Exhibit 99.1
SMSC REPORTS OVER 70% YEAR-OVER-YEAR INCREASE IN THIRD QUARTER REVENUES
Posts Strong Earnings Growth
Hauppauge, NY - December 15, 2005 - SMSC (Nasdaq: SMSC) revenues for the third
quarter ended November 30, 2005 rose by over 70% to $86.6 million, compared to
last year's third quarter revenues of $50.8 million, and by 10% sequentially. On
a GAAP basis, operating income was $6.7 million in the third quarter compared to
an operating loss of $0.4 million a year ago, and net income was $5.4 million,
or $0.24 per share, compared to $0.6 million, or $0.03 per share, in the third
quarter of last year.
To provide additional insight into cash earnings capacity, SMSC also presents
results on a non-GAAP basis, excluding non-cash acquisition related charges and
non-cash charges associated with Stock Appreciation Rights (SARs). On this
basis, non-GAAP adjusted operating income was $11.8 million, or 13.6% of
revenues, compared to an operating loss of $0.1 million in the year-ago period.
Non-GAAP adjusted net income was $8.6 million, or $0.38 per share, compared to
net income of $0.8 million, or $0.04 per share, in the third quarter last year.
A reconciliation of GAAP to non-GAAP measures is provided in the schedule that
accompanies this release which, together with additional disclosure in a slide
presentation on quarterly highlights, is posted on SMSC's website at
www.smsc.com. These materials will be discussed in a management teleconference
scheduled for 5:00 PM Eastern Standard Time, December 15, 2005. Presentation
materials and a link to a webcast of the teleconference will be accessible from
the investor relations section of the website.
Approximately 40% of the year-over-year revenue growth was due to the inclusion
of OASIS SiliconSystems Holding AG (acquired March 30, 2005), and approximately
60% of the revenue growth came from SMSC's pre-existing products. Excluding
products acquired through the OASIS acquisition, revenues on a comparable
year-over-year basis increased approximately 70% in the Consumer Electronics and
Infotainment markets, approximately 10% in the Industrial and Other markets, and
approximately 25% in the Mobile and Desktop PC markets.
Including the acquisition, third quarter revenues from the Consumer Electronics
and Infotainment markets comprised approximately 36% of total revenues, and
revenues from the Industrial and Other markets accounted for approximately 17%
of the total. Revenues from Mobile PC were strong and outpaced revenues from the
Desktop PC market, which were flat sequentially and lower on a year-to-year
comparative quarterly basis. Together, revenues from the Mobile and Desktop PC
markets generated 47% of third quarter revenues. Evidencing its continuing focus
on more defensible and differentiated products, the Company estimates that
approximately 80% of all units shipped during the third quarter were analog or
mixed-signal products.
Steven J. Bilodeau, Chairman and Chief Executive Officer, said "We believe SMSC
has now demonstrated its capacity for sustainable revenue, operating income and
net income growth. We have a balanced business and expanding margins resulting
from the investments in new products in prior periods. Our intention is to
continue to create value by investing in new product development to drive future
growth, as well as in the infrastructure needed to support this planned growth."
Cash and liquid investments at November 30, 2005 were $141.7 million, compared
to $131.7 million at August 31, 2005. The Company has no bank debt, and book
value per share was $14.76 as of November 30, 2005.
For the fourth quarter, revenues are expected to be between $82 and $86 million,
representing a 53% increase at the midpoint of guidance versus the fourth
quarter revenues of the prior fiscal year. Non-GAAP adjusted net income is
expected to be between $0.28 and $0.34 per share, assuming approximately 23.5
million diluted weighted average shares outstanding. This guidance is presented
only on a non-GAAP basis because of SMSC's inability to project its future stock
price and any resultant adjustment that might be required to adjust SARs to
market value. It excludes non-cash acquisition related charges and all SARs
related charges. Please refer to the SMSC website at www.smsc.com for further
details regarding fourth quarter guidance contained in the conference call slide
presentation.
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 and Hi-Speed USB.
SMSC is headquartered in Hauppauge, New York with operations in North America,
Asia 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
uncertainties may cause our actual future results to be materially different
from those discussed in forward-looking statements. Our risks and uncertainties
include the timely development and market acceptance of new products; the impact
of competitive products and pricing; our ability to procure capacity from our
suppliers and the timely performance of their obligations, the effects of
changing economic conditions domestically and internationally and on our
customers; changes in customer order patterns, our relationships with and
dependence on customers and growth rates in the personal computer, consumer
electronics and embedded and automotive markets and with our sales channel;
changes in customer order patterns, including order cancellations or reduced
bookings; the effects of tariff, import and currency regulation; and excess or
obsolete inventory and variations in inventory valuation, among others. In
addition, 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.
