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Dialog Semiconductor Plc
Annual report and accounts 2015
Mobile
life, smart
connections
Annual report and accounts 2015
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Dialog Semiconductor develops and distributes
standard and custom highly integrated, mixed signal
integrated circuits (“ICs”), optimised for personal,
portable, hand-held devices, Internet of Things (“IoT”),
Smart Home, LED solid-state lighting (“SSL”) and
automotive applications. The Company brings expertise
to the rapid development of integrated circuits while
providing flexible and dynamic support, innovation and the
assurance of dealing with an established business partner.
With leading manufacturing partners, Dialog operates a fabless business model
and is a socially responsible employer pursuing many programmes to benefit
employees, the community, other stakeholders and the environment.
Strategic report
Corporate governance
Financial statements
Meet the Board
p54–55
53
54
56
58
61
67
68
76
82
Introduction to governance
Leadership – Board of Directors
Leadership – Management team
Directors’ report
Corporate Governance statement
Directors’ remuneration report
Annual report on remuneration
Directors’ remuneration policy report
Statement of Directors’ responsibilities
Responsibility statement
Strategy
in action
p16–23
01 Group at a glance
02 Highlights
04 Chairman’s statement
06 CEO’s review
08 Our business model
10 Our people
12 Our markets
14 Strategic framework
16 Extending our product portfolio
18 Broader and deeper customer base
20 Continuous innovation
22
Strategic focus on China consumer
electronic market
24 Segment review
– 24 Mobile Systems
– 26 Connectivity
– 28 Power Conversion
– 30 Automotive and Industrial
32 Key performance indicators (“KPIs”)
34 Financial review
42 Corporate responsibility and sustainability
48 Managing risk and uncertainty
83
84
85
86
87
88
89
Independent Auditor’s report
Consolidated statement of income
Consolidated statement of
comprehensive income
Consolidated balance sheet
Consolidated statement of cash flows
Consolidated statement of changes
in equity
Notes to the consolidated
financial statements
145 Company balance sheet
146 Company statement of changes in equity
147 Company statement of cash flows
148
149 Appendix to Financial Review
Notes to the Company financial statements
Additional information
155 Glossary of Terms – Technical
157 Glossary of Terms – Financial
158 Advisers and corporate information
159 Group directory
160 Related undertakings
161 Branches and representative offices
For more information visit:
www.dialog-semiconductor.com
Group at a glance
01
Dialog’s power-saving technologies deliver high
efficiency and enhance the consumer’s user experience
by extending battery lifetime and enabling faster charging
of their portable devices. Its technology portfolio also
includes audio, Bluetooth® Smart, Rapid Charge™ AC/DC
power conversion and multi-touch.
Automotive
& Industrial
> Motor control ICs
> Control ASICs
Revenue
US$34m
of group revenue
3%
p 30–31
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Connectivity
> Bluetooth® Smart
> Short-range
wireless VoIP
> Voice over DECT
Revenue
US$117m
of group revenue
9%
p 26–27
Mobile Systems
> Power management
> Audio
> Display
Revenue1
US$1,119m
of group revenue
82%
p 24–25
Consumer
applications
Personal
Portable
Connected
Power Conversion
> AC/DC converters
> Solid-state lighting LED drivers
> AC/DC chargers and adapters
> AC/DC embedded networking
converters
Revenue
US$85m
of group revenue
6%
p 28–29
1 Mobile Systems including Corporate revenue of $4.8 million
www.dialog-semiconductor.com
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
02 Highlights
2015 Performance highlights
Dialog delivered another year of strong financial results in
2015, 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, which you can see outlined on pages 14 and 15, 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.
2015 Financial highlights
Underlying revenue
growth
+17%
(2014: US$1,156m)
Underlying gross
margin
46.7%
(2014: 45.3%)
Underlying operating
profit growth
Underlying diluted
EPS
+38%
(2014: US$230.3m)
US$3.02
(2014: US$2.27)
IFRS revenue
growth
+17%
(2014: US$1,156m)
IFRS gross
margin
46.1%
(2014: 44.5%)
IFRS operating
profit growth
+40%
(2014: US$185.9m)
IFRS diluted
EPS
US$2.29
(2014: US$1.93)
Our performance against each of these key
financial metrics, together with a range of
other performance measures, is set out in
greater detail under “2015 performance”
on pages 32 and 33.
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 2015, Dialog
delivered against all of the key
performance measures for the business.
To provide a useful reflection of business
performance, measurement is on an
underlying (non-IFRS) basis. Full
explanations and reconciliations of non-
IFRS measures (underlying) to the nearest
equivalent IFRS measures can be found in
the section entitled “Financial performance
measures” on page 149).
Dialog Semiconductor PlcAnnual report and accounts 2015 03
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Strategic highlights
Extending our product portfolio for portable and consumer platforms
> New SSL LED driver platform designed to deliver the ultimate in dimmer
performance and compatibility with an ultra-low cost for next-generation
LED bulbs.
> Expanding our range of Bluetooth Smart System-on-Chip (“SoC”) products
with three application-optimised products aimed at high volume, high growth
consumer markets.
> Entered white goods sector with expanded Power Conversion product portfolio.
Broader and deeper customer base
> Our AC/DC technology is at the heart of Samsung’s Adaptive Fast Charging
(“AFC”) AC/DC wall adapter. Our custom chipset incorporates Samsung’s AFC
technology and is designed for use with the Galaxy S6, Galaxy Note 4 and later
models of the Galaxy S and Galaxy Note series smartphones.
> Our SmartBond™ technology is at the heart of Xiaomi’s new Mi Bluetooth Voice
Remote Control. Our Bluetooth® Smart SoC with integrated voice codec delivers
high performance, low-latency audio with minimum size, cost and power
consumption.
> Global distribution deal with Digi-Key. Dialog’s Bluetooth® Smart development kits
accelerate development of smallest lowest-power Bluetooth® devices for the IoT.
Continuous innovation
> We launched the world’s first Bluetooth® Smart Wearable-on-Chip™.
The small, ultra-low power integrated circuit includes key functionalities to create
a fully hosted wearable computing product.
> Entered the power management segment for computing systems with the
launch of the DA9213, a power management IC that enables the design of
smaller, thinner notebook computers and tablets powered by dual cell stacked
(2S) Li-ion or Li-Polymer batteries.
> Launched a Bluetooth® Smart development kit with full support for Apple®
HomeKit to accelerate development of Smart Home accessories.
> Collaboration with Bosch Sensortec on low-power smart sensor wireless platform
for gesture recognition in wearable computing devices, immersive gaming and
3D indoor mapping and navigation.
Strategic focus on fast-growing China consumer
electronics market
> Extending power management leadership in China through our collaboration
with MediaTek. Our sub-PMIC is powering the MediaTek MT6795 processor in
HTC One M9+ and E9+ Android-based smartphones.
> Established a strategic partnership with ShunSin Technology (Foxconn
Technology Group) and Dyna Image, a Lite-On subsidiary. This partnership will
accelerate Dialog’s entrance to China’s fast-growing consumer market and
access advanced sensor capability to provide increased system content for
smartphones, wearables and smart digital lighting devices.
> Our Rapid Charge™ technology was selected by Huawei and LeTV. It supports
Huawei’s proprietary Fast Charger Protocol (FCP) in their latest Honor 7
smartphone model and LeTV’s USB Type C smartphone charging adapter.
www.dialog-semiconductor.com
See page 16 for strategy in action
See page 18 for strategy in action
See page 20 for strategy in action
See page 22 for strategy in action
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
04
Chairman’s statement
Dear Shareholder,
2015 has been another year of substantial progress for
Dialog. We have delivered strong, double-digit growth,
achieving revenue in excess of US$1.35 billion and
underlying EBITDA margin of 26.5%.
“The performance of
our business in 2015
underscores the
capability, dedication
and commitment of
our 1,660 employees
across the world.”
Richard Beyer, Chairman
Head offices
Design and Manufacturing
Sales offices
Our operating profit grew twice as fast as
the top line and we delivered another year
of strong cash flow generation, resulting in a
strong balance sheet with a net cash position
of US$567 million. The performance of our
business in 2015 underscores the capability,
dedication and commitment of our 1,660
employees across the world.
Throughout 2015, we have also continued
to successfully execute against our objective
to deliver the next phase of high-volume
products for our customers – across Power
Management, audio, Bluetooth® Smart,
Rapid Charge™ AC/DC and power conversion
technologies.
Our proven team, deep portfolio of intellectual
property and market-leading innovation,
enable us to consistently deliver value for
our industry-leading customers and across a
range of products. We continue to diversify
and add new customers, particularly within
the fast-growing IoT segment where we have
developed applications for smart watches,
fitness bands, Smart Home applications,
advanced TV remote controls and wireless
gaming accessories. The range of applications
for our products is growing and we are excited
about the business opportunity at our reach.
Dialog Semiconductor PlcAnnual report and accounts 2015
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We operate from
over 31 locations
in 14 countries
>
UK
Edinburgh
London
Reading
Swindon
Netherlands
Hengelo
Hertogenbosch
Germany
Germering
Kirchheim
Austria
Graz
Italy
Livorno
Greece
Athens
Patras
Turkey
Istanbul
Hong Kong
Singapore
Taiwan
Taichung
Taipei
Zhubei
China
Shanghai
Beijing
Shenzhen
Tianjin
Korea
Seoul
Japan
Tokyo
USA
Chandler
Santa Clara
Campbell
We did not complete the proposed acquisition
of Atmel announced in September 2015.
The unsolicited proposal of Microchip
Technologies for Atmel was deemed superior
to ours and the Board decided not to revise
the terms of our offer. Our goal is to continue
to create long-term value for our Shareholders.
Throughout 2015 we had the opportunity
to engage with our Shareholders and I want
to thank all of you for your support and your
engagement through the year.
Our Board sets the strategic direction for
the business and oversees the execution
of that strategy by the management team,
ably led by Jalal Bagherli, who, together
with his team, has built Dialog into the
market-leading company it is today.
The Board also ensures that Dialog’s corporate
governance principles and practices are
effective, and we have continued to review
and enhance our disclosure and corporate
governance practices during 2015.
We welcomed another new independent
non-executive Director, Alan Campbell, to the
Board during the year. Alan brings a wealth
of experience in the semiconductor industry
as well as many years’ senior experience in
a listed company. We are pleased to have a
Director of Alan’s experience on the Board,
and his input has been invaluable since joining.
As set out in my letter last year, we would
also recognise the contribution of both John
McMonigall and Peter Weber, who retired
as Directors at our 2015 AGM. Both played a
key role in helping Dialog create substantial
value for Shareholders and we were fortunate
to have their contributions as Directors over
many years.
To conclude, the Board and I are pleased
with the progress we have made in 2015 and
thank the Executive Team and all of Dialog’s
employees for their continued commitment to
the business.
We would also like to thank you, our
Shareholders, for your continued support and
the trust you have placed in us as a Board. We
look to 2016 and beyond with confidence and
are proud of the business we are building, the
customers we are serving and the value we
are creating for our Shareholders.
Richard Beyer
Chairman
www.dialog-semiconductor.com
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
06
CEO’s review
Dear Shareholder,
We can be proud of our achievements during 2015.
I am extremely pleased with what we have accomplished.
Through the hard work and dedication of all
our employees we have continued our strong growth
trajectory and laid solid foundations for the future success
of the business.
Global Semiconductor
Alliance (“GSA”)
Awards
Most Respected
Public Semiconductor
Company Achieving
$1 billion to $2 billion in
Annual Sales Award
Best Financially Managed
Semiconductor Company
Achieving Greater than
$500 million in Annual
Sales Award
“We are building a
vibrant and innovative
mixed signal business
which is well positioned
for future growth.”
Jalal Bagherli, Chief Executive Officer
Financial performance
In 2015, the Company delivered a strong set
of financial results. In particular we:
> Delivered 17% year-on-year growth
in revenue;
> Delivered a third consecutive year of
underlying gross margin improvement,
up by 140bps in 2015 from 2014 and
increased profitability while maintaining
a sustainable level of investment in
innovation; and
> Generated US$192 million free cash flow.
In summary, we have – once again – delivered
on our objective of high growth together with
a solid financial performance.
Progress through innovation
In 2015 we made fantastic progress
throughout the business. We launched
great new products and continued to seek
leadership positions in new markets. These
efforts have been underpinned by our strategy
to innovate, expand our product portfolio,
diversify, and grow into new, fast-growth
markets. It is those core strategic tenets which
ensure we deliver exceptional value to our
customers, and allow us to seek to establish
leadership positions in new regions and
addressable markets.
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 2015 we
broadened and deepened those relationships
with multiple new products.
We consider the diversification of our
customer base a key strategic objective. In
line with our diversification strategy, I want to
highlight four significant developments which
position us well for future growth.
The first of these developments has been
within our Power Conversion business.
As consumers use their devices more often
and screens and processors grow, ensuring
long battery life and fast charging is becoming
essential for both Original Equipment
Manufacturers (“OEMs”) and end-users.
Dialog Semiconductor Plc
Annual report and accounts 2015
It has become the fastest growing segment
in the smartphone industry and in 2015 we
established a leadership position with our
Rapid Charge™ technology, gaining a majority
share of the smartphone fast charging market.
This has helped to broaden and deepen our
customer base. We will continue to invest in
this area to capture the opportunity available.
The next area I want to focus on is our
Bluetooth® Smart solution. In 2015, we
introduced the world’s first single-chip
solution for wearables. This is a landmark
innovation which has helped us gain
further traction within wearables as our
customers seek to create the next generation
of smart watches and fitness bands. We also
established a footprint in every leading Smart
Home ecosystem. This is one of the fastest
growing segments within IoT, and Bluetooth®
Smart is now acting as a common technology
link across different ecosystems. This provides
Dialog with an opportunity to carve out a
leadership position in short range connectivity.
We know these market-leading innovations
can provide value to customers around the
world. We have also talked about our strategy
to extend our product portfolio and
partnerships for portable platforms.
Our strategic partnership with Dyna Image
Taiwan was a very exciting step in the
diversification of our product portfolio. This is
Dialog’s first foray into the sensor market, and
it will provide us with an opportunity to supply
increased content for smartphones, wearables
and smart digital lighting devices.
This initiative has also served us well in
gaining market share in China’s fast-
growing consumer electronics market.
2015 – The one year view
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
00.00%
-10.00%
-20.0%
-30.0%
07
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January 2016 – Full year 2015 share price performance
Dialog Semiconductor Plc (XTRA:DLG) – Share Pricing
PHLX Semiconductor Sector Index (^SOX) – Index Value
Germany TECDAX (Total Return) Index – Index Value
EURO STOXX Index (EUR) (^SXXE) – Index Value
To that end, we promoted our sub-PMIC
products as part of MediaTek’s platforms,
now adopted by several Chinese OEMs such
as Lenovo and Meizu. Our Mobile Systems
business also announced a brand new
product, the DA9312, which extends our
power management technology to dual-cell
computing devices.
Acquisition of Atmel
Our proposed acquisition of Atmel did not
reach a successful completion. The Board
of Atmel deemed the unsolicited proposal
from Microchip to be a superior offer and
we decided not to revise the terms of our
offer. Even though we are disappointed
that it did not come to fruition we remain
highly confident in our strategic plan, market
opportunities and competitive strengths.
We will continue to put the interests of our
customers and Shareholders at the forefront
of all our decisions. Our focus is to create long-
term value for our Shareholders and we are
thankful for the support and feedback of our
Shareholders throughout 2015.
Around the Company
To help Dialog innovate and respond to
consumer demand we need to attract and
retain the best global talent. This year we hired
an employee almost every day to help grow
our talented engineers and take Dialog’s global
employee base to 1,660 across 14 countries.
We have also launched a brand new website,
which is attracting more traffic than ever and
serves as an excellent shop window for new
customers and employees.
NASDAQ Composite Index (^COMP) – Index Value
To give us a competitive advantage in the
employment marketplace, we continue to
open 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 2015 we expanded all of our design
groups, upgrading our design centre in Taiwan
and opening a new centre in Phoenix, Arizona.
Both of these centres are now up and running
and have delivered their first set of products.
Encouragingly, the hard work of all Dialog’s
employees was recognised when we won two
awards at this year’s Global Semiconductor
Alliance Awards Dinner. We were proud to
win the award for the “Most Respected Public
Semiconductor Company Achieving $1 Billion
to $2 Billion in Annual Sales” as well as the
award for the “Best Financially Managed
Semiconductor Company Achieving Greater
than $500 Million in Annual Sales”. On behalf
of the Board and the Executive Team I want
to thank Dialog’s employees for their efforts
and dedication, and we are grateful for their
continued support.
I would also like to record my appreciation
for Jean-Michel Richard, who stepped down
as Dialog’s Chief Financial Officer and Senior
Vice President of Finance in December 2015.
Jean-Michel served as our CFO for nine years
during which Dialog underwent a significant
transformation and delivered outstanding
growth in revenue and earnings.
2015 has not been without its challenges.
We have been facing some tough
macroeconomic trends, and a number of
our larger customers have seen sales growth
slowing. Despite this, each of our divisions
has made fantastic progress, developing new
products, diversifying and moving into new,
high-growth markets.
As we move into 2016 our ambition is
stronger than ever. I believe we are uniquely
positioned to capitalise on a new generation
of ultra-portable, low-power connected
devices. To capture that long-term growth
opportunity we are staying agile and
maintaining the innovative spirit our customers
have come to value. This is the spirit of Dialog.
We appreciate the continued support of our
Shareholders as we continue building a vibrant
and innovative mixed signal business which is
positioned for future growth.
Jalal Bagherli
CEO
www.dialog-semiconductor.com
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
08 Our business model
Our partnership approach, operational flexibility and
the quality of our products are key sources of value to
our customers.
i o n o f
t
c
b est-in-class technologies
e l e
S
Customers
OEMs/ODMs
Suppliers
Partners
IP
M
an
ufa
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t
u
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to n
cle (6–18 m
y
c
n
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i
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e
D
IP
Expert
engineering
talent
E
x
p
e
r
t
e
n
gin
e
erin
g talent
Innovation in
Mixed signal
analog
Product cycle (1– 5
e
y
a r s)
Customers
OEMs/ODMs
r
i
n
g
c
y
c
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e
(
3
m
o
n
t
h
s
)
Expert
engineering
talent
nt
ply chain manageme
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R
Dialog Semiconductor PlcAnnual report and accounts 2015
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09
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
in our own teams. These areas of expertise
support the 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
our Test and Product teams and deployed to
our back-end partners.
Dialog has built a robust supply chain
management approach which seeks to ensure
the delivery of a high volume of products for
global consumer electronics launches.
3. Market-leading products
Dialog’s focus and expertise in power
management and power efficiency
semiconductors contributes to better energy
efficiency and lower power consumption for
a range of portable devices and applications
in the consumer products market.
Our integrated design approach helps to
reduce component size and number, meaning
our customers can reduce costs and maximise
performance.
Our customers are attracted by the quality
and performance of our products 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 2015, are set
out in the segment review on pages 24 to 31.
Sustainability
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 will generate
profitable revenue streams and create long-
term 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 pages 68 to 81.
We design and distribute highly integrated
semiconductors using best-in-class
manufacturing and packaging technologies.
Our business seeks to deliver steep production
ramps of new products.
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-
intensity business while retaining some core
manufacturing and advanced packaging
competencies in-house.
Value
creation
Partnerships
1 Reciprocal cooperation with
customers and partners enhances
our innovation capacity.
Our business model has three dimensions
built on innovation:
1. Short and collaborative design cycle.
2. High-touch fabless model with strong
production partnerships.
3. Market-leading products.
1. Short and collaborative design cycle
In the consumer electronics market, product
development times are short due to rapidly
evolving consumer requirements in a highly
competitive and changing market.
The design of our customised Application
Specific ICs (“ASIC”) is well embedded in our
customers’ design cycle. For the design of
ASIC solutions, we engage with our customers
as an “extended R&D team”, delivering
differentiation in short design cycles.
We recruit the best talent we can globally and
believe the size and focus of our engineering
talent is a sustainable source of competitive
advantage. We believe 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. Through the last
20 years, Dialog has amassed a significant
reusable intellectual property portfolio,
including more than 620 granted patent
families.
2. High-touch fabless model with strong
production partnerships
Our foundry, test and packaging partners are
amongst the leading companies in their field
and we have developed a strong collaboration
with them over time.
We outsource production to industry-leading
wafer foundries such as TSMC, UMC and
Global Foundries. This approach enables
flexibility to deploy the most advanced
production processes and maintain low capital
intensity. Our Global Operations and Quality
functions have teams based at our partners’
manufacturing sites, enabling a continuous
quality improvement process.
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.
www.dialog-semiconductor.com
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
10
Our people
1,660 people worldwide, 62 nationalities across 14 countries
“Our employees are
highly engaged and
are the key contributors
to our success.”
Martin Powell, Senior Vice President,
Human Resources
Employees by region
● 17% Asia
● 69% Europe
● 14% North America
Source: Gartner 2015, Juniper 2014, Dialog Semiconductor
Our performance
Employee retention (%)
Manager retention rate
Overall employee
retention rate
Diversity (%)
Women overall
Part-time employees
Number of nationalities
2015
2014
95.0
93.3
93.1
94.3
15.8
15.8
3.5
62
3.9
58
Dialog Semiconductor PlcAnnual report and accounts 2015
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Engaging our employees – the Voice
of Dialog
In 2015, we conducted our second annual
“Voice of Dialog” employee survey, working
with our external partner to ensure employees’
responses are anonymous, confidential and
accurate.
Compared to last year, our overall employee
engagement score is up from 64% to 66%.
This is significantly above CEB benchmarks for
companies in our sector, or of our size.
From the 2014 survey, we identified three key
action areas for improvement: 1) involving
employees more in decision-making, 2)
stronger encouragement of work-life balance,
and 3) improved leadership communication,
especially of the direction of the Company. We
are pleased to report that our scores in each
of these areas have increased over the last 12
months. We will, however, strive for further
improvements.
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.
Recognising and rewarding performance
In 2015 we continued to operate consistent
ways of rewarding our employees through
a global annual base salary review, short
and long-term incentive plans, and the
provision of employee welfare benefits.
Recognition of employee performance and
contribution remains one of our top priorities.
In addition to providing a cash recognition
award programme, we have also focused on
recognition training for managers and will
continue to strengthen our capabilities in
this area.
Developing employees to
support growth
We help our employees to achieve their full
potential through training and development.
Employees 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
2015 we are delighted to have surpassed our
training quality targets in both Training Course
Evaluation and Training Competency Gain.
In 2015 we also rationalised our training
suppliers to provide better value for money
while offering more training courses than
ever before. Looking forward to 2016 we will
continue to develop our Management and
Leadership portfolio to support the ever-
growing organisation.
Valuing diversity
At the end of the year we employed 1,660
people worldwide, a 21% increase on
the prior year. We now operate from 31
locations in 14 countries and our global
workforce continues to increase in diversity.
Dialog’s workforce comprises 62 different
nationalities. We continue to recruit globally
for the most talented people, identify
centres of engineering talent and build our
business around them. In 2015, we continued
expanding our existing design centres in
Europe, Asia and North America.
Women comprise 15.8% of the overall
workforce, unchanged from 2014. There is
currently no female representation on our
Board of Directors or Senior Management
team.
One of Dialog’s strategic sustainability aims
is to encourage women into engineering and
during 2015 we ran a number of events and
programmes designed to do so.
See our corporate responsibility and
sustainability section on pages 42 to 47.
www.dialog-semiconductor.com
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
12
Our markets
Smart connected devices interact with our environment
using connectivity and sensing technologies. Effective
power management and increasing energy efficiency
remain at the core of these devices.
Market trends
PMIC
Bluetooth® Smart
Wireless, USB audio
12% CAGR
65% CAGR
Million US$
2018
2016
2014
4,819
4,385
3,844
Million US$
2018
2016
2014
118
347
Million US$
863
2018
2016
2014
35
19
Source: Gartner 2015, Juniper 2014, Dialog Semiconductor
Quelle: Dialog, Gartner
Quelle: Dialog, Gartner
45% CAGR
85
Sales of smartphones with larger screens
(5”+) grew 180% in 2014, and contributed
significantly to growth in 2015. Almost half of
all smartphones sold in Q1-20151 fell into this
5”+ category and it is predicted to reach 70%
of total smartphone unit demand in 2015.
This growth trend has been visible across all
regions and price levels. According to Nielson’s
Mobile Insights Report2, nearly a quarter
(24%) of purchasers cite large screen size as
their top reason for purchasing compared with
about 12% for brand or operating system.
Dialog’s R&D investment in power
management allows our Mobile Systems
business to be well positioned for mid/high-
end models as it enables both OEMs and
Platform Customers to produce lighter and
thinner smart devices with higher power
efficiency and longer battery life.
In the period 2014-2018, units of smartphones
are estimated to grow at 9% CAGR while
tablets are expected to decline at 4% CAGR
over the same period. Smartphone shipments
within key emerging markets are predicted to
more than double3 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.
The number of smart connected devices
continues to increase. In 2020 we expect
to have 4.5 billion smartphones and smart
vehicles, ten “appcessories” per person and
50 billion wireless connections. Smartphones
and tablets are the central mobile gateways
and all major mobile platforms, iOS, Android
and Windows 10, have adopted Bluetooth®
Smart as a core connectivity technology.
We anticipate Bluetooth® Smart will also
have a key role in connecting IoT nodes into
the cloud. The Bluetooth® Smart market is
expected to grow 65% CAGR in the period
2014-2018.
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
enabling high density wireless networks in
the enterprise environment without the risk
of interference with the overcrowded 2.4GHz
frequency space. Our products excel in audio
performance, integrated power management
and interfacing to 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. Portable devices
continue to ship with larger batteries to
support more and more powerful processors
and large screen sizes. These devices require
additional power to charge them and even
more power to charge them quickly. With
consumers demanding feature-rich mobile
devices that can charge faster than ever
before, rapid charging has become the
1 GFK, Trends and Forecasting 2015
2 http://www.nielsen.com/us/en/insights/news/2015/super-size-me-large-screen-mobile-sees-growth-in-the-midst-of-a-small-screen-surge.html
Dialog Semiconductor PlcAnnual report and accounts 2015 Market CAGR 2014-2018 (%)
PMIC
Bluetooth
Wireless
AC/DC
Audio
LED
12
18
2
14
65
45
13
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AC/DC converters
Audio Codec
LED Solid State Lighting and LED Backlight
18% CAGR
2% CAGR
Million US$
2018
2016
2014
Million US$
Million US$
1,166
828
1,620
2018
2016
2014
348
327
319
2018
2016
2014
Quelle: Dialog, Gartner
Quelle: Dialog, Gartner
Quelle: Dialog, Gartner
14% CAGR
1,379
1,071
825
materials (“BOM”) cost. We support dimmable
and non-dimmable bulbs across a wide range
of residential and commercial applications. Our
solutions include strong dimming intellectual
property, as well as smart lighting driver and
Bluetooth® Smart ICs to address wireless
lighting control and sensing via the IoT.
The influence of consumer electronics in
the development of 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.
fastest-growing segment in the highest
volume power market – smartphones – with a
2014-2018 CAGR estimated at 300%4.
Dialog leads the way in rapid charging
with the widest customer base and AC/DC
adapter IC solutions that support virtually
all fast charge protocols, including the latest
Qualcomm® Quick Charge™ 3.0 technology,
MediaTek’s second-generation Pump Express
Plus™, Huawei’s fast charger protocol (“FCP”),
Samsung’s Adaptive Fast Charging (“AFC”)
technology and other proprietary OEM
protocols.
The served available market (“SAM”) for
Dialog’s SSL LED drivers is estimated to
grow 14% CAGR from US$825 million in
2014 to approximately US$1,379 million in
2018. This represents a large opportunity
requiring millions of SSL LED driver ICs. Dialog
addresses this market with a broad range of
SSL LED driver ICs that embed our exclusive
technologies to enable high performance
dimming, seamless dimmer compatibility and
high quality of light, all with a very low bill of
3 Source: IDC Worldwide Mobile Phone Tracker, May 28, 2014 http://www.idc.com/getdoc.jsp?containerId=prUS24857114
4 Combination of Gartner and dialog data
www.dialog-semiconductor.com
Our key customers
Our customers want our focused
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.
Customers with a significant contribution
to revenue include Apple, Panasonic,
Bosch, Gigaset and Xiaomi.
These top five customers represented
85% of Dialog revenue in 2015. We
recognise there is a risk associated with
this level of customer concentration
(see details on pages 48 and 49 of the
Risk section) and the revenue derived
from our largest customer is shown on
page 137, note 29. We are delighted to
have such a strong relationship and during
2015 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
2015 we have welcomed new customers
across multiple business segments.
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
14
Strategic framework
We made great progress in 2015 and continue to power ahead
with solid initiatives in each of the four pillars of our strategy which
aim to generate sustainable long-term shareholder value.
Strategic priorities
2015 progress
Forward focus
Extending our product portfolio
We aim to continuously extend our product portfolio of highly integrated mixed signal,
lower power products. This helps us to diversify, open up new addressable markets
and stay ahead of the competition.
Case study: Dyna Image strategic partnership, pages 16–17
Broader and deeper
customer base
The quality and performance of our products have attracted the leading brands in each of our
markets. We want to maintain and grow those strong relationships while further diversifying our
customer base by launching new products and opening up new addressable markets.
Case study: The next wave: Smart Home, pages 18–19
Continuous innovation
Innovation is at the core of our business. Our top talent and technology, paired with an
innovative-product development philosophy and sustained engineering investment
enables Dialog to provide industry-leading solutions which consistently deliver
extraordinary value for our customers.
Case study: Expanding our market leadership in fast charge, pages 20–21
Establish regional engagements
A core strategic objective is to establish regional engagements using highly integrated analog
and power technologies. In particular, we are building innovative partnerships with leading
semiconductor companies in Greater China. During 2015, we collaborated with MediaTek and
established the Dyna Image strategic partnership. We also welcomed Xiaomi, one of the leading
Chinese OEMS in our top five customers.
Case study: Expanding our presence in the Chinese market, pages 22–23
> Expanded Bluetooth® Smart range with three
> Expand low latency wireless audio
products aimed at high-volume, high-growth
activity towards microphones and
consumer markets.
headset brands.
> Entered white goods sector with expanded
> Exploit high-voltage, high-power
power conversion product portfolio.
density technology to address
> New SSL dimmable LED drivers compatible with
broader footprint within multicell
ultra-low cost for next-generation LED bulbs.
mobile segment.
> Established strategic partnership with ShunSin
> Expand SSL LED driver solutions for
Technology and Dyna Image, a Lite-On
subsidiary.
commercial, professional, wireless
and smart lighting markets.
> Xiaomi adopted Dialog’s Bluetooth® Smart SoC
> Diversify Mobile Systems design-in
for its innovative voice remote control unit.
activity on new customers within
> Global distribution deal with Digi-Key to
the computing segment.
accelerate development of small low-power
>
Increase content in power adapters,
Bluetooth devices for IoT.
replacing passive components with
> AC/DC technology gained majority share of the
Dialog active digital solutions.
global smartphone fast charging market.
> Deliver next-generation Rapid
Charge™ adapter solutions to
smartphone, tablet and portables
markets.
>
Launched world’s first Bluetooth® Smart
Invest in Bluetooth® Smart platform
Wearable-on-Chip™ which enables the creation
to increase market footprint.
of fully hosted wearables.
> Entered computing systems with power
Invest in novel power-optimised
products for IoT, Smart Home and
>
>
management IC enabling design of smaller,
wearable applications.
thinner notebooks and tablets.
>
Launched Bluetooth® Smart development kit
to accelerate development of Smart Home
accessories.
> Collaboration with Bosch Sensortec for gesture
recognition in wearables, immersive gaming and
3D indoor mapping navigation.
> Sub-PMIC powering MediaTek MT6795
> Deepen our collaboration with
processor in HTC One M9+ and E9+ Android-
strategic partners.
based smartphones.
> Rapid Charge™ technology selected by
Samsung, Huawei and LeTV.
> The Dyna Image strategic partnership has
provided good opportunities to partner with
local Chinese businesses.
> Establish new partners and grow
dynamic engineering design
community.
Dialog Semiconductor PlcAnnual report and accounts 2015 15
Strategic priorities
2015 progress
Forward focus
Sustainability vision and values
> Expanded Bluetooth® Smart range with three
products aimed at high-volume, high-growth
consumer markets.
> Entered white goods sector with expanded
power conversion product portfolio.
> New SSL dimmable LED drivers compatible with
ultra-low cost for next-generation LED bulbs.
> Established strategic partnership with ShunSin
Technology and Dyna Image, a Lite-On
subsidiary.
> Expand low latency wireless audio
activity towards microphones and
headset brands.
> Exploit high-voltage, high-power
density technology to address
broader footprint within multicell
mobile segment.
> Expand SSL LED driver solutions for
commercial, professional, wireless
and smart lighting markets.
Our vision is to
embed sustainable
and responsible
practices into the way
we act internally and
engage externally
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Applicable
external standards
> United Nations Global Compact
>
ISO14001 environmental
management system standard
ISO9001 quality management
system standard
>
> Global Reporting Initiative and
G4 Sustainability Reporting
Guidelines
> Xiaomi adopted Dialog’s Bluetooth® Smart SoC
for its innovative voice remote control unit.
> Global distribution deal with Digi-Key to
accelerate development of small low-power
Bluetooth devices for IoT.
> AC/DC technology gained majority share of the
global smartphone fast charging market.
>
> Diversify Mobile Systems design-in
activity on new customers within
the computing segment.
Increase content in power adapters,
replacing passive components with
Dialog active digital solutions.
> Deliver next-generation Rapid
Charge™ adapter solutions to
smartphone, tablet and portables
markets.
Invest in Bluetooth® Smart platform
to increase market footprint.
Invest in novel power-optimised
products for IoT, Smart Home and
wearable applications.
>
Launched world’s first Bluetooth® Smart
Wearable-on-Chip™ which enables the creation
of fully hosted wearables.
>
>
> Entered computing systems with power
>
management IC enabling design of smaller,
thinner notebooks and tablets.
Launched Bluetooth® Smart development kit
to accelerate development of Smart Home
accessories.
> Collaboration with Bosch Sensortec for gesture
recognition in wearables, immersive gaming and
3D indoor mapping navigation.
> Sub-PMIC powering MediaTek MT6795
> Deepen our collaboration with
processor in HTC One M9+ and E9+ Android-
based smartphones.
> Rapid Charge™ technology selected by
Samsung, Huawei and LeTV.
> The Dyna Image strategic partnership has
provided good opportunities to partner with
local Chinese businesses.
strategic partners.
> Establish new partners and grow
dynamic engineering design
community.
www.dialog-semiconductor.com
Extending our product portfolio
We aim to continuously extend our product portfolio of highly integrated mixed signal,
lower power products. This helps us to diversify, open up new addressable markets
and stay ahead of the competition.
Case study: Dyna Image strategic partnership, pages 16–17
Broader and deeper
customer base
The quality and performance of our products have attracted the leading brands in each of our
markets. We want to maintain and grow those strong relationships while further diversifying our
customer base by launching new products and opening up new addressable markets.
Case study: The next wave: Smart Home, pages 18–19
Continuous innovation
Innovation is at the core of our business. Our top talent and technology, paired with an
innovative-product development philosophy and sustained engineering investment
enables Dialog to provide industry-leading solutions which consistently deliver
extraordinary value for our customers.
Case study: Expanding our market leadership in fast charge, pages 20–21
Establish regional engagements
A core strategic objective is to establish regional engagements using highly integrated analog
and power technologies. In particular, we are building innovative partnerships with leading
semiconductor companies in Greater China. During 2015, we collaborated with MediaTek and
established the Dyna Image strategic partnership. We also welcomed Xiaomi, one of the leading
Chinese OEMS in our top five customers.
Case study: Expanding our presence in the Chinese market, pages 22–23
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
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Extending our product portfolio
Dialog Semiconductor PlcAnnual report and accounts 2015 17
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Dyna Image strategic
partnership
Establishing a new advanced sensor capability
Dialog Semiconductor, Foxconn
Technology Group’s ShunSin Technology
(“SST”) and Lite-On established a sensor
strategic partnership via the investment
in Dyna Image Taiwan. This investment
represents Dialog’s first foray into
the sensor market. We have become
closely involved with technologies that
complement our power management,
audio and Bluetooth® Smart expertise
in smartphone, IoT and smart lighting
applications.
We are working closely
with Dyna Image on the
development of sensors
and sensor solutions for
smartphones and IoT
applications
It also represents another important step
in our strategy to gain market share in the
fast-growing Greater China smartphone
and IoT markets through innovative local
business partnerships. We’ll continue
to bring our customers best-in-class
technology and help them integrate it
quickly and reliably into their designs
to improve performance, cut costs and
reduce time-to-market.
Dyna Image specialises in the design
and manufacture of optical, inertia and
environmental sensors for consumer
electronics applications and is already
shipping optical sensors in volume to the
China market.
We are working closely with Dyna Image
on the development of sensors and
sensor solutions for smartphones and IoT
applications, including those for wearable
devices. These technologies will initially
include sensors for ambient light and
proximity as well as colour and gesture
analysis.
Dialog will build on its market-leading
position in power management,
Bluetooth® Smart technologies for
consumer electronics, and solid-state
lighting for smart and connected home by
providing customers with more system-
level solutions.
The Company will also enhance the
competitiveness of its offering by
continuing to leverage both Lite-On’s
manufacturing capabilities in Taiwan and
the strategic relationship with SST for
advanced packaging that results from the
businesses’ mutual investment in Dyna
Image.
www.dialog-semiconductor.com
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
18
Broader and deeper customer base
The next wave:
Smart Home
Unlocking the door to a connected future
The Smart Home market is one of the
fastest-growing segments within the
Internet of Things. The major ecosystem
shapers Google, Apple and Samsung have
entered the Smart Home market and are
pushing forward. The Smart Home market
for Bluetooth® Smart is expected to grow
to 19% CAGR (2015-2019)1. Bluetooth®
Smart will have a central role in the Smart
Home wireless technology space.
Dialog has a footprint in all leading Smart
Home ecosystems:
> We are a member of the Thread Group
and actively developing a solution for
the “Works with Nest” initiative.
In collaboration with Apple, Dialog has
released a development kit for their
HomeKit ecosystem.
>
> Samsung has adopted Dialog’s
Bluetooth® Smart solution in their Artik
Smart Home modules.
Bluetooth® Smart is a common link across
the different ecosystems. It is already in
millions of smartphones and devices. It is
well designed to be an access technology:
fast, extreme low power and IPv6 capable.
Dialog’s best-in-class SmartBond™ product
portfolio is already enabling customers
to develop innovative products for this
rapidly growing segment.
1 Bluetooth Technology’s role in the Internet of Things, IHS, May 2015
Dialog Semiconductor PlcAnnual report and accounts 2015 19
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Continuous innovation
Higher efficiency for higher power
density: Our Rapid Charge™ solutions
provide efficiency as high as 88%.
SmartDefender™ for safer charging:
Our SmartDefender™ technology is
available with most of our Rapid Charge™
solutions. It helps protect mobile devices
from heat damage caused by short circuits
in dirty or damaged charging ports, or by
worn USB cables and connectors – all with
no additional components or cost.
Support for virtually all fast charge
protocols: Our Rapid Charge™ solutions
are compliant with the Qualcomm®
Quick Charge™ 3.0 and Quick Charge 2.0
technologies, MediaTek’s Pump Express™
and second-generation Pump Express
Plus™, Huawei’s FCP, Samsung’s AFC
technology and other proprietary OEM
protocols.
