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SMSC REPORTS 25% YEAR-OVER-YEAR INCREASE IN FIRST
QUARTER FISCAL 2007 SALES
 Earnings Exceed Prior Expectations
 Hauppauge, NY  July 10, 2006




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SMSC turned in a quarter of
impressive year-over-year growth. Revenues increased by 25% from the same period last year due to
strong design ramps and consumer market penetration. GAAP operating income as a percentage of sales
was 12% and net income per diluted share was $0.37. On a non-GAAP basis, operating income was 10.6%
of sales and net income per diluted share was $0.33, exceeding the Companys prior estimate.
 The revenue growth in Consumer Electronics and Infotainment markets more than offset softness in
the PC market. We anticipate sequential growth in each of our market verticals in the second
quarter, and we still expect that SMSC will substantially outgrow the overall semiconductor market
again this year.
  www.smsc.com
 About SMSC:




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www.smsc.com
 Forward Looking Statements:
   Use of Non-GAAP Financial Information




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SMSC is a registered trademark of Standard Microsystems Corporation.
 Contact:       carolynne.borders@smsc.com




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STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS (Unaudited)
 (in thousands, except per share amounts)
 Three Months EndedMay 31,2006
    
    2005Revenues
    
    $
    86,144
    
    
    $
    68,807Costs and expenses:Cost of goods sold
    
    
    44,914
    
    
    
    36,492Research and development
    
    
    15,168
    
    
    
    12,966Selling, general and administrative
    
    
    13,803
    
    
    
    13,591Amortization of intangible assets
    
    
    1,569
    
    
    
    1,153In-process research and development
    
    
    
    
    
    
    895Income from operations
    
    
    10,690
    
    
    
    3,710Interest income
    
    
    1,146
    
    
    
    723Interest expense
    
    
    (32
    )
    
    
    (21
    )Other expense, net
    
    
    (63
    )
    
    
    (26
    )Income before provision for income taxes
    
    
    11,741
    
    
    
    4,386Provision for income taxes
    
    
    3,108
    
    
    
    1,359Net income
    
    $
    8,633
    
    
    $
    3,027Basic net income per share:
    
    $
    0.40
    
    
    $
    0.15Diluted net income per share:
    
    $
    0.37
    
    
    $
    0.15Weighted average common shares outstanding:Basic
    
    
    21,824
    
    
    
    20,066Diluted
    
    
    23,147
    
    
    
    20,476




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STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP AND NON-GAAP CONSOLIDATED FINANCIAL DATA (Unaudited)
 (In thousands, except per share amounts)
 Three Months Ended May 31,2006
    
    2005GAAP
    
    Adjustment
    
    Non-GAAP
    
    GAAP
    
    Adjustment
    
    Non-GAAPSales and revenues
    
    $
    86,144
    
    
    $
    
    
    
    $
    86,144
    
    
    $
    68,807
    
    
    $
    
    
    
    $
    68,807Costs and expenses:Cost of goods sold
    
    
    44,914
    
    
    
    488
    (f)
    
    
    45,402
    
    
    
    36,492
    
    
    
    (605
    )(a)
    
    
    35,887Research and development
    
    
    15,168
    
    
    
    534
    (f)
    
    
    15,702
    
    
    
    12,966
    
    
    
    32
    (b)
    
    
    12,998Selling, general and administrative
    
    
    13,803
    
    
    
    2,078
    (f)
    
    
    15,881
    
    
    
    13,591
    
    
    
    85
    (b)
    
    
    13,676Amortization of intangible assets
    
    
    1,569
    
    
    
    (1,569
    )(d)
    
    
    
    
    
    
    1,153
    
    
    
    (1,153
    )(d)In-process research and development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    895
    
    
    
    (895
    )(c)
    
    
    Income from operations
    
    
    10,690
    
    
    
    (1,531
    )
    
    
    9,159
    
    
    
    3,710
    
    
    
    2,536
    
    
    
    6,246Interest income
    
    
    1,146
    
    
    
    
    
    
    
    1,146
    
    
    
    723
    
    
    
    
    
    
    
    723Interest expense
    
    
    (32
    )
    
    
    
    
    
    
    (32
    )
    
    
    (21
    )
    
    
    
    
    
    
    (21
    )Other income (expense), net
    
    
    (63
    )
    
    
    
    
    
    
    (63
    )
    
    
    (26
    )
    
    
    
    
    
    
    (26
    )Income before provision for income taxes
    
    
    11,741
    
    
    
    (1,531
    )
    
    
    10,210
    
    
    
    4,386
    
    
    
    2,536
    
    
    
    6,922Provision for income taxes
    
    
    3,108
    
    
    
    (459
    )(e)
    
    
    2,649
    
    
    
    1,359
    
    
    
    954
    (e)
    
    
    2,313Net income
    
    
    8,633
    
    
    
    (1,072
    )
    
    
    7,561
    
    
    
    3,027
    
    
    
