-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VjUXQOISYQy7AEh63xWVFIKkicNeMAcsvQpu6wacwk4m02pBhy1mBr8HwySaL+7g Y/yGQOLvQ3qFAlf/UyQ8fQ== 0000093384-98-000010.txt : 19980714 0000093384-98-000010.hdr.sgml : 19980714 ACCESSION NUMBER: 0000093384-98-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980531 FILED AS OF DATE: 19980710 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: STANDARD MICROSYSTEMS CORP CENTRAL INDEX KEY: 0000093384 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 112234952 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-07422 FILM NUMBER: 98664315 BUSINESS ADDRESS: STREET 1: 80 ARKAY DRIVE CITY: HAUPPAUGE STATE: NY ZIP: 11934 BUSINESS PHONE: 5164342904 MAIL ADDRESS: STREET 1: 80 ARKAY DR CITY: HAUPPAUGE STATE: NY ZIP: 11934 10-Q 1 STANDARD MICROSYSTEMS CORP. 10-Q 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 May 31, 1998 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: 516-435-6000 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 July 10, 1998 there were 15,971,293 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)
May 31, February 28, 1998 1998 Assets Current assets: Cash and cash equivalents $ 51,292 $ 47,155 Short-term investments 4,000 8,603 Accounts receivable, net of allowance for doubtful accounts of $1,021 and $1,011, respectively 24,598 22,268 Inventories 20,893 19,471 Deferred tax benefits 6,004 6,226 Other current assets 6,659 4,884 - -------------------------------------------------------------------------------------- Total current assets 113,446 108,607 - -------------------------------------------------------------------------------------- Property, plant and equipment: Land 3,832 3,832 Buildings and improvements 29,001 28,897 Machinery and equipment 102,461 99,087 - -------------------------------------------------------------------------------------- 135,294 131,816 Less: accumulated depreciation 87,983 84,397 - -------------------------------------------------------------------------------------- Property, plant and equipment, net 47,311 47,419 - -------------------------------------------------------------------------------------- Other assets 37,251 37,688 Net assets of discontinued operation 17,068 17,076 - -------------------------------------------------------------------------------------- $ 215,076 $ 210,790 ====================================================================================== Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 16,129 $ 10,637 Accrued expenses and other liabilities 7,749 8,458 Current portion of obligations under capital leases 564 553 - -------------------------------------------------------------------------------------- Total current liabilities 24,442 19,648 - -------------------------------------------------------------------------------------- Obligations under capital leases 2,379 2,524 Other liabilities 4,528 4,773 Minority interest in subsidiary 11,464 11,468 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 15,967,000 and 15,926,000 shares, respectively 1,597 1,593 Additional paid-in capital 107,796 107,306 Retained earnings 60,444 59,999 Accumulated other comprehensive income 2,426 3,479 - -------------------------------------------------------------------------------------- Total shareholders' equity 172,263 172,377 - -------------------------------------------------------------------------------------- $ 215,076 $ 210,790 ====================================================================================== See Notes to Condensed Consolidated Financial Statements.
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data)
Three Months Ended May 31, 1998 1997 - -------------------------------------------------------------------------------------- Revenues $ 37,595 $ 34,803 Cost of goods sold 26,211 27,789 - -------------------------------------------------------------------------------------- Gross profit 11,384 7,014 - -------------------------------------------------------------------------------------- Operating expenses: Research and development 4,067 3,578 Selling, general and administrative 7,084 8,801 - -------------------------------------------------------------------------------------- 11,151 12,379 - -------------------------------------------------------------------------------------- Income (loss) from operations 233 (5,365) - -------------------------------------------------------------------------------------- Other income (expense): Interest income 591 130 Interest expense (62) (89) Other income (expense), net (36) 112 - -------------------------------------------------------------------------------------- 493 153 - -------------------------------------------------------------------------------------- Income (loss) before minority interest and provision for income taxes 726 (5,212) Minority interest in net income (loss) of subsidiary (4) 5 - -------------------------------------------------------------------------------------- Income (loss) before provision for income taxes 730 (5,217) Provision for (benefit from) income taxes 285 (1,878) - -------------------------------------------------------------------------------------- Income (loss) from continuing operations 445 (3,339) - -------------------------------------------------------------------------------------- Loss from discontinued operation (net of income tax benefit of $2,723) - (4,841) - -------------------------------------------------------------------------------------- Net income (loss) $ 445 $ (8,180) ====================================================================================== Basic and diluted net income (loss) per share: Income (loss) from continuing operations $ 0.03 $ (0.22) Loss from discontinued operation - (0.32) - -------------------------------------------------------------------------------------- Basic and diluted net income (loss) per share: $ 0.03 $ (0.54) ====================================================================================== Weighted average common shares outstanding Basic 15,946 15,056 Diluted 16,034 15,056 See Notes to Condensed Consolidated Financial Statements.
