SMSC Announces Third Quarter Fiscal 2003 Revenues and Earnings; Quarterly Product Revenues Grow by 16% Over Prior Year.Business Editors/High-Tech Writers HAUPPAUGE Hauppauge can refer to:
Outlook Includes 25% - 30% Year-over-Year Revenue Growth for Fourth Quarter Standard Microsystems Corporation (Nasdaq: SMSC SMSC Short Message Service Center SMSC Standard Microsystems Corporation (New York) SMSC Spiritual Moral Social Cultural (education) SMSC Stephenville Medical and Surgical Clinic ) today announced that revenues for the third quarter ended November November: see month. 30, 2002 were $40.6 million, an increase of 16%, compared to $35.0 million in the third quarter of fiscal 2002, excluding a $29.6 million special license payment received during the third quarter of fiscal 2002. Reported revenues for the third quarter of fiscal 2002, including the special license payment, were $64.6 million. Gross profit percentage for the third quarter of fiscal 2003 was 44.2%, compared to 62.4% in the previous year's third quarter. Gross profit percentage in last year's third quarter was impacted favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. by the special license payment and negatively by inventory charges related to business restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and other obsolescence ob·so·les·cent adj. 1. Being in the process of passing out of use or usefulness; becoming obsolete. 2. Biology Gradually disappearing; imperfectly or only slightly developed. . Without those items, the gross profit percentage would have been 38.9% in the previous year's third quarter, and the year-over-year improvement would have been 5.2%. Research and development expenses for the third quarter of fiscal 2003 were $8.0 million, compared to $8.8 million in the year-ago quarter. Selling, general and administrative expenses were $9.5 million, compared to $9.9 million in last year's third quarter. Amortization of acquired intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. associated with the acquisition of Gain Technology Corporation in June 2002, were $0.4 million in this year's third quarter. As previously announced on December 2, 2002, SMSC recorded non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. in the third quarter of fiscal 2003 for declines in value, considered to be "other than temporary" in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). , of its investments in SMC Networks SMC Networks is a company that manufacture network equipment such as network cards, switches, wireless routers, etc. Previously an independent company, it was taken over by the Accton group. External links
Due to the significance of the special items recorded in both the third quarter of fiscal 2003 and in the comparable quarter of fiscal 2002, SMSC is presenting certain pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma information to facilitate a comparison of the operating results for both periods. The pro forma information is attached. As shown in the pro forma table, income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the third quarter of fiscal 2003 was $0.6 million, or $0.03 per share, a significant improvement compared to a loss of $3.0 million, or $0.18 per share, in the third quarter of fiscal 2002, all on a pro forma basis. The discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. loss in the third quarter of fiscal 2003, which represented legal expenses associated with the sale of SMC Networks, Inc., was $0.1 million, or $0.01 per share. Cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments at the end of the third quarter of fiscal 2003 were $104.5 million. The Company has no bank debt. SMSC's book value as of November 30, 2002 was $12.10 per share. "Product revenues for the third quarter demonstrated solid growth, increasing by 16% over last year and 6% sequentially. SMSC also exceeded the high end of its profit expectations, excluding the investment write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. ," said Steven J. Bilodeau, Chairman, President and Chief Executive Officer. "The Embedded Inserted into. See embedded system. business had its strongest quarter of bookings in two years and the Advanced I/O (Input/Output) The transfer of data between the CPU and a peripheral device. Every transfer is an output from one device and an input to another. See PC input/output. I/O - Input/Output business, which also had a positive book to bill, continues to gain momentum with new products." Mr. Bilodeau continued, "SMSC's fourth quarter, which is traditionally a seasonally slower period, is expected to produce significant revenue growth, between 25% and 30% over last year, as several new products launch and design wins ramp. Looking ahead, we will continue to pursue growth strategies focused on expanding our customer base, increasing market share and extending our presence in new markets." Commenting on third quarter results, Andrew M. Caggia, Senior Vice President and Chief Financial Officer said, "On a pro forma basis, revenues, gross profit and net income all met or exceeded our expectations and significantly improved from the last year's third quarter. Cash increased in the quarter and inventories were down by almost $6 million sequentially. Overall, we continue to maintain a strong financial foundation from which to execute our growth strategy as we look ahead to fiscal 2004." BUSINESS OUTLOOK FOR SMSC: For the fourth quarter of fiscal 2003, SMSC expects revenues to grow by 25% to 30% compared to the fourth quarter of fiscal 2002. Gross profit percentage is expected to be approximately 44.0%. Research and development expenses are expected to range from $8.0 million to $9.0 million, and selling, general and