(Source: Business Wire)
SMSC (NASDAQ: SMSC) today announced financial results for its second
quarter of fiscal 2010, ended August 31, 2009.
Highlights
Second quarter fiscal 2010 revenue increased 20 percent sequentially
to $75.1 million,
Non-GAAP gross margin increased 520 basis points sequentially to 52.2
percent,
Return to profitability on non-GAAP basis with non-GAAP EPS of $0.08
Increased cash and investments by $4.1 million,
Expect a 9-15 percent sequential increase in third quarter fiscal 2010
revenue.
Total revenue for the second quarter of fiscal 2010 was $75.1 million,
an increase of 20 percent sequentially and a decrease of 23 percent when
compared to the same period in the prior year. The GAAP net loss for the
second quarter of fiscal 2010 was $6.5 million, or $0.30 per diluted
share, compared to GAAP net income of $8.7 million or $0.38 per diluted
share for the same period in the prior year. The non-GAAP net income for
the second quarter of fiscal 2010 was $1.7 million or $0.08 per diluted
share, compared to non-GAAP net income of $10.3 million or $0.46 per
diluted share in the second quarter of fiscal 2009. The GAAP gross
margin for the second quarter of fiscal 2010 was 47.3 percent.
"SMSC revenue, non-GAAP gross margin and non-GAAP earnings all exceeded
our expectations in the fiscal second quarter," said Christine King,
President & Chief Executive Officer. "The strong sales growth from the
first quarter was primarily driven by improved consumer and automotive
product sales. In fact, our portable product line achieved record sales
in the second quarter. PC sales were also healthy. Most importantly, our
non-GAAP gross margin grew by over 500 basis points from first quarter
as a result of our cost reduction actions and higher revenue. Finally,
we surpassed our goal of breakeven non-GAAP net income results in the
second quarter, delivering $0.08 of profit per diluted share."
Ms. King continued, "Our fiscal third quarter revenue is expected to
grow by 9 to 15 percent sequentially and we expect typical seasonality
in the fourth quarter of fiscal 2010. It is our goal to continue to
execute on our financial and strategic objectives."
During the second quarter, SMSC also announced an agreement to acquire
Tallika Corporation, a team of engineers located in India and Phoenix,
for $3.4 million as well as a strategic relationship with Symwave, Inc.,
a supplier of system solutions for SuperSpeed USB devices, in which SMSC
invested $4 million.
During the second quarter of fiscal 2010, the Company generated $6.7
million in cash from operations, and the sum of cash and investments
increased by $4.1 million from $171.2 million at May 31, 2009 to $175.3
million. For the three months ended August 31, 2009, $6.2 million of
auction rate securities were redeemed at par, as well as an additional
$10.0 million redeemed at par to date in the third quarter of fiscal
2010.
Business Outlook
Looking ahead to the third quarter of fiscal 2010, the Company expects:
Revenue in the range of $82 to $86 million,
Non-GAAP gross margin to be flat to up 50 basis points sequentially,
Non-GAAP operating expenses to be flat to up 2 percent from the second
quarter of fiscal 2010,
Non-GAAP earnings per diluted share in the range of $0.19 to $0.24.
The unaudited non-GAAP financial measures in this release, including the
business outlook, exclude charges and credits for stock appreciation
rights (SARs) and stock options associated with the accounting pursuant
to SFAS 123R, the amortization of acquired intangible assets,
restructuring charges and related accelerated depreciation on certain
test equipment and litigation settlement expenses.
Conference Call and Webcast Information
Christine King, President and Chief Executive Officer of SMSC, will host
a conference call and webcast on October 1, 2009 at 5 P.M. ET, to
discuss the Company's second quarter fiscal 2010 financial results and
its business outlook. The teleconference may be accessed by dialing
1-888-452-3998 in the U.S. or 1-719-325-2103 from outside of the U.S. A
replay of the call will also be available. The live call and replay
teleconference confirmation code is 8474742. A webcast and replay will
be available under the investor relations section of the Company's web
site at www.smsc.com.
Use of Non-GAAP Financial Information
Included within the press release are non-GAAP financial measures that
supplement the Company's Condensed Consolidated Income Statements
prepared under generally accepted accounting principles (GAAP). These
non-GAAP financial measures adjust the Company's actual results prepared
under GAAP to exclude certain charges. In the schedules attached to this
press release, the non-GAAP measures have been reconciled to and should
be considered together with the Condensed Consolidated Income Statements.
