dir 11yr
share option
Non exec dir 6yr
share option
Non exec dir 6yr
share option
Non exec dir 6yr
share option
Non exec dir 6yr
share option
Non exec dir 11yr
share option
13/05/09
13/05/13
13/05/16
1.52
15,138
–
15,138
13/05/09
13/05/13
13/05/16
1.52
4,104
–
4,104
04/02/10
04/02/11
04/02/15
0.11
155,000
– 155,000
–
–
–
–
–
–
18/02/11
18/02/11
18/02/16
0.12
508,170
– 258,170
–
250,000
16/02/12
16/02/15
16/02/18
0.12
89,473
–
10,931
13,210
65,332
16/02/13
16/02/16
16/02/19
0.12
98,084
18/02/13
18/02/16
18/02/20
0.01
42,611
18/02/13
18/02/16
18/02/19
0.12
42,611
–
–
–
–
5,099
92,985
–
–
42,611
–
2,216
40,395
16/02/14
16/02/17
16/02/20
0.12
98,957
18/02/14
18/02/17
18/02/21
0.01
40,153
18/02/14
18/02/17
18/02/21
0.12
40,153
–
–
–
–
98,957
–
40,153
–
40,153
955,191 179,263 443,343
20,525
670,586
19/06/06
19/06/10
19/06/13
1.27
10/05/07
10/05/08
10/05/14
1.80
30/04/08
30/04/09
30/04/15
1.35
22/04/09
22/04/10
22/04/16
1.17
–
–
–
–
21/07/11
21/04/14
01/05/18
0.15
2,293
18/07/12
21/04/15
01/05/19
0.15
2,081
12/07/06
12/07/10
12/07/13
1.40
10/05/07
10/05/08
10/05/14
1.80
30/04/08
30/04/09
30/04/15
1.35
–
–
–
22/04/09
22/04/10
22/04/16
1.17
–
21/07/11
21/04/14
01/05/18
0.15
2,039
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,293
–
2,081
–
–
–
–
–
–
–
–
–
2,039
Full Name
Jalal
Bagherli
Jalal
Bagherli
Jalal
Bagherli
Jalal
Bagherli
Jalal
Bagherli
Jalal
Bagherli
Jalal
Bagherli
Jalal
Bagherli
Jalal
Bagherli
Jalal
Bagherli
Jalal
Bagherli
Aidan
Hughes
Aidan
Hughes
Aidan
Hughes
Aidan
Hughes
Aidan
Hughes
Aidan
Hughes
Christopher
Burke
Christopher
Burke
Christopher
Burke
Christopher
Burke
Christopher
Burke
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance
80
Annual report on remuneration
Full Name
Share Plan
Grant Date
Final
Vesting
Date
Lapse Date
Exercise
Price
(EUR)
Holding
at 31st
December
2013
Granted
Exercised
Lapsed
Holding
at 31
December
2014
Christopher
Burke
Non exec dir 11yr
share option
18/07/12
21/04/15
01/05/19
0.15
1,850
–
Gregorio
Reyes
Gregorio
Reyes
Gregorio
Reyes
Gregorio
Reyes
Gregorio
Reyes
Gregorio
Reyes
John
McMonigall
John
McMonigall
John
McMonigall
John
McMonigall
John
McMonigall
John
McMonigall
Peter
Weber
Peter
Weber
Peter
Weber
Peter
Weber
Peter
Weber
Peter
Weber
Russ
Shaw
Russ
Shaw
Russ
Shaw
Russ
Shaw
Non exec dir 6yr
share option
Non exec dir 6yr
share option
Non exec dir 6yr
share option
Non exec dir 6yr
share option
Non exec dir 11yr
share option
Non exec dir 11yr
share option
Non exec dir 6yr
share option
Non exec dir 6yr
share option
Non exec dir 6yr
share option
Non exec dir 6yr
share option
Non exec dir 11yr
share option
Non exec dir 11yr
share option
Non exec dir 6yr
share option
Non exec dir 6yr
share option
Non exec dir 6yr
share option
Non exec dir 6yr
share option
Non exec dir 11yr
share option
Non exec dir 11yr
share option
Non exec dir 6yr
share option
Non exec dir 6yr
share option
Non exec dir 6yr
share option
Non exec dir 6yr
share option
19/06/06
19/06/10
19/06/13
1.27
10/05/07
10/05/08
10/05/14
1.80
30/04/08
30/04/09
30/04/15
1.35
22/04/09
22/04/10
22/04/16
1.17
–
–
–
–
21/07/11
21/04/14
01/05/18
0.15
2,803
18/07/12
21/04/15
01/05/19
0.15
2,544
19/06/06
19/06/10
19/06/13
1.27
10/05/07
10/05/08
10/05/14
1.80
30/04/08
30/04/09
30/04/15
1.35
22/04/09
22/04/10
22/04/16
1.17
–
–
–
–
21/07/11
21/04/14
01/05/18
0.15
2,039
18/07/12
21/04/15
01/05/19
0.15
1,850
19/06/06
19/06/10
19/06/13
1.27
10/05/07
10/05/08
10/05/14
1.80
30/04/08
30/04/09
30/04/15
1.35
22/04/09
22/04/10
22/04/16
1.17
–
–
–
–
21/07/11
21/04/14
01/05/18
0.15
2,039
18/07/12
21/04/15
01/05/19
0.15
1,850
12/07/06
12/07/10
12/07/13
1.40
10/05/07
10/05/08
10/05/14
1.80
30/04/08
30/04/09
30/04/15
1.35
22/04/09
22/04/10
22/04/16
1.17
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,803
2,544
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,850
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,039
–
1,850
–
–
–
–
–
–
–
–
–
2,039
–
1,850
–
–
–
–
–
–
–
–
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 81
Full Name
Share Plan
Grant Date
Final
Vesting
Date
Lapse Date
Exercise
Price
(EUR)
Holding
at 31st
December
2013
Granted
Exercised
Lapsed
Holding
at 31
December
2014
Russ
Shaw
Russ
Shaw
Non exec dir 11yr
share option
Non exec dir 11yr
share option
21/07/11
21/04/14
01/05/18
0.15
2,293
18/07/12
21/04/15
01/05/19
0.15
2,081
25,762
–
–
–
–
–
5,347
–
2,293
–
–
2,081
20,415
Number at
31 December 2013
Dr Jalal Bagherli
Chris Burke
Aidan Hughes
John McMonigall
Gregorio Reyes
Russ Shaw
Peter Weber
Chang-Bun Yoon
10 pence
ordinary shares
EIP
– performance
shares
Deferred shares
EIP
– unvested
shares
Share
options
– unvested
Share options
– vested
(unexercised)
Share options
– exercised
in year
268,676
187,557
42,611
42,611
–
682,412
15,593
25,000
76,000
–
9,946
22,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,889
4,374
3,889
5,347
4,374
3,889
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
1,223,867
19,482
29,374
79,889
5,347
14,320
25,889
0
Unaudited information
Annual change in CEO pay versus employee pay
The table below compares the change in base salary, benefits (excluding pension) and bonus awards for the CEO and for an average UK
employee over the period 2013 to 2014. The salary increase shown for the CEO was referred to in the 2013 annual report and communicated
to investors in 2014. It reflects the Remuneration Committee’s view that the salary positioning of the CEO was too far behind market median
levels to be sustainable, especially in light of the Company’s strong performance. In accordance with the discretion referred to in the policy
section above, the Committee increased the CEO’s salary in 2014 at a rate higher than that for other employees.
Measure
Chief Executive base salary
Relevant average comparator employees’ base salary
Chief Executive taxable benefits
Relevant average comparator employees’ taxable benefits
Chief Executive annual bonus
Relevant average comparator employees’ annual bonus
Chief Executive total
Relevant average comparator employees’ total2
Percentage change from 2013 to 2014 %
12.21
5.6
(16.4)
(16.0)
6.4
47.8
8.0
9.3
1 The percentage change from 2013 to 2014 has been calculated using base salary before the deduction of any amounts sacrificed into pension. This provides a more accurate
representation of the annual percentage change.
2 Represents the sum of base salary, taxable benefits and bonus.
At the time of preparation for this report annual bonuses for the Group had yet to be finalised and the numbers presented reflect expected
payouts.
The relevant employee comparator group includes all UK-based Dialog employees and were selected for comparison since they are located in
the same market as the CEO and receive similar benefits as described in the policy section above.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 82
Annual report on remuneration
Relative importance of spend on pay
This chart shows the amounts spent in 2013 and 2014 by Dialog on employee pay, and research and development, and also the Group’s
accumulated retained earnings at the relevant year end.
US$
400,000,000
350,000,000
300,000,000
250,000,000
200,000,000
150,000,000
100,000,000
50,000,000
0
2013
2014
Pay spend for Group
Research and development
Accumulated retained earnings
Note: the above chart shows that Dialog’s retained earnings (in grey) exceeded the spend on research and development (in black),
and both of these exceed the compensation spend for the Group (in blue).
CEO pay and relative TSR performance
The following graph compares Dialog Semiconductor’s TSR performance to that of the same investment in the German TecDAX Index. This
comparison has been chosen because it reflects the local market and industry in which Dialog is listed. We also show a comparison to the
Philadelphia SE Semiconductor Sector Index (Price return) as an additional industry comparator, recognising that Dialog competes with
companies on an international basis.
TSR is the measure of the returns that a company has provided for its shareholders, reflecting share price movements and – where relevant –
assuming reinvestment of dividends. Data is averaged over 30 days at the end of each financial year.
Total Shareholder Return
£ Sterling
6,000
5,000
4,000
3,000
2,000
1,000
0
2008
2009
2010
2011
2012
2013
2014
This graph shows the value, by 31 December 2014, of £100 invested in Dialog Semiconductor Plc on 31 December 2008 compared with
the value of £100 invested in the German TecDAX Index on the same date. Also plotted as the price index for the Philadelphia Semiconductor
Sector Index (rebased to 100). Data has been averaged over 30 days at the end of each financial year.
Dialog Semiconductor
German TecDAX Index
Philadelphia Semiconductor Index
Source: Datastream (Thompson Reuters)
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 83
We also present in the table below the annual change in the single figure total remuneration provided to the CEO over the same period.
Financial year ending
Total remuneration including
unrealised gains on options
(single figure basis)1,2
Annual bonus
(% of maximum)3
Long-term variable pay
(% of maximum)
31 December 2009
31 December 2010
30 December 2011
31 December 2012
31 December 2013
31 December 2014
US$1,028,853
US$4,809,398 US$30,426,678
US$2,167,224
US$2,046,555
US$3,929,904
N/A
95%
N/A
N/A
100%
91.94%
89.12%
100%
100%
100%
100%
78%
1 The total remuneration for 2010 and 2011 includes awards made under the 2008 LTIP plan approved by Shareholders at the 2008 AGM. The values vested to the CEO from this
plan were US$3,593,299 (2010) and US$29,103,138 (2011), resulting from the exceptional performance and share price growth of the Company, as can be seen in the TSR
performance chart on page 82. There are no further awards under this plan. Total remuneration includes the value of long-term incentive awards at the time they vest, as
required by UK reporting regulations. The actual value realised by the CEO is based on the market value on the date they are permitted (under directors’ trading restrictions) and/
or choose to exercise options or sell shares. The value presented does not therefore reflect exactly that received by the CEO.
2 Under the Company’s annual bonus plan the CEO may receive “maximum base bonus” of 200% of salary, with a “further bonus” equivalent to 1% of the Company’s annual
consolidated profit after tax and interest but before extraordinary items, less the value of the maximum base bonus described above (i.e. 200% of salary). No “further bonus” has
been paid to date.
3 No maximum bonus was defined prior to 2012.
Operation of policy in the following year
The main change to policy for 2015 is the replacement of the EIP with a new LTIP. The Committee intends to make the first award under this
new scheme after the 2015 AGM and the award size will be in line with the maximum set out in the policy table. The award will vest after
three years subject to three equally weighted performance conditions:
• Dialog TSR performance over the three-year performance period relative to the constituents of the S&P 1500 Select Semiconductor index.
• Dialog Revenue in each year of the three-year performance period.
• Dialog EBIT in each year of the three-year performance period.
The amount vesting under this award will be disclosed in the 2017 annual report and accounts.
Governance
Remuneration Committee
The Board as a whole is responsible for setting the Company’s policy on Directors’ remuneration. The Board of Directors has established a
Remuneration Committee (the “Committee”) and has delegated authority to this Committee to determine and recommend to the Board:
the salaries and incentive compensation of the Company’s officers and its subsidiaries; and provide recommendations for other employees
and consultants as appropriate.
The Committee comprises independent, non-executive Directors. In 2014 the members were Chris Burke, Michael Cannon (Chair), Russ Shaw
and Peter Weber. There were no changes in committee members during the year. The Committee’s members have no financial interest in the
Company other than as Shareholders and through the remuneration paid to them by the Company.
By invitation, other members of the Board may attend the Committee’s meetings. The CEO and the Senior Vice President, Human Resources,
may also attend by invitation but take no part in discussions or decisions on matters relating to their own remuneration. The Committee is
free to seek its own independent advice free from management as it deems appropriate.
During the year, the Committee sought and received general advice relating to remuneration from Towers Watson. Following a review
of advisers in 2014, the Committee appointed New Bridge Street to provide advice to the Committee. The Committee is satisfied that
the advice received from both Towers Watson and New Bridge Street is objective and independent and is not subject to any material conflict
of interest.
Towers Watson and New Bridge Street are signatories to the UK Remuneration Consultants Group Code of Conduct and all advice received
during the year was provided in accordance with this code. They provide no other services to the Company. Fees paid to Towers Watson
during the year in respect of advice relating to Directors’ pay totalled £167,599 (excluding VAT) and fees paid to New Bridge Street during
the year in respect of advice totalled £67,050 (excluding VAT).
The Committee also received advice from the Senior Vice President, Human Resources and the Company Secretary. During the year the
Committee met formally on five occasions, in addition the Committee Chairman held a number of meetings with advisers.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance 84
Annual report on remuneration
Responsibilities
The Remuneration Committee’s main responsibilities include to:
• determine the salaries and incentive compensation of the Company’s officers and the officers of the Company’s subsidiaries;
• provide recommendations for other employees and consultants as appropriate; and
• administer the Company’s compensation, stock and benefits plan.
The key activities of the Committee during the year were to:
• review, plan and approve CEO and Executive Management remuneration;
• review and address Annual General Meeting outcomes;
• consider market trends;
• review changes to disclosure regime in the UK; and
• review the long-term incentive and the structure of the CEOs remuneration package.
Shareholder voting results from 2014 AGM
The table below summarises the number of votes for and against the Directors’ Remuneration Policy and Annual Report on
Remuneration at the 2014 AGM. We also include the number of abstentions (referred to as votes withheld).
Resolution
Approval of Directors’
Remuneration Policy
Approval of Directors’
Remuneration Report
(excluding the Directors’
Remuneration Policy)
Votes for1
Votes against1
No. of shares
%
No. of shares
%
Votes
withheld2
Total
votes cast
% of voting
capital
instructed3
21,746,112
97.64%
526,050
2.36%
457,571
22,272,162
31.34%
22,016,619
97.54%
555,702
2.46%
157,412
22,572,321
31.76%
1 Votes “For” and “Against” are expressed as a percentage of votes received.
2 A “Vote withheld” is not a vote in law and is not counted in the calculation of the votes “For” or “Against” a resolution.
3 Total number of shares in issue at 5.30 pm BST (6.30 pm (CEST)) on 27 March 2014 was 71,068,930 shares.
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance Statement of Directors’ responsibilities
85
The Directors are responsible for preparing the annual report and the Group and parent company financial statements in accordance with
the applicable law and regulations. UK company law requires the Directors to prepare Group and parent company financial statements for
each financial year. Under the law the Directors are required to prepare the Group financial statements in accordance with IFRS as adopted
by the EU and have elected to prepare the parent company financial statements on the same basis.
The Group and parent company financial statements are required by law and IFRS as adopted by the EU to present fairly the financial
position of the Group and the parent company and the financial performance and cash flows 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;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable
information;
• provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the entity’s financial position and financial performances;
• state whether they have been prepared in accordance with IFRS as adopted by the EU; and
• make judgements and estimates that are reasonable and prudent.
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 and article 4
of the IAS Regulation.
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 Strategic report, 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
The Directors confirm, to the best of their knowledge, that:
• in accordance with the applicable reporting principles, the consolidated financial statements, prepared in accordance with IFRS as
adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit and loss of the issuer and undertakings
included in the consolidation.
• the annual report and accounts includes a fair review of the development and performance of the business and the position of the
Company and the Group, together with a description of the principal risks and uncertainties associated with the expected development
of the Company and the Group.
The annual report and accounts, taken as a whole, is in line with good corporate governance standards, provides the information necessary
for Shareholders to assess the Company’s performance, business model and strategy and is fair, balanced and understandable.
Dr Jalal Bagherli
Chief Executive Officer
Jean-Michel Richard
CFO, Vice President Finance
19 February 2015
Dialog Semiconductor Plc | Annual report and accounts 2014Corporate Governance
86
Independent Auditors’ report to the members
of Dialog Semiconductor Plc
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 2014
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.
What we have audited
We have audited the financial statements of Dialog Semiconductor Plc for the year ended 31 December 2014 which comprise Consolidated
and Company Statements of financial position, the Consolidated income statement, the Consolidated statement of comprehensive income,
the Consolidated and Company statement of cash flows and the Consolidated and Company statements of changes in equity and the related
notes 1 to 35. The financial reporting framework that has been applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in
accordance with the provisions of the Companies Act 2006.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 85, 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.
In addition, we read all the financial and non-financial information in the annual report and accounts to identify material inconsistencies with
the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes 87
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; and
• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the financial statements;
• the information given in the Corporate Governance Statement set out on pages 59 to 66 with respect to internal control and risk
management systems in relation to financial reporting processes and about share capital structures is consistent with the financial
statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is:
• materially inconsistent with the information in the audited financial statements; or
• apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired in the course of
performing our audit; or
• is otherwise misleading.
In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit
and the directors’ statement that they consider the annual report is fair, balanced and understandable and whether the annual report
appropriately discloses those matters that we communicated to the audit committee which we consider should have been disclosed.
