SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended August 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-7422 STANDARD MICROSYSTEMS CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 11-2234952 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 80 ARKAY DRIVE, HAUPPAUGE, NEW YORK 11788 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 516-273-3100 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ____X____ No ________ As of October 11, 1996 there were 13,865,115 shares of the registrant's common stock outstanding. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) August 31, February 29, 1996 1996 Assets Current assets: Cash and cash equivalents $ 11,612 $ 18,459 Accounts receivable, net of allowance for doubtful accounts of $1,719 and $1,369, respectively 62,346 55,976 Inventories 67,095 60,408 Deferred tax benefits 8,737 8,607 Other current assets 13,121 5,434 Total current assets 162,911 148,884 Property, plant and equipment: Land 3,832 3,832 Buildings and improvements 27,374 26,839 Machinery and equipment 119,023 109,235 150,229 139,906 Less: accumulated depreciation 87,808 79,698 Property, plant and equipment, net 62,421 60,208 Other assets 41,435 51,567 $266,767 $260,659 Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 27,785 $ 30,801 Accrued expenses and other liabilities 22,264 23,884 Income taxes payable 1,255 1,096 Total current liabilities 51,301 55,781 Long-term debt 8,000 - Minority interest in subsidiary 11,375 11,376 Shareholders' equity: Preferred stock, $.10 par value- Authorized 1,000,000 shares, none outstanding - - Common stock, $.10 par value- Authorized 30,000,000 shares, outstanding 13,856,000 and 13,711,000 shares, respectively 1,386 1,371 Additional paid-in capital 86,234 84,737 Retained earnings 102,276 100,217 Unrealized holding gain, net of tax 1,624 2,226 Foreign currency translation adjustment 4,571 4,951 Total shareholders' equity 196,091 193,502 $266,767 $260,659 STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) Three Months Ended Six Months Ended August 31, August 31, 1996 1995 1996 1995 Revenues $99,217 $85,434 $199,289 $157,643 Cost of goods sold 69,267 62,611 132,463 106,425 Gross profit 29,950 22,823 66,826 51,218 Operating expenses: Research and development 6,168 7,952 12,154 16,188 Selling, general and administrative 22,398 28,686 48,809 52,191 Amortization of intangible assets 1,220 3,872 2,460 5,244 29,786 40,510 63,423 73,623 Income (loss) from operations 164 (17,687) 3,403 (22,405) Other income (expense): Interest income 137 112 265 224 Interest expense (244) (225) (337) (453) Other income (expense), net 184 (73) 160 (118) 77 (186) 88 (347) Income (loss) before minority interest and provision for income taxes 241 (17,873) 3,491 (22,752) Minority interest in net income of subsidiary 0 36 1 76 Income (loss) before provision for income taxes 241 (17,909) 3,490 (22,828) Provision for (benefit from) income taxes 99 (5,804) 1,431 (7,722) Net income (loss) $ 142 $(12,105) $ 2,059 $(15,106) Net income (loss) per common and common equivalent share $ 0.01 $ (0.91) $ 0.15 $ (1.14) Weighted average common and common equivalent shares outstanding 13,864 13,331 13,836 13,298 STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Six Months Ended August 31, 1996 1995 Cash flows from operating activities: Cash received from customers $ 192,646 $ 185,755 Cash paid to suppliers and employees (200,399) (182,492) Interest received 260 219 Interest paid (453) (599) Income taxes paid 2,658 (3,453) Net cash used for operating activities (5,288) (570) Cash flows from investing activities: Capital expenditures (9,920) (19,717) Long-term investment 0 (13,990) Other 266 17 Net cash used for investing activities (9,639) (33,690) Cash flows from financing activities: Proceeds from issuance of common stock 346 806 Borrowings under line of credit agreements 23,950 28,000 Repayments of borrowings under line of credit agreements (15,950) (12,000) Net cash provided by financing activities 8,346 16,806 Effect of foreign exchange rate changes on cash and cash equivalents (266) (90) Net decrease in cash and cash equivalents (6,847) (17,544) Cash and cash equivalents at beginning of period 18,459 29,478 Cash and cash equivalents at end of period $ 11,612 $ 11,934 Reconciliation of net income (loss) to net cash used for operating activities: Net income (loss) $ 2,059 $ (15,106) Adjustments to reconcile net income (loss) to net cash used for operating activities: Depreciation and amortization 11,062 10,621 Other adjustments, net 812 492 Changes in operating assets and liabilities: Accounts receivable (6,646) 28,148 Inventories (6,750) (6,364) Accounts payable and accrued expenses and other