Exhibit 99.1
SMSC REPORTS FOURTH QUARTER AND FISCAL YEAR 2006 RESULTS
Fiscal 2006 Revenues Increase by 53% to $319 Million and EPS Grows by $0.47
Hauppauge, NY - April 18, 2006 - SMSC (Nasdaq: SMSC) revenues for the fourth
quarter ended February 28, 2006 rose by $29.7 million, or 54%, to $84.6 million,
compared to last year's fourth quarter revenues of $54.9 million, and were down
by $2.0 million, or 2%, from the third quarter of fiscal 2006, consistent with
previous guidance and expected seasonality. Approximately $13.6 million, or 46%,
of the year-over-year fourth quarter revenue growth was due to the inclusion of
OASIS SiliconSystems (OASIS), acquired on March 30, 2005, and approximately
$16.1 million, or 54%, of the revenue growth came from SMSC's pre-existing
product lines.
On a GAAP basis, operating income was $3.3 million in the fourth quarter,
compared to an operating loss of $6.9 million a year ago, and net income was
$3.8 million, or $0.16 per share, compared to a net loss of $2.8 million, or
$0.15 per share, in the fourth quarter of last year.
SMSC also presents results on an adjusted non-GAAP basis to provide additional
insight into underlying operating performance on a comparable basis. For fiscal
2005, this excludes a patent litigation settlement and a gain on the sale of
real estate, and for fiscal 2005 and 2006, excludes non-cash acquisition related
charges and non-cash charges and credits associated with Stock Appreciation
Rights (SARs). A reconciliation of GAAP to non-GAAP measures is provided in the
schedule that accompanies this release.
On this basis, non-GAAP operating income for the fourth quarter of fiscal 2006
was $7.2 million, or 8.5% of revenues, compared to a loss of $2.4 million in the
year-ago period. Non-GAAP net income was $6.3 million, or $0.27 per share,
compared to net income of $0.1 million in the fourth quarter of last year.
Non-GAAP net income of $0.27 per share in the fourth quarter of fiscal 2006
includes a $1.1 million expense ($0.7 million, or $0.03 per share, after tax)
for the cash impact of SARs that were exercised during the period. SMSC does not
consider SAR-related expenses in its earnings estimates due to the inability to
predict stock prices and their impact on SAR exercises during the quarter.
Excluding these expenses, non-GAAP earnings per share were consistent with the
Company's prior estimates.
For fiscal 2006, SMSC posted record annual semiconductor product sales of $308.3
million, 56% higher than product sales of $197.8 million in the prior year.
Total revenues increased to $319.1 million from $208.8 million last year. OASIS
accounted for $52.8 million of total product sales in fiscal 2006. On a GAAP
basis, net income per share was $0.55 versus $0.08 in fiscal 2005. On a non-GAAP
basis, as described above, net income per share was $1.13 versus $0.29 in fiscal
2005.
Cash and liquid investments at February 28, 2006 increased to $155.0 million
from $141.7 million at November 30, 2005. The Company has no bank debt, and book
value per share as of February 28, 2006 was $15.18. SMSC's February 28, 2006
Consolidated Balance Sheet reports a $17.8 million liability, and a
corresponding increase in goodwill, reflecting additional cash and SMSC common
stock which is payable to former OASIS shareholders in the first quarter of
fiscal 2007, as a result of achievement of certain performance goals.
Steven J. Bilodeau, Chairman and Chief Executive Officer, said, "In fiscal 2006,
SMSC's revenues grew by over 54% from the prior year with more than half of that
growth coming organically. Excluding the acquisition of OASIS, the Company grew
28%, or more than three times the rate of the semiconductor industry as a whole.
The acquisition of OASIS and its Automotive Infotainment product line, which
provided the balance of the revenue increase, is proving to be an excellent fit
because of its strong growth prospects, as well as market and technological
synergies.
"SMSC significantly improved profitability as non-GAAP operating income on a
full year basis reached 10.4% of revenues and non-GAAP earnings per share rose
by $0.84 to $1.13. Our current product portfolio and new product pipeline is
giving us exciting new opportunities in all of our markets."
For the first quarter of fiscal 2007, revenues are expected to be between $82
and $85 million, which represents over 20% year-over-year growth at the
midpoint. Non-GAAP net income is expected to be between $0.23 and $0.27 per
share, assuming approximately 23.1 million diluted weighted average shares
outstanding. This guidance is presented only on a non-GAAP basis to provide
comparability to historical non-GAAP financial measures and because of SMSC's
inability to project its future stock price and the charges or credits that
might be required to record stock-based compensation. Accordingly, this guidance
excludes both non-cash acquisition related charges and the impact of expensing
stock-based compensation in accordance with the requirements of FASB Statement
No. 123(R), which will be effective for SMSC in the first quarter of fiscal
2007.
A management teleconference to discuss the quarterly and full year results is
scheduled for 5:00 PM EDT, April 18, 2006. Slide presentation materials
containing additional disclosure regarding results and future earnings
expectations, and a link to a webcast of the teleconference will be accessible
from the investor relations section of SMSC's website at www.smsc.com.
