Exhibit 99.1
SMSC REPORTS 26% YEAR-OVER-YEAR GROWTH
IN SECOND QUARTER FISCAL 2004 REVENUES
Posts More than 150% Increase in Income from Continuing Operations Per Share
From Year-Ago Period
Raises Fiscal 2004 Earnings Estimate by 25%, Exclusive of Income
from Special IP Payments
Hauppauge, NY - September 16, 2003 - Standard Microsystems Corporation (Nasdaq:
SMSC) today announced that revenues for the second quarter ended August 31, 2003
of $48.3 million exceeded prior Company estimates, and increased by 26% compared
to $38.3 million in the second quarter of fiscal 2003. This represents the sixth
consecutive quarter of sequential revenue increases.
Gross profit percentage for the second quarter of fiscal 2004 was 44.5% compared
to 44.7% in the previous year's second quarter.
Research and development expenses for the quarter were $9.3 million, compared to
$7.8 million in the year-ago quarter, and selling, general and administrative
expenses were $10.0 million, compared to $8.7 million in last year's second
quarter. The year-over-year increases in operating expenses primarily reflect
investments in engineering and marketing personnel and generally higher expenses
associated with increasing revenues.
Operating income in the second quarter of fiscal 2004 was $1.9 million, versus
$0.2 million in the year-ago period.
Second quarter income from continuing operations was $1.5 million, or $0.08 per
share, an increase of over 150%, compared to $0.6 million, or $0.03 per share,
in the year-ago quarter.
Cash and short-term investments at the end of the second quarter of fiscal 2004
were $122.6 million, up from $120.9 million at May 31, 2003. The Company has no
bank debt, and book value per share as of August 31, 2003 was $12.41.
"We are very pleased with our second quarter results. Boosted by strong demand
across all major product lines, revenues significantly exceeded prior Company
expectations," said Steven J. Bilodeau, Chairman and Chief Executive Officer.
"In total, revenues from desktop and mobile products grew by 26% versus last
year's second quarter."
Mr. Bilodeau added, "The aggregate sales of SMSC's non-PC products, including
our USB and networking products, also showed 26% growth, indicating the momentum
we are gaining in our product diversification strategy."
BUSINESS OUTLOOK FOR SMSC:
On September 8, 2003, SMSC and Intel Corporation (Intel) announced that the two
companies had enhanced their intellectual property and business relationships.
As part of this agreement, SMSC expects to receive a $20 million payment from
Intel in the third quarter of fiscal 2004 and another $2.5 million payment in
the fourth quarter.
For the third quarter of fiscal 2004, SMSC expects revenues to be approximately
$70 million, including the special $20 million payment. Excluding that payment,
revenues are expected to increase by approximately 23% year-over-year. Gross
profit percentage is expected to be approximately 60% in the third quarter,
including the impact of the special payment, or approximately 44% without that
impact. Research and development expenses are expected to be between $9.5
million and $10.0 million, and selling, general and administrative expenses are
expected to be between $10.5 million and $11.0 million. Amortization of acquired
intangibles is expected to be $317 thousand. The effective tax rate is estimated
to be approximately 36% in the third quarter, and the Company expects third
quarter income from continuing operations to be between $0.75 and $0.80 per
share, including the special payment, and up slightly from the second quarter of
fiscal 2004 without that payment.
For fiscal 2004, SMSC expects revenues to increase by more than 35%, as compared
with fiscal 2003, including the $22.5 million of special payments, or by 20% to
25% without those payments. This significantly exceeds previous guidance, which
indicated a more than 15% revenue increase over the prior year. Gross profit
percentage, including the special payments, is expected to exceed 50%. Without
the impact of the payments, gross profit is expected to be approximately 45%.
Research and development expenses are expected to be between $37 million and $38
million, and selling, general and administrative expenses are expected to be
between $40 million and $41 million. Amortization of acquired intangibles is
expected to be approximately $1.3 million. The effective tax rate for fiscal
2004 will be approximately 35%. Income from continuing operations for fiscal
2004, including the $22.5 million of special payments, is expected to be between
$1.05 and $1.15 per share, or between $0.30 and $0.35 per share without the
special payments, an increase of approximately 25% from prior Company estimates.