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Three Months Ended May 31, 1998 1997 - --------------------------------------------------------------------------------------- Cash flows from operating activities: Cash received from customers $ 35,131 $ 33,174 Cash paid to suppliers and employees (31,953) (36,148) Interest received 494 68 Interest paid (62) (75) Income taxes paid (77) (79) - -------------------------------------------------------------------------------------- Net cash provided by (used for) operating activities 3,533 (3,060) - -------------------------------------------------------------------------------------- Cash flows from investing activities: Capital expenditures (3,458) (2,066) Sales of short-term investments 4,603 - Other (19) - - -------------------------------------------------------------------------------------- Net cash provided by (used for) investing activities 1,126 (2,066) - -------------------------------------------------------------------------------------- Cash flows from financing activities: Proceeds from issuance of common stock 242 14,769 Borrowings under line of credit agreements - 14,060 Repayments of borrowings under line of credit agreements - (16,490) Repayments of obligations under capital leases (134) - - -------------------------------------------------------------------------------------- Net cash provided by financing activities 108 12,339 - -------------------------------------------------------------------------------------- Effect of foreign exchange rate changes on cash and cash equivalents (638) 216 - -------------------------------------------------------------------------------------- Net cash provided by (used for) discontinued operation 8 (7,102) - -------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 4,137 327 Cash and cash equivalents at beginning of period 47,155 8,382 - -------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 51,292 $ 8,709 ====================================================================================== Reconciliation of net income (loss) to net cash provided by (used for) operating activities: Net income (loss) $ 445 $ (3,339) Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation and amortization 3,828 3,180 Other adjustments, net 139 212 Changes in operating assets and liabilities: Accounts receivable (2,558) (1,668) Inventories (1,615) 3,092 Accounts payable and accrued expenses and other liabilities 4,575 (2,137) Other changes, net (1,281) (2,400) - -------------------------------------------------------------------------------------- Net cash provided by (used for) operating activities $ 3,533 $ (3,060) ====================================================================================== See Notes to Condensed Consolidated Financial Statements.
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The unaudited 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 month period ended May 31, 1998. 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 28, 1998. Certain items shown have been reclassified to conform with the fiscal 1999 presentation. 2. Inventories Inventories are valued at the lower of first-in, first-out cost or market and consist of the following (in thousands): May 31, 1998 Feb. 28, 1998 -------------------------------------------------------- Raw Materials $ 1,353 $ 1,269 Work in Process 13,186 11,879 Finished Goods 6,354 6,323 -------------------------------------------------------- $ 20,893 $ 19,471 ======================================================== 3. Net Income Per Share Basic net income per share is based upon the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average common shares outstanding during the period plus the dilutive effect of shares issuable through stock options and warrants. The shares used in calculating basic and diluted net income (loss) per share are reconciled as follows (in thousands): Three months ended May 31, 1998 1997 ---------------------------------------------------------------- Average shares outstanding for basic net income (loss) per share 15,946 15,056 Dilutive effect of stock options 88 - ---------------------------------------------------------------- Average shares outstanding for diluted net income (loss) per share 16,034 15,056 ================================================================ The Company reported a loss in the first quarter of fiscal 1998, and accordingly, the effect of stock options and warrants was anti-dilutive for this period and was therefore excluded from the calculation of average common shares outstanding for diluted net income (loss) per share. 