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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended February 28, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-7422
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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)
(631) 435-6000
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value
Preferred Stock Purchase Rights
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(Title of Class)
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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (x)
As of March 28, 2002, 15,956,971 shares of the registrant's common stock
were outstanding and the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $ 359,201,534.
Documents Incorporated By Reference
The documents incorporated by reference into this Form 10-K and the Parts
hereof into which such documents are incorporated are listed below:
Document Part
Those portions of the registrant's 2002 annual report to
shareholders (the "Annual Report") which are specifically
identified herein as incorporated by reference into this
Form 10-K. II
Those portions of the registrant's proxy statement for the
registrant's 2002 Annual Meeting (the "Proxy Statement")
which are specifically identified herein as incorporated
by reference into this Form 10-K. III
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Standard Microsystems Corporation
Form 10-K
For the Fiscal Year Ended February 28, 2002
TABLE OF CONTENTS
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Items 1, 3, 7 and 7A of this Form 10-K contain forward-looking statements
concerning various aspects of the Company's business, including its strategy,
product development efforts, and litigation. These statements involve numerous
risks and uncertainties including those discussed throughout this document. For
a further explanation and details of some of these risks, please refer to "Other
Factors That May Affect Future Operating Results" under Item 1.
PART I
Item 1. Business.
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General Description of the Business
Standard Microsystems Corporation (the Company, the Registrant, or SMSC) is a
Delaware corporation, organized in 1971. As used herein, the terms Company,
Registrant and SMSC include the Company's subsidiaries, except where the context
otherwise requires.
SMSC is a designer and worldwide supplier of advanced digital and analog
Input/Output (I/O) system and connectivity solutions for a broad range of
communications and computing applications in the areas of Advanced I/O,
Connectivity, Local Area Networking and Embedded Control Systems. The Company is
prominent as the world's leading supplier of Advanced I/O integrated circuits
for desktop and mobile personal computers. Advanced I/O circuits contain a
variety of individual functions and unique I/O controllers delivered in a single
package, including floppy disk control, keyboard control and BIOS, parallel and
serial port control, and often flash memory, infrared communications support, a
real time clock, system management and power management.
The Company sells its products to a worldwide customer base, which includes most
of the world's leading personal computer manufacturers. The Company's Advanced
I/O circuits reside on the motherboards of personal computer products sold by
Compaq, Dell, Fujitsu, Gateway, Hewlett-Packard, IBM, Intel, NEC, Sony, Toshiba
and most other leading manufacturers.
The Company serves the USB connectivity market with its family of connectivity
products, which provide solutions using both USB 1.1 and USB 2.0 technologies.
Embedded Networking products are designed to serve a variety of
machine-to-machine communications applications, such as set-top boxes, home
gateway products, printers and wireless communication interfaces.
SMSC is headquartered in Hauppauge, New York, and has operations in North
America, Taiwan, Europe and Japan. The Company operates four engineering and
marketing facilities, located in California, New York, Texas and Japan. These
offices are staffed with highly skilled integrated circuit design and product
engineers, and semiconductor marketing and sales specialists.
Principal Products of the Company
The Company' s products are sold into the personal computer and embedded systems
marketplaces. Personal computer products include Advanced I/O Controllers, as
well as recently introduced keyboard and system controllers and environmental
monitoring and control devices. Embedded systems applications include USB
connectivity products, Ethernet and Arcnet embedded networking products,
embedded I/O products and systems logic products.
The Company continually works to broaden its product offerings and has made
significant investments in the development of new products in all of its product
families. Many of the Company's newer products have increasing amounts of analog
circuitry content, complementing the Company's traditional strength in digital
circuitry. The Company believes that the market for analog applications offers a
significant new growth opportunity. Several of the Company's recent product
introductions include the following:
o The LPC47N350 Keyboard and System Controller for legacy-free notebook PC's
was introduced in April 2002. This device features the Company's unique
PortSwitch interface, a patent-pending hot-switchable external LPC
interface that enables cost-effective, full-featured port replication and
docking solutions.
o In February 2002, The Company announced its entry into the Hi-Speed USB 2.0
peripheral controller market with two new integrated circuits, the
USB97C201 ATA/ATAPI/CF Bridge Controller and the USB97C210 memory card
controller for USB memory card readers. These products feature data
transfer rates to fully support the rapidly expanding USB 2.0
communications standard.
o In November 2001, the Company introduced two environmental monitoring and
control devices, the EMC6D100 and the EMC6D101. These products, designed
with analog circuitry, monitor voltages and temperatures critical to the
stability and reliability of a PC or embedded computing system. They
provide the thermal monitoring and control necessary to protect today's
high-heat, small form factor system designs.
o The LPC47S45X Advanced I/O Controller, introduced in August 2001, is
designed specifically for PC server applications. Based upon the Company's
pioneering desktop Advanced I/O architecture, this device offers important
platform management features needed in server applications, including a
real time clock and an X-Bus interface.
o The LPC47M192 Advanced I/O Controller with hardware monitoring capability
was introduced in October 2001. This product offers voltage and temperature
monitoring, fan speed detection and other environmental control features.
The cost savings available to customers using this product make it
particularly attractive to the low-cost, mass PC market.
o The LAN91C111, introduced in January 2001, is a non-PCI 10/100 mbps
single-chip Ethernet MAC+PHY controller, and is designed to provide Fast
Ethernet connectivity solutions in a broad range of embedded devices,
including set-top-boxes, ATM machines, switching hubs, printers,
motherboards, adapter cards, security systems, network appliances and game
consoles. Following considerable design-in activity during fiscal 2002, the
Company expects to begin shipping this device in high volume during fiscal
2003.
Advanced Input/Output (I/O) Controllers
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The Company is the world's leading supplier of Advanced I/O Controllers for both
the desktop and mobile personal computer markets.
Advanced Input/Output Controllers integrate multiple communication functions
between the PC and peripheral devices onto a single chip. Generally required in
every PC and other related computing applications, basic I/O functionality
historically included such functions as floppy disk control, keyboard control
and BIOS, and parallel and serial port control.
As computing designs have expanded, the role of the I/O controller has expanded,
and legacy interfaces have been augmented or replaced by new interfaces such as
SMBus controllers, power management controllers, real time clocks, pulse width
modulators, voltage and temperature measurement circuits, flash memory, fan
speed control circuits and USB hub ports. The Company is adept at using these,
and other, I/O technology "building blocks" to uniquely configure Advanced I/O
solutions to meet specific customer requirements. The Company's skill in
integrating greater functionality into Advanced I/O devices enables designers to
implement features at progressively lower cost points.
