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 August 31, 1996
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: 516-273-3100
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 October 11, 1996 there were 13,865,115 shares of the
registrant's common stock outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STANDARD MICROSYSTEMS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
August 31, February 29,
1996 1996
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 11,612 $ 18,459
Accounts receivable, net of allowance for doubtful
accounts of $1,719 and $1,369, respectively 62,346 55,976
Inventories 67,095 60,408
Deferred tax benefits 8,737 8,607
Other current assets 13,121 5,434
Total current assets 162,911 148,884
Property, plant and equipment:
Land 3,832 3,832
Buildings and improvements 27,374 26,839
Machinery and equipment 119,023 109,235
150,229 139,906
Less: accumulated depreciation 87,808 79,698
Property, plant and equipment, net 62,421 60,208
Other assets 41,435 51,567
$266,767 $260,659
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 27,785 $ 30,801
Accrued expenses and other liabilities 22,264 23,884
Income taxes payable 1,255 1,096
Total current liabilities 51,301 55,781
Long-term debt 8,000 -
Minority interest in subsidiary 11,375 11,376
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 13,856,000 and 13,711,000
shares, respectively 1,386 1,371
Additional paid-in capital 86,234 84,737
Retained earnings 102,276 100,217
Unrealized holding gain, net of tax 1,624 2,226
Foreign currency translation adjustment 4,571 4,951
Total shareholders' equity 196,091 193,502
$266,767 $260,659
</TABLE>
<PAGE>
STANDARD MICROSYSTEMS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31,
August 31,
1996 1995
1996 1995
<S> <C> <C> <C> <C>
Revenues $99,217 $85,434 $199,289 $157,643
Cost of goods sold 69,267 62,611 132,463 106,425
Gross profit 29,950 22,823 66,826 51,218
Operating expenses:
Research and development 6,168 7,952 12,154 16,188
Selling, general and administrative 22,398 28,686 48,809 52,191
Amortization of intangible assets 1,220 3,872 2,460 5,244
29,786 40,510
63,423 73,623
Income (loss) from operations 164 (17,687) 3,403 (22,405)
Other income (expense):
Interest income 137 112 265 224
Interest expense (244) (225) (337) (453)
Other income (expense), net 184 (73) 160 (118)
77 (186)
88 (347)
Income (loss) before minority interest
and provision for income taxes 241 (17,873) 3,491 (22,752)
Minority interest in net income
of subsidiary 0 36 1 76
Income (loss) before provision
for income taxes 241 (17,909) 3,490 (22,828)
Provision for (benefit from)
income taxes 99 (5,804) 1,431 (7,722)
Net income (loss) $ 142 $(12,105) $ 2,059 $(15,106)
Net income (loss) per common and
common equivalent share $ 0.01 $ (0.91) $ 0.15 $ (1.14)
Weighted average common and common
equivalent shares outstanding 13,864 13,331 13,836 13,298
</TABLE>
<PAGE>
STANDARD MICROSYSTEMS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
August 31,
1996 1995
<S> <C>
<C>
Cash flows from operating activities:
Cash received from customers $ 192,646
$ 185,755
Cash paid to suppliers and employees (200,399)
(182,492)
Interest received 260
219
Interest paid (453)
(599)
Income taxes paid 2,658
(3,453)
Net cash used for operating activities (5,288)
(570)
Cash flows from investing activities:
Capital expenditures (9,920)
(19,717)
Long-term investment 0
(13,990)
Other 266
17
Net cash used for investing activities (9,639)
(33,690)
Cash flows from financing activities:
Proceeds from issuance of common stock 346
806
Borrowings under line of credit agreements 23,950
28,000
Repayments of borrowings under line of credit agreements (15,950)
(12,000)
Net cash provided by financing activities 8,346
16,806
Effect of foreign exchange rate changes on cash and cash equivalents (266)
(90)
Net decrease in cash and cash equivalents (6,847)
(17,544)
Cash and cash equivalents at beginning of period 18,459
29,478
Cash and cash equivalents at end of period $ 11,612
$ 11,934
Reconciliation of net income (loss)
to net cash used for operating activities:
Net income (loss) $ 2,059
$ (15,106)
Adjustments to reconcile net income (loss) to net cash
used for operating activities:
Depreciation and amortization 11,062
10,621
Other adjustments, net 812
492
Changes in operating assets and liabilities:
Accounts receivable (6,646)
28,148
Inventories (6,750)
(6,364)
Accounts payable and accrued expenses and other liabilities (5,080)
(9,502)
Other changes, net (745)
(8,859)
Net cash used for operating activities $ (5,288)
$ (570)
</TABLE>
<PAGE>
STANDARD MICROSYSTEMS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The 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 and six month periods ended August 31, 1996. 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 29, 1996.