liabilities (5,080) (9,502) Other changes, net (745) (8,859) Net cash used for operating activities $ (5,288) $ (570) STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The interim financial statements furnished reflect all adjustments (consisting of only normal and recurring adjustments) which are, in the opinion of management, necessary to present a fair statement of the Company's financial position and results of operations for the three and six month periods ended August 31, 1996. The financial statements should be read in conjunction with the summary of significant accounting policies and notes to consolidated financial statements included in the Company's annual report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended February 29, 1996. 2. Inventories are valued at the lower of first-in, first-out cost or market and consist of the following (in thousands): Aug. 31, 1996 Feb. 29, 1996 Raw Materials $11,905 $ 9,556 Work in Process 39,014 34,622 Finished Goods 16,176 16,230 $67,095 $60,408 3. Commitments and Contingencies In September 1996, the Company reached an agreement with Penril DataComm Networks, Inc., to settle a legal action initiated by Penril in June 1993. In 1990 and 1991, Penril had entered into technology and product agreements with Sigma Networks Systems, Inc., which was subsequently acquired by SMC in December 1992. Sigma became a wholly-owned subsidiary and was renamed SMC Enterprise Networks, Inc. In January 1996, SMC sold the business of SMC Enterprise Networks to Cabletron Systems Inc. In June 1993, Penril commenced an action, asserting claims against SMC, SMC Enterprise Networks and certain officers of SMC Enterprise Networks. SMC asserted counterclaims against Penril. All of these claims related to disputed interpretations of rights and obligations under the agreements that Sigma executed in 1990 and 1991, prior to its acquisition by SMC. SMC and Penril agreed to a settlement under which all claims of both parties are to be dismissed, with prejudice. As a result, SMC anticipates a charge to pretax earnings of approximately $4 million in the third quarter of fiscal 1997. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The following table presents the Company's Consolidated Statements of Income, as percentages of revenues, for the three and six month periods ended August 31, 1996 and 1995: 3 Months 6 Months 1996 1995 1996 1995 Revenues 100.0% 100.0% 100.0% 100.0% Cost of goods sold 69.8 73.3 66.5 67.5 Gross profit 30.2 26.7 33.5 32.4 Research and development 6.2 9.3 6.1 10.3 Selling, general and administrative 22.6 33.6 24.5 33.1 Amortization of intangible assets 1.2 4.5 1.2 3.3 Total operating expenses 30.0 47.4 31.8 46.7 Income (loss) from operations 0.2 (20.7) 1.7 (14.2) Other income (expense), net 0.0 (0.2) 0.1 (0.2) Income (loss) before minority interest and taxes 0.2 (20.9) 1.8 (14.4) Minority interest in net income of subsidiary 0.0 0.1 0.0 0.1 Income (loss) before provision for income taxes 0.2 (21.0) 1.8 (14.5) Provision for (benefit from) income taxes 0.1 (6.8) 0.8 (4.9) Net income (loss) 0.1% (14.2)% 1.0% (9.6)% Results of Operations by Industry Segment The following table presents the Company's revenues and operating income by industry segment for the three and six month periods ended August 31, 1996 and 1995 (in millions): 3 Months 6 Months 1996 1995 1996 1995 Component products Integrated circuit revenues $45.0 $28.6 $ 95.0 $56.2 Foundry device revenues 4.7 3.4 10.7 5.8 Total component products revenues $49.7 $32.0 $105.7 $62.0 Operating income 4.0 8.6 16.2 17.1 % of revenues 8.2% 26.9% 15.3% 27.6% System products Adapter revenues $35.6 $35.2 $ 66.3 $66.7 Hub and switch revenues 9.9 13.6 18.8 21.1 Total system products revenues $45.5 $48.8 $ 85.1 $87.8 Operating income 1.6 (19.0) (1.8) (28.6) % or revenues 3.4% (38.9)% (2.1)% (32.6)% Toyo Microsystems Corporation Revenues $4.0 $4.6 $8.5 $7.8 Operating income - 0.2 - 0.3 % of revenues - 3.6 % - 4.1% General, corporate and other operating income (loss) ($5.4) ($7.4) ($11.0) ($11.3) Standard Microsystems Corporation conducts its operations primarily through the Component Products Division and the System Products Division. The Component Products Division designs, produces and markets very-large- sale-integrated circuits, mainly for control of various personal computer functions, and specialized semiconductor-related products that are produced in SMC's own foundry. The System Products Division designs, produces and markets products that connect personal computers to, and allow communications over, local area networks (LANs). The Company's subsidiary, Toyo Microsystems Corporation (TMC), sells component and system products in the Japanese