The particular features of Advanced I/O Controllers are dictated according to
the designer's requirements and vary based on target markets as well as the need
to maintain compatibility with other components of the design. The attributes of
a specific Advanced I/O controller are intended to make it more specifically
suitable for targeted applications like commercial or consumer PCs, servers, and
PC motherboards for the merchant motherboard or embedded markets.
Another advantage of designing-in the Company's products is that one circuit
board design can accommodate any one of the several devices within any specific
product group. This allows customers to easily upgrade to higher-performance
products as their end market changes, retaining investments in board design,
firmware development, and overall testing and reliability procedures.
Most of the Company's Advanced I/O Controllers are designed for the Low Pin
Count (LPC) bus architecture. LPC is a simpler, more efficient, lower cost means
of interconnecting peripheral devices, which is gradually replacing the Industry
Standard Architecture (ISA) bus.
The Company's market leadership in Advanced I/O Controllers is particularly
evident in the size, power, and feature-sensitive mobile PC market. The Company
offers a complete line of Advanced I/O solutions designed especially for
notebook applications. The flagship device in this product line is the
LPC47N252, currently the market's leading Advanced I/O Controller for notebook
PCs. This highly-integrated device is designed to support the LPC bus
architecture and includes a powerful keyboard controller based on the 8051
microprocessor, which enables internal keyboard scanning and control. This
device provides power management features important to the mobile PC
environment, and also contains 64K of embedded flash.
Keyboard and System Control Products
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Traditionally, the Company has offered keyboard control functionality as
integrated within its Advanced I/O Controller products. With the growing demand
for legacy-free computing applications, the Company has recently introduced
products which provide stand-alone keyboard and system control, and believes
that this market segment will provide opportunities for growth in fiscal 2003
and beyond.
The Company's recently introduced LPC47N350, is the Company's first stand-alone
keyboard and system control device, and is targeted for legacy-free notebook PC
applications. This device incorporates an 8051-based controller with on-board
flash memory, and features the Company's unique PortSwitch interface, a
patent-pending hot-switchable external LPC interface that enables
cost-effective, full-featured port replication and docking solutions.
Environmental Monitoring and Control Products
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The Company's recently introduced line of Environmental Monitoring and Control
devices (the EMC6D100 and the EMC6D101) provide solutions to temperature and
voltage monitoring requirements, which are critical to the stability and
reliability of PCs and other computing systems. The automatic fan speed control
capability of these products provides thermal protection across multiple zones,
even when the operating system (OS) is not running. These devices' intelligent
control of fan speed also provides a patent-pending reduced noise design and
addresses the power consumption concerns of mobile applications.
These analog designs leverage the Company's technical competencies beyond the PC
space, and mark an expansion of the Company's leading role as a designer of
digital integrated circuits. The market for analog applications offers a
significant new growth opportunity for the Company.
USB Connectivity Products
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Universal Serial Bus (USB) is a rapidly-growing communication standard for
connecting peripheral devices to host devices, offering ease of use,
expandability and increased speed.
The Company has been supplying USB 1.1 controller devices for mass-storage
products in high volume for several years. The Company's USB97C100 and USB97C102
devices are general-purpose controllers for use in high performance or multiple
peripheral applications, such as port replicators. The USB97CFDC device, which
integrates the Company's floppy disk controller, provides a complete,
single-chip USB solution for external floppy drives.
To address the next generation of higher-speed, higher bandwidth USB
connectivity, the Company recently introduced its first two Hi-Speed USB 2.0
devices. USB 2.0 technology allows for data transfer at rates up to 40 times
faster than the earlier USB 1.1 technology.
The Company's USB97C201 is the market's first single-chip USB 2.0 peripheral
controller capable of Ultra Direct Memory Access (UDMA) mode 4 data rates,
allowing the transfer of data to and from ATA/66 and ATA/100 disk drives at the
maximum sustainable USB 2.0 burst data rate of 53 mbps. In addition to an
internal PHY, the USB97C201 also contains a high-speed internal 8051
microprocessor. The USB97C201's programmable patent-pending architecture and
modern process technology yield a very small die size, which results in an
economical solution for the price-competitive external drive market.
The USB97C210 is the world's first Hi-Speed USB 2.0 multi-format memory card
controller. The USB97C210 consists of a USB 2.0 physical layer transceiver and
serial interface engine, data buffers, an 8051 microprocessor with expanded
scratchpad and program SRAM, and dedicated controllers for each memory card
type. With its Hi-Speed USB 2.0 interface and patent-pending architecture, the
USB97C210 rapidly transfers large amounts of data, such as MP3 and MPEG files,
to memory cards.
Embedded Networking - Ethernet Products
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Local Area Networking (LAN) devices enable personal computers and peripheral
devices to be connected to networks and permit communications among LAN users.
Connection to a LAN permits a user to send messages to and receive messages from
other LAN users and share common resources such as printers, disk drives, files
and programs. The Company's Ethernet products are primarily used in embedded LAN
applications and can provide customers with complete Ethernet connectivity
solutions.
The Company has developed an advanced family of highly-integrated, single-chip
Ethernet devices, including 10 mbps Ethernet controllers, and 10/100 mbps Fast
Ethernet media access controllers (MAC) and physical layer transceivers (PHY)
for non-PCI bus architectures.
The Company's newest Ethernet device is the LAN91C111, a high-performance
non-PCI Fast Ethernet controller that integrates a MAC Layer, a PHY Layer and 8K
bytes of internal SRAM onto a single, compact device. It is designed to
facilitate the implementation of Fast Ethernet connectivity solutions for a
broad range of embedded applications. The LAN91C111's configurable, generic bus
interface is compatible with popular embedded host interfaces, including ARM,
SH, MIPS, 68K/Coldfire, PowerPC and other RISC processors.
The Company offers a suite of networking device drivers that support the rich
feature sets and exploit the architectural advantages of all of its Ethernet
hardware solutions. Drivers are available for the most popular networking
environments and operating systems, including DOS, Windows, Windows CE, Windows
NT Embedded, embedded RTOS, Novell Netware, and Linux.
Embedded Networking - Arcnet Products
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The Company offers a complete line of Arcnet-based embedded networking devices
that provide solutions in industrial and embedded machine-to-machine
communication applications. They are used in such diverse applications as
cellular phone base stations, passenger elevator systems, ATM machines, HVAC
control systems, factory automation, point-of-sale systems and a wide variety of
other applications where reliability of communications between machines is of
paramount importance. While Ethernet has become the dominant LAN protocol in
office networking, the Arcnet protocol offers many characteristics that make it
ideal for industrial and embedded networking environments, including its high
reliability and fault tolerance, and its adaptability to a wide variety of
cabling media and configurations.