These non-GAAP measures are not meant as a substitute for GAAP, but are
included solely for informational and comparative purposes. The
Company's management believes that this information assists in
evaluating operational trends, financial performance, and cash
generating capacity. Management believes these non-GAAP measures allow
investors to evaluate SMSC's financial performance using some of the
same measures as management. However, the non-GAAP financial measures
should not be regarded as a replacement for corresponding, similarly
captioned, GAAP measures. SMSC also presents unaudited non-GAAP
supplemental vertical market information to provide additional insight
into underlying operating performance on a comparable basis. Guidance is
presented on a non-GAAP basis only, given that the GAAP basis charges
for equity-based compensation related to SARs cannot be projected
reasonably.
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, commodity
prices, interest rates and foreign exchange, potential investment losses
as a result of liquidity conditions, the effects of changing economic
and political conditions in the market domestically and internationally
and on our customers; 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.
About SMSC
SMSC is a leading developer of Smart Mixed-Signal Connectivity
solutions. SMSC employs a unique systems level approach that
incorporates a broad set of technologies and intellectual property to
deliver differentiating products to its customers. The company is
focused on delivering connectivity solutions that enable the
proliferation of data in personal computers, automobiles, portable
consumer devices and other applications. SMSC's feature-rich products
drive a number of industry standards and include USB, MOST®
automotive networking, embedded system control and analog solutions,
including thermal management and RightTouch capacitive sensing. SMSC is
headquartered in New York and has offices and research facilities in
North America, Asia, Europe and India. Additional information is
available at www.smsc.com.
SMSC and MOST are registered trademarks and Smart Mixed-Signal
Connectivity and RightTouch are trademarks of Standard Microsystems
Corporation.
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED INCOME STATEMENTS (in thousands, except per share amounts)
Three Months Ended Six Months Ended
August 31, August 31,
(Unaudited)
2009 2008 2009 2008
Sales and revenues $ 75,075 $ 97,196 $ 137,554 $ 189,986
Costs of goods sold 39,532 47,529 74,211 93,176
Gross profit on sales 35,543 49,667 63,343 96,810
Costs and expenses:
Research and development 20,096 18,028 38,562 36,363
Selling, general and administrative 24,854 21,589 46,514 45,681
Restructuring charges 649 - 870 -
Settlement Charge - - 2,050 -
(Loss) income from operations (10,056 ) 10,050 (24,653 ) 14,766
Interest income 265 1,082 695 2,825
Interest expense (39 ) (24 ) (59 ) (96 )
Other (expense) income, net (139 ) 1,003 (433 ) 849
(Loss) income before provision for income taxes (9,969 ) 12,111 (24,450 ) 18,344
(Benefit from) provision for income taxes (3,435 ) 3,408 (8,720 ) 5,163
Net (loss) income $ (6,534 ) $ 8,703 $ (15,730 ) $ 13,181
Net (loss) income per share:
Basic $ (0.30 ) $ 0.39 $ (0.72 ) $ 0.59
Diluted $ (0.30 ) $ 0.38 $ (0.72 ) $ 0.58
Weighted average common shares outstanding:
Basic 22,054 22,188 21,979 22,323
Diluted 22,054 22,608 21,979 22,740
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STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
August 31, February 28,
2009 2009
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 117,190 $ 97,156
Short-term investments 10,000 -
Accounts receivable, net 44,536 26,799
Inventories 46,012 53,413
Deferred income taxes 20,224 14,155
Other current assets 8,967 13,658
Total current assets 246,929 205,181
Property, plant and equipment, net 65,210 65,635
Goodwill 44,321 44,321
Intangible assets, net 27,988 27,413
Long-term investments 48,116 69,223
Deferred income taxes 17,395 14,123
Other assets 7,951 3,790
Total assets $ 457,910 $ 429,686
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 23,172 $ 12,881
Deferred income on shipments to distributors 17,566 11,278
Accrued expenses, income taxes and other current liabilities 43,707 35,136
Total current liabilities 84,445 59,295
Deferred income taxes 6,595 5,958
Other liabilities 18,711 15,625
Shareholders' equity:
Preferred stock - -
Common stock 2,665 2,642
Additional paid-in capital 332,932 325,596
Retained earnings 108,912 124,642
Treasury stock, at cost (101,199 ) (101,199 )
Accumulated other comprehensive income (loss) 4,849 (2,873 )
Total shareholders' equity 348,159 348,808
Total liabilities and shareholders' equity $ 457,910 $ 429,686
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STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES Supplemental Reconciliation of GAAP Results to Non-GAAP Financial Measures (in thousands, except per share amounts)