2. Inventories are valued at the lower of first-in, first-out cost or
market and consist of the following (in thousands):
Aug. 31, 1996 Feb. 29, 1996
Raw Materials $11,905 $ 9,556
Work in Process 39,014 34,622
Finished Goods 16,176 16,230
$67,095 $60,408
3. Commitments and Contingencies
In September 1996, the Company reached an agreement with Penril DataComm
Networks, Inc., to settle a legal action initiated by Penril in June 1993.
In 1990 and 1991, Penril had entered into technology and product
agreements with Sigma Networks Systems, Inc., which was subsequently
acquired by SMC in December 1992. Sigma became a wholly-owned subsidiary
and was renamed SMC Enterprise Networks, Inc. In January 1996, SMC
sold the business of SMC Enterprise Networks to Cabletron Systems Inc.
In June 1993, Penril commenced an action, asserting claims against SMC,
SMC Enterprise Networks and certain officers of SMC Enterprise Networks.
SMC asserted counterclaims against Penril. All of these claims related to
disputed interpretations of rights and obligations under the agreements
that Sigma executed in 1990 and 1991, prior to its acquisition by SMC.
SMC and Penril agreed to a settlement under which all claims of both
parties are to be dismissed, with prejudice. As a result, SMC anticipates a
charge to pretax earnings of approximately $4 million in the third quarter
of fiscal 1997.
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
The following table presents the Company's Consolidated Statements of Income,
as percentages of revenues, for the three and six month periods
ended August 31, 1996 and 1995:
3 Months
6 Months
1996 1995
1996 1995
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 69.8 73.3 66.5 67.5
Gross profit 30.2 26.7 33.5 32.4
Research and development 6.2 9.3 6.1 10.3
Selling, general and administrative 22.6 33.6 24.5 33.1
Amortization of intangible assets 1.2 4.5 1.2 3.3
Total operating expenses 30.0 47.4 31.8 46.7
Income (loss) from operations 0.2 (20.7) 1.7 (14.2)
Other income (expense), net 0.0 (0.2) 0.1 (0.2)
Income (loss) before minority
interest and taxes 0.2 (20.9) 1.8 (14.4)
Minority interest in net income
of subsidiary 0.0 0.1 0.0 0.1
Income (loss) before provision
for income taxes 0.2 (21.0) 1.8 (14.5)
Provision for (benefit from)
income taxes 0.1 (6.8) 0.8 (4.9)
Net income (loss) 0.1% (14.2)% 1.0% (9.6)%
Results of Operations by Industry Segment
The following table presents the Company's revenues and operating
income by industry segment for the three and six month periods ended
August 31, 1996 and 1995 (in millions):
3 Months 6 Months
1996 1995 1996 1995
Component products
Integrated circuit revenues $45.0 $28.6 $ 95.0 $56.2
Foundry device revenues 4.7 3.4 10.7 5.8
Total component products revenues $49.7 $32.0 $105.7 $62.0
Operating income 4.0 8.6 16.2 17.1
% of revenues 8.2% 26.9% 15.3% 27.6%
System products
Adapter revenues $35.6 $35.2 $ 66.3 $66.7
Hub and switch revenues 9.9 13.6 18.8 21.1
Total system products revenues $45.5 $48.8 $ 85.1 $87.8
Operating income 1.6 (19.0) (1.8) (28.6)
% or revenues 3.4% (38.9)% (2.1)% (32.6)%
Toyo Microsystems Corporation
Revenues $4.0 $4.6 $8.5 $7.8
Operating income - 0.2 - 0.3
% of revenues - 3.6 % - 4.1%
General, corporate and other
operating income (loss) ($5.4) ($7.4) ($11.0) ($11.3)
Standard Microsystems Corporation conducts its operations primarily through
the Component Products Division and the System Products Division. The
Component Products Division designs, produces and markets very-large-
sale-integrated circuits, mainly for control of various personal computer
functions, and specialized semiconductor-related products that are produced
in SMC's own foundry. The System Products Division designs, produces
and markets products that connect personal computers to, and allow
communications over, local area networks (LANs). The Company's
subsidiary, Toyo Microsystems Corporation (TMC), sells component
and system products in the Japanese market.
