Exhibit 99.1
SMSC REPORTS SECOND QUARTER FISCAL 2005 RESULTS
Hauppauge, NY - September 20, 2004 - SMSC (Nasdaq: SMSC) today announced that
revenues for the second quarter ended August 31, 2004 were $50.2 million, in
line with the Company's estimate announced on August 17, 2004, and approximately
4% higher than revenues of $48.3 million in the second quarter of fiscal 2004.
Gross profit percentage on total revenues was 47.6% for the second quarter of
fiscal 2005, compared to 44.5% in the previous year's second quarter. Gross
profit percentage on product sales was 44.4% in this year's second quarter as
compared to 44.2% a year ago.
Research and development expenses for the second quarter were $11.2 million,
compared to $9.3 million in the year-ago quarter, and selling, general and
administrative expenses were $11.9 million, compared to $10.0 million in last
year's second quarter. The year-over-year increases in operating expenses
primarily reflect investments in engineering and marketing personnel to support
future revenue growth, litigation costs and tooling costs for new product
developments.
Operating income in the second quarter of fiscal 2005 was $0.6 million as
compared to $1.9 million in the year-ago period. Second quarter net income was
$0.9 million, or $0.05 per share, compared to $1.5 million, or $0.08 per share,
in the second quarter of fiscal 2004.
Cash and liquid investments at August 31, 2004 were $182.0 million, an increase
of $12.3 million from $169.7 million at May 31, 2004. Tax refunds totaling $6.9
million contributed to the increase in cash and liquid investments in the
quarter. Inventories at August 31, 2004 totaled $27.8 million and remain
appropriate relative to expected demand. The Company has no bank debt, and book
value per share was $14.47 as of August 31, 2004.
"As announced on August 17th, SMSC's second quarter revenues were below normal
seasonal patterns resulting from a general slowdown in orders across our
businesses, particularly in PC I/O products, as ODMs rebalanced excess
inventories," said Steven J. Bilodeau, Chairman and Chief Executive Officer.
"However, based on current customer demand, we expect third quarter product
revenues to show sequential growth."
Mr. Bilodeau added, "Looking at second quarter revenues compared to last year,
networking and connectivity products produced strong growth of over 50% and 80%,
respectively. In addition, non-PC I/O revenues contributed 41% of total second
quarter product sales, as SMSC continues to execute on its goal of diversifying
its product portfolio.
"During the second quarter, SMSC introduced two 'industry first' products with
its USB2.0 2-port hub for portable and integrated applications, as well as its
suite of integrated industrial-temperature embedded I/O controllers. Also, early
in September, SMSC announced a comprehensive line of USB2.0 hubs, USB2.0 card
reader, USB2.0 PHY, mobile super I/O and embedded ethernet controllers for a
wide range of consumer and commercial connectivity solutions. Our commitment to
driving product innovation, as evidenced in these recent introductions, should
serve us well in our diversification goal as we target a broader range of
markets."
Business Outlook:
For the third quarter of fiscal 2005, SMSC expects revenues to be between $54
million and $57 million, representing a sequential increase in revenues of
approximately 11%, at the midpoint of that range. Gross profit percentage is
expected to be between 45% and 46%, reflective of product mix and a slowing of
cost reductions due to tightened supply constraints. Research and development
expenses are expected to be between $10.5 million and $11.5 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
approximately $0.3 million. Due to higher interest income caused by the
increased cash balance and a change in the mix of taxable and non-taxable
investments, interest income is expected to be approximately $0.7 million. The
effective tax rate is estimated to be between 26% and 27%, and the Company
expects third quarter net income to be between $0.10 and $0.14 per share.
About SMSC:
Many of the world's most successful global technology companies rely upon SMSC
as a go-to resource for integrated circuits and semiconductor system solutions
that span analog, digital and mixed-signal technologies. SMSC delivers products
that solve the challenges of space, cost and time-to-market for high-speed
computing, connectivity and embedded networking applications.
SMSC addresses computing, communications and consumer electronics markets
through leading positions in Input/Output and non-PCI Ethernet products;
innovations in USB 2.0 and other high-speed serial solutions; and integrated
networking products employed in a broad range of applications. Leveraging
substantial intellectual property and a comprehensive global infrastructure,
SMSC thrives at the intersection of silicon, software and customized OEM
applications.
