SMSC Reports 27% Growth in Fourth Quarter Fiscal 2003 Revenues; Fourth Quarter Net Income Exceeds $1 Million; Posts 20% Growth In Fiscal 2003 Product Revenues.Business Editors HAUPPAUGE, N.Y.--(BUSINESS WIRE)--April 7, 2003 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 fourth quarter ended February 28, 2003 increased by 27% to $42.6 million, compared to $33.5 million in the fourth quarter of fiscal 2002. Gross profit percentage for the fourth quarter of fiscal 2003 grew by more than four percentage points to 45.3%, compared to 41.2% in the previous year's fourth quarter. Research and development expenses for the quarter were $8.5 million, compared to $6.4 million in the year-ago quarter, and selling, general and administrative expenses were $9.9 million, compared to $7.3 million in last year's fourth 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, was $0.4 million in this year's fourth quarter. Fourth quarter 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 was $1.1 million, or $0.06 per share, compared to $0.8 million, or $0.04 per share, in the year-ago quarter. "In an industry suffering ongoing economic hardships, SMSC's fourth quarter capped off a year of solid growth. Success in value integration and profitably growing market share enabled SMSC to deliver fourth quarter revenue that was 27% higher than the prior year," said Steven J. Bilodeau, Chairman and Chief Executive Officer. "Our 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 contributed significantly during the quarter and experienced a 17% increase in revenues over the prior year, with a particular strength in notebook sales. In large part, reflective of our focus on product diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. , our Embedded Inserted into. See embedded system. business grew by over 60% versus last year's fourth quarter, as sales of new 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 and Ethernet products ramped." On a GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). basis, revenues for fiscal 2003 were $155.5 million compared to $159.3 million in fiscal 2002, and SMSC reported a loss from continuing operations of $0.42 per share in fiscal 2003 versus a profit of $0.47 per share in the year-ago period. Due to the significance of special items recorded earlier in fiscal 2003 and in 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 special items include investment impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charges, restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. associated with SMSC's exit from the PC chipset A set of chips that provides the interfaces between all of the PC's subsystems. It provides the buses and electronics to allow the CPU, memory and input/output devices to interact. business and a special intellectual property-related payment. Details of the special items are shown in the attached table of pro forma information. Full Year Financial Highlights: -- Revenues for fiscal 2003 were $155.5 million, an increase of 20% from pro forma revenues of $129.7 million in fiscal 2002, exceeding the semiconductor industry's composite revenue growth of approximately 1%. -- Gross profit of 44.6% grew by more than six percentage points compared to a pro forma 38.3% in fiscal 2002, as SMSC continued to increase the analog content in its product line and provide innovative, higher-value features to cost effectively address its customers' needs. Reported gross profit in fiscal 2002, including special items, was 49.0%. -- Pro forma income from continuing operations of $0.14 per share was a $0.43 per share improvement over the prior year. -- SMSC's balance sheet remains strong with cash and short-term investments at February 28, 2003 of $112.9 million, no bank debt and book value per share of $12.17. "The dramatic year-over-year improvement in SMSC's pro forma income from continuing operations, from a loss of $4.9 million in fiscal 2002 to a profit of $2.5 million in fiscal 2003, illustrates our leverage to earnings as revenue grows," said Andrew M. Caggia, Senior Vice President and Chief Financial Officer. "Our balance sheet remains strong and we look forward to continued growth as we enter 2004. " Commenting on operating achievements over the last year, Mr. Bilodeau said, "In addition to solid financial performance, the Company achieved a number of milestones that enhanced its ability to grow profitably. SMSC completed an important acquisition that greatly broadened its technical capabilities, significantly increased market share, introduced several products serving new high growth markets, secured a number of key design wins and upgraded its quality certification to the highest ISO