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.
David Hales
(Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Reading
19 February 2015
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes 88
88 Consolidated financial statements and notes
Consolidated financial statements and notes
89
Consolidated statement of financial position
As at 31 December 2014
Consolidated income statement
For the year ended 31 December 2014
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
Investments
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
Deferred tax liabilities
Total non-current liabilities
Ordinary shares
Additional paid-in capital
Retained earnings
Other reserves
Employee stock purchase plan shares
Net Shareholders´ equity
Total liabilities and Shareholders´ equity
Notes
At 31 December
2014
US$000
At 31 December
2013
US$000
8
9
10
7
11
12
13
4, 5, 6, 14
14
15
7
7
16
17
18
19
18
20
7
324,280
100,569
99,140
64
3,586
10,491
538,130
59,263
244,878
131,505
1,446
1,858
95
28,771
186,025
127,336
117,541
72
3,994
12,476
447,444
58,465
244,878
148,591
1,531
1,450
158
24,935
467,816
480,008
1,005,946
927,452
90,906
22,120
8,305
29,409
35,997
186,737
1,955
188,123
5,455
195,533
13,353
274,517
366,650
(15,776)
(15,068)
91,391
23,923
8,000
5,354
34,356
163,024
1,488
265,657
40,633
307,778
12,852
246,289
199,881
(130)
(2,242)
22
623,676
456,650
1,005,946
927,452
Revenue
Cost of sales
Gross profit
Selling and marketing expenses
General and administrative expenses
Research and development expenses
Other operating income
Operating profit
Interest income
Interest expense
Income tax expense
Net profit
Foreign currency exchange gains (losses), net
Result before income taxes
Earnings per share (in US$)
Basic
Diluted
Basic
Diluted
Notes
2014
US$000
2013 reclassified
US$000*)
3, 27, 28
1,156,105
3
(641,296)
901,380
(549,572)
514,809
351,808
(60,070)
(59,445)
(49,000)
(44,255)
(213,808)
(160,814)
4,416
4,921
185,902
102,660
27
3
27
3
3
7
(31,242)
2014
2013
419
(14,829)
(2,171)
169,321
138,079
2.05
1.93
67,329
76,882
565
(13,345)
(168)
89,712
(27,508)
62,204
0.95
0.92
65,641
67,676
Weighted average number of shares (in thousands)
2
*) Following a change in accounting policy the presentation of income from customer-specific research and development contracts has been reclassified. For further information please refer to note 2
to the consolidated financial statements.
These financial statements were approved by the Board of Directors on 19 February 2015 and were signed on its behalf by:
Dr Jalal Bagherli
Director
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated income statement
For the year ended 31 December 2014
Revenue
Cost of sales
Gross profit
Selling and marketing expenses
General and administrative expenses
Research and development expenses
Other operating income
Operating profit
Interest income
Interest expense
Foreign currency exchange gains (losses), net
Result before income taxes
Income tax expense
Net profit
Earnings per share (in US$)
Basic
Diluted
Consolidated financial statements and notes
89
89
Notes
2014
US$000
2013 reclassified
US$000*)
3, 27, 28
1,156,105
3
(641,296)
901,380
(549,572)
27
3
27
3
3
514,809
351,808
(60,070)
(59,445)
(49,000)
(44,255)
(213,808)
(160,814)
4,416
4,921
185,902
102,660
419
(14,829)
(2,171)
169,321
7
(31,242)
138,079
565
(13,345)
(168)
89,712
(27,508)
62,204
2014
2013
2.05
1.93
67,329
76,882
0.95
0.92
65,641
67,676
Weighted average number of shares (in thousands)
2
Basic
Diluted
*) Following a change in accounting policy the presentation of income from customer-specific research and development contracts has been reclassified. For further information please refer to note 2
to the consolidated financial statements.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
90
90 Consolidated financial statements and notes
Consolidated statement of comprehensive income
For the year ended 31 December 2014
Net profit
Other comprehensive income to be reclassified to profit or loss in
subsequent periods:
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
2014
US$000
2013
US$000
138,079
62,204
(1,032)
(19,794)
5,180
(15,646)
269
91
(63)
297
Total comprehensive income for the year
122,433
62,501
*) For amounts reclassified from other comprehensive income and recognized in profit and loss, please refer to note 28.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
91
91
Consolidated statement of cash flows
For the year ended 31 December 2014
Cash flows from operating activities:
Net profit
Adjustments to reconcile net profit to net cash generated from operations:
Interest expense net
Income tax expense
Impairment of inventories
Depreciation of property, plant and equipment
Amortisation of intangible assets
Result 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:
Purchase of property, plant and equipment
Purchase of iWatt net of acquired cash
Purchase of intangible assets
Payments for capitalised development costs
Sale (purchase) of other investments
Change in other long term assets
Cash flow used for investing activities
Cash flows from financing activities:
Payment for capital increase
Net cash flow from financial liabilities
Purchase of employee stock purchase plan shares
Sale of employee stock purchase plan shares
Cash flow from (used for) financing activities
Notes
2014
US$000
2013
US$000
138,079
62,204
3
7
13
14
24
9
13
4
14
14
14,410
31,242
9,828
22,144
33,431
407
21,173
26,764
8,570
(376)
(7,494)
816
9,657
308,651
(4,680)
396
(33,909)
270,458
(23,842)
–
(12,058)
(6,670)
34
(474)
(43,010)
(39)
(105,000)
(6,172)
22,114
(89,097)
12,780
27,508
14,445
18,581
28,646
1,369
8,487
(33,418)
26,871
(923)
(19,490)
4,135
4,067
155,262
(3,805)
587
(41,365)
110,679
(23,173)
(303,851)
(9,519)
(5,974)
(1,500)
(186)
(344,203)
–
103,650
–
3,071
106,721
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
Cash and cash equivalents at end of period
8
138,351
(126,803)
(96)
393
138,255
186,025
324,280
(126,410)
312,435
186,025
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
92
92 Consolidated financial statements and notes
Consolidated statement of changes in equity
For the year ended 31 December 2014
Additional paid-in
Ordinary shares
capital
Retained earnings
US$000
US$000
US$000
Other reserves
Currency
translation
adjustment
US$000
Employee stock
Hedges
purchase plan shares
US$000
US$000
Total
US$000
Balance at 1 January 2013
12,852
243,829
129,190
(1,964)
1,537
(2,853)
382,591
Net profit
Other comprehensive income
Total comprehensive income (loss)
Sale of employee stock purchase plan
shares
Equity settled transactions, net of tax
Changes in equity total
Balance at 31 December 2013 /
1 January 2014
Net profit
Other comprehensive income
Total comprehensive income (loss)
–
–
–
–
–
–
–
–
–
62,204
–
62,204
2,460
–
–
8,487
–
254
254
–
–
2,460
70,691
254
–
43
43
–
–
43
–
–
–
611
–
611
62,204
297
62,501
3,071
8,487
74,059
12,852
246,289
199,881
(1,710)
1,580
(2,242)
456,650
–
–
–
–
–
–
138,079
–
–
–
(1,297)
(14,349)
138,079
(1,297)
(14,349)
–
–
–
138,079
(15,646)
122,433
Capital increase for employee share option
plan (gross proceeds)
501
9,780
Transaction cost of capital increase -
employee share option plan
Acquisition of employee stock purchase
plan shares
Sale of employee stock purchase plan
shares
Equity settled transactions, net of tax
–
–
–
–
(39)
–
18,487
–
–
–
–
–
28,690
–
–
–
–
–
–
–
–
–
–
(10,281)
–
–
(39)
(6,172)
(6,172)
3,627
–
22,114
28,690
Changes in equity total
501
28,228
166,769
(1,297)
(14,349)
(12,826)
167,026
Balance at 31 December 2014
13,353
274,517
366,650
(3,007)
(12,769)
(15,068)
623,676
For further details, please refer to note 22.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
93
93
Notes to the consolidated financial statements
For the year ended 31 December 2014
1. General
The consolidated financial statements of Dialog Semiconductor Plc (“Dialog” or the “Group”) for the year ended 31 December 2014 were
authorised for issue in accordance with a resolution of the Directors on 19 February 2015. Dialog Semiconductor Plc is a company
incorporated in the UK, whose shares are publicly listed in Frankfurt/Main, Germany. The principal activities of the Group are set out in the
segment reporting (note 27).
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 voluntary change regarding the presentation of
income and related expenses from customer-specific research and development as described below and changes resulting from the adoption
of the following amended, revised and new standards and the new IFRIC interpretation during the year:
IAS 32 Financial Instruments: Presentation (amended)
The amended were issued in December 2011 and is effective for periods beginning on or after 1 January 2014. The amendment introduces
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. As the Group is not setting off financial instruments in accordance with IAS 32 and does not have relevant
offsetting arrangements, the amendment does not have an impact on the Group.
IAS 36 Recoverable Amount Disclosures for Non-Financial Assets (amendments to IAS 36)
The amendments made to this standard were issued in May 2013 and are effective for annual periods beginning on or after 1 January 2014,
early application is permitted. These narrow-scope amendments to IAS 36 Impairment of Assets address the disclosure of information about
the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. In addition the amendment removes the
requirement to disclose the recoverable amount for a cash generating unit which is not impaired.
IAS 39 Financial Instruments: Recognition and Measurement entitled Novation of Derivatives and Continuation of Hedge Accounting
(amendments to IAS 39)
The amendments made to this standard were issued in June 2013 and are effective for annual periods beginning on or after 1 January 2014.
The narrow-scope amendments will allow hedge accounting to continue in a situation where a derivative, which has been designated as a
hedging instrument, is novated to effect clearing with a central counterparty as a result of laws or regulation, if specific conditions are met. This
amendment had no impact on the financial position nor the financial performance of Dialog.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
94
94 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
2. Summary of significant accounting policies continued
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 (amended in June 2012 in order to clarify the transition guidance in IFRS 10 and to provide additional
transition relief in IFRS 10, IFRS 11 and IFRS 12). The new and revised standards are effective for periods beginning on 1 January 2013;
however the standards were adopted by the EU for periods beginning on 1 January 2014, at the latest.
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 new standard has no effect on the financial statements of the Group.
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 new standard has no effect on the financial statements of the Group, as the Group is not engaged in joint arrangements.
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 new standard introduced additional disclosures.
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.
IFRIC Interpretation 21: Levies
The new IFRIC was issued in May 2013 and is effective for annual periods beginning on or after 1 January 2014. The IFRIC outlines the
accounting for liabilities to pay levies imposed by governments, other than income taxes, especially when the entity should recognise a liability
to pay a levy. IFRIC 21 is an interpretation of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. IAS 37 sets out criteria for the
recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an
obligating event). The Interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the
relevant legislation that triggers the payment of the levy. The Group already applies the requirements clarified by IFRIC 21 on the accounting of
the National Insurance related to share-based payments. The liability is recognised progressively if the obligating event occurs over a period of
time.
Recently issued accounting standards not yet adopted (Standards and Interpretations are endorsed by the EU except as noted
otherwise)
IAS 1 Presentation of Financial Statements – Disclosure Initiative
The amendments to IAS 1 Presentation of Financial Statements were issued in December 2014 and are effective for periods beginning on or
after 1 January 2016. The amendments are designed to further encourage companies to apply professional judgement in determining what
information to disclose in their financial statements. For example, the amendments make clear that materiality applies to the whole of financial
statements and that the inclusion of immaterial information can inhibit the usefulness of financial disclosures. Furthermore, the amendments
clarify that companies should use professional judgement in determining where and in what order information is presented in the financial
disclosures. Dialog has not yet fully analysed the impact of the amendments to IAS 1 on its financial statements. The amendments have not yet
been endorsed by the EU.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
95
95
2. Summary of significant accounting policies continued
IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets - Clarification of acceptable methods of depreciation and
amortisation
The amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets were issued in May 2014 and are effective for periods
beginning on or after 1 January 2016. IAS 16 and IAS 38 both establish the principle for the basis of depreciation and amortization as being the
expected pattern of consumption of the future economic benefits of an asset.
The amendments have clarified that the use of revenue-based methods to calculate the depreciation of an asset is in general not appropriate
because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the
economic benefits embodied in the asset. The new Standard is not relevant to Dialog, as Dialog has not applied revenue based depreciation
methods. The amendments have not yet been endorsed by the EU.
IAS 19 Employee Benefits entitled Defined Benefit Plans: Employee Contributions (amendments to IAS 19)
The amendments made to this standard were issued in November 2013 and are effective for annual periods beginning on or after 1 July 2014
with early application permitted. The narrow-scope amendments apply to contributions from employees or third parties to defined benefit plans.
Dialog does not expect a material impact on the financial position nor the financial performance of Dialog.
IFRS 9 Financial Instruments
The IASB issued the completed Standard IFRS 9 Financial Instruments in July 2014. The latest package of improvements introduced by IFRS 9
includes a model for classification and measurement, a single, forward-looking ‘expected loss’ impairment model and a substantially-reformed
approach to hedge accounting. After its completion the new Standard addresses:
Classification and Measurement
Classification determines how financial assets and financial liabilities are accounted for in financial statements and, in particular, how they are
measured on an ongoing basis. IFRS 9 introduces an approach for the classification of financial assets, which is driven by cash flow
characteristics and the business model in which an asset is held. This single, principle-based approach replaces existing rule-based requirements.
Impairment
The new Standard requires entities to account for expected credit losses from when financial instruments are first recognised and to recognise
full lifetime expected losses on a more timely basis.
Hedge accounting
IFRS 9 introduces a substantially-reformed model for hedge accounting, with enhanced disclosures about risk management activity. The new
model represents a significant overhaul of hedge accounting that aligns the accounting treatment with risk management activities, enabling
entities to better reflect these activities in their financial statements.
Own credit
IFRS 9 removes the volatility in profit or loss that was caused by changes in the credit risk of liabilities elected to be measured at fair value. This
change in accounting means that gains caused by the deterioration of an entity’s own credit risk on such liabilities are no longer recognised in
profit or loss.
The new Standard is applicable for periods beginning on or after 1 January 2018 and has not yet been endorsed by the EU. Dialog has not yet
fully analysed the impact of IFRS 9 on its financial statements.
IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures
The narrow-scope amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures were
issued in September 2014 and are applicable for financial periods beginning on or after 1 January 2016. The amendments address an
inconsistency between the requirements in IFRS 10 and those in IAS 28 (2011), in dealing with the sale or contribution of assets between an
investor and its associate or joint venture. The amendments have no effect on the financial statements of Dialog, as Dialog has no investments
in joint operations or associates. The amendments have not yet been endorsed by the EU.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
96
96 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
2. Summary of significant accounting policies continued
IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 28 Investments in Associates and
Joint Ventures – Applying the Consolidation Exception
The narrow-scope amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 28
Investments in Associates and Joint Ventures were issued in December 2014 and are applicable for financial periods beginning on or after 1
January 2016. The amendments introduce minor clarifications to the requirements when accounting for investment entities. The amendments
have no effect on the financial statements of Dialog. The amendments have not yet been endorsed by the EU.
IFRS 11 Joint Operations – amendment to IFRS: Accounting for Acquisitions of Interests in Joint Operations
The amendments to IFRS 11 Joint Operations were issued in May 2014 and are applicable for periods beginning on or after 1 January 2016. The
amendments add new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business. The
amendment has no effect on the financial statements of Dialog, as Dialog has no investments in joint operations. The amendment has not yet
been endorsed by the EU.
IFRS 14 Regulatory Deferral Accounts
The IASB issued an interim Standard, IFRS 14 Regulatory Deferral Accounts in January 2014 for the annual periods beginning on or after 1
January 2016.
The aim of this interim Standard is to enhance the comparability of financial reporting by entities that are engaged in rate-regulated activities.
IFRS 14 permits first-time adopters to continue to recognise amounts related to rate regulation in accordance with their previous GAAP
requirements when they adopt IFRS. However, to enhance comparability with entities that already apply IFRS and do not recognise such
amounts, the Standard requires that the effect of rate regulation must be presented separately from other items. An entity that already presents
IFRS financial statements is not eligible to apply the Standard. IFRS 14 Regulatory Deferral Accounts is effective from 1 January 2016, with early
application permitted.
As Dialog is not engaged in rate-regulated activities, the amendment does not have an impact on the Group.
IFRS 15 Revenue Recognition
IFRS 15 Revenue Recognition was issued in May 2014 and is effective for annual periods beginning on or after 1 January 2017. The core
principle of the new Standard is for companies to recognise revenue to depict the transfer of goods or services to customers in amounts that
reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The new
Standard will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed
comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements. The new
Standard has not yet been endorsed by the EU. Dialog has not yet fully analysed the impact of IFRS 15 on its financial statements.
Annual Improvements to IFRSs 2010–2012 Cycle and Annual Improvements to IFRSs 2011–2013 Cycle- 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 December 2013, which are effective for
annual periods beginning on or after 1 July 2014. The Annual Improvements to IFRSs 2010–2012 Cycle is a collection of amendments to IFRSs
in response to eight issues addressed during 2010–2012. The Annual Improvements to IFRSs 2011–2013 Cycle is a collection of amendments
to IFRSs in response to four issues addressed during 2011–2013. Dialog is evaluating, whether there might be a material impact on the
financial position or the financial performance of Dialog.
Annual Improvements to IFRSs 2012-2014 Cycle – 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 September 2014, which are effective for
annual periods beginning on or after 1 January 2016. This includes amendments to various existing IFRSs. Dialog does not expect a material
impact on the financial position nor the financial performance of Dialog. Dialog analyses the impact of this new Standard on its revenue
recognition principles. The amendments have not yet been endorsed by the EU.
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:
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
97
97
2. Summary of significant accounting policies continued
Name
Country of incorporation
Participation
Dialog Semiconductor GmbH
Dialog Semiconductor B.V.
Dialog Semiconductor (UK) Limited
Dialog Semiconductor Operations Services Limited 1)
Powerventure Semiconductor Limited
Dialog Semiconductor Inc. (former iWatt Inc.) 1)
iWatt Cayman 1)
Dialog Semiconductor KK
iWatt MFG HK Limited 1)
IKOR Acquisition Corporation 1)
iWatt L.L.C. 1)
Dialog Argo Holdings Inc.
