SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-7422
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STANDARD MICROSYSTEMS CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 11-2234952
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
80 ARKAY DRIVE, HAUPPAUGE, NEW YORK 11788
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(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 January 13, 1999 there were 15,505,124 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>
November 30, February 28,
1998 1998
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 69,452 $ 47,155
Short-term investments 2,000 8,603
Accounts receivable, net of allowance for doubtful
accounts of $1,111 and $1,011, respectively 25,167 22,268
Inventories 22,685 19,471
Deferred tax benefits 5,817 6,226
Other current assets 7,366 4,884
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Total current assets 132,487 108,607
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Property, plant and equipment:
Land 3,832 3,832
Buildings and improvements 29,703 28,897
Machinery and equipment 94,622 99,087
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128,157 131,816
Less: accumulated depreciation 86,365 84,397
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Property, plant and equipment, net 41,792 47,419
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Other assets 38,550 37,688
Net assets of discontinued operation - 17,076
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$ 212,829 $ 210,790
======================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 12,242 $ 10,637
Accrued expenses and other liabilities 8,172 8,458
Current portion of obligations under capital leases 835 553
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Total current liabilities 21,249 19,648
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Obligations under capital leases 3,237 2,524
Other liabilities 4,678 4,773
Commitments and contingencies
Minority interest in subsidiary 11,521 11,468
Shareholders' equity:
Preferred stock, $.10 par value-
Authorized 1,000,000 shares, none outstanding - -
Common stock, $.10 par value-
Authorized 30,000,000 shares,
outstanding 16,019,000 and 15,926,000
shares, respectively 1,602 1,593
Additional paid-in capital 108,362 107,306
Retained earnings 61,853 59,999
Treasury stock 521,000 shares, at cost (2,957) -
Accumulated other comprehensive income 3,284 3,479
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Total shareholders' equity 172,144 172,377
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$ 212,829 $ 210,790
======================================================================================
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
STANDARD MICROSYSTEMS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 30, November 30,
------------------------- -------------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues $ 45,272 $ 42,768 $ 123,743 $ 118,755
Cost of goods sold 30,581 29,977 85,047 88,197
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Gross profit 14,691 12,791 38,696 30,558
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Operating expenses:
Research and development 5,187 4,075 13,911 11,209
Selling, general and administrative 8,860 8,356 23,407 25,503
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14,047 12,431 37,318 36,712
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Income (loss) from operations 644 360 1,378 (6,154)
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Other income (expense):
Interest income 705 331 1,896 561
Interest expense (77) (44) (198) (205)
Litigation settlement - - - (2,000)
Other income (expense), net (33) (67) (111) 61
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595 220 1,587 (1,583)
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Income (loss) before minority interest and
provision for income taxes 1,239 580 2,965 (7,737)
Minority interest in net income of subsidiary 36 24 53 63
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Income (loss) before provision for income taxes 1,203 556 2,912 (7,800)
Provision for (benefit from) income taxes 400 195 1,058 (2,753)
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Income (loss) from continuing operations 803 361 1,854 (5,047)
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Discontinued operation:
Loss from discontinued operation (net of income
taxes of ($1,838) and ($8,270), respectively) - (3,413) - (15,424)
Gain on sale of discontinued operation (net of taxes
of $555) - 1,030 - 1,030
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Net income (loss) $ 803 $ (2,022) $ 1,854 $ (19,441)
==================================================================================================================
Basic net income (loss) per share:
Income (loss) from continuing operations $ 0.05 $ 0.02 $ 0.12 $ (0.33)
Loss from discontinued operation - (0.22) - (1.00)
Gain on sale of discontinued operation - 0.07 - 0.07
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Basic net income (loss) per share $ 0.05 $ (0.13) $ 0.12 $ (1.26)
==================================================================================================================
Diluted net income (loss) per share:
Income (loss) from continuing operations $ 0.05 $ 0.02 $ 0.12 $ (0.33)
Loss from discontinued operation - (0.21) - (1.00)
Gain on sale of discontinued operation - 0.06 - 0.07
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Diluted net income (loss) per share $ 0.05 $ (0.13) $ 0.12 $ (1.26)
==================================================================================================================
Weighted average common shares outstanding
Basic 15,745 15,701 15,872 15,400
Diluted 15,748 16,165 15,915 15,400