Systems Logic Chipsets
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The Company has expanded its embedded market presence by entering the embedded
systems logic arena with the introduction of the VictoryBX/GX-66 chipset. While
originally targeted for both PC and embedded applications, this product line is
now being marketed extensively into the embedded marketplace. The Company
decided to exit the PC chipset business in November 2001.
Competition
The Company competes in the semiconductor industry, servicing and providing
solutions for the PC, networking, connectivity and embedded control
marketplaces. Many of the Company's larger customers conduct business in the
personal computer industry. Intense competition, rapid technological change,
cyclical market patterns, price erosion and periods of mismatched supply and
demand have historically characterized both industries.
The Company faces competition from several large semiconductor manufacturers,
some of which have greater size and financial resources than the Company. The
Company's principal competitors in the Advanced I/O Controller market include
National Semiconductor Corporation, Winbond Electronics Corporation and
Integrated Technology Express, Inc. (ITE).
As the Company continues to broaden its product offerings, it will likely face
new competitors in other markets. Many of the Company's potential competitors
have the ability to invest larger dollar amounts into research and development,
and some have their own manufacturing facilities, which may give them a cost
advantage on large volume products.
The principal methods that the Company uses to compete include the introduction
of innovative new products, adding new features, improving performance,
servicing customers, availability of product and constantly striving to reduce
manufacturing costs.
Research and Development
The semiconductor industry, and the individual markets in which the Company
currently competes, are highly competitive, and the Company believes that the
continued investment in research and development (R&D) is critical to
maintaining and improving its competitive position.
The Company's research and development activities are performed by a team of
highly-skilled and experienced engineers and technicians, and is primarily
directed towards the design of new integrated circuits, the development of new
software design tools and blocks of logic, as well as ongoing cost reductions
and performance improvements in existing products.
During fiscal 2002, the Company announced its exit from the PC chipset business,
which included a reorganization of its engineering and development resources.
The Company has redirected its engineering resources towards its core
technologies, focusing on the development and incorporation of new technologies
and features into Advanced I/O, networking, connectivity and embedded systems
products.
Manufacturing
The Company is a fabless semiconductor solutions provider, which is an
increasingly common business model in the semiconductor industry. Third party
contract foundries and package assemblers are engaged to fabricate the Company's
products onto silicon wafers, cut these wafers into die and assemble the die
into finished packages. This strategy allows the Company to focus its resources
on product design and development, marketing and quality assurance. It also
reduces fixed costs and capital requirements, and allows the Company access to
the most advanced manufacturing capabilities.
The Company's primary wafer suppliers are Chartered Semiconductor Manufacturing,
Ltd. in Singapore and Taiwan Semiconductor Manufacturing Company, Ltd. (TSMC) in
Taiwan. The Company may negotiate additional foundry supply contracts and
establish other sources of wafer supply for its products as such arrangements
become useful or necessary, either economically or technically.
Processed silicon wafers are shipped to various third party assembly suppliers,
most of which are located in the Pacific Rim region, where good die are
separated into individual chips that are then encapsulated into plastic
packages. As is the case with the Company's wafer supply requirements, the
Company employs a number of independent suppliers for assembly purposes. This
enables the Company to take advantage of the subcontractor's high volume
manufacturing, related cost savings, speed and supply flexibility. It also
provides the Company with timely access to cost-effective advanced process and
package technologies. The Company purchases most of its assembly services from
Advanced Semiconductor Engineering, Inc., ST Assembly Test Services, Ltd.,
Siliconware Precision Industries Co., Ltd., and Amkor Technology, Inc.
Following assembly, each of the packaged units receives final testing, marking
and inspection prior to shipment to customers. Final testing for most of the
Company's products is performed at the Company's own state-of-the-art testing
operation in Hauppauge, New York. Final testing services of independent test
suppliers are also utilized as necessary, most of which occurs in the Pacific
Rim region.
Customers demand semiconductors of the highest quality and reliability for
incorporation into their products. The Company focuses on product reliability
from the initial stages of the design cycle through each specific design
process, including production test design. In addition, designs are subject to
in-depth circuit simulation at temperature, voltage and processing extremes
before initiating the manufacturing process. The Company prequalifies each of
its assembly and foundry subcontractors. This prequalification process consists
of a series of industry standard environmental product stress tests, as well as
an audit and analysis of the subcontractor's quality system and manufacturing
capability. Wafer foundry production and assembly services are closely monitored
to ensure consistent overall quality, reliability and yield levels. The Company
is certified under ISO 9002, a comprehensive International Standards
Organization specified quality system.
Sales, Marketing and Customer Service
The Company's sales and marketing strategy is to achieve design wins with
technology leaders in targeted markets through superior sales, field application
and engineering support. Sales and marketing resources have been organized to
pursue opportunities and to support two separate, but complementary, product
families - Personal Computer (PC) Products and Embedded Products.
PC Products are marketed primarily to companies who design and manufacture PC
motherboards and PC systems. Most of these companies are large PC suppliers,
including Compaq, Dell, Fujitsu, Gateway, Hewlett-Packard, IBM, Intel, Sony and
Toshiba, or their subcontractors, among others. PC Products are also sold
through electronics distributors, providing access to a broad base of smaller
suppliers of PC products.
The markets served by Embedded Products, which include the Company's networking,
connectivity and embedded systems products, are characterized by smaller orders,
longer design cycles, higher margins and longer product life cycles. These
products are sold to a wide customer base, a significant portion of which occurs
through electronics distributors.
The Company markets and sells its products in the United States through a direct
sales force, electronics distributors and manufacturer's representatives. Two
independent distributors are currently engaged to serve the North American
market. Internationally, products are marketed and sold through regional sales
offices located in Germany and Taiwan, as well as through a network of
independent distributors and representatives. The Company serves the Japanese
marketplace primarily through its majority-owned subsidiary, SMSC Japan
(previously known as Toyo Microsystems Corporation).
In accordance with industry practices, distributors have certain rights of
return and price protection privileges on unsold products until the distributor
sells the product. Distributor contracts may be terminated by written notice by
either party. The contracts specify the terms for the return of inventories.
Returns of product pursuant to termination of these agreements have not been
material.
The Company strives to make the design-in of its products as easy as possible
for its customers. To facilitate this, the Company offers a wide variety of
support tools, including evaluation boards, sample BIOS, diagnostics programs,
sample schematics and PCB layout files, driver programs, data sheets, industry
standard specifications and other documentation. These tools are readily
available from the Company's sales offices and sales representatives. The
Company's home page on the world wide web (http://www.smsc.com) provides
customers with immediate access to its latest product information. In addition,
the Company maintains an electronic bulletin board so that registered customers
can download software updates as needed. Customers are also provided with
reference platform designs for many of the Company's products, which enables
easier and faster transitions from the initial prototype designs through final
production releases.