Dialog Argo Holdings L.L.C. 1)
iWatt Cooperatief U.A. 1)
Dialog Semiconductor Hong Kong Limited 1)
iWatt B.V. 1)
iWatt HK Limited 1)
iWatt Integrated Circuits (Shenzhen) Limited 1)
iWatt Integrated Circuits Technology (Tianjin) Limited 1)
Dialog Semiconductor (Italy) S.r.l.
Dialog Semiconductor Arastirma Gelistirme ve Ticaret A.S.
Dialog Semiconductor Hellas Societe Anonyme of Integrated Circuits 1)
Dialog Semiconductor Trading (Shanghai) Limited 1)
Germany
The Netherlands
UK
UK
UK
USA
Cayman Islands
Japan
Hong Kong
USA
USA
USA
USA
The Netherlands
Hong Kong
The Netherlands
Hong Kong
China
China
Italy
Turkey
Greece
China
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
[1] Held indirectly
The assessment of Control is based on the new accounting Standards IFRS 10 and IFRS 11. Control is achieved when Dialog is exposed, or has
rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
Specifically, Dialog controls an investee if, and only if, Dialog has:
Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee);
Exposure, or rights, to variable returns from its involvement with the investee;
The ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when Dialog has less than a
majority of the voting or similar rights of an investee, Dialog considers all relevant facts and circumstances in assessing whether it has power
over an investee, including:
The contractual arrangement with the other vote holders of the investee;
Rights arising from other contractual arrangements;
The Group’s voting rights and potential voting rights.
Dialog re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three
elements of control. Consolidation of a subsidiary begins when Dialog obtains control over the subsidiary and ceases when Dialog loses
control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the
consolidated financial statements from the date Dialog gains control until the date Dialog ceases to control the subsidiary.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
98
98 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
2. Summary of significant accounting policies continued
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and
to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are
made to the financial statements of subsidiaries to bring their accounting policies into line with Dialog’s accounting policies. All intra-group
assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of Dialog are eliminated in full on
consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
Business combinations and Goodwill
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 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.
Fair value measurement
The Group measures financial instruments, such as, derivatives (forward contracts and as hedging designated deposits), at fair value at each
balance sheet date. Also, fair values of financial instruments measured at amortised cost are disclosed in note 25. Fair value is the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
In the principal market for the asset or liability; or
In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible to the Group.
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2. Summary of significant accounting policies continued
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the
asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,
maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy,
described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly
observable;
Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have
occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
The Group’s Board of non-executive Directors and the Chief Financial Officer determine the policies and procedures for both recurring fair
value measurement, such as investment properties and unquoted AfS financial assets, and for non-recurring measurement.
External valuers are involved for valuation of significant assets, such as investments and available for sale (AfS) financial assets, significant
liabilities, such as contingent consideration and share option expense. Involvement of external valuers is decided upon annually by the Board
of non-executive Directors after discussion with and approval by the Company’s Audit Committee. Selection criteria include market knowledge,
reputation, independence and whether professional standards are maintained. The Board of non-executive Directors decides, after discussions
with the Group’s external valuers, which valuation techniques and inputs to use for each case.
At each reporting date, the Board of non-executive Directors analyses the movements in the values of assets and liabilities which are required
to be re-measured or re-assessed as per the Group’s accounting policies. For this analysis, the Board of non-executive Directors verifies the
major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant
documents.
The Board of non-executive Directors, in conjunction with the Group’s external valuers, also compares significant changes in the fair value of
each asset and liability with relevant external sources to determine whether the change is reasonable.
On an interim basis, the Board of non-executive Directors and the Group’s external valuers present the valuation results to the Audit
Committee and the Group’s independent auditors. This includes a discussion of the major assumptions used in the valuations.
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics
and risks of the asset or liability and the level of the fair value hierarchy as explained above.
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Notes to the consolidated financial statements
continued
2. Summary of significant accounting policies continued
Foreign exchange
The functional currency for the Group entities is generally the currency in which they primarily generate and expense 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). On disposal of an entity, the component of other comprehensive income relating to that particular entity is recognised in the
income statement.
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. 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
Pound Sterling
Japanese Yen
Euro
Exchange rate at
Annual average exchange rate
31 December 2014
31 December 2013
US$1 =
0.64
119.29
0.82
US$1 =
0.61
104.96
0.73
2014
US$1 =
0.61
105.75
0.75
2013
US$1 =
0.64
97.54
0.75
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 is 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.
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2. Summary of significant accounting policies continued
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.
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 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.
The Group has not entered into trading actions nor designated assets as financial assets through profit or loss in 2014 and 2013.
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 2014 as well as
31 December 2013, 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.
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.
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Notes to the consolidated financial statements
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2. Summary of significant accounting policies continued
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).
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
the derecognition as receivables under factoring agreement.
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 2014 and 2013 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.
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2. Summary of significant accounting policies continued
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a
currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and
settle the liabilities simultaneously.
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 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 was measured based on
foreign currency market rates at each reporting date.
If the requirements for hedge accounting set out in IAS 39 are met, the Group designates and documents the hedge relationship from the
date a derivative contract is entered into or the cash deposit is designated as a hedging instrument, either as a fair value hedge or a cash flow
hedge.
The Group did not enter into fair value hedges in 2014 and 2013.
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 transaction is no longer expected to occur.
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.
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Notes to the consolidated financial statements
continued
2. Summary of significant accounting policies continued
Cash and cash equivalents
Cash and cash equivalents include highly liquid investments with original maturity dates of three months or less and are subject to an
insignificant risk of changes in value. The financial position cash and cash equivalents also includes deposits designated as hedging
instruments.
Inventories
Inventories include assets held for sale in the ordinary course of business (finished goods), in the process of production (work in process) or in
the form of materials to be consumed in the production process (raw materials). Inventories are valued at the lower of cost and net realisable
value. Cost, which includes direct materials, labour and overhead, plus indirect overhead, is determined using the first-in, first-out (FIFO)
method. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated
costs to make the sale.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. These include the cost of
replacing part of the plant and equipment when that cost is incurred, if the recognition criteria are met. Depreciation is charged on a straight-
line basis over the estimated useful lives of the assets as follows:
Category of assets
Test equipment
Leasehold improvements
Office and other equipment
Useful life
3 to 8 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 and marketing related intangible
assets) 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 are 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 assets
Customer related intangible assets
Purchased software, licenses and other
Patents
Intangible assets from internal development
Useful life
1.5 to 8.5 years
3 to 10 years
10 years
1 to 9.5 years
Amortisation expenses are allocated to the cost of goods sold, selling expenses, research and development expenses or general administration
expenses. Other than its goodwill, 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-
114 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.
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2. Summary of significant accounting policies continued
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.
Impairment of non-monetary assets including Goodwill
Dialog assesses at each reporting date whether there is an indication that an asset may be impaired. Goodwill is tested for impairment
annually (as at 30 November) and when circumstances indicate that the carrying value may be impaired. Impairment testing involves
comparing the carrying amount of each cash-generating unit including goodwill or item of intangible assets, property, plant or equipment to
the recoverable amount, which is the higher of its fair value less costs to sell or its value in use. If the carrying amount exceeds the recoverable
amount, the asset is considered impaired and is written down to its recoverable amount. An impairment is determined for an individual asset,
unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets (cash-generating
unit). Dialog considers its operating segments as cash-generating units. If a cash generating unit is found to be impaired, an impairment loss is
first recognized on any goodwill allocated to it. Any remaining impairment amount is then allocated among the other assets of the cash-
generating unit, and pro-rated impairment losses are recognized on the carrying amounts of these assets.
Impairment losses of continuing operations are recognised in the income statement in expense categories consistent with the function of the
impaired asset, except goodwill. Impairment losses on goodwill are recognized in “other expense”.
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. These are forecasted on the basis of the Group’s
current planning, the planning horizon normally being four years including one year of budgeted and three additional forecasted years. In
determining the fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be
identified, an appropriate valuation model is used.
Forecasting for the entire planning period involves making assumptions, especially regarding future selling prices, sales volumes and costs.
Where the recoverable amount is the fair value less costs to sell, the cash-generating unit or individual asset is measured from the viewpoint
of an independent market participant. Where the recoverable amount is the value in use, the cash-generating unit or individual asset is
measured as currently used. In either case, net cash flows beyond the planning period are determined on the basis of long-term business
expectations using the respective individual growth rates derived from market information.
The net cash inflows are discounted at a pre-tax discount rate. To allow for the different risk and return profiles of the Group’s principal
businesses, the discount rate is calculated separately for each strategic business unit (synonymously cash generating unit from impairment test
perspective) furthermore, the specific capital structure is defined by benchmarking against comparable companies in the same industry sector.
The cost of equity corresponds to the return expected by stockholders, while the cost of debt is based on the conditions on which comparable
companies can obtain long-term financing. Both components are derived from capital market information.
For assets other than goodwill, 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.
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Notes to the consolidated financial statements
continued
2. Summary of significant accounting policies continued
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.
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.
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2. Summary of significant accounting policies continued
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.
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. This item also
includes amortisation charges related to capitalised development cost. Impairment charges are shown either in cost of sales when revenues
had already been realized or in research and development expenses if not.
Sales and marketing expenses
Sales and marketing expenses consist primarily of salaries, travel expenses, sales commissions, bad debt expenses and costs associated with
advertising and other marketing activities.
General and administrative expenses
General and administrative expenses consist primarily of personnel and support costs for finance, human resources, ERP system and other
management departments which are not attributable to development, production or sales functions.
Research and development costs
Costs identified as research costs are expensed as incurred, whereas development costs on an individual project are capitalised as an intangible
asset and amortised over the period of expected future benefit if the Group can demonstrate the following:
The technical feasibility of completing the intangible asset so that it will be available for use or sale;
Its intention to complete the intangible asset and use or sell it;
Its ability to use or sell the intangible asset;
How the intangible asset will generate probable future economic benefits. Among other things, the Group can demonstrate the
existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of
the intangible asset;
The availability of adequate technical, financial and other resources to complete the development and use or sell the intangible asset; and
Its ability to measure reliably the expenditure attributable to the intangible asset during its development.
Interest income/expense
Interest income is recognised as interest accrues. Interest income includes interest income from investments in securities, cash and cash
equivalents. Income and expense resulting from the allocation of premiums and discounts is also included. Interest expense is generally
expensed as incurred.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of
time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed
in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
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.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
108
108 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
2. Summary of significant accounting policies continued
Income taxes
Current income taxes for current and prior periods are measured at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are accounted for using the liability method and are recognised for the future tax consequences attributable
to differences between the financial statement carrying amounts of assets and liabilities, and their respective tax bases, as well as on the carry-
forward of unused tax losses that can be utilised.
Deferred tax assets and liabilities are measured using tax rates that have been enacted, or substantively 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 date of substantive
enactment.
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 generally assumed that tax losses incurred first will be utilized first and the respective provision will be reversed.
Deferred tax assets and deferred tax liabilities are offset, if and only 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.
Income tax is charged or credited to other comprehensive income if it relates to items that are charged or credited to other comprehensive
income. Similarly, income tax is charged or credited directly to equity if it relates to items that are credited or charged directly to equity.
Otherwise income tax is recognised in the income statement.
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 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.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
109
109
2. Summary of significant accounting policies continued
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.
The last measurement date for the LTIP was 31 January 2011, the LTIP was then replaced by the Executive Incentive Plan, see below.
For further information please refer to note 24.B.
Executive Incentive plan
In 2011 the Group established an equity settled Executives Incentive Plan (EIP). As described above, the EIP replaces the LTIP. Under this plan,
key executives and other key value drivers of the business are eligible to share in a percentage of the value created for Shareholders. Pay-outs
are now in addition to share price growth also based on corporate performance targets.
Each participant in the EIP is awarded a number of units which convert into Company shares according to the level of the Company’s share
price, EBIT and revenue growth over a term of three years from the date of grant.
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. For further information please refer to note
24.C.
Employee and non-executive Director benefit trusts – Treasury shares
The Group has an employee benefit trust and a non-executive Director benefit trust. These trusts are separately administrated and are funded
by the Group, which consolidates the assets, liabilities, income and expenses in its own accounts. The shares held by the trusts are recorded at
cost and are shown under “Employee stock purchase plan shares” in the statement of changes in Shareholders’ equity.
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 (loss) 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.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
110
110 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
2. Summary of significant accounting policies continued
The weighted average number of shares outstanding is as follows:
Basic number of shares
Effect of dilutive options outstanding
Dilutive number of shares
2014
US$000
67,329
9,553
76,882
2013
US$000
65,641
2,035
67,676
The number of anti-dilutive share options outstanding was 950,340 (2013: 3,179,646).
In 2014 the potential ordinary shares of the convertible bond were dilutive as their conversion to ordinary shares would decrease earnings per
share.
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 including Goodwill
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. Goodwill is tested for impairment annually, whether or not there is any indication that it may be
impaired. The impairment test 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 2014
was US$534,786,000 (2013: US$569,475,000), please refer to notes 4, 5, 6, 10, 13 and 14 for further information.
Business Combinations
In accordance with business combination accounting, we allocated during the occurred transactions in previous years 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 identifying certain intangible assets acquired and 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,
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 and described in note 4 (Business Combination).
Goodwill is allocated to cash generating units or groups of cash generating units, that is expected to benefit from the synergies of the
business combination, irrespective of whether other assets or liabilities of the acquire are assigned to these units or group of units. The
estimates of these synergies include but are not limited to: future cash flows from the sale of products, changes in fair values of cash
generating units and discount rate. We refer to note 6 (Impairment testing) for the accounting treatment including applied approach and
assumptions related to the current business combination.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
111
111
2. Summary of significant accounting policies continued
Deferred tax assets and liabilities
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 on projected future taxable profits and cash flows is required to determine the amount of deferred tax
assets that can be recognised, based upon the likely timing of future taxable profits, together with future tax planning strategies. At year-end
2014, net deferred tax assets amounting to US$23,316,000 were recognised (2013: net deferred tax liabilities US$15,698,000).
Further information regarding the assessment of future taxable income is disclosed in note 7.
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 2014, the expense related to stock options was US$13,381,000 (2013: US$5,642,000). For
further information on stock options please refer to note 24.A and 24.D.
Executives’ Long Term Incentive Plan
The fair value of the awards is recognised as a compensation expense with a corresponding increase in equity. The fair value is measured
at grant date, using a Monte Carlo Model, based on standard inputs such as the Company’s share price, interest rate, volatility of the
Company’s share price, dividend yield, expected life and fluctuation. Due to the nature of these assumptions, such estimates are subject
to significant uncertainty. In 2014, an expense of nil was booked (2013: nil). Further information regarding LTIP is provided in note 24.B
and 24.D.
Executives Incentive Plan
The fair value of the awards is recognised as a compensation expense with a corresponding increase in equity. The fair value is measured
at grant date, using a Monte Carlo Model, based on standard inputs such as the Company’s share price, interest rate, volatility of the
Company’s share price, dividend yield, expected life and fluctuation. Due to the nature of these assumptions, such estimates are subject
to significant uncertainty. In 2014, an expense of US$7,792,000 was booked (2013: US$2,846,000). Further information regarding EIP is
provided in note 24.C and 24.D.
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 2014 no
receivables or liabilities from constructions contracts were outstanding (2013: 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 economic feasibility is confirmed, usually when a
product development project has reached a defined milestone according to an established project management model. The amortisation starts
when the capitalized product is ready for intended use. 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 2014, the carrying amount of capitalised development costs was US$50,401,000 (2013:
US$57,352,000), please refer to note 14.
Actual results may differ from all of the above judgements and estimates.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
112
112 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
2. Summary of significant accounting policies continued
Voluntary change in accounting policy
In 2014 management decided to change the presentation of income and related expenses from customer-specific research and development
contracts. The previous accounting policy was to present income from customer-specific research and development contracts within the
revenue line; associated expenses were presented under cost of sales. Going forward, the income will be presented within the other operating
income line; the expenses will be shown under research and development expenses.
The new accounting policy was adopted on 1 January 2014 and has been applied retrospectively. The change in policy will lead to a more
transparent presentation and will improve the comparability within the peer group.
As this voluntary change in accounting policy has an effect on the current and prior reporting periods, management reports the following
affected financial statement lines according to IAS8.29:
Revenue
Cost of sales
Gross profit
Research and development expenses
Other operating income
Operating profit
2013 as previously
Reclassification
2013 reclassified
reported
US$000
902,907
(551,099)
351,808
(159,287)
3,394
102,660
US$000
(1,527)
1,527
US$000
901,380
(549,572)
–
351,808
(1,527)
1,527
(160,814)
4,921
–
102,660
The reclassification of income and related expenses from customer-specific research and development contracts does not impact earnings per share.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
113
113
3. Other disclosures to the income statement
a) Operating expenses and revenues
Auditors' remuneration
for the audit of the Group financial statements
for the statutory audit of the subsidiaries
for other audit related services
Other fees for auditors
Tax advisory services
Services related to Corporate Finance transaction
Depreciation of property, plant and equipment
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 payments
Pension costs from defined contribution plans1)
Included in revenues:
Revenue from the sale of goods
Revenue from royalties
Included in revenue from sale of goods income attributable to prior periods from BenQ cash settlement
Included in cost of sales:
Amount of inventory recognised as expense
Impairment of inventories recognised as an expense
Included in other operating income:
Release of an earn out provision (see note 18)
BenQ Settlement
Revenue from customer specific research and development contracts
Income from insurance benefits and compensation
*) Following a change in accounting policy the presentation of income from customer-specific research and development contracts has been reclassified.
For further information please refer to note 2 to the consolidated financial statements.
[1] The pension costs from defined contribution plans include costs for the state funded pension plan in Germany of US$3,256,000 (2013: US$2,732,000).