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
STANDARD MICROSYSTEMS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
November 30,
------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 121,244 $ 114,054
Cash paid to suppliers and employees (115,576) (108,260)
Interest received 1,912 433
Interest paid (198) (214)
Income taxes paid (259) (97)
Cash paid for litigation settlement - (2,000)
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Net cash provided by operating activities 7,123 3,916
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Cash flows from investing activities:
Capital expenditures (11,288) (3,835)
Sale of machinery and equipment 6,263 -
Purchases of short-term investments (3,002) (4,000)
Sales of short-term investments 9,605 -
Investment in Accelerix Incorporated - (250)
Escrow investment (86) (2,020)
Other (437) 53
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Net cash provided by (used for) investing activities 1,055 (10,052)
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Cash flows from financing activities:
Proceeds from issuance of common stock 322 18,287
Purchases of treasury stock (2,957) -
Borrowings under line of credit agreements - 33,960
Repayments of borrowings under line of credit agreements - (40,960)
Repayments of obligations under capital leases (451) -
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Net cash provided by (used for) financing activities (3,086) 11,287
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Effect of foreign exchange rate changes on cash and cash equivalents 129 (458)
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Net cash provided by (used for) discontinued operation 17,076 (8,837)
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Net cash provided by sale of discontinued operation - 36,777
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Net increase in cash and cash equivalents 22,297 32,633
Cash and cash equivalents at beginning of period 47,155 8,382
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Cash and cash equivalents at end of period $ 69,452 $ 41,015
===============================================================================================
Reconciliation of income (loss) from continuing operations
to net cash provided by operating activities:
Income (loss) from continuing operations $ 1,854 $ (5,047)
Adjustments to reconcile income (loss) from continuing operations
to net cash provided by operating activities:
Depreciation and amortization 10,844 10,015
Other adjustments, net 612 897
Changes in operating assets and liabilities:
Accounts receivable (2,780) (4,807)
Inventories (3,166) 10,471
Accounts payable and accrued expenses and other liabilities 772 (939)
Other changes, net (1,013) (6,674)
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Net cash provided by operating activities $ 7,123 $ 3,916
===============================================================================================
Noncash investing and financing activities:
During fiscal 1999, the Company financed certain capital expenditures totaling
$1,446,000 through capital lease obligations.
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
STANDARD MICROSYSTEMS CORPORATION
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited interim consolidated 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 as of, and results of
operations for the three and nine month periods ended, November 30, 1998
and 1997. 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):
Nov. 30, 1998 Feb. 28, 1998
--------------------------------------------------------
Raw Materials $ 1,506 $ 1,269
Work in Process 13,244 11,879
Finished Goods 7,935 6,323
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$ 22,685 $ 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):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 30, November 30,
------------------ -----------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Average shares outstanding for
basic net income (loss) per share 15,745 15,701 15,872 15,400
Dilutive effect of stock options 3 464 43 -
----------------------------------------------------------------------------------
Average shares outstanding for
diluted net income (loss) per share 15,748 16,165 15,915 15,400
==================================================================================
</TABLE>
The Company reported a loss from continuing operations in the first
nine months 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.
<PAGE>
4. Comprehensive Income
Beginning with the first quarter of fiscal 1999, the Company adopted
Statement of Financial Accounting Standard 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 income
(loss) for the three and nine month periods ended November 30, 1998 and
1997 were as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 30, November 30,
------------------ -------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net income (loss) $ 803 $ (2,022) $1,854 $ (19,441)
Other comprehensive income (loss):
Currency translation adjustment 1,227 (149) 275 (671)
Unrealized gain (loss) on investment (12) (506) (470) 141
---------------------------------------------------------------------------------------
Total comprehensive income (loss) $2,018 $ (2,677) $1,659 $ (19,971)
=======================================================================================
</TABLE>
5. Common Stock Repurchase Program
In October 1998, the Company's Board of Directors approved a common stock
repurchase program, allowing the Company to repurchase up to one million
shares of its common stock on the open market or in private transactions.
During the third quarter of fiscal 1999, the Company repurchased 521,000
shares of common stock at a cost of $2,957,000. These shares are
currently being held as treasury stock.