Sales managers are dedicated to key OEM customers to ensure the highest level of
customer service and to promote close cooperation and communication. The Company
also serves its customers with a worldwide network of field application
engineers. These engineers assist customers in the selection and proper use of
its products and are available to answer customer questions and resolve
technical issues. The field application engineers are supported by factory
application engineers, who work with both the customer's and the Company's
factory design and product engineers to develop the requisite support tools, as
well as facilitate the smooth introduction of new products.
The Company generates a significant portion of its revenues from international
sales. While the demand for the Company's products is primarily driven by the
worldwide demand for personal computers, peripheral devices, and embedded
systems applications sold by U.S.-based suppliers, a significant portion of the
Company's products are sold to manufacturing subcontractors of those U.S.-based
suppliers, located in Asia and the Pacific Rim. The majority of the world's
personal computer, personal computer motherboard and other high technology
manufacturing activity occurs in that region. The Company expects that
international shipments, particularly to the Asia and Pacific Rim region, will
continue to represent a significant portion of its revenues.
The table below summarizes revenues by geographic region for fiscal 2002
(dollars in thousands):
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For the year ended February 28, 2002 Amount Percent
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Asia and Pacific Rim .................. $ 106,123 66.6 %
North America ......................... 42,913 26.9 %
Europe ................................ 10,157 6.4 %
Rest of World ......................... 105 0.1 %
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$ 159,298 100.0 %
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Intellectual Property
The Company believes that intellectual property is a valuable asset that has
been, and will continue to be, important to the Company's success. The Company
has received numerous United States patents relating to its technologies and
additional patent applications are pending. It is the Company's policy to
protect these assets through reasonable means. To protect these assets, the
Company relies upon nondisclosure agreements, contractual provisions, and patent
and copyright laws.
The Company has patent cross-licensing agreements with more than thirty
companies, including such semiconductor manufacturers as IBM, Intel, Micron
Technology, NEC and Toshiba. Almost all of the Company's cross-licensing
agreements give the Company the right to use, royalty-free, patented
intellectual property of the other companies. In situations where the Company
needs to acquire strategic intellectual property not covered by cross-licenses,
the Company enters into agreements to purchase or license the required
intellectual property.
Backlog and Customers
The Company's business, and to a large extent much of the semiconductor
industry, is characterized by short-term order and shipment schedules, rather
than volume purchase contracts. The Company schedules production based upon a
forecast of demand for its products. Sales are made primarily pursuant to
purchase orders generally requiring delivery within one month, and at times,
several months. Typical of industry practice, the Company's backlog may be
canceled or rescheduled by the customer on short notice without significant
penalty. As a result, the Company's backlog may not be indicative of actual
sales and therefore should not be used as a measure of future revenue.
From time to time, several key customers can account for a significant portion
of the Company's revenues. During fiscal 2002, 2001 and 2000, the Company had
two customers whose purchases represented a significant portion of the Company's
revenues in certain fiscal years. Revenues from one customer represented 29.0%
in fiscal 2002, and 11.2% in fiscal 2001, of the Company's revenues for those
respective fiscal years. Revenues from a second customer represented 15.2% in
fiscal 2002, and 14.5% in fiscal 2000, of the Company's revenues for those
respective fiscal years. No other customer represented more than 10% of the
Company's revenues in those fiscal years. The Company expects that its key
customers will continue to account for a significant portion of its revenues in
fiscal 2003 and for the foreseeable future.
Employees
At February 28, 2002, the Company employed 428 individuals, including 82 in
sales, marketing and customer support, 130 in manufacturing and manufacturing
support, 131 in research and product development and 85 in administrative
support and building maintenance activities.
The Company's future success depends in large part on the continued service of
key technical and management personnel and on its ability to continue to attract
and retain qualified employees, particularly those highly skilled design,
product and test engineers involved in manufacturing existing products and the
development of new products. The competition for such personnel is intense.
The Company has never had a work stoppage. No employees are represented by a
labor organization and the Company considers its employee relations to be good.
Other Factors That May Affect Future Operating Results
Before deciding to invest in the Company, or to maintain or increase your
investment, you should carefully consider the risks described below, in addition
to the other information contained in this report and in the Company's other
reports filed with the SEC, including our reports on Forms 10-Q and 8-K. The
risks and uncertainties described below are not the only ones facing the
Company. Additional risks and uncertainties not presently known or that are
currently deemed immaterial may also affect the Company's operations. If any of
these risks actually occurs, SMSC's financial condition or results of operations
may be adversely affected.
The Semiconductor Industry - The Company 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. The semiconductor industry has experienced
significant economic downturns at various times in the past, characterized by
diminished product demand and accelerated erosion of selling prices. In
addition, many of the Company's competitors in the semiconductor industry are
larger and have significantly greater financial and other resources than the
Company.
The Personal Computer Industry - Sales of many of the Company's products depend
largely on sales of personal computers and peripheral devices. Reductions in the
rate of growth of the PC market could adversely affect the Company's operating
results. In addition, as a component supplier to PC manufacturers, the Company
often experiences greater demand fluctuation than its customers themselves
experience. Also, some of the Company's products are used in PCs for the
consumer market, which, can be more volatile than other segments of the PC
marketplace.
Worldwide Economic Environment - Calendar 2001 was characterized by slower
economic activity, decreased consumer confidence, reduced corporate profits and
capital spending and liquidity concerns which, along with recent international
conflicts and terrorist and military activity, resulted in a downturn in
worldwide economic conditions. As a result of these unfavorable economic
conditions, the Company experienced a slowdown in customer orders in fiscal
2002. Although the volume of orders placed by customers is beginning to show
signs of increasing, concerns remain regarding the timing, strength and duration
of economic recovery, and its effect, if any, on the semiconductor industry. In
addition, recent political and social turmoil related to international conflicts
and terrorist acts may place further pressure on economic conditions in the U.S.
and worldwide. These unstable political, social and economic conditions make it
difficult for the Company, its customers and its suppliers to forecast and plan
future business activities.
Product Development and Technological Change - The Company's prospects are
highly dependent upon the successful development and timely introduction of new
products at competitive prices and performance levels, with acceptable margins.