2014
US$000
2013 reclassified
US$000*)
(543)
(43)
(187)
(2,480)
(82)
(3,335)
(22,144)
(3,294)
(8,289)
(1,291)
(20,557)
(33,431)
(736)
(9)
(170)
(2,019)
(335)
(3,269)
(18,581)
(10,940)
(8,203)
(983)
(8,520)
(28,646)
(161,405)
(18,522)
(21,173)
(9,325)
(115,913)
(12,055)
(8,487)
(7,703)
(210,425)
(144,158)
1,155,124
899,660
981
–
869
851
(580,485)
(9,828)
(484,957)
(14,445)
1,939
–
1,546
931
4,416
3,249
145
1,527
–
4,921
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
114
114 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
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 443,343 (2013: nil) 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 and liabilities
Financial liabilities measured at amortised cost
2014
US$000
5,042
2014
No.
1
1
2014
US$000
3,930
–
2013
US$000
2,849
2013
No.
1
–
2013
US$000
1,820
37
2014
US$000
419
(14,829)
(14,410)
(1,993)
(12,417)
2013
US$000
565
(13,345)
(12,780)
(3,845)
(8,935)
(14,410)
(12,780)
d) Government grants
The Group receives government grants for research and development activities of its Dutch design centre. Under the condition that
technologies are new to the company and performed by the Group’s employees, a grant can be received for its development. This grant is
based on the hours spent on these R&D activities. In 2014 the Group received grants in the amount of US$738,284 (2013: US$1,055,000). In
the income statement the grants received were deducted from research and development expenses. In addition in 2014 the Company has
applied for a grant in the form of a tax relief, an amount of up to US$2,712,743 (2013: US$3,567,000) can be deducted from a positive
taxable income in the Netherlands.
In 2014 the Group claimed also R&D Expenditure Credit (“RDEC”) with respect to qualifying Research & Development (“R&D”) activities
undertaken by Dialog Semiconductor (UK) Limited. The RDEC claim includes staff costs relating to Directors or employees who are directly and
indirectly engaged in qualifying R&D activities, as well as certain consumable items and utility expenses (power, water, gas etc.) and computer
software costs, where the costs relate to qualifying R&D activities.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
115
115
3. Other disclosures to the income statement continued
The RDEC claimed in 2014 of US$1,250,000 was deducted from research and development expenses in the income statement. US$959,000
of this amount represents a receivable from the UK tax authorities. The remaining amount of US$291,000 can be used to offset UK corporate
taxes payable.
e) Headcount
The average number of persons employed by the Group (including the Executive Director) during the year, analysed by category, was as
follows:
Research and Development
Production
Sales and Marketing
Admin
IT
2014
832
157
199
131
41
1,360
2013
588
127
156
71
30
972
4. Business combination
Acquisition in 2013
On 16 July 2013 Dialog Semiconductor Plc acquired 100% of the voting rights of iWatt Inc. (“iWatt”) for a purchase price with a fair value of
US$311,449,000 of which US$306,261,000 was paid in cash at the time of the acquisition. Headquartered in Campbell, California, with
approximately 180 employees worldwide, iWatt is a leading provider of digital power management integrated circuits with a patent portfolio
of more than 110 patents and a strong design and application engineering presence in Asia. Its innovative PrimAccurate™ technology
platform enables high performance, energy-efficient, small form-factor and cost-effective solutions for markets such as AC/DC power
conversion and LED Solid State Lighting (SSL). The Company’s solutions are designed into the products of leading global OEMs and it has
shipped more than one billion power management ICs since 2007.
This acquisition underscores Dialog's strategy to diversify its markets and growth opportunities through select strategic acquisitions. iWatt’s
business is highly complementary to Dialog’s existing PMIC business. It will enable the resulting business combination to address adjacent
emerging power management segments and increase its Total Addressable Market. It diversifies Dialog’s product portfolio adding two high
growth product families; AC/DC charge adaptor IC and a broad range of LED Solid State Lighting ICs. iWatt’s business contributes to the
diversification of Dialog’s client portfolio by adding new Tier-1 customers and expanding the business opportunities at existing smartphone
Tier-1 OEMs.
The acquisition has been accounted for using the acquisition method as required by IFRS 3.4. Due to the timing of the acquisition the initial
accounting for the business combination was incomplete at the time the 2013 financial statements were authorized for issue. The fair values
recognized on the acquisition represented in the annual report and accounts 2013 provisional amounts.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
116
116 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
4. Business combination continued
Assets acquired and liabilities assumed
The book values at iWatt and provisional fair values of the identifiable assets and liabilities of iWatt as at the date of acquisition were:
Book values at iWatt
Fair value adjustments
Fair value recognised
US$000
US$000
on acquisition
US$000
Assets
Cash and cash equivalents
Trade accounts receivable and other receivable
Inventories
Other current assets
Property, plant and equipment
Intangible assets 1)
Deferred tax assets
Other non-current assets
Total assets
Liabilities
Trade and other payables
Provisions
Income taxes payable
Other current liabilities
Deferred tax liabilities
Total liabilities
Total identifiable net assets at fair value
Goodwill arising on acquisition
Purchase price
Fair value of contingent consideration (earn out) 2)
Purchase consideration transferred
–
–
6,996
–
3,117
113,499
–
–
2,410
11,017
13,030
776
4,866
113,553
16,200
314
123,612
162,166
2,410
11,017
6,034
776
1,749
54
16,200
314
38,554
11,585
7,342
227
3,431
–
22,585
–
(3,903)
–
–
44,630
40,727
15,969
82,885
11,585
3,439
227
3,431
44,630
63,312
98,854
212,595
311,449
(5,188)
306,261
[1] For further information please refer to note 14 for allocation of fair value adjustments to Group’s asset classes.
[2] For further information please refer to note 18.
The fair value of the trade receivables amounted to US$11,017,000. None of the trade receivables have been impaired and the full contractual
amounts have been collected. The fair value of inventories contained a step-up of US$6,996,000 which had an adverse impact on gross
margin and the financial results for the reporting period 2013.
The intangible assets comprised mainly customer and technology (including core technology) related intangible assets.
The deferred tax assets mainly represented tax loss carryforwards, temporary differences relating to intangible assets, other temporary
differences and tax credits.
The deferred tax liability mainly comprised the tax effect on fair value adjustments from the purchase price allocation.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
117
117
4. Business combination continued
The goodwill of US$212,595,000 comprised the value of expected significant synergies, especially with the Company’s Mobile Systems
segment, and other benefits from combining the assets and activities of iWatt with those of the Dialog Group as explained above.
From the date of the acquisition, iWatt has contributed in 2013 US$26,768,000 of revenue (net of US$7,073,000 of deferred revenue which
was not accounted for due to acquisition accounting rules) and a loss of US$22,533,000 before tax which were presented in the Group’s
created segment Power Conversion. If iWatt had been acquired on 1 January 2013, revenue of the Group in 2013 would have been
US$942,520,000. However, due to a lack of IFRS-specific data prior to the acquisition of iWatt, pro-forma profit or loss of the combined entity
in 2013 could not be determined reliably.
Purchase consideration
The total purchase price consideration amounted to US$306,261,000. There was an additional total contingent consideration (earn out) of up
to US$35 million agreed with the previous owners of iWatt. The maximum payment of US$35 million related to the two earn out periods. On
January 28th 2014, Dialog’s management informed the previous owners that the targets for the first earn-out period were not achieved and
that as a result, no payment will be made for this period.
On November 11th 2014 Dialog’s management informed the previous owners that the targets for the second and final earn-out period were
not achieved and that as a result, no payment will be made.
Analysis of cash flows from acquisition in 2013
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
US$000
(3,974)
(306,261)
2,410
(307,825)
Acquisition costs of US$3,974,000 have been expensed and were included in general and administrative expenses in the income statement of
2013.
The acquisition was funded from both Dialog’s existing cash resources and additional debt facilities of US$115 million of which no amount is
outstanding at 31 December 2014.
5. Allocation of goodwill
As mentioned in note 4, the unallocated goodwill in 2013 of US$212,595,000 comprised the value of significant expected synergies,
especially within the Mobile Systems segment, as well as other benefits from combining the assets and activities of iWatt Inc. with those of
the Dialog Group. In view of the significant differences that existed between the Dialog Group and the former iWatt Group when it comes to
sales channels and the geographical foot print in particular, the evaluation was on going at 31 December 2013.
During the integration process, one of the key activities was the evaluation of the complementarity between the two groups as it relates to
technology, product portfolio, customer base and sales channels, in an effort to properly and reliably identify cross selling opportunities
between the in 2013 acquired iWatt group and Dialog’s existing segments. Dialog considers its operating segments as cash-generating units.
In the second quarter of 2014 the evaluation process of synergies and the purchase price allocation were finalized. The final goodwill
allocation did not result in fair value changes of the acquired assets and goodwill compared to the amounts reported in the financial
statements as of 31 December 2013.
IFRS 36.80 requires the allocation of goodwill to the cash generating units expected to benefit from the synergies of the combination,
irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groups of units. Management decided to
determine the present value of the synergies based on the expected cash flow approach and to allocate these to the identified cash-
generating units.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
118118 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
5. Allocation of goodwill continued
Based on the expected cash flow approach the unallocated goodwill of US$212,595,000 has been allocated to the cash generating units
Power Conversion (US$49,515,000), Mobile Systems (US$102,014,000) and Connectivity (US$61,066,000). Based on management
assumptions the Automotive/Industrial segment will not benefit from synergies from the business combination with iWatt. The first
annual impairment review of this goodwill took place in Q4 2014 (for further details, please refer to note 6 below).
For impairment testing purposes, goodwill acquired through business combinations (2013: iWatt and 2011: SiTel) has been allocated, as
follows:
Power Conversion
Connectivity
Mobile Systems
Unallocated
Total
2014
US$000
2013
US$000
2014
US$000
2013
US$000
2014
US$000
Goodwill
49,515
–
88,199
27,133
107,164
2013
US$000
5,150
2014
US$000
2013
US$000
2014
US$000
2013
US$000
–
212,595
244,878
244,878
6. Impairment testing
Mobile Systems, Connectivity and Power Conversion segments
As described in note 2 in more detail an impairment loss must be recognized if the carrying amount of a cash generating unit exceeds its
recoverable amount. The recoverable amount can either be measured as the fair value less cost to sell or the value in use, whichever value is
higher. In Q4 2014 the company performed individual impairment tests for the three relevant CGU’s (Mobile Systems, Connectivity and Power
Conversion) based on the value in use to determine the recoverable amount.
Key assumptions used in value in use calculations
The calculation of value in use for the three units is most sensitive to the following assumptions:
Return on sales;
Discount rates;
Growth rates used to extrapolate cash flows beyond the planning period.
Return on sales – Return on sales is calculated by dividing the EBITDA by net sales for each of the units. The EBITDA is defined as the
operating profit (loss) excluding depreciation and amortisation expenses as reported in note 27.
Discount rates – Discount rates represent the current market assessment of the risks specific to each CGU, taking into consideration the time
value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate
calculation is based on the specific circumstances of the Group and its operating segments and is derived from its weighted average cost of
capital (WACC). The WACC takes into account both debt and equity. The applied discount rate represents a pre-tax WACC. The cost of equity
is derived from the expected return on investment by market participants. The cost of debt is based on the interest bearing borrowings the
Group is obliged to service. Segment-specific risk is incorporated by applying individual beta factors. The beta factors are evaluated annually
based on publicly available market data. In addition the risk free interest rate is updated on yearly basis from market available data. The
calculation of the recoverable amount is based on pre-tax cash flows discounted using a pre-tax discount rate.
Growth rate estimates – Rates are based on company’s industry research and applied for calculation of perpetuity.
The discounted cash flow calculations use projections that are based on management’s expectations covering the assessment year 2015. The
planning horizon reflects the assumptions for short-to mid-term market developments. Cash flows for the assessment years 2016 to 2018 are
extrapolated using appropriate growth rates. Key assumptions on which management has based its determination of the value in use include
the development of key assumptions mentioned above. Cash flow calculations are supported by external sources of information.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
119
119
6. Impairment testing continued
Impairment Testing Parameters
Actual
Return on sales
Pre-tax discount rate
Growth rates
3 year planning period
Return on sales
Pre-tax discount rate
Growth rates
Perpetual annuity
Return on sales
Pre-tax discount rate
Growth rates
Mobile Systems
Connectivity
Power Conversion
2014
in %
24.9
11.3
26.5
2013
in %
22.0
11.3
16.6
2014
in %
7.2
11.3
0.5
2013
in %
3.7
11.3
(4.7)
2014
in %
3.9
11.3
21.1
27.1 - 29.5
26.5 - 29.1
9.0 - 15.0
12.2 - 21.1
9.1 - 15.6
11.3
11.3
11.3
11.3
11.3
10.1 - 23.6
10.8 - 25.3
20.2 - 33.8
15.6 - 41.9
20.0 - 24.9
29.0
11.3
1.0
28.0
11.3
1.0
14.0
11.3
1.0
21.0
11.3
1.0
14.5
11.3
1.0
2013
in %
-
-
-
-
-
-
-
-
-
The determination of recoverable amounts for Group’s segment was based on a value in use calculation using parameters mentioned above.
The recoverable amounts were US$3,667,498,000 for Mobile Systems segment; US$252,125,000 for Connectivity segment and
US$206,161,000 for Power Conversion segment as at 31 December 2014.
Sensitivity to changes in assumptions
The implications of the key assumptions for the recoverable amount are discussed below:
Growth rate assumptions - Management recognises that the speed of technological change in the company’s industry sector and the
possibility of new entrants can have a significant impact on growth rate assumptions of respective segments. Therefore growth rate
assumptions are segment specific, including respective main customers, technology and distribution channels. The weighted effect of new
entrants is not expected to have an adverse impact on the forecasts, but could yield a reasonably possible alternative to the estimated average
growth rate for the planning horizon of 13.7% (2013: 12.3%) for Mobile Systems segment; 27.8% (2013: 28.7%) for Connectivity segment
and 24.0% for Power Conversion segment. A reduction to 0.0% (2013: 0.0%) in the planning horizon average growth rate in Mobile
Systems segment with all other factors being held constant would not result in impairment. For the Connectivity segment, a reduction of the
average growth rate to 23.1% (2013: 15.0%) over the planning horizon with all other factors being held constant would result in impairment.
A reduction of the average growth rate to 17.7% over the planning horizon with all other factors being held constant would result for the
Power Conversion segment in impairment.
Discount rates - A rise in pre-tax discount rate to 55.0% (2013: 31.0%) in the Mobile Systems segment with all other factors being held
constant would result in impairment. A rise in pre-tax discount rate to 27.3% (2013: 32.6%) in the Connectivity segment with all other
factors being held constant would result in impairment. For Power Conversion segment a rise in pre-tax discount rate to 14.4% with all other
factors being held constant would result in impairment.
Management concluded that impairment charge against goodwill should be recognised in either of the three strategic business units.
However, although the assumptions concerning the macroeconomic environment and developments in the industries in which Dialog operates
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. Given the Dialog’s management outlook as at December 31, 2014
with respect to growth and discount rates for Group’s segments, management does not expect significant changes in key assumptions.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
120
120 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
7. Income taxes
Income tax benefit (expense) is comprised of the following components:
Current taxes:
United Kingdom
Foreign
Deferred taxes:
United Kingdom
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 the recognition of previously unrecognised deferred tax assets
Movement in deferred tax liabilities following intra-group reorganisation *)
Adjustments recognised for tax of prior periods
Income tax expense
2014
US$000
2013
US$000
–
–
(56,695)
(35,702)
2,558
22,895
–
8,194
(31,242)
(27,508)
2014
US$000
2013
US$000
(56,689)
(6)
(36,979)
1,277
(7,765)
11,009
17,759
4,450
7,186
1,983
-
(975)
(31,242)
(27,508)
*) The amount of US$17,759,000 relates to a one-off non-cash deferred tax credit resulting from an intra-group reorganisation of certain Intellectual Property, which impacted the recorded value of
deferred tax liabilities.
Tax charged / (credited) directly to other comprehensive income:
Current tax charge/(credit)
Deferred tax charge/(credit)
Total tax charged / (credited) directly to other comprehensive income
Tax charged / (credited) directly to equity:
Current tax charge/(credit)
Deferred tax charge/(credit)
Total tax charged / (credited) directly to equity
2014
US$000
–
5,180
5,180
–
7,517
7,517
2013
US$000
–
(63)
(63)
–
–
–
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
121
121
7. Income taxes continued
Factors affecting the tax expense for the year
Historically, even though Dialog Semiconductor Plc is a UK company, the reconciliation of income taxes was determined using the German
income tax rate, on the basis that the principal operations were located in Germany. However, in light of the evolutionary change in the
Group’s operating model, and in particular the on-going exercise to align our Intellectual Property ownership with the commercial structure of
the Group, this is no longer the case. Operations are now global, with strategic decision-making centred in the UK. Accordingly, it is now
considered appropriate to perform the reconciliation of income taxes to the UK rate of the parent company, Dialog Semiconductor Plc.
A reconciliation of income taxes determined using the UK income tax rate of 21.5% (2013: 23.25%), 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)
Benefit from previously unrecognised deferred tax assets that is used to reduce actual income tax expense
Additional losses for which no deferred tax asset is recognised
Adjustments recognised for tax of prior periods
Differences arising from differences between functional currency and tax currency
Tax gain on intra-group reorganisation
Movement in deferred tax liabilities following intra-group reorganisation *)
Other
Actual income tax expense
2014
US$000
(36,404)
(12,901)
(5,120)
4,267
(553)
11,009
(6,495)
4,444
(5,426)
(2,445)
17,759
623
2013
US$000
(20,858)
(5,251)
(2,276)
1,487
(71)
1,983
(2,827)
302
(45)
–
–
48
(31,242)
(27,508)
*) The amount of US$17,759,000 relates to a one-off non-cash deferred tax credit resulting from an intra-group reorganisation of certain Intellectual Property, which impacted the recorded value of
deferred tax liabilities.