6. Sale of Equipment
In September 1994, the Company entered into an agreement with Lucent
Technologies, Inc. (Lucent) whereby the Company purchased approximately
$16 million of wafer manufacturing equipment for installation at Lucent's
Madrid, Spain, facility. The agreement provided that a portion of
Lucent's wafer production capacity during the five year period which
began in March 1996 would be reserved for the Company's requirements at
favorable pricing.
In September 1998, the Company and Lucent mutually terminated this
agreement, whereby Lucent purchased the wafer manufacturing equipment
from the Company for approximately $8.2 million. Of these proceeds, $6.2
million was paid in cash, with the remaining $2.0 million to be paid in
ten equal quarterly installments. No gain or loss was recognized by the
Company on this sale. While Lucent's wafer production and pricing
obligations to the Company have been terminated, the Company intends to
continue using Lucent as a supplier.
7. Contingencies
Pursuant to a Stock Purchase Agreement dated September 30, 1997, the
Company sold an 80.1% interest in SMC Networks, Inc., a then-newly formed
subsidiary comprised of its former local area networking division, to an
affiliate of Accton Technology Corporation of Hsinchu, Taiwan (Accton)
for $40,237,000 in cash. Of these proceeds, $2,012,000 was placed into
an escrow account as security for a portion of the Company's
indemnification obligations under the Agreement. The escrow account was
scheduled for release to the Company in January 1999.
In December 1998, Accton notified the Company and the escrow agent of
Accton's intention to seek certain indemnification and damages from the
Company in excess of $10 million, for alleged misrepresentations and
inadequate disclosures related to the transaction, alleged fraudulent
inducement of the transaction, and other alleged breaches of covenants
and representations in the Stock Purchase Agreement and related
agreements. Accordingly, the escrow account has not been released as
scheduled.
The Company is confident that it negotiated and fully performed the
agreements with Accton in good faith. While it is not possible at this
time to assess the likelihood of any liability being established, the
Company considers these claims to be without merit. The Company will
vigorously defend itself against these allegations and expects that the
outcome will not be material to the Company.
<PAGE>
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.
I/O circuits 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).
The following table presents the Company's consolidated revenues for the three
and nine month periods ended November 30, 1998 and 1997 (in thousands):
Three months ended Nine months ended
November 30, November 30,
Standard Microsystems Corporation 1998 1997 1998 1997
- -------------------------------------------------------------------------------
Integrated circuit revenues $34,745 $35,199 $ 96,660 $ 98,054
Foundry revenues 2,832 2,446 9,003 6,450
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37,577 37,645 105,663 104,504
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Toyo Microsystems Corporation
- -------------------------------------------------------------------------------
Integrated circuit revenues 6,701 4,238 15,184 10,980
Other revenues 994 885 2,896 3,271
- -------------------------------------------------------------------------------
7,695 5,123 18,080 14,251
===============================================================================
Total revenues $45,272 $42,768 $123,743 $118,755
===============================================================================
Combined integrated circuit revenues $41,446 $39,437 $111,844 $109,034
===============================================================================
Revenues for the third quarter of fiscal 1999 increased to $45.3 million, or
5.8%, from the year-earlier revenues of $42.8 million. For for the nine month
period ended November 30, 1998, revenues were $123.7 million, an increase of
4.1% compared to $118.8 million for the year-earlier period. The revenue
increases for both the three and nine month periods were due to increased unit
volumes of integrated circuit shipments, driven by new product introductions
and the continued acceptance and growth of the Company's input/output (I/O)
devices in the Japanese market. Partially offsetting these factors were
declines in average selling prices. The Company has also reported an increase
in foundry revenue for both the current three and nine month periods compared
to comparable year-earlier periods.
GROSS PROFIT
The Company's gross profit percentage for the third quarter of fiscal 1999 was
32.5%, compared to 29.9% reported for the third quarter of fiscal 1998. For the
current nine month period, the gross profit percentage reported was 31.3%,
compared to 25.7% in the prior year.