Qualcomm® Quick Charge™ is a product of Qualcomm
Technologies, Inc.
Rapid Charge™ leader
In 2015, we established a leadership
position with a majority share of the
smartphone fast charging segment,
the widest rapid charge customer
base and AC/DC adapter chipsets
supporting virtually all fast charge
protocols from platform vendors and
mobile OEMs.
Dialog’s Rapid Charge™ technology
supports virtually all fast charge protocols
and addresses efficiency and power
density issues.
Portable devices are shipping with larger
batteries supporting more powerful
processors and larger screens. These
devices need more power to charge and
even more to charge faster, making rapid
charging the fastest-growing segment in
the largest power market – smartphones.
Many smartphone platform vendors and
OEMs have developed and implemented
various rapid charging protocols to
support the size, maximum current and
other design parameters of the batteries
designed into their phones.
Manufacturers are reluctant to ship their
latest smartphones with bigger adapters
to accommodate the higher power. As a
result, rapid charging means they need
to pack more power (high power density)
in the same size adapter. Higher power
density necessitates smaller components
and much higher efficiency to ensure
that manufacturers’ specified thermal
requirements for the adapter case are
not exceeded.
Dialog’s competitive advantages
Scalability: We use an external power
switch that enables one controller IC to
provide an optimised solution in power
adapters from 15W to as high as 36W.
System partitioning: We quickly
and cost effectively support additional
protocols by modifying the secondary-
side interface IC with no changes to the
complex controller IC on the primary side.
Dialog Semiconductor PlcAnnual report and accounts 2015Expanding our market leadership in fast chargeRapid Charge™ powering the next generation of mobile devices 21
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Dialog Semiconductor PlcAnnual report and accounts 2015Financial statementsAdditional information
22
Strategic focus on China
consumer electronics market
Expanding our presence
in the Chinese market
Developing deeper customer engagements
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 technology companies in Greater
China to develop deeper customer
engagements in the region.
We have collaborated with MediaTek
since 2014. Together, we have delivered
intelligent, precision control of power to
their latest LTE platforms.
Customers such as Lenovo, Meizu, Oppo
and LeTV are launching new smartphones
with our power management IC.
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%.
“ China will account
for almost a third of
smartphone shipments
by 2018 according
to IDC1.”
1 Source: IDC Worldwide Mobile Phone Tracker, May 28, 2014 http://www.idc.com/getdoc.jsp?containerId=prUS24857114
Dialog Semiconductor PlcAnnual report and accounts 2015 23
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24
Segment review
Mobile Systems
Consumer expectations for mobile devices continue
to increase as the devices are used interchangeably.
Accommodating such requirements and maintaining
battery life adds complexity to power management
solutions and increases its value-add.
Revenue (US$ million)
2015
2014
2013
+18%
1,114.5
942.6
744.9
Our markets
> System and battery management ICs
for large-screen smartphones and
tablets (5”-11” category).
> Audio CODECs for smartphones and
tablets.
> High voltage power management
for Ultrabooks™, convertible tablets
and Ultraslims. Multi-touch sensors
supporting the broader computing
market.
Udo Kratz, Senior Vice President and General
Manager, Mobile Systems Business Group
Revenue
US$1,114.5m
(2014: US$942.6m)
>
> Automotive-grade PMICs for in-vehicle
infotainment, electronic instrument
cluster, and driver-assisted displays.
Low-power and highly integrated
power management for smart
wearable devices.
Low quiescent, low-cost power
management for Smart Home and
other embedded IoT applications.
>
Our products
Dialog replaces discrete power management
components with highly integrated, single-chip
solutions that reduce energy usage, provide
design simplicity at a lower cost and improve
the overall power density of mobile products.
Our Power Management Integrated Circuits
(“PMICs”) are unique in that they are fully
configurable. This allows them to be factory-
tailored to meet the exact voltage and current
needs of every component on the board.
This flexibility serves two purposes. First, it is
equally attractive to platform vendors as it is to
end customers. Platform vendors can validate
one PMIC and use it in multiple platform
variants, and end customers who wish to
differentiate against other platform customers
can modify some peripheral functions.
Second, it also means our platform partners
are well prepared for transformational trends
in the smartphone industry. This year we
saw the rapid upgrade of Graphics Processor
Units (“GPUs”) to support larger smartphone
displays, but the inherent flexibility of the
PMIC meant our platform partners knew they
could adapt quickly.
Diversification of customers, especially in China,
and indeed end applications remains a key
focus. At Computex Taipei, Dialog announced
a new product DA9312 which extends our
technology to multicell-powered PMICs.
The notebook market has demonstrated that
higher currents and larger screens are more
efficiently served by multicell batteries as
higher power may be delivered at reduced
current with lower losses. Dialog’s Computex
announcement marked our expansion into
the exciting convergence area of convertible/
hybrid tablets and increases our PMIC SAM by
an estimated US$800 million by 2018.
The complexity of PMICs continues to increase
with the continued market adoption of the
Internet of Things.
Always-on sensing combined with increased
context awareness in a wide range of smart
devices has the effect of exponentially
increasing the number of use cases that
customers wish to support.
Dialog Semiconductor PlcAnnual report and accounts 2015 25
Forward focus
> Diversify our design-in activity with new customers
within the computing segment.
> Exploit our high-voltage, high-power density
technology to address a broader footprint within
the multicell mobile segment.
> Deepen our collaboration with strategic partners
> Invest in novel power management for the
Internet of my Things, Smart Home and
wearable applications.
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> Announced sampling of DA9312 PMIC with 20 amp
delivery and world-beating 98% peak efficiency in
just 80mm2 board space.
> Successfully added two brand new platform vendors
to Dialog’s platform partner programme.
> Ramped up mass production of a low-power audio-
solution for a flagship gaming customer.
> Expanded our MediaTek partnership to several smart
device platforms shipping to multiple customers.
> Sampled our third-generation sub-PMIC delivering up
to 20A processor core power with high accuracy.
Key drivers
> Market growth of Ultrabooks™, hybrid tablets and
2-in-1 convertibles in thinner form factors accelerating
demand for higher performance power management
combined with reduction in board area.
> Industry-wide calls for PMIC vendors to increase the
achievable power density to address ever-tighter
thermal budgets.
> Broader adoption and reliance upon platform reference
designs for lower customer development cost and faster
time to market.
> For existing markets such as smartphones, the
challenge to balance high-end flagship performance
against “just good enough” performance at lower price
points.
“The flexibility of our
sub-PMIC prepares
our customers for the
next generation of
smart devices.”
Strategies to manage leakage and quiescent
current are now evolving in parallel with new
topologies to deliver higher power density
to support the next level of “full power”
benchmark performance.
Accommodating such diverse requirements
while maintaining battery life is one reason
why customers continue to turn to Dialog
to support their next power challenge. With
such powerful market dynamics at play in
high-volume segments, the stage is set for
the next wave of innovation in smart power
management – Dialog is well positioned to
deliver.
Our audio technology allows the capture
of speech and audio with high quality and
low power consumption while enabling
speaker playback at maximum voltage and
power efficiency. 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.
Dialog was one of the first companies to
combine a fully configurable PMIC with a
low-power audio CODEC, stacked in a single
package to deliver board space and cost
savings to customers.
www.dialog-semiconductor.com
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
26
Segment review
Connectivity
Since the development of SmartBond™ in 2013, Dialog
has grown from a single Bluetooth® Smart
product to a complete portfolio in 2015.
Revenue (US$ million)
2015
2014
2013
+27%
117.0
92.1
91.6
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 enabling IoT node
connectivity to the cloud.
> 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.
Our products
Dialog’s SmartBond™ family is the simplest
route to delivering the most power-friendly
and flexible Bluetooth® Smart connected
products to the market. SmartBond™ DA14580
is still the lowest power, highest integration
Bluetooth® Smart SoC, covering a broad
range of applications. Based on this world-
leading product we extended our portfolio
with optimised solutions targeting dedicated
applications: DA14581 for wireless charging,
DA14582 with an integrated voice codec and
DA14583 which has on-board flash memory.
In 2015 we introduced the first single-chip
solution for wearables: DA14680. Customers
can now create next-generation Bluetooth®
Smart wearables without compromising on
functionality, battery lifetime or system size.
With a solid partner ecosystem, an increasing
portfolio of reference designs and a daily growing
online SmartBond™ engineering community,
Dialog has a strong base for further growth.
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.
Sean McGrath, Senior Vice President and General
Manager, Connectivity, Automotive & Industrial
Business Group
Revenue
US$117.0m
(2014: US$92.1m)
Dialog Semiconductor PlcAnnual report and accounts 2015 27
Forward focus
> Continue to invest in the Bluetooth® Smart platform
and increase market footprint.
> Focus on wearables and Smart Home Bluetooth®
Smart market segments.
> Expand our low latency wireless audio activity
towards microphones and headset brands.
> Continue to establish new partners and grow a
dynamic engineering design community.
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2015 progress
> Growing market share for Bluetooth® Smart product
portfolio.
> Extended SmartBond™ portfolio with four new
products targeting specific applications.
> Announcing a number of Bluetooth® Smart design wins:
Xiaomi, Samsung, SMK and MediaTek.
> Launched the new USB-Audio product in Jabra’s
Unified Communication headsets.
Key drivers
> Rapid market expansion of Bluetooth® Smart fuelled
by connectivity needs of the Internet of Things.
> Increasing trend to use the proven DECT standard
in new applications such as Smart Home and low
latency audio.
> Maturity of DECT handset market, DECT 1.9GHz
terminals also has growth areas such as the new
wireless 1.9GHz HD-voice terminals for IP-telephony
via broadband modems.
> Focusing on the fast-growing Unified Communication
products segment with 1.9GHz DECT audio and
USB-audio headsets.
“Our product portfolio and
roadmap targeting the
IoT market provides a
solid basis for continued
revenue growth.”
By enabling voice and data to run over a
single network, 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
touchscreen LCD, and banking-grade levels of
security authentication.
www.dialog-semiconductor.com
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
28
Segment review
Power Conversion
Rapid charging is the fastest-growing segment in
the highest volume power market – smartphones.
With our ability to support virtually all fast charging
protocols, Dialog was able to quickly build a
majority market share in 2015.
Revenue (US$ million)
2015
2014
2013
26.8
+5%
84.6
80.4
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: Consumers
are demanding feature-rich mobile devices,
with more powerful processors and larger
screens that can charge faster than ever
before. This means rapid charging has become
the fastest growing segment in the highest
volume power market – smartphones, with a
2014-2018 CAGR estimated at 300%1.
In addition to AC/DC adapters for
smartphones, there is also a growing market
for standalone adapters that can be used
to charge a variety of devices over USB. This
drives demand for more power-efficient
AC/DC adapters that can charge quickly and
safely, without increasing the adapter size.
In 2015, we established our position as
market leader with: a majority share of the
smartphone fast charging segment, the widest
rapid charge customer base, and AC/DC
adapter chipsets which support virtually all fast
charge protocols. Our Rapid Charge™ solutions
are compliant with the newest Qualcomm®
Quick Charge™ 3.0 technology, MediaTek’s
second-generation Pump Express Plus™,
Huawei’s FCP, Samsung’s AFC technology and
other proprietary OEM technologies.
Our fast charging chipsets can be found in
adapters for leading smartphone brands in
China, South Korea and Japan, including
Huawei, LeTV, Hosiden and many more.
We further expanded our power conversion
product portfolio in 2015 with the release of
our second-generation synchronous rectifier
IC (iW673) that works with our rapid charge
devices to improve efficiency, enabling smaller
form-factor higher power adapters.
Our AC/DC converter ICs can also be found in
power supplies for white goods, networking
devices (set top boxes, routers) and industrial
control products. They enable optimisation
for high operating efficiency and low standby
power to meet or exceed the most stringent
worldwide energy standards for external
power supplies.
Davin Lee, Senior Vice President and General
Manager of the Power Conversion Business Group
Revenue
US$84.6m
(2014: US$80.4m)
1 Combination of Gartner and Dialog data
Dialog Semiconductor PlcAnnual report and accounts 2015 29
Forward focus
> Continue to deliver next-generation Rapid Charge™
adapter solutions for the smartphone, tablet and
portables markets.
> Increase our semiconductor content in power
adapters, replacing energy-wasting passive
components with Dialog active digital solutions.
> Continue addressing the LED driver market for
mainstream retrofit SSL bulbs and expanding
our SSL LED driver solutions for commercial and
professional LED lighting.
> Expand our SSL LED driver solutions for the
wireless and smart lighting markets.
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2015 progress
> Majority share of rapid charging market supporting more
protocols than any other vendor.
> Delivered three-chip Rapid Charge™ solution for Huawei’s
new Honor 7 smartphone charging adapters, and a
Qualcomm® Quick Charge™ 2.0-compliant adapter chipset
for LeTV’s flagship smartphone charging adapters.
> Released second-generation synchronous rectifier IC,
addressing demand for higher power density without
increasing adapter size.
> Developed complete ecosystem to support our wireless
controlled lighting that combines Dialog LED drivers with
Dialog Bluetooth® Smart technology.
> Developed SSL LED driver uniquely suited to smart lighting
market, where ability to change colour and hue is required.
Key drivers
> More powerful smartphone processors and larger
screens require larger phone batteries.
> Consumers want faster-charging smartphones,
necessitating higher power adapters.
> Consumers expect these higher power adapters to
remain small; driving need for higher power density.
> Need to support smartphone OEMs and platform
vendors’ fast charge technologies.
> Consumers demanding lower cost SSL bulbs and
regulation is phasing out inefficient incandescent and
compact fluorescent lamp (“CFL”) bulbs.
> Emerging smart lighting market fuelled by wireless
technologies and IoT.
“Our LED drivers deliver
a high performance with
a low cost.”
LED solid-state lighting: Dialog offers a
broad range of SSL LED driver ICs, embedding
our exclusive technologies to enable high-
performance dimming, seamless dimmer
compatibility and high quality of light, all with
a low BOM cost. We support both dimmable
and non-dimmable bulbs across a wide range of
residential and commercial applications.
With consumers demanding lower cost dimmable
SSL bulbs, our customers are constantly challenging
us to provide high-performance LED drivers that
reduce BOM in SSL bulbs. In 2015, we saw strong
market adoption of our iW3688 dimmable SSL LED
driver due to its exceptional dimmer compatibility
and low BOM cost. We also developed our next-
generation dimmable driver, which will provide an
even lower IC BOM cost solution.
Fundamental to our dimmable SSL product
line is our strong dimming intellectual property
that uses advanced digital analytics to enable
compatibility with a wider range of dimmers,
providing superior TRIAC and digital dimming
performance.
Our SSL solutions also include our iW6401 smart
lighting driver designed for digitally controlled
lighting systems. The iW6401 pairs with Dialog’s
Bluetooth® Smart technology to put it at the heart
of our smart lighting platform, enabling complete,
turnkey system solutions for multi-room wireless
lighting control via a smartphone or tablet.
In 2015, we also expanded our smart lighting
product line with our high-power iW3627 SSL
LED driver, which is uniquely suited to the needs
of smart lighting applications where the ability
to change colour and hue is required.
www.dialog-semiconductor.com
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
30
Segment review
Automotive
& Industrial
Dialog is an automotive-certified company
addressing the mid to high-end European segment.
In 2015, revenue from our Automotive & Industrial
segment declined by 16%
Revenue (US$ million)
2015
2014
2013
-16%
34.4
41.0
37.3
Our markets
> Custom motor control ICs for
windscreen wipers and companion
processor integrated power
management for automotive
infotainment systems.
> Electronic ballasts for fluorescent or
high-intensity industrial lighting and
energy-efficient controllers for LED
lighting solutions.
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 and Japanese cars.
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
Revenue
US$34.4m
(2014: US$41.0m)
Dialog Semiconductor PlcAnnual report and accounts 2015 31
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Forward focus
> Supporting our customers to remain competitive.
> Follow this market with appropriate investments.
2015 progress
> Successful ramp-up of new ASIC LED controller.
Key drivers
> Increasing market for reverse wipers and
LED lighting solutions.
“Our expertise in power
management and mixed
signal design means
we are able to uniquely
support our customers.”
www.dialog-semiconductor.com
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
32
Key performance indicators
(“KPIs”)
The Board uses a range of indicators to assess performance, to ensure
performance is aligned to the strategy, and to ensure continued alignment with
Shareholder interests. The key performance indicators are set out below.
Underlying (non-IFRS) measures are used to comment on business performance.
See explanations and reconciliations to the nearest equivalent IFRS measures in
the section entitled “Financial performance measures” on page 149).
Revenue growth
Performance indicator
Definition and relevance
2015 performance
IFRS
+17%
Underlying
+17%
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
useful reflection of business performance.
Full-year IFRS revenue in 2015 was 17%
above 2014. This growth is the result of
volume and average sales price (“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
2015 performance
IFRS
Underlying
46.1%
46.7%
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
and manage our manufacturing costs over
a period of time. Underlying gross margin
provides a useful reflection of the economic
value of our products.
Underlying gross margin in 2015 was
140bps above 2014. This increase reflects
the higher economic value of our products
as a result of the high level of innovation
and integration and the level of efficiency of
our high-touch fabless model.
Operating expenses as a percentage of revenue
Performance indicator
Definition and relevance
2015 performance
IFRS
Underlying
27.0%
23.3%
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 useful reflection of the focus and
efficiency of our operating structure. OpEx
includes Selling & Marketing expenses, General
& Administrative expenses and Research &
Development expenses.
Underlying OpEx % in 2015 was
23.3%, 220bps below 2014. This level
of investment reflects the strategic
commitment to innovation in our Research
& Development (R&D) effort. It also reflects
our commitment to invest and improve
the efficiency of our Sales, General &
Administrative infrastructure and align
it with a growing revenue base. It is
important to note that our Research &
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 PlcAnnual report and accounts 2015 33
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Operating profit growth
Performance indicator
Definition and relevance
2015 performance
IFRS
Underlying
+39.7%
+38.0%
Actual and prior year’s full-year underlying
operating profit. Monitoring this operating
profit trend provides a measure of the
economic value of our operating business.
Underlying operating profit in 2015 was
38.0% above 2014. 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 R&D and SG&A
structure.
Operating margin
Performance indicator
Definition and relevance
2015 performance
IFRS
Underlying
19.2%
23.4%
Actual and prior year’s underlying operating
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 operating margin provides a
useful link to our ability to generate cash as we
are a low capital intensity business.
Underlying operating margin in 2015 was
350 bps above 2014. 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 OpEx structure.
Diluted EPS (US$)
Performance indicator
Definition and relevance
2015 performance
IFRS
$2.29
Underlying
$3.02
Actual and prior year’s underlying diluted EPS.
Monitoring this trend provides a useful measure
of our ability to increase the inherent value of
our business for our Shareholders over a period
of time. Underlying diluted EPS provides a
reflection of the inherent value of the business.
Diluted underlying EPS was 33% up over
2014 to US$3.02. This increase reflects the
higher inherent value of our business as a
whole.
www.dialog-semiconductor.com
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
34
Financial review
“ In 2015, our business delivered high returns and strong cash
generation. We closed the year with a solid balance sheet built
on the low capital intensity of our fabless business model and
rigorous working capital management.”
Group summary
US$ millions unless stated otherwise
Revenue2
Gross profit
Gross margin %2
R&D % of revenue
SG&A % of revenue
EBITDA1
EBITDA margin %1
Operating profit2
Operating margin %2
Profit before tax
Net income
Basic EPS (US$)
Diluted EPS (US$)(2)
Cash flow from operating activities
IFRS basis
Underlying basis1
2015
2014
Change
2015
2014
1,355.3
1,156.1
+17% 1,355.3
1,156.1
624.8
46.1%
16.5%
10.6%
316.6
514.8
+21%
44.5% +160bps
18.5% -200bps
10.3% +30bps
241.9
+31%
632.3
46.7%
15.6%
7.7%
359.5
Change
+17%
+21%
523.4
45.3% +140bps
17.5% -190bps
8.1%
269.4
-40bps
+33%
23.4%
20.9% +250bps
26.5%
23.3% +320bps
259.7
185.9
+40%
317.7
230.3
+38%
19.2%
16.1% +310bps
23.4%
19.9% +350bps
254.8
177.3
$2.42
$2.29
317.7
169.3
138.1
$2.05
$1.93
270.5
+51%
+28%
+18%
+19%
+17%
317.6
238.4
$3.25
$3.02
n/a
223.0
172.2
$2.56
$2.27
n/a
+42%
+38%
+27%
+33%
made in these areas is provided in note 2 to the
consolidated financial statements.
1 Non-IFRS measures (see explanations and reconciliations to the nearest equivalent IFRS measures in the section entitled “Financial performance measures” on page 149).
2 Key performance indicators.
Basis of preparation
Accounting policies
The Group’s financial statements have been
prepared in accordance with IFRS as adopted
by the EU and those parts of the Companies
Act 2006 that are applicable to companies
reporting under IFRS. There are no differences
between IFRS as adopted by the EU and IFRS
as issued by the IASB that affect the Group’s
financial statements.
non-IFRS measures as a substitute for, or
superior to, the equivalent IFRS measures.
Non-IFRS measures used by Dialog may not
be directly comparable with similarly-titled
measures used by other companies.
Non-IFRS measures
Management assesses the performance of the
Group’s businesses using a variety of measures.
Certain of these measures are non-IFRS
measures because they exclude amounts that
are included in, or include amounts that are
excluded from, the most directly comparable
measure calculated and presented in accordance
with IFRS or are calculated using financial
measures that are not calculated in accordance
with IFRS. All measures described as underlying
and EBITDA (whether stated on an IFRS or an
underlying basis) are non-IFRS measures.
Investment in Dyna Image
On 4 June 2015, Dialog acquired a 45.7%
shareholding in Dyna Image Corporation of
Taiwan (“Dyna Image”) and was granted a
call option over the remaining shares. As a
consequence of the call option, Dyna Image
is accounted for as a subsidiary of Dialog
and therefore its results subsequent to the
acquisition are included in the Group’s results.
The Group’s principal accounting policies during
2015 were unchanged compared with 2014.
Recent accounting pronouncements that have not
yet been adopted by the Group are outlined in
note 2 to the consolidated financial statements.
Critical accounting estimates and
judgements
Management considers that the most significant
estimates and judgements made in preparing
the consolidated financial statements arise
in relation to the accounting for business
combinations, product development costs,
customer-specific R&D contracts, share-based
compensation and deferred income taxes,
and in assessing the recoverability of goodwill
and other intangible assets. An explanation
of the significant estimates and judgements
An explanation of the adjustments made to
the equivalent IFRS measures in calculating
the non-IFRS measures and reconciliations of
the non-IFRS measures to the equivalent IFRS
measures for each of the periods presented
are set out in the section entitled ‘Financial
performance measures’ on page 149.
We report non-IFRS measures because they
provide both management and investors
with useful additional information about
the underlying trading performance of the
Group’s businesses. We do not regard these
Analysis of results by operating segment
Mobile Systems
Revenue from the Mobile Systems segment
was 18.2% higher at $1,114.5 million in
2015 compared with $942.6 million in 2014.
Revenue increased mainly because of higher
sales volumes from our expanding range
of highly integrated and increasingly more
complex power management integrated
circuits. Classic mobile devices such as
smartphones and new connected devices
such as smart watches were the main growth
drivers. Mobile Systems represented 82.2%
(2014: 81.5%) of the Group’s revenue.
Dialog Semiconductor PlcAnnual report and accounts 2015 “ Group revenue increased by 17%, recording
the ninth consecutive year of revenue growth.”
35
Summary of segment results
US$ millions
Mobile Systems
Automotive & Industrial
Connectivity
Power Conversion
Corporate
Total
Operating profit was $341.9 million (2014:
$244.2 million) and the operating margin was
30.7% (2014: 25.9%). Underlying operating
profit was $343.7 million in 2015 compared
with $247.0 million in 2014, an increase of
39.2%. Underlying operating profit increased
principally because of higher revenue and a
reduction in R&D expenses. Although R&D
expenditure by the Mobile Systems segment
increased by $10.2 million in 2015, this was
more than offset by UK R&D expenditure
credits of $6.1 million and an increase of
$11.5 million to $15.3 million in the amount of
development costs capitalised compared with
2014. Underlying operating margin improved
by 460 basis points to 30.8% (2014: 26.2%).
Underlying operating profit excludes payroll
taxes of $1.8 million (2014: $2.8 million) arising
on share-based compensation of Mobile
Systems employees.
Automotive & Industrial
Revenue from the Industrial & Automotive
segment was down 16.1% at $34.4 million
in 2015 compared with $41.0 million in
2014. Revenue decreased primarily because
of reduced demand for traditional industrial
lighting. Industrial & Automotive represented
2.5% (2014: 3.5%) of the Group’s revenue.
Operating profit was $9.3 million (2014:
$11.2 million). Operating margin remained
broadly in line with 2014 at 27.0% (2014:
27.4%) because the effect of lower revenue
was largely offset by successful cost reduction
initiatives. Underlying operating profit
was $9.5 million in 2015 compared with
$11.5 million in 2014, a decrease of 17.3%.
Underlying operating profit was lower
principally because of the decline in sales
volumes. Underlying operating margin was
broadly in line with 2014 at 27.6% (2014:
28.1%).
www.dialog-semiconductor.com
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Operating profit/(loss)
2015
1,114.5
34.4
117.0
84.6
4.8
2014
942.6
41.0
92.1
80.4
Change
+18%
-16%
+27%
+5%
–
>100%
1,355.3
1,156.1
+17%
2015
2014
341.9
9.3
8.4
(20.7)
(79.2)
259.7
244.2
11.2
(2.2)
(21.1)
(46.2)
185.9
Underlying operating profit excludes payroll
taxes of $0.2 million (2014: $0.3 million)
arising on share-based compensation of
Automotive & Industrial employees.
Connectivity
Revenue from the Connectivity segment
was 27.0% higher at $117.0 million in 2015
compared with $92.1 million in 2014. Revenue
increased primarily because of growth in
DECT-based markets with new professional
applications such as cordless headsets and
microphones and the emerging Bluetooth®
Smart segment. Connectivity represented
8.6% (2014: 8.0%) of the Group’s revenue.
During 2015, there was a substantial
improvement in the results of the Connectivity
segment. Connectivity delivered an operating
profit of $8.4 million in 2015 compared with
an operating loss of $2.2 million in 2014 and
achieved an operating margin of
7.1% compared with (2.4)% in 2014.
Underlying operating profit was $9.3 million
in 2015 compared with an underlying
operating loss of $0.3 million in 2014, the
turnaround being principally due to higher
sales volumes. Although R&D expenditure
by the Connectivity segment increased by
$5.2 million in 2015, R&D expenses were
broadly flat after taking into account the
increase of $4.9 million to $7.7 million in the
amount of development costs capitalised
compared with 2014. Underlying operating
margin was 8.0% in 2015 compared with
break even in 2014.
Underlying operating profit/loss
excludes payroll taxes of $0.2 million
(2014: $0.3 million) arising on share-based
compensation of Connectivity employees
and the additional amortisation expense of
$0.8 million (2014: $1.6 million) that
arose from the recognition at fair value of
identifiable intangible assets on the acquisition
of SiTel BV in 2012.
Power Conversion
Revenue from the Power Conversion
segment was 5.3% higher at $84.6 million in
2015 compared with $80.4 million in 2014.
Whilst revenue increased principally due to the
roll out of new rapid charge solutions during
the second half of 2015, this was partially
offset by softness in the LED market. Power
Conversion represented 6.2% (2014: 7.0%) of
the Group’s revenue.
Power Conversion incurred an operating loss of
$20.7 million, slightly lower than the operating
loss of $21.1 million incurred in 2014 and the
operating margin improved slightly to (24.4)%
compared with (26.3)% in 2014. Power
Conversion incurred an underlying operating
loss of $6.6 million compared with a loss of $2.3
million in 2014, the increase principally reflecting
higher R&D expenditure to support the roll out
of our Rapid ChargeTM technology across several
OEMs in Asia. Underlying operating margin was
(7.8)% in 2015 compared with (2.9)% in 2014.
Underlying operating loss excludes payroll
taxes of $0.3 million (2014: $0.4 million)
arising on share-based compensation of
Power Conversion employees, additional
amortisation and depreciation expenses of
$13.6 million (2014: $15.2 million) that arose
from the recognition at fair value of assets
acquired with iWatt in 2013 and costs of
integrating that business of $0.3 million (2014:
$3.2 million).
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
36
Financial review continued
“ Revenue from Connectivity was 27% higher at
US$117 million building on our Bluetooth® Smart products
and solid performance in new DECT-based markets.”
Corporate
Corporate activities include emerging market
businesses (principally those relating to the
development of PMICs for TVs and set top
boxes and Dyna Image). Revenue was
$4.8 million in 2015 (2014: $Nil), the increase
reflecting the inclusion of Dyna Image from
June 2015.
Corporate activities also include the costs
of operating central corporate functions,
and the Group’s share-based compensation
expense and certain other unallocated costs.
Corporate activities made an operating loss of
$79.2 million in 2015 compared with a loss of
$46.2 million in 2014. Corporate’s underlying
operating loss was $38.3 million
(2014: loss of $25.6 million), the increase
principally being due to higher product
development costs in our emerging market
businesses.
Corporate’s underlying operating loss excludes
the Group’s share-based compensation
expense (which is not allocated to operating
segments) of $19.2 million (2014: $21.2
million), payroll taxes arising on share-based
compensation of Corporate employees of
$0.1 million (2014: $0.1 million), an expense
of $3.4 million (2014: credit of $1.9 million)
on the remeasurement of the contingent
consideration payable for the purchase of
iWatt and aborted merger costs of $17.6
million (2014: $1.3 million).
Components of operating profit
Revenue
+ Cost of sales
= Gross profit
– Selling and
marketing expenses
– General and
administrative expenses
– R&D expenses
+ Other operating
income
= Operating profit
Dialog primarily derives revenue from the sale of goods, but
a small amount of revenue comes from royalty payments.
Cost of sales consists of material costs, the costs of
outsourced production and assembly, related personnel
costs (including share-based compensation), applicable
overhead and depreciation of test and other equipment.
Selling and marketing expenses consist primarily of
personnel costs (including share-based compensation),
travel expenses, sales commissions, advertising and other
marketing costs, together with amortisation expenses in
relation to identifiable intangible assets such as customer
relationships, key customers and order backlog acquired in
business combinations.
General and administrative expenses consist primarily of
personnel costs (including share-based compensation) and
support costs for our finance, human resources and other
management departments.
R&D expenses consist principally of personnel costs
(including share-based compensation) and other design and
engineering-related costs associated with the development
of new ASICs and Application Specific Standard Products
(ASSPs).
Other operating income consists of income from customer-
specific R&D contracts and other income that is not classified
as revenue, less other operating expenses.
Analysis of the Group’s results
Revenue
Revenue was 17.2% higher at $1,355.3 million
in 2015 compared with $1,156.1 million in
2014. Revenue rose primarily because of
higher sales volumes and an increase in the
average selling price of Dialog’s more complex
devices in the Mobile Systems segment and
strong sales in its Connectivity segment, driven
by solid performance of DECT and Bluetooth®
Smart products.
Dialog’s revenue, particularly in its Mobile
Systems segment, is dependent on the life
cycle of its customers’ products and the
seasonal nature of the spending pattern in
the consumer markets in which they operate.
As a result, Dialog’s business may fluctuate
seasonally with lower revenue in the first half
of the year, since many of its larger consumer-
focused customers tend to have stronger sales
later in the year as they prepare for the major
holiday selling seasons.
Cost of sales
Cost of sales was 13.9% higher than in 2014
at $730.5 million (2014: $641.3 million).
Cost of sales increased in response to higher
sales volumes but the extent of the increase
was mitigated by significant material cost
reductions and improved efficiencies resulting
from Dialog’s ongoing collaboration with its
foundry and back-end partners.
Gross profit
Gross profit was $624.8 million in 2015
compared with $514.8 million in 2014, an
increase of 21.4%.
Gross margin improved by 160 basis points to
46.1% in 2015 (2014: 44.5%), principally due
to higher sales volumes and an improvement
in gross margins resulting from ongoing
cost reduction initiatives and efficiency
improvements in the manufacturing process.
Reflecting these factors, underlying gross
profit was 20.8% higher at $632.3 million
(2014: $523.4 million) and the underlying
gross margin improved by 140 basis points to
46.7% (2014: 45.3%).
Operating expenses
Summary
Operating expenses totalled $366.2 million
in 2015 (2014: $333.3 million) and represented
27.0% of revenue (2014: 28.8%).
Underlying operating expenses totalled
Dialog Semiconductor PlcAnnual report and accounts 2015 “ We balance careful management of operating
expenses with the need to invest in innovation.”
37
$315.8 million in 2015 (2014: $295.6 million).
Underlying operating expenses decreased as
a percentage of revenue from 25.6% in 2014
to 23.3% in 2015.
($213.8 million) after taking into account UK
R&D expenditure credits of $6.1 million (2014:
$1.2 million) and capitalised development
costs of $24.8 million (2014:$6.7 million).
Selling, general and administrative
expenses (SG&A)
SG&A expenses totalled $143.0 million in
2015 compared with $119.5 million in 2014,
an increase of 19.7%.
Selling and marketing expenses increased by
3.5% in 2015 to $62.2 million (2014: $60.1
million), primarily as a reflection of Dialog’s
investment in sales and marketing efforts in its
Power Conversion and Connectivity segments
to support growth in new markets.
General and administrative expenses were
$80.9 million in 2015 compared with $59.4
million in 2014, an increase of 36.1%. Whilst
the increase was largely a reflection of Dialog’s
ongoing growth strategy and efforts to scale
up its support functions, it was accentuated
by professional fees and other costs totalling
$17.6 million incurred in 2015 in relation to
the proposed merger with Atmel that was
terminated in January 2016. Also during 2015,
Dialog recognised an expense of $3.4 million
within general and administrative expenses
in relation to the full and final settlement of
the contingent consideration payable for the
purchase of iWatt.
Capitalised development costs were
significantly higher than in 2014 due an
increase in the number of products under
development that had satisfied both technical
and commercial feasibility conditions at a stage
in the development process beyond which
significant further development costs were still
to be incurred, reflecting Dialog’s increasing
product portfolio and the complexity of the
development activities being undertaken.
Underlying R&D expenses were $211.9 million
in 2015 compared with $202.2 million in 2014,
an increase of 4.8%. Underlying R&D expenses
decreased as a percentage of revenue from
17.5% in 2014 to 15.6% in 2015.
Other operating income
Dialog recognised other operating income
of $1.2 million in 2015 compared with $4.4
million in 2014. During 2015, income from
customer-specific R&D contracts amounted to
$1.2 million (2014: $1.5 million). Additionally,
in 2014, other operating income included the
receipt of an insurance claim of $0.9 million
and a reduction of $1.9 million in the provision
for contingent consideration payable for the
purchase of iWatt.
Underlying SG&A expenses were $103.9
million in 2015 compared with $93.4 million
in 2014, an increase of 11.3%. Underlying
SG&A expenses decreased as a percentage of
revenue from 8.1% in 2014 to 7.7% in 2015.
In the first quarter of 2016, Dialog will
recognise as other operating income the
fee of $137.3 million paid to Dialog on the
termination of the proposed acquisition of
Atmel in January 2016.
Research and development expenses (R&D)
Dialog has an extensive R&D engineering
team focused on mixed signal semiconductor
power saving technologies. Dialog believes
that its R&D activities are critical to support its
strategy of growth and product diversification.
We continued to hire engineers during 2015
and our engineering headcount has now more
than quadrupled since 2010. During 2015,
our R&D activities focused on PMIC, both
Application Specific IC (ASIC) and standard
products for mobile and TVs, Bluetooth®,
AC/DC chargers and LED Solid State Lighting.
R&D expenditure increased by 14.5% to
$254.1 million in 2015 (2014: $221.7 million).
R&D expenses were $223.2 million
www.dialog-semiconductor.com
Operating profit
Operating profit was $259.7 million in 2015
compared with $185.9 million in 2014,
an increase of 39.7%. Operating margin
improved by 310 basis points to 19.2% in
2015 (2014: 16.1%).
Underlying operating profit was 38.0%
higher than in 2014 at $317.6 million (2014:
$230.3 million). Underlying operating margin
improved by 350 basis points to 23.4% (2014:
19.9%), due to higher sales volumes and
gross margins, lower R&D expenses (net of
capitalised development costs and UK R&D
expenditure credits) and tight control of SG&A
expenses.
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Interest income
Interest income increased to $1.2 million
(2014: $0.4 million), reflecting the improved
management of surplus cash and higher
market interest rates.
Interest expense
Interest expense was $8.4 million lower
than in 2014 at $6.4 million (2014: $14.8
million), principally due to the conversion
by the bondholders of the $201 million 1%
Convertible Bonds 2017 in April 2015 and
the phased repayment during 2014 of the
remaining $105 million of debt that was
drawn on the Base Currency Term Loan facility
that was used to finance the acquisition of
iWatt in 2013. During 2015, Dialog incurred
commitment fees of $1.2 million in relation to
the $2.1 billion term facility that was arranged
to finance in part the proposed acquisition
of Atmel. In the first quarter of 2016, Dialog
will recognise additional commitment fees of
$1.9 million that were incurred prior to the
cancellation of the facility in January 2016.
Excluding the above items, interest expense
was $4.1 million (2014: $3.4 million) in
relation to amounts drawn under the Group’s
receivables financing facilities, and hire
purchase arrangements and finance leases.
Other finance income and expense
Dialog is exposed to foreign currency translation
risk in relation to monetary assets and liabilities
that are denominated in currencies other
than the functional currencies of the entities
by which they are held (principally, the Euro,
Pound Sterling and Japanese Yen). During 2015,
the Group recognised a related net currency
translation gain of $0.4 million (2014: net loss of
$2.2 million).
During 2015, Dialog recognised an expense
of $0.1 million representing the reduction in
the fair value of its call option over the non-
controlling interests in Dyna Image since its
investment in that business.
Income tax expense
The Group’s income tax expense for 2015
was $77.6 million (2014: $31.2 million), which
resulted in an effective tax rate of 30.4%
(2014: 18.5%).
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
38
Financial review continued
“Earnings grew twice as fast as revenue.”
Management monitors the Group’s effective
tax rate excluding one-off items that hinder
comparison from year to year. Costs of $18.8
million relating to the proposed acquisition of
Atmel were excluded in 2015 and the one-off
non-cash deferred tax credit of $17.8 million
resulting from an intra-group reorganisation
of certain Intellectual Property was excluded
in 2014.
Excluding these one-off items, the Group’s
effective tax rate for 2015 was 28.4% (2014:
29.0%) with the reduction having been driven
by the ongoing exercise to align the ownership
of the Group’s Intellectual Property with its
commercial structure. As a consequence,
Dialog has been able to recognise in full
previously unrecognised UK trading loss carry
forwards and to benefit from the favourable
UK tax regime for technology companies. We
believe the gradual decrease in our effective tax
rate is sustainable and will continue in the years
to come.
Net income
Net income was $177.3 million (2014: $138.1
million), of which a loss of $1.5 million (2014:
$nil) was attributable to the non-controlling
interest in Dyna Image for the period since
Dialog invested in the business. Underlying net
income was $238.4 million compared with
$172.2 million in 2014, an increase of 38.5%.
Earnings per share
Basic earnings per share were $2.42 (2014:
$2.05) based on the weighted average of
73.8 million shares (2014: 67.3 million shares)
that were in issue during the year. Diluted
earnings per share were $2.29 (2014: $1.93).