Deferred tax
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
Recognised net deferred tax assets / (liabilities)
At 31 December
At 31 December
2014
US$000
2013
US$000
(10,818)
(43,028)
8,105
3,200
22,829
23,316
1,913
2,771
22,646
(15,698)
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
122
122 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
7. Income taxes continued
Tax loss carryforwards, temporary differences and net deferred tax assets are summarised as follows:
31 December 2014
31 December 2013
Tax loss
Temporary
Net deferred tax
Temporary
Net deferred tax assets
carryforwards
differences
assets (liabilities)
Tax loss carryforwards
Germany
UK
Netherlands
US
Other
Total
US$000
–
106,573
30,714
51,642
–
188,929
US$000
5,206
18,236
(6,146)
(19,134)
1,883
US$000
1,477
7,940
6,142
7,002
755
US$000
–
73,600
23,258
64,509
differences
US$000
1,026
31,968
(7,863)
(112,154)
–
1,563
(liabilities)
US$000
288
–
3,849
(20,398)
563
45
23,316
161,367
(85,460)
(15,698)
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$82,643,000 (2013: US$121,579,000). In addition, no deferred tax asset is recognised in respect of federal and state tax
credits of US$4,416,000 (2013: US$3,643,000). The amount of deductible temporary differences and unused tax loss carry forwards for
which no deferred tax asset is recognised has reduced in the year primarily as a result of the on-going exercise to align our Intellectual Property
ownership with the commercial structure of the Group. This has allowed Dialog to utilise and to further partially recognise previously
unrecognised UK tax loss carry forwards and other UK deductible temporary differences.
In assessing whether the deferred tax assets can be used, management considers the probability that some, or all, of the deferred tax assets
will not be realised. The utilisation of deferred tax assets depends upon generating taxable profit during the periods in which those temporary
differences become deductible or tax-loss carryforwards can be utilised. Management considers the reversal of deferred tax liabilities,
projected future taxable income, benefits that could be realised from available tax planning strategies and other positive and negative factors
in making this assessment.
The utilisation of tax loss carryforwards and temporary differences for which currently no deferred tax asset is recognized is subject to the
achievement of positive income in periods which are beyond the Company’s current business plan and therefore this utilisation is uncertain.
Consequently no deferred tax assets were recognised for these losses and temporary differences.
The tax loss carryforwards in the US will expire between 2014 and 2034 and in the Netherlands between 2017 and 2023; other tax loss
carryforwards have no expiration date.
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
2015. The amount that will be paid in 2015 is shown within the current assets.
No deferred tax has been recognised in respect of undistributed earnings of subsidiaries because no liability is expected to arise on distribution
under applicable tax legislation or because the Group is in a position to control the timing of the reversal of the temporary differences and it is
probable that such differences will not reverse in the foreseeable future.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
123
123
8. Cash and cash equivalents
Cash at bank
Short-term deposits
Deposits designated as a hedging instrument
Cash and cash equivalents
At 31 December
At 31 December
2014
US$000
178,242
140,204
5,834
324,280
2013
US$000
151,016
35,009
–
186,025
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.
9. Trade accounts receivable and other receivable
Trade accounts receivable
Receivables from factoring agreement
At 31 December
At 31 December
2014
US$000
80,594
19,975
100,569
2013
US$000
113,236
14,100
127,336
Trade receivables are non-interest bearing and are generally on 30-60-day terms.
As described in note 28, the Group has two selective factoring agreements, one since 2007 and the other since 2012. The amount shown as
receivables from the factoring agreements represents respectively a 15% or 10% 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. There are no significant risks related to the continuing involvement. 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$96,000 and US$82,000 at 31 December 2014
and 2013, respectively. The related allowance for doubtful accounts was US$96,000 and US$82,000 at 31 December 2014 and 2013,
respectively.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
124
124 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
9. Trade accounts receivable and other receivable continued
The allowance for doubtful accounts developed as follows:
At 31 December
At 31 December
2014
US$000
82
18
–
(4)
–
96
2013
US$000
1,130
20
(670)
(168)
(230)
82
At 31 December
At 31 December
2014
US$000
78,994
–
1,566
32
2
–
2013
US$000
109,087
–
3,272
456
28
393
80,594
113,236
At 31 December
At 31 December
2014
US$000
11,013
30,047
58,080
–
2013
US$000
14,276
26,815
76,438
12
99,140
117,541
Allowance for doubtful accounts at beginning of year
Additions charged to bad debt expense
Write-offs charged against the allowance
Reductions credited to income
Effect of movements in foreign currency
Allowance for doubtful accounts at end of year
As at 31 December 2014 and 2013, the aging analysis of trade accounts 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
10. Inventories
Inventories are comprised of the following:
Raw materials
Work-in-process
Finished goods
Deposits
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
125
125
11. Other financial assets
Other financial assets comprise:
Deposits for hedging contracts
Hedging instruments
At 31 December
At 31 December
2014
US$000
3,586
–
3,586
2013
US$000
1,532
2,462
3,994
The deposits for hedging contracts are an advance settlement for hedging instruments with a negative fair value. The deposits do not bear
interests and are offset with amounts due when the hedge is settled.
The amount shown under hedging instruments includes the fair value of derivative financial instruments used for cash flow hedges. The
Group is exposed to currency risks in the course of its operating activities. These risks are reduced by the use of forward currency exchange
contracts.
The Group has clear guidelines as to the use of those derivatives, and compliance is constantly monitored. For further information on the
Group’s hedging policy please see note 28.
12. Other current assets
Other current assets comprise:
Prepaid expenses 1)
Other tax receivables
Other
[1] Including US$ nil (2013: US$3,440,000) prepayments made to a major supplier.
At 31 December
At 31 December
2014
US$000
7,459
1,253
1,779
10,491
2013
US$000
10,713
1,017
746
12,476
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
126
126 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
13. Property, plant and equipment, net
A summary of activity for property, plant and equipment for the years ended 31 December 2014 and 2013 is as follows:
Cost
Balance at 31 December 2012 /
1 January 2013
Additions relating to the iWatt acquisition 1)
Effect of movements in foreign currency
Additions
Reclassifications
Disposals
Balance at 31 December 2013 /
1 January 2014
Effect of movements in foreign currency
Additions
Reclassifications
Disposals
Leasehold
Office and other
Construction in
Test equipment
improvements
US$000
US$000
equipment
US$000
progress
US$000
Total
US$000
108,198
4,440
(12)
6,640
–
(1,112)
9,630
170
108
3,468
–
(157)
118,154
13,219
(119)
8,640
14
(2,299)
(421)
3,003
199
(488)
32,578
256
195
12,321
10
(1,477)
43,883
(910)
11,338
94
(595)
12
–
12
686
(10)
–
700
(63)
1,412
(309)
(156)
150,418
4,866
303
23,115
–
(2,746)
175,956
(1,513)
24,393
(2)
(3,538)
Balance at 31 December 2014
124,390
15,512
53,810
1,584
195,296
Depreciation and impairment losses
Balance at 31 December 2012 /
1 January 2013
Effect of movements in foreign currency
Depreciation charge for the year
Impairment charges
Disposals
Balance at 31 December 2013 /
1 January 2014
Effect of movements in foreign currency
Depreciation charge for the year
Reclassifications
Disposals
(79,609)
2
(10,107)
(171)
1,028
(2,640)
(28)
(1,546)
–
61
(17,851)
(90)
(6,928)
(346)
734
(88,857)
(4,153)
(24,481)
12
(11,007)
(5)
2,221
215
(2,147)
–
161
453
(8,997)
5
547
Balance at 31 December 2014
(97,636)
(5,924)
(32,473)
–
–
–
–
–
–
–
–
–
–
–
(100,100)
(116)
(18,581)
(517)
1,823
(117,491)
680
(22,151)
–
2,929
(136,033)
Net book value
At 31 December 2012 / 1 January 2013
At 31 December 2013 / 1 January 2014
Balance at 31 December 2014
28,589
29,297
26,754
6,990
9,066
9,588
14,727
19,402
21,337
12
700
50,318
58,465
1,584
59,263
Finance leases
The carrying value of property, plant and equipment held under finance leases at 31 December 2014 was US$488,000 (31 December 2013:
US$288,000). Additions during the year were US$614,000 (2013: US$40,000). As of the reporting date future minimum lease payments
under those finance lease contracts were US$450,000 (2013: US$ nil). The present value of the net minimum lease payments was
US$419,000 (2013: US$ nil).
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
127
127
14. Goodwill and other intangible assets
A summary of activity for intangible assets for the years ended 31 December 2014 and 2013 is as follows:
Cost
Balance at 31 December 2012 /
1 January 2013
Additions relating to the iWatt acquisition 1)
Effect of movements in foreign currency
Additions
Reclassifications
Disposals
Balance at 31 December 2013 /
1 January 2014
Effect of movements in foreign currency
Additions
Reclassifications
Disposals
Goodwill
Other intangible assets
Customer related
Purchased software,
intangible assets
licenses and other
US$000
US$000
US$000
32,283
212,595
–
–
–
–
14,100
62,975
–
–
–
–
52,214
979
168
4,146
–
(50)
Intangible assets
from internal
development
US$000
Patents
US$000
6,704
–
–
1,711
–
–
31,099
49,599
–
5,988
–
(14)
Total
US$000
104,117
113,553
168
11,845
–
(64)
244,878
77,075
57,457
8,415
86,672
229,619
–
–
–
–
–
–
–
–
(205)
7,873
(8)
(118)
(101)
2,153
–
(50)
(192)
6,670
–
–
(498)
16,696
(8)
(168)
Balance at 31 December 2014
244,878
77,075
64,999
10,417
93,150
245,641
Amortisation and impairment losses
Balance at 31 December 2012 /
1 January 2013
Effect of movements in foreign currency
Amortisation charge for the year
Impairment charges
Disposals
Balance at 31 December 2013 /
1 January 2014
Effect of movements in foreign currency
Amortisation charge for the year
Reclassifications
Impairment charges
Disposals
Balance at 31 December 2014
Net book value
–
–
–
–
–
–
–
–
–
–
–
–
(10,504)
–
(7,805)
–
–
(21,899)
(71)
(7,891)
(21)
38
(2,251)
–
(1,304)
–
–
(17,674)
–
(11,646)
–
–
(52,328)
(71)
(28,646)
(21)
38
(18,309)
(29,844)
(3,555)
(29,320)
(81,028)
–
(7,695)
–
–
–
164
(8,285)
–
(2,478)
119
6
(1,513)
–
–
3
31
(13,460)
–
–
–
201
(30,953)
–
(2,478)
122
(26,004)
(40,324)
(5,059)
(42,749)
(114,136)
At 31 December 2012 / 1 January 2013
32,283
3,596
30,315
4,453
13,425
51,789
At 31 December 2013 / 1 January 2014
Balance at 31 December 2014
[1] Internally developed by iWatt pre-acquisition.
244,878
244,878
58,766
51,071
27,613
24,675
4,860
5,358
57,352
50,401
148,591
131,505
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
128
128 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
14. Goodwill and other intangible assets continued
A key element of the 2013 additions was the acquisition of iWatt Inc. In connection with this acquisition the company acquired goodwill,
internally developed intangible assets, patents and customer related intangible assets, such as customer relationship and order backlog.
Customer related intangible assets comprise intangible assets acquired in a business combination with iWatt in 2013 containing key customers,
other customer relationships and order backlog. Intangible assets from internal development represent capitalised development costs of
individual projects. We refer to Note 2 for a description of applied accounting policies as well as applied ranges of useful lives for subsequent
measurement.
Hire purchase
The carrying value of intangible assets held under hire purchase leases at 31 December 2014 was US$14,613,000 (31 December 2013:
US$17,162,000). Additions during the year were US$2,101,000 (2013: US$343,000). As of the reporting date future minimum payments
under those hire purchase contracts were US$13,906,000 (2013: US$15,300,000). The present value of the net minimum payments was
US$12,114,000 (2013: US$12,743,000).
15. Investments
The Investment in amount of US$1.4 million (2013: US$1.5 million) relates to a strategic equity investment into Arctic Sand Technologies, Inc.,
an MIT spin-off commercialising an innovative new approach to power conversion for multiple markets, including smartphones, tablets,
UltrabooksTM and data centres. The investment was part of a Series A funding round, with Dialog participating alongside other venture capital
and strategic investors. The investment of US$1.4 million represents a 7.69% share in Arctic Sand on fully diluted position. We refer to note
25 Additional disclosures on financial instruments in terms of fair value determination.
16. 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.
At 31 December
At 31 December
2014
US$000
83,303
7,603
90,906
2013
US$000
83,778
7,613
91,391
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
129
129
17. Other financial liabilities
Other financial liabilities comprise:
Hire purchase agreements and finance lease obligations
Accrued interest and bank liabilities
Fair value of derivative financial instruments
At 31 December
At 31 December
2014
US$000
4,198
452
17,470
22,120
2013
US$000
3,236
20,431
256
23,923
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. Accrued interest and bank liabilities represent the short-term accrued coupon of 1.0% per-annum payable semi-annually
in arrears for convertible bond. The prior year amount includes in addition to accrued coupon the bank interest and repayment instalment
related to a bank facility.
18. 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:
At 31 December 2013
Currency change
US$000
US$000
Discount
US$000
Additions
US$000
Used
US$000
Released
US$000
Obligations for product warranties
Pending legal claims
Earn-out and related matter in
relation to the iWatt acquisition
Other 1)
Total current
Dilapidation
Lease obligations
Severence
Total non-current
Total
1,266
321
1,939
4,474
8,000
881
207
400
1,488
9,488
–
(38)
–
(2)
(40)
(60)
–
(18)
(78)
(118)
–
–
–
–
–
54
–
–
54
54
1,259
(1,042)
–
–
–
–
43,353
(41,242)
–
–
(1,939)
(44)
44,612
(42,284)
(1,983)
–
300
228
528
–
(37)
–
(37)
–
–
–
–
At 31 December
2014
US$000
1,483
283
–
6,539
8,305
875
470
610
1,955
45,140
(42,321)
(1,983)
10,260
[1] Including deferred revenue of US$10.2 million (2013: US$6.5 million) and related cost of sales in amount of US$3.7 million (2013: US$2.1 million), resulting in a net provision of US$6.5 million (2014:
US$4.4 million).
As reported in note 4 to the annual report and accounts 2013 and updated in quarterly reports in 2014 as part of the iWatt purchase
Agreement and Plan of Merger entered into among the parties on 1 July 2013 a contingent consideration (Earn-out) was agreed with the
previous owners of iWatt. Given that the revenue targets for both Earn-out Periods were not met, the Earn-out accrual has been released.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
130130 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
19. 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
At 31 December
2014
US$000
27,131
2,800
6,066
35,997
2013
US$000
19,415
2,400
12,541
34,356
Terms and conditions of the above other current liabilities:
obligations for personnel and social expenses have an average term of three months (2013: three months); and
other payables are non-interest bearing and are normally settled on 30 day terms.
20. Other non-current financial liabilities
Other non-current financial liabilities comprise:
Liabilities relating to the convertible bond 1)
Bank loan 2)
Liabilities relating to hire purchase and finance lease obligations
[1] Please refer to note 21 Convertible Bond )below).
[2] Please refer to note 28 Financial risk management objects and policies.
At 31 December
At 31 December
2014
US$000
180,207
–
7,916
188,123
2013
US$000
171,971
84,179
9,507
265,657
21. Convertible bond
As previously reported in the consolidated financial statements and notes for the years 2012 and 2013, the Company launched during Q1
2012 a 5 year Convertible Bond Offering raising gross proceeds of US$201 million. The offering closed on 12 April 2012. The bonds, which
are listed on the Luxembourg Stock Exchange’s Euro MTF market, will be convertible into ordinary shares of Dialog Semiconductor Plc., listed
on the Regulated Market of the Frankfurt Stock Exchange. 1,005 Bonds with a principal amount of US$200,000 each were issued at 100%
with a coupon of 1.0% per-annum payable semi-annually in arrears. The initial conversion price is US$29.5717 (€22.367).
After deduction of cost in amount of US$4,369,000 related to commission and other costs incurred in connection with the bond issuance the
net proceeds of issuing the Bonds were US$196,631,000 in Q1 2012. In accordance with IAS 32, US$163,607,000 of gross proceeds was
allocated to financial liabilities and US$37,393,000 was allocated to equity. The debt component of convertible bonds is measured using the
market interest rate obtainable on a similar debt instrument but one that is not convertible. This debt component is measured as liabilities at
amortised cost until it is converted into equity or becomes due for repayment. The component of the net proceeds allocated to equity
represents the fair value of the conversion right at the time of issuance.
The volume outstanding as per 31 December 2014 for this bond totals US$201 million (2013: US$201 million), taking account of conversions
into shares.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes Consolidated financial statements and notes
131
131
22. Shareholders’ equity and other reserves
Ordinary shares
The amount of authorized shares at 31 December 2014 was 104,311,860 (2013: 104,311,860) with a par value of £0.10 per share, of which
71,068,930 (2013: 68,068,930) shares were issued and outstanding.
At 1 January 2013
Issued on 7 March 2014
At 31 December 2014
Amount of shares
68,068,930
3,000,000
71,068,930
US$000
12,852
501
13,353
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. Since the launch of convertible bond in 2012 the
conversion rights with a fair value in amount of US$36,579,000 have been classified as equity instruments in accordance with IAS 32 and
disclosed as additional paid-in capital.
Retained earnings
Retained earnings comprise losses and non-distributed earnings of consolidated Group companies.
Other reserves
Currency translation reserve
The currency translation reserve is used to record exchange differences arising from the translation of the financial statements of
subsidiaries and branches whose functional currency is not the US$. At 31 December 2014 and 2013, the negative currency translation
reserve was US$3,007,000 and US$1,710,000 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 2014 the negative cash flow hedge reserve was US$12,769,000 compared to a positive cash flow
hedge reserve of US$1,580,000 at 31 December 2013. Please refer to note 28 for the amounts reclassified from other comprehensive income
and recognized in profit and loss statement.
The related tax effects allocated to each component of other reserves for the years ended 31 December 2014 and 2013 are as follows:
Currency translation adjustment
Hedges
Other comprehensive income (loss)
Pre-tax
US$000
(1,032)
(19,794)
(20,826)
2014
Tax effect
US$000
(265)
5,445
5,180
Net
US$000
(1,297)
(14,349)
(15,646)
2013
Tax effect
US$000
(15)
(48)
(63)
Pre-tax
US$000
269
91
360
Net
US$000
254
43
297
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
132132 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
22. Shareholders’ equity and other reserves continued
Employee stock purchase plan shares
The employee stock purchase plan shares contain the acquisition cost of the shares held by the employee benefit trust and the non-executive
Director benefit trust (the “Trusts”). Please refer to note 24 (below). At 31 December 2014 and 31 December 2013, the Trusts held
2,825,412 and 2,097,799 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.