market. Revenue transfers between industry segments are excluded from the above figures. The majority of these transfers consist of component and system products shipped to TMC for resale in Japan. Revenues The Company's revenues rose 16.1% in the second quarter of fiscal 1997 from the year-earlier level as a 55.1% increase in component products' revenues more tahn offset a 6.8% decrease in system products' revenues as wll as a 12.6% decrease in TMC's revenues. In the first half of fiscal 1997, the Company's revenues rose 26.4% as a 70.4% increase in component products' revenues, as well as a 9.3% increase in TMC's revenues, more than offset a 3.1% decrease in system products' revenues. In the second quarter of fiscal 1997, the Company's revenues declined 0.9% from the first quarter of fiscal 1997 as an 11.3% decrease in component products' revenues as well as an 11.5% decrease in TMC's revenues barely offset a 15.2% increase in system products' revenues. Compared to year-earlier results, component products' revenue growth in the second quarter and first half of fiscal 1997 continued to be led by increased shipments of personal computer input/output (PC I/O) integrated circuits. Sales growth of Ultra I/O, the newest generation of PC I/O, devices more than offset sales declines of the mature Super I/O class of circuit. When comparing the revenue decline in the second quarter from the first quarter of fiscal 1997, increased Ultra I/O sales were unable to offset a sharp decline in Super I/O sales. Lower selling prices and unit shipments led to decline. In addition, a device used in inkjet printer carttridges, that is produced in SMC's own wafer foundry, has contributed revenue gains over year-earlier periods. Comprising most of foundry device shipments, this device is sold principally to a single customer who reduced orders in the second quarter of fiscal 1997. SMC expects further declines in orders and revenues from this customer during the remainder of the year. During the fourth quarter of fiscal 1996, SMC received initial wafers from two suppliers under the programs discussed in the Wafer Purchase Agreements section below. The Company also received initial wafers from other suppliers, requiring no specific investment. All of these sources contributed to an increase in second quarter and first half component products revenues over the year earlier levels. Relative to year-earlier results, system products' lower revenues reflected decreased hub and LAN switch revenues, due primarily to the January 1996 sale of the Enterprise Networks Business Unit (ENBU) to Cabletron Systems, Inc. ENBU's revenues were approximately $4 million in the second quarter and $7 million in the first half of fiscal 1996. Compared to year-earlier results Network interface card (adapter) revenues, changed very little reflecting slightly higher unit shipments in the second quarter and slightly lower unit shipments in the first half. Results were improved by a shift in product mix toward Fast Ethernet and Ethernet PCI-bus adapters, with higher selling prices than most other Ethernet adapters. As a result, average selling prices (ASPs) fell only modestly from year-earlier levels. Higher Fast Ethernet adapter, Ethernet PCI-bus adapter and new Ethernet switch shipments were primarily responsible for the increase in system products' revenues in the second quarter over the first quarter of fiscal 1997. TMC's second quarter revenue decline came from both lower component and system products shipments. First half growth came solely from increased integrated circuit revenues, principally PC I/O devices, as networking product revenues declined. The following table presents the Company's revenues by geographic area as percentages of total revenues from unaffiliated customers. All but Japan (TMC), within the category Revenues outside the United States, are considered export revenues shipped from U.S. operations. 3 Months 6 Months Periods ended August 31, 1996 1995 1996 1995 United States 50.3% 46.5% 46.5% 43.6% Asia and Pacific Rim 29.2 24.9 33.2 25.2 Europe 12.4 17.7 12.0 20.4 Canada 2.5 3.0 2.3 3.2 Other 1.6 2.5 1.7 2.7 Export revenues 45.7 48.1 49.2 51.5 Japan (TMC) 4.0 5.4 4.3 4.9 Revenues outside the United States 49.7 53.5 53.5 56.4 Total Revenues 100.0% 100.0% 100.0% 100.0% United States revenues increased 25.8% in the second quarter and 35.0% in the first half of fiscal 1997 over year-earlier levels. The increases in both periods were largely from shipments of component products, principally PC I/O and foundry products. System products' second quarter fiscal 1997 domestic revenues declined reflecting sale of the Enterprise Networks Business Unit. A first half increase primarily