Revenue transfers between industry segments are excluded from the above
figures. The majority of these transfers consist of component and system
products shipped to TMC for resale in Japan.
Revenues
The Company's revenues rose 16.1% in the second quarter of fiscal 1997
from the year-earlier level as a 55.1% increase in component
products' revenues more tahn offset a 6.8% decrease in system products'
revenues as wll as a 12.6% decrease in TMC's revenues. In the first half
of fiscal 1997, the Company's revenues rose 26.4% as a 70.4% increase
in component products' revenues, as well as a 9.3% increase in TMC's
revenues, more than offset a 3.1% decrease in system products' revenues.
In the second quarter of fiscal 1997, the Company's revenues declined
0.9% from the first quarter of fiscal 1997 as an 11.3% decrease in component
products' revenues as well as an 11.5% decrease in TMC's revenues barely
offset a 15.2% increase in system products' revenues.
Compared to year-earlier results, component products' revenue growth in the
second quarter and first half of fiscal 1997 continued to be led by increased
shipments of personal computer input/output (PC I/O) integrated circuits. Sales
growth of Ultra I/O, the newest generation of PC I/O, devices more than
offset sales declines of the mature Super I/O class of circuit. When comparing
the revenue decline in the second quarter from the first quarter of fiscal
1997, increased Ultra I/O sales were unable to offset a sharp decline in
Super I/O sales. Lower selling prices and unit shipments led to
decline.
In addition, a device used in inkjet printer carttridges, that is produced in
SMC's own wafer foundry, has contributed revenue gains over year-earlier
periods. Comprising most of foundry device shipments, this device is sold
principally to a single customer who reduced orders in the second quarter of
fiscal 1997. SMC expects further declines in orders and revenues from this
customer during the remainder of the year.
During the fourth quarter of fiscal 1996, SMC received initial
wafers from two suppliers under the programs discussed in the Wafer
Purchase Agreements section below. The Company also received
initial wafers from other suppliers, requiring no specific investment.
All of these sources contributed to an
increase in second quarter and first half component products revenues
over the year earlier levels.
Relative to year-earlier results, system products' lower revenues reflected
decreased hub and LAN switch revenues, due primarily to the January
1996 sale of the Enterprise Networks Business Unit (ENBU)
to Cabletron Systems, Inc. ENBU's revenues were approximately
$4 million in the second quarter and $7 million in the first half of fiscal
1996. Compared to year-earlier results Network interface card
(adapter) revenues, changed very little reflecting slightly higher unit
shipments in the second quarter and slightly lower unit shipments
in the first half. Results were improved by
a shift in product mix toward Fast Ethernet and Ethernet PCI-bus
adapters, with higher selling prices than most other Ethernet adapters.
As a result, average selling prices (ASPs) fell only modestly from
year-earlier levels.
Higher Fast Ethernet adapter, Ethernet PCI-bus adapter and new Ethernet
switch shipments were primarily responsible for the increase in
system products' revenues in the second quarter over the first
quarter of fiscal 1997.
TMC's second quarter revenue decline came from both lower component and
system products shipments. First half growth came solely from increased
integrated circuit revenues, principally PC I/O devices, as networking
product revenues declined.
The following table presents the Company's revenues by geographic area as
percentages of total revenues from unaffiliated customers. All but Japan
(TMC), within the category Revenues outside the United States, are
considered export revenues shipped from U.S. operations.