23. 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$6,069,000 (2013: US$4,971,000). At 31 December 2014, contributions amounting to US$916,000
(2013: US$772,000) 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$3,256,000 (2013: US$2,732,000).
24. Share-based payments
A) Stock option plans (SOP) and Employee Share plans (ESP)
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 2014, 12,541,576 shares could be issued (2013: 12,012,164 shares). Notwithstanding the
foregoing the Company has determined that dilution will be managed using an average annual flow rate of 1% per annum such that the
Company will move dilution towards a rolling 10% in 10 years.
Unless otherwise determined by the Board, stock options granted to employees before 31 December 2013, were 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. After an amendment of the stock option plan grants made on or after 31 October 2006 had a seven-year life and vest monthly over a
period of one to 48 months. These stock options may not be exercised until they have been held for one calendar year from the grant date.
At the 2013 Annual General Meeting, Shareholders approved the new Dialog Semiconductor Plc Employee Share Plan 2013 (ESP) which will
be operated alongside, and within the same aggregate dilution limit detailed above, the existing share option plan. In 2014 the first options
were granted under the ESP.
At the 2011 Annual General Meeting, Shareholders approved a change of the fee structure for non-executive Directors. 2/3 of the total fees
are delivered in cash and 1/3 of the non-executive Directors’ annual total fees are delivered in Company equity. The number of shares is
calculated using the average 30 day share price preceding the date of the Annual General Meeting. Shares are 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). At the 2013 Annual General Meeting, Shareholders resolved that all non-executive Directors fees be paid in cash
only. Accordingly no stock options were granted to non-executive Directors in 2013 and 2014.
The fair value of all grants in the two-year period ended 31 December 2014 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.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes Consolidated financial statements and notes
133
133
24. Share-based payments continued
The following assumptions were used for stock option grants for the years ended 31 December 2014 and 2013:
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 €)
2014
0%
36%
0.2%
2013
0%
46%
0.8%
2.0 - 5.0
2.0 - 6.0
20.83
18.40
0.10
18.31
12.66
13.56
13.56
4.41
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 second award under LTIP was made to selected new and existing members of the executive management. In 2013 and 2014, no
further awards under the LTIP plan were made or can be 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.
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
4 February 2010, with 25% exercisable from 22 February 2010 and the remaining 75% exercisable for 5 years from 21 February 2011.
Measurement date 31 January 2011 (Last Measurement Date)
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 2011 of €11.1310 (prior year return hurdle 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.
C) Executives Incentive Plan (EIP)
The Group also operates the Dialog Executive Incentive Plan (EIP) which was approved by the shareholders at the Annual General Meeting in
May 2010. Under this plan, key executives and other key value drivers of the business are eligible to share in a percentage of the value created
for Shareholders. The Remuneration Committee may not grant awards under the EIP more than five years after its approval.
Dialog Semiconductor Plc | Annual report and accounts 2014
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134
134 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
24. Share-based payments continued
Under the EIP, up to 0.75% of the issued share capital at the date of grant will be made available for the Remuneration Committee to grant
to participants in the EIP on an annual basis. It is envisaged that these shares will be granted to approximately 10 – 15 key executives. A
portion of the total number of shares which can be awarded each year would be reserved for grants to new recruits. However, there is no
requirement for the Remuneration Committee to allocate all available shares on an annual basis.
Continuity of Employment Condition
25% of the EIP Award will be banked in equal annual instalments (1/3 of 25% each year) based on the achievement of a share price hurdle
measured at the end of each year (Continuity Award). The hurdle is such that the Company’s share price at each measurement point (being
the anniversary of the date of grant – the first grant was on 16 February 2012 the second grant was on 16 February 2013) must be greater
than the higher of the share price on the date of grant or previous measurement points. Where the share price hurdle has not been achieved
at the end of the year, that proportion of the Continuity Award will lapse.
At the end of the three year holding period, the Continuity Award will vest and become exercisable subject to continuity of employment.
Individuals have three years with which to exercise vested options.
Corporate Performance Conditions
75% of any EIP Award will vest subject to the achievement of challenging performance conditions (Performance Award). The primary
performance measure relates to EBIT and Revenue Growth targets. The vesting of 50% of the Performance Award relates to EBIT growth with
the other 50% relates to revenue growth targets. The number of shares which vest under the primary performance measure would then be
subject to a secondary performance measure (as set out below). The Company believes that these two measures are directly relevant to the
Company’s strategy at its current stage of development and that the executives should be rewarded on this basis and that focusing on these
metrics are critical to driving shareholder value over the medium to long term. Targets are set on an annual basis, rather than over the long-
term, to ensure that they remain challenging and relevant. These targets take into consideration budget and market expectations for EBIT and
revenue growth for the relevant financial year on the following basis:
Threshold (e.g. an acceptable level of performance growth which must be attained for an award to begin to vest)
Target (e.g. the level of performance for achieving budgeted growth and which ensures that the business is online for achieving its long-term
objectives)
Exceptional (e.g. the level of performance which is acknowledged by the Remuneration Committee as exceptional)
At the end of the three year performance period, the Remuneration Committee will determine the level of vesting based on the actual level of
growth achieved over the three year period relative to the compounding of the three yearly targets.
Provided that the threshold level of growth has been achieved for both targets, at the end of the performance period, the level of vesting for
both metrics will be as follows:
Level of Corporate Performance
Threshold 1)
Target 1)
Exceptional 1)
[1] Straight-line between points
% of EIP Award vesting
20%
40%
100%
Where the threshold level of growth has not been achieved for either the EBIT or revenue target the Performance Award will lapse.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
135
135
24. Share-based payments continued
Under the secondary performance measure the number of shares vesting at the end of the performance period as determined under the
primary performance measure can be adjusted using a downward multiplier of up to 20% against a customer diversification target.
For example, in measuring customer diversity this could be calibrated as the increase in the regional revenues in key strategic market as a
percentage of total revenues.
The level of vesting of the Performance Award at the end of the three year period will therefore be based on:
Growth in Revenues (50%) + Growth in EBIT (50%) X - 20% Adjustment Factor
The balance of any Performance Award which does not vest in accordance with the above performance conditions will lapse.
The following assumptions were used for the fair value calculations:
Share price at grant date
Exercise price
Expected volatility
Risk-free-interest-rate
Assumed level of vesting regarding the performance conditions
Option lifetime
1st Grant in 2014
Grant in 2013
€16.0
€0.12
36%
0.2%
70%
€13.61
€0.12
45%
0.8%
50%
6 Years
6 Years
D) Development of plans
Stock option plan activity (including stock options granted under the LTIP and the EIP) for the years ended 31 December 2014 and 2013 was
as follows:
2014
2013
Weighted average
exercise price
Weighted average
exercise price
Outstanding at beginning of year
Granted
Exercised
Forfeited
Outstanding at end of year
Options
6,036,051
1,748,517
(2,452,916)
(183,628)
5,148,024
€
7.93
0.09
6.82
4.52
5.90
Options
5,878,825
1,062,623
(581,969)
(323,428)
6,036,051
Options exercisable at year end
1,845,756
9.64
3,417,287
€
7.83
6.29
3.99
7.83
7.93
6.82
The weighted average share price at the date of exercise of options was €21.85 and €13.55 in the years ended 31 December 2014 and 2013
respectively.
Liabilities from share option exercises to employees were US$210,000 at 31 December 2014 (2013: US$113,000).
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
136
136 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
24. Share-based payments continued
The following table summarises information on stock options outstanding (including stock options granted under the LTIP and the EIP) at 31
December 2014:
Range of Exercise Prices
€0.0 - 3.00
€3.00 - 8.00
€8.00 - 16.85
€0.0 - 16.85
Options outstanding
Weighted average
Options exercisable
Number
remaining
Weighted average
Weighted average
outstanding at 31
contractual life
exercise price
Number exercisable
exercise price
December 2014
(in years)
€
at 31 December 2014
2,897,366
193,227
2,057,431
5,148,024
4.3
1.9
4.1
4.1
0.16
6.98
13.87
5.90
446,653
193,227
1,205,876
1,845,756
€
0.51
6.98
13.45
9.64
E) Employee and non-executive Director benefit trusts
The Group established an employee benefit trust and a non-executive Director benefit trust (the “Trusts”). The Trusts purchase shares in the
Group for the benefit of employees and non-executive Directors under the Group’s share option schemes. At 31 December 2014 the Trusts
held 2,825,412 shares (2013: 2,097,799).
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
137
137
25. Additional disclosures on financial instruments
Amounts recognised in the statement of financial position according to IAS 39
Category
Carrying
amount
in accordance
31 December 2014
Amortised cost
with IAS 39
US$000
US$000
Assets
Cash at bank and Short-term deposits
LaR
318,446
318,446
Fair value
recognised
in other comprehensive
income
US$000
–
n/a
5,834
–
5,834
LaR
100,569
100,569
LaR
3,586
3,586
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
Investments
Liabilities
Trade account payables
Other payables
Other financial liabilities
Hire purchase agreements and finance
lease obligations
Convertible Bond
Derivative financial liabilities
Derivatives without hedging
relationship
Derivatives with hedging
relationship
n/a
n/a
AfS
FLAC
FLAC
FLAC
FLAC
FLAC
n/a
n/a
–
–
1,446
–
–
–
83,303
83,303
7,603
836
7,603
836
11,279
11,279
180,659
180,659
–
17,470
–
–
422,601
422,601
5,834
–
1,446
–
–
(17,470)
–
–
–
–
–
–
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
Derivative financial assets with hedging relationship
Derivative financial liabilities with hedging
relationship
Financial liabilities at amortised cost (FLAC)
(283,679)
(283,679)
Fair value
recognised in
profit or loss
US$000
Fair value
31 December
2014
US$000
Fair-Value-
Hierarchy
–
–
–
n/a
318,446
n/a
5,834
n/a
100,569
–
Level 1
3,586
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Level 3
1,446
n/a
n/a
n/a
83,303
7,603
836
Level 2
Level 2
10,553
192,236
–
–
Level 2
17,470
–
–
–
–
–
–
–
–
422,601
5,834
–
–
–
–
(17,470)
(294,530)
–
–
–
–
–
–
–
–
–
–
–
17,470
–
5,834
–
–
–
–
(17,470)
–
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
138
138 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
25. Additional disclosures on financial instruments continued
The fair value of derivatives has been determined with reference to available market information (Level 2) applying mark-to-market method.
The carrying amounts of the loans and receivables and financial liabilities approximate their fair values due to short-term maturities. Since the
market conditions affecting the non-current liability component of the convertible bond and liability related to long-term finance lease
contract have changed, the fair value at 31 December 2014 deviates from the carrying amount. Equity investments and securities are
recognised at fair value if there is an active market for them with publicly available prices. Due to the lack of a reliable measurement basis for
the fair value of the equity investment this is held at cost of US$1.4 million. Instruments allocated to the column “fair value recognised in
other comprehensive income” are derivative financial instruments designated as cash flow hedges.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
139
139
25. Additional disclosures on financial instruments continued
Amounts recognised in the statement of financial position according to IAS 39
Category
Carrying
amount
Fair value
recognised
Fair value
in other comprehensive
recognised in
in accordance
31 December 2013
Amortised cost
income
profit or loss
Fair-Value-
with IAS 39
US$000
US$000
US$000
US$000
Hierarchy
Fair value
31 December
2013
US$000
Assets
Cash at bank and Short-term deposits
Trade accounts receivable and other receivable
LaR
LaR
186,025
186,025
127,336
127,336
Other non-derivative financial assets
Deposits for hedging
contracts
Derivative financial assets
Derivatives without hedging
relationship
Derivatives with hedging
relationship
Investments
Liabilities
Trade account payables
Other payables
Other financial liabilities
Hire purchase agreements and finance lease
obligations
Convertible Bond
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)
Held-to-maturity investments (HtM)
Available-for-sale financial assets (AfS)
Derivatives without hedging relationship
Derivative financial assets with hedging relationship
Derivative financial liabilities with hedging
relationship
Financial liabilities at amortised cost (FLAC)
LaR
1,532
1,532
n/a
n/a
AfS
FLAC
FLAC
FLAC
FLAC
FLAC
n/a
n/a
–
2,462
1,531
–
–
–
83,778
83,778
7,613
7,613
104,190
104,190
12,744
12,744
172,390
172,390
–
256
–
–
–
–
–
–
2,462
–
–
–
–
–
–
–
–
–
n/a
n/a
186,025
127,336
–
Level 1
1,532
–
–
–
–
–
–
–
–
–
–
–
Level 2
Level 3
2,462
1,531
n/a
n/a
–
83,778
7,613
104,190
Level 2
Level 2
13,006
186,411
–
–
256
–
Level 2
256
314,893
314,893
–
1,531
–
2,462
(256)
–
–
–
–
–
(380,715)
(380,715)
–
–
–
–
2,206
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
314,893
–
–
–
2,462
(256)
(394,998)
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
140
140 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
26. 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
2014
US$000
12,565
12,433
10,544
5,320
4,869
8,655
54,386
2014
US$000
7,522
2,507
489
2
–
–
2013
US$000
9,610
7,048
6,170
5,957
4,342
9,700
2013
US$000
6,145
708
46
21
2
–
10,520
42,827
6,922
Total payments for operating leases and software commitments, charged as an expense in the income statement, amounted to
US$15,547,000 and US$10,021,000 for the years ended 31 December 2014 and 2013 respectively.
Finance lease, hire purchase and software commitments
The Group has finance leases and hire purchase contracts for test and IT equipment and has software contracts. The leases have terms of
renewal but no purchase options and escalation clauses. Renewals are at the option of the specific entity that holds the lease. Future
minimum payments under finance leases and hire purchase and software contracts together with the present value of the net minimum
payments are as follows:
Within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Thereafter
Total minimum payments
Less amounts representing finance charges
Present value of minimum payments
Minimum payments
2014
US$000
4,403
4,403
3,400
1,700
–
–
13,906
(1,792)
12,114
2013
US$000
3,400
3,400
3,400
3,400
1,700
–
15,300
(2,557)
12,743
Capital commitments
The Group has contractual commitments for the acquisition of property, plant and equipment in 2014 of US$4,491,000 (2013: US$5,161,000)
and for the acquisition of intangible assets of US$4,846,000 (2013: US$1,207,000).
Contingent liability
On 9 April 2014 the previous owners of iWatt commenced litigation against Dialog in the Court of Chancery in Delaware seeking damages for
alleged breaches of the purchase agreement as it relates to the earn-out payments. Dialog’s management believes that it has complied with all
of its obligations under the Merger Agreement and is defending its position. Dialog management and the Board of Directors believe that the
outflow of resources to settle the claimed obligation is not probable.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
141
141
27. 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 (2013: four) operating segments, which are independently managed by bodies responsible for the respective
segments depending on the nature of products offered. The fourth segment was added in the third quarter 2013 and represents the acquired
iWatt business. 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.
a) Operating segments
The Group’s operating segments are:
Mobile Systems
This segment includes our power management and audio chips especially designed to meet the needs of the wireless systems markets and 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, Bluetooth and VoIP technology. The Connectivity segment includes
the operating results of our subsidiary Dialog Semiconductor B.V.
Power conversion
This segment includes our AC/DC converter solutions for smaller, fast charging power adaptors for portable devices as well as our LED drivers
for solid-state lighting products.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
142
142 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
27. Segmental reporting continued
2014
2013 reclassified*)
Mobile
Automotive/
Connectivity
Power
Corporate
Total
Mobile
Automotive/
Connectivity
Power
Corporate
Total
Systems
Industrial
US$000
Conversion
US$000
US$000
Systems
US$000
942,628
US$000
40,952
US$000
92,120 80,367
US$000
383) 1,156,105 744,869
Industrial
US$000
37,259
US$000
Conversion
US$000
US$000
US$000
91,616 26,768
8683) 901,380
Revenues1)
R&D expenses
141,246
2,392
25,703 22,476
21,991
213,808 118,091
1,749
22,677
8,806
9,491 160,814
Operating profit
(loss)2)
Depreciation/
amortisation
Inventory
impairment and
fixed asset
disposal losses
Investments
244,180
11,232
(2,163) (21,135) (46,212) 185,902 141,242
12,211
(2,121) (22,533) (26,139) 102,660
41,535
227
5,060
5,739
3,021
55,582
35,230
152
5,467
5,163
1,215
47,227
6,096
30,681
260
167
212
3,737
3,582
4,239
85
2,231
10,235
41,0554)
11,832
27,199
154
117
2,200
4,220
1,504
3,986
124
15,814
938 36,4605)
At 31 Dec 2014
At 31 Dec 2013
Inventories
71,327
6,165
13,678
7,970
–
99,140
93,604
7,460
11,227
4,752
498 117,541
*) Following a change in accounting policy the presentation of income from customer-specific research and development contracts has been adjusted retrospectively.
For further information please refer to note 2 to the consolidated financial statements.
[1] All revenues are from sales to external customers.
[2] Certain overhead costs are predominantly allocated based on sales and headcount.
The Operating loss of the Corporate segment results from Holding and Trust related expenses, share option and business development costs.
[3]The revenue in the corporate column include mainly corporate projects related revenue, sales discounts and in 2013 the BenQ settlement.
[4] Including US$24,393,000 additions to PPE, US$16,696,000 additions to intangible assets and (US$34,000) currency change of other investments.
[5] Including US$23,115,000 additions to PPE, US$11,844,000 additions to intangible assets and US$1,501,000 purchase of other investments.
Investments comprise additions to property, plant and equipment, and intangible assets.
In 2014 and 2013 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, inventories and the Group’s profit and
losses, assets and liabilities.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
143
143
27. Segmental reporting continued
b) Corporate
Revenues in the Corporate column include US$38,000 revenue components (2013: US$851,000 BenQ Cash settlement).
R&D expenses in the Corporate column predominantly include stock option expenses and expenses for the Executive Incentive Plan (EIP) of
US$9,761,000 (2013: US$3,564,000). Furthermore there are US$11,730,000 (2013: US$5,789,000) development expenses for new
technology projects and US$467,000 for Powerventure (2013: US$ nil).