Three Months Ended August 31,
2009 2008
Gross profit -- GAAP basis $ 35,543 $ 49,667
Stock-based compensation ((a)) 904 115
Amortization of intangible assets 1,058 1,110
Accelerated depreciation on test equipment ((b)) 1,699 -
Gross profit -- non-GAAP basis 39,204 50,892
(Loss) income from operations -- GAAP basis (10,056 ) 10,050
Non-GAAP adjustments:
Stock-based compensation included in: ((a))
Costs of goods sold 904 115
Research and development 2,384 446
Selling, general and administrative 5,698 484
8,986 1,045
Amortization of intangible assets included in:
Costs of goods sold 1,058 1,110
Selling, general and administrative 496 405
1,554 1,515
Restructuring charges 649 -
Accelerated depreciation on testers transferred 1,699 -
Income from operations -- non-GAAP basis 2,832 12,610
Net (loss) income -- GAAP basis (6,534 ) 8,703
Non-GAAP adjustments (as scheduled above) 12,888 2,560
Tax effect of non-GAAP adjustments (4,640 ) (922 )
Net income -- non-GAAP basis 1,714 10,341
GAAP net (loss) income per share -- diluted (0.30 ) 0.38
Non-GAAP net income per share -- diluted 0.08 0.46
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Management believes that non-GAAP financial measures assist it in
evaluating operational trends, financial performance, and cash
generating capacity, and that these non-GAAP measures allow investors to
evaluate SMSC's financial performance using some of the same measures as
management. However, the non-GAAP financial measures should not be
regarded as a replacement for corresponding, similarly captioned, GAAP
measures.
((a)) To eliminate compensation expense for Stock Appreciation Rights ("SARs") and stock options as recorded under GAAP applicable in each period presented. Cash paid in connection with exercises of SARs totaled $0.4 million and a negligible amount in the three month periods ended August 31, 2009 and 2008, respectively. The Company does not include charges related to restricted stock awards in these non-GAAP adjustments, as they are issued primarily in connection with the Company's annual employee incentive compensation program.
((b)) To eliminate accelerated depreciation charges taken prior to and in anticipation of the transfer of certain test center assets to a new supplier in Asia.
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STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES Supplemental Reconciliation of GAAP Results to Non-GAAP Financial Measures (in thousands, except per share amounts)
Six Months Ended August 31,
2009 2008
Gross profit -- GAAP basis $ 63,343 $ 96,810
Stock-based compensation 1,454 573
Amortization of intangible assets 2,082 2,397
Accelerated depreciation on test equipment ((b)) 1,699 -
Gross profit -- non-GAAP basis 68,578 99,780
(Loss) income from operations -- GAAP basis (24,653 ) 14,766
Non-GAAP adjustments:
Stock-based compensation included in: ((a))
Costs of goods sold 1,454 573
Research and development 3,865 2,101
Selling, general and administrative 9,091 3,686
14,410 6,360
Amortization of intangible assets included in:
Costs of goods sold 2,082 2,397
Selling, general and administrative 979 898
3,061 3,295
Restructuring charges 870 -
Settlement charge 2,050 -
Accelerated depreciation on testers transferred 1,699 -
(Loss) income from operations -- non-GAAP basis (2,563 ) 24,421
Net (loss) income -- GAAP basis (15,730 ) 13,181
Non-GAAP adjustments (as scheduled above) 22,090 9,655
Tax effect of non-GAAP adjustments (7,952 ) (3,476 )
Net (loss) income -- non-GAAP basis (1,592 ) 19,360
GAAP net (loss) income per share -- diluted (0.72 ) 0.58
Non-GAAP net (loss) income per share -- diluted (0.07 ) 0.85
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Management believes that non-GAAP financial measures assist it in
evaluating operational trends, financial performance, and cash
generating capacity, and that these non-GAAP measures allow investors to
evaluate SMSC's financial performance using some of the same measures as
management. However, the non-GAAP financial measures should not be
regarded as a replacement for corresponding, similarly captioned, GAAP
measures.
((a)) To eliminate compensation expense for Stock Appreciation Rights ("SARs") and stock options as recorded under GAAP applicable in each period presented. Cash paid in connection with exercises of SARs totaled $0.4 million and $0.3 million in the six month periods ended August 31, 2009 and 2008, respectively. The Company does not include charges related to restricted stock awards in these non-GAAP adjustments, as they are issued primarily in connection with the Company's annual employee incentive compensation program.
((b)) To eliminate accelerated depreciation charges taken prior to and in anticipation of the transfer of certain test center assets to a new supplier in Asia.
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