Diluted earnings per share additionally reflects
the weighted average number of 3.5 million
(2014: 2.7 million) dilutive employee share
options and awards and 2.4 million shares
(2014: 6.8 million shares) that would have
been issued on conversion of the $201 million
convertible bond that was redeemed in April
2015.
Underlying basic earnings per share were
$3.25 (2014: $ 2.56), an increase of 27.0%
reflecting the Group’s further profitable
growth during 2015. Underlying diluted
earnings per share were $3.02 (2014: $2.27).
Cash flow
Summary
Cash flows during the year may be summarised as follows:
US$ millions
Cash generated from operations
Interest paid, (net)
Income taxes paid
Cash flows from operating activities
Purchase of property, plant and equipment
Purchase of intangible assets
Capitalised development expenditure
Purchase of businesses, net of cash acquired
Repayment of borrowings
(Purchase)/sale of Dialog shares by employee benefit trusts, net
Exchange and other movements
2015
362.5
(2.5)
(42.3)
317.7
(33.0)
(11.7)
(24.8)
(2.6)
–
(2.4)
(0.3)
243.5
2014
308.7
(4.3)
(33.9)
270.5
(23.8)
(12.1)
(6.7)
–
(105.0)
15.9
(0.4)
138.4
Increase in cash and cash equivalents
Cash flows from operating activities
Cash generated from operations before
movements in working capital was
$74.4 million higher than in 2014, reflecting
the increase in the Group’s operating profit.
Working capital was $20.6 million lower at
the end of 2015 compared with the end of
2014. Cash generated from operations was
therefore $53.8 million higher at $362.5
million compared with $308.7 million in 2014.
As a fabless business, Dialog commits to
purchase inventory from its suppliers in
advance in order to satisfy expected demand
for its products. Payables were $34.4 million
higher at the end of 2015 compared with
the end of 2014, principally due to higher
purchases of inventory to satisfy the sales
volumes that were expected in the fourth
quarter of 2015. At the end of 2015, payables
also included $16.7 million of professional
fees and other costs payable in relation to the
proposed acquisition of Atmel.
Whilst the market for Dialog’s products
was particularly strong in the fourth
quarter of 2014, sales were lower than
expected in the fourth quarter of 2015.
As a result, inventory was $42.6 million higher
but receivables were $29.7 million lower at the
end of 2015 compared with the end of 2014.
Net interest paid
Net interest paid decreased to $2.5 million
(2014: $4.3 million), principally due to the
conversion of the $201 million convertible
bond in April 2015 and the repayment during
2014 of the remaining $105 million of debt
that was drawn to finance the acquisition of
iWatt in 2013.
Income taxes paid
Income taxes paid increased by $8.5 million
to $42.4 million in 2015 compared with $33.9
million in 2014. Since tax payments largely
comprise payments on account in respect of
current year taxable profits, the increase in
income taxes paid largely reflects the year-on-
year increase in the Group’s taxable profits.
Cash flows from investing activities
Purchase of property, plant and
equipment
Cash paid for purchases of property, plant and
equipment amounted to $33.0 million (2014:
$23.8 million).
Purchase of intangible assets
Cash paid for purchases of intangible assets
amounted to $11.7 million (2014: $12.1 million)
and consisted primarily of spending on patent
applications, purchased software and licences
and software development for internal
business applications.
Dialog Semiconductor PlcAnnual report and accounts 2015 39
“ We remain a highly cash generative business and
cash generated from operations in 2015 stood at
US$362.5 million, an increase of US$53.9 million.”
hedge their obligations under the Group’s
employee share schemes. Additionally,
during 2014, Dialog issued 3.0 million
shares to the employee benefit trusts
for $0.5 million (there was no effect on
the Group’s cash position except for the
settlement of issue costs). During 2015, the
Group received proceeds of $11.6 million
(2014: $22.1 million) on the exercise of
share options awarded under employee
share schemes.
Liquidity and capital resources
Financial risk management
Dialog is exposed to financial risks including
counterparty credit risk, liquidity risk
and market risks, which include foreign
exchange risk and interest rate risk.
Disclosures about these risks and the ways
in which they are managed by Dialog are
presented in note 29 to the consolidated
financial statements.
Dialog has a centralised Treasury function
whose principal role is to ensure that
adequate liquidity is available to meet the
Group’s funding requirements as they
arise and that financial risks arising from
the Group’s operations are identified and
effectively managed. Treasury operations
are conducted in accordance with policies
that are approved by the Board and are
reviewed on a regular basis.
Dialog hedges certain foreign exchange
risks using derivative financial instruments.
Dialog does not hold derivative financial
instruments for speculative purposes.
Net funds
Net funds comprised:
US$ millions
Cash and cash equivalents
Convertible Bonds (including accrued interest)
Derivative financial instruments
Finance lease obligations
Net funds1
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Cash and cash equivalents
Cash is managed in line with Treasury
policy to ensure there is no significant
concentration of credit risk in any one
financial institution. Credit risk is measured
using counterparty credit ratings. As a
minimum, a counterparty must have a
long-term public rating of at least ‘single
A’. Counterparty limits are based on a
rating matrix and closely monitored. Similar
consideration is given to the Group’s
portfolio of derivative financial instruments.
At the end of 2015, cash and cash
equivalents amounted to $566.8 million
(end of 2014: $324.3 million), which
comprised cash at bank and other short-
term highly liquid investments with a
maturity of three months or less.
Borrowing facilities
At the beginning of 2014, the Group had a
Base Currency Term Loan and a committed
revolving credit facility that were entered
into at the time of the acquisition of iWatt
in 2013.
During 2014, in addition to repaying the
balance of the term loan, Dialog voluntarily
reduced the commitment under the
revolving credit facility from $25 million
to $10 million. During 2015, the revolving
credit facility remained undrawn until it was
voluntarily cancelled in June 2015.
At the end of 2015, Dialog had no
committed borrowing facilities.
2015
2014
566.8
–
(4.6)
(8.6)
553.6
324.3
(180.7)
(17.5)
(12.1)
114.0
1 Net funds/(debt) is defined as cash and cash equivalents less current and non-current financial liabilities.
Capitalised development expenditure
Payments related to capitalised development
expenditure amounted to $24.8 million in
2015 compared with $6.7 million in 2014,
the increase reflecting the higher number of
products under development whose costs
qualify for capitalisation.
Acquisitions
On 4 June 2015, Dialog acquired a 45.7%
shareholding in Dyna Image for $13.6 million
in cash, of which $12.9 million was paid on
completion and $0.7 million was deferred for
12 months. At the time of the acquisition, the
parties agreed on a call option that allows
Dialog to acquire the outstanding shares in
Dyna Image that it does not already own
in one or more tranches at any time over a
period of three years after the closing date.
Dialog considers that the call option gives
it the power to direct the activities of Dyna
Image. Accordingly, Dialog’s acquisition of
a minority shareholding in Dyna Image was
accounted for as a business combination and
Dyna Image is accounted for as a subsidiary
of Dialog.
Dialog recognised goodwill of $6.6 million
on the acquisition and initially recognised
the call option at its fair value on the
acquisition date of $1.0 million. Further
information about the acquisition of
Dyna Image is presented in note 4 to the
consolidated financial statements.
Also during 2015, Dialog paid
$3.4 million in settlement of the contingent
consideration payable on the purchase of
iWatt (this was reflected in cash generated
from operations).
Cash flows from financing activities
Borrowings
During 2015, the Group had no amounts
drawn under its borrowing facilities. During
2014, the Group repaid the remaining $105
million of debt that was drawn against
the Base Currency Term Loan facility for
financing the acquisition of iWatt in 2013.
Employee share schemes
During 2015, Dialog employee benefit
trusts bought 0.4 million (2014: 0.2 million)
Dialog shares in the market at a cost
of $14.0 million (2014: $6.2 million) to
www.dialog-semiconductor.com
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
40
Financial review continued
“ At the end of 2015, cash and cash equivalents
amounted to US$566.8 million.”
Receivables financing facilities
During 2015, Dialog continued to utilise
receivables financing facilities provided
by two institutions. During 2015, the
aggregate amount of these facilities
increased from $92 million to $112 million.
At the end of 2015, $40.4 million was
drawn against the available balance (end
of 2014: $41.9 million). We are confident
that the receivables financing facilities
together with the Group’s significant cash
balances and strong cash generation will be
more than sufficient to satisfy the Group’s
working capital requirements in the near to
medium term.
Conversion of convertible bond
On 16 March 2015, Dialog announced that
it would exercise its option to redeem all
outstanding $201 million 1% Convertible
Bonds 2017 (“the Bonds”) on 5 May 2015.
By 28 April 2015, all holders of the Bonds
had exercised their conversion rights in
respect of all outstanding Bonds. On
conversion, the carrying amount of the
Bonds was $183.1 million. Conversion
resulted in the issue of 6,797,025 new
ordinary shares in Dialog with an aggregate
nominal value of $1.0 million and an increase
in additional paid-in capital of $182.1
million.
Derivative financial instruments
Dialog uses forward currency contracts
and currency swaps to manage the
Group’s exposure to currency risk on
highly probable forecast cash flows
denominated in foreign currencies;
principally employment costs, rents and
other contractual payments. Derivative
financial instruments are measured at fair
value that is determined based on market
forward exchange rates at the balance
sheet date. At the end of 2015, currency
derivatives held by the Group were
represented by a liability of $4.6 million
(end of 2014: liability of $17.5 million). All
currency derivatives held were designated
as hedging instruments in cash flow
hedge relationships. During 2015, a loss of
$19.0 million (2014: loss of $23.6 million)
was recognised in other comprehensive
income representing the change in the fair
value of derivatives in effective hedging
relationships and a cumulative fair value
loss of $32.0 million (2014: loss of $3.8
million) was transferred from other
comprehensive income to the income
statement on the occurrence of the hedged
cash flows.
At the end of 2015, Dialog’s call option to
acquire the non-controlling interests in
Dyna Image was included in non-current
assets at its fair value of $0.9 million.
Capital management
Dialog considers that its capital represents
total equity (shareholders’ equity plus
non-controlling interests).
During 2015, shareholders’ equity
increased by $393.4 million, primarily due
to the profit for the year attributable to
shareholders in Dialog of $178.8 million.
Shareholders’ equity stood at $1,017.1
million at the end of 2015 (end of 2014:
$623.7 million).
At the end of 2015, non-controlling
interests amounted to $7.8 million (end of
2014: $nil) in relation to Dyna Image that
was acquired in June 2015.
Dialog monitors its capital by reference to
the equity ratio (total equity divided by total
assets). Whilst Dialog generally seeks to
maintain a high capital ratio it will fund its
growth strategy using a mix of equity and
debt after giving consideration to prevailing
market conditions. At the end of 2015,
the equity ratio was 79.6% (end of 2014:
62.0%), the increase largely reflecting the
conversion of the $201 million Convertible
Bonds in April 2015.
Other assets and liabilities
US$ millions
Assets
Cash and cash equivalents
Other current assets
Total current assets
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
Liabilities and equity
Current liabilities
Convertible Bonds
Deferred tax liabilities
Other non-current liabilities
Total liabilities
Shareholders’ equity
Non-controlling interests
Total liabilities and equity
2015
2014
566.8
230.7
797.5
251.1
138.6
68.4
28.5
3.8
490.4
324.3
213.8
538.1
244.9
131.5
59.3
28.8
3.3
467.8
1,287.9
1,005.9
253.7
–
1.6
7.7
263.0
1,017.1
7.8
186.7
180.2
5.4
9.9
382.2
623.7
–
1,287.9
1,005.9
Dialog Semiconductor PlcAnnual report and accounts 2015 41
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With the exception of assets held under
finance leases, which are secured by a lessor’s
charge over the leased assets, the Group’s
property, plant and equipment is not subject
to any encumbrances.
Income tax assets and liabilities
At the end of 2015, income tax payables were
$62.2 million (end of 2014: $29.4 million),
the increase reflecting the rise in the Group’s
taxable profits.
At the end of 2015, the Group had net
deferred tax assets of $26.9 million (end of
2014: $23.3 million), comprising deferred
tax assets of $28.5 million (end of 2014:
$28.8 million) and deferred tax liabilities of
$1.6 million (end of 2014: $5.5 million). Net
deferred tax assets increased by $3.6 million
during 2015, mainly due to the recognition of
previously unrecognised deferred tax assets in
the UK as a result of the ongoing exercise to
align the ownership of the Group’s Intellectual
Property with its commercial structure.
Going concern
For the reasons set out on page 58, the
Directors continue to adopt the going
concern basis in preparing the Group’s
and the Company’s financial statements.
Management’s outlook for 2016 is set
out on page 7 and the principal risks and
uncertainties that may affect the Group’s
results, cash flows and financial position
during 2016 and into the future are outlined
on pages 48 to 52.
Goodwill
At the end of 2015, the carrying amount
of goodwill was $251.1 million (end of
2014: $244.9 million). During 2015, Dialog
recognised goodwill of $6.6 million on the
acquisition of Dyna Image and there was a
reduction in goodwill of $0.4 million due to
changes in currency exchange rates.
Goodwill impairment tests carried out during
2015 showed that the recoverable amount of
each cash-generating unit to which goodwill
is allocated was comfortably in excess of its
carrying amount and therefore no impairment
was recognised.
Other intangible assets
At the end of 2015, the carrying amount of
other intangible assets was $138.6 million
(end of 2014: $131.5 million). During 2015,
additions amounted to $38.4 million,
comprising capitalised product development
costs of $24.5 million, developed technology
acquired with Dyna Image of $5.6 million
and purchased software, licences and patents
totalling $8.3 million. During 2015, the
amortisation expense was $31.1 million
(2014: $33.4 million).
Property, plant and equipment
Since Dialog operates a fabless business
model, it does not have any manufacturing
facilities but it does occupy R&D facilities
and administrative offices. At the end
of 2015, Dialog operated in 31 locations
worldwide covering a total of 42,500 square
metres. Dialog’s facilities are all held under
operating leases. Management believes that
Dialog’s facilities are adequate for its current
requirements.
Property, plant and equipment principally
comprises test equipment, office equipment
and leasehold improvements. At the end of
2015, the carrying amount of property, plant
and equipment was $68.4 million (end of
2014: $59.3 million). Additions during the year
amounted to $34.9 million and the carrying
amount of assets disposed of was $1.4 million.
During 2015, the depreciation expense was
$24.2 million (2014: $22.2 million).
www.dialog-semiconductor.com
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
42
Corporate responsibility
and sustainability
This section provides high-level analysis of our most
material sustainability issues, details on how we manage
them and selected data on how we have performed.
Further detail is available in our 2015 Sustainability Report
(which is aligned with the Global Reporting Initiative G4
Sustainability Reporting Guidelines or G4 Guidelines)
and on our website.
www.dialog-semiconductor.com/sustainability
Our sustainability vision and applicable standards
Vision
Applicable external standards
To embed sustainable and
responsible practices into the
way we act internally and
engage externally
> United Nations Global Compact
>
>
> Global Reporting Initiative and G4 Sustainability Reporting Guidelines
ISO14001 environmental management system standard
ISO9001 quality management system standard
Materiality
We aim to align our sustainability
management activities (including reporting)
with our most material issues.
We have worked with external advisers to
identify and prioritise these issues on the
basis of:
> The potential or actual impact of Dialog
on its stakeholders; and
> The potential or actual impact of
stakeholders on the ability of Dialog
to achieve its business objectives.
This process has been informed by our:
> Ongoing stakeholder engagement
throughout 2015;
> Targeted stakeholder engagement to
directly support our materiality process;
and
> Corporate risk management process
A description of the materiality process can be found below.
Materiality assessment process
1 Initial review of
sustainability issues
facing:
> Dialog
> Dialog’s
stakeholders
> The semiconductor
(and wider
electronics) sector
2 Definition of
a “Dashboard”
of relevant issues
for Dialog and
its stakeholders.
3 In-depth analysis to prioritise (using a
structured, score-based framework)
each Dashboard issue based on Dialog’s
actual and potential impact on its
stakeholders – and vice versa.
This included:
> Analysis of Dialog’s activities,
locations and business partners.
> Engagement with internal
discipline experts.
> A review of existing company
management system components.
> A review of Dialog’s existing
risk assessment and supply chain
audit results.
> A review of external analysis and
commentary on the semiconductor
(and wider electronics) industry.
5 “Mapping” of
the G4 Guidelines
against Dialog’s
most material
issues.
4 Gathering of
feedback on
the results from
internal discipline
experts and external
stakeholders –
and the appropriate
adjustment of
scores.
Dialog Semiconductor PlcAnnual report and accounts 2015 43
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Economic
performance
and impact
Advancement
of technology
Intellectual
property
Corporate
governance
Compliance with
customer standards
Recruitment: Professionals
The results of this process are set out in the matrix below. This includes our most material issues,
as well as a range of additional relevant issues that we are also proactively managing.
Materiality matrix
High
Material
Product
impacts
Labour/
human rights
(supply chain)
Conflict
minerals
Relevant
Health
and safety
(supply chain)
Diversity and equality
Enhancing the external skills pool
Philanthropy
Employee development
Recruitment: Graduates
Rewards, morale
and engagement
Energy and
carbon emissions
Pollution, resources
and waste
Environmental
impacts
(supply chain)
Corruption/bribery
Transparency
(supply chain)
General legal compliance
Health and safety
Retention
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I
Irrelevant
Relevant issue
Material issue
Low
Low
Impact on Dialog
High
www.dialog-semiconductor.com
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
44 Corporate responsibility
and sustainability continued
“ We are focused on maintaining a sustainable skills pipeline.”
Business ethics
Materiality
Our business relies on the trust of our business
partners, including our investors, customers
and suppliers. This includes:
> Our strict adherence to our customers’
exacting technical, commercial and ethical
requirements.
> The protection of both our own intellectual
property and that of our business partners,
which is fundamental to the technologically
innovative nature of our business.
> Our strict compliance with the laws of our
host societies – including those relating
to anti-bribery and anti-corruption.
In addition, we support the aims and
objectives of Section 1502 of the United
States’ Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (relating
to conflict minerals).
Any breach of this trust, or of our legal
obligations, would have the potential to
seriously compromise our business – whether
in terms of the loss of valuable commercial
relationships, the undermining of our
reputation or the application of official
sanctions.
How we manage business ethics
We manage business ethics through:
> The application of our corporate Code
of Conduct, which addresses issues
including anti-corruption, the protection of
intellectual property and whistleblowing.
> A range of specific sub-policies addressing
issues such as conflict minerals, financial
dealings, conflicts of interest and financial
crime. Our Conflict Minerals Policy
commits us to not knowingly procuring tin,
tantalum, tungsten or gold (“3TG”) from
the Great Lakes region of Africa that has
not been certified as “conflict free”. We
ask our suppliers to undertake reasonable
due diligence of their own supply chain to
ensure that this is the case.
In 2015, we did not identify:
> Any cases of corruption involving Dialog or
its employees.
> Any cases where 3TG integrated into
our products may have or did finance or
support armed groups in the Great Lakes
Region.
Responsibility for our performance sits with
our Senior Vice President General Counsel
who is supported in this role by the Assistant
Company Secretary.
Employees receiving online compliance communications and training in 2015
Total number who received business ethics communications
Proportion who received business ethics communications
Total number who received formal business ethics training2
Proportion who received formal business ethics training
Board
members
8
100%
Employees
1,660
100%
All (then) Board
members
received
business ethics
training in
2014. No Board
training took
place in 2015.
731
44%
Our people
Materiality
The nature of our business, which relies
on the ongoing advancement of cutting-
edge semiconductor technology, means we
are highly reliant on our ability to recruit,
retain and develop high-quality electronic
engineering professionals, as well as leading
management talent. This is particularly the
case given:
> Strong, ongoing competition for skills
within the sector.
> An ageing electronics engineering
demographic.
> Our strong commercial growth.
In this context, we are focused on maintaining
a sustainable skills pipeline – ranging from
the identification, development (and ultimate
recruitment) of high-potential undergraduates
(see below), through to the attraction of
experienced experts. We take a holistic view
towards both recruitment and retention
that looks beyond the provision of highly
competitive financial rewards. We also
aim to deliver the kind of lifestyle, working
environment, development opportunities and
inclusive culture that mean people choose to
develop high-quality, long-term careers with us.
How we manage our people
We manage our people through:
> The application of national-level Human
Resource Policies, tailored to reflect local
legal requirements, business priorities and
labour markets.
> The application of our corporate Code of
Conduct, which sets out our minimum,
Group-wide requirements in relation to
labour and human rights, health and safety
and related issues.
> Ongoing talent planning and gap
identification. The Code of Conduct is
available online1.
> Proactive engagement at university level
to identify and recruit new talent.
> Ongoing identification and engagement
of high-value professionals and leaders.
Responsibility for our performance sits with
the Senior Vice President Human Resources
who is supported in this role by dedicated
regional Human Resource teams.
Relevant performance indicators in relation to
our people can be found on pages 10 and 11.
1 See: www.dialog-semiconductor.com/sites/default/files/csr-aa-001_code-of-conduct.pdf
2
i.e. who started online training
Dialog Semiconductor PlcAnnual report and accounts 2015 “ We aim to have a positive impact on the environment
through the development of energy-saving technology.”
45
Environmental responsibility
Materiality
As we contract out the fabrication of our
products (see below), we are primarily focused
on office-based research, development
and design activities. As such, our direct
environmental impacts are relatively limited.
Nonetheless, we still seek to minimise what
impacts we do have as a matter of good
practice. This includes our ongoing efforts to
minimise our:
> Energy consumption and carbon emissions.
> Pollution and waste.
> Use of natural resources.
In addition, we aim to have a positive impact
on the environment through the development
and marketing of energy saving technology
(see below).
How we manage environmental
responsibility
We manage environmental responsibility
through:
> The application of our corporate Code of
Conduct, which addresses our emissions
to air and water, resource use, the
management of hazardous substances
and waste management; and
> The application of our environmental
management system, which is certified
to the ISO14001 environmental
management standard. A key element
in this management system is our
Quality and Environment Manual, which
supports our efforts to achieve continuous
improvement. This is supported by a body
of specific guidance.
Responsibility for our performance (both
with respect to our own operations and
the fabrication plants that manufacture our
products) lies with the Senior Vice President
for Global Manufacturing Operations. They
are supported in this respect by the Senior
Director, Quality and Environment as well as
the Environmental Manager, who manage
day-to-day processes.
This reflects:
> Evolving stakeholder expectations, which
place ever-growing emphasis on the need
for companies to identify, and use their
legitimate influence to proactively manage,
their indirect sustainability impacts.
> Dialog’s duty to help protect its own
customers from reputational, contractual
or commercial harm.
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Carbon emissions (tonnes)
2015
Total
159.8
1,890.7
Scope 13
Scope 2
Scope 3 (travel only)4 3,975.1
Per
employee
0.1
1.1
2.41
Value chain
Materiality
Given the nature of our business model and
our commercial relationships, value chain
management is a particularly important
issue for Dialog. This not only includes
operational aspects (including the avoidance
and mitigation of supply chain disruption
and supply constraints), but also sustainability
aspects such as:
> The impact of our business partners on
human rights and labour rights.
> Health and safety performance amongst
our suppliers.
> The environmental impacts of both our
suppliers and the contents of our products.
How we manage our value chain
We manage our value chain through:
> A policy of only dealing with fabrication
partners who are accredited to or
are compliant with the ISO14001
(environment), OHSAS18001 (health and
safety) and ISO9001 (quality) management
standards.
> Screening of all new fabrication partners
against our Self-Audit Checklist (which
covers labour and human rights, health
and safety, the environment and business
ethics), as well as pre-qualification audits
prior to the integration of new fabrication
partners into our supply chain.
> Annual auditing (by joint Dialog and
third-party auditing teams) of all existing
fabrication partners against our Supplier
Audit Checklist and Corporate Social
Responsibility Checklist. In addition to
requirements relating to ISO14001,
OHSAS18001 and ISO9001, auditing
covers a range of broader corporate social
responsibility issues, including those drawn
from the SA8000 social accountability
standard.
Responsibility in this respect sits with the
Senior Vice President Global Manufacturing
Operations. They are supported in this role
on a day-to-day basis by the Environmental
Manager.
3 Scope 1 and 2 emissions from two largest design centres – Nabern and Swindon
4
Includes all air travel and car hire from Nabern office
www.dialog-semiconductor.com
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
46 Corporate responsibility
and sustainability continued
159.8 tonnes
Total carbon emissions
Proportion of major fabrication partners screened/audited for sustainability
performance by issue type (new fabrication partners screened5/existing fabrication
partners audited6)
Health and safety (%)
Environment (%)
Labour rights (incl. human rights) (%)
Society (%)
2013
100/100
100/100
100/100
100/100
2014
100/100
100/100
100/100
100/100
2015
100/100
100/100
100/100
100/100
Type and number of ‘major’ negative audit findings7
Health and safety
Environment
Labour practices (incl. human rights)
Society
2013
2014
2015
0
0
0
0
0
0
2
0
0
0
0
0
5 Screening activity is aimed at improving the performance of our fabrication partners where necessary, rather than their
exclusion from our supply chain.
Includes both documentary auditing and on-site auditing. Approximately 85% of our fabrication partners were subjected
to on-site auditing in 2015.
i.e., audit findings of sufficient seriousness that Dialog requires immediate correction on the part of the supplier.
6
7
100%
Fabrication partners accredited to or
compliant with ISO14001. OHSAS18001
and ISO9001
Society
Materiality
Dialog is committed to generating positive
social impacts, at both a societal and
community level. Like many companies,
our most important social impact (as well
as our raison d’etre) is our generation and
redistribution of economic value – amongst
our investors, employees, suppliers, host
governments and other beneficiaries. Given
the ongoing expansion of our business, as
well as ever-increasing demand for advanced
semiconductor technology, this positive
impact is likely to grow.
Furthermore, our position at the very forefront
of semiconductor research and development
means we are constantly helping advance
scientific knowledge in this area – helping
lay the ground for future technological
innovation, whether by ourselves or others.
Likewise, the nature of our products, which
are primarily focused on power management,
energy efficiency, IoT and wearable products,
means we play an integral role in helping
millions of end-users access affordable and
life-enhancing technology.
We also remain committed to having a positive
impact at a local level. Our most material
issue in this respect is the enhancement of
local skills pools. This not only benefits school
and university students by enhancing their
engineering skills, but also helps bolster our
own ability to recruit talented new graduates
and support our long-term skills pipeline
(see above). Beyond this, we also carry out
community engagement and philanthropy.
Although these do not represent material
issues, such activity is in line with our values
and helps support our corporate reputation.
Dialog Semiconductor PlcAnnual report and accounts 2015 47
Total value generation and distribution by type (US$ millions)
Economic value generated
Economic value distributed
Operating costs8
Employee wages and benefits9
Payments to providers of capital
Payments to government
Community investments
Economic value retained
2013
901.4
844.5
659.4
144.2
13.3
27.6
0.5
56.9
2014
1,156.1
1,020.7
764.0
210.4
14.8
31.5
0.5
135.4
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1,355.3
1,201.1
871.7
224.3
6.6
98.5
0.6
154.2
8 Excluding employee wages and benefits and property tax.
9
Including share-based payments.
Number of United States patents currently held and pending in each given year
Held
Pending
2013
36
46
2014
14
104
2015
3
84
Number of individuals receiving direct and indirect educational support (by type)
University internships and industrial placements
University scholarships
University bursaries
School-level support (including mentoring, work
experience, project support plus UTC Swindon
partnership)
Total
2013
2014
2015
28
10
6
108
152
34
12
9
174
229
55
15
9
332
411
0
major negative audit findings
How we manage our impacts on society
Full details on how we manage our economic
value generation and distribution, as well as
our research and development activities, can
be found throughout this annual report.
We help promote electronic engineering skills
in our local communities through a range of
means, including:
> The provision of sponsorship and access
bursaries to engineering students at the
universities of Edinburgh, London (Imperial
College), Southampton, Ulm and Karlsruhe,
as well as National Chao Tung University.
> A key partnership with University Technical
College Swindon in the United Kingdom.
Industrial placements for undergraduate
students in the United Kingdom, Germany,
the Netherlands, Greece, Turkey, Italy,
Austria, the United States, Japan and
Taiwan.
>
> Mentoring and support of school students
in the United Kingdom, the Netherlands
and Germany.
Responsibility sits with our Chief Executive
Officer and Chief Financial Officer as a
principle (with respect to our economic
performance). Meanwhile our Senior Vice
President, Engineering is responsible for
technological innovation. In addition, our
Chief Financial Officer oversees all community
investment activity, supported on a day-to-
day basis by our Head of Corporate Social
Responsibility, Sustainability and University
Relations.
www.dialog-semiconductor.com
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
48 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 led by the Chief
Financial Officer. The Risk Management Office meets on a regular basis.
The Risk Management office and the executive team gather information from the business, as well as 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 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 macroeconomic and industry-specific cyclical risks, are outside
Dialog’s control.
The Company recognises four categories of risks: Strategic, Operational, Financial, and Legal and Compliance. Our principal risks have not changed
since last year’s report. We made further progress in 2015 introducing new products, expanding our customer base, working closely with our
partners and suppliers and introducing new employee initiatives such as “The Spirit of Dialog”.
Strategic risks
Dialog management is focused on executing on its four strategic pillars in order to mitigate the current dependencies on key markets and customers.
Risk
Actions
Progress in 2015
Dialog invests in 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.
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.
Continued development of Quick charge
AC/DC converters to meet evolving
protocols. Release of new PMIC for the
multi cell computing market. In addition to
SmartBondTM Dialog developed Bluetooth
related products for wearables and Smart
Home applications.
Dialog invested US$223.2 million or 16.5%
of revenue in R&D in 2015 across a range of
highly targeted areas. This is an increase of
4.4% over 2014.
Dialog Semiconductor PlcAnnual report and accounts 2015 49
Strategic risks (continued)
Risk
Actions
Progress in 2015
Dependency on key customers
Dialog relies on a relatively small number
of customers, within the wireless
communication sector, 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 continues with its Greater
China strategy in addition to new design
wins at MediaTek and Xiaomi. Dialog has
won business at HTC, LeTV and WeChat.
Dialog has made significant progress with its
highly differentiated AC/DC quick charging
products, reporting an estimated 70%
market share.
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; and
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 2015, the number of engineers increased
by approximately 23%.
Dialog has developed an effective recruitment
process to attract high-calibre staff.
Approximately 75% of our total 2015 hires
were for engineering-related functions.
Dialog has dedicated human resource managers
to drive further development of its personnel
and benchmark its employment terms to match
industry top performers.
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Emerging talent programmes were expanded
in 2015, with our highest ever levels of both
Interns and Graduates entering the business.
A business focus on Graduate hiring resulted
in us doubling our Graduate intake in 2015
compared to 2014, with 40 new Graduates
being hired globally – the majority within
engineering functions.
Staff turnover was 6.9% (2014: 5.7%). In
order to minimise staff turnover Dialog has
an improved performance management
system to ensure that we are able to reward
our best employees through appropriate
mechanisms, including career development.
These activities include:
> ongoing market place benchmarking;
the creation of a strong employment
>
proposition to attract people; and
retention and new LTI programme for key
employees in 2015.
>
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.
In 2015 Dialog launched the “Spirit of
Dialog” to document the principles that have
contributed to our success. The Spirit is now
embedded in Recruitment, Performance
Management, Promotions and Development.
In an increasingly competitive market, a key
success factor will come from our ability to
recruit and retain high-quality people. There
is a risk that competitors may actively target
our key people.
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.
Regular reviews of remuneration practice and
employee value propositions to ensure we are
able to attract and retain key people. Our “all-
employee” share plan is an important part of this.
Dialog has designed and launched a Management
and Leadership curriculum available to all new and
experienced people managers globally.
www.dialog-semiconductor.com
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
50
Managing risk and uncertainty
continued
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 2015
Third-party suppliers
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.
IT systems
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; and
the semiconductor supply chain
requires complex, reliable and secured
information systems, given the multiple
processes and plants being utilised.
Quality assurance
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 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 is supported by its customers to
mitigate the risk of disruption to supply.
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 2015
vs 97% in 2014. This measures performance
against delivery dates confirmed by Dialog at
date of order.
In 2015, Dialog carried out 30 vendor audits vs
30 in 2014. These audits cover a wide range
of topics including compliance and product
quality (ISO9000 and ISO14000) reviews.
This is supported by regular business reviews
when Dialog management meets its
suppliers to discuss supplier performance and
future capabilities.
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 operates a “high-touch” fabless model,
with engineers working together with our foundry
partners to optimise the manufacturing process.
In 2015 Dialog made significant investments
in internal capabilities (test development,
failure analysis etc).
Dialog places a high importance on quality
assurance, product validation prior to mass
productions, in line controls and monitoring
of yields with real-time feed from offshore
manufacturing.
Dialog worked with key suppliers to achieve
the highest possible industry standard
yields based upon typical defect density
limitation. To support this Dialog has, in total,
approximately 30 engineers located at key
vendors.
Dialog continues to evolve its internal processes
and procedures to ensure new requirements are
assessed and appropriate resources applied to
satisfy these requirements.
Yield performance on key products
is monitored monthly during internal
operational reviews.
Dialog Semiconductor PlcAnnual report and accounts 2015 51
Financial risks
Given the Company’s sector and business model, Dialog tends to be highly cash generative, operating across the globe. This exposes the Group to
several financial risks including fluctuations in interest and foreign exchange rates and credit risk relating to counterparties the Company transacts
with. It also needs to ensure access to liquidity at all times to meet its financial obligations, including investment in future growth. Through strong
stewardship and financial discipline we are able to mitigate the impact of these risks on the financial performance of the Group.
Risk
Actions
Progress in 2015
Foreign currency
The majority of Dialog’s revenue and
expense is denominated in US Dollar. Some
exposure exists to non USD denominated
operating expenditure, primarily Euro and
GB Pound Sterling, meaning exchange rate
volatility could have an adverse impact on
our financial statements. Please refer to
note 29 on pages 138 to 143.
Counter-party
Dialog is exposed to counter-party risks with
banks, suppliers and customers.
Transactional currency exposures are managed
using forward currency contracts, hedging no
further than 12 months out on a layered approach.
These are designated as cash flow hedges and
at the year-end approximately US$160 million
equivalent were outstanding.
Dialog has currency hedges outstanding at
year end of approximately US$160 million
equivalent, representing > 70% of forecast
non USD expenditure for 2016.
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The Company uses receivables financing to
manage any risks with selected customers.
No institutional default on financial
transactions.
When executing financial transactions Dialog only
deals with reputable financial institutions with a
minimum credit rating of single A.
Funding and liquidity
The risk of being unable to continue to meet
the financial obligations/requirements of our
operations.
Given the business is highly cash generative the
Group finances its operations from surplus cash,
raising debt when necessary. The policy is to
maintain a sufficient level of liquidity appropriate to
meet short-term liabilities and longer-term strategy.
Cash flow from operating activities in 2015
was US$318 million.
Dialog reports US$567 million of cash and
no debt, increasing from US$324 million
reported at the end of 2014.
www.dialog-semiconductor.com
Dialog Semiconductor PlcAnnual report and accounts 2015Strategic reportFinancial statementsAdditional information
52
Managing risk and uncertainties
continued
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 2015
Dialog continues to monitor the legislative changes
across key countries to ensure it stays abreast of
both global and local legislative changes.
Dialog appointed a General Counsel.
Dialog carefully selects its suppliers and regularly
audits their activities.
In 2015, 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 640 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
(DLP) area. A DLP solution was rolled out to
most locations and we started to monitor the
first project using defined rules.
By rolling out a new IT system in 2015.
Dialog improved control over access granted
to specific project data for employees and
external third parties.
A system is available to control the access to
design projects and all related documents
and specifications. Access can be requested
and requires approval by the responsible
project manager. Reporting is available to
those who had access to the design project
at a dedicated point in time.
Compliance with laws and regulations
Given Dialog’s growth strategy it needs
to ensure that it understands and complies
with the local laws and customs wherever it
operates.
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.
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).
Strategic Report approved on 8 March 2016.
Jalal Bagherli
CEO
Dialog Semiconductor PlcAnnual report and accounts 2015 Introduction to governance
53
Dear Shareholder,
2015 was another year of sustained progress for Dialog. In addition to our strong corporate
performance, we have continued to strengthen our Board and review our corporate governance
principles against best practice.
We remain committed to a process of ongoing Board refreshment and renewal to ensure that the
Company has a Board which comprises the appropriate skills and expertise to drive the continued
growth of the business; and, to provide our exceptional leadership team with appropriate
direction, support and oversight. During the year, we welcomed Alan Campbell to the Board as
an independent, non-executive Director.
Alan brings over 30 years of relevant business and financial expertise to the Board with many
years’ experience as a Chief Financial Officer in the semiconductor industry. He also has
experience of large scale corporate transactions which was invaluable during the course of 2015
when we engaged in a potential transaction with Atmel.
Alan also assumed the role of Chair of the Audit Committee in July 2015 and we are pleased
to add another Director with significant financial experience to our Audit Committee alongside
Aidan Hughes and Eamonn O’Hare.
John McMonigall and Peter Weber also stepped down from the Board during 2015. Both
John and Peter were long-standing members of the Board and they both made a significant
contribution to the growth and development of Dialog during their tenure. We are grateful to
them for their commitment to Dialog over many years.
Our Chairman of the Remuneration Committee, Mike Cannon has written a letter to shareholders
on page 67 of this report. We are proposing a number of changes to shareholders relating to our
remuneration structure and systems to better align our practice with those of our closest peers
and in line with US practice where virtually all of our peers are based. Given the scale and extent
of our business in the US, this represents an important market for comparison – particularly as it
relates to recruiting the most talented people to support the growth of the business. However,
we recognise that normal practice is usually to align governance practice with your home or
“domicile” market and the Committee is also mindful that market practice and shareholder
guidelines in the UK, in relation to service contracts and severance arrangements, are different
from those in the US. As set out in Mike’s letter, and in the AGM Notice of Meeting, we have
recommended the adoption of these changes to all shareholders and we welcome your support.
I have now served on the Dialog Board for nine years – a period during which there has
been exciting and dramatic change within the business. It is worth noting that nine years is a
period beyond which some consider the independence of non-executive Directors as being
potentially compromised. While we do not believe that tenure of longer than nine years of itself
compromises independence, our policy at Dialog is to put forward any Director who has a tenure
of nine years or longer for annual election. This offers shareholders the opportunity to express
their view in the form of their vote at each and every AGM and to express their concern or
support in a transparent way.
During the next year we will be continuing refreshment and renewal of the Board (including,
given my tenure, finding a new Chairman of the Nomination Committee) – a process which is
ongoing and which we will update Shareholders on throughout the year as appropriate.
Finally, as we have outlined before, as a Board, we are open to all feedback from Shareholders.
All Directors are available at the Group’s AGM 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 PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information
54
Leadership – Board of Directors
The Board of Dialog currently comprises eight Directors.
This includes one Executive Director, and seven independent
non-executive Directors (including the Chairman).
From left: Eamonn O’Hare, Mike Cannon, Rich Beyer, Aidan Hughes, Dr Jalal Bagherli, Alan Campbell, Russ Shaw and Chris Burke.
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.
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.
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 65-66.
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 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.