administrative expenses are projected to range from $9.0 million to $10.0 million. Acquisition-related charges are expected to be approximately $0.4 million. The effective tax rate is estimated to be 11% in the fourth quarter of fiscal 2003, and the Company expects income from continuing operations to be approximately $0.05 per share. The discontinued operations loss is expected to be less than $0.1 million (after taxes). Without the investment write-down or the prior year tax benefits recorded in the third quarter of this year, full year fiscal 2003 income from continuing operations is expected to be approximately $0.13 per share. ABOUT SMSC: SMSC provides Real World Connectivity(TM) solutions for high-speed communication and computing computing - computer applications. Leveraging a broad intellectual property portfolio and an extensive history in the design of the world's most preferred Advanced Input/Output products, SMSC delivers integrated hardware and software solutions to manage systems and connect peripherals in today's rapidly evolving computing architectures. SMSC works with industry leading OEMs to combine advanced digital, mixed-signal and analog functionality into Application Specific Standard Products. The Company's Embedded Products connect people, machines and information. SMSC delivers integrated Ethernet Ethernet Telecommunications networking protocol introduced by Xerox Corp. in 1979. It was developed as an inexpensive way of sending information quickly between office machines connected together in a single room or building, but it rapidly became a standard computer and USB USB in full Universal Serial Bus Type of serial bus that allows peripheral devices (disks, modems, printers, digitizers, data gloves, etc.) to be easily connected to a computer. 2.0 solutions, along with a diverse range of other products, for network printers, set-top boxes The cable TV box that sits on "top" of the TV "set," although it is often located several feet away in an equipment rack. The set-top box descrambles the premium channels and provides a tuner for the higher cable numbers that very old TVs did not support. , home gateway products, car navigation See GPS. systems, cellular base stations, USB peripherals and more. SMSC is based in Hauppauge, New York Hauppauge (pronounced /hɔpɔg/) is a hamlet in the Town of Islip and the Town of Smithtown in Suffolk County, New York, United States. and maintains offices worldwide, including locations in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , Asia, Europe and Japan. SMSC operates engineering design centers in Phoenix, AZ, Tucson, AZ, Hauppauge, NY and Austin, TX. More information about the Company is available on the World Wide Web at http://www.smsc.com. FORWARD LOOKING STATEMENTS: Except for historical information contained herein, the matters discussed in this announcement are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 Obsolete Inventory Term that refers to inventory that is at the end of its product life cycle and has not seen any sales or usage for a set period of time usually determined by the industry. This type of inventory has to be written down and can cause large losses for a company. and variations in inventory valuation, among others. Such statements are qualified in their entirety The whole, in contradistinction to a moiety or part only. When land is conveyed to Husband and Wife, they do not take by moieties, but both are seised of the entirety. by the inherent risks and uncertainties surrounding sur·round tr.v. sur·round·ed, sur·round·ing, sur·rounds 1. To extend on all sides of simultaneously; encircle. 2. To enclose or confine on all sides so as to bar escape or outside communication. n. 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 char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by intense competition, rapid technological change, cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. 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 See peripheral. peripheral device - peripheral , and reductions in the rate of growth of the PC and Embedded markets Refers to custom-designed, computer-based devices and applications that perform a fixed set of tasks. It may refer to cellphones and other handhelds, network appliances (routers, access points, modems) and myriad consumer electronics products. could adversely affect its operating results. SMSC conducts business outside the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and is subject to tariff tariff, tax on imported and, more rarely, exported goods. It is also called a customs duty. Tariffs may be distinguished from other taxes in that their predominant purpose is not financial but economic—not to increase a nation's revenue but to protect domestic 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 here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" and are based upon the information available to SMSC at this time. Such information is subject to change, and we will not necessarily inform you of such changes. These and other risks and uncertainties, including potential liability resulting from pending or future litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and quarterly reports on Form 10-Q Form 10-Q See 10-Q. filed with the Securities and Exchange Commission, particularly those sections entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: "Other Factors That May Affect Future Operating Results" for a more complete discussion of these and other risks and uncertainties. Standard Microsystems and SMSC are registered trademarks, and Real World Connectivity is a trademark, of Standard Microsystems Corporation. Product names and company names are trademarks of their respective holders.
