Standard Microsystems Corporation (SMSC) has reported sales and revenues of $84.3 million for the third quarter of fiscal 2009, down 19.5%, compared with the sales and revenues of $104.7 million in the year-ago quarter. It has also reported a net income of $9 million, or $0.41 per diluted share, for the third quarter of fiscal 2009, compared with the net income of $8.7 million, or $0.36 per diluted share, in the year-ago quarter.
Operating margin was 6.9% in the third quarter fiscal 2009, compared to 10.3% in the previous quarter and 13.6% for the third quarter fiscal 2008. The primary drivers behind the decline in operating margin were reduced revenue as well as executive transition expenses of $1.8 million, offset somewhat by a significant reduction in stock-based compensation expense. On a non-GAAP basis, operating margin for the third quarter fiscal 2009 was 6.3%, compared to 13.0% in the previous quarter and 19.7% in the prior year. The unaudited non-GAAP financial measures in this release exclude charges and credits for stock appreciation rights (SARs) and stock options associated with the accounting pursuant to SFAS 123R and the amortization of acquired intangible assets.
EPS improvement was primarily due to the benefit of favorable foreign exchange rates during the quarter and $1.5 million in tax credits from Congress’s recent extension of income tax credits related to qualified domestic research and development expenditures. Non-GAAP net income for third quarter fiscal 2009 was $8.7 million or $0.39 per diluted share, compared to $12.8 million or $0.53 per diluted share in the third quarter fiscal 2008.
“Despite the fact that we were able to meet our revised revenue and earnings objectives, business conditions continue to deteriorate, particularly in the PC and automotive markets,” said Christine King, president and chief executive officer. “The broad based malaise in our industry driven by unprecedented economic conditions is causing weak end-customer demand in all geographies. In response to these difficult times we intend to focus on maintaining our strong balance sheet and take appropriate actions to right size our business for the expected lower revenue levels while continuing our focus on new design wins.”
Sales and revenues for the first nine months of fiscal 2009 were $274.3 million, a decrease of 3.3% compared to the first nine months of fiscal 2008. Net income for the first nine months of fiscal 2009 was $22.2 million, or $0.99 per diluted share, as compared to net income of $21.2 million, or $0.89 per diluted share, for the same period of fiscal 2008. Non-GAAP net income for the first nine months of fiscal 2009 was $28.1 million, or $1.25 per diluted share, compared to non-GAAP net income of $33.9 million or $1.43 per diluted share in the first nine months of fiscal 2008.
The company generated operating cash flow during the quarter of $21.3 million. The sum of cash and long-term investments decreased in the third quarter of fiscal year 2009 from $179.0 million at August 31, 2008 to $176.6 million, after repurchasing $11.4 million of SMSC stock during the quarter and taking a $4.5 million temporary impairment on auction rate securities. SMSC has no bank debt, and the book value per share as of November 30, 2008 was $19.13 as compared with $19.49 as of August 31, 2008.
The recent and ongoing difficult economic conditions and sharp decline in visibility continue to hinder the company’s ability to provide guidance. As a result, management cautions that it is important to consider the following guidance together with the caveats, assumptions and discussion that will be presented during a conference call and webcast as outlined below. Looking ahead to the fourth quarter of fiscal 2009, the Company expects:
Sales and Revenues to be $45 to $51 million.
Cost of goods sold as a%age of revenue to be up around 400 to 600 bps.
Operating expenses to be roughly flat sequentially.
Non-GAAP loss per diluted share to be in the range of $0.40 to $0.55, excluding amortization of acquisition related intangibles, and stock-based compensation expense.
Cash and investment balances to be slightly down.