4. Comprehensive Income Beginning with the first quarter of fiscal 1999, the Company adopted Statement of Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive Income." SFAS No. 130 separates comprehensive income into two components: net income and other comprehensive income. Other comprehensive income refers to revenues, expenses, gains and losses that, under generally accepted accounting principles, are recorded as elements of shareholders' equity and are excluded from net income. The Company's other comprehensive income consists of foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as their functional currency, and unrealized gains and losses on a long-term equity investment. The components of the Company's comprehensive loss for the three month periods ended May 31, 1998 and 1997 were as follows (in thousands): Three months ended May 31, 1998 1997 -------------------------------------------------------------- Net income (loss) $ 445 $ (8,180) Other comprehensive income (loss): Currency translation adjustment (981) 328 Unrealized gain (loss) on investment (72) 101 -------------------------------------------------------------- Total comprehensive loss $ (608) $ (7,751) ============================================================== Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview Standard Microsystems Corporation (the Company) is a worldwide supplier of MOS/VLSI integrated circuits (ICs) for the personal computer industry and is also a foundry supplier of MicroElectroMechanical Systems (MEMS) devices. The Company designs and markets input/output (I/O) circuits for personal computers, which perform many of the basic input/output functions required in every personal computer, including floppy disk control, keyboard control and BIOS, parallel port control and serial port control. The Company also supplies ICs for local area network applications, connectivity applications and embedded control systems. While most of the Company's IC products are manufactured by world-class semiconductor foundries and assemblers, the Company's MEMS devices are produced in the Company's own wafer foundry, which specializes in MEMS manufacturing. The Company conducts its business in Japan through its majority-owned subsidiary, Toyo Microsystems Corporation. Revenues The Company operates predominantly in one industry segment in which it designs, develops and markets integrated circuits for the personal computer industry and provides foundry services for MicroElectroMechanical Systems (MEMS) customers. The following table presents the Company's consolidated revenues for the three month periods ended May 31, 1998 and 1997 (in thousands): Three months ended May 31, 1998 1997 - -------------------------------------------------------------- Standard Microsystems Corporation Integrated circuit revenues $ 30,343 $ 28,978 Foundry revenues 2,593 1,619 - -------------------------------------------------------------- 32,936 30,597 - -------------------------------------------------------------- Toyo Microsystems Corporation Integrated circuit revenues 3,496 2,776 Other revenues 1,163 1,430 - -------------------------------------------------------------- 4,659 4,206 - -------------------------------------------------------------- Total revenues $ 37,595 $ 34,803 ============================================================== Combined integrated circuit revenues $ 33,839 $ 31,754 ============================================================== The Company's revenues of $37.6 million for the first quarter of fiscal 1999 increased 8.0% from year-earlier revenues of $34.8 million. This increase in revenue was primarily the result of higher revenues from I/O products, and increased revenues from both foundry services and Toyo Microsystems. Unit shipments of I/O devices increased by about 24%, but were partially offset by a decline in average I/O selling prices. Overall, I/O devices contributed approximately 89% of the combined integrated circuit revenues for the three months ended May 31, 1998, and approximately 88% for the year-earlier period. Gross Profit The Company's gross profit margin for the first quarter of fiscal 1999 was 30.3%, compared to a gross profit margin of 20.2% reported in for the first quarter of fiscal 1998. The gross profit margin for the first quarter of fiscal 1998 had been significantly restrained by accelerated selling price reductions on certain I/O products at that time. The gross profit margin improvement in the first quarter of fiscal 1999 reflects stabilized market conditions (as compared to the first quarter of fiscal 1998) which moderated the rate of decline in average selling prices, as well as shipments of new, higher-margined products. In addition, higher foundry revenues allowed for better utilization of fixed manufacturing overhead. Operating Expenses Research and development expenses increased $0.5 million, or 13.9%, to $4.1 million in the first quarter of fiscal 1999, compared to $3.6 million for the year-earlier period. This change reflects increases in engineering staff and higher product development expenses. Selling, general and administrative expenses declined $1.7 million, or 19.3%, to $7.1 million in the first quarter of fiscal 1999, compared to $8.8 million in the year-earlier period. This decrease reflects reductions in general administrative expenses (including finance, information systems, human resources, legal and other administrative support) resulting from the Company's October 1997 divestiture of a majority interest in SMC Networks, Inc., its former system products division. The Company is continuing to provide information systems and facilities support services for SMC Networks, Inc., at fair value. SMC Networks no longer utilizes the Company for finance or human resources services. Other Income and Expense During the first quarter of fiscal 1999, the Company's other income (net) increased to $0.5 million, from $0.2 million in the first quarter of fiscal 1998. This