3 Months 6 Months
Periods ended August 31, 1996 1995 1996 1995
United States 50.3% 46.5% 46.5% 43.6%
Asia and Pacific Rim 29.2 24.9 33.2 25.2
Europe 12.4 17.7 12.0 20.4
Canada 2.5 3.0 2.3 3.2
Other 1.6 2.5 1.7 2.7
Export revenues 45.7 48.1 49.2 51.5
Japan (TMC) 4.0 5.4 4.3 4.9
Revenues outside the United States 49.7 53.5 53.5 56.4
Total Revenues 100.0% 100.0% 100.0% 100.0%
United States revenues increased 25.8% in the second quarter
and 35.0% in the first half of fiscal 1997 over year-earlier levels.
The increases in both periods were largely from
shipments of component products, principally PC I/O and foundry products.
System products' second quarter fiscal 1997 domestic revenues declined
reflecting sale of the Enterprise Networks Business Unit. A first half
increase primarily reflected a first quarter improvement as year earlier
results had been impeded by the liquidation of excess distributor inventories.
International revenues increased 8.1 % in the second quarter and 20.0% in
the first half of fiscal 1997 over year-earlier results.
Asian and Pacific Rim revenues grew 36.3% in the second quarter and 67.3%
in the first half largely because component products'
domestic branded customers increased the proportion of PCs produced in
offshore factories and demand grew from a major Asian-based PC producer.
European revenues fell 18.9% in the second quarter and 25.4% in the first half,
chiefly reflecting a decline in system products' revenues from its major
international market. This decline reflected the absence of the divested
ENBU product line.
Gross Profit
The gross profit margin increased to 30.2% for the second quarter of fiscal
1997 from 26.7% for the second quarter of fiscal 1996. For the first half of
fiscal 1997, the gross profit margin increased to 33.5% from 32.5% a year
earlier. The principal factor contributing to the gross margin improvement
was an $11.8 million charge to cost of goods sold to reduce the carrying
value of certain system products inventory in the second quarter of fiscal
1996. That charge reduced gross margins by 13.7 percentage points in the
second quarter and 7.5 percentage points in the first half of fiscal 1996.
Offsetting the favorable impact from the absence of the inventory charge was:
(I) reduced margins of PC I/O integrated circuits derived from low yields
of a new Ultra I/O device and sharply reduced ASPs for the
Super I/O generation products and (ii) lower margins from greater
competition for foundry products.
Operating Expenses
Research and development expenses declined 22.4% to $6.2 million
in the second quarter of fiscal 1997 from $8.0 million
in the year earlier period. For the first half of fiscal 1997,
R&D expenses declined 24.9% to $12.2 million from
$16.2 million a year earlier. The decline reflected
elimination of the divested ENBU's expenditures, partially offset by higher
R&D spending for component products and the remaining networking
products business.
Selling, general and administrative expenses decreased 21.9% to $22.4 million
in the second quarter of fiscal 1997, compared to $28.7 million in the
year earlier period. For the first half of fiscal 1997, S,G&A expenses
declined to 6.5% to $48.8 million from $52.2 million a year earlier. In the
year earlier second quarter, the Company incurred a severance related
benefit charge of $2.5 million. Consequently, the lower spending in fiscal
1997 resulted chiefly from the absence of the severance charge and lower
selling and marketing costs reflecting elimination of the divested ENBU's
expenditures. These reductions were partially offset by increased spending
to support higher component products revenues and costs related to a new
client/server information system.
Amortization of intangible assets decreased 68.5% in the second quarter
and 53.1% in the first half of fiscal 1997 from comparable year earlier
periods. In the year earlier second quarter, the Company incurred a $2.4
million write-down of previously acquired LAN technology to its estimated
realizable value. Consequently, the lower amortization in fiscal 1997 resulted
chiefly from the absence of the write-down and also reflected benefits from an
accelerated write-off of certain assets during fiscal 1996 that reduced the rate
of quarterly amortization in succeeding periods.
Operating Profits
In the second quarter of fiscal 1997, the company reported an operating
profit of $0.2 million which compared to an operating loss of $17.7 a year
earlier. In the first half of fiscal 1997, the company reported an operating
profit of $3.4 million which compared to an operating loss of $22.4 a year
earlier. The major contributors to the improvement were
the absence of special charges, elimination of losses from the divested ENBU
and higher component products revenues. These benefits were partially
offset by lower gross profit margins for component products and
higher information systems costs.