Our forward looking 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. All
forward-looking statements speak only as of the date hereof and are based upon
the information available to SMSC at this time. Such statements are subject to
change, and the Company does not undertake to update such statements. 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
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
November 30, November 30,
---------------------------------- ----------------------------------
2005 2004 2005 2004
-------------- -------------- -------------- ---------------
Revenues $ 86,623 $ 50,755 $ 234,490 $ 153,965
Costs and expenses:
Cost of goods sold 45,697 27,483 126,561 80,128
Research and development 14,907 10,390 42,558 32,472
Selling, general and administrative 17,742 12,989 49,887 36,693
Amortization of intangible assets 1,547 265 4,257 848
In-process research and development - - 895 -
- ------------------------------------------------------------------------------------------- -----------------------------------
Income (loss) from operations 6,730 (372) 10,332 3,824
Interest income 900 704 2,272 1,726
Other expense, net (21) (20) (73) (58)
- ------------------------------------------------------------------------------------------- -----------------------------------
Income before provision for income taxes 7,609 312 12,531 5,492
Provision for (benefit from) income taxes 2,218 (301) 4,094 1,072
- ------------------------------------------------------------------------------------------- -----------------------------------
Net income $ 5,391 $ 613 $ 8,437 $ 4,420
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Basic net income per share: $ 0.26 $ 0.03 $ 0.41 $ 0.24
=========================================================================================== ===================================
Diluted net income per share: $ 0.24 $ 0.03 $ 0.39 $ 0.23
=========================================================================================== ===================================
Weighted average common shares outstanding:
Basic 20,983 18,395 20,548 18,321
Diluted 22,543 19,035 21,558 19,375
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP AND ADJUSTED NON-GAAP CONSOLIDATED FINANCIAL DATA
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended November 30,
----------------------------------------------------------------------------------------
2005 2004
----------------------------------------- ------------------------------------------
GAAP Adjustment Non-GAAP GAAP Adjustment Non-GAAP
---- ---------- -------- ---- ---------- --------
Revenues $ 86,623 $ - $ 86,623 $ 50,755 $ - $ 50,755
Costs and expenses:
Cost of goods sold 45,697 (219)(a) 45,478 27,483 - 27,483
Research and development 14,907 (748)(b) 14,159 10,390 - 10,390
Selling, general and administrative 17,742 (2,554)(b) 15,188 12,989 - 12,989
Amortization of intangible assets 1,547 (1,547)(c) - 265 (265)(c) -
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations 6,730 5,068 11,798 (372) 265 (107)
Interest income 900 - 900 704 - 704
Other expense, net (21) - (21) (20) - (20)
- ------------------------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes 7,609 5,068 12,677 312 265 577
Provision for (benefit from) income taxes 2,218 1,810 (d) 4,028 (301) 95 (d) (206)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 5,391 $ 3,258 $ 8,649 $ 613 $ 170 $ 783
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Basic net income per share $ 0.26 $ 0.41 $ 0.03 $ 0.04
====================================================================================================================================
Diluted net income per share $ 0.24 $ 0.38 $ 0.03 $ 0.04
====================================================================================================================================
Weighted average common shares outstanding:
Basic 20,983 20,983 18,395 18,395
Diluted 22,543 22,543 19,035 19,035
Notes:
SMSC uses certain non-GAAP 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
GAAP and non-GAAP results.
(a) The adjustment to Cost of goods sold includes $65 to remove 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 only impacted GAAP
Cost of goods sold for the turnover period of the OASIS inventory at the
date of acquisition, which was completed in September 2005.
The remaining $154 adjustment to Cost of goods sold is to remove non-cash
charges associated with Stock Appreciation Rights (SARs). SMSC includes the
actual cash cost of SARs in non-GAAP results as SARs are exercised.
(b) The adjustments to Research & development and Selling, general &
administrative expense are to remove the impact of non-cash charges
associated with SARs. SMSC includes the actual cash cost of SARs in
non-GAAP results as SARs are exercised.
(c) The adjustment to Amortization of intangible assets for the three months
ended November 30, 2005 includes $1,282 related to the OASIS acquisition
and $265 related to the fiscal 2003 acquisition of Gain Technology
Corporation (Gain). The adjustment for the three months ended November 30,
2004 relates entirely to the Gain acquisition.
(d) The adjustments to the Provision for (benefit from) income taxes were
determined by applying the appropriate incremental tax rates to the
adjustments described in notes (a) through (c) above.