standards This is a list of ISO standards that are discussed in Wikipedia articles. For a list of all the more than 16,000 ISO standards (as of 2007), see the ISO Catalogue. About 300 of the standards produced by ISO and IEC's Joint Technical Committee 1 (JTC1) have been made freely/publicly ." KEY FISCAL 2003 BUSINESS HIGHLIGHTS FOR SMSC: -- Completed the acquisition of Gain Technology Corporation, now known as the SMSC Analog Technology Center. The acquisition brought to SMSC a veteran analog and mixed-signal development team of 35 engineers and designers with an average of more than ten years experience. It greatly enhanced the Company's existing analog and mixed-signal capabilities and brought with it a depth of talent that expands the product and market opportunities that SMSC may pursue in the future. -- Announced the availability of SMSC's GT3200, the first in a family of high-performance analog physical layer (PHY See physical layer and physical. ) and high-speed serial data communication IC's for networking, computing computing - computer , consumer electronics and embedded system Any electronic system that uses a CPU chip, but that is not a general-purpose workstation, desktop or laptop computer. Such systems generally use microprocessors, or they may use custom-designed chips or both. applications. -- Joined with ARC International This article is about the publicly traded processor company. For the privately held French housewares company of the same name, see ARC International (household). to announce the availability of a complete USB 2.0 solution, certified See certification. for high-speed operation by the USB Interoperability The capability of two or more hardware devices or two or more software routines to work harmoniously together. For example, in an Ethernet network, display adapters, hubs, switches and routers from different vendors must conform to the Ethernet standard and interoperate with each other. Forum (USB-IF), which allows developers to combine ARC's customizable VUSB-HS device controller with SMSC's GT3200 PHY IC to reduce product cost and power consumption while accelerating time-to-market for products with 480-Mbps USB connectivity. -- Introduced the USB97C242 Single-Chip Hi-Speed USB Flash Drive See USB drive. Controller, a low- cost product designed for use in flash drives which are portable, solid-state storage devices (storage) solid-state storage device - Any memory component with no moving parts, typically built around some kind of semiconductor integrated circuit. An example is bubble memory. See also: RAM disk. small enough to hang on a key chain. -- National Technical Systems, Inc. certified the Company's USB97C210 USB 2.0 Multi-Format Flash Memory Card Controller Chip and the USB97C201 USB 2.0 ATA/ATAPI/CF Controller Chip as Hi-Speed USB Peripheral Silicon building blocks. The USB97C210 was also the first 6-in-1 Flash Card Controller to receive Hi-Speed USB certification from the USB-IF and the first Hi-Speed 6-in-1 Flash Card Controller in production. -- SMSC's USB97C202 Second Generation USB 2.0 Mass Storage Class Controller, a USB bridge chip designed for use in external hard disks, CDRW See CD-RW. , and DVD drives DVD drives come in a variety of speeds and options. The original drive (1x) transferred data at 1.35MB per second. By doubling the spindle speed (RPMs) for 2x drives, the transfer rate increased to 2.7MB/sec and has been increasing ever since. , was certified as USB compliant by the USB-IF. -- Accelent Systems Inc. selected SMSC's LAN (Local Area Network) A communications network that serves users within a confined geographical area. The "clients" are the user's workstations typically running Windows, although Mac and Linux clients are also used. 91C111 10/100 non-PCI Ethernet device to be incorporated in its Integrated Development Platform based on the Intel(R) PXA250 applications processor with XScale(TM) technology. -- Introduced the LPC (language) LPC - A variant of C designed ca 1988 to program LP MUDs. 47N253 Integrated Advanced Notebook I/O Controller, Embedded Controller Controller circuitry built into a device or on the main system board, in contrast with a removable card or module. and Keyboard Controller A circuit that monitors keystrokes and generates the required data bits when pressed. for full-featured notebook PC's, combining the functionality of a Super I/O "Super I/O" is the name given to a class of I/O controller integrated circuits that began to be used on personal computer motherboards in the late 1980s. A super I/O chip combines interfaces for a variety of low-bandwidth devices. , a high-performance 8051 microprocessor for keyboard control and system