-----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, S7xfRW5f4Pspph77v0YgwqJ6kdIl71Af6B1TDQWklcKp/PfPgGWAbYYghzt2wOGD b8zu/HuooVIGrLbxSqzMSA== 0000093384-05-000032.txt : 20050926 0000093384-05-000032.hdr.sgml : 20050926 20050926155823 ACCESSION NUMBER: 0000093384-05-000032 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050831 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050926 DATE AS OF CHANGE: 20050926 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STANDARD MICROSYSTEMS CORP CENTRAL INDEX KEY: 0000093384 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 112234952 STATE OF INCORPORATION: DE FISCAL YEAR END: 0806 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-07422 FILM NUMBER: 051102931 BUSINESS ADDRESS: STREET 1: 80 ARKAY DRIVE CITY: HAUPPAUGE STATE: NY ZIP: 11788 BUSINESS PHONE: 6314342904 MAIL ADDRESS: STREET 1: 80 ARKAY DR CITY: HAUPPAUGE STATE: NY ZIP: 11788 8-K 1 form_8k-q2fy06.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): September 21, 2005 -------------------------------------------- STANDARD MICROSYSTEMS CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 0-7422 11-2234952 (State or other jurisdiction of (Commission File (I.R.S. Employer incorporation) Number) Identification No.) 80 Arkay Drive, Hauppauge, New York 11788 (Address of principal executive offices) (Zip Code) (631) 435-6000 (Registrant's telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) -------------------------------------------- Section 2 - Financial Information Item 2.02 - Results of Operations and Financial Condition On September 21, 2005, Standard Microsystems Corporation issued a press release announcing its financial results for its second quarter ended August 31, 2005. A copy of the press release is attached as Exhibit 99.1. Use of non-GAAP Financial Information Included within the press release are non-GAAP financial measures relating to the Company's Consolidated Statements of Operations that supplement the Company's Consolidated Statements of Operations prepared under general accepted accounting principles (GAAP). These non-GAAP financial measures adjust the Company's actual results prepared under GAAP to exclude non-cash charges relating to the Company's acquisitions of OASIS SiliconSystems Holding AG and Gain Technology Corporation, and adjustments to remove the impact of provisions to adjust stock appreciation rights to their market value as a result of an increase in the Company's stock price during the quarter. The non-GAAP measures have been reconciled to and should be considered together with the 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 is an additional measure that assists in evaluating operational trends and should not be regarded as a replacement for corresponding GAAP measures. The information in Exhibit 99.1 attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended. Section 9 - Financial Statements and Exhibits Item 9.01 - Financial Statements and Exhibits ( c ) Exhibits 99.1 - Press release dated September 21, 2005, reporting Standard Microsystems Corporation's financial results for its second quarter ended August 31, 2005. -------------------------------------------- SIGNATURES 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 hereunto duly authorized. STANDARD MICROSYSTEMS CORPORATION (Registrant) Date: September 26, 2005 By: /s/ ANDREW M. CAGGIA --------------------------------- Andrew M. Caggia Senior Vice President and Chief Financial Officer, and Director (Principal Financial Officer) -------------------------------------------- Exhibit Index Exhibit No. Description 99.1 Press release dated September 21, 2005, reporting Standard Microsystems Corporation's financial results for its second quarter ended August 31, 2005. EX-99.1 2 q2fy06-press_release.txt Exhibit 99.1 SMSC REPORTS 58% YEAR-OVER-YEAR INCREASE IN SECOND QUARTER REVENUES, INCLUDING OASIS ACQUISITION Revenues and Earnings Exceed Company's Prior Estimates Hauppauge, NY - September 21, 2005 - SMSC (Nasdaq: SMSC) today announced that revenues for the second quarter ended August 31, 2005 were $79.1 million, an increase of approximately 58% from last year's second quarter revenues of $50.2 million. Approximately half of the increase was attributable to the March 30, 2005 acquisition of OASIS SiliconSystems Holding AG (OASIS), and the remainder resulted from growth in SMSC's other product lines. Second quarter fiscal 2006 revenues included $1.1 million received with respect to shipments to a Taiwanese distributor in fiscal 2005, which could not be recognized previously due to collectibility concerns. Gross profit percentage was 43.9% for