increase reflects higher interest income as a result of higher average cash and short-term investment balances for the first three months of fiscal 1999 compared to the year-earlier period. Income Taxes For the first quarter of fiscal 1999, income taxes have been provided at an effective tax rate of 39.0%, compared to a tax benefit at an effective tax rate of 36.0% for the first quarter of fiscal 1998. The Company's effective income tax rate primarily reflects statutory tax rates, income tax credits, and the impact of certain non-deductible expenses and tax-exempt income. Liquidity and Capital Resources Cash and cash equivalents were $51.3 million as of May 31, 1998, compared to $47.2 million at February 28, 1998, an increase of $4.1 million. Short-term investments were $4.0 million at May 31, 1998, compared to $8.6 million as of February 28,1998, a reduction of $4.6 million. Working capital was $89.0 million at both May 31, 1998 and February 28, 1998. For the first three months of fiscal 1999, the Company's operating activities provided $3.5 million of cash, investing activities provided $1.1 million, and financing activities provided $0.1 million. Partially offsetting these sources was a net foreign exchange translation loss of $0.6 million, primarily the result of the recent devaluation of the Japanese yen. The Company's inventories increased modestly from $19.5 million at February 28, 1998 to $20.9 million at May 31, 1998. Overall annual inventory turnover for the first quarter was about 5.0 times, compared to about 5.3 for the fourth quarter of fiscal 1998. Accounts receivable also increased from $22.3 million to $24.6 million, partially reflecting higher revenues in the first quarter of fiscal 1999 compared to the fourth quarter of fiscal 1998. Accounts payable increased significantly, from $10.6 million at February 28, 1998 to $16.1 million at May 31, 1998, reflecting a larger amount of inventory purchased during the last month of the quarter, as well as higher accounts payable for capital expenditures. Net assets of discontinued operations consists primarily of income tax refunds associated with the Company's fiscal 1998 net operating loss, most of which was allocable to the operations of the now discontinued system products division. The Company's capital expenditures increased to $3.5 million during the first three months of fiscal 1999, compared to $2.1 million for the year-earlier quarter. Capital expenditures are expected to increase during the remainder of fiscal 1999, with further expenditures planned for semiconductor test equipment and manufacturing equipment. The Company maintains a $25 million line of credit with several banks, which expires in July 1998, and permits the Company to borrow funds on a revolving basis, primarily to finance working capital needs. The Company intends to renegotiate this credit line, or pursue other financing arrangements, prior to such expiration. There have been no borrowings since October 1997 under this credit agreement. The Company believes that its cash, cash equivalents and short-term investments, cash flows from operations and its borrowing capacity, will be sufficient to finance the Company's operating and capital requirements for the next twelve months. Other Factors That May Affect Future Operating Results Certain statements and information contained in this quarterly report constitute "forward-looking statements" within the meaning of the Federal securities laws. These forward-looking statements involve risks and uncertainties, which may cause actual results and performance to be different from those expressed or implied in such statements. The Company's operating results are subject to general economic conditions and a variety of risks characteristic of the semiconductor and personal computer industries, including cyclical market patterns, price erosion, product development risks, technological change, business conditions and concentrations in Asia, reliance upon foundries and subcontractors, and forecasts of product demand, any of which could cause the Company's operating results to differ materially from past results. For a discussion of such risks, see "Management's Discussion and Analysis" in Item 7 of the Company's Annual Report on Form 10-K filed for the fiscal year ending February 28, 1998. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable. PART II - OTHER INFORMATION Item 5. Other Information The persons named on the form of proxy to be mailed in connection with the solicitation of proxies on behalf of the registrant's board of directors for the registrant's annual stockholders meeting will vote in their own discretion on any matter as to which the registrant shall not have received notice by April 17, 1999. 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: July 10, 1998 /S/ Eric M. Nowling --------------------------------- (Signature) Eric M. Nowling Vice President - Finance and Chief Financial Officer (Principal Financial and Accounting Officer) EX-27 2 ART. 5 FDS FOR 1ST QUARTER 10-Q
5 1,000 3-MOS FEB-28-1999 MAY-31-1998 51,292 4,000 24,598 1,021 20,893 113,446 135,294 87,983 215,076 24,442 0 0 0 1,597 170,666 215,076 37,595 37,595 26,211 26,211 11,151 10 62 730 285 445 0 0 0 445 0.03 0.03
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