Exhibit 99.1
SMSC REPORTS 30% YEAR-OVER-YEAR INCREASE IN
FIRST QUARTER REVENUES, INCLUDING OASIS ACQUISITION
Earnings Per Share Exceeds Company Expectation
Hauppauge, NY - June 29, 2005 - SMSC (Nasdaq: SMSC) today announced that
revenues for the first quarter ended May 31, 2005 were $68.8 million, an
increase of approximately 30% from last year's first quarter revenues of $53.1
million. Of the 30% increase, 18% was due to the acquisition of OASIS
SiliconSystems Holding AG (OASIS), which closed on March 30, 2005, and 12% was
due to growth in SMSC's other products lines. Gross profit percentage was 47.0%
for the three months ended May 31, 2005 and 50.3% for the year-earlier quarter.
Operating income for the period was $3.7 million, compared to $3.6 million a
year ago. Net income was $0.15 per share in first quarter of fiscal year 2006,
compared to $0.15 per share in the first quarter of last year.
To provide additional insight into its underlying operations, SMSC is also
presenting a first quarter fiscal 2006 statement of operations on a pro forma
(non-GAAP) basis, excluding non-cash acquisition-related charges, which are
in-process research and development, amortization of acquired intangibles and
adjustments to the value of opening inventory at the date of the OASIS
acquisition. This statement is presented in a format that reconciles the pro
forma, non-GAAP measures to the most comparable GAAP measures.
On a pro forma basis, operating results were as follows. Gross profit percentage
for the period was 47.9%, compared to 50.3% in the previous year's first
quarter, exceeding SMSC's prior expectation due to a shift in mix to higher
margin products. Operating income was $6.4 million, or 9.3% of sales, compared
to $4.0 million, or 7.5% of sales, in the year-ago period. Pro forma net income
was $4.7 million or $0.23 per share, an increase in earnings per share of 44%,
from pro forma net income of $3.1 million, or $0.16 per share in the first
quarter of fiscal 2005.
"Revenues for the first quarter were robust, driven by the addition of revenues
from OASIS and strong sales of our mobile PC, EMC and USB connectivity
products," said Steven J. Bilodeau, Chairman and Chief Executive Officer. "We
realized higher profitability than anticipated due to product mix coupled with
lower operating expenses than previously projected. As sales increased, we also
benefited from positive leverage in our operating expenses, which improved
operating profit margins by nearly 4% of sales."
Mr. Bilodeau continued, "This is an exciting time for our business as we are
realizing the benefits of investments made in recent years to build a more
diversified global semiconductor company. This was also the first quarter of
sales contribution from our recent OASIS acquisition, which is now our new
Automotive Infotainment Systems group, and we are pleased with the progress of
the integration of this business into SMSC. These strong first quarter results
demonstrate that our strategy to drive sales growth and improved profitability
is on track."
Cash and liquid investments at May 31, 2005 were $121.0 million, compared to
$172.6 million at February 28, 2005, of which approximately $61 million, net of
cash acquired, was utilized in the acquisition of OASIS on March 30, 2005. The
Company has no bank debt, and book value per share was $14.57 as of May 31,
2005.
Pro Forma Business Outlook:
Second quarter guidance for pro forma net income, which is expected to be
between $0.17 and $0.21 per share, is presented only on a pro forma basis
because of SMSC's inability to project its future stock price and its impact on
any expense provision that might be required to mark Stock Appreciation Rights
(SARs) to market until the end of the fiscal quarter.
For the second quarter, in line with the pro forma net income guidance above,
SMSC expects the following measures on a pro forma basis:
o Revenues to be between $73 million and $77 million, reflecting a
year-over-year increase of nearly 50% at the midpoint of that range.
o Gross profit percentage to be between 46% and 48%.
o Research and development expense to be between $14 million and $15 million.
o Selling, general and administrative expense to be between $15 million and
$16 million.
o The effective tax rate to be approximately 36%, including an expected
one-time provision related to a streamlining of the legal entity structure
of certain wholly owned subsidiaries acquired from OASIS.
Expense recognition related to SARs is determined by a mark-to-market
calculation based on the SMSC stock price at the end of each period. The SARs
outstanding as of May 31, 2005 have an average exercise price of approximately
$17.10. Each $1.00 increase in SMSC's share price over $17.10 as of August 31,
2005 would require an expense provision of approximately $0.7 million ($0.4
million or $0.02 per share, after tax) in the second quarter, based on
approximately 1.5 million SARs outstanding. None of the SARs outstanding are
currently vested and all SARs are scheduled to vest between September 2005 and
April 2010.
In addition, the pro forma adjustments included in the guidance above exclude
the impacts of two non-cash acquisition related charges, which are the
amortization of acquired intangibles, estimated to be $1.6 million, and an
adjustment to the cost of goods sold to reflect the write up of the cost of
inventory at the date of the OASIS acquisition, which is estimated to be $0.9
million.
About SMSC:
Many of the world's most successful global technology companies rely upon SMSC
as a go-to resource for semiconductor system solutions that span analog, digital
and mixed-signal technologies. Leveraging substantial intellectual property,
integration expertise and a comprehensive global infrastructure, SMSC solves
design challenges and delivers performance, space, cost and time-to-market
advantages to its customers. SMSC's application focus targets key vertical
markets including mobile and desktop PCs, servers, consumer electronics,
automotive infotainment and industrial applications. The Company has developed
leadership positions in its select markets by providing application specific
solutions such as mixed-signal PC system controllers, non-PCI Ethernet, ARCNET,
MOST, Hi-Speed USB and other high-speed serial communications.