the three months ended August 31, 2005, compared to 47.6% for the year-earlier quarter, and 47.0% for the quarter ended May 31, 2005. For purposes of this discussion, gross profit is defined as revenues minus cost of goods sold, before amortization of intangible assets. The cost of the inventory underlying the $1.1 million of revenues referenced above was written off in the fourth quarter of fiscal 2005. Therefore, there is no cost of good sold in the second quarter of fiscal 2006 associated with that revenue. Also, the gross profit percentage for the second quarter of fiscal 2006 reflects the impact of yield losses aggregating $1.5 million related to certain atypical production issues. Those yields have now returned to expected levels and gross profit improvement is expected in the third quarter of fiscal 2006. Research and development expenses for the quarter were $14.7 million, compared to $11.2 million in the year-ago quarter, and selling, general and administrative expenses were $18.6 million, compared to $11.9 million in last year's second quarter. The year-over-year increase in costs and expenses primarily reflects the addition of OASIS and an expense provision of $5.7 million in the second quarter of fiscal 2006 to adjust Stock Appreciation Rights (SARs) to market value as a result of the increase in SMSC's stock price during the quarter. This SARs provision is included within cost of goods sold ($0.4 million), research and development expenses ($1.4 million) and selling, general and administrative expenses ($3.9 million). All of the above resulted in an operating loss of $0.1 million in the second quarter, compared to operating income of $0.6 million a year ago. Net income was breakeven in the second quarter of fiscal 2006, compared to $0.9 million, or $0.05 per share, in the second quarter of last year. To provide additional insight into its underlying operations, SMSC is also presenting a second quarter fiscal 2006 statement of operations on a non-GAAP basis, excluding the aforementioned provision to adjust SARs to market value, as well as the impact from non-cash acquisition-related charges, comprised of amortization of acquired intangible assets and adjustments to the value of opening inventory at the date of the OASIS acquisition. This statement is presented in a format that reconciles the non-GAAP measures to the comparable GAAP measures. On a non-GAAP basis, operating results were as follows: Gross profit percentage for the period was 45.6%, compared to 47.6% in the previous year's second quarter. Operating income was $8.1 million, or 10.3% of revenues, compared to $0.8 million, or 1.6% of revenues, in the year-ago period. Non-GAAP net income was $5.3 million, or $0.25 per share, compared to net income of $1.1 million, or $0.06 per share, in the second quarter of fiscal 2005. "Second quarter revenues showed growth across all of our product areas," said Steven J. Bilodeau, Chairman and Chief Executive Officer. "Non-PC related sales represented 51% of total sales in the second quarter, with 33% shipping into consumer electronics and automotive infotainment applications and 18% in industrial and other. Shipments into mobile and desktop PCs totaled 49% of sales with mobile exceeding desktop shipments for the second quarter in a row." Mr. Bilodeau continued, "We are also pleased to have achieved our target of 10% operating income as a percentage of revenues at a $300 million annual run rate, as SMSC delivered a 10.3% operating income margin on a non-GAAP basis this quarter. Going forward, as revenues increase, we expect the continued leverage of operating expenses to further improve operating margins. Our current expectation is that the third quarter will be another quarter of robust year-over-year growth in revenues and earnings as outlined herein." Cash and liquid investments at August 31, 2005 were $131.7 million, compared to $121.0 million at May 31, 2005. The Company has no bank debt, and book value per share was $14.61 as of August 31, 2005. Non-GAAP Business Outlook: Third quarter guidance for non-GAAP net income, which is expected to be between $0.31 and $0.37 per share, assuming approximately 23 million diluted weighted average shares outstanding, is presented only on a non-GAAP basis because of SMSC's inability to project its future stock price and any resultant adjustment that might be required to adjust SARs to market value. For the third quarter, in line with the non-GAAP net income per share guidance above, SMSC expects the following on a non-GAAP basis: o Revenues of between $81 million and $86 million, reflecting a year-over-year increase of more than 