Standard Microsystems Corp. (SMSC) filed Quarterly Report for the period ended 2009-08-31.
Standard Microsystems Corporation is a worldwide supplier of metal-oxide-semiconductor/very-large-scale-integrated circuits for the personal computer and related industries. Their integrated circuits are developed and sold for applications in PC input/output PC connectivity Local Area Networking PC systems logic and embedded networking. Standard Microsystems Corp. has a market cap of $467 million; its shares were traded at around $21.2 with and P/S ratio of 1.4. Standard Microsystems Corp. had an annual average earning growth of 30.9% over the past 5 years.
Highlight of Business Operations:
An operating loss of $10.1 million was generated in the second quarter of fiscal 2010, as compared to an operating loss of $14.6 million in the prior quarter ended May 31, 2009 and operating income of $10.1 million in the second quarter of the prior year. The decline in operating loss compared to the prior quarter ended May 31, 2009 was due to the increase in revenue and gross profit sequentially over the prior quarter as well as the benefit of cost reduction initiatives we have completed, partially offset by an increase in stock based compensation charges of $3.6 million. The prior quarter also included a settlement charge of $2.1 million in connection with the OPTi, Inc. patent infringement lawsuit against the Company, The significant decline in operating income compared to the second quarter of the prior fiscal year ended August 31, 2008 was primarily attributable to the year over year decrease in product sales volume in the second quarter of fiscal 2010, as well as increase in stock based compensation of $7.1 million (expenses related to stock appreciation rights increased $7.7 million in the quarter due to the increase in the Company’s stock price relative to the increase in the second quarter of the prior year) and the reduction in intellectual property revenues of $3.0 million per quarter as noted above.
R&D expenses were $38.6 million, or 28.0% of sales and revenues, for the six-months ended August 31, 2009 compared to $36.4 million, or approximately 19.1% of sales and revenues, for the six-months ended August 31, 2008. Stock based compensation charges pursuant to SFAS 123R of $4.0 million are included in the current six-month period as compared to a charge of $2.4 million in the six-month period ending August 31, 2008. Increases in costs associated with mask write-offs ($0.4 million) and occupancy costs associated with our new facility in Austin, Texas ($0.6 million), which was occupied in January, 2009 to replace two existing facilities whose leases were due to expire, as well as the increase in stock based compensation charges ($1.6 million) accounted for most of the increase for the period.
Selling, General and Administrative Expenses Selling, general and administrative (“SG&A”) expenses were $24.9 million, or approximately 33.1% of sales and revenues, for the quarter ended August 31, 2009, compared to $21.6 million, or approximately 22.2% of revenues, for the quarter ended August 31, 2008. Stock based compensation charges pursuant to SFAS 123R of $5.9 million are included in the current quarterly period as compared to a charge of $1.3 million in the three month period ended August 31, 2008. The increase in stock based compensation charges was partially offset by a decrease in administrative costs ($0.9 million) and headcount ($0.6 million) in connection with the Company’s cost saving initiatives and restructuring plan initiated in the fourth quarter of fiscal 2009.
SG&A expenses were $46.5 million, or approximately 33.8% of sales and revenues, for the six-month period ended August 31, 2009, compared to $45.7 million, or approximately 24.0% of revenues, for the six-month period ended August 31, 2008. Stock based compensation charges pursuant to SFAS 123R of $9.6 million are included in the current six- month period as compared to a charge of $5.1 million in the six-month period ended August 31, 2008. The increase in stock based compensation charges was partially offset by a decrease in administrative costs ($1.7 million) and headcount ($0.3 million) in connection with the Company’s cost saving initiatives and restructuring plan initiated in the fourth quarter of fiscal 2009.
The benefit for income taxes for the three and six month periods ended August 31, 2009, was $3.4 million and $8.7 million, or an effective income tax rate of 34.5% against $10.0 million losses and an effective income tax rate of 35.7% on $24.5 million of losses before income taxes, respectively. The tax provision for the six month period ended August 31, 2009 included the impact of $0.1 million from tax exempt income, a $0.2 million increase in reserves for uncertain tax positions and approximately $0.1 million of accrued interest and penalties.
The provision for income taxes for the three and six month periods ended August 31, 2008 was $3.4 million and $5.2 million, respectively, for an effective income tax rate of 28.1% against $12.1 million of income before income taxes and an effective income tax rate of 28.1% on $18.3 million of income before income taxes respectively. The tax provision for the six month period ended August 31, 2008 included the impact of $0.7 million from tax exempt income, a $0.4 million decrease in reserves for uncertain tax positions in connection with the completion of certain income tax audits and the related reversal of approximately $0.3 million of interest and penalties accrued in respect of tax exposures attributable to prior periods.
SMSC is in the portfolios of NWQ Managers of NWQ Investment Management Co.
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