reflected a first quarter improvement as year earlier results had been impeded by the liquidation of excess distributor inventories. International revenues increased 8.1 % in the second quarter and 20.0% in the first half of fiscal 1997 over year-earlier results. Asian and Pacific Rim revenues grew 36.3% in the second quarter and 67.3% in the first half largely because component products' domestic branded customers increased the proportion of PCs produced in offshore factories and demand grew from a major Asian-based PC producer. European revenues fell 18.9% in the second quarter and 25.4% in the first half, chiefly reflecting a decline in system products' revenues from its major international market. This decline reflected the absence of the divested ENBU product line. Gross Profit The gross profit margin increased to 30.2% for the second quarter of fiscal 1997 from 26.7% for the second quarter of fiscal 1996. For the first half of fiscal 1997, the gross profit margin increased to 33.5% from 32.5% a year earlier. The principal factor contributing to the gross margin improvement was an $11.8 million charge to cost of goods sold to reduce the carrying value of certain system products inventory in the second quarter of fiscal 1996. That charge reduced gross margins by 13.7 percentage points in the second quarter and 7.5 percentage points in the first half of fiscal 1996. Offsetting the favorable impact from the absence of the inventory charge was: (I) reduced margins of PC I/O integrated circuits derived from low yields of a new Ultra I/O device and sharply reduced ASPs for the Super I/O generation products and (ii) lower margins from greater competition for foundry products. Operating Expenses Research and development expenses declined 22.4% to $6.2 million in the second quarter of fiscal 1997 from $8.0 million in the year earlier period. For the first half of fiscal 1997, R&D expenses declined 24.9% to $12.2 million from $16.2 million a year earlier. The decline reflected elimination of the divested ENBU's expenditures, partially offset by higher R&D spending for component products and the remaining networking products business. Selling, general and administrative expenses decreased 21.9% to $22.4 million in the second quarter of fiscal 1997, compared to $28.7 million in the year earlier period. For the first half of fiscal 1997, S,G&A expenses declined to 6.5% to $48.8 million from $52.2 million a year earlier. In the year earlier second quarter, the Company incurred a severance related benefit charge of $2.5 million. Consequently, the lower spending in fiscal 1997 resulted chiefly from the absence of the severance charge and lower selling and marketing costs reflecting elimination of the divested ENBU's expenditures. These reductions were partially offset by increased spending to support higher component products revenues and costs related to a new client/server information system. Amortization of intangible assets decreased 68.5% in the second quarter and 53.1% in the first half of fiscal 1997 from comparable year earlier periods. In the year earlier second quarter, the Company incurred a $2.4 million write-down of previously acquired LAN technology to its estimated realizable value. Consequently, the lower amortization in fiscal 1997 resulted chiefly from the absence of the write-down and also reflected benefits from an accelerated write-off of certain assets during fiscal 1996 that reduced the rate of quarterly amortization in succeeding periods. Operating Profits In the second quarter of fiscal 1997, the company reported an operating profit of $0.2 million which compared to an operating loss of $17.7 a year earlier. In the first half of fiscal 1997, the company reported an operating profit of $3.4 million which compared to an operating loss of $22.4 a year earlier. The major contributors to the improvement were the absence of special charges, elimination of losses from the divested ENBU and higher component products revenues. These benefits were partially offset by lower gross profit margins for component products and higher information systems costs. Other Income and Expense In the second quarter and first half of fiscal 1997, Other income (expense), net improved by $0.26 million and $0.44 million over the respective year earlier periods, attributed principally to lower interest charges from lower average loan balances during the period. Income Taxes In the second quarter and first half of fiscal 1997, income taxes were provided at the Company's expected effective rate for fiscal 1997 of 41.0%. In fiscal 1996, income taxes were provided at a rate of 32.4% for the second quarter and at 33.8% for the first half. The Company's effective