Exhibit 99.1
SMSC REPORTS RECORD ANNUAL SEMICONDUCTOR REVENUES
Strong Growth in Year-over-Year Sales of Connectivity & Networking Products
Fourth Quarter Operating Profit Quadruples From Prior Year
Hauppauge, NY - April 12, 2004 - Standard Microsystems Corporation (Nasdaq:
SMSC) today announced that revenues for the fourth quarter ended February 29,
2004 were $52.1 million, an increase of approximately 22% over revenues of $42.6
million in the fourth quarter of fiscal 2003.
Gross profit percentage for the fourth quarter of fiscal 2004 was 48.1%,
compared to 45.3% in the previous year's fourth quarter.
Research and development expenses for the quarter were $10.2 million, compared
to $8.5 million in the year-ago quarter, and selling, general and administrative
expenses were $11.1 million, compared to $9.9 million in last year's fourth
quarter. The year-over-year increases in operating expenses primarily reflect
investments in engineering and marketing personnel, tooling costs for new
product developments and generally higher expenses associated with increasing
revenues.
Operating income in the fourth quarter of fiscal 2004 was $3.5 million versus
$0.8 million in the year-ago period. Fourth quarter income from continuing
operations was $3.4 million, or $0.17 per share, compared to income from
continuing operations of $1.1 million, or $0.06 per share, in the year-ago
period.
During the fourth quarter of fiscal 2004, SMSC announced that it had redeemed
the minority interest in SMSC Japan from Sumitomo Metal Industries, Ltd.
(Sumitomo). The transaction resulted in SMSC Japan becoming a wholly owned
subsidiary of SMSC and in a Gain on redemption of preferred stock of subsidiary
of $6.7 million, or $0.34 per share, which is reported as a component of Net
income applicable to common shareholders on the Company's Consolidated Statement
of Operations for the three months ended February 29, 2004.
Cash and liquid investments at the end of fiscal 2004, including $15.6 million
with maturities in excess of one year, were $173.9 million, up $12.0 million
from $161.9 million at November 30, 2003, and up $61.0 million from the end of
the prior fiscal year. Inventories at the end of the fiscal year totaled $23.2
million and remain appropriate relative to expected demand. The Company has no
bank debt, and book value per share as of February 29, 2004 increased to $14.27,
compared to $12.17 as of February 28, 2003.
Fiscal 2004 Financial Highlights:
o SMSC posted record annual semiconductor product revenues for fiscal 2004,
up 24% compared to fiscal 2003.
o Gross profit percentage reached 50.8%, or 45.1% without the $22.5 million
of IP payments from Intel, versus 44.6% in fiscal 2003, as SMSC continued
to increase the analog content in its product line and provide innovative,
higher-value features.
o The Company achieved strong growth in year-over-year sales of USB &
networking products. USB sales more than tripled from the prior year and
sales of networking products increased by more than 50%.
o SMSC's total PC I/O sales increased by 14% from fiscal 2003, growing faster
than the worldwide PC market for the same period.
o The Company achieved operating income of $28.8 million compared to $1.1
million in fiscal 2003.
o Income from continuing operations increased to $1.17 per share versus a
loss of $0.42 per share in the year-ago period.
"We are pleased to report that SMSC posted record annual semiconductor revenues
in fiscal 2004," said Steven J. Bilodeau, Chairman and Chief Executive Officer.
"Sales of USB and networking products showed strong year-over-year growth for
both the fourth quarter and full fiscal year as we delivered a greater breadth
of products to an increasingly diverse set of customers. In addition, SMSC's PC
I/O sales growth for the year continued to outpace that of the PC industry
overall."
Mr. Bilodeau added, "Looking ahead, as we grow the proportion of our non-PC I/O
products, which grew to 36% of fourth quarter product sales, we are closing
design wins for applications that are increasingly outside of SMSC's traditional
end markets and are more consumer driven. In particular, we expect continued
strong sales of networking and connectivity products in the first quarter of
fiscal 2005, which should result in non-PC I/O revenues growing to approximately
40% of total first quarter product sales."
Fiscal 2004 Business Highlights:
o Redeemed the minority interest in SMSC Japan from Sumitomo, resulting in
SMSC Japan becoming a wholly owned subsidiary of SMSC.
o Announced that SMSC and Accton Technology Corporation reached final
settlement of an arbitration award, resulting in SMSC receiving cash
payments totaling approximately $2.7 million.
o Reported that SMSC and Intel Corporation reached an agreement to enhance
their intellectual property and business relationship. The agreement
provides for an aggregate of $75 million in payments from Intel to SMSC, of
which $22.5 million was received in fiscal 2004, and the balance is to be
paid in quarterly installments through calendar 2008.
o Announced three new single chip environmental monitoring and control
devices targeting mobile, desktop, workstation, server and embedded
markets.
o Announced the availability of a new multi-zone fan control device with
hardware monitoring and acoustic noise reduction features.
o Won several key design wins implementing non-PCI Ethernet devices in
digital televisions, set-top boxes, digital media adapters and digital
video recorders. Introduced a new 10/100 Ethernet PHY targeting embedded
and consumer electronics applications.
o SMSC and the European ARCNET user group announced the availability of an
ARCNET/Ethernet IP Gateway to allow seamless connectivity to existing LAN
networks.
o Introduced a new 9-in-1 flash media controller supporting the higher
performance Memory Stick PRO technology licensed by Sony.
o Announced SMSC's market entry into the high performance USB 2.0 hub market
with a 4-port low power, high-speed hub.