The success of new products depends on various factors, including timely
completion of product development programs, market acceptance of the Company's
and its customers' new products, securing sufficient foundry capacity for volume
manufacturing of wafers, achieving acceptable wafer fabrication yields by the
Company's independent foundries and the Company's ability to offer these new
products at competitive prices. In order to succeed in having the Company's
products incorporated into new products being designed by its customers, the
Company must anticipate market trends and meet performance, quality and
functionality requirements of such customers and must successfully develop and
manufacture products that adhere to these requirements. In addition, the Company
must meet the timing and price requirements of its customers and must make such
products available in sufficient quantities. There can be no assurance that the
Company will be able to identify market trends or new product opportunities,
develop and market new products, achieve design wins or respond effectively to
new technological changes or product announcements by others.
The Company's future growth will depend, among other things, upon its ability to
continue to expand its product line. To the extent that the Company attempts to
compete in new markets, it may face competition from suppliers that have
well-established market positions and products that have already been proven to
be technologically and economically competitive. There can be no assurance that
the Company will be successful in displacing these suppliers in the targeted
applications.
Price Erosion - The semiconductor industry is characterized by intense
competition. Historically, average selling prices in the semiconductor industry
generally, and for the Company's products in particular, have declined
significantly over the life of each product. While the Company expects to reduce
the average selling prices of its products over time as it achieves
manufacturing cost reductions, competitive pressures may require the reduction
of selling prices more quickly than such cost reductions can be achieved. If not
offset by reductions in manufacturing costs or by a shift in the mix of products
sold toward higher-margin products, declines in the average selling prices could
reduce gross margins.
Reliance upon Subcontract Manufacturing - The vast majority of the Company's
products are manufactured and assembled by independent foundries and subcontract
manufacturers. This reliance upon foundries and subcontractors involves certain
risks, including potential lack of manufacturing availability, reduced control
over delivery schedules, the availability of advanced process technologies,
changes in manufacturing yields and potential cost fluctuations.
Forecasts of Product Demand - The Company generally must order inventory to be
built by its foundries and subcontract manufacturers well in advance of product
shipments. Production is often based upon either internal or customer-supplied
forecasts of demand, which can be highly unpredictable and subject to
substantial fluctuations. Because of the volatility in the Company's markets,
there is risk that the Company may forecast incorrectly and produce excess or
insufficient inventories. This inventory risk is increased by the trend for
customers to place orders with shorter lead times.
Strategic Relationships with Customers - The Company's future success depends in
significant part on strategic relationships with certain of its customers. If
these relationships are not maintained, or if these customers develop their own
solutions or adopt a competitor's solutions, the Company's operating results
could be adversely affected.
In the past, the Company has relied on its strategic relationships with certain
customers who are technology leaders in its target markets. The Company intends
to pursue and continue to form these strategic relationships in the future.
These relationships often require the Company to develop new products that
typically involve significant technological challenges. The customers frequently
place considerable pressure on the Company to meet their tight development
schedules. Accordingly, the Company may have to devote a substantial portion of
its resources to these strategic relationships, which could detract from or
delay completion of other important development projects.
Customer Concentration - A limited number of customers account for a significant
portion of the Company's revenues. The Company's revenues from any one customer
can fluctuate from period to period depending upon market demand for that
customer's products, the customer's inventory management of the Company's
products and the overall financial condition of the customer.
Shipments to Distributors - A significant portion of the Company's fiscal 2002
revenues were made through distributors. The Company's distributors generally
offer products of several different suppliers, including products that may be
competitive with the Company's products. Accordingly, there is risk that these
distributors may give higher priority to products of other suppliers, thus
reducing their efforts to sell the Company's products. In addition, the
Company's agreements with its distributors are generally terminable at the
distributor's option. No assurance can be given that future sales by
distributors will continue at current levels or that the Company will be able to
retain its current distributors on acceptable terms. A reduction in sales
efforts by one or more of the Company's current distributors or a termination of
any distributor's relationship with the Company could have an adverse effect on
the Company's operating results.
Business Concentration in Asia - A significant number of the foundries and
subcontractors used by the Company are located in Asia. Many of the Company's
customers also manufacture in Asia or subcontract manufacturing to Asian
companies. This concentration of manufacturing and selling activity in Asia
poses risks that could affect the supply and cost of the Company's products,
including currency exchange rate fluctuations, economic and trade policies and
the political environment within Asian communities. The Pacific Rim region is
also subject to the risk of earthquakes. For example, in September 1999, a major
earthquake caused widespread damage and business interruptions in Taiwan. A
significant portion of the world's personal computer component and circuit board
manufacturing, as well as personal computer assembly, occurs in Taiwan, and many
of the Company's suppliers and customers are based in, or do significant
business in, Taiwan. While the September 1999 earthquake did not materially
adversely affect the Company's business, future earthquakes or other natural
disasters in this region could adversely effect the Company's operating results.
Protection of Intellectual Property - The Company has historically devoted
significant resources to research and development activities and believes that
the intellectual property derived from such research and development is a
valuable asset that has been, and will continue to be, important to the
Company's success. The Company relies upon nondisclosure agreements, contractual
provisions and patent and copyright laws to protect its proprietary rights. No
assurance can be given that the steps taken by the Company will adequately
protect its proprietary rights. During its history, the Company has executed
patent cross-licensing agreements with many of the world's largest semiconductor
suppliers, under which the Company receives and conveys various intellectual
property rights. Many of these agreements are still effective. The Company could
be adversely affected should circumstances arise which cause certain of these
agreements to terminate prematurely.
Infringement and Other Claims - Companies in the semiconductor industry often
aggressively protect and pursue their intellectual property rights. From time to
time, the Company has received notices claiming that the Company has infringed
upon or misused other parties' proprietary rights. The Company has also in the
past received, and may again in the future receive, notices of claims related to
business transactions conducted with third parties, including asset sales and
other divestitures. Although the Company defends itself vigorously in these
actions, and has not incurred material liabilities under such claims in the
past, it is possible that the Company may not prevail in such actions, if any,
in the future. Any damages resulting from such actions may materially and
adversely affect the Company's business, financial condition and results of
operations. In addition, even if claims against the Company are not valid or
successfully asserted, defense against the claims could result in significant
costs and a diversion of management and resources.
Dependence on Key Personnel - The success of the Company is dependent in large
part on the continued service of its key management, engineering, marketing,
sales and support employees. Competition for qualified personnel is intense in
the semiconductor industry, and the loss of current key employees, or the
inability of the Company to attract other qualified personnel, could hinder the
Company's product development and ability to manufacture, market and sell its
products.
Investments in Other Companies - The Company maintains several equity
investments in both publicly and privately held companies, some of which operate
in the semiconductor or personal computer industries, 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. Investments in publicly held companies
are reported at market value on the accompanying Consolidated Balance Sheets and
are subject to normal open market valuation risk. Investments in privately held
companies are reported at the lower of cost or net realizable value, and are
reviewed regularly for events and circumstances that may affect their current
and future value.