The principal factors contributing to the gross profit improvement for the
current three and nine month periods were (i) continued product cost
reductions, driven by both product design efficiencies and excessive capacity
in the semiconductor manufacturing marketplace, and (ii) a shift in the
Company's product mix towards new, higher-margined products. Partially
offsetting these factors was the Company's MEMS wafer foundry operating below
its break-even capacity for all periods presented, resulting in a deficit gross
profit on foundry revenues. The Company is focusing on increasing foundry
revenues and improving the wafer foundry's operating efficiencies.
OPERATING EXPENSES
Research and development expenses were $5.2 million in the third quarter of
fiscal 1999, a 26.8% increase from $4.1 million in the third quarter of fiscal
1998. For the current nine month period, the Company reported research and
development expenses of $13.9 million, a 24.1% increase from $11.2 million in
the year earlier nine month period. This increase for both the three and nine
month periods reflects an increase in engineering staff, increased spending on
engineering prototypes and increased engineering test development activity.
The Company has increased its research and development expenditures over the
past year to accelerate the introduction of new products. Research and
development expenditures consist primarily of circuit design and development,
and related support activities. The Company firmly believes that, as changes
in technology continue to accelerate, continued investment in research and
development is critical.
Selling, general and administrative expenses increased 5.9% to $8.9 million in
the third quarter of fiscal 1999, compared to $8.4 million for the year-earlier
quarter. This increase is primarily associated with higher selling and
marketing costs associated with higher revenues reported in the current
quarter. Selling, general and administrative expenses decreased by 8.2% to
$23.4 million for the current nine month period, compared to year-earlier
expenses of $25.5 million. This decrease reflects reductions in general and
administrative expenses (including finance, information systems and other
administrative support) resulting from the Company's October 1997 divestiture
of a majority interest in SMC Networks, Inc., its former local area networking
division.
OTHER INCOME AND EXPENSE
During the three and nine month periods ended November 30, 1998, the Company's
interest income increased to $0.7 million and $1.9 million, respectively, from
$0.3 million and $0.6 million in the comparable year-earlier periods. These
increases reflect higher average cash and cash equivalent balances in the
current year periods compared to the comparable year-earlier periods.
The Company's nine month results in fiscal 1998 include a $2 million charge
recorded in the second quarter of fiscal 1998 for the settlement of class
action litigation initiated against the Company in fiscal 1996.
INCOME TAXES
For the three and nine month periods ended November 30, 1998, income tax
provisions have been recorded at effective tax rates of 33.3% and 36.3%,
respectively, compared to a tax provision of 35.1% and a tax benefit of 35.3%,
reported for the three and nine month periods ended November 30, 1997,
respectively. 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 and short-term investments increased to $71.5 million
at November 30, 1998, compared to $55.8 million at February 28, 1998. Working
capital increased to $111.2 million at November 30, 1998 from $89.0 million at
February 28, 1998. Two transactions have provided a significant amount of cash
to the Company during the nine month period ended November 30, 1998. In the
second quarter, the Company received an $18.1 million federal income tax
refund, most of which was attributable to the Company's discontinued operation
and was previously reported within Net assets of discontinued operation on its
Consolidated Balance Sheet. Additionally, in the third quarter, the Company
sold certain wafer manufacturing equipment to Lucent Technologies, Inc.,
resulting in cash proceeds of $6.2 million. Further details regarding this
transaction can be found in Note 6 to the Consolidated Financial Statements
included herein.
At August 31, 1998, the Company had reported an unusual increase in accounts
receivable as several large customers in Asia had extended their payments
beyond the Company's expected payment terms. This was apparently due to
ongoing economic problems in that region. These companies committed to, and
did, pay the delinquent amounts to Company during the third quarter of fiscal
1999.
The Company's inventories have declined to $22.7 million at November 30, 1998,
compared to $25.5 million at August 31, 1998. This inventory decline is the
result of lower manufacturing costs and several new inventory management
programs implemented during the third quarter.
The Company's capital expenditures were $12.7 million during nine months ended
November 30, 1998 (including $1.4 million of expenditures financed through
capital leases), significantly higher than $3.8 million of capital expenditures
in the year-earlier period. Most of this increase reflects investments in
semiconductor test equipment and manufacturing equipment for the Company's MEMS
wafer foundry.
In October 1998, the Company's Board of Directors approved a common stock
repurchase program, allowing the Company to repurchase up to 1 million shares
of its common stock on the open market or in private transactions. During the
third quarter of fiscal 1999, the Company repurchased 521,000 shares of common
stock at a total cost of $3.0 million.