60% at the midpoint of that range. Of that growth, approximately 28% results from the OASIS acquisition and 32% is attributable to SMSC's pre-existing business. o Gross profit percentage of between 46% and 48%. o Research and development expenses of between $13.5 million and $14.5 million. o Selling, general and administrative expenses of between $14 million and $15 million. o An effective income tax rate of approximately 31%. The non-GAAP third quarter guidance above excludes the impact of (a) any charges or credits that might be required relative to SARs and (b) two non-cash acquisition related charges, which are the amortization of acquired intangible assets, estimated to be $1.6 million, and an adjustment to cost of goods sold to reflect the write up of the cost of inventory at the date of the OASIS acquisition, which is estimated to be $0.1 million. SMSC currently has approximately 1.5 million SARs outstanding, none of which are vested, but all of which are scheduled to vest between September 2005 and September 2010. In GAAP results, expense recognition related to SARs is determined by a mark-to-market calculation based on SMSC's stock price at the end of each period. The SARs outstanding as of August 31, 2005 have been marked to the actual market price of $26.05 on that date. If the market price of SMSC stock remained at $26.05 on November 30, 2005, an expense provision of approximately $1.0 million ($0.7 million, or $0.03 per share, after tax) would be required in the third quarter due to the passage of additional vesting time related to the SARs. Each $1.00 change in SMSC's share price above or below $26.05 as of November 30, 2005 would require an additional expense provision or credit of approximately $0.75 million ($0.5 million, or $0.02 per share, after tax) in the third quarter, with any credit limited to a maximum of $5.7 million ($3.9 million, or $0.17 per share, after tax). SMSC includes the actual cash cost of SARs in non-GAAP results as SARs are exercised. However, the non-GAAP guidance above includes no estimate of any cash cost that might be incurred in the third quarter of fiscal 2006 because it is impossible to predict the number of SARs that may be exercised or the market value of SMSC stock at the time any exercise. About SMSC: Many of the world's most successful global technology companies rely upon SMSC as a go-to resource for semiconductor system solutions that span analog, digital and mixed-signal technologies. Leveraging substantial intellectual property, integration expertise and a comprehensive global infrastructure, SMSC solves design challenges and delivers performance, space, cost and time-to-market advantages to its customers. SMSC's application focus targets key vertical markets including mobile and desktop PCs, servers, consumer electronics, automotive infotainment and industrial applications. The Company has developed leadership positions in its select markets by providing application specific solutions such as mixed-signal PC system controllers, non-PCI Ethernet, ARCNET, MOST, Hi-Speed USB and other high-speed serial communications. SMSC is headquartered in Hauppauge, New York with operations in North America, Taiwan, Japan, Korea, China and Europe. Engineering design centers are located in Arizona, New York, Texas and Karlsruhe, Germany. Additional information is available at www.smsc.com. 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 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 or distributors, order cancellations or reduced bookings; and excess or obsolete inventory 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 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, as well as general industry and market conditions. Reductions in the rate of growth of the PC, consumer electronics, embedded or automotive markets could adversely affect its operating results. SMSC conducts business outside the United States 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 and are based upon the information available to SMSC at this time. Such information is subject to change, and the Company may not necessarily inform, or be required to inform, investors of such changes. 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" for a more complete discussion of these and other risks and uncertainties. SMSC is a registered trademark of Standard Microsystems Corporation. Product names and company names are trademarks of their respective holders. Contact: Carolynne Borders Director of Corporate Communications SMSC Phone: 631-435-6626 Fax: 631-273-5550 carolynne.borders@smsc.com STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share amounts)