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 within our sales channel;
changes in customer order patterns, including order cancellations or reduced
bookings; the effects of tariff, import and currency regulation; potential or
actual litigation; 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, except to
the extent required under applicable law and regulation. 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" or "Risk Factors" for a more complete discussion of
these and other risks and uncertainties.
SMSC is a registered trademark of Standard Microsystems Corporation.
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 Fiscal Year Ended
February 28, February 28,
---------------------------------- ----------------------------------
2006 2005 2006 2005
-------------- -------------- -------------- --------------
Revenues $ 84,628 $ 54,850 $ 319,118 $ 208,815
Costs and expenses:
Cost of goods sold 45,748 33,938 172,309 114,066
Research and development 15,647 10,516 58,205 42,988
Selling, general and administrative 18,431 12,066 68,318 48,759
Amortization of intangible assets 1,545 265 5,802 1,113
In-process research and development - - 895 -
Settlement charge - 6,000 - 6,000
Gains on real estate transactions - (1,017) - (1,017)
- ------------------------------------------------------------------------------------------- -----------------------------------
Income (loss) from operations 3,257 (6,918) 13,589 (3,094)
Interest income 1,016 806 3,288 2,532
Other expense, net (3) (45) (76) (103)
- ------------------------------------------------------------------------------------------- -----------------------------------
Income (loss) before provision for income taxes 4,270 (6,157) 16,801 (665)
Provision for (benefit from) income taxes 518 (3,339) 4,612 (2,267)
- ------------------------------------------------------------------------------------------- -----------------------------------
Net income (loss) $ 3,752 $ (2,818) $ 12,189 $ 1,602
=========================================================================================== ===================================
Basic net income (loss) per share: $ 0.17 $ (0.15) $ 0.59 $ 0.09
=========================================================================================== ===================================
Diluted net income (loss) per share: $ 0.16 $ (0.15) $ 0.55 $ 0.08
=========================================================================================== ===================================
Weighted average common shares outstanding:
Basic 21,468 18,552 20,783 18,376
Diluted 23,304 18,552 21,998 19,318
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 February 28,
----------------------------------------------------------------------------------
2006 2005
------------------------------------- -----------------------------------------
GAAP Adjustment Non-GAAP GAAP Adjustment Non-GAAP
==== ========== ======== ==== ========== ========
Revenues $ 84,628 $ - $ 84,628 $ 54,850 $ - $ 54,850
Costs and expenses:
Cost of goods sold 45,748 (104)(a) 45,644 33,938 50 (a) 33,988
Research and development 15,647 (611)(b) 15,036 10,516 197 (b) 10,713
Selling, general and administrative 18,431 (1,651)(b) 16,780 12,066 519 (b) 12,585
Amortization of intangible assets 1,545 (1,545)(c) - 265 (265)(c) -
Settlement charge - - - 6,000 (6,000)(d) -
Gains on real estate transactions - - - (1,017) 1,017 (e) -
- -----------------------------------------------------------------------------------------------------------------=-------------
Income (loss) from operations 3,257 3,911 7,168 (6,918) 4,482 (2,436)
Interest income 1,016 - 1,016 806 - 806
Other expense, net (3) - (3) (45) - (45)
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) before provision for income
taxes 4,270 3,911 8,181 (6,157) 4,482 (1,675)
Provision for (benefit from) income taxes 518 1,402 (f) 1,920 (3,339) 1,569 (f) (1,770)
- -------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 3,752 $ 2,509 $ 6,261 $ (2,818) $ 2,913 $ 95
===============================================================================================================================
Basic net income (loss) per share $ 0.17 $ 0.29 $ (0.15) $ 0.01
===============================================================================================================================
Diluted net income (loss) per share $ 0.16 $ 0.27 $ (0.15) $ -
===============================================================================================================================
Weighted average common shares outstanding:
Basic 21,468 21,468 18,552 18,552
Diluted 23,304 23,304 18,552 19,224
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 operating measures.
(a) The adjustment to Cost of goods sold for the three months ended February
28, 2006 removes the impact of non-cash charges associated with Stock
Appreciation Rights (SARs). The adjustment for the three months ended
February 28, 2005 removes a $50 credit associated with SARs.
As SARs are exercised, the actual cash cost of SARs is included within
non-GAAP operating measures.
(b) The adjustments to Research & development and Selling, general &
administrative expense remove the impact of non-cash charges or credits
associated with SARs.
As SARs are exercised, the actual cash cost of SARs is included within
non-GAAP operating measures.
(c) The adjustment to Amortization of intangible assets for the three months
ended February 28, 2006 includes $1,279 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 February 28,
2005 relates entirely to the Gain acquisition.
(d) The adjustment to Settlement charge for the three months ended February
28, 2005 removes the impact of a litigation settlement payment.
(e) The adjustment to Gains on real estate transactions for the three months
ended February 28, 2005 removes a gain realized on the sale of an idle
facility.
(f) 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 (e) above.