Other Income and Expense
In the second quarter and first half of fiscal 1997, Other income (expense),
net improved by $0.26 million and $0.44 million over
the respective year earlier periods, attributed principally to lower
interest charges from lower average loan balances during the period.
Income Taxes
In the second quarter and first half of fiscal 1997, income taxes were
provided at the Company's expected effective rate for fiscal 1997 of 41.0%.
In fiscal 1996, income taxes were provided at a rate of 32.4% for the
second quarter and at 33.8% for the first half. The Company's effective
income tax rate primarily reflects statutory rate and non-deductible
goodwill amortization. The change in the effective income tax rate from
a year earlier relects the relationship of the non-deductible items to the
Company's pretax income in fiscal 1997 and pretax loss in fiscal 1996.
Wafer Purchase Agreements
During fiscal 1996, the Company purchased $16.0 million of wafer fabrication
equipment for installation in a semiconductor plant owned by Lucent
Technologies' (formerly AT&T Corp.) Microelectronics Business Unit in
Madrid, Spain. The agreement, under which the equipment was purchased,
allocates sub-micron wafer production capacity to the Company for five years
beginning in March 1996.
In fiscal 1996, SMC purchased a minority equity interest in
Singapore-based Chartered Semiconductor Pte Ltd. for $19.9 million
which is included within Other assets on the accompanying balance
sheet. Under this agreement, Chartered allocates sub-micron wafer
production capacity to the Company for ten years. This arrangement and the
Lucent agreement are intended to provide a portion of the Company's
long-term production requirements for integrated circuits.
Liquidity and Capital Resources
The Company's working capital increased to $111.6 million at August 31, 1996,
from $93.1 million at the end of fiscal 1996. The increase in working capital
primarily reflected increases of $7.4 million in accounts receivable,
$6.5 million in inventories and $7.7 million in other current assets and a
decrease of $4.5 million in current liabilities, partially offset by a decrease
of $7.8 million in cash and cash equivalents.
For reasons described below, during the first half of fiscal 1997,
the decrease in cash and cash equivalents to $11.6 million
primarily reflected financing capital expenditures of $9.9
million and the increase in inventories and accounts receivable, partially
offset by an increase in long-term debt of $8.0 million.
During the second quarter of fiscal 1997, days sales outstanding (DSOs)
increased to 57 days from 54 in the fourth quarter of fiscal 1996 and 50
in the second quarter of fiscal 1996. The increased DSOs and
receivables in the second quarter of fiscal 1997 reflected a greater
percentage of sales occurring toward the end of the quarter when
compared to the preceding periods.
Cost of goods sold divided by inventory increased to 4.1 times, annualized,
for the second quarter of fiscal 1997 from 4.0 times for the fourth quarter
of fiscal 1996 and decreased from 4.8 times for the year earlier period. The
decrease in inventory turnover from the year earlier quarter primarily
reflected year-earlier cost of goods sold that were inflated by the $11.8
million inventory charge. Adjusting year-earlier cost of goods sold by
eliminating that charge, reduces inventory turnover for the year-earlier
quarter to 3.9 times.
During the first quarter of fiscal 1997, a decrease in inventory turns
resulted in the Company's non-compliance with a financial condition
covenant under its $25.0 million line of credit agreement. In connection
therewith, the Company obtained waivers from its banks respecting the
failure to meet this covenant. As a result of the improvement in inventory
turns, the Company is in compliance with all financial condition
covenants at August 31, 1996.
Of $9.9 million of capital expenditures in the first half of fiscal 1997,
the most significant items were $3.0 million for upgrading the
Company's information system and $2.9 million for production
equipment for SMC's own wafer foundry.
In September 1996, the Comapny reached an agreement with Penril
DataComm Networks, Inc., to settle a legal action initiated by Penril
in June 1993. As a result, SMC anticipates a charge to pretax
earnings of approximately $4 million in the third quarter of fiscal 1997.
The Company believes that its present working capital position, combined
with forecasted cash flow and available borrowing capacity, will be
sufficient to meet cash requirements for the next twelve months. Cash flow
anticipated from operations, supplemented by borrowings under the revolving
credit line, as necessary, is anticipated to be used chiefly to fund capital
expenditures during the remainder of fiscal 1997. Capital expenditures
expected in fiscal 1997 include upgrading the Company's information system
and purchasing various foundry production, design and test equipment.