Three Months Ended August 31, -------------------------------------------------------------------------------------- 2005 2004 ------------------------------------------ ---------------------------------------- GAAP Adjustment Non-GAAP GAAP Adjustment Non-GAAP Revenues $ 79,060 $ - $ 79,060 $ 50,157 $ - $ 50,157 Costs and expenses: Cost of goods sold 44,372 (1,354)(a) 43,018 26,260 - 26,260 Research and development 14,685 (1,429)(b) 13,256 11,220 - 11,220 Selling, general and administrative 18,554 (3,893)(b) 14,661 11,852 - 11,852 Amortization of intangible assets 1,557 (1,557)(c) - 266 (266)(c) - - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from operations (108) 8,233 8,125 559 266 825 Interest income 649 - 649 556 - 556 Other income (expense), net (5) - (5) (6) - (6) - ------------------------------------------------------------------------------------------------------------------------------------ Income before provision for income taxes 536 8,233 8,769 1,109 266 1,375 Provision for income taxes 517 2,954 (d) 3,471 214 96 (d) 310 - ------------------------------------------------------------------------------------------------------------------------------------ Net income 19 5,279 5,298 895 170 1,065 ==================================================================================================================================== Basic net income per share $ - $ 0.26 $ 0.05 $ 0.06 ==================================================================================================================================== Diluted net income per share $ - $ 0.25 $ 0.05 $ 0.06 ==================================================================================================================================== Weighted average common shares outstanding: Basic 20,630 20,630 18,308 18,308 Diluted 21,611 21,611 19,169 19,169
Notes: SMSC uses certain non-GAAP information to evaluate its operating results and believes such information also provides investors with additional insight into its underlying operations. This schedule presents a full reconciliation between GAAP and non-GAAP results. (a) The adjustment to Cost of goods sold includes $974 to remove the impact of writing up the cost of inventory at the date of the OASIS acquisition over OASIS' original cost of the inventory. That write up will only impact GAAP Cost of goods sold for the turnover period of the OASIS inventory at the date of acquisition. That turnover period is expected to conclude in the quarter ending November 30, 2005. The remaining $380 adjustment to Cost of goods sold is to remove the impact of the provision to adjust Stock Appreciation Rights (SARs) to market value as a result of the increase in SMSC's stock price in the quarter. SMSC includes the actual cash cost of SARs in non-GAAP results as the SARs are exercised. No SARs had become exercisable through August 31, 2005. (b) The adjustments to Research & development and Selling, general & administrative expense are to remove the impact of the provision to adjust Stock Appreciation Rights (SARs) to market value as a result of the increase in SMSC's stock price in the quarter. SMSC includes the actual cash cost of SARs in non-GAAP results as the SARs are exercised. No SARs had become exercisable through August 31, 2005. (c) The adjustment to Amortization of intangible assets for the three months ended August 31, 2005 includes $1,291 related to the OASIS acquisition and $266 related to the fiscal 2003 acquisition of Gain Technology Corporation (Gain). The adjustment for the three months ended August 31, 2004 relates entirely to the Gain acquisition. (d) The adjustments to the Provision for income taxes were determined by applying the appropriate incremental tax rates to the adjustments described in notes (a) through (c) above. STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share amounts)
Three Months Ended August 31, -------------------------------------------------------------------------------------- 2005 2004 ------------------------------------------ ---------------------------------------- GAAP Adjustment Non-GAAP GAAP Adjustment Non-GAAP Revenues $ 79,060 $ - $ 79,060 $ 50,157 $ - $ 50,157 Costs and expenses: Cost of goods sold 44,372 (1,354)(a) 43,018 26,260 - 26,260 Research and development 14,685 (1,429)(b) 13,256 11,220 - 11,220 Selling, general and administrative 18,554 (3,893)(b) 14,661 11,852 - 11,852 Amortization of intangible assets 1,557 (1,557)(c) - 266 (266)(c) - - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from operations (108) 8,233 8,125 559 266 825 Interest income 649 - 649 556 - 556 Other income (expense), net (5) - (5) (6) - (6) - ------------------------------------------------------------------------------------------------------------------------------------ Income before provision for income taxes 536 8,233 8,769 1,109 266 1,375 Provision for income taxes 517 2,954 (d) 3,471 214 96 (d) 310 - ------------------------------------------------------------------------------------------------------------------------------------ Net income 19 5,279 5,298 895 170 1,065 ==================================================================================================================================== Basic net income per share $ - $ 0.26 $ 0.05 $ 0.06 ==================================================================================================================================== Diluted net income per share $ - $ 0.25 $ 0.05 $ 0.06 ==================================================================================================================================== Weighted average common shares outstanding: Basic 20,630 20,630 18,308 18,308 Diluted 21,611 21,611 19,169 19,169
Notes: SMSC uses certain non-GAAP information to evaluate its operating results and believes such information also provides investors with additional insight into its underlying operations. This schedule presents a full reconciliation between GAAP and non-GAAP results. (a) The adjustment to Cost of goods sold includes $974 to remove the impact of writing up the cost of inventory at the date of the OASIS acquisition over OASIS' original cost of the inventory. That write up will only impact GAAP Cost of goods sold for the turnover period of the OASIS inventory at the date of acquisition. That turnover period is expected to conclude in the quarter ending November 30, 2005. The remaining $380 adjustment to Cost of goods sold is to remove the impact of the provision to adjust Stock Appreciation Rights (SARs) to market value as a result of the increase in SMSC's stock price in the quarter. SMSC includes the actual cash cost of SARs in non-GAAP results as the SARs are exercised. No SARs had become exercisable through August 31, 2005. (b) The adjustments to Research & development and Selling, general & administrative expense are to remove the impact of the provision to adjust Stock Appreciation Rights (SARs) to market value as a result of the increase in SMSC's stock price in the quarter. SMSC includes the actual cash cost of SARs in non-GAAP results as the SARs are exercised. No SARs had become exercisable through August 31, 2005. (c) The adjustment to Amortization of intangible assets for the three months ended August 31, 2005 includes $1,291 related to the OASIS acquisition and $266 related to the fiscal 2003 acquisition of Gain Technology Corporation (Gain). The adjustment for the three months ended August 31, 2004 relates entirely to the Gain acquisition. (d) The adjustments to the Provision for income taxes were determined by applying the appropriate incremental tax rates to the adjustments described in notes (a) through (c) above. STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share amounts)
Six Months Ended August 31, ----------------------------------------------------------------------------------- 2005 2004 ---------------------------------------- --------------------------------------- GAAP Adjustment Non-GAAP GAAP Adjustment Non-GAAP Revenues $ 147,867 $ - $ 147,867 $ 103,210 $ - $ 103,210 Costs and expenses: Cost of goods sold 80,864 (1,959)(a) 78,905 52,645 - 52,645 Research and development 27,651 (1,397)(b) 26,254 22,082 - 22,082 Selling, general and administrative 32,145 (3,808)(b) 28,337 23,704 - 23,704 Amortization of intangible assets 2,710 (2,710)(d) - 583 (583)(d) - In-process research and development 895 (895)(c) - - - - ------------------------------------------------------------------------------------------------------------------------------- Income from operations 3,602 10,769 14,371 4,196 583 4,779 Interest income 1,372 - 1,372 1,022 - 1,022 Other income (expense), net (52) - (52) (38) - (38) - ------------------------------------------------------------------------------------------------------------------------------- Income before provision for income taxes 4,922 10,769 15,691 5,180 583 5,763 Provision for income taxes 1,876 3,908 (e) 5,784 1,373 210 (e) 1,583 - ------------------------------------------------------------------------------------------------------------------------------- Net income 3,046 6,861 9,907 3,807 373 4,180 =============================================================================================================================== Basic net income per share 0.15 $ 0.49 $ 0.21 $ 0.23 =============================================================================================================================== Diluted net income per share $ 0.14 $ 0.47 $ 0.20 $ 0.21 =============================================================================================================================== Weighted average common shares outstanding: Basic 20,325 20,325 18,278 18,278 Diluted 21,071 21,071 19,482 19,482