income tax rate primarily reflects statutory rate and non-deductible goodwill amortization. The change in the effective income tax rate from a year earlier relects the relationship of the non-deductible items to the Company's pretax income in fiscal 1997 and pretax loss in fiscal 1996. Wafer Purchase Agreements During fiscal 1996, the Company purchased $16.0 million of wafer fabrication equipment for installation in a semiconductor plant owned by Lucent Technologies' (formerly AT&T Corp.) Microelectronics Business Unit in Madrid, Spain. The agreement, under which the equipment was purchased, allocates sub-micron wafer production capacity to the Company for five years beginning in March 1996. In fiscal 1996, SMC purchased a minority equity interest in Singapore-based Chartered Semiconductor Pte Ltd. for $19.9 million which is included within Other assets on the accompanying balance sheet. Under this agreement, Chartered allocates sub-micron wafer production capacity to the Company for ten years. This arrangement and the Lucent agreement are intended to provide a portion of the Company's long-term production requirements for integrated circuits. Liquidity and Capital Resources The Company's working capital increased to $111.6 million at August 31, 1996, from $93.1 million at the end of fiscal 1996. The increase in working capital primarily reflected increases of $7.4 million in accounts receivable, $6.5 million in inventories and $7.7 million in other current assets and a decrease of $4.5 million in current liabilities, partially offset by a decrease of $7.8 million in cash and cash equivalents. For reasons described below, during the first half of fiscal 1997, the decrease in cash and cash equivalents to $11.6 million primarily reflected financing capital expenditures of $9.9 million and the increase in inventories and accounts receivable, partially offset by an increase in long-term debt of $8.0 million. During the second quarter of fiscal 1997, days sales outstanding (DSOs) increased to 57 days from 54 in the fourth quarter of fiscal 1996 and 50 in the second quarter of fiscal 1996. The increased DSOs and receivables in the second quarter of fiscal 1997 reflected a greater percentage of sales occurring toward the end of the quarter when compared to the preceding periods. Cost of goods sold divided by inventory increased to 4.1 times, annualized, for the second quarter of fiscal 1997 from 4.0 times for the fourth quarter of fiscal 1996 and decreased from 4.8 times for the year earlier period. The decrease in inventory turnover from the year earlier quarter primarily reflected year-earlier cost of goods sold that were inflated by the $11.8 million inventory charge. Adjusting year-earlier cost of goods sold by eliminating that charge, reduces inventory turnover for the year-earlier quarter to 3.9 times. During the first quarter of fiscal 1997, a decrease in inventory turns resulted in the Company's non-compliance with a financial condition covenant under its $25.0 million line of credit agreement. In connection therewith, the Company obtained waivers from its banks respecting the failure to meet this covenant. As a result of the improvement in inventory turns, the Company is in compliance with all financial condition covenants at August 31, 1996. Of $9.9 million of capital expenditures in the first half of fiscal 1997, the most significant items were $3.0 million for upgrading the Company's information system and $2.9 million for production equipment for SMC's own wafer foundry. In September 1996, the Comapny reached an agreement with Penril DataComm Networks, Inc., to settle a legal action initiated by Penril in June 1993. As a result, SMC anticipates a charge to pretax earnings of approximately $4 million in the third quarter of fiscal 1997. The Company believes that its present working capital position, combined with forecasted cash flow and available borrowing capacity, will be sufficient to meet cash requirements for the next twelve months. Cash flow anticipated from operations, supplemented by borrowings under the revolving credit line, as necessary, is anticipated to be used chiefly to fund capital expenditures during the remainder of fiscal 1997. Capital expenditures expected in fiscal 1997 include upgrading the Company's information system and purchasing various foundry production, design and test equipment. Factors That May Affect Future Results Except for the historical information contained in this quarterly report, certain matters discussed herein are forward-looking statements that involve risks and uncertainties. The forward-looking statements contained herein are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Variables that