Prior Company guidance called for income from continuing operations to be in the
range of $0.24 to $0.28 per share.
Andrew M. Caggia, Senior Vice President and Chief Financial Officer said, "The
investments we have made in new product development have enabled SMSC to gain
measurable traction in a wide range of emerging markets. As a result of this
success, coupled with increasing revenues in businesses we have long served,
SMSC is looking forward to its seventh sequential quarter of increasing revenues
and expects to continue to outperform the industry's growth during this fiscal
year."
About SMSC:
SMSC provides Real World Connectivity(TM) solutions for high-speed communication
and computing applications. Leveraging a broad intellectual property portfolio,
the Company thrives at the intersection of software, silicon and customized OEM
applications. Through the integration of its leading-edge digital, mixed-signal
and analog functionality and software expertise, SMSC delivers complete
solutions that monitor and manage computing systems and connect peripherals to
computers and to one another.
The Company is the world's leading provider of Advanced Input/Output (I/O)
hardware and software solutions ranging from legacy PC I/O to leading-edge
system management functionality. Through high-speed serial interfaces, including
USB 2.0 and embedded Ethernet, SMSC delivers faster and higher-bandwidth
peripheral connections for a wide range of products such as memory card readers,
mass storage devices, digital cameras and keyboards and enables innovative
high-speed networking functionality for consumer electronics, set-top boxes,
printers, car navigation systems, cellular base stations, and more.
SMSC, a fabless semiconductor supplier, is based in Hauppauge, New York and
maintains offices worldwide, including locations in North America, Taiwan,
Japan, Korea, China and Europe. SMSC operates engineering design centers in
Phoenix, AZ, Tucson, AZ, Hauppauge, NY and Austin, TX. More information about
the Company is available on the World Wide Web at http://www.smsc.com.
Standard Microsystems and SMSC are registered trademarks, and Real World
Connectivity is a trademark, of Standard Microsystems Corporation. Product names
and company names are trademarks of their respective holders.
Forward Looking Statements:
Except for historical information contained herein, the matters discussed in
this announcement are forward-looking statements about expected future events
and financial and operating results that involve risks and uncertainties. These
include the timely development and market acceptance of new products; the impact
of competitive products and pricing; the effect of changing economic conditions
in domestic and international markets; changes in customer order patterns,
including loss of key customers, order cancellations or reduced bookings; and
excess or obsolete inventory and variations in inventory valuation, among
others. Such statements are qualified in their entirety by the inherent risks
and uncertainties surrounding future expectations and may not reflect the
potential impact of any future acquisitions, mergers or divestitures.
SMSC competes in the semiconductor industry, which has historically been
characterized by intense competition, rapid technological change, cyclical
market patterns, price erosion and periods of mismatched supply and demand. In
addition, sales of many of the Company's products depend largely on sales of
personal computers and peripheral devices, and reductions in the rate of growth
of the PC and Embedded markets could adversely affect its operating results.
SMSC conducts business outside the United States and is subject to tariff and
import regulations and currency fluctuations, which may have an effect on its
business. All forward-looking statements speak only as of the date hereof and
are based upon the information available to SMSC at this time. Such information
is subject to change, and we will not necessarily inform you of such changes,
except as required by law. These and other risks and uncertainties, including
potential liability resulting from pending or future litigation, are detailed
from time to time in the Company's reports filed with the SEC. Investors are
advised to read the Company's Annual Report on Form 10-K and quarterly reports
on Form 10-Q filed with the Securities and Exchange Commission, particularly
those sections entitled "Other Factors That May Affect Future Operating Results"
for a more complete discussion of these and other risks and uncertainties.