The operating losses recorded in the corporate column for the year ended 31 December 2014 of US$46,212,000 (2013: US$26,139,000) are
primarily resulting from stock option expenses US$21,170,000 (including EIP) (2013: US$8,487,000), the costs of the holding company
US$10,941,000 (2013: US$12,838,000), expenses for developing new technology projects US$16,151,000 (2013: US$8,783,000) and
US$494,000 for Powerventure (2013: US$ nil). Additionally in 2014 NRE Revenues in amount of US$600,000 (2013: US$996,000 BenQ cash
settlement) were included as well as another operating income of US$1,939,000 (2013: US$3,249,000) resulting from release of earn out
provision.
c) Geographic information – Revenues by shipment destination
Revenues
United Kingdom
Other European countries
China
Other Asian countries
Other countries
Total revenues
Investments
Germany
Japan
United Kingdom
Netherlands
USA
Taiwan
Singapore
Other
Total investments
2014
2013 reclassified*)
US$000
US$000
782
60,098
983,412
100,667
11,146
1,156,105
945
62,628
742,324
87,022
8,461
901,380
15,042
21,072
273
9,751
4,718
6,696
720
18
3,837
41,055
121
8,266
3,599
1,796
145
97
1,364
36,460
*) Following a change in accounting policy the presentation of income from customer-specific research and development contracts has been adjusted retrospectively.
For further information please refer to note 2 to the consolidated financial statements.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
144
144 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
27. Segmental reporting continued
Assets
Germany
USA
United Kingdom
Netherlands
Japan
Other
Total assets
At 31 December
At 31 December 2013
2014
US$000
US$000
451,769
359,435
124,745
51,893
2,386
15,718
438,816
377,293
54,316
51,477
1,946
3,604
1,005,946
927,452
Revenues are allocated to countries based on the location of the shipment destination. Segmental investments and assets are allocated based
on the geographic location of the asset.
28. Financial risk management objects and policies
Vulnerability due to certain significant risk concentrations
The Group’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Group’s future operating
results and cause actual results to vary materially from historical results include, but are not limited to, the highly cyclical nature of both the
semiconductor and wireless communications industries, dependence on certain customers and the ability to obtain an adequate supply of
sub-micron wafers.
The Group's products are generally utilised in the wireless and automotive industries. The Group generates a substantial portion of its revenue
from the Mobile Systems segment, which accounted for 81,5% and 82,5% of its total revenue for the years ended 31 December 2014 and
2013, respectively.
Changes in foreign currency exchange rates influence the Group’s results of operations. The Group’s sales, purchases of raw materials and
manufacturing services are primarily denominated in US$.
The Group 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 2014, one (2013: one) customer individually accounted for more than 10% of the Group's revenues. Total revenues from this
customer were US$909,900,903 (2013: US$718,733,000). Net receivables from this customer at 31 December 2014 were US$83,075,043
(2013: US$111,799,982). This customer is part of the Mobile Systems segment (for further information please see Strategic report – 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, 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 2014 and 2013, the Group’s policy that no trading in derivatives shall be undertaken.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
145
145
28. 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, convertible bond (please refer to note 21) and
loans as prescribed below.
The Group had long-term debt outstanding resulting from Base Currency term loan facility in an aggregate amount equal to US$100.0 million
and a multicurrency revolving loan facility in an aggregate amount of US$15.0 million equal to the total revolving facility commitments. Based
on the pre-payments of US$10.0 million during 2013 and of US$105.0 million during 2014, there is no amount outstanding at 31 December
2014 (31 December 2013: US$105.0 million outstanding). The applied interest rate contained the margin, LIBOR and mandatory cost. These
were the cost of compliance with the requirements of the Bank of England and/or the Financial Conduct Authority and the requirements of
the European Central Bank. Both facilities have been repaid earlier as the contractual termination date on 31 March 2017.
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:
2014
2013
Increase/decrease in
Effect on profit
Effect on equity
basis points
US$000
US$000
2
(2)
31
(22)
58
(58)
794
(565)
58
(58)
794
(565)
Currency risk
The main functional currency within the Group and the presentation currency for the consolidated financial statements is the US$. 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 2014 and 2013 nearly all the Group’s sales were denominated in US$.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
146
146 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
28. Financial risk management objects and policies continued
The Group uses forward currency contracts as well as certain deposits (together referred to as the “hedging instruments”) to eliminate the
currency exposure of recurring expected payments, such as salaries, wages and office rents non-US$ 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$ 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
changes in the Group’s equity (resulting in addition from changes in the fair value of deposits designated as cash flow hedges).
2014
Euro
Pound Sterling
Euro
Pound Sterling
2013
Euro
Pound Sterling
Euro
Pound Sterling
[1] Categories according to IAS 39.
Loans and receivables (LaR) and deposits
designated as cash flow hedges 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
(11.7%)
(5.6%)
11.7%
5.6%
4.4%
2.2%
(4.4%)
(2.2%)
(3,056)
(30)
3,056
30
236
23
(236)
(23)
(3,056)
(30)
3,056
30
236
23
(236)
(23)
975
130
(975)
(130)
(401)
(83)
401
83
975
130
(975)
(130)
(401)
(83)
401
83
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 risk 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$92,000,000 (2013: US$92,000,000). 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 and cash equivalents, would arise
from default by counterparty.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
147
147
28. Financial risk management objectives and policies continued
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 2014, the Group had cash and cash equivalents of US$324,280,000 (2013: US$186,025,000).
The Group’s policy is to structure its maturities of current financial assets within the Group to meet 100% of the respective maturities of the
liabilities. The table below summarises the maturity profile of the Group’s financial liabilities at 31 December 2014, based on contractual
undiscounted payments:
Financial year ended 2014
Trade accounts payable
Other payables
Other financial liabilities
Other current liabilities
Financial year ended 2013
Trade accounts payable
Other payables
Other financial liabilities
Other current liabilities
Less than 3 months
3 to 12 months
US$000
US$000
1 to 5 years
US$000
Total
US$000
83,303
7,603
17,922
35,997
144,825
83,778
7,613
8,923
34,356
–
–
4,198
–
4,198
–
–
–
–
188,123
–
188,123
–
–
15,000
265,657
–
–
134,670
15,000
265,657
83,303
7,603
210,243
35,997
337,146
83,778
7,613
289,580
34,356
415,327
The non-current other financial liabilities as of 31 December 2014 were US$188.1 million (31 December 2013: US$265.7 million) of which
US$180.2 million represents the book value of the liability from the convertible bond (31 December 2013: US$172.0 million). The remaining
amount of US$7.9 million is related to liabilities from hire purchase and finance lease obligations (31 December 2013: US$9.5 million).
We had a three-year (2011-2014) revolving credit facility of US$35.0 million available for use that bears an interest rate of LIBOR + 140bp. As
of 16 July 2013 the facility was cancelled and replaced by a US$25.0 million revolving credit line facility which is available until March 2017.
This facility has been used in 2013 in the amount of US$15.0 million in order to finance the iWatt acquisition, US$10 million were repaid in
December 2013 and US$5 million in January 2014. As of 31 December 2014, the revolving credit line facility was reduced to US$10.0 million
which remains untapped.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
148
148 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
28. Financial risk management objects and policies continued
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. Also in 2012 the Group launched a 5 year convertible bond offering amounting
to US$201 million which has a significant impact on the capital structure of the Group, amongst others it led to a decrease of the equity ratio
in 2012 and 2013. During the assessment year 2014 none conversion rights have been exercised (2013: none). For further information please
refer to note 21.
The Group monitors capital using an equity ratio (total equity divided by total assets). The equity ratio as of 31 December 2014 was 62,0%
(2013: 49.2%). Capital includes net Shareholders’ equity. The Group’s policy is to finance operational business development and growth if at
all possible with equity and 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. However financing of strategic decisions focused on long term growth is
ensured by long-term liabilities. For this reason, the funding of iWatt acquisition was partially subject of new debt facilities, a Base Currency
term loan facility in an aggregate amount equal to US$100.0 million and a multicurrency revolving loan facility in an aggregate amount of
US$15.0 million equal to the total revolving facility commitments. To improve the equity ratio we pre-paid US$10 million during 2013 and the
remaining amount of US$105 million during 2014. Therefore, there is no amount outstanding at 31 December 2014. Both facilities have been
repaid earlier than the contractual termination date on 31 March 2017.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
149
149
28. Financial risk management objects and policies continued
Hedging activities
At 31 December 2014, the Group held Forward exchange contracts and deposits (referred to as the “hedging instruments”) designated as
hedges of firm commitments and forecast transactions in 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, Pounds Sterling or
Japanese Yen into US Dollars. The fair values of the hedging instruments which equal the book values are as follows:
Fair values
Forward exchange contracts
Deposits
At 31 December 2014
At 31 December 2013
Assets
US$000
–
5,834
Liabilities
US$000
17,470
–
Assets
US$000
2,462
–
Liabilities
US$000
256
–
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 2015 to December 2015 and January 2014 to December
2014 respectively were assessed to be highly effective and, at 31 December 2014, a net unrealised loss of US$12,769,000 was included in
other comprehensive income in respect of these cash flows (2013: gain of US$1,580,000). During the financial year 2014 a loss of
US$23,614,000 (2013: gain of US$1,747,000) was recognised in other comprehensive income and a loss of US$3,821,000 (2013: gain of
US$1,656,000) was reclassified from other comprehensive income and recognised in profit and loss. The months of occurrence of the cash
flows are the same as the month when the income statement is affected.
The following tables show the contractual maturities of the payments for which deposits are used as hedging instruments, i.e., when the
hedged item will be recognised in profit or loss.
Maturity
Nominal amount €000
Forward rate US$/€
Nominal amount
Historical
Derivatives
Deposits
€000
rate US$/€
2014
January 2015
February 2015
March 2015
April 2015
May 2015
June 2015
July 2015
August 2015
September 2015
October 2015
November 2015
December 2015
2013
January 2014 - December 2014
9,000
13,000
16,000
9,000
13,000
13,000
9,000
13,000
7,000
7,000
9,000
9,000
–
1.3344
1.3232
1.3280
1.3333
1.3231
1.3235
1.3343
1.3244
1.3062
1.3064
1.2993
1.2994
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,000 1.2724
1,800 1.2165
1,000 1.2165
–
–
–
–
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
150
150 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
28. Financial risk management objects and policies continued
Hedging instruments for Pound Sterling commitments:
Nominal amount £000
Forward rate US$/£
Derivatives
2,700 1.6921
2,700 1.6913
4,900 1.6672
2,700 1.6825
2,700 1.6818
2,700 1.6809
2,700 1.6706
2,700 1.6698
2,000 1.6465
2,000 1.6461
2,000 1.6458
2,000 1.6455
3,200 1.5214
3,200 1.5213
3,200 1.5213
3,200 1.5288
3,200 1.5287
3,200 1.5287
–
–
–
–
–
–
–
–
–
–
–
–
Maturity
2014
January 2015
February 2015
March 2015
April 2015
May 2015
June 2015
July 2015
August 2015
September 2015
October 2015
November 2015
December 2015
2013
January 2014
February 2014
March 2014
April 2014
May 2014
June 2014
July 2014
August 2014
September 2014
October 2014
November 2014
December 2014
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
151
151
28. Financial risk management objects and policies continued
Hedging instruments for Japanese Yen commitments:
Maturity
2014
January 2015
February 2015
March 2015
April 2015
May 2015
June 2015
July 2015
August 2015
September 2015
October 2015
November 2015
December 2015
2013
January 2014
February 2014
March 2014
April 2014
May 2014
June 2014
July 2014
August 2014
September 2014
October 2014
November 2014
December 2014
Nominal amount ¥000
Forward rate ¥/US$
Derivatives
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
35,000
35,000
35,000
35,000
103.632
103.612
103.581
103.813
103.803
103.762
104.663
104.617
108.130
108.120
107.960
107.850
50,000 94.8100
50,000 94.7500
50,000 94.7000
50,000 95.0000
50,000 99.0000
45,000 99.3000
–
–
–
–
–
–
–
–
–
–
–
–
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
152
152 Consolidated financial statements and notes
Notes to the consolidated financial statements
continued
29. Transactions with related parties
For the relationship between the parent company, Dialog Semiconductor Plc, and its subsidiaries please see note 2.
Related parties are comprised of eight (2013: eight) non-executive members of the Board of Directors and eleven (2013: nine) 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 corporate governance section beginning on page 51. 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.
2014
US$000
5,679
203
7,942
13,823
2013
US$000
4,283
193
3,097
7,573
Compensation of non-executive Directors
The compensation of non-executive Directors was US$1,112,120 (2013: US$1,029,000). As at 31 December 2014 the amount of Board
member fees outstanding was US$ nil (2013: US$ nil). For further information please see the Directors’ remuneration report within the
corporate governance section on pages 66 to 84.
Other related party transactions
In 2014 and 2013 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.
30. Subsequent event
There are no known events after the date of the Statement of Financial Position that require disclosure.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Consolidated financial statements and notes
153
153
Company statement of financial position
For the year ended 31 December 2014
Assets
Cash and cash equivalents
Amounts owed by group undertakings
Other current assets
Total current assets
Investments
Other intangible assets
Deposits
Total non-current assets
Total assets
Other financial liabilities
Amounts owed to Group undertakings
Trade and other payables
Other payables
Total current liabilities
Other non-current financial liabilities
Ordinary Shares
Share Premium
Retained earnings (accumulated deficit)
Other reserves
Employee stock purchase plan shares
Total Shareholders´ equity
Total liabilities and Shareholders´ equity
Notes
At 31 December
At 31 December
2014
US$000
2013
US$000
93,570
272,804
246
366,620
514,056
506
254
40,355
336,450
109
376,914
443,741
–
–
514,816
443,741
31
881,436
12,931
184,070
1,360
392
198,753
180,207
13,353
274,517
229,788
(114)
(15,068)
820,655
20,419
21,280
2,565
1,510
45,774
256,150
12,852
246,289
261,832
–
(2,242)
33
502,476
518,731
881,436
820,655
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 profit after taxation was US$32,093,000 (2013: profit of US$163,564,000).
These financial statements were approved by the Board of Directors on 19 February 2015 and were signed on its behalf by:
Dr Jalal Bagherli
Director
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
154
154 Company financial statements and notes
Company statement of changes in equity
For the year ended 31 December 2014
Balance at 31 December 2012 /
1 January 2013
Net profit
Other comprehensive income
Total comprehensive income (loss)
Sale of employee stock purchase plan shares
Changes in Equity total
Balance at 31 December 2013 /
1 January 2014
Net profit
Other comprehensive income
Total comprehensive income (loss)
Capital increase for employee share option plan (gross
proceeds)
Transaction cost of capital increase - employee share option
plan
Acquisition of employee stock purchase plan shares
Sale of employee stock purchase plan shares
Equity settled transactions, net of tax
Additional paid-in
Other reserves
Employee stock
purchase plan
Ordinary shares
US$000
capital
Retained earnings
US$000
US$000
Hedges
US$000
shares
US$000
Total
US$000
12,852
243,829
–
–
–
–
–
–
–
–
2,460
2,460
12,852
246,289
–
–
–
–
–
–
501
9,780
–
–
–
–
(39)
–
18,487
–
98,268
163,564
–
163,564
–
163,564
261,832
(32,093)
–
(32,093)
–
–
–
–
49
–
–
–
–
–
–
–
–
(114)
(114)
–
–
–
–
–
(2,853)
352,096
–
–
–
611
611
(2,242)
–
–
–
163,564
–
163,564
3,071
166,635
518,731
(32,093)
(114)
(32,207)
(10,281)
–
–
(6,172)
3,627
–
(39)
(6,172)
22,114
49
Changes in Equity total
501
28,228
(32,044)
(114)
(12,826)
(16,255)
Balance at 31 December 2014
13,353
274,517
229,788
(114)
(15,068)
502,476
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Company financial statements and notes
155
155
Company statement of cash flows
For the year ended 31 December 2014
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Interest expense (income), net
Expense related to share-based payments
Changes in working capital:
Trade accounts payable
Other assets and liabilities
Cash generated from (used for) operations
Interest paid
Interest received
2014
US$000
2013
US$000
(32,093)
163,564
1,586
49
(1,205)
(11,788)
(43,451)
(2,010)
10,703
722
–
560
(8,438)
156,408
(3,265)
528
Cash flow from (used for) operating activities
(34,758)
153,671
Cash flows from investing activities:
Purchase of iWatt net of acquired cash
Purchase of intangible assets
Foundation of other affiliated companies
Funds received from (paid to) other group companies
Cash flow from (used for) investing activities
Cash flows from financing activities:
Payment for capital increase
Other non-current financial liabilities
Net cash flow from financial liabilities
Purchase of employee stock purchase plan shares
Sale of employee stock purchase plan shares
Cash flow from (used for) 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
–
(506)
–
–
(70,315)
(281,845)
226,436
155,615
(101,634)
(383,479)
(39)
(75,943)
(7,488)
(6,172)
22,114
–
–
111,980
–
3,071
(67,528)
115,051
(114)
–
53,215
(114,757)
40,355
93,570
155,112
40,355
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
156
156 Company financial statements and notes
Notes to the Company financial statements
For the year ended 31 December 2014
31. Investments
This represents the investment of the Company in Dialog Semiconductor GmbH, Dialog Semiconductor B.V., in 2012 the newly incorporated
subsidiaries in Italy and Turkey and in 2013 the newly acquired iWatt Inc. and Dialog Semiconductor Ltd. The increase of investments relates to
intra-group reorganizations as stated in Note The proportion of ownership interest is at 100% on all investments mentioned above.
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 these undertakings were as follows:
Capital and reserves
Profit for the year
Based on preliminary unaudited results.
2014
US$000
583,282
153,138
2013
US$000
359,690
153,060
32. Deferred tax
The utilisation 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 utilisation is uncertain. Consequently no deferred tax assets
were recognised for these losses and temporary differences.
33. Share capital and share options
Details of the Company’s share capital and share options are set out in notes 22 and 24 to the consolidated financial statements as at
31 December 2014.
34. Headcount and costs
The Company does not have any employees.
35. Events after the reporting period
There are no known events after the date of the Statement of Financial Position that require disclosure.