affect the Company's future operating results include product selling prices and costs, worldwide demand for personal computers and numerous competitive factors. ASPs for the Company's products generally decline from period to period. The Company attempts to offset this trend by reducing manufacturing costs by a comparable amount and introducing products with a higher value. The ability to succeed in these tasks is a key determinant to the Company's gross profit margins. The Company's most important customers for component products are personal computer producers, and a slowdown in the rate of growth in demand for Pcs could affect the Company's growth and intensify competition. The inability to obtain adequate integrated circuit wafers could allow competitors who process wafers internally to gain market share relative to the Company. These competitors may also, more aggressively, reduce product selling prices. The Company's adapters are inserted in newly sold and previously installed PCs, so that the sales growth of PCs influences sales of adapters as well. Improvements in PC performance require more powerful adapters, and that has led to a shift in the mix of adapters that the Company sells toward the high speed PCI bus and Fast Ethernet adapters. The Company also sells PC cards for portable computers. Product mix, product selling prices and the acceptance of newly introduced products can be altered by competitors' new products, promotions and pricing. The Company's product development, sales and marketing progress is dependent on hiring and retaining employees with specific skills. The Company is also dependent on a limited number of suppliers for certain components, assemblies, software and finished products. High levels of production by PC manufacturers led to an industry-wide shortage of silicon wafer fabrication capacity in fiscal 1996 and 1995. While these shortages eased during the fourth quarter of fiscal 1996, they could occur again and lead to difficulty in securing additional manufacturing capacity, potentially curtailing revenue and profit growth over the remainder of fiscal 1997 and beyond. Alternatively, PC production could weaken, leading customers to hold excess inventories of components and other parts, resulting in canceling or rescheduling orders for the Company's products. With 53.5% of the Company's revenues in the first half of fiscal 1997 shipped to customers located outside of the United States, global economic conditions and changes in foreign currency exchange rates can influence the demand for the Company's products. Because of these and other circumstances that could affect the Company's operating results, past financial performance is not necessarily indicative of results to be expected in the future. PART II - OTHER INFORMATION Item 1. Legal Proceedings As set forth in Note 3 to Consolidated Financial Statements, in June 1993, Penril DataComm Networks, Inc. commenced an action in a Maryland state court against SMC, its wholly owned subsidiary SMC Enterprise Networks, Inc. (successor by merger to Sigma Networks Systems, Inc.), and two former officers of Sigma, alleging breach of agreements between Penril and Sigma made before SMC acquired Sigma. SMC asserted counterclaims against Penril. Denying liability for the claims respectively made against them, the parties settled this litigation in September 1996, and agreed to dismiss all claims with prejudice. SMC anticipates, as a result, that it will record a $4 million pretax charge for the third 1997 fiscal quarter. Item 4. Submission of Matters to a Vote of Security Holders The following matters were submitted to a vote of security holders at the Registrant's annual meeting of shareholders which was held on July 22, 1996. The following were elected directors, each receiving the number of votes set opposite his name: Broker For Withheld Non-votes Evelyn Berezin 11,380,459 858,151 -0- Peter F. Dicks 11,378,326 860,284 -0- James R. Berrett 11,396,449 842,161 -0- Kathleen B. Earley 11,387,663 850,947 -0- The 1996 Stock Option Plan was approved and adopted by the following vote: Broker For Against Abstain Non-votes 5,620,921 1,757,350 106,615 4,753,724 At the meeting, the selection of Arthur Andersen LLP as the Company's auditors for the current year was ratified by the following vote: Broker For Against Abstain Non-votes 11,790,442 402,889 41,739 3,540 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K. None. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STANDARD MICROSYSTEMS CORPORATION (Registrant) DATE: October 11, 1996 /S/ Anthony M. D'Agostino (Signa ture) Anthony M. D'Agostino Senior Vice President, Finance and Treasurer (Principal Financial Officer)