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP AND ADJUSTED NON-GAAP CONSOLIDATED FINANCIAL DATA
(Unaudited)
(In thousands, except per share amounts)
Fiscal Year Ended February 28,
---------------------------------------------------------------------------------
2006 2005
-------------------------------------- ---------------------------------------
GAAP Adjustment Non-GAAP GAAP Adjustment Non-GAAP
==== ========== ======== ==== ========== ========
Revenues $ 319,118 $ - $ 319,118 $ 208,815 $ - $ 208,815
Costs and expenses:
Cost of goods sold 172,309 (2,282)(a) 170,027 114,066 (8)(a) 114,058
Research and development 58,205 (2,757)(b) 55,448 42,988 (32)(b) 42,956
Selling, general and administrative 68,318 (8,013)(b) 60,305 48,759 (85)(b) 48,674
Amortization of intangible assets 5,802 (5,802)(c) - 1,113 (1,113)(c) -
In-process research and development 895 (895)(d) - - - -
Settlement charge - - - 6,000 (6,000)(e) -
Gains on real estate transactions - - - (1,017) 1,017 (f) -
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations 13,589 19,749 33,338 (3,094) 6,221 3,127
Interest income 3,288 - 3,288 2,532 - 2,532
Other expense, net (76) - (76) (103) - (103)
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) before provision for income
taxes 16,801 19,749 36,550 (665) 6,221 5,556
Provision for (benefit from) income taxes 4,612 7,121 (g) 11,733 (2,267) 2,178 (g) (89)
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 12,189 $ 12,628 $ 24,817 $ 1,602 $ 4,043 $ 5,645
=============================================================================================================================
Basic net income per share $ 0.59 $ 1.19 $ 0.09 $ 0.31
=============================================================================================================================
Diluted net income per share $ 0.55 $ 1.13 $ 0.08 $ 0.29
=============================================================================================================================
Weighted average common shares outstanding:
Basic 20,783 20,783 18,376 18,376
Diluted 21,998 21,998 19,318 19,318
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 operating measures.
(a) The adjustment to Cost of goods sold for the fiscal year ended February 28,
2006 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 $630 adjustment to Cost of
goods sold removes non-cash charges associated with Stock Appreciation
Rights (SARs). The adjustment for the fiscal year ended February 28, 2005
removes a charge of $8 associated with SARs.
As SARs are exercised, the actual cash cost of SARs is included within
non-GAAP operating measures.
(b) The adjustments to Research & development and Selling, general &
administrative expenses remove the impact of non-cash charges associated
with SARs.
As SARs are exercised, the actual cash cost of SARs is included within
non-GAAP operating measures.
(c) The adjustment to Amortization of intangible assets for the fiscal year
ended February 28, 2006 includes $4,740 related to the OASIS acquisition
and $1,062 related to the fiscal 2003 acquisition of Gain Technology
Corporation (Gain). The adjustment for the fiscal year ended February 28,
2005 relates entirely to the Gain acquisition.
(d) The adjustment to In-process research and development for the fiscal year
ended February 28, 2006 removes a charge related to the OASIS acquisition.
(e) The adjustment to Settlement charge for the fiscal year ended February 28,
2005 removes the impact of a litigation settlement payment.
(f) The adjustment to Gains on real estate transactions for the fiscal year
ended February 28, 2005 removes a gain realized on the sale of an idle
facility.
(g) 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 (f) above.
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands)
February 28,
-----------------------
2006 2005
---------- ----------
Assets
Current assets:
Cash and cash equivalents $ 43,932 $ 116,126
Short-term investments 111,101 56,519
Accounts receivable, net 39,802 23,499
Inventories 41,861 33,310
Deferred income taxes 17,457 17,701
Other current assets 5,599 4,584
- --------------------------------------------------------------------------------
Total current assets 259,752 251,739
- --------------------------------------------------------------------------------
Property, plant and equipment, net 38,242 22,630
Goodwill 94,606 29,435
Intangible assets, net 44,039 3,584
Deferred income taxes 8,307 7,163
Other assets 3,314 4,708
- --------------------------------------------------------------------------------
$ 448,260 $ 319,259
================================================================================
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 27,153 $ 15,995
Deferred income on shipments to distributors 13,205 7,689
Business acquisition consideration payable 17,750 -
Accrued expenses, income taxes and other liabilities 28,935 13,400
- --------------------------------------------------------------------------------
Total current liabilities 87,043 37,084
- --------------------------------------------------------------------------------
Deferred income taxes 9,817 -
Other liabilities 17,269 12,326
Shareholders' equity:
Preferred stock - -
Common stock 2,400 2,053
Additional paid-in capital 250,792 187,854
Retained earnings 112,801 100,612
Treasury stock, at cost (25,961) (23,799)
Deferred stock-based compensation (3,953) (1,925)
Accumulated other comprehensive income (loss) (1,948) 5,054
- --------------------------------------------------------------------------------
Total shareholders' equity 334,131 269,849
- --------------------------------------------------------------------------------
$ 448,260 $ 319,259
================================================================================