Business Outlook:
For the first quarter of fiscal 2005, SMSC expects revenues to be between $51
million and $55 million, reflecting a year-over-year increase of 24% at the
midpoint of that range. Gross profit percentage is expected to increase from the
preceding quarter and be between 49% and 50%. Research and development expenses
are expected to be between $10 million and $11 million, and selling, general and
administrative expenses are expected to be between $11 million and $12 million.
Amortization of acquired intangibles is expected to be $317 thousand. The
effective tax rate is estimated to be approximately 29%, and the Company expects
first quarter net income to be between $0.13 and $0.17 per share.
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 and copiers, wireless routers, gaming machines, security and
surveillance systems, car navigation systems, 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.
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.
SMSC is a registered trademark, and Real World Connectivity is a trademark, of
Standard Microsystems Corporation. Product names and company names are
trademarks of their respective holders.
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)
February 29, February 28,
2004 2003
---- ----
Assets
Current assets:
Cash and cash equivalents $ 135,161 $ 90,025
Short-term investments 23,136 22,872
Accounts receivable, net 21,946 22,738
Inventories 23,162 17,644
Deferred income taxes 15,064 8,545
Other current assets 8,549 8,710
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Total current assets 227,018 170,534
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Property, plant and equipment, net 23,430 22,257
Long-term investments 15,600 -
Goodwill 29,595 29,773
Intangible assets, net 4,697 6,008
Deferred income taxes 6,493 16,437
Other assets 3,192 7,598
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$ 310,025 $ 252,607
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Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 14,679 $ 9,114
Deferred income on shipments to
distributors 7,972 5,943
Accrued expenses, income taxes and
other liabilities 13,168 9,838
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Total current liabilities 35,819 24,895
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Other liabilities 12,104 12,037
Minority interest in subsidiary - 11,663
Shareholders' equity:
Preferred stock - -
Common stock 2,019 1,859
Additional paid-in capital 181,830 147,655
Retained earnings 99,010 77,492
Treasury stock, at cost (23,454) (23,454)
Deferred stock-based compensation (1,962) (2,102)
Accumulated other comprehensive income 4,659 2,562
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Total shareholders' equity 262,102 204,012
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$ 310,025 $ 252,607
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STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
Three Months Ended Fiscal Year Ended
----------------------------- -----------------------------
February 29 or 28, February 29 or 28,
----------------------------- -----------------------------
2004 2003 2004 2003
---- ---- ---- ----
Sales and revenues:
Product sales $ 49,218 $ 42,175 $ 191,969 $ 154,244
Intellectual property revenues 2,896 437 23,904 1,273
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52,114 42,612 215,873 155,517
Cost of goods sold 27,044 23,316 106,236 86,093
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Gross profit 25,070 19,296 109,637 69,424
Operating expenses (income):
Research and development 10,168 8,504 38,793 31,166
Selling, general and administrative 11,120 9,881 42,168 36,268
Amortization of intangible assets 317 360 1,311 1,167
Gains on real estate transactions - - (1,444) -
Restructuring costs - (247) - (247)
- ------------------------------------------------------------------------------------------------ ------------------------------
Income from operations 3,465 798 28,809 1,070
Interest income 467 459 1,918 2,069
Impairment of investments - - - (16,306)
Other expense, net (43) (109) (933) (209)
- ------------------------------------------------------------------------------------------------ ------------------------------
Income (loss) before provision for
(benefit from) income taxes and
minority interest 3,889 1,148 29,794 (13,376)
Provision for (benefit from) income taxes 461 81 8,051 (6,422)
Minority interest in net income of subsidiary 62 7 201 17
- ------------------------------------------------------------------------------------------------ ------------------------------
Income (loss) from continuing operations 3,366 1,060 21,542 (6,971)
Gain (loss) from discontinued operations (net of income
taxes of $94, $(21), $(14), and $(281)) 169 (36) (24) (500)
- ------------------------------------------------------------------------------------------------ ------------------------------
Net income (loss) 3,535 1,024 21,518 (7,471)
Gain on redemption of preferred stock of subsidiary 6,685 - 6,685 -
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Net income (loss) applicable to common shareholders $ 10,220 $ 1,024 $ 28,203 $ (7,471)
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Basic net income (loss) per share:
Income (loss) from continuing operations $ 0.19 $ 0.06 $ 1.25 $ (0.42)
Gain (loss) from discontinued operations 0.01 - - (0.03)
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Basic net income (loss) per share 0.20 0.06 1.25 (0.45)
Gain on redemption of preferred stock of subsidiary 0.37 - 0.39 -
- ------------------------------------------------------------------------------------------------ ------------------------------
Basic net income (loss) per share applicable to
common shareholders $ 0.57 $ 0.06 $ 1.64 $ (0.45)
================================================================================================ ==============================
Diluted net income (loss) per share:
Income (loss) from continuing operations $ 0.17 $ 0.06 $ 1.17 $ (0.42)
Gain (loss) from discontinued operations 0.01 - - (0.03)
- ------------------------------------------------------------------------------------------------ ------------------------------
Diluted net income (loss) per share 0.18 0.06 1.16 (0.45)
Gain on redemption of preferred stock of subsidiary 0.34 - 0.36 -
- ------------------------------------------------------------------------------------------------ ------------------------------
Diluted net income (loss) per share applicable to common
shareholders $ 0.51 $ 0.06 $ 1.53 $ (0.45)
================================================================================================ ==============================
Weighted average common shares outstanding:
Basic 18,007 16,748 17,226 16,538
Diluted 19,887 17,908 18,479 16,538
The sum of the income (loss) per share amounts may not total due to rounding.