SMSC (NASDAQ: SMSC) today announced financial results for its
first quarter of fiscal 2013, ended May 31, 2012.
Highlights:
- Quarterly revenue of $103.1
million,
- Record non-GAAP gross profit of 58.4
percent,
- Non-GAAP operating profit of 15.3
percent,
- Non-GAAP earnings per share of
$0.53,
- Cash and investments of $187.4
million.
Total revenue for the first quarter of fiscal 2013 was $103.1
million, roughly flat with the same prior year period and an
increase of approximately 15 percent sequentially. First quarter
revenue included $9.5 million in sales related to the BridgeCo
acquisition. Non-GAAP gross margin was 58.4 percent compared to
56.4 percent for the same prior year period. GAAP gross margin was
54.5 percent compared to 53.9 percent for the same prior year
period. Non-GAAP net income was $12.2 million, or $0.53 per diluted
share, compared to non-GAAP net income of $11.0 million, or $0.47
per diluted share in the first quarter of fiscal 2012. GAAP net
loss for the first quarter of fiscal 2013 was $17.2 million, or
$0.76 per diluted share, compared to GAAP net income of $6.2
million, or $0.26 per diluted share for the same prior year period.
The difference between the GAAP and non-GAAP results was primarily
driven by adjustments for stock-based compensation of $28.3
million, mainly due to fair market adjustments to stock
appreciation rights based on the increase in SMSC's share price in
the three month period ended May 31, 2012 as well as $4.0 million
in merger and acquisitions related expenses.
“SMSC’s first quarter financial performance was very strong with
revenue and non-GAAP gross margin, operating profit and earnings
per share all coming in ahead of our guidance,” said Christine
King, President & Chief Executive Officer of SMSC. “Networking
sales significantly contributed to the revenue upside primarily as
a result of key product ramps. Non-GAAP gross margin increased to
58.4 percent, driven by a favorable combination of higher revenue,
better product mix, continued cost reductions and inventory
management. This record result is higher than our gross margin
target model. Strict control of operating expenses enabled us to
deliver 15.3 percent non-GAAP operating profit. Finally, on a
non-GAAP basis, an effective tax rate of 22.3 percent contributed
to our improved earnings per share of $0.53.”
The unaudited non-GAAP financial measures in this release,
including the business outlook, exclude charges and credits for
stock appreciation rights (SARs), restricted stock units and stock
options associated with the accounting pursuant to FASB ASC 718,
the amortization of acquired intangible assets, restructuring
charges and executive transition costs, costs associated with
business acquisition related activities including transaction
costs, inventory write-up and write-off on acquisitions, the
revaluation of contingent consideration and compensation expense on
acquisitions, impairment losses, transaction costs related to the
building sale, employer taxes related to stock compensation and the
gain on release of a claim liability.
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 Statements of
Operations.
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.
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 ability to realize the expected benefits
of acquisitions; 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, Kleer® and JukeBlox® wireless audio,
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, MOST, Kleer and JukeBlox are registered trademarks and
Smart Mixed-Signal Connectivity, TrueAuto and RightTouch are
trademarks of Standard Microsystems Corporation.