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 and 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 in 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 ● ✚
Dialog Semiconductor PlcAnnual report and accounts 2015
Chris Burke
Independent non-executive Director
Chris joined the Board in July 2006. He has a
career of 30 years in telecommunications 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 as 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 N R
Board experience ● ◆ ✚
Alan Campbell
Independent non-executive Director
Alan joined the Board in May 2015 and was
appointed as Chair of the Audit Committee in
July 2015. He brings over 30 years of relevant
business and financial expertise to Dialog
Semiconductor, having extensive experience as a
Chief Financial Officer in the semiconductor
industry. He began his career in 1979 with
Motorola and has spent over 12 years in Europe
and 20 years in the USA. In 2004 he guided
Freescale through its separation from Motorola
and successfully executed to an initial public
offering (“IPO”) that listed the company on the
New York Stock Exchange (“NYSE”). In 2006 he
was instrumental in the execution of a Leverage
Buy-Out (“LBO”) in one of the largest technology
financial transactions at that time. In 2011 he
successfully led the company back to the public
market to be listed on the NYSE.
External appointments
Alan currently serves on the Board and is a
member of the Audit Committee of ON
Semiconductor
Committee membership A*
Board experience ● ■ ✚
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.
He is also an investor and adviser to a number of
international private technology companies.
Committee membership A
Board experience ● ■ ✚
55
Eamonn O’Hare
Independent non-executive Director
Eamonn joined the Board in May 2014 as an
independent non-executive Director. He was
appointed as Chair of the Audit Committee in
December 2014 and was replaced by Alan
Campbell in July 2015. 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 ◆ ■ ✚
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 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 ● ◆ ✚
Committee membership
A – Audit Committee
N – Nomination Committee
R – Remuneration Committee
* Denotes Chair of the committee
Board experience
●
Technology
◆
Telecommunications
■
Finance
✚ Governance
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information
56
Leadership – Management team
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.
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.
Andrew Austin
Senior Vice President,
Corporate Projects
Andrew joined Dialog in
April 2009 and held the
position of Senior Vice
President, Worldwide Sales
until the end of Q3 2015.
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.
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.
Tenure with Dialog (years)
Name
Role Tenure with
Dr Jalal Bagherli
Chief Executive Officer
Andrew Austin
Senior Vice President, Corporate Projects
Vivek Bhan
Senior Vice President, Engineering
Christophe Chene
Senior Vice President, Asia
Mohamed Djadoudi
Senior Vice President, Global Manufacturing Operations and Quality
Udo Kratz
Davin Lee
Senior Vice President and General Manager, Mobile Systems Business Group
Senior Vice President and General Manager, Power Conversion Business Group
Sean McGrath
Senior Vice President and General Manager, Connectivity, Automotive and Industrial Business Group
Martin Powell
Senior Vice President, Human Resources
Tom Sandoval
Senior Vice President, Worldwide Sales
Colin Sturt
Senior Vice President, General Counsel
Mark Tyndall
Senior Vice President, Corporate Development and Strategy and General Manager Emerging Products Business Group
10
6
2
4
8
9
2
3
5
0
0
7
Dialog Semiconductor PlcAnnual report and accounts 2015 57
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
Martin Powell
Senior Vice President,
Human Resources
Martin joined Dialog in July
2010 and is responsible for
developing and driving
people strategies in support
of Dialog’s business goals
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.
and initiatives worldwide, including fostering an
environment where Dialog’s teams can thrive.
Prior to Dialog, Martin 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.
Tom Sandoval
Senior Vice President,
Worldwide Sales
Tom joined Dialog in
September 2015 and is
responsible for the worldwide
sales organisation. He has
over 25 years of experience in
the semiconductor industry and has held
executive management positions in sales,
marketing and engineering. Prior to joining
Dialog, Tom served as Vice President of Sales for
the Americas at Xilinx. He previously served as
CEO of Calypto Design Systems. Tom holds a BS
degree in Electrical Engineering from the
University of Southern California.
Colin Sturt
Senior Vice President,
General Counsel
Colin Sturt joined Dialog
Semiconductor in October
2015 as Senior Vice President,
General Counsel. Prior to
joining Dialog, Colin held the
Mark Tyndall
Senior Vice President,
Corporate Development
and Strategy and
General Manager
Emerging Products
Business Group
Mark joined Dialog
position of Vice President of Corporate
Development, General Counsel and Corporate
Secretary at Micrel, Incorporated. He was
previously a corporate attorney with Davis Polk &
Wardwell LLP. Earlier in his career Colin served in
manufacturing management and operational
and organisational improvement roles with
National Semiconductor Corporation. He holds a
Law degree from the Columbia University Law
School and a Bachelor’s and two Master’s
degrees from Brigham Young University.
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.
Jean-Michel Richard
Retired CFO, Senior Vice President Finance
Jean-Michel retired from the role of CFO and
Senior Vice President Finance in December 2015.
He 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.
Emmanuel Walter
Interim CFO
Emmanuel joined Dialog in July 2015 and was
appointed Interim CFO in December following
Jean-Michel’s departure. He has more than
20 years’ experience and has previously held
senior financial executive positions with
multinationals such as General Electric and ABB,
specialising in the engineering sector as well as in
the Chinese market, where he has worked as a
CFO for a power related equipment
manufacturing businesses. Emmanuel has an
Electrical Engineering degree, a 1st Class BSc, an
ACCA 1st pass and a top-tier MBA from
Manchester Business School. He is the Chairman
of the ACCA Corporate Sector Committee.
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information 58
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 2015. 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 develops and
distributes 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.
The Company is registered in the UK and
the registered number is 3505161. A full list
of Company branches outside of the UK is
detailed in Dialog’s related undertakings set
out on pages 160 and 161.
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 1
to 52. Information on treasury policies and
objectives is included in note 2 to these
financial statements.
Subsequent events
On 20 September 2015 Dialog announced
it had agreed to acquire Atmel Corporation
for a total consideration of approximately
$4.6 billion. Dialog shareholders voted to
approve the transaction on 19 November
2015. On 13 January 2016 the Board of
Atmel deemed an unsolicited proposal from
Microchip Technology Inc. to be a superior
offer. The following day the Board of Dialog
concluded it was not in the best of interests
of Shareholders to increase the offer price for
Atmel and decided not to revise the terms of
the offer. This resulted in Atmel’s termination
of the merger agreement with Dialog. Upon
termination of the merger agreement by
Atmel to accept Microchip’s proposal, Atmel
was required to pay Dialog a $137.3 million
termination fee. On 20 January 2016 the
Group received the fee.
Dividends and share repurchases
The Group has historically been committed
to reinvesting all profits into laying the
framework for future growth of the Dialog
Group. Accordingly, since its initial public
offering in 1999, Dialog has not paid any cash
dividend or carried out any share repurchases.
Directors do not recommend the payment of
a dividend for 2015 (2014: nil). At the 2016
Annual General Meeting the Board will be
asking shareholders for an authority to put in
place a general framework for a share buy-
back programme. It should be emphasised
that, even if this authority is granted, no
decision has yet been made to implement
such a programme and implementation will
only occur if the board considers this in the
best interests of the Company depending on
the prevailing circumstances.
Purchase of own shares by Employee
Benefit Trust
The Company operates an Employee Benefit
Trust, which purchase and sell 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
2015, the Trust held 1,879,195 shares, which
represented 2.4% of the total called-up share
capital, at a nominal value of £187,919.
Share capital
The Company’s issued share capital comprised
a single class of shares referred to as ordinary
shares.
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 64 of this annual report.
Directors
The Directors, together with their biographies,
are listed on pages 54 and 55 of this report.
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 and 15.
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 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 application specific
standard products (“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. Further details on
the Group’s commitment to sustainable and
environmentally friendly business practices are
set out on pages 42 to 47.
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$567 million of cash at the year end
(2014: US$324 million) and at the end of 2015,
Dialog had no committed borrowing facilities.
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.
Dialog Semiconductor PlcAnnual report and accounts 2015 59
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 16% of the overall
workforce and further details are set out on
page 10 of this report. Although this is in line
with the industry average, 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.
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 54 and 55 of this
report. Having made enquiries of fellow
Directors 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.
This confirmation is given and should be
interpreted in accordance with the provisions
of s418 of the Companies Act 2006.
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 the
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 is set out on pages 48
to 52 of this report.
Financial instruments
The Group’s financial risk management and
policies, and exposure to risks, are set out on
pages 51 and 52 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 2015, Dialog operated from 31 locations in
14 countries with a highly diverse workforce,
incorporating employees from 62 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.
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 76 to 81 of this report. No
Director had a material interest during the year
ended 31 December 2015 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 is subject to
annual re-election. The next Annual General
Meeting will be held on 28 April 2016 at 9am
at Tower Bridge House, St Katharine’s Way,
London E1W 1AA.
Corporate governance
The Company’s corporate governance
statement is set out on pages 61 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.
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information 60 Directors’ report continued
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 28 April 2016 at 9am.
By order of the Board
Dr Jalal Bagherli
Director
8 March 2016
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.
The agreement between the Company and its
Directors for compensation for loss of office
is given in the Director’s remuneration policy
report on pages 78 and 79 of this report.
The Company’s Articles of Association may
only be amended by a special resolution at a
general meeting of Shareholders.
Capital structure
At 31 December 2015, 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
> Directors and senior management 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).
Dialog Semiconductor PlcAnnual report and accounts 2015 Corporate governance statement
61
The Board of Dialog Semiconductor is committed to
maintaining high corporate governance standards to
protect the interests of all stakeholders.
These standards reflect a range of guidelines
which apply to the Company given its
status as a UK incorporated, Frankfurt Stock
Exchange listed company. 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
2015 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
Code 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 56 and 57 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 eight Directors
who are listed below. During 2015, Alan
Campbell was appointed to the Board as an
independent non-executive Director. Details
on his recruitment are set out below.
John McMonigall and Peter Weber also served
as Directors during 2015 until their retirement
on 30 April 2015.
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 54 and 55.
Director
Rich Beyer
Status
Independent/non-independent
Tenure (years)
Current
Independent (Chairman)
Dr Jalal Bagherli
Current
Non-independent (Executive)
Chris Burke
Current
Independent
Alan Campbell
Current
Independent
Mike Cannon
Current
Independent
Aidan Hughes
Current
Independent
Eamonn O’Hare
Current
Independent
Russ Shaw
Current
Independent
John McMonigall
Peter Weber
Retired
Retired
* Note: Concurrent tenure means tenure on the Board concurrently with the Company’s CEO.
Concurrent
tenure*
(years)
2
N/A
9
0
2
10
1
9
–
–
2
10
9
0
2
11
1
9
–
–
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information 62 Corporate governance statement
continued
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 54 and 55.
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, Alan Campbell, was appointed to the
Board in 2015. 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 in a
process (supported by an external search
and recruitment agent) to identify potential
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. Alan Campbell 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.
During the course of his appointment,
the Board considered the prior working
relationship between Rich Beyer and Alan
Campbell while both served at Freescale.
Rich Beyer joined Freescale in March 2008
and held the position of Chairman and CEO
through to June 2012. During this period Alan
held the position of Chief Financial Officer of
Freescale reporting to Rich. The Board noted
the three year cooling off period between
this prior working relationship and Alan’s
appointment to the Dialog Board. Having
carefully considered all the factors, the Board
concluded that Alan Campbell is wholly
independent.
During the year, John McMonigall and Peter
Weber retired from the Board, having served
for 17 and nine years respectively.
As outlined above, the Board remains
committed to continuing refreshment and
it is expected that more than one new
independent, non-executive Directors will be
appointed during the course of 2016.
Board size
At the end of 2015, the Board comprised
eight Directors. A maximum of ten Directors
is allowable under Dialog’s Articles of
Association. The eight members of the Dialog
Board include one Executive Director and
seven independent, non-executive Directors
(including the Chairman). The Nomination
Committee has reviewed the size and
performance of the Board during the year.
The Committee considered that the Board
functions 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, Alan Campbell, Mike Cannon, Aidan
Hughes, Eamonn O’Hare and Russ Shaw are
independent. The Chairman, Rich Beyer, was
2015 Board and sub-committees
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 six 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 2015, the Board
specifically considered the independence
of Aidan Hughes given his tenure on the
Board. The Board’s unanimous view is that
Mr Hughes’ 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.
While the Board is satisfied that Mr Hughes is
wholly independent, in line with the best-
practice principles, as he has been a member
of the Board for in excess of nine years, he is
subject to annual re-election by Shareholders.
Mr Hughes also stepped down from his role as
Chairman of the Audit Committee having served
as Chairman of that Committee for ten years.
The Board also notes that the concurrent
tenure of both Chris Burke and Russ Shaw is
now at nine years. While the Board considers
both Directors to be wholly independent
in judgement and character, it recognises
best practice in respect of Board tenure and
independence criteria and will factor this into
its refreshment policy during 2016. In addition
as with Aidan Hughes, both Directors will be
subject to annual re-election by shareholders.
Director
Board
Audit Remuneration
Nomination
Number of meetings in 2015
Meetings attended
Richard Beyer
Dr Jalal Bagherli
Chris Burke
Alan Campbell
Michael Cannon
Aidan Hughes
John McMonigall (retired)
Eamonn O’Hare
Russ Shaw
Peter Weber (retired)
5
5
5
5
4
5
5
1
4
5
1
5
3
5
1
5
1
5
5
5
5
1
5
3
5
2
1
5
Alan Campbell, 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.
Dialog Semiconductor PlcAnnual report and accounts 2015 63
This offers Shareholders the opportunity to
express their view in the form of their vote
at each and every AGM and to express their
concern or support in a transparent way.
During the next year we will be continuing
refreshment and renewal of the Board
(including, given Russ Shaw’s tenure, finding a
new Chairman of the Nomination Committee)
– a process which is ongoing and which we
will update shareholders on throughout the
year as appropriate.
Senior Independent Director
John McMonigall stepped down from the
Board as Senior Independent Director during
2015. The process of finding a new SID is
ongoing and we will update Shareholders
through the year as appropriate. Rich Beyer is
available to Shareholders who have concerns
for which contact through the normal channel
of CEO has failed to resolve or is inappropriate.
Audit Committee financial expert
Dialog’s Audit Committee is comprised of a
number of Directors who have recent and
relevant financial experience. Alan Campbell,
Chairman of the Audit Committee, has
long-standing experience as a CFO in the
semiconductor industry. Eamonn O’Hare has
two decades’ experience as CFO at some of
the world’s fastest-growing consumer and
technology businesses. Aidan Hughes has
experience as a senior accountant and Finance
Director at a number of public companies.
Biographies are set out on page 54 and 55.
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.
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.
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 2015. The attendance at Board
and sub-committee meetings by the Directors
who held office in 2015 is set out on page 62.
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.
In addition, the non-executive Directors meet
annually to review the performance of the
Chairman. This process, which commenced in
2015, is an annual process. The 2016 review will
be held during the course of the calendar year.
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 2015 Board meetings were held
in Edinburgh and California.
The Company has also put in place a process
of periodic training sessions for Directors
which are facilitated by a third party. In 2014,
all (then) Board members received business
ethics training, in 2015, the Board received
investor activism training.
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. An internal review was conducted
in December 2015 and follows a similar
internally coordinated review process which
was undertaken in 2013. It is conducted
anonymously and is managed by the
Company Secretary. The findings of the 2015
review will be presented to the Board in 2016
for consideration and the implementation of
related recommendations.
In 2014, consistent with corporate governance
best practice, the Board engaged an
independent third party to conduct an
evaluation. The evaluation was conducted 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.
The non-executive Directors also meet to
review the performance of the Chairman and
the 2016 review will be held during the course
of the calendar year.
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 54 and 55.
Directors’ fees
The annual fee for non-executive Directors
in 2015 was £80,000. The annual fee for the
Chairman was £110,000. The Chair of the
Audit Committee, the Nomination Committee
and the Remuneration 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 2015 are set out on
pages 65 and 66.
Directors’ fees were 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.
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.
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information 64 Corporate governance statement
continued
It is proposed that non-executive directors
fees be increased in 2016 and that, subject to
Shareholder approval, fees be paid in the form
of cash and shares. Further details are set out
in the Remuneration Report on pages 76 to 81.
Committee members
Audit Committee
Nomination Committee
Remuneration Committee
Alan Campbell (Chair)
Russ Shaw (Chair)
Mike Cannon (Chair)
Aidan Hughes
Eamonn O’Hare
Chris Burke
Mike Cannon
Chris Burke
Russ Shaw
100% independent (3 of 3) 100% independent (3 of 3) 100% independent (3 of 3)
Share ownership and dealing
Details of Directors’ shareholdings are set out
on page 71. 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 2015, these were:
Audit Committee, Nomination Committee and
Remuneration Committee. Ad hoc committees
are formed from time to time to deal with
specific matters.
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 65 and 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
IFRS as adopted by the EU.
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 September 2015, Dialog hosted a day
of presentations and product displays, for
institutional investors and analysts. The event
was attended by many of Dialog’s senior
management team.
The composition of the Board sub-
committees, as at 8 March 2016, is set out
on pages 54 and 55. Attendance at meetings
held in 2015 is set out in the table on page 62.
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
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 2015 were:
> 4.38% Deutsche Bank AG
> 3.46% Waddell & Reed
As of 24 February 2016 the Company was
aware of the following holdings:
The Bank of New York Mellon
SA/NV
Citigroup Global Markets
9,812,748
7,601,310
DeAWM Investment GmbH
5,227,218
BNP Paribas Securities Services
4,458,083
RBC Investor Services Trust
3,091,336
Chase Nominees Ltd. (022)
2,580,121
Nortrust Nominees Limited
2,484,772
Chase Nominees Ltd. (234)
2,203,847
Dialog’s free-float is 75,986,760 or 97.6%
of the outstanding shares. The free-float
is calculated by excluding the 1,879,195
shares held in the Dialog Semiconductor Plc
Employee Benefit Trust.
Dialog Semiconductor PlcAnnual report and accounts 2015
65
> 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 2015
The Audit Committee discharged its
obligations during the year as follows:
> Reviewed the 2014 (issued in February
2015) and 2015 (issued in March 2016)
full-year results announcement.
> Reviewed the annual report and financial
statements – including the report of the
external auditor – for the year ended 31
December 2014 (issued in February 2015)
and for the year ended 31 December 2015
(issued in April 2016).
> Reviewed the quarterly financial
statements issued in May, July and October
2015.
> Conducted a tender for the role of external
auditor and appointed a new external
auditor.
> Reviewed the external audit plan presented
by the external auditor in advance of the
audit for the year ended 31 December
2015.
> Approved the annual internal audit plan
and received and reviewed internal audit
reports including the annual assessment
and review of internal controls.
> Reviewed the Atmel F-4 filing as well
as the incurred M&A project cost of
$18.8 million.
> Reviewed the SOX compliance project
linked to the planned US listing linked to
the Atmel M&A project.
External Auditor | Appointment
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 free-float includes the following shares
held on behalf of discretionary clients as per
the share register on 31 December 2015:
The Bank of New York
Mellon SA/NV
10,241,611
Citigroup Global Markets
8,189,425
BNP Paribas Securities Services
4,652,630
DeAWM Investment GmbH
4,304,493
State Street f. Benefit of Clients
3,937,351
CACEIS Bank Deutschland GmbH 2,316,262
Chase Nominees Ltd.
2,074,432
RBC Investor Services Trust
2,039,203
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 48 to 52.
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 2015 and up to the date of
the approval of the 2015 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 2015, these were:
Audit Committee, Nomination Committee
and Remuneration Committee. Reports on
the activity of these committees during 2015
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 2015, the Audit Committee comprised
only independent non-executive Directors.
Members at the end of 2015 were Alan
Campbell, Chairman, Aidan Hughes and
Eamonn O’Hare. John McMonigall and Peter
Weber retired from the Committee during the
year when they retired from the Board.
As set out on page 55, the Board has
determined that Alan Campbell, Eamonn
O’Hare and Aidan Hughes all have recent and
relevant financial experience.
The Audit Committee meets a minimum of
four times a year. In 2015, the Committee met
five times. Attendance at meetings held is set
out in the table on page 62. The Committee
also meets privately with the internal and
external auditors and separately with the
executive management.
The internal audit function is appropriately
resourced with the required skills and
experience, and is supported by specialist
resources where required. The Head of
Internal Audit is accountable to the Audit
Committee and meets independently with
the Committee Chairman regularly during the
year. The Committee approves the internal
audit plan and receives a report on internal
audit activity at each meeting, and monitors
the status of findings or improvement actions.
Aidan Hughes stepped down as Chairman
of the Committee at the December 2014
Board meeting. Aidan Hughes had served
in this role for nine years. Eamonn O’Hare
succeeded Aidan Hughes as Chairman but
he has stepped down due to the pressure of
other commitments, and has been replaced by
Alan Campbell.
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;
> Make recommendations on the
appointment and remuneration of external
auditors and to monitor their performance
and independence; and
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information
66 Corporate Governance statement
continued
EY were appointed as the Group’s external
auditor in 2006. Although the Committee
was satisfied that EY continued to provide an
effective audit service throughout their tenure,
during 2015, in line with best practice, the
Audit Committee put the external audit out to
tender. Following the tender process, which
included proposals from three firms, including
the incumbent, Deloitte LLP were selected
as the Group’s new external auditors and
their approval will be subject to approval by
Shareholders at the 2016 AGM.
Dialog is committed to putting out the statutory
audit to tender at least every ten years.
External Auditor | Role
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 in note 3 on page 103.
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.
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.
At the end of 2015, the Nomination
Committee comprised Russ Shaw (Chair), Chris
Burke and Mike Cannon. John McMonigall
and Aidan Hughes stepped down from the
committee during the year. The Committee
comprises 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.
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 62.
Activity in 2015
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, Alan
Campbell, was recruited during the course
of 2015; and
review succession arrangements for
all key executive positions.
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 2015, the Remuneration Committee
comprised Mike Cannon (Chair), Chris Burke
and Russ Shaw. Peter Weber stepped down
from the Committee during the year. 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.
During the year the Committee sought
and received general advice relating to
remuneration from independent adviser
New Bridge Street and Radford (both part of
Aon plc). New Bridge Street is a signatory to
the Remuneration Consultants Group Code
of Conduct and any advice was provided
in accordance with this code. New Bridge
Street and Radford provided no other services
to Dialog during 2015 and have no other
connection with the Company other than as
adviser on issues relating to remuneration.
Remuneration advice was also provided in
2014 by New Bridge Street. Remuneration
advice was also provided by another
independent firm, Towers Watson, between
2012 and 2014.
In 2015, the Committee met formally on
five occasions. In addition, the Committee
Chairman held a number of meetings with
adviser. Attendance at scheduled meetings is
set out on page 62.
The full terms of reference of the Committee
are available on our website under the
Corporate Governance section of the Investor
Relations section.
A detailed report on the work of the
Remuneration Committee during 2015,
is set out on pages 68 to 81.
Dialog Semiconductor PlcAnnual report and accounts 2015 Directors’ remuneration report
67
Annual statement from Mike Cannon, Chairman of the Remuneration Committee
Dear Shareholders,
On behalf of the Remuneration Committee I am pleased to present the Directors’ Remuneration Report for 2015. As last year, 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 2015.
Dialog is an international semiconductor company whose operations and competitors are largely based in the US. As a result, remuneration in Dialog’s
sector is heavily influenced by US practice and this is reflected in some aspects of Dialog’s Remuneration Policy. Dialog’s Remuneration Policy has been
designed so that the majority of remuneration is delivered through performance-based, long-term variable remuneration with a large equity component.
Performance and remuneration for 2015
At the 2015 AGM, Dialog shareholders approved a number of changes to the remuneration policy to simplify remuneration and increase the
emphasis on rewarding sustained shareholder returns. These changes have been implemented in 2015 and include: the removal of the share
matching scheme; the removal of the CEO’s profit sharing arrangement; and the introduction of a relative total shareholder return (“TSR”)
performance measure to the long-term incentive plan (“LTIP”).
Dialog has performed very strongly over the last 11 financial years since the current CEO was appointed, having delivered a TSR of 1,705%. This
strong performance continued in 2015 and has been reflected in Dialog’s financial performance. As a result, an annual bonus award of 79.25%
of maximum has been achieved by the CEO for 2015. The portion of bonus above the target level (1x base salary) is deferred into shares for three
years with no match. The long-term Executive Incentive Plan (“EIP”) for the period 2013-15 is expected to achieve a vesting level of 81.3%, driven
by performance relative to the three metrics, which are share price, revenue and EBIT.
Base salary
The Committee reviewed the CEO’s base salary in the first half of 2015 with reference to: Dialog’s performance; the increased scale of the Group;
and, market data for Dialog’s competitors. The market data showed that the CEO’s base salary was below market median levels. As a result, the
Committee awarded the CEO a base salary increase of 5%. His resulting base salary is £440,713 (US$653,062).
The Remuneration Committee is proposing a change to remuneration policy for the Executive Director, and a separate resolution to increase the
non-executive director fee capacity.
Changes to executive contract policy:
The change to the remuneration policy relates to our policy on service contracts for Dialog’s CEO and any other future executive director
appointments. This policy is currently out of line with market practice amongst Dialog’s competitors. Remuneration arrangements for Dialog’s
competitors reflect the US market. The Committee believes it is important to take account of market practice in our sector and to operate a flexible
remuneration policy which enables the company to compete in its employment market.
However, the Committee is also mindful that market practice and shareholder guidelines in the UK, in relation to service contracts and severance
arrangements, are different from those in the US. The proposed changes to our service contract policy take account of shareholder guidelines for
UK companies.
Details of the proposed changes are included in the Directors’ Remuneration Policy section of this report.
Changes to non-executive director fee arrangement:
NED fees were last reviewed in 2011. Since that time Dialog has more than doubled in size and there has been an increase in the complexity of
the business and NED time commitment. In 2015 and 2016 current fee levels were reviewed against market practice for Dialog’s competitors. The
review showed that current fee levels at Dialog were around 55% of market median levels. In addition, the review showed that Dialog’s practice of
paying fees entirely in cash was out of line with market practice; in its sector, fees are typically paid in a mix of cash and shares. At the 2016 AGM,
the Board is submitting a separate resolution to shareholders to allow Dialog to increase the maximum aggregate fees of non-executive directors
to enable market median levels to be paid. Following this increase, Dialog will pay the majority of fees in shares with no performance or service
conditions. The total fees paid in cash will be lower than currently. The fee levels for 2016 are set out in the annual report on remuneration.
In addition, non-executive directors will be required to retain the shares (net of any requirement to pay tax) until they have fulfilled a minimum
shareholding requirement.
Conclusions
Remuneration earned by Dialog executives in 2015 continues to be aligned with the outstanding performance achieved over the last 11 years.
The changes proposed to remuneration for 2016 will bring our policy for contracts closer in line with market practice taking account of shareholder
guidelines for UK companies. Non-executive director fees will be brought to market median levels with a substantial percentage in shares to
enhance alignment with shareholders.
The Committee would welcome your support for the proposed changes to the Directors’ Remuneration Policy and the annual report on remuneration.
Mike Cannon
Chairman, Remuneration Committee
8 March 2016
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information 68 Annual report on remuneration
Audited information
Incumbent
Year
Total
salary
US$1
Benefits
US$
Pension
US$8
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
Dr Jalal Bagherli
Dr Jalal Bagherli
2015
637,514
19,885
95,627
753,026 1,035,103 4,376,712 5,411,815 1,788,129 6,164,841
2014
620,838
22,390
0
643,227 1,167,616 2,710,299 3,877,915 1,810,843 4,521,143
Notes:
1 Base salary earned during the financial year ending 31 December 2014 excludes US$4,466 sacrificed into pension.
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 2014 performance year 65,332 EIP options vested and were valued at a price of €26.80 in
the 2014 annual report. The figure has been updated based on the actual market close price at vesting of €34.25. For the 2015 performance year, assuming the share price measure is not
met, Revenue targets are partially met and EBIT targets are met, 114,373 EIP options will vest. Value is based on a price of €35.25 (average share price over last three months in 2015).
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 Until March 2014 the CEO participated in a defined benefit pension arrangement, through a Defined Benefit Small Self-Administered Scheme. In 2014 a value of $0 is disclosed for pension
because all pension was deemed to have been accrued prior to the beginning of the financial year, and the contributions made during 2014 were in respect of 2013 accrual. From April
2014 to 31 December 2014, no pension benefit was provided for the executive. From 2015 the CEO receives a pension allowance of 15% of base salary.
9 Exchange rates used are: GBP 1 = USD 1.481831; EUR 1 = USD 1.089301
Incumbent
Chris Burke
Chris Burke
Aidan Hughes
Aidan Hughes
John McMonigall4
John McMonigall
Gregorio Reyes1
Russ Shaw
Russ Shaw
Peter Weber4
Peter Weber
Richard Beyer
Richard Beyer
Michael Cannon
Michael Cannon
Eamonn O’Hare
Eamonn O’Hare2
Alan Campbell5
Alan Campbell
Year
2015
2014
2015
2014
2015
2014
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
Fees
US$
118,546
140,466
118,117
140,466
39,516
128,858
32,255
133,365
140,466
39,515
124,858
163,001
171,680
129,043
124,858
112,614
101,808
84,587
N/A
Taxable
Benefits
US$
8,885
–
16,468
–
1,568
–
–
5,857
–
9,142
–
17,011
–
17,222
–
9,285
–
8,147
N/A
114,718
146,973
Incentives
(Annual)
US$
Incentives
(Long-term)
US$
Other
remuneration
US$
Shares
vested3
US$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
87,198
42,864
98,086
48,204
87,198
42,864
98,086
48,204
87,198
42,864
–
–
–
–
–
–
–
N/A
–
N/A
–
N/A
–
N/A
Total
US$
214,630
183,330
232,671
188,670
128,282
171,722
237,308
188,670
135,855
167,722
180,012
171,680
146,265
124,858
121,899
101,808
92,734
N/A
Notes:
1 Gregorio Reyes retired from the Board on 1 May 2014.
2 Eamonn O’Hare joined the Board on 7 March 2014.
3 Shares vested shows the value of the number of shares vested in 2014 and 2015 at the closing share price on the day of vesting. There were no performance conditions attached
to the vesting.
4 Peter Weber and John McMonigall retired from the Board on 30 April 2015
5 Alan Campbell joined the Board on 30 April 2015
6 Exchange rates used are: GBP 1 = USD 1.481831; EUR 1 = USD 1.089301
Executive Director
Fixed remuneration
Base salary
The Remuneration Committee reviewed the CEO’s base salary in July 2015 with reference to Dialog’s performance and with reference to
remuneration market data at Dialog’s sector. The market data showed that the CEO’s base salary is below mid-market levels. Taking account of
Dialog’s sustained strong performance over recent years, including 2015, the CEO was awarded a 5% increase in annual base salary with effect from
1 July 2015. His salary from 1 July 2015 is £440,713 (US$653,062) which is closer to the mid-market level.
Other benefits
The CEO received a cash allowance in lieu of a company car (US$15,115), medical insurance for himself and his spouse and Group life and income
protection insurance. The total value of taxable benefits provided was US$19,885 equivalent to 3.04% of his current salary.
Pension
The CEO receives a pension allowance of 15% of base salary which is in line with policy. In 2015 the Company made pension allowance payments of
£64,533 (US$95,627) to the CEO.
Dialog Semiconductor PlcAnnual report and accounts 2015 69
Variable compensation
For 2015, the CEO was eligible for an annual bonus of 100% of base salary for achieving target performance with up to 200% of base salary for
maximum performance, and no awards payable if profit was below threshold. The portion of any bonus awarded above target is deferred into
shares which vest after three years. In prior years, the CEO also received an award of matching shares relating to his deferred bonus. This share match
has ceased to apply with effect from the bonus for FY 2015 based on the Directors’ remuneration policy approved by Shareholders in 2015.
Performance measures used were:
> financial goals (60%) comprising revenue (20%), gross margin (20%), EBIT (20%);
>
> personal goals (20%).
customer-related measures (20%); and
Performance against targets set in these areas was as shown in the table below. Performance under gross margin, customer-related, and personal
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
threshold
Below
target
On
target
Above
target
US$1,355 million
19.2%
Revenue is defined as Total Dialog 2015 IFRS Revenue (US$1,355 million). EBIT is defined as Total Dialog 2015 IFRS EBIT.
Accordingly, the Committee determined that a bonus equivalent to 158.5% of base salary should be paid. The amount over 100% will be deferred
into shares.
Long-term incentive plans
In 2011, the Group established an equity settled Executive Incentive Plan (EIP) replacing the previous LTIP under which no further grants could be
made from 31 May 2011. The EIP was then replaced by the new Long Term Incentive Plan, as no further grants could be made under EIP from 5 May
2015. The first new LTIP Awards were granted on 1 May 2015, after approval of the plan at the 2015 AGM.
Awards granted under the 2013 EIP are capable of vesting in 2016 subject to the satisfaction of Revenue, EBIT and Share Price performance
measures. Following the completion of the final performance period in 2015, the Committee has assessed performance against the performance
targets set over the performance period and has determined that 81.3% 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)
Actual vesting outcome
(% of award)
37.5%
37.5%
25%
100%
27.1%
37.5%
16.7%
81.3%
The Chief Executive was awarded a total of 140,695 EIP share options in 2013, of which 98,084 EIP share options were awarded as performance
shares and 42,611 share options were awarded as part of a matching award (invested shares) under the deferred bonus agreement.
As a result of the actual vesting outcome, 114,373 of the total 140,695 EIP share options awarded to the Chief Executive in 2013 (i.e. 81.3%) will
vest in 2016. 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. They will be
disclosed in the annual report in a future year if they are no longer considered to be commercially sensitive.
As the share price at the date of vesting for the 114,373 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 2015 of Euro 35.25. This results in a value of
US$4,376,712 as shown in the LTI column of the 2015 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 2015.
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information
70 Annual report on remuneration
continued
Share awards made during the year continued
Awarded during the year
Date of award
Granted
number
Market price
at date of
grant
Face value of award
% of award
that will vest
at threshold
Performance period
LTIP – performance shares
Dr Jalal Bagherli
Deferred shares
Dr Jalal Bagherli
EIP – invested shares
Dr Jalal Bagherli
01/05/2015
97,329
€40.56
€3,947,664
25%
01/01/2015–31/12/2017
12/02/2015
29,913
€34.84
€1,042,169
n/a
No performance
conditions
12/02/2015–12/02/2018
12/02/2015
29,913
€34.84
€1,042,169
15%
01/01/2015–31/12/2017
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 2015, the CEO was awarded 97,329 LTIP shares (in the form of nominal price options), which at the date of grant (1 May 2015) had a value of
€3,947,664. Receipt of these shares is subject to achievement of performance conditions as outlined below.
Long-Term Incentive Plan (LTIP – Performance Shares) Performance metrics:
> Dialog TSR performance over the three-year performance period relative to the constituents of the S&P 1500 Select Semiconductor index (1/3)
> Dialog Revenue in each year of the three-year performance period (1/3)
> Dialog EBIT in each year of the three-year performance period (1/3)
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 assessed on actual Dialog performance against targets set at the beginning of each year.
Relative Total Shareholder Return is measured at the third anniversary date of the award over the three-year performance period.
Shares accrued during the performance period are released to Executive Directors as soon as practicable after the third anniversary of the award.
Of his 2014 annual bonus (paid in 2015), the CEO deferred 100% of the bonus paid which at the share price on the date of award (€34.84) was
equivalent to 29,913 shares. The Deferred Shares for the annual bonus have no further performance conditions.
The Deferred Shares were matched on a one-for-one basis under the EIP. Receipt of these shares is subject to achievement of performance
conditions as outlined below but do not vest for three years:
Executive Incentive Plan (EIP – Invested Shares) Performance metrics:
> 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 2015, 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.
Dialog Semiconductor PlcAnnual report and accounts 2015 71
Directors’ interests in shares
The CEO is expected to establish and hold a shareholding of at least 300% of salary. The CEO currently complies with this requirement.