Notes: SMSC uses certain non-GAAP information to evaluate its operating results and believes such information also provides investors with additional insight into its underlying operations. This schedule presents a full reconciliation between GAAP and non-GAAP results. (a) The adjustment to Cost of goods sold includes $1,587 to remove the impact of writing up the cost of inventory at the date of the OASIS acquisition over OASIS' original cost of the inventory. That write up will only impact GAAP Cost of goods sold for the turnover period of the OASIS inventory at the date of acquisition. That turnover period is expected to conclude in the quarter ending November 30, 2005. The remaining $372 adjustment to Cost of goods sold is to remove the impact of the provision to adjust Stock Appreciation Rights (SARs) to market value as a result of the increase in SMSC's stock price in the quarter. SMSC includes the actual cash cost of SARs in non-GAAP results as the SARs are exercised. No SARs had become exercisable through August 31, 2005. (b) The adjustments to Research & development and Selling, general & administrative expense are to remove the impact of the provision to adjust Stock Appreciation Rights (SARs) to market value as a result of the increase in SMSC's stock price in the quarter. SMSC includes the actual cash cost of SARs in non-GAAP results as the SARs are exercised. No SARs had become exercisable through August 31, 2005. (c) The adjustment to In-process research and development is to remove from the pro forma results the cost of in-process research and development that was purchased in the OASIS acquisition and immediately expensed. (d) The adjustment to Amortization of intangible assets for the six months ended August 31, 2005 includes $2,178 related to the OASIS acquisition and $532 related to the fiscal 2003 acquisition of Gain Technology Corporation (Gain). The adjustment for the six months ended August 31, 2004 relates entirely to the Gain acquisition. (e) The adjustments to the Provision for income taxes were determined by applying the appropriate incremental tax rates to the adjustments described in notes (a) through (d) above. STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands) August 31, February 28, 2005 2005 --------------- --------------- Assets Current assets: Cash and cash equivalents $ 24,678 $ 116,126 Short-term investments 106,988 56,519 Accounts receivable, net 29,109 23,788 Inventories 38,818 33,310 Deferred income taxes 16,612 17,701 Other current assets 4,794 4,295 - ----------------------------------------------------------------------------- Total current assets 220,999 251,739 - ----------------------------------------------------------------------------- Property, plant and equipment, net 28,915 22,630 Goodwill 79,032 29,435 Intangible assets, net 48,152 3,584 Deferred income taxes 9,456 7,163 Other assets 3,864 4,708 - ----------------------------------------------------------------------------- $ 390,418 $ 319,259 ============================================================================= Liabilities and shareholders' equity Current liabilities: Accounts payable $ 22,216 $ 15,995 Deferred income on shipments to distributors 8,876 7,689 Accrued expenses, income taxes and other liabilities 21,574 13,400 - ----------------------------------------------------------------------------- Total current liabilities 52,666 37,084 - ----------------------------------------------------------------------------- Deferred income taxes 16,116 - Other liabilities 15,429 12,326 Shareholders' equity: Preferred stock - - Common stock 2,295 2,053 Additional paid-in capital 229,340 187,854 Retained earnings 103,658 100,612 Treasury stock, at cost (25,961) (23,799) Deferred stock-based compensation (3,588) (1,925) Accumulated other comprehensive income 463 5,054 - ----------------------------------------------------------------------------- Total shareholders' equity 306,207 269,849 - ----------------------------------------------------------------------------- $ 390,418 $ 319,259 ============================================================================= -----END PRIVACY-ENHANCED MESSAGE-----