SMSC is based in Hauppauge, New York with operations in North America, Taiwan,
Japan, Korea, China and Europe. Engineering design centers are located in
Arizona, New York and Texas. Additional information is available at
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, consumer electronics 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 the Company may not necessarily
inform, or be required to inform, investors of such changes. 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 of Standard Microsystems Corporation. Product
names and company names are trademarks of their respective holders.
Contact:
Carolynne Borders
Director of Corporate Communications
SMSC
Voice: 631-435-6626
Fax: 631-273-5550
carolynne.borders@smsc.com
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,
--------------------------------- -----------------------------------
2004 2003 2004 2003
---- ---- ---- ----
Sales and revenues:
Product sales $ 47,233 $ 47,961 $ 97,585 $ 90,449
Intellectual property revenues 2,924 328 5,625 561
- ---------------------------------------------------------------------------------------------------------------------------------
50,157 48,289 103,210 91,010
Cost of goods sold 26,260 26,783 52,645 48,842
- ---------------------------------------------------------------------------------------------------------------------------------
Gross profit 23,897 21,506 50,565 42,168
Operating expenses (income):
Research and development 11,220 9,280 22,082 18,381
Selling, general and administrative 11,852 9,965 23,704 19,478
Amortization of intangible assets 266 317 583 677
Gains on real estate transactions - - - (1,444)
- ---------------------------------------------------------------------------------------------------------------------------------
Income from operations 559 1,944 4,196 5,076
Interest income 556 391 1,022 834
Other expense, net (6) (9) (38) (745)
- ---------------------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes
and minority interest 1,109 2,326 5,180 5,165
Provision for income taxes 214 785 1,373 1,680
Minority interest in net income of subsidiary - 35 - 96
- ---------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 895 1,506 3,807 3,389
Loss from discontinued operations (net of income tax
benefits of $14 and $106) - (26) - (190)
- ---------------------------------------------------------------------------------------------------------------------------------
Net income $ 895 $ 1,480 $ 3,807 $ 3,199
=================================================================================================================================
Basic net income per share:
Income from continuing operations $ 0.05 $ 0.09 $ 0.21 $ 0.20
Loss from discontinued operations - - - (0.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Basic net income per share $ 0.05 $ 0.09 $ 0.21 $ 0.19
=================================================================================================================================
Diluted net income per share:
Income from continuing operations $ 0.05 $ 0.08 $ 0.20 $ 0.19
Loss from discontinued operations - - - (0.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Diluted net income per share $ 0.05 $ 0.08 $ 0.20 $ 0.18
=================================================================================================================================
Weighted average common shares outstanding:
Basic 18,308 16,863 18,278 16,830
Diluted 19,169 17,859 19,482 17,643
The sum of the income (loss) per share amounts may not total due to rounding.
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands)
August 31, February 29,
2004 2004
---- ----
Assets
Current assets:
Cash and cash equivalents $ 159,524 $ 135,161
Short-term investments 13,835 23,136
Accounts receivable, net 27,747 21,946
Inventories 27,849 23,162
Deferred income taxes 13,435 15,064
Other current assets 3,314 8,549
- --------------------------------------------------------------------------
Total current assets 245,704 227,018
- --------------------------------------------------------------------------
Property, plant and equipment, net 24,299 23,430
Long-term investments 8,600 15,600
Goodwill 29,435 29,595
Intangible assets, net 4,115 4,697
Deferred income taxes 6,784 6,493
Other assets 3,327 3,192
- --------------------------------------------------------------------------
$ 322,264 $ 310,025
==========================================================================
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 19,022 $ 14,679
Deferred income on shipments to distributors 12,858 7,972
Accrued expenses, income taxes and other
liabilities 11,113 13,168
- --------------------------------------------------------------------------
Total current liabilities 42,993 35,819
- --------------------------------------------------------------------------
Other liabilities 12,143 12,104
Shareholders' equity:
Preferred stock - -
Common stock 2,030 2,019
Additional paid-in capital 184,023 181,830
Retained earnings 102,817 99,010
Treasury stock, at cost (23,799) (23,454)
Deferred stock-based compensation (2,573) (1,962)
Accumulated other comprehensive income 4,630 4,659
- --------------------------------------------------------------------------
Total shareholders' equity 267,128 262,102
- --------------------------------------------------------------------------
$ 322,264 $ 310,025
==========================================================================