Number at
31 December 2015
Dr Jalal Bagherli
Chris Burke
Aidan Hughes
John McMonigall
Gregorio Reyes
Russ Shaw
Peter Weber
Richard Beyer
Michael Cannon
Eamonn O’Hare
Alan Campbell
Share Awards with
Performance Conditions
Share Awards without
Performance Conditions
10 pence
ordinary
shares
Performance
shares
(EIP & LTIP)
EIP – invested
shares
Deferred
shares
Share
options
(unvested)
Share options
(vested &
unexercised)
Options
exercised in
year
Total
268,676
354,603
110,461
112,677
0
25,000
50,000
0
0
0
0
0
0
0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0
–
–
–
–
–
–
–
–
–
–
100,000
150,000 1,096,417
–
3,889
3,889
4,374
–
29,374
–
–
4,374
–
–
–
–
–
3,889
53,889
–
–
3,889
0
4,374
3,889
–
–
–
–
0
0
0
0
Full Name
Share plan
Grant date
Final
vesting
date
Exercise
price
(EUR)
Holding
at 31 Dec
2014
Lapse date
Granted
Exercised
Lapsed
Jalal Bagherli
Dialog share unapproved –7yr
13/05/09 13/05/13 13/05/16 1.52
Jalal Bagherli
Jalal Bagherli
Dialog share approved – 7yr
Long-term incentive plan
13/05/09 13/05/13 13/05/16 1.52
04/02/10 04/02/11 04/02/15 0.11
–
–
–
Jalal Bagherli
Long-term incentive plan
18/02/11 18/02/11 18/02/171 0.12
250,000
Jalal Bagherli
Executive incentive plan
16/02/12 16/02/15 16/02/18 0.12
65,332
Jalal Bagherli
Executive incentive plan
16/02/13 16/02/16 16/02/19 0.12
92,985
Jalal Bagherli
Deferred bonus plan 2013
18/02/13 18/02/16 18/02/20 0.01
42,611
Jalal Bagherli
Executive incentive plan
18/02/13 18/02/16 18/02/19 0.12
40,395
Jalal Bagherli
Executive incentive plan
16/02/14 16/02/17 16/02/20 0.12
98,957
Jalal Bagherli
Deferred bonus plan 2013
18/02/14 18/02/17 18/02/21 0.01
40,153
Jalal Bagherli
Executive incentive plan
18/02/14 18/02/17 18/02/21 0.12
40,153
–
–
–
–
–
–
–
–
–
–
–
Jalal Bagherli
Deferred bonus plan
12/02/15 12/02/18 12/02/22 0.01
Jalal Bagherli
Executive incentive plan
12/02/15 12/02/18 12/02/22 0.12
Jalal Bagherli
LTIP nominal cost option
01/05/15 01/03/18 01/03/25 0.15
– 29,913
– 29,913
– 97,329
–
–
–
150,000
–
–
–
–
–
–
–
–
–
–
670,586 157,155 150,000
Notes:
1 The exercise period for this grant was extended by the Board of Directors
Aidan Hughes
NED 06 share option
19/06/06 19/06/10 19/06/13 1.27
Aidan Hughes
NED 06 share option
10/05/07 10/05/08 10/05/14 1.80
Aidan Hughes
NED 06 share option
30/04/08 30/04/09 30/04/15 1.35
Aidan Hughes
NED 06 share option
22/04/09 22/04/10 22/04/16 1.17
Aidan Hughes
NED 11 share option
21/07/11 21/04/14 01/05/18 0.15
Aidan Hughes
NED 11 share option
18/07/12 21/04/15 01/05/19 0.15
Christopher Burke NED 06 share option
12/07/06 12/07/10 12/07/13 1.40
Christopher Burke NED 06 share option
10/05/07 10/05/08 10/05/14 1.80
Christopher Burke NED 06 share option
30/04/08 30/04/09 30/04/15 1.35
Christopher Burke NED 06 share option
22/04/09 22/04/10 22/04/16 1.17
Christopher Burke NED 11 share option
21/07/11 21/04/14 01/05/18 0.15
Christopher Burke NED 11 share option
18/07/12 21/04/15 01/05/19 0.15
Gregorio Reyes
NED 06 share option
19/06/06 19/06/10 19/06/13 1.27
Gregorio Reyes
NED 06 share option
10/05/07 10/05/08 10/05/14 1.80
Gregorio Reyes
NED 06 share option
30/04/08 30/04/09 30/04/15 1.35
–
–
–
–
2,293
2,081
–
–
–
–
2,039
1,850
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,039
1,850
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Holding
at 31 Dec
2015
–
–
–
100,000
65,332
92,985
42,611
40,395
98,957
40,153
40,153
29,913
29,913
97,329
677,741
–
–
–
–
2,293
2,081
–
–
–
–
–
–
–
–
–
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information
72
Annual report on remuneration
continued
Directors’ interests in shares continued
Full Name
Share plan
Grant date
Final
vesting
date
Exercise
price
(EUR)
Holding
at 31 Dec
2014
Lapse date
Granted
Exercised
Lapsed
Gregorio Reyes
NED 06 share option
22/04/09 22/04/10 22/04/16 1.17
Gregorio Reyes
NED 11 share option
21/07/11 21/04/14 01/05/18 0.15
Gregorio Reyes
NED 11 share option
18/07/12 21/04/15 01/05/19 0.15
John McMonigall NED 06 share option
19/06/06 19/06/10 19/06/13 1.27
John McMonigall NED 06 share option
10/05/07 10/05/08 10/05/14 1.80
John McMonigall NED 06 share option
30/04/08 30/04/09 30/04/15 1.35
John McMonigall NED 06 share option
22/04/09 22/04/10 22/04/16 1.17
John McMonigall NED 11 share option
21/07/11 21/04/14 01/05/18 0.15
John McMonigall NED 11 share option
18/07/12 21/04/15 01/05/19 0.15
NED 06 share option
19/06/06 19/06/10 19/06/13 1.27
NED 06 share option
10/05/07 10/05/08 10/05/14 1.80
NED 06 share option
30/04/08 30/04/09 30/04/15 1.35
NED 06 share option
22/04/09 22/04/10 22/04/16 1.17
NED 11 share option
NED 11 share option
21/07/11 21/04/14 01/05/18 0.15
18/07/12 21/04/15 01/05/19 0.15
2,039
1,850
NED 06 share option
12/07/06 12/07/10 12/07/13 1.40
NED 06 share option
10/05/07 10/05/08 10/05/14 1.80
NED 06 share option
30/04/08 30/04/09 30/04/15 1.35
NED 06 share option
22/04/09 22/04/10 22/04/16 1.17
NED 11 share option
NED 11 share option
21/07/11 21/04/14 01/05/18 0.15
18/07/12 21/04/15 01/05/19 0.15
–
–
–
–
2,293
2,081
20,415
–
–
–
–
–
–
–
2,039
1,850
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,039
1,850
–
–
–
–
2,039
1,850
–
–
–
–
–
–
11,667
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Holding
at 31 Dec
2015
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,293
2,081
8,748
Share Awards with
Performance Conditions
Share Awards without
Performance Conditions
10 pence
ordinary
shares
EIP –
performance
shares
EIP –
unvested
shares
Deferred
shares
Share
options
– unvested
Share options
– vested
(unexercised)
Share options
– exercised
in year
Total
268,676
257,274
80,548
82,764
–
250,000
443,343 1,382,605
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
–
–
–
Peter Weber
Peter Weber
Peter Weber
Peter Weber
Peter Weber
Peter Weber
Russ Shaw
Russ Shaw
Russ Shaw
Russ Shaw
Russ Shaw
Russ Shaw
Number at
31 December 2014
Dr Jalal Bagherli
Chris Burke
Aidan Hughes
John McMonigall
Gregorio Reyes
Russ Shaw
Peter Weber
Richard Beyer
Michael Cannon
Eamonn O’Hare
Dialog Semiconductor PlcAnnual report and accounts 2015 73
Unaudited information
Annual change in CEO pay versus employee pay
The table below compares the average change in base salary, benefits (excluding pension) and bonus awards for the CEO and for an average UK
employee over the period 2014 to 2015. The salary increase shown for the CEO is above the average increase for UK employees but in line with
salary increases for high performers, which ranged from 3% to 8%. The increase to the CEO’s base salary resulted from the annual salary review
which showed that the CEO’s base salary was below mid-market levels. Taking account of Dialog’s sustained strong performance over recent years,
including 2015, the Remuneration Committee decided that an increase of 5% to the CEO’s base salary was appropriate and it was noted that the
resulting base salary remains below mid-market levels.
Measure
Base salary
Taxable benefits
Annual bonus
Total1
Percentage change from
2014 to 2015
CEO
5.0
(11.2)
(11.3)
(5.7)
Average UK
employee
4.5
(35.0)
8.1
4.6
1 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.
Relative importance of spend on pay
As no distributions were made to shareholders the chart below shows the amounts spent in 2014 and 2015 by Dialog on research and development
and the Group’s accumulated retained earnings at the relevant year end in comparison to spend on employee pay.
US$
700,000,000
600,000,000
500,000,000
400,000,000
300,000,000
200,000,000
100,000,000
0
2014
2015
Remuneration spend for the 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, and both of these exceed the remuneration spend for the Group.
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information 74
Annual report on remuneration
continued
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
US$
5,000
4,000
3,000
2,000
1,000
0
Dec 08
Dec 09
Dec 10
Dec 11
Dec 12
Dec 13
Dec 14
Dec 15
This graph shows the value, by 31 December 2015, of US$100 invested in Dialog Semiconductor Plc on 31 December 2008 compared with
the value of US$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)
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
31 December 2009
31 December 2010
31 December 2011
31 December 2012
31 December 2013
31 December 2014
31 December 2015
Total remuneration including
unrealised gains on options
(single figure basis)(1)
Annual bonus (% of
maximum)(2)
Long-term variable pay
(% of maximum)
US$1,028,853 US$4,809,398 US$30,426,678 US$2,167,224 US$2,046,555 US$4,521,143 US$6,164,841
N/A
N/A
N/A
100%
91.94%
89.12%
79.25%
95%
100%
100%
100%
100%
78%
81.3%
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 74. 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 No maximum bonus was defined prior to 2012.
Operation of policy in the following year
In 2016, the remuneration policy for the CEO will be implemented along broadly similar lines to 2015. Remuneration will continue to be comprised of
base salary, benefits, pension, annual bonus and a LTIP award. The annual bonus will be based on similar metrics to last year, namely, financial goals
(60%), customer goals (20%) and personal goals (20%).
The LTIP award granted to the Chief Executive in 2016 will have a target value of £2m in accordance with the approved policy and, as in 2015, will
vest after three years subject to the satisfaction of three performance metrics:
> 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.
Non-executive director fees will be restructured in 2016 to be brought in line with market levels and to increase alignment with Shareholders by
paying 60% of the fees in shares (subject to a holding requirement but not a performance condition). The cash element of the fees will reduce and
the total fee level, which is comprised of a cash and equity component, will increase. The planned fee levels and the portion paid in cash and shares
are set out in the table opposite:
Dialog Semiconductor PlcAnnual report and accounts 2015 In thousands
Chairman fee
Base fee
Committee Chairmanship fee
Audit
Remuneration
Nominations and Governance
Committee membership fee
Audit
Remuneration
Nominations and Governance
75
Shares
£120
£87
–
–
–
–
–
–
2015
2016
Cash
£110
£80
£10
£10
£10
–
–
–
Shares
–
–
–
–
–
–
–
–
Cash
£80
£58
£16
£12
£5
£5
£6
£2.5
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. The members are currently Chris Burke, Michael Cannon (Chair) and Russ Shaw.
There was a change to the membership of the Committee during the year as Peter Weber retired from the Board on 30 April 2015. 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 New Bridge Street and Radford (both part of Aon
plc). The Committee is satisfied that the advice received from New Bridge Street and Radford is objective and independent and is not subject to any
material conflict of interest.
New Bridge Street and Radford 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 New Bridge Street and Radford during the
year in respect of advice totalled £146,100 (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.
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 CEO’s remuneration package.
Shareholder voting results from 2015 AGM
The table below summarises the number of votes for and against the Directors’ remuneration policy and annual report on Remuneration at the 2015
AGM. We also include the number of abstentions (referred to as votes withheld).
Votes for1
Votes against1
Resolution
No. of shares
% No. of shares
%
Votes
withheld2
Total votes cast
% of voting
capital
instructed3
Approval of Directors’ Remuneration Policy
31,497,822
88.15% 4,234,656
11.85% 107,417
35,732,478
45.89%
Approval of Directors’ Remuneration Report
(excluding the Directors’ Remuneration Policy)
34,413,262
96.31% 1,318,921
3.69% 107,712
35,732,183
45.89%
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 29 April 2015 was 77,865,955 shares.
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information 76 Directors’ remuneration
policy report
Our policy on remuneration
This year the Remuneration Committee is proposing to amend our policy regarding service contracts and separation arrangements for executive
Directors. As a result, this Directors’ Remuneration Policy is being submitted to a shareholder vote at the 2016 AGM, and if applied, will take effect
from the date of the 2016 AGM. The principal amendment to the Directors’ Remuneration Policy brings the service contract policy closer in line with
market practice, but takes account of UK shareholder guidelines.
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. The policy is
intended to take formal effect from the 2016 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 2015
No change.
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 2015
No change.
Dialog Semiconductor PlcAnnual report and accounts 2015
77
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.
Any reasonable business related expenses (including tax thereon) can be reimbursed if determined to be a
taxable benefit. Executive Directors are eligible for other benefits and all-employee share plans which are
introduced for the wider workforce on broadly similar terms.
Performance framework
n/a
Changes in policy since 2015
Flexibility to include benefits provided for the wider workforce.
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 normally vest after three years, and are subject to the plan rules in the event of termination
or change in control. Dividend equivalents may be paid on any shares which vest.
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.
Performance framework
Performance metrics include:
> financial goals (which determine a significant portion of bonus every year);
>
> organisational and employee-related goals.
commercial goals; and
For financial metrics, performance is set in line with the stretch annual budget.
Changes since 2015
Flexibility to pay dividend equivalents on any shares which vest.
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information
78
Directors’ remuneration
policy report continued
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
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.
Operation
Performance framework
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. Dividend
equivalents may be paid on any shares which vest. Certain “leaver” provisions apply and are described in
the section headed “Termination arrangements” below.
The Committee has the discretion in certain circumstances to settle an award in cash. In practice this will
only be used in exceptional circumstances for Executive Directors.
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 three 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.
Changes since 2015
Discretion to settle an award in cash in exceptional circumstances and inclusion of facility to pay dividend
equivalents on any shares which vest.
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 in line with market practice where appropriate.
Maximum opportunity
To limit the Company’s liability for payments in cases of termination, and to provide a fair and equitable
settlement in line with market practice where appropriate.
Notice periods from the company do not exceed 12 months.
Termination not in connection with a change in control
In the case of the current Chief Executive the notice period is 12 months.
The maximum termination payment due in the case of termination of employment by the Company
without “cause” or termination by the Executive for a pre-defined good reason (see definition below) is:
> 1x base salary.
> 12 months’ continuation of pension and fringe benefits.
> Annual bonus pro-rated for the period worked only and subject to the normal performance test at year end.
Termination in connection with a change in control
In the case of the current Chief Executive the notice period from the employee or the company is 12 months.
The maximum payment due in the case of termination of employment by the Company without “cause” or
termination by the Executive for a pre-defined good reason in connection with a change in control event is:
> 1x base salary.
> 12 months’ continuation of pension and fringe benefits.
> Annual bonus time pro-rated for the period worked, and subject to performance.
Dialog Semiconductor PlcAnnual report and accounts 2015 Termination arrangements
Executive Directors
79
Additional points:
The above termination payments (both in connection with and not in connection with a change-in-
control) would be reduced by the amount of any other contractual payments made to the Executive. Such
payments could include a payment in lieu of notice, garden leave payment, and/or a payment in lieu of
holiday accrual. Any 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. An Executive
can also be placed on garden leave.
A pre-defined “good reason” includes: material salary reduction (other than across-the-board reductions
of up to 15%) or any reduction on change of control; company required relocation by 50 miles; or material
diminution in duties, responsibilities or authority (but a change in reporting line alone does not constitute
a good reason).
In addition to the above termination payments, the Committee may pay reasonable outplacement and legal
fees where considered appropriate and may pay any statutory entitlements or settle any compromise claims
in connection with a termination of employment, where considered in the best interests of the Company.
Termination provisions for the EIP and LTIP are as follows:
Termination not in connection with a change in control
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 time proration.
In the case that employment is terminated by the Company without cause or termination by the executive
for a pre-defined good reason detailed above, then the outstanding awards will vest subject to time
proration and performance against targets.
Termination in connection with a change in control
In the event of a change in control of the Company any award will be rolled over into an award in the new
entity but with the Company having discretion for time pro-rated vesting, subject to performance, with
the balance rolled over. Performance-based awards, after application of performance test, will roll over
into to time-based awards. Any awards rolled over will ordinarily vest at the nominal vesting date. However
in the case that employment is terminated by the Company without cause, or termination by the executive
for a pre-defined good reason detailed above in connection with a change in control, then outstanding
awards will vest immediately without time proration.
Changes in policy since 2015
Termination provisions brought closer in line with market practice, but taking account of UK shareholder
guidelines.
Termination arrangements
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.
Changes in policy since 2015
No change.
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information 80
Directors’ remuneration
policy report continued
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 taking account of 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.
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 normally exceed 12 months. However, if it is
necessary to offer an executive Director a longer notice period at recruitment, then the length of the notice
period will reduce on a rolling basis until it is no greater than 12 months.
Changes in policy since 2015
No change.
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.
Dialog Semiconductor PlcAnnual report and accounts 2015 81
Shareholding requirement
The Committee will set a shareholding requirement for Executive Directors. The requirement for the current CEO was increased from 200% to
300% of base salary with effect from 2015. The Committee reviews the level of shareholding requirement from time to time and has authority to
amend it as necessary.
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) vested 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 60 Dialog employees. This
number may increase over time as the business grows.
>
> Notice periods – Other UK employees’ contracts of employment include three-month notice periods.
Indicative remuneration levels resulting from policy
The charts below represent for the 2016 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).
6,000
5,000
4,000
3,000
2,000
1,000
0
£2,970
67%
15%
18%
Target
£529
100%
Minimum
Fixed pay
Annual Bonus
LTIP
£5,411
74%
16%
10%
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 maximum value of the LTIP award
vesting; and
> maximum performance: fixed pay, maximum annual bonus of 200% of salary and 100% of the maximum value of the LTIP award vesting.
We have assumed that the grant in 2016 under the LTIP will have a target value of £2 million. This could range up to £4 million for achievement of
the maximum performance targets. This is in line with the target and maximum value permitted under the policy.
Stakeholder views
Shareholder proxy advisory groups are engaged when the Company is considering material changes to policy, including approval of any new share plans.
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 SVP Blog.
Mike Cannon
Chairman, Remuneration Committee
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information 82
Statement of Directors’
responsibilities
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.
select suitable accounting policies and then apply them consistently;
In preparing each of the Group and parent company financial statements, the Directors are required to:
>
> 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:
>
the financial statements, prepared in accordance with IFRS as adopted by the European Union and IFRS as issued by the IASB, give a true and fair
view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a
whole; and
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 undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face;
and
the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for
shareholders to assess the company’s position, performance, business model and strategy.
>
>
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
8 March 2016
Dialog Semiconductor PlcAnnual report and accounts 2015 Independent Auditor’s report
to the members of Dialog Semiconductor Plc
83
We have audited the financial statements of Dialog Semiconductor Plc for the year ended 31 December 2015 which comprise the Consolidated
Statement of Income, the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Balance Sheets, the
Consolidated and Parent Company Statements of Cash Flows, the Consolidated and Parent Company Statements of Changes in Equity and the
related notes 1 to 37. 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, 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 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.
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 2015 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.
>
>
>
Separate opinion in relation to IFRSs as issued by the IASB
As explained in note 1 to the group financial statements, the group in addition to complying with its legal obligation to apply IFRSs as adopted by
the European Union, has also applied IFRSs as issued by the International Accounting Standards Board (IASB).
In our opinion the group financial statements comply with IFRSs as issued by the IASB.
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.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us 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.
Alexander Butterworth ACA
(Senior statutory auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
Reading, UK
8 March 2016
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information 84 Consolidated statement of income
84
Consolidated statement of income
Year ended 31 December
Year ended 31 December
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
Other finance income (expense)
Profit before income taxes
Income tax expense
Net income
Loss attributable to non-controlling interests
Profit attributable to shareholders in the Company
Earnings per share (in US$)
Basic
Diluted
Weighted average number of shares (in thousands)
Basic
Diluted
Notes
3, 28
2015
US$000
1,355,312
(730,508)
2014
US$000
1,156,105
(641,296)
2013
US$000
901,380
(549,572)
624,804
514,809
351,808
28
3
28
3
3
3
5
23
6
(62,157)
(80,878)
(223,182)
1,159
259,746
1,215
(6,411)
289
254,839
(77,580)
177,259
(1,507)
178,766
(60,070)
(59,445)
(213,808)
4,416
185,902
419
(14,829)
(2,171)
169,321
(31,242)
138,079
–
138,079
(49,000)
(44,255)
(160,814)
4,921
102,660
565
(13,345)
(168)
89,712
(27,508)
62,204
–
62,204
2015
2014
2013
2.42
2.29
73,763
79,660
2.05
1.93
67,329
76,882
0.95
0.92
65,641
67,676
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015
Consolidated statement of
Consolidated statement of comprehensive income
comprehensive income
Year ended 31 December
85
85
Year ended 31 December
Net income
Other comprehensive income
Items that may be reclassified to profit or loss in subsequent periods
Currency translation differences on foreign operations
Income tax relating to currency translation differences on foreign operations
Cash flow hedges:
- Fair value (loss) gain recognised on effective hedges in the year
- Fair value loss (gain) transferred to profit or loss
Income tax relating to cash flow hedges
Other comprehensive income (loss) for the year
2015
US$000
2014
US$000
2013
US$000
177,259
138,079
62,204
(1,884)
(10)
(18,960)
31,980
(3,694)
7,432
(1,032)
(265)
(23,614)
3,820
5,445
(15,646)
269
(15)
1,747
(1,656)
(48)
297
Total comprehensive income for the year
184,691
122,433
62,501
Attributable to:
- Shareholders in the Company
- Non-controlling interests
Total comprehensive income for the year
186,619
(1,928)
122,433
–
184,691
122,433
62,501
–
62,501
www.dialog-semiconductor.com
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information
86 Consolidated balance sheet
Consolidated balance sheet
86
As at 31 December
As at 31 December
Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Income tax receivables
Other current assets
Total current assets
Goodwill
Other intangible assets
Property, plant and equipment
Other financial assets
Income tax receivables
Deferred tax assets
Total non-current assets
Total assets
Liabilities and equity
Trade and other payables
Other financial liabilities
Provisions
Income taxes payable
Other current liabilities
Total current liabilities
Convertible bonds
Other financial liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Ordinary shares
Additional paid-in capital
Retained earnings
Other reserves
Dialog shares held by employee benefit trust
Equity attributable to shareholders in the Company
Non-controlling interests
Total equity
Total liabilities and equity
Notes
2015
US$000
2014
US$000
7
8
10
9
11
13
14
12
15
5
16
17
18
19
21
20
18
5
23
22
566,809
72,668
2,086
134,930
129
20,856
797,478
251,062
138,604
68,444
3,758
51
28,454
490,373
324,280
100,569
3,586
99,140
64
10,491
538,130
244,878
131,505
59,263
3,304
95
28,771
467,816
1,287,851
1,005,946
131,553
8,245
1,861
62,181
49,884
253,724
–
4,919
2,725
1,598
9,242
14,402
463,725
571,510
(7,923)
(24,630)
1,017,084
7,801
90,906
22,120
1,829
29,409
42,473
186,737
180,207
7,916
1,955
5,455
195,533
13,353
274,517
366,650
(15,776)
(15,068)
623,676
–
1,024,885
623,676
1,287,851
1,005,946
These financial statements were approved by the Board of Directors on 8 March 2016 and were signed on its behalf by:
Dr Jalal Bagherli
Director
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015
Consolidated statement of cash flows
Consolidated statement of cash flows
Year ended 31 December
Year ended 31 December
87
87
Cash flows from operating activities:
Net income
Non-cash items within net profit:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Loss on disposals and impairment of fixed assets
Impairment of inventories
Share-based payments expense
Interest expense, net
Income tax expense
Cash generated from operations before changes in working capital
Changes in working capital:
Trade accounts receivable and other receivables
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 intangible assets
Payments for capitalised development costs
Purchase of businesses, net of acquired cash
Sale (purchase) of other investments
Change in other long term assets
Cash flow used for investing activities
Cash flows from financing activities:
Draw down of borrowings
Repayment of borrowings
Share issue costs
Purchase of Dialog shares by employee benefit trusts
Sale of Dialog shares by employee benefit trusts
Cash flow (used for)/from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Currency translation differences
Cash and cash equivalents at end of period
Notes
2015
US$000
2014
US$000
2013
US$000
177,259
138,079
62,204
24,010
31,120
1,751
9,047
19,215
5,196
77,580
345,178
29,737
(42,624)
(354)
34,448
122
(3,975)
362,532
(3,602)
1,107
(42,374)
317,663
(32,955)
(11,678)
(24,778)
(2,636)
68
278
(71,701)
–
–
–
(14,032)
11,589
(2,443)
243,519
324,280
(990)
566,809
22,144
33,431
407
9,828
21,173
14,410
31,242
270,714
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)
18,581
28,646
1,369
14,445
8,487
12,780
27,508
174,020
(33,418)
26,871
(923)
(19,490)
4,135
4,067
155,262
(3,805)
587
(41,365)
110,679
(23,173)
(9,519)
(5,974)
(303,851)
(1,500)
(186)
(43,010)
(344,203)
–
(105,000)
(39)
(6,172)
22,114
(89,097)
113,650
(10,000)
–
–
3,071
106,721
138,351
(126,803)
186,025
(96)
324,280
312,435
393
186,025
3
5
7
www.dialog-semiconductor.com
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information
88 Consolidated statement of changes
88
Consolidated statement of changes in equity
in equity
Year ended 31 December
Year ended 31 December
Other reserves
Dialog shares
Ordinary
shares
Additional paid-
in capital
US$000
US$000
Retained
earnings
US$000
Currency
translation
reserve
held by
Equity attributable
Non-
Hedging
reserve
employee
benefit trusts
to shareholders
in the Company
controlling
interests
US$000
US$000
US$000
US$000
US$000
As at 1 January 2013
12,852
243,829
129,190
(1,964)
1,537
(2,853)
382,591
Net income
Other comprehensive income
Total comprehensive income
Other changes in equity:
Sale of Dialog shares by employee benefit
trusts
Share-based payments, net of tax
–
–
–
–
–
–
–
–
62,204
–
62,204
2,460
–
–
8,487
–
254
254
–
–
–
43
43
–
–
–
–
–
62,204
297
62,501
611
–
3,071
8,487
As at 31 December 2013
12,852
246,289
199,881
(1,710)
1,580
(2,242)
456,650
Net income
Other comprehensive income (loss)
Total comprehensive income (loss)
Other changes in equity:
Dialog shares issued to employee benefit
trusts
Share issue costs
Purchase of Dialog shares by employee
benefit trusts
Sale of Dialog shares by employee benefit
trusts
Share-based payments, net of tax
–
–
–
501
–
–
–
–
–
–
–
138,079
–
–
–
(1,297) (14,349)
138,079
(1,297) (14,349)
–
–
–
138,079
(15,646)
122,433
9,780
(39)
–
–
–
–
18,487
–
–
28,690
–
–
–
–
–
–
–
–
–
–
(10,281)
–
–
(39)
(6,172)
(6,172)
3,627
–
22,114
28,690
As at 31 December 2014
13,353
274,517
366,650
(3,007) (12,769)
(15,068)
623,676
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
US$000
382,591
62,204
297
62,501
3,071
8,487
456,650
138,079
(15,646)
122,433
–
(39)
(6,172)
22,114
28,690
623,676
Net income
Other comprehensive income (loss)
Total comprehensive income (loss)
–
–
–
–
–
–
178,766
–
–
(1,473)
–
9,326
178,766
(1,473)
9,326
Other changes in equity:
Conversion of Convertible Bonds
Non-controlling interests in business acquired
(note 4)
Purchase of Dialog shares by employee
benefit trusts
Sale of Dialog shares by employee benefit
trusts
Share-based payments, net of tax
1,049
182,089
–
–
–
–
–
7,119
–
–
26,094
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
178,766 (1,507) 177,259
7,432
(421)
7,853
186,619 (1,928) 184,691
183,138
–
183,138
– 9,729
9,729
(14,032)
(14,032)
4,470
–
11,589
26,094
–
–
–
(14,032)
11,589
26,094
As at 31 December 2015
14,402
463,725
571,510
(4,480)
(3,443)
(24,630)
1,017,084 7,801 1,024,885
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015
Notes to the consolidated financial
Notes to the consolidated financial
statements
statements
For the year ended 31 December 2015
For the year ended 31 December 2015
89
89
1. Background
Description of business
Dialog Semiconductor plc (‘the Company’) is a public limited company that is incorporated and domiciled in the United Kingdom. The
Company’s ordinary shares are listed on the Frankfurt Stock Exchange.
Dialog creates and markets highly integrated, mixed signal integrated circuits, optimised for personal, portable, hand-held devices, low energy
short-range wireless, LED solid-state lighting and automotive applications. Dialog has four operating segments: Mobile Systems; Automotive &
Industrial; Connectivity; and Power Conversion. Segment information is presented in note 28.
Company name and registered office
Dialog Semiconductor Plc
Tower Bridge House
St Katharine’s Way
London E1W 1AA
United Kingdom
Statement of compliance
The consolidated financial statements of the Company and its subsidiaries (together, “Dialog” or the “Group”) set out on pages 84 to 145
have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union and those
parts of the Companies Act 2006 that are applicable to companies reporting under IFRS. From the Group’s perspective, there are no applicable
differences between IFRS adopted for use in the European Union and IFRS as issued by the International Accounting Standards Board (IASB),
and therefore the consolidated financial statements also comply with IFRS as issued by the IASB.
Basis of preparation
The consolidated financial statements are prepared on a going concern basis and in accordance with the historical cost convention, except
that derivative financial instruments are stated at their fair value.
The Group’s significant accounting policies are set out in note 2.
Presentation currency
The consolidated financial statements are presented in US dollars (US$), which is the functional currency of the Company, and amounts are
rounded to the nearest thousand US dollars (US$000) except when otherwise stated.
Approval of the financial statements
The consolidated financial statements for the year ended 31 December 2015 were authorised for issued in accordance with a resolution of the
Directors on 8 March 2016.
Company financial statements
Separate financial statements for the Company prepared in accordance with IFRS are set out on pages 146 to 149.
2. Summary of significant accounting policies
Changes in accounting policies and presentation
At the beginning of 2015, Dialog adopted the Annual Improvements to IFRSs arising from the IASB’s 2010-2012 and 2011- 2013, review
cycles, which had no impact on the Group’s results or financial position. Otherwise, the Group’s accounting policies were unchanged
compared with the year ended 31 December 2014.
With effect from the fourth quarter of 2015, management changed the balance sheet presentation of deferred revenue and related cost of
sales. In prior periods, the net amount of deferred revenue and related cost of sales was presented as a provision but it is now presented
within other current liabilities. Management considers that the revised presentation represents more appropriately the degree of certainty as to
the amount and timing of deferred revenue and related costs of sales.
Management has restated balance sheets presented for prior periods to reflect this change of presentation which had the following effect on
the Group’s balance sheet as at 31 December 2014:
Consolidated balance sheet
Provisions
Other current liabilities
2014
As previously reported
Reclassification
2014
As restated
US$000
US$000
US$000
8,305
35,997
(6,476)
6,476
1,829
42,473
As at 31 December 2015, the net amount of deferred revenue and related cost of sales included within other current liabilities was
US$9,994,000.
www.dialog-semiconductor.com
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90
90
2. Summary of significant accounting policies continued
Accounting standards issued but not adopted as at 31 December 2015
Outlined below are new or amended accounting pronouncements that have been issued by the IASB and are relevant to Dialog but had not yet
been adopted by Dialog as at 31 December 2015. Management has not yet completed its evaluation of financial effect of the pronouncements
on revenue recognition, leases and financial instruments.
Revenue Recognition
IFRS 15 Revenue from Contracts with Customers provides a single, principles based five-step model to be applied to all contracts with customers.
The five steps in the model are as follows: identify the contract with the customer; identify the performance obligations in the contract;
determine the transaction price; allocate the transaction price to the performance obligations in the contract; and recognise revenue when (or as)
the entity satisfies a performance obligation. IFRS 15 introduces extensive new disclosures about revenue, provides guidance for transactions
that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improves guidance for
multiple-element arrangements. In July 2015, the IASB proposed some targeted amendments to IFRS 15. As some entities may wish to apply
these amendments at the same time as they first apply IFRS 15, the IASB deferred the effective date of the standard by one year and it is now
effective for annual periods beginning on or after 1 January 2018.
Leases
In January 2016, the IASB issued IFRS 16 Leases, which will change the way that lessees will recognise, measure, present and disclose leases.
IFRS 16 provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12
months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to
lessor accounting substantially unchanged from its predecessor, IAS 17 Leases. IFRS 16 is effective for annual periods beginning on or after 1
January 2019.
Financial instruments
IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Classification and Measurement. Changes made by IFRS 9 that are relevant
to Dialog include the introduction of a new model for classification and measurement of financial assets and financial liabilities, a single,
forward-looking ‘expected loss’ model for measuring impairment of financial assets (including trade receivables) and a new approach to hedge
accounting that is more closely aligned with an entity’s risk management activities . IFRS 9 is effective for annual periods beginning on or after 1
January 2018.
Other pronouncements
At the beginning of 2016, Dialog adopted Amendments to IAS 1 Presentation of Financial Statements - Disclosure Initiative that are designed
to assist entities in applying 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 entities may use their judgement in determining where and in
what order information is presented in the financial disclosures.
Also at the beginning of 2016, Dialog adopted the Annual Improvements to IFRSs arising from the IASB’s 2012-14 review cycle, which had no
impact on the Group’s results or financial position.
In January 2016, the IASB published amendments to IAS 7 Statement of Cash Flows that are intended to improve information provided to
users of financial statements about an entity’s financing activities. In particular, the amendments require that specific changes in liabilities
arising from financial activities are disclosed and suggest that this requirement may be fulfilled by way of a reconciliation of the opening and
closing balances of liabilities arising from financing activities. The amendments are effective for annual periods beginning on or after 1
January 2017.
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015Notes to the consolidated financialstatements continued For the year ended 31 December 2015
91
91
2. Summary of significant accounting policies continued
Principles of consolidation
The consolidated financial statements include the Company and its subsidiaries. The Company’s subsidiaries as at 31 December 2015 were as
follows:
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
Dialog Semiconductor (Shenzhen) Limited 1
iWatt Integrated Circuits Technology (Tianjin) Limited 1
Dialog Semiconductor (Italy) S.r.l.
Dialog Semiconductor Arastima Gelistirme ve Ticaret AS
Dialog Semiconductor Hellas Societe Anonyme of Integrated Circuits 1
Dialog Semiconductor Trading (Shanghai) Limited 1
Avengers Acquisition Corporation
Dialog Semiconductor Finance L.L.C.
Dialog Semiconductor Finance B.V.
Dyna Image Corporation
1 Held indirectly
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
USA
USA
The Netherlands
Taiwan
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%
100.0%
100.0%
100.0%
45.7%
The Company had no other related undertakings as at 31 December 2015.
A subsidiary is an entity that is controlled, either directly or indirectly, by the Company. 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; and
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; and
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.
www.dialog-semiconductor.com
Dialog Semiconductor Plc
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92 Notes to the consolidated financial
92
statements continued
For the year ended 31 December 2015
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 is not 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. 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.
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.
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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 unquoted available-for-sale (AfS) financial assets, and for non-recurring measurement.
External valuation specialists were engaged to assist in the valuation of significant assets, such as investments, significant liabilities, such as
contingent consideration and share option expense. Involvement of external valuation specialists 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 management decides, after discussions with the Group´s
external valuation specialist, which valuation techniques and inputs to use for each case and is responsible for the final valuation. Any material
cases are reviewed and approved by the Board of non-executive Directors.
At each reporting date, management 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, management verifies the major inputs applied in the latest valuation by
agreeing the information in the valuation computation to contracts and other relevant documents. The analysis is then discussed with and
approved by the board of directors.
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. 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.
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
31 December 2015
US$1 =
Exchange rate at
31 December 2014
US$1 =
31 December 2013
US$1 =
0.67
120.40
0.92
0.64
119.29
0.82
0.61
104.96
0.73
Annual average exchange rate
2015
US$1 =
0.65
121.10
0.90
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 (accounted for at fair value through profit or loss) and non-derivative financial assets, as well as investments
classified as available for sale.
Financial liabilities generally represent claims for repayment in cash or another financial asset. In particular, this includes trade payables,
liabilities to banks and derivative financial liabilities.
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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 the case of investments not at fair value through profit or loss, directly attributable transaction costs.
The Group determines the classification of its financial assets on first recognition and, where allowed and appropriate, re-evaluates this
designation at each financial year end.
All regular purchases and sales of financial assets are recognised on the settlement date, which is the date that the Group receives the asset.
Regular purchases or sales are classified as purchases or sales of financial assets that require delivery of assets within the period generally
established by regulation or convention of the market place.
At each reporting date, the Group assesses whether a financial asset or group of financial assets is impaired.
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 2015 as well as
31 December 2014, 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 note 8.
Available-for-sale financial assets
Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified as loans
and receivables, held-to-maturity investments or as financial assets at fair value through profit or loss.
After initial measurement available-for-sale financial assets are measured at fair value. Unrealised gains and losses, net of the related tax effect,
on available-for-sale financial assets are excluded from earnings and are reported as a component of other reserves until realised, or the
investment is determined as being impaired.
At each reporting date, the carrying amounts of available-for-sale assets are assessed to determine whether there is objective, significant
evidence of impairment as outlined in IAS 39.59. Any impairment losses on available-for-sale financial assets are charged to profit or loss. The
Group does not use allowance accounts in order to record the impairment in the consolidated balance sheet 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.
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.
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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.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated balance sheet 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 2015 and 2014.
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.
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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.
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 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 5 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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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 recognised 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 recognised 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 recognised 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 forecast on the basis of the Group’s
current planning, the planning horizon normally being four years including one year of budgeted and three additional forecast 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.
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.
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 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:
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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 probable and can be estimated.
Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attaching conditions will be
complied with. When the grant relates to an expense item, it is recognised as income over the period necessary to match the grant on a
systematic basis to the costs that it is intended to compensate. Grants are deducted in reporting the related expense. Specifically, government
grants whose primary conditions is that the Group should purchase, construct or otherwise acquire non-current assets are recognised as
deferred revenue in the consolidated balance sheet and transferred to profit or loss on a systematic and rational basis over the useful lives of
the related assets.
Cost of sales
Cost of sales consists of the costs of outsourced production, assembly and test, personnel costs and applicable overheads and depreciation of
equipment. Provisions for estimated product warranties are recorded in cost of sales at the time the related sale is recognised. This item also
includes amortisation charges related to capitalised development costs. Impairment charges are shown either in cost of sales when revenues
had already been realised or in research and development expenses if not.
Sales and marketing expenses
Sales and marketing expenses consist primarily of salaries, travel expenses, sales commissions 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; and
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.
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Interest income/interest 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.
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 below operating profit.
Employee benefits – defined contribution plans
Contributions to defined contribution and state-funded pension plans are recognised in the income statement as incurred.
Income taxes
Current income taxes for current and prior periods are measured at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are accounted for using the liability method and are recognised for the future tax consequences attributable
to differences between the financial statement carrying amounts of assets and liabilities, and their respective tax bases, as well as on the carry-
forward of unused tax losses that can be utilised.
Deferred tax assets and liabilities are measured using tax rates that have been enacted, or 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 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 balance
sheet.
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.
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100 Notes to the consolidated financial
100
statements continued
For the year ended 31 December 2015
2. Summary of significant accounting policies continued
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. In this
calculation it is taken into account that the options are subject to graded vesting.
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.
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 25.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. Vesting is
based on share price growth and 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.
The EIP expired on 5 May 2015 and was then replaced by the new Long Term Incentive Plan (LTIP), see below.
For further information please refer to note 25.C.
Long Term Incentive Plan
In 2015 the Group established an equity settled Long Term Incentive Plan (LTIP). As described above, the LTIP replaces the EIP. The first LTIP
Awards were granted in 2015 within six weeks following the AGM in April.
Under this plan, the executive Director and others in senior roles will be granted an LTIP Award either in form of a nil cost option, a conditional
share award, a market priced option or a cash-settled award linked to the value of the Company´s share price. Awards to executive Directors
will vest subject to the achievement of challenging performance conditions. Awards to other employees may be made with or without
performance conditions. For 2015 awards, there are three different performance measures, relating to EBIT, Revenue Growth and Relative
Total Shareholder Return (TSR). Each of these three performance measures will determine one-third of the vesting. The vesting period will be
three years.
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 25.D.
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.
Dialog Semiconductor Plc
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101
101
2. Summary of significant accounting policies continued
Earnings per share
Basic earnings per share amounts are calculated by dividing net profit (loss) for the year attributable to ordinary equity holders of Dialog by the
weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit (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.
For further information please refer to note 6.
Critical accounting judgements and key sources of estimation uncertainty
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.
Critical judgements in applying accounting policies
Business Combinations
In accordance with business combination accounting, Dialog allocated the purchase price of acquired companies to the tangible and
intangible assets acquired and liabilities assumed, based on their estimated fair values. Dialog engaged 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 are 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 13 Goodwill for the accounting treatment including applied approach and assumptions
related to the current business combination.
Key sources of estimation uncertainty
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 or
cash generating units. 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 2015 was US$593,040,000 (2014: US$534,786,000), please refer to notes 4, 9, 13 and 14 for further information.
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. At year-end 2015, net deferred tax assets amounting to
US$26,856,000 were recognised (2014: net deferred tax assets US$23,316,000).
Further information regarding the assessment of future taxable income is disclosed in note 5.
www.dialog-semiconductor.com
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Annual report and accounts 2015
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102 Notes to the consolidated financial
102
statements continued
For the year ended 31 December 2015
2. Summary of significant accounting policies continued
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 2015, the expense related to stock options was US$13,315,0000 (2014: US$13,381,000, 2013 :
US$5,642,000). For further information on stock options please refer to note 25.A and 25.E.
Executives’ Long Term Incentive Plan
The fair value of the awards is recognised as a compensation expense with a corresponding increase in equity. The fair value is measured
at grant date, using a Monte Carlo Model, based on standard inputs such as the Company’s share price, interest rate, volatility of the
Company’s share price, dividend yield, expected life and fluctuation. Due to the nature of these assumptions, such estimates are subject
to significant uncertainty. In 2015, an expense of US$ nil was booked (2014: nil, 2013 : nil). Further information regarding the LTIP is
provided in note 25.B and 25.E.
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 2015, an expense of US$3,615,000 was booked (2014: US$7,792,000, 2013: US$2,846,000). Further
information regarding the EIP is provided in note 25.C and 25.E.
New Long Term Incentive Plan (LTIP)
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 2015, an expense of US$2,285,000 was booked. Further information regarding the LTIP is provided in note
25.D and 25.E.
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 capitalised 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 2015, the carrying amount of capitalised development costs was US$66,206,000 (2014:
US$50,401,000), please refer to note 14.