SMSC is headquartered in Hauppauge, New York with operations in North America,
Taiwan, Japan, Korea, China and Europe. Engineering design centers are located
in Arizona, New York, Texas and Karlsruhe, Germany. 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 or distributors, 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, as well as general industry and
market conditions. Reductions in the rate of growth of the PC, consumer
electronics, embedded or automotive 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
Phone: 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
May 31,
--------------------------------
2005 2004
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Revenues $ 68,807 $ 53,053
Costs and expenses:
Cost of goods sold 36,492 26,385
Research and development 12,966 10,862
Selling, general and administrative 13,591 11,852
Amortization of intangible assets 1,153 317
In-process research and development 895 -
- --------------------------------------------------------------------------------
Income from operations 3,710 3,637
Interest income 723 466
Other expense, net (47) (32)
- --------------------------------------------------------------------------------
Income before provision for income taxes 4,386 4,071
Provision for income taxes 1,359 1,159
- --------------------------------------------------------------------------------
Net income $ 3,027 $ 2,912
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Basic net income per share: $ 0.15 $ 0.16
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Diluted net income per share: $ 0.15 $ 0.15
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Weighted average common shares outstanding:
Basic 20,066 18,246
Diluted 20,476 19,790
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
PRO FORMA (NON-GAAP) CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
Three Months Ended May 31,
----------------------------------------------------------------------------------
2005 2004
-------------------------------------- ---------------------------------------
Pro Forma Pro Forma
GAAP Adjustment (Non-GAAP) GAAP Adjustment (Non-GAAP)
Revenues $ 68,807 $ - $ 68,807 $ 53,053 $ - $ 53,053
Costs and expenses:
Cost of goods sold 36,492 (614)(a) 35,878 26,385 - 26,385
Research and development 12,966 - 12,966 10,862 - 10,862
Selling, general and administrative 13,591 - 13,591 11,852 - 11,852
In-process research and development 895 (895)(b) - - - -
Amortization of intangible assets 1,153 (1,153)(c) - 317 (317)(c) -
- ------------------------------------------------------------------------------------------------------------------------------------
Income from operations 3,710 2,662 6,372 3,637 317 3,954
Interest income 723 - 723 466 - 466
Other income (expense), net (47) - (47) (32) - (32)
- ------------------------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes 4,386 2,662 7,048 4,071 317 4,388
Provision for income taxes 1,359 998 (d) 2,357 1,159 114 (d) 1,273
- ------------------------------------------------------------------------------------------------------------------------------------
Net income 3,027 1,664 4,691 2,912 203 3,115
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Basic net income per share $ 0.15 $ 0.23 $ 0.16 $ 0.17
====================================================================================================================================
Diluted net income per share $ 0.15 $ 0.23 $ 0.15 $ 0.16
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Weighted average common shares outstanding:
Basic 20,066 20,066 18,246 18,246
Diluted 20,476 20,476 19,790 19,790
Notes:
SMSC uses pro forma information to evaluate its operating results and believes
such information also provides investors with additional insight into its
underlying operations. This schedule presents a full reconciliation between pro
forma and GAAP results.
(a) The adjustment to Cost of goods sold is to remove from the pro forma
results the impact of writing up the cost of inventory at the date of the
Oasis acquisition over Oasis' original cost of the inventory. That write up
will only impact GAAP Cost of goods sold for the turnover period of the
OASIS inventory at the date of acquisition. That turnover period is
expected to conclude in the quarter ending November 30, 2005.
(b) The adjustment to In-process research and development is to remove from the
pro forma results the cost of in-process research and development that was
purchased in the Oasis acquisition and immediately expensed.
(c) The adjustment to Amortization of intangible assets for the three months
ended May 31, 2005 includes $887 related to the Oasis acquisition and $266
related to the fiscal 2003 acquisition of Gain Technology Corporation
(Gain). The adjustment for the three months ended May 31, 2004 relates
entirely to the Gain acquisition.
(d) The adjustments to the Provision for income taxes was determined by
applying the appropriate incremental tax rates to the adjustments described
in notes (a) through (c) above.
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands)
May 31, February 28,
2005 2005
------------ -------------
Assets
Current assets:
Cash and cash equivalents $ 19,674 $ 116,126
Short-term investments 101,279 56,519
Accounts receivable, net 29,881 23,788
Inventories 42,303 33,310
Deferred income taxes 16,252 17,701
Other current assets 5,753 4,295
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Total current assets 215,142 251,739
- --------------------------------------------------------------------------------
Property, plant and equipment, net 25,959 22,630
Goodwill 78,912 29,435
Intangible assets, net 49,671 3,584
Deferred income taxes 7,728 7,163
Other assets 3,549 4,708
- --------------------------------------------------------------------------------
$ 380,961 $ 319,259
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Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 21,097 $ 15,995
Deferred income on shipments to distributors 11,126 7,689
Accrued expenses, income taxes and other
liabilities 17,772 13,400
- --------------------------------------------------------------------------------
Total current liabilities 49,995 37,084
- --------------------------------------------------------------------------------
Deferred income taxes 16,658 -
Other liabilities 12,215 12,326
Shareholders' equity:
Preferred stock - -
Common stock 2,273 2,053
Additional paid-in capital 225,515 187,854
Retained earnings 103,639 100,612
Treasury stock, at cost (25,961) (23,799)
Deferred stock-based compensation (3,642) (1,925)
Accumulated other comprehensive income 269 5,054
- --------------------------------------------------------------------------------
Total shareholders' equity 302,093 269,849
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$ 380,961 $ 319,259
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