Factors That May Affect Future Results
Except for the historical information contained in this quarterly report,
certain matters discussed herein are forward-looking statements that involve
risks and uncertainties. The forward-looking statements contained herein
are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995.
Variables that affect the Company's future operating results include product
selling prices and costs, worldwide demand for personal computers and numerous
competitive factors. ASPs for the Company's products generally
decline from period to period. The Company attempts to offset this trend
by reducing manufacturing costs by a comparable amount and introducing
products with a higher value. The ability to succeed in these tasks is a key
determinant to the Company's gross profit margins.
The Company's most important customers for component products are personal
computer producers, and a slowdown in the rate of growth in demand for Pcs
could affect the Company's growth and intensify competition. The inability
to obtain adequate integrated circuit wafers could allow competitors who
process wafers internally to gain market share relative to the Company.
These competitors may also, more aggressively, reduce product
selling prices.
The Company's adapters are inserted in newly sold and previously installed
PCs, so that the sales growth of PCs influences sales of adapters as well.
Improvements in PC performance require more powerful adapters, and that
has led to a shift in the mix of adapters that the Company sells toward the
high speed PCI bus and Fast Ethernet adapters. The Company also sells PC
cards for portable computers. Product mix, product selling prices and the
acceptance of newly introduced products can be altered by competitors'
new products, promotions and pricing.
The Company's product development, sales and marketing progress is dependent
on hiring and retaining employees with specific skills. The Company is also
dependent on a limited number of suppliers for certain components, assemblies,
software and finished products.
High levels of production by PC manufacturers led to an industry-wide
shortage of silicon wafer fabrication capacity in fiscal 1996 and 1995. While
these shortages eased during the fourth quarter of fiscal 1996, they could
occur again and lead to difficulty in securing additional manufacturing
capacity, potentially curtailing revenue and profit growth over the remainder
of fiscal 1997 and beyond. Alternatively, PC production could weaken, leading
customers to hold excess inventories of components and other parts, resulting
in canceling or rescheduling orders for the Company's products.
With 53.5% of the Company's revenues in the first half of fiscal 1997
shipped to customers located outside of the United States, global economic
conditions and changes in foreign currency exchange rates can influence
the demand for the Company's products. Because of these and other
circumstances that could affect the Company's operating results, past
financial performance is not necessarily indicative of results to be
expected in the future.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As set forth in Note 3 to Consolidated Financial Statements, in June 1993,
Penril DataComm Networks, Inc. commenced an action in a Maryland state
court against SMC, its wholly owned subsidiary SMC Enterprise Networks,
Inc. (successor by merger to Sigma Networks Systems, Inc.), and two
former officers of Sigma, alleging breach of agreements between Penril
and Sigma made before SMC acquired Sigma. SMC asserted
counterclaims against Penril. Denying liability for the claims respectively
made against them, the parties settled this litigation in September 1996,
and agreed to dismiss all claims with prejudice. SMC anticipates, as a
result, that it will record a $4 million pretax charge for the third 1997
fiscal quarter.
Item 4. Submission of Matters to a Vote of Security Holders
The following matters were submitted to a vote of security
holders at the Registrant's annual meeting of shareholders
which was held on July 22, 1996.
The following were elected directors, each receiving the
number of votes set opposite his name:
Broker
For Withheld Non-votes
Evelyn Berezin 11,380,459 858,151 -0-
Peter F. Dicks 11,378,326 860,284 -0-
James R. Berrett 11,396,449 842,161 -0-
Kathleen B. Earley 11,387,663 850,947 -0-
The 1996 Stock Option Plan was approved and adopted by
the following vote:
Broker
For Against Abstain Non-votes
5,620,921 1,757,350 106,615 4,753,724
At the meeting, the selection of Arthur Andersen LLP as the
Company's auditors for the current year was ratified by
the following vote:
Broker
For Against Abstain Non-votes
11,790,442 402,889 41,739 3,540
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K.
None.
<PAGE>
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: October 11, 1996 /S/ Anthony M. D'Agostino
(Signa
ture)
Anthony M.
D'Agostino
Senior Vice
President, Finance
and
Treasurer
(Principal
Financial Officer)
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