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP AND ADJUSTED NON-GAAP CONSOLIDATED FINANCIAL DATA
(Unaudited)
(In thousands, except per share amounts)
Nine Months Ended November 30,
----------------------------------------------------------------------------------------
2005 2004
----------------------------------------- ------------------------------------------
GAAP Adjustment Non-GAAP GAAP Adjustment Non-GAAP
---- ---------- -------- ---- ---------- --------
Revenues $ 234,490 $ - $ 234,490 $ 153,965 $ - $ 153,965
Costs and expenses:
Cost of goods sold 126,561 (2,178)(a) 124,383 80,128 - 80,128
Research and development 42,558 (2,146)(b) 40,412 32,472 - 32,472
Selling, general and administrative 49,887 (6,361)(b) 43,526 36,693 - 36,693
Amortization of intangible assets 4,257 (4,257)(c) - 848 (848)(c) -
In-process research and development 895 (895)(d) - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Income from operations 10,332 15,837 26,169 3,824 848 4,672
Interest income 2,272 - 2,272 1,726 - 1,726
Other expense, net (73) - (73) (58) - (58)
- ------------------------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes 12,531 15,837 28,368 5,492 848 6,340
Provision for income taxes 4,094 5,718 (e) 9,812 1,072 305 (e) 1,377
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 8,437 $ 10,119 $ 18,556 $ 4,420 $ 543 $ 4,963
====================================================================================================================================
Basic net income per share $ 0.41 $ 0.90 $ 0.24 $ 0.27
====================================================================================================================================
Diluted net income per share $ 0.39 $ 0.86 $ 0.23 $ 0.26
====================================================================================================================================
Weighted average common shares outstanding:
Basic 20,548 20,548 18,321 18,321
Diluted 21,558 21,558 19,375 19,375
Notes:
SMSC uses certain non-GAAP 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
GAAP and non-GAAP results.
(a) The adjustment to Cost of goods sold includes $1,652 to remove 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 only impacted
GAAP Cost of goods sold for the turnover period of the OASIS inventory at
the date of acquisition, which was completed in September 2005.
The remaining $526 adjustment to Cost of goods sold is to remove non-cash
charges associated with Stock Appreciation Rights (SARs). SMSC includes the
actual cash cost of SARs in non-GAAP results as SARs are exercised.
(b) The adjustments to Research & development and Selling, general &
administrative expense are to remove the impact of non-cash charges
associated with SARs. SMSC includes the actual cash cost of SARs in
non-GAAP results as SARs are exercised.
(c) The adjustment to Amortization of intangible assets for the nine months
ended November 30, 2005 includes $3,460 related to the OASIS acquisition
and $797 related to the fiscal 2003 acquisition of Gain Technology
Corporation (Gain). The adjustment for the nine months ended November 30,
2004 relates entirely to the Gain acquisition.
(d) The adjustment to In-process research and development for the nine months
ended November 30, 2005 removes a charge related to the OASIS acquisition.
(e) The adjustments to the Provision for income taxes were determined by
applying the appropriate incremental tax rates to the adjustments described
in notes (a) through (d) above.
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands)
November 30, February 28,
2005 2005
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 31,731 $ 116,126
Short-term investments 109,982 56,519
Accounts receivable, net 36,686 23,499
Inventories 40,663 33,310
Deferred income taxes 18,313 17,701
Other current assets 5,660 4,584
- ----------------------------------------------------------------------------------------------------------
Total current assets 243,035 251,739
- ----------------------------------------------------------------------------------------------------------
Property, plant and equipment, net 33,828 22,630
Goodwill 76,630 29,435
Intangible assets, net 45,311 3,584
Deferred income taxes 9,765 7,163
Other assets 3,777 4,708
- ----------------------------------------------------------------------------------------------------------
$ 412,346 $ 319,259
==========================================================================================================
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 26,387 $ 15,995
Deferred income on shipments to distributors 11,534 7,689
Accrued expenses, income taxes and other liabilities 27,985 13,400
- ----------------------------------------------------------------------------------------------------------
Total current liabilities 65,906 37,084
- ----------------------------------------------------------------------------------------------------------
Deferred income taxes 15,070 -
Other liabilities 15,051 12,326
Shareholders' equity:
Preferred stock - -
Common stock 2,342 2,053
Additional paid-in capital 238,696 187,854
Retained earnings 109,049 100,612
Treasury stock, at cost (25,961) (23,799)
Deferred stock-based compensation (3,799) (1,925)
Accumulated other comprehensive income (loss) (4,008) 5,054
- ----------------------------------------------------------------------------------------------------------
Total shareholders' equity 316,319 269,849
- ----------------------------------------------------------------------------------------------------------
$ 412,346 $ 319,259
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