Volatility of Stock Price - The market price of the Company's common stock can
fluctuate significantly on the basis of such factors as the Company's or its
competitors' announcements of new products, quarterly fluctuations in the
Company's financial results or in the financial results of other semiconductor
companies, changes in the expectations of market analysts or investors, or
general conditions in the semiconductor industry or in the financial markets. In
addition, stock markets in general have recently experienced extreme price and
volume volatility. This volatility has often had a significant impact on the
stock prices of high technology companies, at times for reasons that appear
unrelated to the company's performance.
Environmental Regulation - Environmental regulations and standards are
established worldwide to control, discharges, emissions, and solid wastes from
manufacturing processes. Within the United States, federal, state and local
agencies establish these regulations. Outside of the United States individual
countries and local governments establish their own individual standards. The
Company believes that its activities conform to present environmental
regulations and the effects of this compliance has not had a material effect on
the Company's capital expenditures, operating results, or competitive position.
While to date the Company has not experienced any material adverse impact from
environmental issues, no assurances can be given as to the impact of future
environmental compliance requirements. Should environmental regulations be
amended or an unforeseen circumstance occur, it could subject the Company to
fines, require the Company to acquire expensive remediation equipment or to
incur other expenses to comply with environmental regulations.
- --------------------------------------------------------------------------------
SMSC is a trademark and Standard Microsystems is a registered trademark of
Standard Microsystems Corporation. Product names and company names are the
trademarks of their respective holders.
Item 2. Properties.
- --------------------
The Company owns four facilities, totaling approximately 222,000 square feet of
plant and office space, located on approximately 25 acres in Hauppauge, New
York. Two of these facilities, totaling 130,000 square feet on 17 acres, are
used to conduct research, development, product testing, warehousing, shipping,
marketing, selling and administrative functions.
The Company leases its other two facilities and related improvements to outside
parties under noncancelable operating leases. The leases are scheduled to expire
in May 2004 and May 2010, respectively.
In addition, the Company maintains offices in leased facilities in San Jose,
California; Austin, Texas; Munich, Germany; Tokyo, Japan and Taipei, Taiwan.
These leases expire at various times through August 2008.
Item 3. Legal Proceedings.
- ---------------------------
The Company is subject to various lawsuits and claims in the ordinary course of
business. While the outcome of these matters cannot be determined, management
believes that their ultimate resolution will not have a material effect on the
Company's operations or financial position.
In October 2000, Standard Microsystems Corporation was named as a defendant,
along with several other semiconductor suppliers, in a patent infringement
lawsuit filed by U.S. Philips Corporation in the United States District Court
for the Southern District of New York (U.S. Philips Corporation v. Analog
Devices, Inc., et al, Case Number 00 CIV. 7426). The Complaint filed in the suit
alleged that some of the Company's products infringe one Philips patent, and was
seeking injunctive relief and unspecified damages.
In November 2001, the Company and Philips agreed to settle the dispute and to
file a joint motion to dismiss all claims. As part of the settlement, the
parties have entered into a nonexclusive licensing agreement under which SMSC is
a licensee of the previously disputed Philips' patent rights.
In October 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 (Accton). In
consideration for the sale, the Company received $40.2 million in cash, of which
$2.0 million was placed in an escrow account, scheduled for release in January
1999, to secure the Company's indemnity obligations under the agreement. The
Company's 19.9% minority interest in SMC Networks, Inc. is carried at a cost of
$8.5 million within Other assets on the accompanying Consolidated Balance
Sheets.
In December 1998, Accton notified the Company and the escrow agent of Accton's
intention to seek indemnification and damages from the Company in excess of
$10.0 million by reason of alleged misrepresentations and inadequate disclosures
relating to the transaction and other alleged breaches of covenants and
representations in the related agreements. Based upon those allegations, the
escrow account was not released to the Company as scheduled in January 1999. In
January 1999, SMSC filed an action in the Supreme Court of New York (the Action)
against Accton, SMC Networks, Inc. and other parties, seeking the release of the
escrow account to the Company on the grounds that Accton's allegations are
without merit, and seeking payment of approximately $1.6 million (the majority
of which is included within Other assets on the Company's Consolidated Balance
Sheets at February 28, 2002 and 2001) owed to the Company by SMC Networks, Inc.
In November 1999, the Court issued an order staying the Action and directed the
parties to arbitration under the arbitration provisions of the original
transaction agreements. The parties are proceeding with arbitration and, in July
2000, the Company asserted various claims against Accton and its affiliates,
including claims for fraud, improper transfer of profits, mismanagement, breach
of fiduciary duties and payment default.
The Company remains confident that it negotiated and fully performed its
obligations under the Agreements with Accton in good faith and considers the
claims against it to be without merit. The Company is vigorously defending
itself against the allegations made by Accton and, although it is not possible
at this time to assess the likelihood of any liability being established,
expects that the outcome will not be material to the Company. Furthermore, the
Company is pursuing recovery of damages and other relief from Accton pursuant to
the Company's claims, but the likelihood of any such recovery also cannot
currently be established.
Item 4. Submission of Matters to a Vote of Security Holders.
- -------------------------------------------------------------
Not applicable.
Executive Officers of the Registrant
- ------------------------------------
The following were the executive officers of Standard Microsystems Corporation
as of April 26, 2002, their ages as of April 26, 2002, their current titles and
positions held during at least the last five years:
Steven J. Bilodeau (age 43) has served as the Company's President and Chief
Executive Officer, and as a member of the Company's Board of Directors, since
March 1999. In February 2000, he assumed responsibility as Chairman of the
Board. Prior to joining SMSC, Mr. Bilodeau held various senior management
positions during his 13 years of service with Robotic Vision Systems Inc.
(RVSI), most recently as President of RVSI's Semiconductor Equipment Group from
1996 through 1998, and as a member of RVSI's Board of Directors from 1997
through 1998.
Andrew M. Caggia (age 53) has served as the Company's Senior Vice President and
Chief Financial Officer since February 2000, and was appointed to the Board of
Directors in February 2001. He previously served as Senior Vice President and
Chief Financial Officer of General Semiconductor, Inc., from July 1997 through
February 2000. Prior to that, he had served as Senior Vice President of Finance
at General Instrument Corporation's Power Semiconductor Division since September
1990.
George W. Houseweart (age 60) has served as the Company's Senior Vice President
and General Counsel since January 1999. Previously, he served as Senior Vice
President - Law and Intellectual Property from 1997 to 1999 and as Vice
President - Law and Intellectual Property from 1994 to 1997. Mr. Houseweart has
been an officer of the Company since 1988.
