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## Liquidity and capital resources 

## Cash flows 

Cash flows from operating activities  were US$52.4 million for 2012 (2011: US$69.6 million). 

Cash inflows of US$139.7 million (2011: US$97.2 million) resulted from the Company’s net profit adjusted by depreciation, amortisation and other non-cash effective expenses. This cash inflow was partly offset by investments in the Company’s working capital of US$77.9 million (2011: US$24.8 million), mainly relating to investments in inventories in support of Q1 2013 backlog and business demand for the first half of 2013. In addition, tax payments of US$9.5 million (2011: US$3.1 million) reduced net cash generated from operating activities. 

## Cash used for investing activities  was 

US$54.3 million for 2012 (2011: US$116.1 million). Cash used for investing activities in 2012 predominantly consisted of US$35.0 million (2011: US$21.2 million) 

for the purchase of advanced test equipment, tooling (masks), laboratory equipment, probe cards and load boards. US$7.7 million (2011: nil) were paid for a new licensing agreement, for further information please refer to note 12 to the consolidated financial statements. US$5.7 million (2011: US$5.4 million) relate to the purchase of other intangible assets. Payments related to capitalised development costs were US$6.0 million (2011: US$5.2 million). 2011 cash used for investing activities included US$84.2 million relating to the acquisition of SiTel Semiconductor. 

## Liquidity 

At 31 December 2012, we had cash and cash equivalents of US$312.4 million (31 December 2011: US$113.6 million). The working capital (defined as current assets minus current liabilities) was US$420.9 million (31 December 2011: US$150.8 million). 

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With an amount of US$164.6 million, long-term debt as of 31 December 2012 represents mainly the fair value of the liability from the convertible bond (31 December 2011: US$0), please refer to note 18 to the consolidated financial statements. 

If necessary, we have available for use a multi- currency three-year (2010–2013) revolving credit line facility of £10.0 million (US$16.2 million) at a rate of LIBOR +150bp and a three-year (2011–2014) revolving credit facility of US$35.0 million that bears interest at an average rate of LIBOR +140bp. At 31 December 2012 and 2011, we had no amounts outstanding under these facilities. In addition, we have two factoring agreements which provide the Company with up to US$60.0 million of readily available cash (a US$30 million increase over 2011). Accordingly, we believe the funding available from these and other sources will be sufficient to satisfy our working capital requirements in the near- to medium-term if needed. 

## Dialog Semiconductor’s underlying financial performance for 2012 and 2011 is summarised below: 

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1) Underlying results in 2012 net of tax effects are based on IFRS, adjusted to exclude share-based compensation charges and related charges for National Insurance of US$8.3 million, excluding US$4.7 million of amortisation of intangibles associated with the acquisition of Dialog B.V., excluding US$4.0 million non-cash effective interest expense in connection with the convertible bond and excluding US$0.5 million non-cash effective interest expense related to the new licensing agreement (please refer to note 12 to the consolidated financial statements). 

 Underlying results in 2011 net of tax effects are based on IFRS, adjusted to exclude share-based compensation charges and related charges for National Insurance of US$6.2 million, excluding one-time transaction costs of US$3.2 million associated with the acquisition of Dialog B.V., excluding US$7.3 million of amortisation of intangibles associated with the acquisition of Dialog B.V. 

 The term “underlying” is not defined in IFRS and therefore may not be comparable with similarly titled measures reported by other companies. Underlying measures are not intended as a substitute for, or a superior measure to, IFRS measures. 

2) EBITDA is defined as operating profit excluding depreciation for property, plant and equipment (2012: US$12.7 million, 2011: US$8.8 million), amortisation for intangible assets (2012: US$19.6 million, 2011: US$16.0 million) and losses on disposals and impairment of fixed assets (2012: US$1.0 million, 2011: US$1.1 million). 

3) 2011 numbers adjusted for the purchase price allocation, please refer to note 4 to the 2012 interim consolidated financial statements. 