Actual results may differ from all of the above judgements and estimates.
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015Notes to the consolidated financialstatements continued For the year ended 31 December 2015
3. Other disclosures to the income statement continued
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 plans2
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:
Revenue from customer specific research and development contracts
Release of an earn out provision
Income from insurance benefits and compensation
BenQ Settlement
Included in other finance income (expense):
Gain (loss) currency translation, net
Gain (loss) on the remeasurement of the call option
103
103
2015
US$000
2014
US$000
2013
US$000
Deloitte1
Ernst &
Young
Ernst &
Young
(360)
(390)
(1,043)
(543)
(43)
(187)
(736)
(9)
(170)
(48)
(2,480)
(2,019)
(555)
(82)
(335)
(2,396)
(3,335)
(3,269)
(24,010)
(22,144)
(18,581)
(13,734)
(12,792)
(10,940)
(7,847)
(8,289)
(8,203)
(1,500)
(1,291)
(983)
(8,039)
(11,059)
(8,520)
(31,120)
(33,431)
(28,646)
(174,359) (161,405) (115,913)
(21,336)
(18,522)
(12,055)
(19,215)
(21,173)
(8,487)
(9,505)
(9,325)
(7,703)
(224,415) (210,425)
(144,158)
1,353,936 1,155,124
899,660
1,376
–
981
–
869
851
(664,355) (580,485)
(484,957)
(9,047)
(9,828)
(14,445)
1,159
–
–
–
1,546
1,939
931
–
1,527
3,249
–
145
1,159
4,416
4,921
408
(2,171)
(168)
(119)
–
–
1 Total fees for prior year auditor Ernst & Young which occurred in 2015 amounted to US$1,498,000.
2 The pension costs from defined contribution plans include costs for the state funded pension plan in Germany of US$3,104,000 (2014: US$3,256,000, 2013: US$2,732,000).
www.dialog-semiconductor.com
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Annual report and accounts 2015
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104 Notes to the consolidated financial
104
statements continued
For the year ended 31 December 2015
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
2015
US$000
7,654
2015
No.
1
4
2015
US$000
6,165
96
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
The highest paid Director exercised 150,000 (2014: 443,343, 2013: nil) share options during the year.
c) Interest income and interest expense
Interest income and interest expense comprise the following items:
Interest income
Interest expense
Of which: from financial instruments relating to categories in accordance with IAS
39
Loans and receivables
Financial liabilities measured at amortised cost
2015
US$000
1,215
(6,411)
(5,196)
2014
US$000
419
(14,829)
(14,410)
2013
US$000
565
(13,345)
(12,780)
(828)
(4,368)
(5,196)
(1,993)
(12,417)
(1,835)
(10,945)
(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 2015 the Group received grants in the amount of US$586,000 (2014: US$738,284, in
2013: US$1,055,000). In the income statement the grants received were deducted from research and development expenses. In addition the
Group´s Dutch design centre has applied for a grant in the form of a tax relief in 2015. An amount of US$1,308,007 (2014: US$2,712,743,
2013: US$3,567,000) is deducted from its taxable profit, resulting in a lower tax charge for the year.
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
Dialog Semiconductor Plc
Annual report and accounts 2015
2015
964
175
218
147
42
2014
832
157
199
131
41
1,546
1,360
2013
588
127
156
71
30
972
Dialog Semiconductor PlcAnnual report and accounts 2015Notes to the consolidated financialstatements continued For the year ended 31 December 2015
105
105
4. Business combination
Acquisition in 2015
Dyna Image Corporation
On 4 June 2015, Dialog acquired a 45.7% shareholding in Dyna Image Corporation, Taipei, Taiwan (“Dyna”) for US$13,601,000 in cash, of
which US$12,921,000 was paid on completion and US$680,000 was deferred for 12 months. Dialog’s initial interest in Dyna was 41.1% on a
fully diluted basis, i.e. taking into account the number of outstanding share options held by directors and employees of Dyna. Prior to the
acquisition, Dyna was a majority-owned subsidiary of the Lite-On group of companies (“Lite On”). Dialog purchased existing shares in Dyna
from Lite-On and also subscribed for new shares.
Lite-On retains a shareholding in Dyna and the remaining shares are owned by the ShunSin Technology group of companies (“SST”) and
directors and employees of Dyna. When it acquired its shareholding, Dialog was also granted a call option to acquire the outstanding shares in
Dyna that it does not already own in one or more tranches at any time during the three years following the closing date. Dialog considers that
the call option gives it the power to direct the activities of Dyna and has therefore accounted for its acquisition of a minority shareholding in
Dyna as a business combination. At the acquisition date, the fair value of the call option was estimated to be US$992,000.
Dyna specialises in the design and manufacture of optical, inertia and environmental sensors for consumer electronics applications and is
already shipping optical sensors in volume to the China market. Dialog’s investment in Dyna underscores Dialog's strategy to diversify its
markets and growth opportunities through selecting strategic acquisitions. Collaboration of Dialog with Dyna will be focused on the
development of sensors and sensor solutions for smartphones and IoT applications, including those for wearable devices. Such technologies
will initially include sensors for ambient light and proximity as well as colour and gesture analysis. Dialog will build on its market-leading
position in power management, Bluetooth® Smart technologies for consumer electronics, and solid state lighting for smart and connected
home by providing customers with more system-level solutions. Dialog will also enhance the competitiveness of its offering by continuing to
leverage both Lite-On’s manufacturing capabilities in Taiwan and the strategic relationship with SST for advanced packaging solutions.
Dyna represents Dialog’s first foray into the sensor market. Dyna’s sensor technology is complementary to Dialog’s power management, audio
and Bluetooth expertise in smartphone, IoT and smart lighting applications. It is another important step in Dialog’s strategy to gain market
share in the fast growing Greater China smartphone and IoT markets through innovative local business partnerships and will also enhance
Dialog’s position in these markets around the world.
www.dialog-semiconductor.com
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information
106 Notes to the consolidated financial
106
statements continued
For the year ended 31 December 2015
4. Business combination continued
Assets acquired and liabilities assumed
Dialog allocated the purchase consideration to the identifiable assets and liabilities of Dyna and goodwill as follows:
Assets acquired
Cash and cash equivalents
Trade and other receivables (net of US$14,000 allowance for doubtful debts)
Inventories
Other current assets
Other intangible assets
Property, plant and equipment
Investments
Deferred tax assets
Total assets acquired
Liabilities assumed
Trade and other payables
Other current liabilities
Deferred tax liabilities
Total liabilities
Net identifiable assets acquired
Non-controlling interests
Goodwill arising on acquisition
Consideration
Purchase consideration was satisfied by:
Cash paid on completion
Deferred cash payment
Call option over non-controlling interests
Consideration
US$000
10,285
1,836
2,212
592
5,600
2,154
6
859
23,544
6,205
648
1,000
7,853
15,691
(9,729)
6,647
12,609
12,921
680
(992)
12,609
Identifiable intangible assets acquired comprised developed technology.
Deferred tax assets recognised mainly represent tax loss carryforwards.
Non-controlling interests in Dyna comprise Common Stock and Convertible Preferred Shares. Dialog measured the non-controlling interests in
the Common Stock at their proportionate share of the net identifiable assets acquired. Since the Convertible Preferred Shares are not entitled
to a proportionate share of Dyna’s net assets in the event of liquidation, the non-controlling interests in the Convertible Preferred Shares were
measured at their fair value at the acquisition date that was based on the price at which Dialog purchased and subscribed for shares in Dyna.
For further information on non-controlling interests refer to note 23.
107
4. Business combination continued
Goodwill recognised on the acquisition of Dyna is attributable to the future strategic growth opportunities arising from the acquisition and the
expected synergies with Dialog’s existing business in each of its Mobile Systems, Connectivity and Power Conversion segments. None of the
goodwill is expected to be deductible for tax purposes.
Dialog will retain the deferred consideration as security for any indemnification claims made by Dialog against the selling shareholders.
During 2015, Dyna contributed US$4,798,000 to the Group’s revenue and a loss before tax of US$3,240,000. If Dyna had been acquired on
1 January 2015, the Group’s revenue would have been US$2,334,000 higher at US$1,357,646,000 and its profit before tax would have been
US$1,685,000 lower at US$253,154,000.
During 2015, costs of US$51,000 relating to the acquisition of Dyna were included in general and administrative expenses.
Acquistion in 2013
iWatt Inc.
On 16 July 2013, Dialog acquired 100% of the voting rights of iWatt Inc. (“iWatt”). 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.
Dialog’s investment in iWatt underscores its strategy to diversify its markets and growth opportunities through select strategic acquisitions.
iWatt’s business is highly complementary to Dialog’s existing PMIC business and the combined business will be able to extend its offering to
emerging power management segments and increase its accessible markets. 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.
Purchase consideration
Cash payable on completion of the acquisition amounted to US$306,261,000 and contingent consideration of up to US$35 million was
payable dependent on the achievement of revenue targets within two earn out periods, Up to US$17 million was payable dependent on
revenue in the six months ended 31 December 2013 and up to a further US$18 million was payable dependent on revenue in the nine
months ended 30 September 2014.
Dialog initially recognised a provision of US$5,188,000 in relation to the fair value of the contingent consideration as at the acquisition date.
Subsequently, Dialog considered that the revenue target for neither earn out period was achieved and therefore released US$3,249.000 of the
provision for contingent consideration at the end of 2013 and the remaining $1,939,000 during 2014. 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. During the second quarter of 2015, a settlement agreement was reached pursuant to which
Dialog paid US$3,375,000 to the previous owners of iWatt in full and final settlement of the claim without admission of faults, wrong doing
or liability by Dialog. Payment of this amount was made in May 2015 and it was included within general and administrative expenses.
Dialog funded the acquisition from both its existing cash resources and additional debt facilities of US$115 million of which US$10 million was
repaid in December 2013 and the remaining balance during 2014.
Unvested share options
All unvested options over iWatt shares that were outstanding to employees of iWatt were cancelled on the acquisition date. Instead, cash
compensation was offered to employees with unvested options that had an exercise price per lower than the implied share price at the
acquisition date, based upon the consideration paid by Dialog. This compensation will be paid out by Dialog over the former vesting period of
the cancelled options subject to the employee remaining with the Group and will be recorded as compensation expense in the income
statement. The maximum amount of compensation that will be paid out is US$3,175,000.
As at 31 December 2015 the outstanding compensation amounts to US$352,000 and is expected to be settled during second quarter of 2016.
Dialog Semiconductor Plc
Annual report and accounts 2015
www.dialog-semiconductor.com
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Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015Notes to the consolidated financialstatements continued For the year ended 31 December 2015
107
107
4. Business combination continued
Goodwill recognised on the acquisition of Dyna is attributable to the future strategic growth opportunities arising from the acquisition and the
expected synergies with Dialog’s existing business in each of its Mobile Systems, Connectivity and Power Conversion segments. None of the
goodwill is expected to be deductible for tax purposes.
Dialog will retain the deferred consideration as security for any indemnification claims made by Dialog against the selling shareholders.
During 2015, Dyna contributed US$4,798,000 to the Group’s revenue and a loss before tax of US$3,240,000. If Dyna had been acquired on
1 January 2015, the Group’s revenue would have been US$2,334,000 higher at US$1,357,646,000 and its profit before tax would have been
US$1,685,000 lower at US$253,154,000.
During 2015, costs of US$51,000 relating to the acquisition of Dyna were included in general and administrative expenses.
Acquistion in 2013
iWatt Inc.
On 16 July 2013, Dialog acquired 100% of the voting rights of iWatt Inc. (“iWatt”). 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.
Dialog’s investment in iWatt underscores its strategy to diversify its markets and growth opportunities through select strategic acquisitions.
iWatt’s business is highly complementary to Dialog’s existing PMIC business and the combined business will be able to extend its offering to
emerging power management segments and increase its accessible markets. 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.
Purchase consideration
Cash payable on completion of the acquisition amounted to US$306,261,000 and contingent consideration of up to US$35 million was
payable dependent on the achievement of revenue targets within two earn out periods, Up to US$17 million was payable dependent on
revenue in the six months ended 31 December 2013 and up to a further US$18 million was payable dependent on revenue in the nine
months ended 30 September 2014.
Dialog initially recognised a provision of US$5,188,000 in relation to the fair value of the contingent consideration as at the acquisition date.
Subsequently, Dialog considered that the revenue target for neither earn out period was achieved and therefore released US$3,249.000 of the
provision for contingent consideration at the end of 2013 and the remaining $1,939,000 during 2014. 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. During the second quarter of 2015, a settlement agreement was reached pursuant to which
Dialog paid US$3,375,000 to the previous owners of iWatt in full and final settlement of the claim without admission of faults, wrong doing
or liability by Dialog. Payment of this amount was made in May 2015 and it was included within general and administrative expenses.
Dialog funded the acquisition from both its existing cash resources and additional debt facilities of US$115 million of which US$10 million was
repaid in December 2013 and the remaining balance during 2014.
Unvested share options
All unvested options over iWatt shares that were outstanding to employees of iWatt were cancelled on the acquisition date. Instead, cash
compensation was offered to employees with unvested options that had an exercise price per lower than the implied share price at the
acquisition date, based upon the consideration paid by Dialog. This compensation will be paid out by Dialog over the former vesting period of
the cancelled options subject to the employee remaining with the Group and will be recorded as compensation expense in the income
statement. The maximum amount of compensation that will be paid out is US$3,175,000.
As at 31 December 2015 the outstanding compensation amounts to US$352,000 and is expected to be settled during second quarter of 2016.
www.dialog-semiconductor.com
Dialog Semiconductor Plc
Annual report and accounts 2015
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108 Notes to the consolidated financial
108
statements continued
For the year ended 31 December 2015
4. Business combination continued
Assets acquired and liabilities assumed
Dialog allocated the purchase consideration to the identifiable assets and liabilities of iWatt and goodwill as follows:
Assets acquired
Cash and cash equivalents
Trade and other receivables (net of US$Nil allowance for doubtful debts)
Inventories
Other current assets
Other intangible assets
Property, plant and equipment
Deferred tax assets
Other non-current assets
Total assets acquired
Liabilities assumed
Trade and other payables
Provisions
Income taxes payable
Other current liabilities
Deferred tax liabilities
Total liabilities
Net identifiable assets acquired
Goodwill arising on acquisition
Consideration
Purchase consideration was satisfied by:
Cash paid on completion
Fair value of contingent consideration (earn out)
Consideration
US$000
2,410
11,017
13,030
776
113,553
4,866
16,200
314
162,166
(11,585)
(3,439)
(227)
(3,431)
(44,630)
(63,312)
98,854
212,645
311,499
306,261
5,188
311,449
Identifiable intangible assets acquired comprised mainly customer and technology (including core technology) related intangible assets.
Deferred tax assets recognised mainly represented tax loss carry forwards, temporary differences relating to intangible assets, other temporary
differences and tax credits.
Goodwill recognised on the acquisition of iWatt comprised the value of expected significant synergies, especially with the Mobile Systems
segment, and other benefits from combining the assets and activities of iWatt with those of Dialog. None of the goodwill is expected to be
deductible for tax purposes.
During 2013, iWatt contributed US$26,768,000 to the Group’s 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. If iWatt had been acquired on 1 January 2013, the Group’s
revenue would have been US$41,140,000 higher at US$942,520,000 but it is not practicable to estimate what the Group’s profit before tax
would have been because iWatt did not prepare financial information in accordance with IFRS prior to its acquisition by Dialog.
During 2013, costs of US$3,974,000 relating to the acquisition of iWatt were included in general and administrative expenses.
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015Notes to the consolidated financialstatements continued For the year ended 31 December 2015
4. Business combination continued
Net cash outflow on acquisitions
Net cash outflow on acquisitions was as follows:
Cash flow used for investing activities
Cash consideration paid:
Acquisition completed in the year
Cash and cash equivalents acquired
Purchase of businesses, net of acquired cash
Cash flow from operating activities
Settlement of contingent consideration
Transaction costs
Effect on cash flow from operations
Net cash outflow in relation to acquisitions
109
109
2015
US$000
2014
US$000
2013
US$000
(12,921)
10,285
(2,636)
(3,375)
(51)
(3,426)
(6,062)
–
–
–
–
–
–
–
(306,261)
2,410
(303,851)
–
(3,974)
(3,974)
(307,825)
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Annual report and accounts 2015
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110 Notes to the consolidated financial
110
statements continued
For the year ended 31 December 2015
5. 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
2015
US$000
2014
US$000
2013
US$000
–
(78,094)
(10,976)
11,490
(77,580)
–
(57,565)
2,558
23,765
–
(37,172)
–
9,664
(31,242)
(27,508)
2015
US$000
2014
US$000
2013
US$000
(77,862)
(232)
(10,014)
8,105
1,292
1,131
(77,580)
(57,559)
(6)
(6,895)
11,009
17,759
4,450
(38,449)
1,277
8,656
1,983
–
(975)
(31,242)
(27,508)
*
The amount of US$17,759,000 in 2014 relates to an one-off non-cash deferred tax credit resulting from an intra-group reorganisation of certain iWatt Intellectual Property, which impacted the
recorded value of purchase price accounting deferred tax liabilities. The amount of US$1,292,000 in 2015 relates to the on-going impact of the reorganisation on the deferred tax liabilities.
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015Notes to the consolidated financialstatements continued For the year ended 31 December 2015
111
111
2013
US$000
–
(63)
(63)
(63)
(63)
–
–
–
–
–
–
2013
US$000
(20,858)
(5,251)
(2,276)
1,487
(71)
1,983
(2,827)
302
(45)
–
–
–
–
48
5. Income taxes continued
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
Deferred tax:
Items that may be reclassified to profit or loss in subsequent periods
Total income tax recognised in other comprehensive income
Tax (charged)/credited directly to equity:
Current tax (charge)/credit
Deferred tax (charge)/credit
Total tax (charged)/credited directly to equity
Deferred tax:
Items that will not be reclassified subsequently to profit or loss
Tax benefit from share-based payments
Total income tax recognised in equity
2015
US$000
–
(3,704)
(3,704)
(3,704)
(3,704)
–
6,878
6,878
–
6,878
6,878
2014
US$000
–
5,180
5,180
5,180
5,180
–
7,517
7,517
–
7,517
7,517
Factors affecting the tax expense for the year
A reconciliation of income taxes determined using the UK income tax rate of 20.25% (2014: 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 *
Tax impact of Atmel acquisition costs
Tax benefit from intellectual property and R&D incentives
Other
Actual income tax expense
2015
US$000
(51,605)
(18,131)
(5,008)
2,509
(1,591)
8,105
(2,828)
899
(12,089)
–
1,292
(3,798)
4,342
323
(77,580)
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
(31,242)
(27,508)
*
The amount of US$17,759,000 in 2014 relates to an one-off non-cash deferred tax credit resulting from an intra-group reorganisation of certain iWatt Intellectual Property, which impacted the
recorded value of purchase price accounting deferred tax liabilities. The amount of US$1,292,000 in 2015 relates to the on-going impact of the reorganisation on the deferred tax liabilities.
www.dialog-semiconductor.com
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information
112 Notes to the consolidated financial
112
statements continued
For the year ended 31 December 2015
5. Income taxes continued
Deferred tax
Analysis of movement in the net deferred tax balance during the year:
At 31 December 2013
Exchange movements
Recognised in income
Recognised in other comprehensive income
Recognised in equity
Acquisitions and disposals
At 31 December 2014
Exchange movements
Recognised in income
Recognised in other comprehensive income
Recognised in equity
Acquisitions and disposals
At 31 December 2015
US$000
(15,698)
(6)
26,323
5,180
7,517
–
23,316
(77)
514
(3,704)
6,878
(71)
26,856
Deferred income tax assets and liabilities, before offset of balances within countries, are as follows:
Temporary differences relating to intangible assets
Temporary differences relating to share based payment
Temporary differences relating to license royalties
Other temporary differences
Deferred taxes in relation to tax credits
Net operating loss carryforwards
Recognised net deferred tax assets / (liabilities)
Amount (charged)/credited to income statement
Net recognised deferred tax asset/(liability)
At 31 December
At 31 December
2015
US$000
5,219
(7,679)
3,325
10,051
594
(10,996)
514
2014
US$000
30,832
10,508
(9,975)
(7,853)
429
2,382
26,323
2015
US$000
(5,721)
11,359
(6,650)
(899)
3,794
24,973
26,856
2014
US$000
(10,818)
11,743
(9,975)
6,337
3,200
22,829
23,316
Deferred tax assets and liabilities are analysed in the consolidated balance sheet, after offset of balances within countries, as follows:
Deferred tax assets
Deferred tax liabilities
Recognised net deferred tax assets / (liabilities)
At 31 December
At 31 December
2015
US$000
28,454
(1,598)
26,856
2014
US$000
28,771
(5,455)
23,316
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015Notes to the consolidated financialstatements continued For the year ended 31 December 2015
113
113
5. Income taxes continued
Tax loss carryforwards, temporary differences and net deferred tax assets are summarised as follows:
Germany
UK
Netherlands
US
Other
Total
31 December 2015
31 December 2014
Tax loss
carryforwards
US$000
–
75,100
25,820
51,081
15,837
167,838
Temporary
differences
US$000
(5,675)
40,611
(10,518)
(16,700)
342
8,060
Net deferred tax
assets (liabilities)
Tax loss
carryforwards
Temporary
differences
Net deferred tax assets
(liabilities)
US$000
US$000
US$000
(1,597)
8,286
3,826
14,195
2,146
–
106,573
30,714
51,642
–
5,206
18,236
(6,146)
(19,134)
1,883
US$000
1,477
7,940
6,142
7,002
755
26,856
188,929
45
23,316
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$83,020,000 (2014: US$82,643,000). In addition, no deferred tax asset is recognised in respect of federal and state tax
credits of US$5,957,000 (2014: US$4,416,000).
In assessing whether the deferred tax assets can be used, management considers the probability that some, or all, of the deferred tax assets
will not be realised. The 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.
No deferred tax assets were recognised for tax loss carryforwards and temporary differences in respect of which there is expected to be
insufficient future taxable profit and therefore utilisation is not probable.
The tax loss carryforwards in the US will expire between 2018 and 2035 and in the Netherlands between 2017 and 2023 and in Taiwan
between 2023 and 2025; other tax loss carryforwards have no expiration date.
The amount shown under “income tax receivables” in the consolidated balance sheet 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 2016.
The amount that will be paid in 2016 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.
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Dialog Semiconductor Plc
Annual report and accounts 2015
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114 Notes to the consolidated financial
114
statements continued
For the year ended 31 December 2015
6. 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.
The weighted average number of shares outstanding is as follows:
Basic number of shares
Effect of dilutive options outstanding
Dilutive shares related to the convertible bond
Dilutive number of shares
Earnings used in the calculation of basic earnings per share
Convertible bond interest expense
Earnings used in the calculation of dilutive earnings per share
2015
73,763
3,537
2,360
79,660
178,766
3,483
182,249
2014
67,329
2,746
6,807
76,882
138,079
10,279
148,358
2013
65,641
2,035
–
67,676
62,204
–
62,204
The number of anti-dilutive share options outstanding was 632,893 in 2015 compared to 950,340 in 2014 and 3,179,646 in 2013.
In May 2015 the Company exercised its option to redeem all outstanding convertible bonds. The full conversion of convertible bonds led to a
decrease of earnings per share and therefore it was seen as dilutive. The earnings used for the calculation of basic and dilutive earnings per
share differ because the convertible bond interest expense is dilutive in 2015 and 2014.
In 2013 the potential ordinary shares of the convertible bond were antidilutive as their conversion to ordinary shares had increased earnings
per share, therefore an amount of 6,806,893 was excluded from the calculation of earnings per share.
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015Notes to the consolidated financialstatements continued For the year ended 31 December 2015
7. Cash and cash equivalents
Cash at bank
Short-term deposits
Deposits designated as a hedging instrument
Cash and cash equivalents
115
115
At 31 December
At 31 December
2015
US$000
135,809
431,000
–
566,809
2014
US$000
178,242
140,204
5,834
324,280
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.
8. Trade accounts receivable and other receivable
Trade accounts receivable
Receivables from factoring agreement
At 31 December
At 31 December
2015
US$000
48,692
23,976
72,668
2014
US$000
80,594
19,975
100,569
Trade receivables are non-interest bearing and are generally on 30 to 60-day terms.
As described in note 29, the Group has three selective factoring agreements, one since 2007, one since 2012 and the other since 2015.
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$73,000 and US$96,000 at 31 December 2015
and 2014, respectively. The related allowance for doubtful accounts was US$73,000 and US$96,000 at 31 December 2015 and 2014,
respectively.
The allowance for doubtful accounts developed as follows:
Allowance for doubtful accounts at beginning of year
Additions charged to bad debt expense
Write-offs charged against the allowance
Reductions credited to income
Effect of movements in foreign currency
Allowance for doubtful accounts at end of year
At 31 December
At 31 December
2015
US$000
96
13
(22)
(14)
–
73
2014
US$000
82
18
–
(4)
–
96
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Dialog Semiconductor Plc
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116 Notes to the consolidated financial
116
statements continued
For the year ended 31 December 2015
8. Trade accounts receivable and other receivable continued
As at 31 December 2015 and 2014, 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
9. Inventories
Inventories are comprised of the following:
Raw materials
Work-in-process
Finished goods
At 31 December
At 31 December
2015
US$000
47,894
431
356
9
2
48,692
2014
US$000
78,994
–
1,566
32
2
–
80,594
At 31 December
At 31 December
2015
US$000
23,651
43,545
67,734
134,930
2014
US$000
11,013
30,047
58,080
99,140
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015Notes to the consolidated financialstatements continued For the year ended 31 December 2015
10. Other financial assets
Other financial assets comprise:
Deposits for hedging contracts
117
117
At 31 December
At 31 December
2015
US$000
2,086
2014
US$000
3,586
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 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 29.
11. Other current assets
Other current assets comprise:
Prepaid expenses
Other tax receivables
Other
At 31 December
At 31 December
2015
US$000
7,812
6,720
6,324
2014
US$000
7,459
1,253
1,779
20,856
10,491
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Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information
118 Notes to the consolidated financial
118
statements continued
For the year ended 31 December 2015
12. Property, plant and equipment, net
A summary of activity for property, plant and equipment for the years ended 31 December 2015 and 2014 is as follows:
13. Goodwill
A summary of activity for goodwill for the years ended 31 December 2015 and 2014 is as follows:
Test equipment
US$000
Leasehold
improvements
US$000
Office and other
equipment
Construction in
progress
US$000
US$000
Cost
As at 1 January 2014
Effect of movements in foreign currency
Additions
Reclassifications
Disposals
As at 31 December 2014
Effect of movements in foreign currency
Additions
Acquisitions through business combinations
Reclassifications
Disposals
As at 31 December 2015
Depreciation and impairment losses
As at 1 January 2014
Effect of movements in foreign currency
Depreciation charge for the year
Reclassifications
Disposals
As at 31 December 2014
Effect of movements in foreign currency
Depreciation charge for the year
Reclassifications
Disposals
As at 31 December 2015
Net book value
As at 31 December 2014
As at 31 December 2015
118,154
(119)
8,640
14
(2,299)
124,390
(77)
12,297
1,600
127
(206)
138,131
(88,857)
12
(11,007)
(5)
2,221
(97,636)
30
(10,978)
21
178
(108,385)
26,754
29,746
13,219
(421)
3,003
199
(488)
15,512
51
2,503
–
942
(267)
18,741
(4,153)
215
(2,147)
–
161
(5,924)
(37)
(2,624)
–
207
(8,378)
9,588
10,363
43,883
(910)
11,338
94
(595)
53,810
68
15,443
15
319
(2,493)
67,162
(24,481)
453
(8,997)
5
547
(32,473)
(230)
(10,552)
(21)
1,340
(41,936)
700
(63)
1,412
(309)
(156)
1,584
2
2,487
539
(1,388)
(115)
3,109
–
–
–
–
–
–
–
–
–
–
–
21,337
25,226
1,584
3,109
59,263
68,444
Carrying amount
As at 1 January
Addition relating to the Dyna Image acquisition
Effect of movements in foreign currency
As at 31 December
Carrying amount
Mobile Systems
Connectivity
Power Conversion
As at 31 December
Total
US$000
175,956
(1,513)
24,393
(2)
(3,538)
195,296
44
32,730
2,154
–
(3,081)
227,143
(117,491)
680
(22,151)
–
2,929
(136,033)
(237)
(24,154)
–
1,725
(158,699)
119
2015
US$000
2014
US$000
244,878
244,878
6,647
(463)
–
–
251,062
244,878
2015
US$000
2014
US$000
108,091
91,909
51,061
251,062
107,164
88,199
49,515
244,878
Dialog considers that its operating segments comprise its cash-generating units (CGUs) for the purpose of allocating goodwill. As at 31
December 2015 and 2014, goodwill was allocated as follows:
As described in note 4, Dialog recognised goodwill of US$6,647,000 in relation to the acquisition Dyna Image, of which management has
allocated US$3,988,000 to Connectivity and US$1,662,000 to Power Conversion and US$997,000 to Mobile Systems segment in proportion
to the synergies that are expected to accrue to those CGU’s from the acquisition.
Impairment tests carried out during the year
Goodwill is tested for impairment annually and whenever there is an indication that it may be impaired. Goodwill is tested for impairment at
the level of the CGUs to which it is allocated. Goodwill is impaired if the carrying amount of the CGU to which it is allocated exceeds its
recoverable amount. Dialog measures recoverable amount on a value in use basis. Value in use represents the present value of the future
cash flows that are expected to be generated by the CGU to which the goodwill is allocated.
Expected future cash flows in the first year were based on the Group’s budget and cash flows in the following three years were forecast based
on the Group’s medium term financial plan. Cash flows beyond the fourth year were estimated by applying a perpetuity growth rate to the
forecast cash flow in the fourth year.
Management considers that the key assumptions used in determining value in use are the expected compound annual growth of revenue
during the budget/forecast period, the perpetuity growth rate and the discount rate.
Expected future revenue of each CGU is based on external forecasts of the future volume of the end markets for the CGU’s products adjusted
to reflect factors specific to the CGU such as its customer base and available distribution channels, the possibility of new entrants to the
market and future technological developments. Cash flows during the budget/forecast period also reflect the cost of materials and other
direct costs, research and development expenditure and selling, general and administrative expenses. Management estimates the cost of
materials and other direct and indirect costs based on current prices and market expectations of future price changes.
Following a review during 2015, management increased from 1% per annum to 2% per annum the perpetuity growth rate that it applies in
estimating the future cash flows of each CGU to which goodwill is allocated. Management considers that the higher growth rate assumption
is more closely aligned with the expected long-term term growth rate for each CGU’s products in its end markets. Even if the perpetuity
growth rate had remained at 1% per annum, there would have been no impairment of goodwill during 2015.
Discount rates applied to the cash flow projections were determined using a capital asset pricing model and reflected current market interest
rates, relevant equity and size risk premiums and the risks specific to the CGU concerned.
Finance leases
The carrying value of property, plant and equipment held under finance leases at 31 December 2015 was US$256,000 (31 December 2014:
US$488,000). Additions during the year were US$ nil (2014: US$614,000). As of the reporting date future minimum lease payments under
those finance lease contracts were US$225,000 (2014: US$450,000). The present value of the net minimum lease payments was US$221,000
(2014: US$419,000).
Dialog Semiconductor Plc
Annual report and accounts 2015
www.dialog-semiconductor.com
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015Notes to the consolidated financialstatements continued For the year ended 31 December 2015
13. Goodwill
A summary of activity for goodwill for the years ended 31 December 2015 and 2014 is as follows:
Carrying amount
As at 1 January
Addition relating to the Dyna Image acquisition
Effect of movements in foreign currency
As at 31 December
119
119
2015
US$000
2014
US$000
244,878
6,647
(463)
251,062
244,878
–
–
244,878
Dialog considers that its operating segments comprise its cash-generating units (CGUs) for the purpose of allocating goodwill. As at 31
December 2015 and 2014, goodwill was allocated as follows:
Carrying amount
Mobile Systems
Connectivity
Power Conversion
As at 31 December
2015
US$000
2014
US$000
108,091
91,909
51,061
251,062
107,164
88,199
49,515
244,878
As described in note 4, Dialog recognised goodwill of US$6,647,000 in relation to the acquisition Dyna Image, of which management has
allocated US$3,988,000 to Connectivity and US$1,662,000 to Power Conversion and US$997,000 to Mobile Systems segment in proportion
to the synergies that are expected to accrue to those CGU’s from the acquisition.
Impairment tests carried out during the year
Goodwill is tested for impairment annually and whenever there is an indication that it may be impaired. Goodwill is tested for impairment at
the level of the CGUs to which it is allocated. Goodwill is impaired if the carrying amount of the CGU to which it is allocated exceeds its
recoverable amount. Dialog measures recoverable amount on a value in use basis. Value in use represents the present value of the future
cash flows that are expected to be generated by the CGU to which the goodwill is allocated.
Expected future cash flows in the first year were based on the Group’s budget and cash flows in the following three years were forecast based
on the Group’s medium term financial plan. Cash flows beyond the fourth year were estimated by applying a perpetuity growth rate to the
forecast cash flow in the fourth year.
Management considers that the key assumptions used in determining value in use are the expected compound annual growth of revenue
during the budget/forecast period, the perpetuity growth rate and the discount rate.
Expected future revenue of each CGU is based on external forecasts of the future volume of the end markets for the CGU’s products adjusted
to reflect factors specific to the CGU such as its customer base and available distribution channels, the possibility of new entrants to the
market and future technological developments. Cash flows during the budget/forecast period also reflect the cost of materials and other
direct costs, research and development expenditure and selling, general and administrative expenses. Management estimates the cost of
materials and other direct and indirect costs based on current prices and market expectations of future price changes.
Following a review during 2015, management increased from 1% per annum to 2% per annum the perpetuity growth rate that it applies in
estimating the future cash flows of each CGU to which goodwill is allocated. Management considers that the higher growth rate assumption
is more closely aligned with the expected long-term term growth rate for each CGU’s products in its end markets. Even if the perpetuity
growth rate had remained at 1% per annum, there would have been no impairment of goodwill during 2015.
Discount rates applied to the cash flow projections were determined using a capital asset pricing model and reflected current market interest
rates, relevant equity and size risk premiums and the risks specific to the CGU concerned.
www.dialog-semiconductor.com
Dialog Semiconductor Plc
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120 Notes to the consolidated financial
120
statements continued
For the year ended 31 December 2015
13. Goodwill continued
The key assumptions used were as follows:
Revenue growth
(compound annual growth rate)
Perpetuity growth rate
Pre-tax discount rate
Mobile Systems
2015
5.5%
2.0%
11.9%
2014
13.5%
1.0%
11.3%
Connectivity
2015
2014
2015
2014
Power Conversion
28.0%
2.0%
11.6%
27.7%
1.0%
11.3%
21.0%
2.0%
11.4%
24.0%
1.0%
11.3%
Possibility of impairment in the near future
Dialog did not recognise any goodwill impairment during 2015 and the recoverable amount of each CGU to which goodwill is allocated was
comfortably in excess of its carrying amount.
Based on its current expectations of future revenue growth, management does not consider that there is a reasonable possibility of
impairment of any of the CGUs to which goodwill has been allocated. Management recognises, however, that the speed of technological
change in the sector in which the Group operates and the risk of reduced market share due to the loss of key customers and/or new entrants
to the market may have a significant impact on the future revenue growth of individual CGUs. Assuming all other factors are held constant,
an impairment of the goodwill allocated to the respective CGUs would result if the compound annual revenue growth rate in the
budget/forecast period was reduced to 24.4% in Connectivity or 14.8% in Power Conversion, or if revenue was to decline at a compound
annual rate of (5.2)% in Mobile Systems.
14. Other intangible assets
A summary of activity for intangible assets for the years ended 31 December 2015 and 2014 is as follows:
Cost
As at 1 January 2014
Effect of movements in foreign currency
Additions
Reclassifications
Disposals
As at 31 December 2014
Effect of movements in foreign currency
Additions
Acquisitions through business combinations
Disposals
Acquired customer
related intangible
Purchased software,
Intangible assets from
assets
US$000
77,075
–
–
–
–
77,075
–
–
–
–
licenses and other
Patents
internal development
US$000
US$000
US$000
Total
US$000
57,457
(205)
7,873
(8)
(118)
64,999
137
4,076
–
(215)
8,415
(101)
2,153
–
(50)
10,417
141
4,257
–
(1)
86,672
(192)
6,670
–
–
93,150
(213)
24,498
5,600
(233)
229,619
(498)
16,696
(8)
(168)
245,641
65
32,831
5,600
(449)
As at 31 December 2015
77,075
68,997
14,814
122,802
283,688
Amortisation and impairment losses
As at 1 January 2014
Effect of movements in foreign currency
Amortisation charge for the year
Impairment charges
Disposals
(18,309)
(29,844)
–
(7,695)
–
–
164
(8,285)
(2,478)
119
(3,555)
6
(1,513)
–
3
(29,320)
31
(13,460)
–
–
(81,028)
201
(30,953)
(2,478)
122
As at 31 December 2014
(26,004)
(40,324)
(5,059)
(42,749)
(114,136)
Effect of movements in foreign currency
Amortisation charge for the year
Disposals
As at 31 December 2015
Net book value
As at 31 December 2014
As at 31 December 2015
–
(7,296)
–
(105)
(8,437)
169
(33,300)
(48,697)
(11)
(1,421)
–
(6,491)
(57)
(13,969)
179
(56,596)
(173)
(31,123)
348
(145,084)
51,071
43,775
24,675
20,300
5,358
8,323
50,401
66,206
131,505
138,604
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015Notes to the consolidated financialstatements continued For the year ended 31 December 2015
121
121
14. Other intangible assets continued
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 2015 was US$10,703,000 (31 December 2014:
US$14,613,000). Additions during the year were US$712,000 (2014: US$2,101,000). As of the reporting date future minimum payments
under those hire purchase contracts were US$9,504,000 (2014: US$13,906,000). The present value of the net minimum payments was
US$8,597,000 (2014: US$12,114,000).
15. Other non-current financial assets
Other non-current financial assets comprise:
Investment in Arctic Sand
Dyna call-option 1
Deposits
1 Please refer to note 4 Business combinations for further information.
At 31 December
At 31 December
2015
US$000
1,446
732
1,580
3,758
2014
US$000
1,446
-
1,858
3,304
The investment of US$1.4 million (2014: US$1.4 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 3.99% share in Arctic Sand on fully diluted position. We refer to note 26 Additional
disclosures on financial instruments in terms of fair value determination.
The deposits comprise mainly rent deposits for offices and parking.
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
2015
US$000
114,075
17,478
131,553
2014
US$000
83,303
7,603
90,906
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122 Notes to the consolidated financial
122
statements continued
For the year ended 31 December 2015
17. Other financial liabilities
Other financial liabilities comprise:
19. Other current liabilities
Other current 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
2015
US$000
3,677
–
4,568
8,245
2014
US$000
4,198
452
17,470
22,120
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 in the prior year represent the short-term accrued coupon of 1.0% per-annum
payable semi-annually in arrears for convertible bond.
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:
Obligations for product warranties
Pending legal claims
Other1
Total current
Dilapidation
Lease obligations
Severance
Total non-current
Total
Balance at 1 January
At 31 December
2015
Currency change
Discount
Additions
Used
Released
US$000
1,483
283
63
1,829
875
470
610
1,955
3,784
US$000
–
(29)
(1)
(30)
(38)
–
(43)
(81)
(111)
US$000
–
–
–
–
39
–
–
39
39
US$000
1,545
–
–
1,545
389
530
147
1,066
US$000
(1,226)
–
–
US$000
(257)
–
–
(1,226)
(257)
–
(132)
(106)
(238)
(16)
–
–
(16)
2,611
(1,464)
(273)
2015
US$000
1,545
254
62
1,861
1,249
868
608
2,725
4,586
1 In 2014, other provisions contained also deferred revenue and related cost of sales which have been reclassified to other current liabilities. For the reclassification of deferred revenue in 2014, please
refer to Note 2.