    582
    
    
    
    4,609Basic net income per share
    
    $
    0.40
    
    
    
    
    
    
    $
    0.35
    
    
    $
    0.15
    
    
    
    
    
    
    $
    0.23Diluted net income per share
    
    $
    0.37
    
    
    
    
    
    
    $
    0.33
    
    
    $
    0.15
    
    
    
    
    
    
    $
    0.23Weighted average common shares outstanding:Basic
    
    
    21,824
    
    
    
    
    
    
    
    21,824
    
    
    
    20,066
    
    
    
    
    
    
    
    20,066Diluted
    
    
    23,147
    
    
    
    
    
    
    
    23,147
    
    
    
    20,476
    
    
    
    
    
    
    
    20,476
 
 (a)
    
    The adjustment to Cost of goods sold includes $614 to remove the impact of writing up the cost of inventory at the
date of the OASIS acquisition over OASIS original cost of the inventory. That write up only impacted GAAP Cost of goods sold for
the turnover period of the OASIS inventory at the date of acquisition. That turnover period concluded in the quarter ending November 30, 2005.
The additional $9 offsetting adjustment to Cost of goods sold is to remove the non-cash impact of the provision to adjust Stock Appreciation Rights
(SARs) to market value as a result of the increase in SMSCs stock price in the quarter.(b)
    
    The adjustments to Research & development and Selling, general & administrative expense are to remove the impact of the provision to adjust Stock
Appreciation Rights (SARs) to market value as a result of the increase in SMSCs stock price in the quarter.(c)
    
    The adjustment to In-process research and development is to remove the cost of in-process research
and development that was purchased in the OASIS acquisition and immediately expensed.(d)
    
    The adjustments to Amortization of intangible assets are related to the fiscal 2006 OASIS Acquisition and the fiscal 2003 acquisition of
Gain Technology Corporation (Gain).(e)
    
    The adjustments to the Provision for income taxes was determined by applying the appropriate incremental tax rates to the
adjustments described in notes (a) through (f).(f)
    
    The adjustments to Cost of goods sold, Research & development and Selling, general & administrative expense are to remove the impact of the
provision
to recognize Stock Appreciation Rights (SARs) and employee stock options at fair value as a result of the Companys adoption of FASB
Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), Share-Based Payment (SFAS 123R), effective March 1, 2006.
The company does not remove the charges under FAS 123R related to restricted stock awards in its non-GAAP presentation because they relate to
normally recurring employee bonus compensation.
As SARs are exercised, the actual cash cost of SARs is included within non-GAAP operating measures. Cash paid in connection with SARs totaled
$31k, $12k of which was included in Research & development and $19k included in Selling, general and administrative expenses.




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STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
 (in thousands)
 May 31,
    
    February 28,2006
    
    2006AssetsCurrent assets:Cash and cash equivalents
    
    $
    24,500
    
    
    $
    43,932Short-term investments
    
    
    105,023
    
    
    
    111,101Accounts receivable, net
    
    
    44,033
    
    
    
    39,802Inventories
    
    
    49,574
    
    
    
    41,861Deferred income taxes
    
    
    16,974
    
    
    
    17,457Other current assets
    
    
    10,001
    
    
    
    5,651Total current assets
    
    
    250,105
    
    
    
    259,804Property, plant and equipment, net
    
    
    45,928
    
    
    
    38,140Goodwill
    
    
    96,987
    
    
    
    94,606Intangible assets, net
    
    
    44,262
    
    
    
    44,039Deferred income taxes
    
    
    6,644
    
    
    
    8,307Other assets
    
    
    3,090
    
    
    
    3,314$
    447,016
    
    
    $
    448,210Liabilities and shareholders equityCurrent liabilities:Accounts payable
    
    $
    30,275
    
    
    $
    27,220Deferred income on shipments to distributors
    
    
    15,007
    
    
    
    13,205Accrued consideration payable pursuant to business acquisition agreement
    
    
    
    
    
    
    17,750Accrued expenses, income taxes and other liabilities
    
    
    26,364
    
    
    
    28,919Total current liabilities
    
    
    71,646
    
    
    
    87,094Deferred income taxes
    
    
    10,273
    
    
    
    9,817Other liabilities
    
    
    14,212
    
    
    
    17,330Shareholders equity:Preferred stock
    
    
    
    
    
    
    Common stock
    
    
    2,427
    
    
    
    2,400Additional paid-in capital
    
    
    255,199
    
    
    
    250,792Retained earnings
    
    
    121,275
    
    
    
    112,642Treasury stock, at cost
    
    
    (30,286
    )
    
    
    (25,961
    )Deferred stock-based compensation
    
    
    
    
    
    
    (3,953
    )Accumulated other comprehensive income (loss)
    
    
    2,270
    
    
    
    (1,951
    )Total shareholders equity
    
    
    350,885
    
    
    
    333,969$
    447,016
    
    
    $
    448,210