Contact:
Carolynne Borders
Director of Corporate Communications
Standard Microsystems Corporation
Voice: 631-435-6626
Fax: 631-273-5550
carolynne.borders@smsc.com
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands)
August 31, February 28,
2003 2003
---- ----
Assets
Current assets:
Cash and cash equivalents $ 101,510 $ 90,025
Short-term investments 21,133 22,872
Accounts receivable, net 26,696 22,738
Inventories 21,535 17,644
Deferred income taxes 11,092 8,545
Other current assets 8,288 8,710
- -------------------------------------------------------------------------------
Total current assets 190,254 170,534
- -------------------------------------------------------------------------------
Property, plant and equipment, net 19,879 22,257
Goodwill 29,595 29,773
Intangible assets, net 5,331 6,008
Deferred income taxes 8,370 11,779
Other assets 5,412 7,598
- -------------------------------------------------------------------------------
$ 258,841 $ 247,949
===============================================================================
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 12,590 $ 9,114
Deferred income on shipments to
distributors 7,805 5,943
Accrued expenses, income taxes
and other liabilities 9,679 9,838
- -------------------------------------------------------------------------------
Total current liabilities 30,074 24,895
- -------------------------------------------------------------------------------
Other liabilities 6,981 7,379
Minority interest in subsidiary 11,759 11,663
Shareholders' equity:
Preferred stock - -
Common stock 1,874 1,859
Additional paid-in capital 149,563 147,655
Retained earnings 80,691 77,492
Treasury stock, at cost (23,454) (23,454)
Deferred stock-based compensation (2,125) (2,102)
Accumulated other comprehensive income 3,478 2,562
- -------------------------------------------------------------------------------
Total shareholders' equity 210,027 204,012
- -------------------------------------------------------------------------------
$ 258,841 $ 247,949
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STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
---------------------------- ----------------------------
August 31, August 31,
---------------------------- ----------------------------
2003 2002 2003 2002
---- ---- ---- ----
Sales and revenues $ 48,289 $ 38,300 $ 91,010 $ 72,307
Cost of goods sold 26,783 21,189 48,842 40,124
- ------------------------------------------------------------------------------------------- ------------------------------
Gross profit 21,506 17,111 42,168 32,183
Operating expenses (income):
Research and development 9,280 7,774 18,381 14,625
Selling, general and administrative 9,965 8,659 19,478 16,853
Amortization of intangible assets 317 447 677 447
Gains on real estate transactions - - (1,444) -
- ------------------------------------------------------------------------------------------- ------------------------------
Income from operations 1,944 231 5,076 258
Interest income 391 533 834 1,114
Other expense, net (9) (7) (745) (22)
- ------------------------------------------------------------------------------------------- ------------------------------
Income before provision for income taxes
and minority interest 2,326 757 5,165 1,350
Provision for income taxes 785 197 1,680 351
Minority interest in net (loss) income of subsidiary 35 (8) 96 (2)
- ------------------------------------------------------------------------------------------- ------------------------------
Income from continuing operations 1,506 568 3,389 1,001
Loss from discontinued operations
(net of income tax benefits of $14, $145, $106, and $191) (26) (258) (190) (339)
- ------------------------------------------------------------------------------------------- ------------------------------
Net income $ 1,480 $ 310 $ 3,199 $ 662
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Basic net income per share:
Income from continuing operations $ 0.09 $ 0.03 $ 0.20 $ 0.06
Loss from discontinued operations - (0.01) (0.01) (0.02)
- ------------------------------------------------------------------------------------------- ------------------------------
Basic net income per share $ 0.09 $ 0.02 $ 0.19 $ 0.04
=========================================================================================== ==============================
Diluted net income per share:
Income from continuing operations $ 0.08 $ 0.03 $ 0.19 $ 0.06
Loss from discontinued operations - (0.01) (0.01) (0.02)
- ------------------------------------------------------------------------------------------- ------------------------------
Diluted net income per share $ 0.08 $ 0.02 $ 0.18 $ 0.04
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Weighted average common shares outstanding:
Basic 16,863 16,631 16,830 16,365
Diluted 17,869 18,214 17,643 18,008