123
At 31 December
At 31 December
2015
US$000
30,188
2,701
16,995
49,884
2014
US$000
27,131
2,800
12,542
42,473
At 31 December
At 31 December
2015
US$000
4,919
2014
US$000
7,916
Obligations for personnel and social expenses
Advances received in relation to customer specific research and development contracts
Other
Terms and conditions of the above other current liabilities:
obligations for personnel and social expenses have an average term of three months (2014: 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 hire purchase and finance lease obligations
21. Convertible bonds
As previously reported in the consolidated financial statements and notes for the years 2012 until 2014, 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
were listed on the Luxembourg Stock Exchange’s Euro MTF market, were 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).
Early redemption of US$201,000,000 1 per cent. convertible bonds
On 16 March 2015, Dialog announced that it would exercise its option to redeem all outstanding 1% Convertible Bonds 2017 on 5 May 2015.
By 28 April 2015, all holders of the Bonds had exercised their conversion rights in respect of all outstanding Bonds. On conversion, the
carrying amount of the bonds was US$183.138 million and led to an increase of common stock by a total of US$1.049 million and an
increase of the additional paid in amount of US$182.089 million. The maximum number of new ordinary shares that has been issued was
6,797,025 (which represent 9.56 per cent of the current total number of ordinary shares issued by Dialog) and the total number of ordinary
shares issued by Dialog increased from 71,068,930 to 77,865,955.
On a full year basis, this early redemption has not resulted in dilution of Dialog's diluted earnings per ordinary share as the potential maximum
number of ordinary shares that would be created by the full conversion of the Bonds were already included on a fully diluted basis in the
calculation of the full year 2014 diluted earnings per share.
Dialog Semiconductor Plc
Annual report and accounts 2015
www.dialog-semiconductor.com
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015Notes to the consolidated financialstatements continued For the year ended 31 December 2015
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
123
123
At 31 December
2015
At 31 December
2014
US$000
30,188
2,701
16,995
49,884
US$000
27,131
2,800
12,542
42,473
Terms and conditions of the above other current liabilities:
obligations for personnel and social expenses have an average term of three months (2014: 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 hire purchase and finance lease obligations
At 31 December
At 31 December
2015
US$000
4,919
2014
US$000
7,916
21. Convertible bonds
As previously reported in the consolidated financial statements and notes for the years 2012 until 2014, 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
were listed on the Luxembourg Stock Exchange’s Euro MTF market, were 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).
Early redemption of US$201,000,000 1 per cent. convertible bonds
On 16 March 2015, Dialog announced that it would exercise its option to redeem all outstanding 1% Convertible Bonds 2017 on 5 May 2015.
By 28 April 2015, all holders of the Bonds had exercised their conversion rights in respect of all outstanding Bonds. On conversion, the
carrying amount of the bonds was US$183.138 million and led to an increase of common stock by a total of US$1.049 million and an
increase of the additional paid in amount of US$182.089 million. The maximum number of new ordinary shares that has been issued was
6,797,025 (which represent 9.56 per cent of the current total number of ordinary shares issued by Dialog) and the total number of ordinary
shares issued by Dialog increased from 71,068,930 to 77,865,955.
On a full year basis, this early redemption has not resulted in dilution of Dialog's diluted earnings per ordinary share as the potential maximum
number of ordinary shares that would be created by the full conversion of the Bonds were already included on a fully diluted basis in the
calculation of the full year 2014 diluted earnings per share.
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124 Notes to the consolidated financial
124
statements continued
For the year ended 31 December 2015
22. Shareholders’ equity and other reserves
Ordinary shares
The amount of authorised shares at 31 December 2015 was 104,311,860 (2014: 104,311,860, 2013: 104,311,860) with a par value of £0.10
per share, of which 77,865,955 (2014: 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/
1 January 2015
Conversion of Convertible Bonds
At 31 December 2015
Amount of shares
68,068,930
3,000,000
71,068,930
6,797,025
77,865,955
US$000
12,852
501
13,353
1,049
14,402
Dialog’s stock is issued in the form of registered shares. All shares are fully paid by cash consideration.
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. Due to the conversion of the convertible bond (see note 21), the additional paid in capital rose by
US$182,089,000 in 2015.
Retained earnings
Retained earnings comprise losses and non-distributed earnings of consolidated Group companies.
Other reserves
Currency translation reserve
The currency translation reserve is used to record exchange differences arising from the translation of the financial statements of
subsidiaries and branches whose functional currency is not the US$. At 31 December 2015 and 2014, the negative currency translation
reserve was US$4,480,000 and US$3,007,000 respectively, compared to US$1,710,000 at 31 December 2013.
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 2015 the negative cash flow hedge reserve was US$3,443,000 compared to a negative cash flow
hedge reserve of US$12,769,000 at 31 December 2014, as compared to a positive cash flow hedge reserve of US$1,580,000 at 31 December
2013. Please refer to note 29 for the amounts reclassified from other comprehensive income and recognised in profit and loss statement.
The related tax effects allocated to each component of other reserves for the years ended 31 December 2015, 2014 and 2013 are as follows:
Currency translation
reserve
Hedging reserve
Other comprehensive
income (loss)
2015
Pre-tax
US$000
Tax effect
US$000
Net
US$000
Pre-tax
US$000
2014
Tax effect
US$000
2013
Net
Pre-tax
Tax effect
Net
US$000
US$000
US$000
US$000
(1,884)
13,020
(10)
(3,694)
(1,894)
9,326
(1,032)
(19,794)
(265)
5,445
(1,297)
(14,349)
269
91
(15)
(48)
254
43
11,136
(3,704)
7,432
(20,826)
5,180
(15,646)
360
(63)
297
Dialog Semiconductor Plc
Annual report and accounts 2015
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125
125
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 25. At 31 December 2015 and 31 December 2014, the Trusts held 1,879,195 and
2,825,412 shares respectively, as compared to 2,097,799 shares as at 31 December 2013. 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. Non-controlling interests
The table below shows details on non-wholly owned subsidiaries of the Group that have material non-controlling interests:
Name of subsidiary
Dyna Image Corporation
1 41.1% on fully diluted basis as described in Note 4.
Proportion of ownership interests
Profit (loss) allocated to non-
Accumulated non-controlling
Place of incorporation and principal place of
and voting rights held by non-
controlling interests
business
controlling interests
Taipei, Taiwan
45.7% 1
US$000
(1,507)
interests
US$000
7,801
Summarised financial information in respect of the Group´s subsidiary that has material non-controlling interests is set out below. The
summarised financial information below represents amounts before intragroup eliminations
Total current assets
Total non-current assets
Total current liabilities
Total non-current liabilities
Equity attributable to shareholders in the Company
Non-controlling interests
At 31 December
2015
US$000
9,609
7,237
4,702
–
4,343
7,801
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126 Notes to the consolidated financial
126
statements continued
For the year ended 31 December 2015
23. Non-controlling interests continued
Revenues
Expenses
Loss for the year
Loss attributable to owners of the Company
Loss attributable to the non-controlling interests
Loss for the year
Other comprehensive income attributable to owners of the Company
Other comprehensive income attributable to the non-controlling interests
Other comprehensive income for the year
Total comprehensive income attributable to owners of the Company
Total comprehensive income attributable to the non-controlling interests
Total comprehensive income for the year
Cash flow (used for)/from operating activities
Cash flow used for investing activities
Cash flow (used for)/from financing activities
Cash flow from operating, investing and financing activities
2015
US$000
4,798
(7,352)
(2,554)
(1,047)
(1,507)
(2,554)
(292)
(421)
(713)
(1,339)
(1,928)
(3,267)
(5,740)
(1,043)
8,721
1,938
24. 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$6,401,000 (2014: US$6,069,000, 2013: US$4,971,000). At 31 December 2015, contributions
amounting to US$1,505,000 (2014: 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$3,104,000 (2014: US$3,256,000,
2013: US$2,732,000).
25. 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 2015, 13,741,051 shares could be issued (2014: 12,541,576 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 2014 and 2015.
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015Notes to the consolidated financialstatements continued For the year ended 31 December 2015
127
127
25. Share-based payments continued
The fair value of all grants in the two-year period ended 31 December 2015 was estimated using the Black-Scholes option pricing model.
Expectations of early exercise are considered in the determination of the expected life of the options. The expected volatility is based on the
historical share price volatility over the remaining life of Dialog Semiconductor Plc shares which is based on information provided by
Bloomberg. The expected volatility is based on the assumption that future trends can be concluded from the historical volatility. Therefore, the
actual volatility may differ from these assumptions.
The following assumptions were used for stock option grants for the years ended 31 December 2015, 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 €)
2015
2014
2013
0%
46%
0.1%
3.0 - 6.0
39.42
39.22
0.10
33.38
0%
36%
0.2%
2.0 - 5.0
20.83
18.40
0.10
18.31
0%
46%
0.8%
2.0 - 6.0
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 2014 and 2015, 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. Therefore, the EIP
expired on 5 May 2015.
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) 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.
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128 Notes to the consolidated financial
128
statements continued
For the year ended 31 December 2015
25. Share-based payments continued
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.
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.
D) New Long Term Incentive Plan
The Group also operates the Dialog Long Term Incentive Plan (LTIP) which was approved by shareholders at the Annual General Meeting on 30
April 2015. This new plan will replace the existing Executive Incentive Plan (EIP) which expired on 5 May 2015. All employees will be eligible to
participate in the LTIP but in practice awards will be targeted at the executive Director level and others in senior roles. The LTIP will operate
over a ten year period from the date of approval by Shareholders. Participants selected by the Remuneration Committee will be granted an
LTIP Award either in the form of:
a nil cost or nominal cost option;
a conditional share award;
a market price option; or
a cash-settled award linked to the value of the Company´s share price (in the case of jurisdictions where it is not feasible to deliver
shares to employees).
The first LTIP Awards were granted to employees in 2015 within six weeks following the AGM in April. Subsequently, it is intended that, other
than in exceptional circumstances, LTIP Awards will be granted to participants within six-week period following the date of publication of the
results of the Company.
Dialog Semiconductor Plc
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129
129
25. Share-based payments continued
Awards to executive Directors will vest subject to the achievement of challenging performance conditions, set at each grant by the
Remuneration Committee. Awards to other employees may be made with or without performance conditions. For 2015 awards, the proposed
performance condition is as follows: there are three different performance measures, relating to EBIT, Revenue Growth and relative Total
Shareholder Return (the TSR). Each of these three performance measures will determine one-third of the vesting.
Relative TSR
The TSR performance measure looks at the total amount returned to Shareholders, whether by way of share price growth or any dividends
paid. The Company´s TSR will be compared to the TSR of the constituents of the S&P Select Semiconductor Index. Dialog´s TSR is measured
over a three-year performance period and compared to the companies in the comparator group. The Committee may choose to use the
average TSR of each company at the start and end of the measurement period, with averaging over not more than three months. If Dialog´s
TSR is below the median of the comparator group then none of this TSR-related part of the award vests. If Dialog´s TSR is at the median of the
comparator group then 25% of the maximum TSR-related part of the award vests. If Dialog´s TSR is at the 60th percentile of the comparator
group then 50% of the maximum TSR-related part of the award will vest. If Dialog´s TSR is at or above the 75th percentile of the comparator
group then 100% of the maximum TSR-related part of the award will vest. Straight line interpolation will apply between the 25%, 50% and
100% vesting points referred above. In addition, the level of vesting for the TSR-related component of the award is capped: if the TSR is
negative for the performance period, vesting is capped at 50% of the maximum award, irrespective of whether the Company has
outperformed the constituents of S&P Select Semiconductor Index against which it is benchmarked.
Financial metrics
The EBIT and revenue growth targets will be measured over a three year period. Targets will be set and measured on an annual basis to ensure
that they remain challenging and relevant. These targets will 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); and
Maximum (e.g. the level of performance which is acknowledged by the Remuneration Committee as exceptional).
Level of Corporate Performance
Threshold 1)
Target 1)
Maximum 1)
[1] Straight-line between points
% of LTIP Award vesting, as a percentage of maximum
25%
50%
100%
At the end of the three-year performance period, the Remuneration Committee will determine the level of vesting based on the actual level of
performance achieved over the three years.
Overall performance assessment
The Remuneration Committee may apply a downward adjustment to the total level of vesting if it considers this to be necessary to take
account of the overall financial health or performance of the Company. The balance of any LTIP Award which does not vest in accordance
with the above performance conditions will lapse.
The vesting period for any awards to executive Directors will be three years. Any awards for other participants that are subject to performance
conditions will also have a three-year vesting period. Where awards below the Executive Directors are granted without performance conditions,
the Remuneration Committee will determine the appropriate vesting period at the time of grant.
The following assumptions were used for the fair value calculations of the Group´s performance related plans described above (EIP and LTIP):
Average share price at grant date
Exercise price
Expected volatility
Risk-free-interest-rate
Assumed level of vesting regarding the performance conditions
Option lifetime
Grant in 2015
Grant in 2014
Grant in 2013
€39.17
€0.12
46%
0%
70%
6 Years
€16.00
€0.12
36%
0.2%
70%
6 Years
€13.61
€0.12
45%
0.8%
50%
6 Years
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130 Notes to the consolidated financial
130
statements continued
For the year ended 31 December 2015
25. Share-based payments continued
E) Development of plans
Stock option plan activity (including stock options granted under the LTIP and the EIP) for the years ended 31 December 2015 and 2014 was
as follows:
2015
2014
Weighted average
exercise price
Weighted average
exercise price
Outstanding at beginning of year
Granted
Exercised
Forfeited
Outstanding at end of year
Options
5,148,024
1,008,344
(1,306,386)
(139,737)
4,710,245
€
5.90
0.10
6.57
3.70
4.53
Options
6,036,051
1,748,517
(2,452,916)
(183,628)
5,148,024
Options exercisable at year end
1,660,213
10.05
1,845,756
€
7.93
0.09
6.82
4.52
5.90
9.64
The weighted average share price at the date of exercise of options was €39.42 and €21.85 in the years ended 31 December 2015 and 2014
respectively.
Liabilities from share option exercises to employees were US$ nil at 31 December 2015 (2014: US$210,000).
The following table summarises information on stock options outstanding (including stock options granted under the LTIP and the EIP) at 31
December 2015:
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 2015
(in years)
€
at 31 December 2015
3,136,787
117,435
1,456,023
4,710,245
4.5
0.9
3.2
4.0
0.13
7.15
13.81
4.53
389,431
117,435
1,153,347
1,660,213
€
0.32
7.15
13.63
10.05
F) 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 2015 the Trusts
held 1,879,195 shares (2014: 2,825,412).
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131
131
26. Additional disclosures on financial instruments
Amounts recognised in the consolidated balance sheet according to IAS 39
Category
Carrying
amount
Fair value
recognised
in other comprehensive
Fair value
recognised in
in accordance
31 December 2015
Amortised cost
income
profit or loss
Fair-Value-
with IAS 39
US$000
US$000
US$000
US$000
Hierarchy
Fair value 31
December
2015
US$000
Assets
Cash at bank and Short-term deposits
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
Investment in Arctic Sand
Liabilities
Trade account payables
Other payables
Other financial liabilities
Hire purchase agreements and finance
lease obligations
Derivative financial liabilities
Derivatives without hedging
relationship
Derivatives with hedging
relationship
Of which aggregated by category in
accordance with IAS 39:
Loans and receivables (LaR)
Deposits designated as a hedging instrument (LaR)
Held-to-maturity investments (HtM)
Available-for-sale financial assets (AfS)
Derivatives without hedging relationship (FVTPL)
Derivative financial liabilities with hedging relationship
(FVTPL)
Financial liabilities at amortised cost (FLAC)
LaR
LaR
566,809
566,809
72,668
72,668
LaR
2,086
2,086
FVTPL
FVTPL
AfS
FLAC
FLAC
FLAC
FLAC
FVTPL
FVTPL
732
–
1,446
–
–
–
114,075
17,478
440
114,075
17,478
440
8,156
8,156
–
4,568
641,563
–
–
1,446
732
–
–
641,563
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
n/a
566,809
n/a
72,668
– Level 1
2,086
732 Level 2
732
– Level 2
n/a
–
–
1,446
–
–
–
n/a
n/a
n/a
114,075
17,478
440
– Level 2
7,688
–
–
–
4,568
– Level 2
4,568
–
–
–
–
–
–
–
732
–
–
–
–
–
–
–
–
–
641,563
–
–
1,446
732
(4,568)
(139,681)
(4,568)
(140,149)
–
(140,149)
(4,568)
–
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 liability related to long-term finance lease contract have changed, the fair value at 31 December 2015 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. If the carrying amount does not approximate their fair values, the fair values of the financial assets and financial liabilities
included in the level 2 and level 3 categories have been determined in accordance with generally accepted pricing models based on a
discounted cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk of counterparties.
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132 Notes to the consolidated financial
132
statements continued
For the year ended 31 December 2015
26. Additional disclosures on financial instruments continued
Assets
Cash at bank and Short-term deposits
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
Investment in Arctic Sand
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)
Deposits designated as a hedging instrument (LaR)
Held-to-maturity investments (HtM)
Available-for-sale financial assets (AfS)
Derivative financial liabilities with hedging
relationship (FVTPL)
Financial liabilities at amortised cost (FLAC)
Amounts recognised in the consolidated balance sheet according to IAS 39
Category
Carrying
amount
Fair value
recognised
Fair value
in other comprehensive
recognised in
in accordance
with IAS 39
31 December 2014
US$000
Amortised cost
US$000
income
US$000
profit or loss
US$000
Fair-Value-
Hierarchy
Fair value
31 December
2014
US$000
LaR
LaR
LaR
318,446
5,834
100,569
318,446
–
100,569
–
5,834
–
–
–
–
n/a
n/a
n/a
318,446
5,834
100,569
LaR
3,586
3,586
FVTPL
FVTPL
AfS
FLAC
FLAC
FLAC
FLAC
FLAC
–
–
1,446
–
–
–
83,303
7,603
836
83,303
7,603
836
11,279
180,659
11,279
180,659
FVTPL
–
FVTPL
17,470
–
–
–
–
–
–
–
–
–
–
–
–
– Level 1
3,586
–
Level2
–
– Level 2
n/a
–
–
1,446
–
–
–
n/a
n/a
n/a
83,303
7,603
836
– Level 2
– Level 2
10,553
192,236
–
–
–
17,470
– Level 2
17,470
422,601
5,834
–
1,446
422,601
–
–
–
–
5,834
–
–
(17,470)
(283,679)
–
(283,679)
(17,470)
–
–
–
–
–
–
–
–
–
–
–
–
–
422,601
5,834
–
1,446
(17,470)
(294,531)
Dialog Semiconductor Plc
Annual report and accounts 2015
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133
133
27. 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 Other commitments
and software
Operating leases
commitments
Other commitments
and software
commitments
2015
US$000
10,432
9,982
7,395
6,561
6,075
17,994
58,439
2015
US$000
10,224
4,665
339
49
33
–
15,310
2014
US$000
8,444
8,186
7,680
5,320
4,869
8,655
43,154
2014
US$000
11,645
6,753
3,352
2
–
–
21,752
Total payments for operating leases and software commitments, charged as an expense in the income statement, amounted to
US$15,434,000 and US$15,547,000 for the years ended 31 December 2015 and 2014 respectively. Of this amount US$6,257,000 and
US$8,417,400 was for software commitments for the years ended 31 December 2015 and 2014 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
2015
US$000
4,402
3,400
1,700
–
–
–
9,502
(906)
8,596
Minimum payments
2014
US$000
4,403
4,403
3,400
1,700
–
–
13,906
(1,792)
12,114
Capital commitments
The Group has contractual commitments for the acquisition of property, plant and equipment in 2015 of US$6,962,000 (2014: US$4,491,000)
and for the acquisition of intangible assets of US$1,325,000 (2014: US$4,846,000).
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134 Notes to the consolidated financial
134
statements continued
For the year ended 31 December 2015
28. 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 the Group considered as being the Board of Management.
The Group reports on four (2014: four, 2013: four) operating segments, which are independently managed by bodies responsible for the
respective segments depending on the nature of products offered. The identification of Company components as operating segments is based
in particular on the existence of business unit managers who report directly to the Board of Management of Dialog and who are responsible
for the performance of the segment under their charge.
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 & 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.
Mobile
Automotive/
Power
Mobile
Automotive/
Power
2015
2014
Systems
Industrial
Connectivity
Conversion
Corporate
Total
Systems
Industrial
Connectivity
Conversion
Corporate
Total
Revenues 1
R&D expenses
Operating profit (loss) 2
Depreciation/
amortisation
Inventory impairment and
fixed asset disposal losses
Investments
US$000
1,114,495
140,066
341,931
US$000
US$000
34,367 117,014 84,636 4,8003 1,355,312 942,628 40,952 92,120 80,367
US$000
US$000
US$000
US$000
US$000
US$000
US$000
2,488
9,340
25,747 23,282 31,599
223,182 141,246
8,360 (20,675)(79,210) 259,746 244,180 11,232
2,392 25,703 22,476 21,991
(2,163) (21,135)(46,212)
US$000
US$000
383 1,156,105
213,808
185,902
31,010
719
6,467 15,754
1,327
55,277 29,959
889
7,337 17,064
333
55,582
8,146
50,938
202
446
394
7,585
1,571
5,875
485
8,403
10,798
6,096
73,2474 30,681
260
167
212 3,582
3,737 4,239
85
2,231
10,235
41,0555
Inventories
97,053
8,913
At 31 Dec 2015
13,563 12,152
3,249
134,930 71,327
6,165 13,678 7,970
–
99,140
At 31 Dec 2014
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.
The Operating profit (loss) is reconciled to profit before taxation on the face of the Income Statement.
3 The revenue in the corporate column include mainly corporate projects related revenue and starting from 2015 the consolidated contribution of Dyna Image.
4 Including US$34,884,000 additions to PPE, US$38,431,000 additions to intangible assets and US$68,000 sale of other investments.
5 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.
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015Notes to the consolidated financialstatements continued For the year ended 31 December 2015
Revenues 1
R&D expenses
Operating profit (loss) 2 244,180 11,232
Depreciation/
amortisation
Inventory impairment
and fixed asset disposal
losses
Investments
6,096
30,681
260
167
29,959
889
135
135
28. Segmental reporting continued
2014
2013
Mobile
Automotive/
Power
Mobile
Automotive/
Power
Systems
Industrial
Connectivity
Conversion
Corporate
Total
Systems
Industrial
Connectivity
Conversion
Corporate
Total
US$000
US$000
US$000
942,628 40,952 92,120 80,367
141,246
US$000
2,392 25,703 22,476 21,991
US$000
US$000
US$000
US$000
US$000
383 1,156,105 744,869 37,259 91,616 26,768
8,806
213,808 118,091
1,749 22,677
US$000
US$000
8683 901,380
9,491 160,814
(2,121) (22,533) (26,139) 102,660
US$000
(2,163) (21,135) (46,212) 185,902 141,242 12,211
7,337 17,064
333
55,582 25,487
971 10,712
9,853
204 47,227
212
3,737
3,582
4,239
85
2,231
10,235 11,832
41,0554 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
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 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 2015, 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.
b) Corporate
Corporate activities include emerging market businesses (since June 2015, Dyna Image), new technology development activities, the costs of
operating central corporate functions, and the Group’s share-based compensation expense and certain other unallocated costs.
Since June 2015 the Corporate segment includes the consolidated contribution of Dyna Image (for further information we refer to note 4
Business combination). In 2015 revenues in the Corporate column include US$4,798,000 revenues from Dyna Image (2014: US$38,000
revenue components, 2013: US$851,000 from the BenQ Cash settlement).
R&D expenses in the Corporate column predominantly include stock option expenses and expenses for the Executive Incentive Plan (EIP) and
Long-Term Incentive Plan (LTIP) of US$9,518,000 (2014: US$9,761,000, 2013: US$3,564,000). Furthermore, there are US$17,827,000 (2014:
US$12,157,000, 2013: US$5,789,000) development expenses for new technology projects and US$2,480,000 from Dyna Image.
The operating losses recorded in the corporate column for the year ended 31 December 2015 of US$79,210,000 (2014: US$46,212,000,
2013: US$26,139,000) are primarily resulting from stock option expenses US$19,215,000 (including EIP and LTIP) (2014: US$21,170,000,
2013: US$8,487,000), the costs of the holding company US$29,762,000, thereof US$17,604,000 costs related to the Atmel acquisition and
integration (2014: US$10,941,000, 2013: US$12,838,000) and expenses for developing new technology projects US$22,048,000 (2014:
US$16,645,000, 2013: US$8,783,000). In 2015, no NRE revenues were included in other operating income (in 2014: US$600,000 NRE
revenues, in 2013: US$996,000 BenQ cash settlement). In 2014 and 2013 another operating income of US$1,939,000, and US$3,249,000
was recorded resulting from the release of earn out provision.
www.dialog-semiconductor.com
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information
136 Notes to the consolidated financial
136
statements continued
For the year ended 31 December 2015
137
28. Segmental reporting continued
c) Geographic information – Revenues by shipment destination
29. Financial risk management objectives and policies
Vulnerability due to certain significant risk concentrations
Revenues
United Kingdom
Other European countries
China
Hong Kong
Other Asian countries
Other countries
Total revenues
Additions to non-current assets
Germany
Japan
United Kingdom
Netherlands
USA
Taiwan
Singapore
Other
Total investments
Non-current assets
Germany
USA
United Kingdom
Netherlands
Japan
Other
Total non-current assets *
* Total non-current assets excluding deferred tax assets.
2015
US$000
2014
US$000
2013
US$000
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.
903
54,859
1,080,488
165,645
42,849
10,568
782
60,098
983,412
53,454
47,213
11,146
1,355,312
1,156,105
2015
US$000
19,444
185
26,710
9,147
5,988
9,316
5
2,452
73,247
945
62,628
742,324
40,201
46,821
8,461
901,380
2014
US$000
15,042
273
9,751
4,718
6,696
720
18
3,837
41,055
At 31 December
At 31 December
2015
US$000
2014
US$000
46,518
257,424
99,992
46,907
1,011
10,067
461,919
47,589
261,565
80,889
42,025
990
5,987
439,045
Revenues are allocated to countries based on the location of the shipment destination. Segmental investments and assets are allocated based
on the geographic location of the asset.
Dialog Semiconductor Plc
Annual report and accounts 2015
www.dialog-semiconductor.com
Dialog Semiconductor Plc
Annual report and accounts 2015
The Group's products are generally utilised in the wireless and automotive industries. The Group generates a substantial portion of its revenue
from the Mobile Systems segment, which accounted for 82.2% and 81.5% of its total revenue for the years ended 31 December 2015 and
2014, respectively, as compared to 82.5% of its total revenue for the year ended 31 December 2013.
Changes in foreign currency exchange rates influence the Group’s results of operations. The Group’s sales, purchases of raw materials and
manufacturing services are primarily denominated in US$.
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 2015, 2014 as well as 2013 one main customer individually accounted for more than 10% of the Group's revenues. Total revenues
from this customer were US$1,077,700,696 (2014: US$909,900,903, 2013: US$718,733,000). Net receivables from this customer at 31
December 2015 were US$25,182,182, (2014: US$83,075,043). This customer is part of the Mobile Systems segment.
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 2015 and 2014, the Group’s policy that no trading in derivatives shall be undertaken.
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 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.
Market risk
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 and for the convertible bond (please refer to note
21) occurred until May 2015.
The Group’s policy is to manage its interest income using a mix of fixed and variable interest rate debts. In order to achieve this policy, the
Group invests in highly liquid funds having a matching investment strategy. Once the operating business has been financed, short-term excess
funds are invested in floating interest rate securities. Only short-term deposits bear fixed interest rates.
Dialog Semiconductor PlcAnnual report and accounts 2015Notes to the consolidated financialstatements continued For the year ended 31 December 2015
137
137
29. Financial risk management objectives and policies
Vulnerability due to certain significant risk concentrations
The Group’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Group’s future operating
results and cause actual results to vary materially from historical results include, but are not limited to, the highly cyclical nature of both the
semiconductor and wireless communications industries, dependence on certain customers and the ability to obtain 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 82.2% and 81.5% of its total revenue for the years ended 31 December 2015 and
2014, respectively, as compared to 82.5% of its total revenue for the year ended 31 December 2013.
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 2015, 2014 as well as 2013 one main customer individually accounted for more than 10% of the Group's revenues. Total revenues
from this customer were US$1,077,700,696 (2014: US$909,900,903, 2013: US$718,733,000). Net receivables from this customer at 31
December 2015 were US$25,182,182, (2014: US$83,075,043). This customer is part of the Mobile Systems segment.
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 2015 and 2014, the Group’s policy that no trading in derivatives shall be undertaken.
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 and for the convertible bond (please refer to note
21) occurred until May 2015.
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.
www.dialog-semiconductor.com
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information
138 Notes to the consolidated financial
138
statements continued
For the year ended 31 December 2015
29. Financial risk management objectives and policies continued
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the
Group’s profit before tax as well as the Group’s equity:
2015
2014
2013
Increase/decrease in
Effect on profit
Effect on equity
basis points
US$000
US$000
23
(23)
2
(2)
31
(22)
1,052
(1,052)
1,052
(1,052)
58
(58)
794
(565)
58
(58)
794
(565)
The reasonable possible changes would not affect the other comprehensive income.
Currency risk
The main functional currency within the Group and the presentation currency for the consolidated financial statements is the US$. 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 2015, 2014 and 2013 nearly all the Group’s sales were denominated in US$.
The following tables demonstrate the foreign currency exposure and the sensitivity to a reasonably possible change in the US$ exchange rate,
with all other variables held constant, of the Group´s profit before tax (resulting from changes in the fair value of financial assets and liabilities)
and changes in the Group´s other comprehensive income (resulting from the Group´s hedging activities).
Financial Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Financial Liabilities
Other financial liabilities
Derivative financial instruments
Trade and other payables
EUR
US$000
11,218
3
134
11,355
(440)
(2,617)
(12,278)
(15,335)
GBP
US$000
183
1
17
201
–
(1,951)
(5,943)
(7,894)
TWD
US$000
3,331
–
124
3,455
–
–
(541)
(541)
Other
US$000
2,545
–
951
3,496
USD
Total
US$000
US$000
549,532
72,664
4,618
566,809
72,668
5,844
626,814
645,321
–
–
(744)
(8,156)
–
(112,047)
(8,596)
(4,568)
(131,553)
(744)
(120,203)
(144,717)
At 31 December 2015
(3,980)
(7,693)
2,914
2,752
506,611
500,604
Reasonably possible change against the US$:
10.4%
5.1%
4.3%
5.8%
0.0%
Potential impact on net income – gain/(loss)
increase against US$
decrease against US$
Potential impact on other comprehensive
income – gain/(loss)
increase against US$
decrease against US$
(142)
142
(272)
272
(290)
290
(99)
99
124
(124)
–
–
(0)
0
–
–
–
–
–
–
(308)
308
(370)
370
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015Notes to the consolidated financialstatements continued For the year ended 31 December 2015
139
139
29. Financial risk management objectives and policies continued
Financial Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Financial Liabilities
Other financial liabilities
Derivative financial instruments
Trade and other payables
EUR
US$000
26,103
2
149
26,254
(4)
(13,240)
(8,308)
(21,552)
GBP
US$000
757
374
18
1,149
(21)
(3,607)
(2,335)
(5,963)
TWD
US$000
5,394
–
138
5,532
–
–
(346)
(346)
Other
US$000
3,683
–
1,016
4,699
USD
US$000
Total
US$000
288,343
100,193
5,569
324,280
100,569
6,890
394,105
431,739
(19)
(623)
(676)
(192,729)
–
(79,241)
(192,773)
(17,470)
(90,906)
(1,318)
(271,970)
(301,149)
At 31 December 2014
4,702
(4,814)
5,186
3,381
122,135
130,590
Reasonably possible change against the US$:
11.7%
5.6%
5.9%
5.7%
0.0%
Potential impact on net income – gain/(loss)
increase against US$
decrease against US$
Potential impact on other comprehensive
income – gain/(loss)
increase against US$
decrease against US$
2,101
(2,101)
(1,550)
1,550
(67)
67
(200)
200
305
(305)
–
–
32
(32)
(11)
11
–
–
–
–
2,371
(2,371)
(1,761)
1,761
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.
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 three factoring agreements with reputable financial institutions. The maximum amount
of cash that can be received under these agreements is US$112,000,000 (2014: 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.
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 2015, the Group had cash and cash equivalents of US$566,809,000 (2014: US$324,280,000).
www.dialog-semiconductor.com
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information
140 Notes to the consolidated financial
140
statements continued
For the year ended 31 December 2015
29. Financial risk management objectives and policies continued
The Group’s policy is to structure its maturities of current financial assets within the Group to meet 100% of the respective maturities of the
liabilities. The table below summarises the maturity profile of the Group’s financial liabilities at 31 December 2015, based on contractual
undiscounted payments:
29. Financial risk management objectives and policies continued
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:
Financial year ended 2015
Trade accounts payable
Other payables
Other financial liabilities
Other current liabilities
Financial year ended 2014
Trade accounts payable
Other payables
Other financial liabilities
Other current liabilities
Less than 3 months
US$000
3 to 12 months
US$000
1 to 5 years
US$000
Total
US$000
114,075
17,478
4,568
39,890
176,011
83,303
7,603
17,922
35,997
144,825
–
–
3,677
–
3,677
–
–
4,198
–
4,198
–
–
4,919
–
4,919
–
–
188,123
–
188,123
114,075
17,478
13,164
39,890
184,607
83,303
7,603
210,243
35,997
337,146
For the disclosure of maturity profile, the deferred revenue and related cost of sales has been excluded from other current liabilities as presented in the balance sheet.
The non-current other financial liabilities as of 31 December 2015 were US$4.9 million (31 December 2014: US$188.1 million) which are
related to liabilities from hire purchase and finance lease obligations (31 December 2014: US$7.9 million). In 2014, US$180.2 million of the
non-current financial liabilities represent the book value of the liability from the convertible bond which was early converted in May 2015 (for
further details we refer to note 21).
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 remained untapped. As of 1 July 2015, this facility was cancelled.
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 had a significant impact on the capital structure of the Group, amongst others it led to a decrease of the equity ratio
in 2013 and 2014. During 2015, the Company exercised its option to redeem all outstanding Bonds on 5 May 2015. Therefore the maximum
number of new ordinary shares that has been issued was 6,797,025 (which represented 9.56 per cent of the current total number of ordinary
shares issued by the Company) and the total number of ordinary shares issued by Dialog increased from 71,068,930 to 77,865,955. Due to
conversions of convertible bonds, ordinary shares rose by a total of US$1.049 million, and the additional paid in capital rose by US$182.089
million. 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 2015 was 79.6%
(2014: 62.0%, 2013: 49.2%). The increased equity ratio was mainly the result of the equity increase in connection with the early redemption
of the convertible bond in May 2015 which is described in more detail in note 21. 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.
Hedging activities
At 31 December 2015, the Group held forward exchange contracts and deposits (referred to as the “hedging instruments”) designated as
hedges of firm commitments and forecast transactions in Euro, Pound Sterling and Japanese Yen.
2015
January 2016
February 2016
March 2016
April 2016
May 2016
June 2016
July 2016
August 2016
September 2016
October 2016
November 2016
December 2016
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
Forward exchange contracts
Fair values
Deposits
At 31 December 2015
At 31 December 2014
Assets
US$000
Liabilities
US$000
–
–
4,568
–
Assets
US$000
–
5,834
Liabilities
US$000
17,470
–
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 2016 to December 2016 and January 2015 to December
2015 respectively were assessed to be highly effective and, at 31 December 2015, a net unrealised loss of US$3,443,000 was included in
other comprehensive income in respect of these cash flows (2014: loss of US$12,769,000). The cash flow hedges of the expected future cash
flows in each month from January 2014 to December 2014 were assessed to be highly effective as well, and at 31 December 2013, a net
unrealised gain of US$1,580,000 was included in other comprehensive income in respect of these cash flows. During the financial year 2015 a
loss of US$18,960,163 (2014: loss of US$23,614,000, 2013: gain of US$1,747,000) was recognised in other comprehensive income and a
loss of US$31,980,000 (2014: 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 rate US$/€
Derivatives
€000
Deposits
141
–
–
–
–
–
–
–
-
-
-
-
-
–
–
–
–
–
–
–
–
–
10,000
12,000
16,000
9,750
9,750
8,500
7,500
6,500
6,500
5,000
5,000
5,000
9,000
13,000
16,000
9,000
13,000
13,000
9,000
13,000
7,000
7,000
9,000
9,000
1.1500
1.1551
1.1381
1.0787
1.0996
1.1071
1.1144
1.1223
1.1236
1.0932
1.0948
1.0964
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
1,800
1,000
–
1.2724
1.2165
1.2165
Dialog Semiconductor Plc
Annual report and accounts 2015
www.dialog-semiconductor.com
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015Notes to the consolidated financialstatements continued For the year ended 31 December 2015
141
141
29. Financial risk management objectives and policies continued
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 2015
At 31 December 2014
Assets
US$000
Liabilities
US$000
–
–
4,568
–
Assets
US$000
–
5,834
Liabilities
US$000
17,470
–
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 2016 to December 2016 and January 2015 to December
2015 respectively were assessed to be highly effective and, at 31 December 2015, a net unrealised loss of US$3,443,000 was included in
other comprehensive income in respect of these cash flows (2014: loss of US$12,769,000). The cash flow hedges of the expected future cash
flows in each month from January 2014 to December 2014 were assessed to be highly effective as well, and at 31 December 2013, a net
unrealised gain of US$1,580,000 was included in other comprehensive income in respect of these cash flows. During the financial year 2015 a
loss of US$18,960,163 (2014: loss of US$23,614,000, 2013: gain of US$1,747,000) was recognised in other comprehensive income and a
loss of US$31,980,000 (2014: 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 rate US$/€
Derivatives
€000
Deposits
2015
January 2016
February 2016
March 2016
April 2016
May 2016
June 2016
July 2016
August 2016
September 2016
October 2016
November 2016
December 2016
2014
January 2015
February 2015
March 2015
April 2015
May 2015
June 2015
July 2015
August 2015
September 2015
October 2015
November 2015
December 2015
10,000
12,000
16,000
9,750
9,750
8,500
7,500
6,500
6,500
5,000
5,000
5,000
9,000
13,000
16,000
9,000
13,000
13,000
9,000
13,000
7,000
7,000
9,000
9,000
1.1500
1.1551
1.1381
1.0787
1.0996
1.1071
1.1144
1.1223
1.1236
1.0932
1.0948
1.0964
1.3344
1.3232
1.3280
1.3333
1.3231
1.3235
1.3343
1.3244
1.3062
1.3064
1.2993
1.2994
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,000
1,800
1,000
–
–
–
–
–
–
–
–
-
-
-
-
-
–
–
–
–
–
–
–
–
1.2724
1.2165
1.2165
–
www.dialog-semiconductor.com
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information
Nominal amount £000 Forward rate US$/£
Derivatives
3,000
3,000
5,500
3,000
3,000
3,000
3,000
2,000
2,500
2,000
2,000
2,000
2,700
2,700
4,900
2,700
2,700
2,700
2,700
2,700
2,000
2,000
2,000
2,000
1.5148
1.5210
1.5176
1.5435
1.5418
1.5418
1.5434
1.5427
1.5076
1.5076
1.5082
1.5088
1.6921
1.6913
1.6672
1.6825
1.6818
1.6809
1.6706
1.6698
1.6465
1.6461
1.6458
1.6455
142 Notes to the consolidated financial
142
statements continued
For the year ended 31 December 2015
29. Financial risk management objectives and policies continued
Hedging instruments for Pound Sterling commitments:
Maturity
2015
January 2016
February 2016
March 2016
April 2016
May 2016
June 2016
July 2016
August 2016
September 2016
October 2016
November 2016
December 2016
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
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015Notes to the consolidated financialstatements continued For the year ended 31 December 2015
29. Financial risk management objectives and policies continued
Hedging instruments for Japanese Yen commitments:
Maturity
2015
January 2016
February 2016
March 2016
April 2016
May 2016
June 2016
July 2016
August 2016
September 2016
October 2016
November 2016
December 2016
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
143
143
Nominal amount ¥000
Forward rate ¥/US$
Derivatives
70,000
70,000
60,000
50,000
50,000
50,000
70,000
50,000
20,000
35,000
35,000
35,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
35,000
35,000
35,000
35,000
119.3397
119.3173
119.3830
118.4000
123.2314
123.1267
120.8600
120.3100
122.1682
121.9781
121.8142
121.6244
103.6324
103.6119
103.5811
103.8135
103.8031
103.7618
104.6634
104.6172
108.1300
108.1200
107.9600
107.8500
www.dialog-semiconductor.com
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144 Notes to the consolidated financial
144
statements continued
For the year ended 31 December 2015
Company balance sheet
As at 31 December
30. Transactions with related parties
For the relationship between the parent company, Dialog Semiconductor Plc, and its subsidiaries please see note 2.