management, as well as a shared flash interface. -- Introduced the LPC47N350 Keyboard and System Controller with LPC PortSwitch(TM) Interface for legacy-free notebook PC's. The LPC47N350 interface is a unique, hot-switchable external interface that enables the design of cost-effective, full-featured port replication and docking solutions. -- Introduced the LPC47N237 Controller, an LPC-based I/O targeted for notebook PC port replicators A device used to quickly connect multiple peripherals to a laptop using only one connector. The desktop devices are permanently plugged into the port replicator, which connects to the laptop via the USB port, PC Card slot or proprietary expansion port. and docks, and companion product to SMSC's line of Notebook PC Keyboard (1) Any keyboard made for the PC. (2) The keyboard introduced with the first IBM PC in 1981 that provided a dual-function keypad for numeric entry and cursor movement. and System Controllers that feature the LPC PortSwitch interface. -- Achieved an upgrade to ISO (1) See ISO speed. (2) (International Organization for Standardization, Geneva, Switzerland, www.iso.ch) An organization that sets international standards, founded in 1946. The U.S. member body is ANSI. 9001:2000 certification by NSAI NSAI Nashville Songwriters Association International NSAI National Standards Authority of Ireland NSAI Non-Steroidal Anti-Inflamatory , Inc., demonstrating the Company's commitment to maintaining a world-class quality management system. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. recently published statistics, as of mid-February 2003, only 13% of the total number of registrations 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. have been upgraded to ISO 9001:2000. BUSINESS OUTLOOK FOR SMSC: For the first quarter of fiscal 2004, SMSC expects revenues to be approximately $42 million, which represents an increase of nearly 24% over the first quarter of fiscal 2003. Gross profit percentage is expected to be approximately 45%. Research and development expenses and selling, general and administrative expenses are both expected to range from $8.5 million to $9.5 million. Acquisition-related charges are expected to be equal to the fourth quarter of fiscal 2003. The effective tax rate is estimated to be approximately 25% for all of fiscal 2004, and the Company expects income from continuing operations to be approximately $0.04 per share. For fiscal 2004, SMSC expects revenues to grow by more than 15% from the annual period just closed. Gross profit percentage is expected to be approximately 44%. Research and development expenses are expected to be between $35 million and $38 million, and selling, general and administrative expenses are expected to range from $36.5 million to $40 million. Acquisition-related charges are expected to be approximately $1.3 million. Income from continuing operations is expected to be approximately $0.20 per share for fiscal 2004. ABOUT SMSC: SMSC provides Real World Connectivity(TM) solutions for high-speed communication and computing 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 and USB 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, 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 by the inherent risks and uncertainties surrounding future expectations and may not reflect the potential impact of any future acquisitions, mergers or divestitures. SMSC competes in the semiconductor industry, which has historically been characterized by intense competition, rapid technological change, cyclical 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 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 Fiscal Year Ended
February 28, February 28,
2003 2002 2003 2002
--------------------------------
Revenues:
As reported, per GAAP $42,612 $33,459 $155,517 $159,298
Deduct special intellectual
property payment - - - (29,595)
--------------------------------
Pro forma revenues $42,612 $33,459 $155,517 $129,703
================================
Income (loss) from continuing
operations:
As reported, per GAAP $1,060 $773 $(6,971) $7,475
Add (Deduct):(*)
Investment impairment
charges - 160 10,436 428
Special intellectual property
payment - - - (18,941)
Inventory write-off related
to
business
restructuring - - - 816
Restructuring charges
(adjustments) (158) (182) (158) 4,950
Other special SG&A charges - - - 575
Prior years' tax benefits - - (829) -
--------------------------------
Pro forma income (loss) from
continuing operations $902 $751 $2,478 $(4,697)
================================
Diluted income (loss) per share
from continuing operations:
As reported, per GAAP $0.06 $0.04 $(0.42) $0.44
Pro forma $0.05 $0.04 $0.14 $(0.29)
Diluted weighted average common