Dialog Semiconductor Plc | Annual report and accounts 2014
Dialog Semiconductor Plc | Annual report and accounts 2014Consolidated financial statements and notes
Appendix to financial review
157
The following tables detail the historical consolidated statements of the operations of Dialog for the years ended 31 December 2014 and 31
December 2013 both on an IFRS and underlying* and basis.
Dialog Semiconductor’s IFRS and underlying financial performance for 2014 and 2013
US$000
Revenues
Cost of sales
Gross profit
Selling and marketing expenses
General and administrative
expenses
Research and development
expenses
Restructuring expenses
Other operating income
Operating profit
Interest income and other
financial income
Interest expense and other
financial expense
Foreign currency exchange gains
and losses, net
Result before income taxes
Income tax expense
Net profit
Earnings per share (in US$)
Basic
Diluted
2014
2013*
IFRS
Adjustments
Underlying1
IFRS
Adjustments
1,156,105
(641,296)
514,809
(60,070)
(59,445)
–
8,597
8,597
11,339
14,796
1,156,105
(632,699)
523,406
(48,731)
902,907
(551,099)
351,808
(49,000)
6,222
9,492
15,714
10,243
Underlying1
909,129
(541,607)
367,522
(38,757)
(44,649)
(44,255)
9,442
(34,813)
(213,808)
11,570
(202,238)
4,416
185,902
(1,939)
44,363
2,477
230,265
(159,287)
–
3,394
102,660
4,930
–
(3,394)
36,935
(154,357)
–
–
139,595
419
–
419
565
–
565
(14,829)
9,269
(5,560)
(13,345)
8,935
(4,410)
(2,171)
169,321
(31,242)
138,079
2.05
1.93
–
53,632
(19,542)
34,090
0.51
0.34
(2,171)
222,953
(50,784)
172,169
2.56
2.27
(168)
89,712
(27,508)
62,204
0.95
0.92
–
45,870
(10,459)
35,411
0.54
0.52
(168)
135,582
(37,967)
97,615
1.49
1.44
EBITDA2
241,884
27,546
269,430
151,256
22,959
174,215
1 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. Underlying results (net of tax) have been fully reconciled to IFRS results (net of tax) above. All other underlying measures
disclosed within this report are a component of this measure and adjustments between IFRS and underlying measures for each of these measures are a component of those disclosed
above.
2 EBITDA is defined as operating profit excluding depreciation for property, plant and equipment (2014: US$22.1 million, 2013: US$18.6 million), amortisation for intangible assets
(2014: US$33.4 million, 2013: US$28.6 million) and losses on disposals and impairment of fixed assets (2013: US$1.4 million, 2013: US$1.4 million).
*
Following a change in accounting policy the presentation of income from customer-specific research and development contracts has been reclassified retrospectively.
For further information please refer to note 2 to the consolidated financial statements.
Dialog Semiconductor Plc | Annual report and accounts 2014Additional information
158
Appendix to financial review
Dialog Semiconductor’s underlying adjustments for 2014
Merger costs
PPA iWatt
One-off
non-cash
deferred
tax credit
US$000
Revenues
Cost of sales
Selling and marketing expenses
General and
administrative expenses
Research and
development expenses
Other operating income
Operating profit
Interest expense and other
financial expense
Option
Expense and
National
Insurance
–
(848)
(3,337)
PPA BV
–
(103
(400)
(10,363)
–
(10,504)
–
(25,052)
(1,066)
–
(1,596)
–
–
Result before income taxes
(25,052)
(1,569)
Acquisition
and
integration
costs
–
–
–
–
–
–
(3,165)
(1,268)
–
–
–
–
Convertible
bond
Licence
agreement
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(7,646)
(7,602)
–
–
1,939
(3,165)
(1,268)
(13,309)
(8,269)
(8,269)
(1,000)
(1,000)
–
–
–
(3,165)
(1,268)
(13,309)
TOTAL
–
(8,597)
(11,339)
(14,796)
(11,570)
1,939
(44,363)
(9,269)
(53,632)
–
–
–
–
–
–
-
–
–
Income taxes
Net income
–
392
–
–
–
–
1,391
17,759
19,542
(25,052)
(1,177)
(8,269)
(1,000)
(3,165)
(1,268)
(11,918)
17,759
(34,090)
(*) Underlying results (net of tax) in 2014 are based on IFRS, adjusted to exclude share-based compensation charges and related charges for National Insurance of US$25.1 million,
excluding US$1.2 million of amortisation of intangibles associated with the acquisition of SiTel (now Dialog B.V.), excluding US$8.3 million non-cash effective interest expense in
connection with the convertible bond, excluding US$1.0 million non-cash effective interest expense related to a licensing agreement, US$1.2 million of expenses associated with
the merger discussions with ams AG, excluding US$3.1 million acquisition and integration expenses in connection with the purchase of iWatt, excluding US$11.9 million of
amortisation and depreciation expenses associated with the acquisition of iWatt and a US$17.7 million one-off tax impact of an intra-group reorganization of certain Intellectual
Property.
(*) Underlying results (net of tax) in 2013 are based on IFRS, adjusted to exclude share-based compensation charges and related charges for National Insurance of US$7.8 million,
excluding US$3.8 million of amortisation of intangibles associated with the acquisition of SiTel (now Dialog B.V.), excluding US$7.8 million non-cash effective interest expense in
connection with the convertible bond, excluding US$0.8 million non-cash effective interest expense related to a licensing agreement entered into in Q3-2012, excluding US$6.3
million acquisition and integration expenses in connection with the purchase of iWatt and US$10.3 million of amortisation and depreciation expenses associated with the
acquisition of iWatt, deferred sales and related cost of sales that were reversed in connection with the iWatt business integration of US$2.5 million were brought back.
Furthermore the gain of US$3.2 million from the release of an earn-out provision in relation to the iWatt acquisition was reversed and a recorded income related to a payment
the company received in connection with the insolvency of BenQ of US$0.7 million was also taken out.
Dialog Semiconductor’s underlying adjustments for 2013
US$000
Revenues
Cost of sales
Selling and marketing expenses
General and
administrative expenses
Research and
development expenses
Other operating income
Operating profit
Option
Expense and
National
Insurance
–
(686)
(1,892)
PPA BV
–
(806)
(3,197)
(3,098)
(2)
(3,685)
–
(9,361)
(1,063)
(5,068)
Convertible
bond
Licence
agreement
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Acquisition
and
integration
costs
–
(15)
(404)
PPA iWatt
(7,073)
(7,985)
(4,750)
BenQ
851
–
–
TOTAL
(6,222)
(9,492)
(10,243)
(6,342)
–
–
(9,442)
(182)
–
–
3,249
(6,943)
(16,559)
–
145
996
(4,930)
3,394
(36,935)
Interest expense and other financial expense
Result before income taxes
Income taxes
Net income
–
–
(9,361)
(5,068)
(7,801)
(7,801)
1,582
1,267
–
(7,779)
(3,801)
(7,801)
(1,134)
(1,134)
322
(812)
–
–
–
(8,935)
(6,943)
(16,559)
996
(45,870)
638
6,933
(283)
10,459
(6,305)
(9,626)
713
(35,411)
Dialog Semiconductor Plc | Annual report and accounts 2014Additional information 159
The Connectivity segment’s underlying financial performance for 2014 and 2013 is summarised below:
US$000
Revenues
Cost of sales
2014
2013*
IFRS
Adjustments
Underlying1
IFRS
Adjustments
Underlying2
92,120
(2,163)
–
1,841
92,120
(322)
91,616
(2,121)
–
5,182
91,616
3,061
1 Underlying results in 2014 are based on IFRS consolidated income statement, adjusted to exclude US$1.6 million of amortisation of intangibles associated with the acquisition of
Dialog B.V. and charges for National Insurance related to share-based compensation in the amount of US$0.2 million.
2 Underlying results in 2013 are based on IFRS consolidated income statement, adjusted to exclude US$5.1 million of amortisation of intangibles associated with the acquisition of
Dialog B.V. and charges for National Insurance related to share-based compensation in the amount of US$0.1 million.
*
Following a change in accounting policy the presentation of income from customer-specific research and development contracts has been adjusted retrospectively. For further
information please refer to note 2 to the consolidated financial statements.
The Power Conversion segment’s underlying financial performance for 2014 and 2013 is summarised below:
US$000
Revenues
Operating profit (loss)
IFRS
Adjustments
Underlying1
IFRS
Adjustments
Underlying2
(80,367)
(21,135)
18,836
80,367
(2,299)
26,768
(22,533)
7,073
21,630
33,841
(903)
2014
2013*
1
2
Underlying results in 2014 are based on IFRS consolidated income statement, adjusted to exclude expenses of US$13.5 million for amortisation of intangibles associated with the
acquisition of iWatt group, US$1.7 million higher cost of sales related to fair value measurement of inventories. and charges for National Insurance related to share-based
compensation in the amount of US$0.4 million As one-time expenses-related acquisition and integration costs in amount of US$3.2million are also excluded from operating result.
Underlying results in 2013 are based on IFRS consolidated income statement, adjusted to include deferred revenue in the amount of US$7.1 million. Expenses of US$8.9 million
for amortisation of intangibles associated with the acquisition of iWatt group, US$7.0 million higher cost of sales related to fair value measurement of inventories and cost of
US$3.2 million related to adjustment of deferred revenues are excluded from operating result. As one-time expenses-related acquisition and integration costs in amount of
US$1.8 million are also excluded from operating result.
*
Following a change in accounting policy the presentation of income from customer-specific research and development contracts has been adjusted retrospectively.
For further information please refer to note 2 to the consolidated financial statements.
Dialog Semiconductor Plc | Annual report and accounts 2014Additional information
160
Glossary of terms – Technical
Technical glossary
Analog A type of signal in an electronic circuit that takes on a
continuous range of values rather than only a few discrete values.
ASIC An Application Specific Integrated Circuit is an integrated chip,
custom-designed for a specific application.
ASSP An Application Specific Standard Product is a semiconductor
device integrated circuit (IC) dedicated to a specific application and sold
to more than one user.
Audio CODEC The interface between analog signals (such as the
human voice) and the digital data processing inside a mobile phone,
determining voice quality.
BCD process platform The incorporation of analog components
(Bipolar), digital components (CMOS) and high-voltage transistors
(DMOS) on the same die to reduce the number of components required
in the bill of materials, minimise board space, costs and the parasitic
losses in comparison to a non-integrated solution.
Buck converter A DC-to-DC buck converter accepts a direct current
input voltage and produces a direct current output voltage to a plurality
of channels.
CAD Computer Aided Design usually refers to a software tool used for
designing electronics hardware or software systems.
CDMA Code Division Multiple Access is an alternative to GSM
technology for mobile wireless networks.
Chips Electronic integrated circuits.
CMOS Complementary Metal Oxide Semiconductor: the most popular
class of semiconductor manufacturing technology.
Digital A type of signal used to transmit information that has only
discrete levels of some parameter (usually voltage).
Digital Enhanced Cordless Telecommunications (DECT)
is a wireless connectivity standard technology originated in Europe
for cordless telephony.
Fabless A company that designs and delivers semiconductors by
outsourcing the fabrication (manufacturing) process.
FET A Field Effect Transistor uses an electric field to control the shape
and hence the conductivity of a channel of one type of charge carrier in
a semiconductor material.
Foundry A manufacturing plant where silicon wafers are produced.
Hi-Fi High-Fidelity is the reproduction of sound with little or
no distortion.
IC Integrated Circuit An electronic device with numerous components
on a single chip.
Imaging The capture and processing of images via an image sensor for
use by an electronic device to send to a display for viewing by
a user.
Internet of Things (IoT) The Internet of Things is an environment
where everyday items, such as smartphones, wearable health meters,
light bulbs, and lighting, security and HVAC systems, are all connected
via the Internet, allowing them to send and receive data and be
controlled wirelessly.
LDO Low dropout voltage regulators are used in battery operated
systems, where the output voltage is typically lower than the
input voltage.
LED A Light Emitting Diode is a semiconductor device that
emits light when charged with electricity, often used for LCD
display backlights.
Liquid Crystal Display (LCD) A display technology found in many
portable electronics products, including personal organisers, cellular
handsets and notebook computers.
LTE Long-Term Evolution is a standard for wireless communication of
high-speed data for mobile phones and data terminals.
Mixed signal A combination of analog and digital signals being
generated, controlled or modified on the same chip.
OEM An Original Equipment Manufacturer that builds products or
components that are used in products sold by another company.
Original Design Manufacturer (ODM) An original design
manufacturer designs and produces products that are specified and then
rebranded by OEMs.
PMIC Power Management IC.
Power Density The maximum amount of power that can be supplied
from a given unit of volume. For example, a high power density power
adapter can supply a large amount of power in the same size case as a
low power density adapter.
Power Management The management of the power requirements
of various subsystems, important in handheld and portable electronics
equipment.
PrimAccurate™ Dialog’s patented control technology that uses digital
algorithms on the primary side of an isolated power supply eliminating
the need for a secondary side regulator and optical feedback isolator to
lower the total BOM cost, reduce the overall solution size and improve
reliability.
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.
Dialog Semiconductor Plc | Annual report and accounts 2014Additional information 161
Smart Lighting Dialog defines smart lighting to encompass solid state
lighting control ranging from various modes of wired digital dimming
via the AC supply line, such as toggle-switch dimming, as well as the
emerging Ledotron® (IEC 62756-1) digital dimming standard. Smart
lighting also includes wireless lighting control via existing wireless
standards such as Bluetooth® Smart, ZigBee®, Z-Wave®, Wi-Fi, and
others.
SmartDefender™ Dialog’s advanced cycle-by-cycle, hiccup mode
technology that addresses soft short circuits in adapter cables and
connectors helping to prevent excessive heat build-up and damage.
SmartMirror™ A technology patented by Dialog Semiconductor which
simplifies circuit design and provides very low current consumption in
Power Management circuits.
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.
SmartPulse™ A wireless sensor network connectivity solution based
on the DECT ULE (Ultra-Low Energy) standard for home automation
applications.
smarteXite Dialog’s brand name for its intelligent LED lighting
technology platform.
SmartXtend™ A technology patented by Dialog Semiconductor that
extends the life and reduces power consumption of high-resolution,
passive matrix OLED displays.
Subcontractor A business that signs a contract to perform part or all
of the obligations of another’s contract.
Synchronous Rectifier An integrated circuit that can replace diodes to
improve efficiency and power density in power conversion applications,
such as power supplies.
Tablet PC A tablet PC refers to a slate- or tablet-shaped mobile
computer device, equipped with a touchscreen or stylus.
TAM Total addressable market, TAM measures the potential market for
your product – and your product only – assuming you could reach 100%
of your customers.
Ultrabook™ A higher-end, compact sub-notebook that is designed to
be compact, thin and light without compromising performance and
battery life. Ultrabooks™ typically feature low power processors and
solid-state drives.
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.
4G Wireless broadband standard.
Dialog Semiconductor Plc | Annual report and accounts 2014Additional information 162
Glossary of terms – Financial
Financial glossary
AGM Annual General Meeting.
EURIBOR The 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.
CAGR Compound Annual Growth Rate, a method of assessing
the average growth of a value over time.
Free-float The proportion of an issuer’s share capital that is available for
purchase in the public equity markets by investors.
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 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 Payments made by a company to its shareholders. When
the 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 UK Disclosure and Transparency Rules implementing the
provisions of the Transparency Directive.
Gross margin This is difference between revenues and cost of sales as
presented in the statement of operations.
Impairment 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 This 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 This refers to 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 All current and non-current assets. Total assets equal total
liabilities and Shareholders’ equity.
Working capital 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.
Dialog Semiconductor Plc | Annual report and accounts 2014Additional information Advisers and corporate information
163
Registered office
Dialog Semiconductor Plc
Tower Bridge House
St Katharine’s Way
London E1W 1AA
UK
Website: www.dialog-semiconductor.com
Registered number
3505161
Financial calendar
Annual General Meeting
Q1 2015 Results
Q2 2015 Results
Q3 2015 Results
Preliminary results for 2015
30 April 2015
7 May 2015
30 July 2015
28 October 2015
February 2016
Public relations
FTI Consulting
200 Aldersgate
Aldersgate Street
London EC1A 4HD
UK
FTI Consulting
Park Tower
Bockenheimer Anlage 44
60322 Frankfurt am Main
Germany
Legal adviser
Reynolds Porter Chamberlain LLP
Tower Bridge House
St Katharine’s Way
London E1W 1AA
UK
Auditors
Ernst & Young LLP
Apex Plaza
Reading
Berkshire RG1 1YE
UK
Principal bankers
HSBC Bank Plc
Thames Valley
Corporate Banking Centre
Apex Plaza
Reading
Berkshire RG1 1AX
UK
Designated sponsors
Close Brothers Seydler
Schillerstrasse 27-29
D-60313 Frankfurt
Germany
Credit Agricole Cheuvreux
Tatnnusarlage 14
D-60325 Frankfurt
Germany
Shares
Information on the Company’s shares and on significant
shareholdings can be found on page 63.
Dialog Semiconductor Plc | Annual report and accounts 2014Additional information
164
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
100 Longwater Avenue
Green Park
Reading RG2 6GP
United Kingdom
Phone: +44 1793 756959
Fax: +44 1189 450219
The Netherlands
Dialog Semiconductor B.V.
Het Zuiderkruis 53
5215 MV ‘s-Hertogenbosch
The Netherlands
Phone: (+31) 73 640 88 22
Fax: (+31) 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) 408 845 8500
Fax: (+1) 408 845 8505
Email: NA_sales_enquiries@diasemi.com
Dailog Semiconsductor Inc.
675 Campbell Technology Pkwy Suite 150
Campbell, California 95008
USA
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
9F, No 185, Sec 2, Tiding Blvd
Neihu district
Taipei city 114
Taiwan, R.O.C.
Phone: (+886) 281 786 222
Fax: (+886) 281 786 220
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
Dialog Semiconductor Plc | Annual report and accounts 2014Additional information Financial statements created in-house with FIRE.sys
Registered office
Dialog Semiconductor Plc
Tower Bridge House
St Katharine’s Way
London E1W 1AA
UK
Website: www.dialog-semiconductor.com