Related parties are comprised of seven (2014: seven) non-executive members of the Board of Directors and twelve (2014: eleven) 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 53. 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.
2015
US$000
6,055
262
5,797
2014
US$000
5,679
203
7,942
12,114
13,824
2013
US$000
4,283
193
3,097
7,573
Compensation of non-executive Directors
The compensation of non-executive Directors was US$1,489,656 (2014: US$1,112,120, 2013: US$1,029,000). As at 31 December 2015 the
amount of Board member fees outstanding was US$ nil (2014: US$ nil, 2013: US$ nil). For further information please see the Directors’
remuneration report within the corporate governance section on pages 67 to 81.
Other related party transactions
In 2015 and 2014 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.
31. Subsequent event
Subsequent to the year end, on 20 January 2016 the Company received $137 million termination fees upon termination of the merger
agreement with Atmel.
Assets
Cash and cash equivalents
Amounts owed by group undertakings
Other current assets
Total current assets
Investments
Other intangible assets
Other financial assets
Total non-current assets
Total assets
Liabilities and equity
Other financial liabilities
Trade and other payables
Other payables
Total current liabilities
Ordinary Shares
Additional paid-in capital
Retained earnings
Other reserves
Amounts owed by group undertakings
Other non-current financial liabilities
Dialog shares held by employee benefit trust
Total equity
Total liabilities and equity
Profit for the financial year
Dr Jalal Bagherli
Director
145
93,570
272,804
246
366,620
514,056
506
254
12,931
184,070
1,360
392
198,753
180,207
13,353
274,517
229,788
(114)
(15,068)
Notes
2015
US$000
2014
US$000
32
528,219
514,816
853,165
881,436
55,100
268,674
1,172
324,946
527,657
562
–
425
23,548
19,071
378
43,422
–
14,402
463,725
356,246
–
(24,630)
35
809,743
502,476
853,165
881,436
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$126,441,000 (2014: profit of US$32,093,000).
These financial statements were approved by the Board of Directors on 8 March 2016 and were signed on its behalf by:
Dialog Semiconductor Plc
Annual report and accounts 2015
www.dialog-semiconductor.com
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015Notes to the consolidated financialstatements continued For the year ended 31 December 2015
Company balance sheet
Company balance sheet
As at 31 December
As at 31 December
145
145
Assets
Cash and cash equivalents
Amounts owed by group undertakings
Other current assets
Total current assets
Investments
Other intangible assets
Other financial assets
Total non-current assets
Total assets
Liabilities and equity
Other financial liabilities
Amounts owed by group undertakings
Trade and other payables
Other payables
Total current liabilities
Other non-current financial liabilities
Ordinary Shares
Additional paid-in capital
Retained earnings
Other reserves
Dialog shares held by employee benefit trust
Total equity
Total liabilities and equity
Notes
2015
US$000
2014
US$000
32
55,100
268,674
1,172
324,946
527,657
562
–
528,219
93,570
272,804
246
366,620
514,056
506
254
514,816
853,165
881,436
425
23,548
19,071
378
43,422
–
14,402
463,725
356,246
–
(24,630)
35
809,743
12,931
184,070
1,360
392
198,753
180,207
13,353
274,517
229,788
(114)
(15,068)
502,476
853,165
881,436
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$126,441,000 (2014: profit of US$32,093,000).
These financial statements were approved by the Board of Directors on 8 March 2016 and were signed on its behalf by:
Dr Jalal Bagherli
Director
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Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information
146 Company statement of changes
146
Company statement of changes in equity
in equity
Year ended 31 December
Additional paid-in
Ordinary shares
US$000
capital
US$000
Retained earnings
US$000
Other reserves
Dialog shares held
Hedging
reserve
US$000
by employee
benefit trusts
US$000
Total
US$000
518,731
(32,093)
(114)
246,289
–
–
261,832
(32,093)
–
–
–
(114)
(2,242)
–
–
–
(32,093)
(114)
–
(32,207)
9,780
(39)
–
18,487
–
–
–
–
–
49
–
–
–
–
–
(10,281)
–
(6,172)
3,627
–
–
(39)
(6,172)
22,114
49
12,852
–
–
–
501
–
–
–
–
13,353
274,517
229,788
(114)
(15,068)
502,476
–
–
–
1,049
–
–
–
14,402
–
–
–
126,441
–
126,441
–
114
114
182,089
–
7,119
–
463,725
–
–
–
17
356,246
–
–
–
–
–
–
–
–
–
(14,032)
4,470
–
126,441
114
126,555
183,138
(14,032)
11,589
17
(24,630)
809,743
Year ended 31 December
Balance at 1 January 2014
Net income (loss)
Other comprehensive income (loss)
Total comprehensive income (loss)
Other changes in equity:
Dialog shares issued to employee benefit trusts
Share issue costs
Purchase of Dialog shares by employee benefit trusts
Sale of Dialog shares by employee benefit trusts
Share-based payments, net of tax
As at 31 December 2014
Net income
Other comprehensive income (loss)
Total comprehensive income (loss)
Other changes in equity:
Conversion of Convertible Bonds
Purchase of Dialog shares by employee benefit trusts
Sale of Dialog shares by employee benefit trusts
Share-based payments, net of tax
As at 31 December 2015
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015
Company statement of cash flows
Company statement of cash flows
Year ended 31 December
Year ended 31 December
147
147
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
Share-based payments expense
Changes in working capital:
Trade accounts payable
Other assets and liabilities
Cash generated from (used for) operations
Interest paid
Interest received
Cash flow from (used for) operating activities
Cash flows from investing activities:
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:
Share issue costs
Other non-current financial liabilities
Cash flow from financial liabilities
Sale of Dialog shares by employee benefit trusts
Purchase of Dialog shares by employee benefit trusts
Cash flow used for financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Currency translation differences
Cash and cash equivalents at end of period
2015
US$000
2014
US$000
126,441
(32,093)
(6,407)
17
17,711
(1,689)
136,073
(1,004)
10,893
145,962
1,586
49
(1,205)
(11,788)
(43,451)
(2,010)
10,703
(34,758)
(56)
(506)
(13,601)
(70,315)
(156,391)
(170,048)
226,436
155,615
–
–
(12,055)
(14,032)
11,589
(14,498)
(38,584)
93,570
114
(39)
(75,943)
(7,488)
(6,172)
22,114
(67,528)
53,329
40,355
(114)
55,100
93,570
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148 Notes to the Company
Notes to the Company financial statements
148
financial statements
For the year ended 31 December 2015
For the year ended 31 December 2015
32. Investments
This represents the investment of the Company in Dialog Semiconductor GmbH, Dialog Semiconductor Ltd, Dialog Semiconductor B.V., in
2012 the incorporated subsidiaries in Italy and Turkey, in 2013 the acquired iWatt Inc. and the subsidiary Dialog KK in Japan. Further, the
investments comprise since 2014 the newly incorporated subsidiary Powerventure Semiconductor Ltd and since 2015 a 45.7% stake (41.1%
on a fully diluted basis) in Dyna Image Corporation (on all other investments mentioned the proportion of ownership interest is 100%).
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
Net income
Based on preliminary unaudited results.
2015
US$000
673,956
214,399
2014
US$000
583,282
153,138
33. Guarantees
General guarantees, within the scope of Article 403, Book 2 of the Dutch Civil Code, have been issued by the Company in respect of its
subsidiaries in the Netherlands, Dialog Semiconductor B.V. and Dialog Semiconductor Finance B.V.
34. Deferred tax
No deferred tax assets were recognised for tax loss carryforwards and temporary differences of the holding company since there is expected to
be insufficient future taxable profits and therefore utilisation is not probable.
35. Share capital and share options
Details of the Company’s share capital and share options are set out in notes 22 and 25 to the consolidated financial statements as at
31 December 2015.
36. Headcount and costs
The Company does not have any employees.
37. Events after the reporting period
There are no known events after the date of the Balance sheet that require disclosure.
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015
Appendix to Financial Review
Appendix to Financial Review
149
149
Financial Performance Measures
Use of non-IFRS measures
Dialog uses a range of measures to assess financial performance, to ensure performance is aligned to strategy and to ensure continued
alignment with shareholders’ interests. Certain of these measures are considered particularly important and are identified as ‘key performance
indicators’ (KPIs). The KPIs identified by Dialog are revenue growth, gross margin, operating expenses as a percentage of revenue, operating
profit growth, operating profit margin and diluted EPS. Dialog monitors these KPIs on both an IFRS basis and an underlying basis.
Underlying measures of profitability are non-IFRS measures because they exclude amounts that are included in, or include amounts that are
excluded from, the most directly comparable measure calculated and presented in accordance with IFRS or are calculated using financial
measures that are not calculated in accordance with IFRS.
We report underlying measures because they provide both management and investors with useful additional information about the
underlying trading performance of the Group’s businesses. We do not regard these non-IFRS measures as a substitute for, or superior to, the
equivalent IFRS measures. Underlying measures used by Dialog may not be directly comparable with similarly-titled measures used by other
companies.
Underlying measures exclude items that can have a significant effect on Dialog’s profit or loss. Dialog compensates for these limitations by
monitoring separately the items that are excluded from the equivalent IFRS measures in calculating these underlying financial measures.
Underlying measures presented by Dialog represent the equivalent IFRS measures adjusted for specific items that are considered by Dialog to
hinder comparison of the financial performance of its businesses either from one period to another or with other similar businesses. During
the periods presented, Dialog excluded from the underlying measures the following specific items of income and expense that were reported
in accordance with IFRS:
share-based compensation expense and related payroll taxes;
the costs of aborted mergers with Atmel in 2015 and AMS AG in 2014;
the costs of integrating acquired businesses;
the following items arising from accounting for business combinations under IFRS:
acquisition-related costs;
the amortisation of intangible assets acquired in business combinations;
the additional depreciation expense arising from the initial recognition at fair value of the tangible assets held by acquired businesses;
the reversal of the increase in cost of sales arising from the initial recognition at fair value of the inventory held by an acquired
business (which represents the profit attributable to the production effort embodied in that inventory);
the recognition in profit or loss of deferred revenue of acquired businesses and related cost of sales; and
changes in the fair value of contingent consideration payable;
the difference between interest payable and the effective interest expense on financial liabilities;
in 2014, a deferred tax credit that was recognised following the intra-group reorganisation of certain intellectual property following the
acquisition of iWatt; and
in 2013, receipt of a payment in connection with the insolvency of BenQ Corporation; and
related income tax effects.
Reconciliations of the measures of underlying profitability used by Dialog to the equivalent IFRS measures for the years ended 31 December
2015, 2014 and 2013 are presented on pages 34 to 41.
www.dialog-semiconductor.com
Dialog Semiconductor Plc
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150 Appendix to Financial Review
150
continued
Explanation of financial performance measures
Revenue growth
Dialog monitors revenue growth because the change in revenue from one period to another and the trend in revenue over time are important
measures of the growth in Dialog’s business. Revenue growth on an IFRS basis and on an underlying basis was as follows:
Operating profit growth
basis was as follows:
Dialog monitors operating growth because the change in operating profit from one period to another and the trend in operating profit over
time provides an important measure of the performance of our operations. Operating profit growth on an IFRS basis and on an underlying
US$’000s unless stated otherwise
IFRS measures
Revenue in the period
Revenue in the comparative period
Revenue growth
Underlying measures
Revenue in the period
Revenue in the comparative period
Revenue growth
2015
2014
2013
US$’000s unless stated otherwise
2015
2014
2013
1,355,312
1,156,105
17.2%
1,355,312
1,156,105
17.2%
1,156,105
901,380
28.3%
1,156,105
907,602
27.4%
901,380
773,583
16.5%
907,602
773,583
17.3%
IFRS measures
Operating profit in the period
Operating profit in the comparative period
Operating profit growth
Underlying measures
Operating profit in the period
Operating profit in the comparative period
Operating profit growth
Gross margin
Gross margin is gross profit expressed as a percentage of revenue. Dialog monitors gross margin because it provides a measure of the value
added by Dialog to its products. Gross margin on an IFRS basis and on an underlying basis was as follows:
Operating profit margin
Operating profit margin is operating profit expressed as a percentage of revenue. Dialog monitors operating profit margin because it provides
a measure of the overall profitability of our operations. Operating profit margin on an IFRS basis and on an underlying basis was as follows:
US$’000s unless stated otherwise
IFRS measures
Revenue
Gross profit
Gross margin
Underlying measures
Revenue
Gross profit
Gross margin
2015
2014
2013
US$’000s unless stated otherwise
2015
2014
2013
1,355,312
624,804
46.1%
1,355,312
632,344
46.7%
1,156,105
514,809
44.5%
1,156,105
523,406
45.3%
901,380
351,808
39.0%
907,602
367,522
40.5%
Operating expenses as a percentage of revenue
Dialog monitors operating expenses as a percentage of revenue because it provides a measure of Dialog’s effort in innovation and the
efficiency of our operating structure. Operating expenses comprise selling, general and administrative (SG&A) expenses and research and
development (R&D) expenses. Operating expenses as a percentage of revenue on an IFRS basis and on an underlying basis was as follows:
EBITDA and EBITDA margin
EBITDA is a non-IFRS measure that represents profit or loss for the period before net finance expense, income tax expense, depreciation and
amortisation expenses and the gain or loss on the disposal of fixed assets and impairment charges. EBITDA margin is a non-IFRS measure that
represents adjusted EBITDA expressed as a percentage of revenue. Dialog presents EBITDA and EBITDA margin because they are widely used
by securities analysts, investors and other interested parties to evaluate the profitability of companies. EBITDA on an IFRS basis and on an
US$’000s unless stated otherwise
IFRS measures
Revenue
Operating expenses
Operating expenses as a percentage of revenue
Underlying measures
Revenue
Operating expenses
Operating expenses as a percentage of revenue
2015
2014
2013
underlying basis may be reconciled to net income profit as follows:
1,355,312
(366,217)
27.0%
1,355,312
(315,847)
23.3%
1,156,105
(333,323)
28.8%
1,156,105
(295,618)
25.6%
901,380
(254,069)
28.2%
907,602
(229,454)
25.3%
151
259,746
185,902
39.7%
317,656
230,265
38.0%
185,902
102,660
81.1%
230,265
139,595
65.0%
102,660
91,032
12.8%
139,595
107,472
29.9%
1,355,312
1,156,105
259,746
19.2%
185,902
16.1%
1,355,312
1,156,105
317,656
23.4%
230,265
19.9%
901,380
102,660
11.4%
907,602
139,595
15.4%
2015
2014
2013
177,259
138,079
4,907
77,580
24,010
31,120
1,751
29
79,250
24,010
16,096
1,751
16,581
31,242
22,144
33,431
407
7,312
50,784
20,456
18,302
407
62,204
12,948
27,508
18,581
28,646
1,369
97,614
4,013
37,967
17,152
16,097
1,369
316,627
241,884
151,256
238,377
172,169
359,513
269,430
174,212
IFRS measures
Revenue
Operating profit
Operating profit margin
Underlying measures
Revenue
Operating profit
Operating profit margin
US$'000s unless stated otherwise
IFRS measures
Net income
Net finance expense
Income tax expense
Depreciation expense
Amortisation expense
(Gain)/loss on disposals
EBITDA
Underlying measures
Net income
Net finance expense
Income tax expense
Depreciation expense
Amortisation expense
(Gain)/loss on disposals
EBITDA
Dialog Semiconductor Plc
Annual report and accounts 2015
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Dialog Semiconductor PlcAnnual report and accounts 2015
151
151
Operating profit growth
Dialog monitors operating growth because the change in operating profit from one period to another and the trend in operating profit over
time provides an important measure of the performance of our operations. Operating profit growth on an IFRS basis and on an underlying
basis was as follows:
US$’000s unless stated otherwise
IFRS measures
Operating profit in the period
Operating profit in the comparative period
Operating profit growth
Underlying measures
Operating profit in the period
Operating profit in the comparative period
Operating profit growth
2015
2014
2013
259,746
185,902
39.7%
317,656
230,265
38.0%
185,902
102,660
81.1%
230,265
139,595
65.0%
102,660
91,032
12.8%
139,595
107,472
29.9%
Operating profit margin
Operating profit margin is operating profit expressed as a percentage of revenue. Dialog monitors operating profit margin because it provides
a measure of the overall profitability of our operations. Operating profit margin on an IFRS basis and on an underlying basis was as follows:
US$’000s unless stated otherwise
IFRS measures
Revenue
Operating profit
Operating profit margin
Underlying measures
Revenue
Operating profit
Operating profit margin
2015
2014
2013
1,355,312
259,746
19.2%
1,355,312
317,656
23.4%
1,156,105
185,902
16.1%
1,156,105
230,265
19.9%
901,380
102,660
11.4%
907,602
139,595
15.4%
EBITDA and EBITDA margin
EBITDA is a non-IFRS measure that represents profit or loss for the period before net finance expense, income tax expense, depreciation and
amortisation expenses and the gain or loss on the disposal of fixed assets and impairment charges. EBITDA margin is a non-IFRS measure that
represents adjusted EBITDA expressed as a percentage of revenue. Dialog presents EBITDA and EBITDA margin because they are widely used
by securities analysts, investors and other interested parties to evaluate the profitability of companies. EBITDA on an IFRS basis and on an
underlying basis may be reconciled to net income profit as follows:
US$'000s unless stated otherwise
IFRS measures
Net income
Net finance expense
Income tax expense
Depreciation expense
Amortisation expense
(Gain)/loss on disposals
EBITDA
Underlying measures
Net income
Net finance expense
Income tax expense
Depreciation expense
Amortisation expense
(Gain)/loss on disposals
EBITDA
2015
2014
2013
177,259
4,907
77,580
24,010
31,120
1,751
316,627
238,377
29
79,250
24,010
16,096
1,751
359,513
138,079
16,581
31,242
22,144
33,431
407
241,884
172,169
7,312
50,784
20,456
18,302
407
269,430
62,204
12,948
27,508
18,581
28,646
1,369
151,256
97,614
4,013
37,967
17,152
16,097
1,369
174,212
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153
2013
3,974
12,548
1,429
6,996
3,903
(3,249)
25,601
(8,200)
17,401
2015
18,843
15,024
-
-
-
3,375
37,242
(1,027)
36,215
2014
1,912
15,129
1,688
-
-
(1,939)
16,790
(19,542)
(2,752)
152 Appendix to Financial Review
152
continued
EBITDA margin on an IFRS basis and on an underlying basis was as follows:
Accounting for business combinations
Dialog excluded from the underlying measures the following specific items arising from business combinations accounting under IFRS:
US$’000s unless stated otherwise
IFRS measures
Revenue
EBITDA
EBITDA margin
Underlying measures
Revenue
EBITDA
EBITDA margin
2015
2014
2013
1,355,312
316,627
23.4%
1,355,312
359,513
26.5%
1,156,105
241,884
20.9%
1,156,105
269,430
23.3%
901,380
151,256
16.8%
907,602
174,213
19.2%
US$’000
Acquisition-related costs
Amortisation of acquired intangible assets
Additional depreciation of tangible assets
Reversal of inventory fair value uplift
Recognition of deferred revenue (net of cost of sales)
Change in the fair value of contingent consideration payable
Increase in profit before tax
Income tax credit
Increase in net income
Earnings per share (EPS)
Dialog monitors basic and diluted EPS on an IFRS basis and on an underlying basis. Dialog believes that underlying EPS measures are useful to
investors in assessing the Group’s ability to generate earnings and provide a basis for assessing the value of the Company’s (for example, by
way of price earnings multiples).
Earnings for calculating IFRS and underlying EPS measures were calculated as follows:
US$’000s
IFRS measures
Net income
Loss attributable to non-controlling interests
Earnings for calculating basic EPS
Effective interest on Convertible Bonds
Earnings for calculating diluted EPS
Underlying measures
Net income
Loss attributable to non-controlling interests
Earnings for calculating basic EPS
Interest payable on Convertible Bonds
Earnings for calculating diluted EPS
2015
2014
2013
Year ended 31 December 2015
177,259
(1,507)
178,766
3,483
182,249
238,376
(1,507)
239,883
503
240,386
138,079
-
138,079
10,279
148,358
172,169
-
172,169
2,010
174,179
62,204
-
62,204
-
62,204
97,614
-
97,614
-
97,614
Underlying and diluted EPS measures are calculated using the average number of shares that are used in calculating the equivalent measures
under IFRS as presented in note 6 to the consolidated financial statements.
Year ended 31 December 2014
Basic and diluted EPS on an IFRS basis and on an underlying basis were as follows:
US$
IFRS measures
Basic EPS
Diluted EPS
Underlying measures
Basic EPS
Diluted EPS
2015
2014
2013
2.42
2.29
3.25
3.02
2.05
1.93
2.56
2.27
0.95
0.92
1.49
1.44
Reconciliation of underlying measures to equivalent IFRS measures
Reconciliations of the measures of underlying profitability used by Dialog to the equivalent IFRS measures for the years ended 31 December
2015, 2014 and 2013 are presented in the following tables.
US$’000
Revenue
Gross profit
SG&A expenses
R&D expenses
Operating profit
Net finance expense
Income tax expense
Net income
EBITDA
IFRS
basis
1,355,312
624,804
(143,035)
(223,182)
259,746
(4,907)
(77,580)
177,259
316,627
Share-based
compensation
Accounting
and related
for business
Aborted merger
Integration
payroll taxes
combinations
costs
costs
Effective
interest
Underlying
basis
-
940
10,287
10,418
21,645
-
(492)
21,153
21,645
6,600
11,061
824
18,485
-
-
(1,027)
17,458
3,461
-
-
-
-
17,604
17,604
1,153
18,757
17,604
176
176
-
-
-
-
-
176
176
-
-
-
-
-
-
3,724
(151)
3,573
1,355,312
632,344
(103,907)
(211,940)
317,656
(30)
(79,250)
238,376
359,513
US$’000
Revenue
Gross profit
SG&A expenses
R&D expenses
Other operating income
Operating profit
Net finance expense
Income tax expense
Net income
EBITDA
IFRS
basis
1,156,105
514,809
(119,515)
(213,808)
4,416
185,902
(16,581)
(31,242)
138,079
241,884
Share-based
compensation
and related
payroll taxes
848
13,700
10,504
25,052
-
-
-
-
25,052
25,052
Accounting
for business
combinations
Aborted
merger
costs
Integration
costs
Effective
interest
Intellectual
property
reorganisation
-
-
7,749
9,914
1,066
(1,939)
16,790
(1,783)
15,007
(27)
-
-
-
-
-
-
-
-
-
-
-
-
1,268
1,253
1,268
1,253
1,268
1,268
1,253
1,253
-
-
-
-
-
-
-
-
9,269
9,269
(17,759)
(17,759)
Underlying
basis
1,156,105
523,406
93,380
202,238
2,477
230,265
(7,312)
(50,784)
172,169
269,430
-
-
-
-
-
-
-
-
Dialog Semiconductor Plc
Annual report and accounts 2015
www.dialog-semiconductor.com
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015
Accounting for business combinations
Dialog excluded from the underlying measures the following specific items arising from business combinations accounting under IFRS:
US$’000
Acquisition-related costs
Amortisation of acquired intangible assets
Additional depreciation of tangible assets
Reversal of inventory fair value uplift
Recognition of deferred revenue (net of cost of sales)
Change in the fair value of contingent consideration payable
Increase in profit before tax
Income tax credit
Increase in net income
2015
18,843
15,024
-
-
-
3,375
37,242
(1,027)
36,215
2014
1,912
15,129
1,688
-
-
(1,939)
16,790
(19,542)
(2,752)
153
153
2013
3,974
12,548
1,429
6,996
3,903
(3,249)
25,601
(8,200)
17,401
Reconciliation of underlying measures to equivalent IFRS measures
Reconciliations of the measures of underlying profitability used by Dialog to the equivalent IFRS measures for the years ended 31 December
2015, 2014 and 2013 are presented in the following tables.
Year ended 31 December 2015
US$’000
Revenue
Gross profit
SG&A expenses
R&D expenses
Operating profit
Net finance expense
Income tax expense
Net income
EBITDA
Share-based
compensation
Accounting
IFRS
basis
and related
for business
Aborted merger
payroll taxes
combinations
costs
1,355,312
624,804
(143,035)
(223,182)
259,746
(4,907)
(77,580)
177,259
316,627
-
940
10,287
10,418
21,645
-
(492)
21,153
21,645
-
6,600
11,061
824
18,485
-
(1,027)
17,458
3,461
-
-
17,604
-
17,604
1,153
-
18,757
17,604
Integration
costs
-
-
176
-
176
-
-
176
176
Effective
interest
Underlying
basis
-
-
-
-
-
3,724
(151)
3,573
-
1,355,312
632,344
(103,907)
(211,940)
317,656
(30)
(79,250)
238,376
359,513
Year ended 31 December 2014
US$’000
Revenue
Gross profit
SG&A expenses
R&D expenses
Other operating income
Operating profit
Net finance expense
Income tax expense
Net income
EBITDA
IFRS
basis
1,156,105
514,809
(119,515)
(213,808)
4,416
185,902
(16,581)
(31,242)
138,079
241,884
Share-based
compensation
and related
payroll taxes
Accounting
for business
combinations
-
848
13,700
10,504
-
25,052
-
-
25,052
25,052
-
7,749
9,914
1,066
(1,939)
16,790
-
(1,783)
15,007
(27)
Aborted
merger
costs
-
-
1,268
-
-
1,268
-
-
1,268
1,268
Integration
costs
-
-
1,253
-
-
1,253
-
-
1,253
1,253
Effective
interest
-
-
-
-
-
-
9,269
-
9,269
-
Intellectual
property
reorganisation
-
-
-
-
-
-
-
(17,759)
(17,759)
-
Underlying
basis
1,156,105
523,406
93,380
202,238
2,477
230,265
(7,312)
(50,784)
172,169
269,430
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Dialog Semiconductor Plc
Annual report and accounts 2015
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154 Appendix to Financial Review
154
continued
Year ended 31 December 2013
US$’000
Revenue
Gross profit
SG&A expenses
R&D expenses
Other operating income
Operating profit
Net finance expense
Income tax expense
Net income
EBITDA
IFRS
basis
901,380
351,808
(93,255)
(160,814)
4,921
102,660
(12,948)
(27,508)
62,204
151,256
Share-based
compensation
and related
payroll taxes
Accounting
for business
combinations
-
686
4,990
3,685
-
9,361
-
(1,582)
7,779
9,361
7,073
15,864
11,923
1,063
(3,249)
25,601
-
(8,200)
17,401
11,623
Integration
costs
Effective interest
BenQ
settlement
-
15
2,772
182
-
2,969
-
(638)
2,331
2,969
-
-
-
-
-
-
8,935
(322)
8,613
-
(851)
(851)
-
-
(145)
(996)
-
283
(713)
(996)
Underlying
basis
907,602
367,522
(73,570)
(155,884)
1,527
139,595
(4,013)
(37,967)
97,614
174,213
Dialog Semiconductor Plc
Annual report and accounts 2015
Dialog Semiconductor PlcAnnual report and accounts 2015
Glossary of Terms – Technical
155
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.
Bluetooth® Smart Bluetooth Smart is a wireless personal area network
technology designed and marketed by the Bluetooth Special Interest
Group aimed at novel applications in the healthcare, fitness, beacons,
security, and home entertainment industries.
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.
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.
CDMA Code Division Multiple Access is an alternative to GSM
technology for mobile wireless networks.
Rapid Charge™ A Dialog product which enables substantially faster
battery charging of portable devices via USB AC/DC power adapters.
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.
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.
SmartBond™ Dialog’s SmartBond™ family is the simplest route to
delivering the most power-friendly and flexible Bluetooth Smart
connected products to the market. Highly integrated, SmartBond
delivers the smallest, most power efficient Bluetooth Smart solutions
available – and enables the lowest system costs.
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 series of wireless sensors, actuators and base station
devices enables the easy creation of wireless sensor networks for
the home automation, security, healthcare and energy monitoring
consumer markets.
SmarteXite™ Dialog’s brand name for its intelligent LED lighting
technology platform.
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information 156
Glossary of Terms – Technical
continued
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.
System-on-Chip An IC that integrates all components of a computer
or other electronic system into a single chip. It may contain digital,
analog, mixed-signal, and often radio-frequency functions—all on a
single chip substrate.
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.
Voice Over IP Our energy-efficient multicore VoIP processors interact
with Bluetooth, Wi-Fi and DECT to enable headset and handset
connectivity while combining industry-leading power consumption with
the flexibility and processing capacity to handle a wealth of enterprise
VoIP applications.
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 PlcAnnual report and accounts 2015
Glossary of Terms – Financial
157
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.
Financial glossary
AGM Annual General Meeting.
CAGR Compound Annual Growth Rate, a method of assessing
the average growth of a value over time.
Cash flow The primary purpose of a statement of cash flow is
to provide relevant information about the cash receipts and cash
payments of an enterprise during a period. It helps to assess the
enterprise’s ability to generate positive future net cash flows.
A statement of cash flows shall explain the change in cash and
cash equivalents during the period by classifying cash receipts
and payments according to whether they stem from operating,
investing or financing activities.
Cash flow from operating activities includes all transactions and
other events that are not defined as investing or financing activities
in paragraphs. Operating activities generally involve producing and
delivering goods and providing services. Cash flows from operating
activities are generally the cash effects of transactions and other events
that enter into the determination of net income.
Comprehensive income The purpose of reporting comprehensive
income is to report a measure of all changes in equity of an enterprise
that results from recognised transactions and other economic events
of the period other than transactions with owners such as capital
increases or dividends. An example of items affecting comprehensive
income is foreign currency translation adjustments resulting from
the process of translating an entity’s financial statements in a foreign
currency into the reporting currency.
Corporate Governance 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.
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.
Free-float The proportion of an issuer’s share capital that is available
for purchase in the public equity markets by investors.
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).
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information 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 2016
28 April 2016
4 May 2016
28 July 2016
3 November 2016
February 2017
158
Advisers and corporate
information
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
Deloitte LLP
3 Victoria Square
Victoria Street
St Albans
AL7 3TF
Principal bankers
HSBC Bank Plc
Thames Valley
Corporate Banking Centre
Apex Plaza
Reading
Berkshire RG1 1AX
UK
Designated sponsors
Oddo Seydler
Schillerstrasse 27-29
D-60313 Frankfurt
Germany
Kepler Cheuvreux
Tatnnusarlage 14
D-60325 Frankfurt
Germany
Shares
Information on the Company’s shares and on significant shareholdings
can be found on page 64.
Dialog Semiconductor PlcAnnual report and accounts 2015 Group directory
159
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
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 Semiconductor Inc.
675 Campbell Technology Pkwy Suite 150
Campbell, California 95008
USA
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information 160 Related undertakings
The Company’s subsidiaries as at 31 December 2015 were as follows:
Name
Registered Address
Avengers Acquisition Corporation
Dialog Argo Holdings L.L.C.1
Dialog Argo Holdings, Inc.
Corporation Trust Center, 1209 Orange Street, Wilmington,
New Castle, DE 19801
Corporation Trust Center, 1209 Orange Street, Wilmington,
New Castle, DE 19801
Corporation Trust Center, 1209 Orange Street, Wilmington,
New Castle, DE 19801
Dialog Semiconductor (Italy) S.R.L.
Via Gaetano D'Alesio No.2, 57126, Livorno
Dialog Semiconductor (Shenzhen) Limited 1
(formerly iWatt Integrated Circuits (Shenzhen) Limited)
Room 1009-10, Chang Hong Science and Technology
Building, South 12 Road, Southern District in High-tech Zone,
Nan Shan District, Shenzhen
Country
United States
United States
United States
Italy
China
Dialog Semiconductor (UK) Limited
Tower Bridge House, St Katharine's Way, London, E1W 1AA
United Kingdom
Dialog Semiconductor Arastırma Gelistirme ve
Ticaret Anonim Sirketi
¸
¸
¸
Istanbul Technical University, Ayazaga Campus,
ARI 6 Building, Maslak, Istanbul, 34469
Dialog Semiconductor B.V.
Het Zuiderkruis 53, 5215 MV's-Hertogenbosch
Dialog Semiconductor Finance B.V.
Het Zuiderkruis 53, 5215 MV's-Hertogenbosch
Dialog Semiconductor Finance L.L.C.
Corporation Trust Center, 1209 Orange Street, Wilmington,
New Castle, DE 19801
Dialog Semiconductor GmbH
Neue Strasse 95, 73230 Kirchheim unter Teck-Nabern
Dialog Semiconductor Hellas Societe Anonyme
of Integrated Circuits1
Megaro Xenia, Achilleos 8 & Lambrou Katsoni, Kallithea,
Athens, 17674
Dialog Semiconductor Hong Kong Limited1
Level 54, Hopewell Centre, 183 Queen's Road East
Dialog Semiconductor Inc.
Dialog Semiconductor K.K.
Dialog Semiconductor Operations
Services Limited
Corporation Trust Centre, 1209 Orange Street, Wilmington,
New Castle, DE 19801
Kamiyacho MT Building 16F, 4-3-20 Toranomon, Minato-ku,
Tokyo, 105-0001
Japan
Tower Bridge House, St Katharine's Way, London, E1W 1AA
United Kingdom
Dialog Semiconductor Plc
Tower Bridge House, St Katharine's Way, London, E1W 1AA
United Kingdom
Dialog Semiconductor Trading (Shanghai)
Limited 1
Room 503,505, Building 1, No. 1535, Hongmei Road,
Shanghai, 200233
Dyna Image Corporation
IKOR Acquisition Corporation1
iWatt B.V. 1
iWatt Cayman 1
iWatt Coöperatief U.A.1
iWatt HK Limited 1
iWatt Integrated Circuits Technology
(Tianjin) Limited 1
iWatt L.L.C.1
iWatt MFG HK Limited 1
8F., No.233-2, Baoqiao Rd., Xindian Dist., New Taipei City,
23145
Corporation Trust Center, 1209 Orange Street, Wilmington,
New Castle, DE 19801
United States
Luna Arena, Herikerbergweg 238, 1101 CM Amsterdam
Netherlands
PO Box 309, Ugland House, Grand Cayman, KY1-1104
Cayman Islands
Luna Arena, Herikerbergweg 238, 1101 CM Amsterdam
Units 515-517, 5/F., Building 12W, No.12, Science Park West
Avenue, Phase Three, Hong Kong Science Park,
Pak Shek Kok, N.T.
Rooms 2701-2, No. 2 Building, TEDA Service Outsourcing
Industrial Park, No. 19 XinHuanxi West Road, TEDA,
Tianjin, 300457
Corporation Trust Center, 1209 Orange Street, Wilmington,
New Castle DE 19801
Rooms 2702-3, 27th Floor, Bank of East Asia Harbour View
Centre, 56 Gloucester Road, Wan Chai
Netherlands
Hong Kong
China
United States
Hong Kong
Powerventure Semiconductor Limited
Tower Bridge House, St Katharine's Way, London, E1W 1AA
United Kingdom
(1) Held indirectly
All subsidiaries are wholly-owned except Dyna Image Corporation in which the company has a 45.7% shareholding. The Company had no other related undertakings as at December 2015.
Turkey
Netherlands
Netherlands
United States
Germany
Greece
Hong Kong
United States
China
Taiwan
Dialog Semiconductor PlcAnnual report and accounts 2015 Branches and representative offices
161
Name
Entity Type
Registered Address
Branch Office
6 FL, Deokmyeong Building 625, Teheran-ro,
Gangnam-gu, Seoul
Branch Office
Kärntner Strasse 518, 8054 Graz-Seiersberg
Branch Office
51 Anson Road, #12-51 Anson Centre, Singapore 079904
Singapore
Branch Office
7F., No.392, Ruiguang Rd., Neihu Dist., Taipei City 114
Taiwan
Branch Office
6 FL, Deokmyeong Building 625, Teheran-ro,
Gangnam-gu, Seoul
Representative
Office
26th Floor, Sathorn City Tower, 175 South Sathorn Road,
Thungmahamek, Sathorn,10120 Bangkok
Korea
Thailand
Branch Office
7F., No.392, Ruiguang Rd., Neihu Dist., Taipei City 114
Taiwan
iWatt HK Limited Korea Branch
Branch Office
6 FL, Deokmyeong Building 625, Teheran-ro,
Gangnam-gu, Seoul
Representative
Office
Branch Office
Room 902-904, Zhong Guan Cun Crowne Palza Office Building,
No. 106 ZhiChun Road, Haidian District, Beijing 100086
China
Branch Office
7F., No. 1, Taiyuan 1st St., Zhubei City, Hsinchu County 302
Taiwan
Dialog Semiconductor (UK)
Limited Korea Branch
Dialog Semiconductor GmbH
Austria Branch
Dialog Semiconductor GmbH
Singapore Branch
Dialog Semiconductor GmbH
Taiwan Branch
Dialog Semiconductor
Operations Services Limited
Korea Branch
Dialog Semiconductor
Operations Services Limited
Thailand Representative Office
Dialog Semiconductor
Operations Services Limited,
Taiwan Branch
iWatt HK Limited Taiwan
Representative Office (de-
registered 08/06/2015)
iWatt Integrated Circuits
Technology (Tianjin) Limited
Beijing Branch
Powerventure Semiconductor
Limited, Taiwan Branch
Country
Korea
Austria
Korea
Taiwan
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information 162 Notes
Dialog Semiconductor PlcAnnual report and accounts 2015 Notes
163
Dialog Semiconductor PlcAnnual report and accounts 2015www.dialog-semiconductor.comStrategic reportCorporate governanceFinancial statementsAdditional information 164 Notes
Dialog Semiconductor PlcAnnual report and accounts 2015 Financial statements created in-house with FIRE.sys
Registered office
Dialog Semiconductor Plc
Tower Bridge House
St Katharine’s Way
London E1W 1AA
UK
www.dialog-semiconductor.com
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