shares outstanding:
As reported, per GAAP 17,905 17,070 16,538 16,900
Pro forma 17,905 17,070 17,928 16,069
(*) 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 Fiscal Year Ended
------------------ -------------------
February 28, February 28,
------------------ -------------------
2003 2002 2003 2002
-------- -------- --------- --------
Sales and Revenues:
Product sales $ 42,175 $ 33,254 $ 154,244 $128,528
Intellectual property
revenues 437 205 1,273 30,770
----------------------------------------------------------------------
42,612 33,459 155,517 159,298
Cost of goods sold 23,316 19,683 86,093 81,264
----------------------------------------------------------------------
Gross profit 19,296 13,776 69,424 78,034
Operating expenses:
Research and development 8,504 6,378 31,166 31,178
Selling, general and
administrative 9,881 7,345 36,268 32,744
Amortization of intangible
assets 360 - 1,167 -
Restructuring costs (247) (285) (247) 7,734
----------------------------------------------------------------------
Income from operations 798 338 1,070 6,378
Interest income 459 578 2,069 3,450
Impairment of investments - (250) (16,306) (669)
Other income (expense), net (109) (23) (209) 1,527
----------------------------------------------------------------------
Income (loss) before
provision for income taxes
and minority interest 1,148 643 (13,376) 10,686
Provision for (benefit from)
income taxes 81 (142) (6,422) 3,171
Minority interest in net
income of subsidiary 7 12 17 40
----------------------------------------------------------------------
Income (loss) from continuing
operations 1,060 773 (6,971) 7,475
Loss from discontinued
operations
(net of income tax benefits
of $21, $558, $281 and $918) (36) (896) (500) (1,564)
----------------------------------------------------------------------
Net income (loss) $ 1,024 $ (123) $ (7,471) $ 5,911
======================================================================
Basic net income (loss) per
share:
Income (loss) from
continuing operations $ 0.06 $ 0.05 $ (0.42) $ 0.47
Loss from discontinued
operations - (0.06) (0.03) (0.10)
----------------------------------------------------------------------
Basic net income (loss) per
share $ 0.06 $ (0.01) $ (0.45) $ 0.37
======================================================================
Diluted net income (loss) per
share:
Income (loss) from
continuing operations $ 0.06 $ 0.04 $ (0.42) $ 0.44
Loss from discontinued
operations - (0.05) (0.03) (0.09)
----------------------------------------------------------------------
Diluted net income (loss) per
share $ 0.06 $ (0.01) $ (0.45) $ 0.35
======================================================================
Weighted average common
shares outstanding:
Basic 16,748 16,018 16,538 16,069
Diluted 17,905 17,070 16,538 16,900
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands)
February 28, February 28,
2003 2002
--------- ---------
Assets
Current assets:
Cash and cash equivalents $ 90,025 $ 98,065
Short-term investments 22,872 28,595
Accounts receivable, net 22,738 21,828
Inventories 17,644 17,585
Deferred income taxes 8,545 8,582
Other current assets 8,710 4,317
----------------------------------------------------------------------
Total current assets 170,534 178,972
----------------------------------------------------------------------
Property, plant and equipment, net 22,257 24,170
Goodwill 29,773 -
Intangible assets, net 6,008 -
Investment in Chartered Semiconductor 1,840 9,992
Deferred income taxes 11,779 7,196
Other assets 5,758 15,733
----------------------------------------------------------------------
$ 247,949 $ 236,063
======================================================================
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 9,114 $ 8,477
Deferred income on shipments to
distributors 5,943 6,225
Accrued expenses, income taxes and other
liabilities 9,838 9,289
----------------------------------------------------------------------
Total current liabilities 24,895 23,991
----------------------------------------------------------------------
Other liabilities 7,379 6,973
Minority interest in subsidiary 11,663 11,646
Shareholders' equity:
Preferred stock - -
Common stock 1,859 1,728
Additional paid-in capital 145,553 119,505
Retained earnings 77,492 84,963
Treasury stock, at cost (23,454) (13,861)
Accumulated other comprehensive income 2,562 1,118
----------------------------------------------------------------------
Total shareholders' equity 204,012 193,453
----------------------------------------------------------------------
$ 247,949 $ 236,063
======================================================================
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