The Company maintains a $10 million line of credit with several banks which
permits borrowings, secured by accounts receivable, on a revolving basis to
finance working capital needs. This credit line will expire in July 1999.
There have been no borrowings under this credit facility since October 1997.
The Company believes that its current cash, cash equivalents and short-term
investments, cash flows from operations and its borrowing capacity will be
sufficient to meet its operating and capital requirements for the next twelve
months.
CONTINGENCIES
Pursuant to a Stock Purchase Agreement dated September 30, 1997, the Company
sold an 80.1% interest in SMC Networks, Inc., a then-newly formed subsidiary
comprised of its former local area networking division, to an affiliate of
Accton Technology Corporation of Hsinchu, Taiwan (Accton) for $40,237,000 in
cash. Of these proceeds, $2,012,000 was placed into an escrow account as
security for a portion of the Company's indemnification obligations under the
Agreement. The escrow account was scheduled for release to the Company in
January 1999.
In December 1998, Accton notified the Company and the escrow agent of Accton's
intention to seek certain indemnification and damages from the Company in
excess of $10 million, for alleged misrepresentations and inadequate
disclosures related to the transaction, alleged fraudulent inducement of the
transaction, and other alleged breaches of covenants and representations in the
Stock Purchase Agreement and related agreements. Accordingly, the escrow
account has not been released as scheduled.
The Company is confident that it negotiated and fully performed the agreements
with Accton in good faith. While it is not possible at this time to assess the
likelihood of any liability being established, the Company considers these
claims to be without merit. The Company will vigorously defend itself against
these allegations and expects that the outcome will not be material to the
Company.
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 further discussion of such risks, see
"Risk Factors" in Part 2, Item 7 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included within the Company's
Annual Report on Form 10-K filed for the fiscal year ended February 28, 1998.
The Company maintains several equity investments in non-public companies which
operate in the semiconductor or personal computer industry, resulting from
strategic business relationships or other investment opportunities which were
deemed beneficial to the Company. These companies are subject to many of the
same risks and uncertainties faced by the Company. These investments, which are
reported at cost on the Company's Consolidated Balance Sheet, are reviewed
regularly for events and circumstances that may effect their current and future
value, within the provisions of Statement of Financial Accounting Standards No.
121, Accounting for the Impairment if Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of.
YEAR 2000 DISCUSSION
Many computer programs were designed to perform data computations on the last
two digits of the numerical value of a year. When computations referencing the
Year 2000 are performed, these programs may interpret "00" as the Year 1900 and
could either corrupt the date-related computations or not process them at all.
As a result, many software and computer systems may need to be upgraded or
replaced in order to comply with such Year 2000 requirements.
The Company's information systems organization, and supported by the Company's
executive staff, have taken company-wide actions to assess the nature and
extent of the Year 2000 issue on its products and infrastructure, including
identification, risk assessment and corrective action of Year 2000 issues.
Beginning in fiscal 1996, the Company began installing new Year 2000 compliant
information systems, and has moved a substantial portion of its core business
applications to this platform. The Company is currently in the process of
installing additional new information systems and expects all internal
information systems to achieve Year 2000 compliance during calendar year 1999.
The Company is also assessing the impact of the Year 2000 issue on its
products, and has not currently identified any material issues in that regard.
However, the Company could be adversely impacted by Year 2000 issues faced by
significant customers, vendors, suppliers, and financial service organizations
with which the Company conducts business. The Company is in the process of
evaluating its key suppliers of goods and services and its customers to
determine the extent, if any, to which the Company's operations are vulnerable
to Year 2000 issues faced by key third parties.
The Company is committed to expending the resources necessary to address this
issue on a timely basis. To date, expenditures directly related to remediation
of Year 2000 issues have not been material. At this time, the Company does not
anticipate that it will incur material expenditures for the resolution of Year
2000 issues relating to either its own information systems or its products
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
<PAGE>
PART II - OTHER INFORMATION
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: January 13, 1999 /S/ Eric M. Nowling
---------------------------------
(Signature)
Eric M. Nowling
Vice President - Finance and Chief Financial Officer
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
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0
0
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</TABLE>