Eric M. Nowling (age 45) has served as the Company's Vice President, Controller
and Chief Accounting Officer since February 2000. Prior to that, he served as
the Company's Vice President - Finance and Chief Financial Officer from
September 1997 through February 2000; as Vice President and Controller (and
acting Chief Financial Officer) from February 1997 to September 1997; and as
Vice President and Controller from 1995 to 1997. Mr. Nowling has been an officer
of the Company since 1995.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
- -------------------------------------------------------------------------------
The information captioned "Market price per share" and the last two paragraphs
appearing in the Company's 2002 Annual Report to Shareholders (the "2002 Annual
Report") within Note 17 to the Consolidated Financial Statements, entitled
"Quarterly Financial Data", are incorporated herein by this reference. Except as
specifically set forth herein and elsewhere in this Form 10-K, no information
appearing in the 2002 Annual Report is incorporated by reference into this
report, nor is the 2002 Annual Report deemed to be filed, as part of this report
or otherwise, pursuant to the Securities Exchange Act of 1934.
Item 6. Selected Financial Data.
- ---------------------------------
The information appearing in the 2002 Annual Report under the caption "Selected
Financial Data" is incorporated herein by this reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
- --------------------------------------------------------------------------------
The information appearing in the 2002 Annual Report under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" is incorporated herein by this reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
- --------------------------------------------------------------------
The information appearing in the 2002 Annual Report under the caption "Financial
Market Risks" is incorporated herein by this reference.
Item 8. Financial Statements and Supplementary Data.
- -----------------------------------------------------
The financial statements, notes thereto, Report of Independent Public
Accountants thereon and quarterly financial data appearing in the 2002 Annual
Report are incorporated herein by this reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
- --------------------------------------------------------------------------------
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
- ------------------------------------------------------------
The information appearing in the Company's Proxy Statement related to the 2002
Annual Meeting of Stockholders (the "2002 Proxy Statement") under the caption
"Election of Directors" is incorporated herein by this reference, and reference
is made to the information appearing under the heading "Executive Officers of
the Registrant" in Part I hereof.
Item 11. Executive Compensation.
- --------------------------------
The information appearing in the 2002 Proxy Statement under the caption
"Executive Compensation" is incorporated herein by this reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- ------------------------------------------------------------------------
The information appearing in the 2002 Proxy Statement under the captions
"Election of Directors" and "Voting Securities of Certain Beneficial Owners and
Management" is incorporated herein by this reference.
Item 13. Certain Relationships and Related Transactions.
- --------------------------------------------------------
The information appearing in the 2002 Proxy Statement under the caption "Certain
Relationships and Related Transactions" is incorporated herein by this
reference.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
- --------------------------------------------------------------------------
(a) 1. Financial Statements
The following consolidated financial statements of the Company and its
subsidiaries have been incorporated by reference from the 2002 Annual Report
pursuant to Part II, Item 8:
Consolidated Statements of Operations for the three years ended February 28,
2002
Consolidated Balance Sheets as of February 28, 2002 and 2001
Consolidated Statements of Shareholders' Equity for the three years ended
February 28, 2002
Consolidated Statements of Cash Flows for the three years ended February 28,
2002
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
2. Financial Statement Schedules
The following financial statement schedule and Report of Independent Public
Accountants thereon are filed as part of this report on Form 10-K and should be
read in conjunction with the Consolidated Financial Statements.
Schedule Title
-------- ---------------------------------
II Valuation and Qualifying Accounts
Schedules not listed above have been omitted because they are not applicable,
not required, or the information required to be set forth therein is included in
the Consolidated Financial Statements or notes thereto.
3. Exhibits
Exhibits, which are listed on the Exhibit Index, are filed as part of this
report and such Exhibit Index is incorporated by reference. Exhibits 10.1
through 10.23 listed on the accompanying Exhibit Index identify management
contracts or compensatory plans or arrangements required to be filed as exhibits
to this report, and such listing is incorporated herein by reference.
(b) Reports on Form 8-K
No report on Form 8-K was filed during the last quarter of the period covered by
this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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)
By /s/ ANDREW M. CAGGIA
--------------------
Andrew M. Caggia
Senior Vice President and Chief Financial
Officer, and Director
(Principal Financial Officer)
Date: April 26, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated.
Signature and Title Date
/s/ STEVEN J. BILODEAU April 26, 2002
----------------------
Steven J. Bilodeau
Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
/s/ ERIC M. NOWLING April 26, 2002
-------------------
Eric M. Nowling
Vice President - Controller and
Chief Accounting Officer
(Principal Accounting Officer)
/s/ JAMES R. BERRETT April 26, 2002
--------------------
James R. Berrett
Director
/s/ JAMES J. BOYLE April 26, 2002
------------------
James J. Boyle
Director
/s/ ROBERT M. BRILL April 26, 2002
-------------------
Robert M. Brill
Director
/s/ PETER F. DICKS April 26, 2002
------------------
Peter F. Dicks
Director
/s/ IVAN T. FRISCH April 26, 2002
------------------
Ivan T. Frisch
Director
Schedule II - Valuation and Qualifying Accounts
For the Three Years Ended February 28, 2002
(in thousands)
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
of Period Expenses Accounts Deductions Period
---------- ---------- ---------- ---------- ----------
Year Ended February 28, 2002
Allowance for Doubtful Accounts .......... $ 362 $ 88 $ -- $ -- (b) $ 450
Reserve for Product Returns .............. $ 560 $ 1,446 $ -- $ (1,568) (c) $ 438
Year Ended February 28, 2001
Allowance for Doubtful Accounts .......... $ 480 $ -- $ (118) (a) $ -- (b) $ 362
Reserve for Product Returns .............. $ 600 $ 1,325 $ -- $ (1,365) (c) $ 560
Year Ended February 29, 2000
Allowance for Doubtful Accounts .......... $ 1,111 $ 60 $ (691) (a) $ -- (b) $ 480
Reserve for Product Returns .............. $ 700 $ 1,110 $ -- $ (1,210) (c) $ 600
(a) Represents adjustment of reserve balance based upon evaluation of accounts receivable collectibility.
(b) Includes amounts written-off as uncollectible, net of recoveries.
(c) Represents returns of product from customers.
Report of Independent Public Accountants on Financial Statement Schedule
- ------------------------------------------------------------------------
To Standard Microsystems Corporation:
We have audited, in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements included in Standard
Microsystems Corporation and subsidiaries' annual report to shareholders,
incorporated by reference in this Form 10-K, and have issued our report thereon
dated April 4, 2002. Our audits were made for the purpose of forming an opinion
on these statements taken as a whole. The accompanying schedule is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Arthur Andersen LLP
New York, NY
April 4, 2002
EXHIBIT INDEX
Incorporated By Exhibit
Reference To: No. Exhibit
- --------------- -------- -------
Exhibit 3 (a) [1] 3.1 Restated Certificate of Incorporation.