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
PRO FORMA INFORMATION (Unaudited)
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
November 30, November 30,
--------------------- ---------------------
2002 2001 2002 2001
----------------------------------------------------------------------
Income (loss) from
continuing operations:
As reported $ (9,032) $ 9,195 $ (8,031) $ 6,702
Add back:
Investment impairment
charge 10,436 268 10,436 268
Inventory write-off
related to business
restructuring - 816 - 816
Restructuring charges - 5,132 - 5,132
Other non-recurring
S,G&A expenses - 575 - 575
Deduct:
Special license
payment - (18,941) - (18,941)
Prior years' tax
benefits (829) - (829) -
----------------------------------------------------------------------
Pro forma income (loss)
from continuing
operations $ 575 $ (2,955) $ 1,576 $ (5,448)
======================================================================
Diluted income (loss) from
continuing operations per
share:
As reported $ (0.54) $ 0.56 $ (0.49) $ 0.40
Pro forma $ 0.03 $ (0.18) $ 0.09 $ (0.34)
Diluted weighted average
common shares outstanding:
As reported 16,718 16,525 16,472 16,799
Pro forma 17,923 16,071 17,965 16,090
All amounts added and deducted in calculating pro forma income (loss)
from continuing operations, except for prior years' tax benefits, are
presented net of applicable income taxes at 36%.
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
--------------------- --------------------
November 30, November 30,
--------------------- --------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Sales and Revenues:
Product Sales $ 40,293 $ 34,644 $ 111,890 $ 95,274
Licensing Revenues 305 29,970 1,015 30,565
----------------------------------------------------------------------
40,598 64,614 112,905 125,839
Cost of goods sold 22,653 24,315 62,777 61,581
----------------------------------------------------------------------
Gross profit 17,945 40,299 50,128 64,258
Operating expenses:
Research and development 8,037 8,793 22,662 24,800
Selling, general and
administrative 9,534 9,896 26,387 25,399
Amortization of intangible
assets 360 - 807 -
Restructuring costs - 8,019 - 8,019
----------------------------------------------------------------------
Income from operations 14 13,591 272 6,040
Interest income 496 813 1,610 2,872
Impairment of investments (16,306) (419) (16,306) (419)
Other income (expense), net (78) (62) (100) 1,550
----------------------------------------------------------------------
Income (loss) before
provision for income taxes
and minority interest (15,874) 13,923 (14,524) 10,043
Provision for (benefit
from) income taxes (6,854) 4,749 (6,503) 3,313
Minority interest in net
income (loss) of
subsidiary 12 (21) 10 28
----------------------------------------------------------------------
Income (loss) from
continuing operations (9,032) 9,195 (8,031) 6,702
Loss from discontinued
operations
(net of income tax
benefits of $69, $64,
$260 and $360) (125) (116) (464) (668)
----------------------------------------------------------------------
Net income (loss) $ (9,157) $ 9,079 $ (8,495) $ 6,034
======================================================================
Basic net income (loss)
per share:
Income (loss) from
continuing operations $ (0.54) $ 0.57 $ (0.49) $ 0.42
Loss from discontinued
operations (0.01) (0.01) (0.03) (0.04)
----------------------------------------------------------------------
Basic net income (loss)
per share $ (0.55) $ 0.56 $ (0.52) $ 0.38
======================================================================
Diluted net income (loss)
per share:
Income (loss) from
continuing operations $ (0.54) $ 0.56 $ (0.49) $ 0.40
Loss from discontinued
operations (0.01) (0.01) (0.03) (0.04)
----------------------------------------------------------------------
Diluted net income (loss)
per share $ (0.55) $ 0.55 $ (0.52) $ 0.36
======================================================================
Weighted average common
shares outstanding:
Basic 16,718 16,071 16,472 16,090
Diluted 16,718 16,525 16,472 16,799
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands)
November 30, February 28,
2002 2002
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 74,197 $ 98,065
Short-term investments 30,291 28,595
Accounts receivable, net 24,482 21,828
Inventories 18,259 17,585
Deferred income taxes 12,781 8,582
Other current assets 6,191 4,317
----------------------------------------------------------------------
Total current assets 166,201 178,972
----------------------------------------------------------------------
Property, plant and equipment, net 23,419 24,170
Goodwill 30,412 -
Intangible assets, net 6,367 -
Investment in Chartered Semiconductor 2,862 9,992
Deferred income taxes 12,177 7,196
Other assets 5,673 15,733
----------------------------------------------------------------------
$ 247,111 $ 236,063
======================================================================
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 6,741 $ 8,477
Deferred income on shipments to
distributors 7,555 6,225
Accrued expenses, income taxes and other
liabilities 11,273 9,289
----------------------------------------------------------------------
Total current liabilities 25,569 23,991
----------------------------------------------------------------------
Other liabilities 7,585 6,973
Minority interest in subsidiary 11,656 11,646
Shareholders' equity:
Preferred stock - -
Common stock 1,854 1,728
Additional paid-in capital 144,693 119,505
Retained earnings 76,468 84,963
Treasury stock, at cost (23,455) (13,861)
Accumulated other comprehensive income 2,741 1,118
----------------------------------------------------------------------
Total shareholders' equity 202,301 193,453
----------------------------------------------------------------------
$ 247,111 $ 236,063
======================================================================
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