STANDARD MICROSYSTEMS CORPORATION
AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited) (in thousands, except per share
amounts) Three Months Ended May 31,
2012 2011 Sales and revenues $ 103,078 $
103,495
Costs of goods sold 46,902 47,710 Gross profit
on sales and revenues 56,176 55,785 Costs and expenses:
Research and development 31,956 24,527 Selling, general and
administrative 44,202 23,229 Restructuring charges 7 343
Revaluation of contingent consideration (801 ) 17 (Loss)
income from operations (19,188 ) 7,669 Interest income 40
118 Interest expense (28 ) (38 ) Other expense, net (70 ) 142
(Loss) income before provision for income taxes
(19,246 ) 7,891 (Benefit from) provision for income taxes
(2,083 ) 1,714 Net (loss) income $ (17,163 ) $ 6,177
Net (loss) income per share: Basic $ (0.76 ) $ 0.27
Diluted $ (0.76 ) $ 0.26
Weighted average common shares outstanding: Basic 22,522
23,059 Diluted 22,522 23,557
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in
thousands) May 31, February 29,
2012 2012 Assets Current assets: Cash
and cash equivalents $ 161,824 $ 147,054 Accounts receivable, net
60,399 50,986 Inventories 37,623 36,622 Deferred income taxes
19,610 15,773 Other current assets 9,496 15,010
Total current assets 288,952 265,445
Property, plant and equipment, net 62,063 64,423 Goodwill
113,050 114,433 Intangible assets, net 27,960 30,587 Long-term
investments 25,605 25,680 Investments in equity securities 2,042
2,042 Deferred income taxes 8,200 7,781 Other assets 3,590
3,595
Total assets $ 531,462 $ 513,986
Liabilities and shareholders' equity
Current liabilities: Accounts payable $ 21,354 $ 18,677
Deferred income on shipments to distributors 18,659 18,449 Accrued
expenses, income taxes and other current liabilities 79,209
61,492
Total current liabilities 119,222
98,618
Other liabilities 20,540 21,001
Shareholders' equity: Preferred stock - - Common
stock 2,898 2,813 Additional paid-in capital 399,833 380,501
Retained earnings 120,790 137,953 Treasury stock, at cost (133,406
) (132,384 ) Accumulated other comprehensive income 1,585
5,484
Total shareholders' equity 391,700
394,367
Total liabilities and shareholders'
equity $ 531,462 $ 513,986
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
Supplemental Reconciliation of GAAP Results to Non-GAAP
Financial Measures (in thousands, except per share
amounts) Three Months Ended May 31,
2012 2011 Gross profit – GAAP basis $ 56,176 $ 55,785
Stock-based compensation (a) 2,252 317 Amortization of intangible
assets 1,718 1,585 Impact of inventory write-up on acquisitions -
124 Impact of inventory write-off (Symwave) - 588
Gross profit– non-GAAP basis $ 60,146
$
58,399 (Loss) income from operations – GAAP basis $
(19,188 ) $ 7,669 Non-GAAP adjustments: Stock-based
compensation included in: (a) Costs of goods sold 2,252 317
Research and development 7,416 1,042 Selling, general and
administrative 18,661 1,971 Non-GAAP adjustments total: 28,329
3,330 Amortization of intangible assets included in: Costs
of goods sold 1,718 1,585 Selling, general and administrative 750
806 Amortization of intangible total: 2,468 2,391
Restructuring charges 7 343 Transaction costs - mergers and
acquisitions 4,042 118 Impact of inventory write-up on acquisition
- 124 Impact of inventory write-off (Symwave) - 588 Impact of
revaluation of contingent consideration (801 ) 17 Transaction costs
- building sale 97 - Compensation expense on acquisitions-R&D
398 8 Compensation expense on acquisitions-MKT 358 7 Compensation
expense on acquisitions-G&A 75 64 Income from
operations – non-GAAP basis $ 15,785 $ 14,580
Net loss (income) – GAAP basis $ (17,163 ) $ 6,177 Non-GAAP
adjustments (as scheduled above) 34,973 6,990 Tax effect of
non-GAAP adjustments (5,587 ) (2,145 ) Net income – non-GAAP basis
$ 12,223 $ 11,022 GAAP net (loss) income per
share – diluted $ (0.76 ) $ 0.26 Non-GAAP income per share –
diluted (b) $ 0.53 $ 0.47 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”),
restricted stock units and stock options as recorded under GAAP
applicable in each period presented. Cash paid in connection with
exercises of SARs totaled $7.7 million and $0.9 million in the
three months ended May 31, 2012 and 2011, respectively. The Company
does not include charges related to restricted stock awards in
these non-GAAP adjustments, as they were issued primarily in
connection with the Company’s prior annual employee incentive
compensation program. (b) The weighted average diluted
common shares outstanding for purposes of computing non-GAAP
diluted income per share is 23,238 and 23,558 thousand shares,
which includes 716 and 499 thousand common share equivalents due to
the dilutive effect of stock options, for the three month periods
ended May 31, 2012 and 2011, respectively. The effect of stock
options is not considered when computing GAAP diluted loss per
share because their effects are antidilutive.
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