Exhibit 3.1 [11] 3.2 By-Laws, as amended.
Exhibit 1 [12] 4.1 Rights Agreement dated January 7,1998,
with ChaseMellon Shareholder Services
L.L.C., as Rights Agent.
Exhibit 4.2 [7] 4.2 Amendment No. 1 to Rights Agreement,
dated January 23, 2001
Exhibit 3 [13] 4.3 Amendment No. 2 to Rights Agreement,
dated April 9, 2002
Exhibit 10.5 [5] 10.1 Employment Agreement with Steven J.
Bilodeau dated March 18, 1999.
Exhibit 10.5 [6] 10.2 Employment Agreement with Andrew M.
Caggia dated January 7, 2000.
* 10.3 Amendments to Employment Agreements
with Steven J. Bilodeau and Andrew M.
Caggia
Registrant's Proxy
Statement dated June
21, 1991, Exhibit A 10.4 1991 Restricted Stock Bonus Plan.
Registrant's Proxy Statement
dated May 31, 1995,
Exhibit A 10.5 1994 Director Stock Option Plan.
Registrant's Proxy Statement
dated July 11, 2001,
Exhibit B 10.6 2001 Director Stock Option Plan.
* 10.7 Amendment to 2001 Director Stock Option
Plan, dated April 4, 2002
Exhibit 10 (m) [2] 10.8 Resolutions adopted February 18, 1992,
amending Director Stock Option Plan,
1991 Restricted Stock Bonus Plan and
1989 Stock Option Plan.
Registrant's Proxy Statement 10.9 Amendment adopted July 14, 1998,
Dated June 1, 1998, Page 11. amending the1994 Director Stock Option
Plan.
Exhibit 10.14 [4] 10.10 Retirement Plan for Directors.
[15] 10.11 Amendment to Retirement Plan for
Directors.
Registrant's Proxy Statement
dated May 25, 1993,
Exhibit A 10.12 1993 Stock Option Plan for Officers and
Key Employees.
Exhibit 10(x) [3] 10.13 Executive Retirement Plan.
* 10.14 Amendment to Executive Retirement Plan.
Registrant's Proxy Statement
dated May 26, 1994,
Exhibit A 10.15 1994 Stock Option Plan for Officers
and Key Employees.
Exhibit 10.18 [4] 10.16 Resolutions adopted October 31, 1994,
amending the Retirement Plan for
Directors and the Executive Retirement
Plan.
Exhibit 10.19 [4] 10.17 Resolutions adopted January 3, 1995,
amending the 1994, 1993 and 1989 Stock
Option Plans and the 1991 Restricted
Stock Plan.
[14] 10.18 1996 Restricted Stock Bonus Plan.
Registrant's Proxy Statement
Dated June 1, 1998,
Exhibit A 10.19 1998 Stock Option Plan for Officers
and Key Employees.
Registrant's Proxy Statement
dated June 9, 1999,
Exhibit A 10.20 1999 Stock Option Plan for Officers
and Key Employees.
Registrant's Proxy Statement
dated June 6, 2000,
Exhibit A 10.21 2000 Stock Option Plan for Officers
and Key Employees.
Registrant's Proxy Statement
dated July 11, 2001,
Exhibit C 10.22 2001 Stock Option and Restricted Stock
Plan for Officers and Key Employees.
* 10.23 Plan for Deferred Compensation in
Common Stock for Outside Directors,
dated March 4, 1997
Item 7, Exhibit 1 [8] 10.24 Common Stock and Warrant Purchase
Agreement, among SMSC and Intel
Corporation, dated March 18, 1997.
Item 7, Exhibit 3 [8] 10.25 Investor Rights Agreement, among SMSC
and Intel Corporation, dated
March 18, 1997.
Exhibit 1 [9] 10.26 Share Purchase Agreement, among SMSC
and Intel Corporation, dated
March 17, 2000.
Exhibit 10.1 [10] 10.27 Stock Purchase Agreement, dated
September 30, 1997, among Accton
Technology Corporation, Global
Business Investments (B.V.I.) Corp.,
Standard Microsystems Corporation, the
Seller Subsidiaries, and AJJA Inc.
Exhibit 10.2 [10] 10.28 Stockholders Agreement, dated October
7, 1997, among Standard Microsystems
Corporation, Accton Technology
Corporation, Global Business
Investments (B.V.I.) Corp., and AJJA
Inc.
Exhibit 10.4 [10] 10.29 Intellectual Property License
Agreement, dated October 7, 1997,
between Standard Microsystems
Corporation and AJJA Inc.
* 13 Portions of Annual Report to
Shareholders for year ended
February 28, 2002, incorporated by
reference.
* 21 Subsidiaries of the Registrant
* 23 Consent of Arthur Andersen LLP
* 99 Letter from the Registrant to the
Securities and Exchange Commission
related to Arthur Andersen LLP
* Filed herewith.
[1] Registrant's Annual Report on Form 10-K for fiscal year ended February 28,
1991.
[2] Registrant's Annual Report on Form 10-K for fiscal year ended February 29,
1992.
[3] Registrant's Annual Report on Form 10-K for fiscal year ended February 28,
1994.
[4] Registrant's Annual Report on Form 10-K for fiscal year ended February 28,
1995.
[5] Registrant's Annual Report on Form 10-K for fiscal year ended February 28,
1999.
[6] Registrant's Annual Report on Form 10-K for fiscal year ended February 29,
2000.
[7] Registrant's Annual Report on Form 10-K for fiscal year ended February 28,
2001.
[8] Schedule 13D filed by Intel Corporation, dated March 27, 1997.
[9] Schedule 13D/A filed by Intel Corporation, dated March 22, 2000.
[10] Registrant's Current Report on Form 8-K dated October 7, 1997.
[11] Registrant's Current Report on Form 8-K dated April 10, 2002.
[12] Registrant's Registration Statement on Form 8-A dated January 15, 1998.
[13] Registrant's Registration Statement on Form 8-A/A dated April 10, 2002.
[14] Registrant's Board of Directors resolution dated November 26, 1996,
authorizing the Registrant to grant awards of up to 350,000 shares of
common stock to employees, similar to those awards provided by the 1991
Restricted Stock Bonus Plan.
[15] Registrant's Board of Directors resolution dated October 17, 2000,
discontinuing accruals under the Retirement Plan for Directors, and
allowing each director an election to receive the cash benefit following
the director's retirement, or to receive a three-year restricted stock
award equal in present value to the director's accrued retirement benefit.