Third Quarter Fiscal 2008 Results:
-- Net Sales of $167.6 Million, up 2% from the previous quarter
-- Gross Profit of $27.8 Million, down 15% from the previous quarter
-- GAAP diluted EPS of ($0.18), vs. $0.18 in the previous quarter
-- Non-GAAP diluted EPS of $0.05, vs. $0.18 in the previous quarter
Net sales for the third quarter of fiscal 2008 were $167.6 million, up 2%
compared to $164.5 million for the second quarter of fiscal 2008, and down
11% compared to $189.2 million for the third quarter of fiscal 2007.
Gross profit for the third quarter of fiscal 2008 was $27.8 million, down
15% compared to $32.8 million for the second quarter of fiscal 2008, and
down 25% compared to $37.3 million for the third quarter of fiscal 2007.
GAAP net income for the third quarter of fiscal 2008 was ($11.0) million,
or ($0.18) per share, compared to GAAP net income of $11.3 million, or
$0.18 per diluted share for the second quarter of fiscal 2008, and $14.6
million, or $0.23 per diluted share for the third quarter of fiscal 2007.
Non-GAAP net income for the third quarter of fiscal 2008 was $3.0 million,
or $0.05 per diluted share, compared to non-GAAP net income of $11.3
million, or $0.18 per diluted share for the second quarter of fiscal 2008,
and $14.6 million, or $0.23 per diluted share for the third quarter of
fiscal 2007. Non-GAAP net income for the third quarter of fiscal 2008
excludes approximately $4.4 million, or $0.07 per diluted share related to
the in-process R&D accounting charge associated with the acquisition of
Adtron, and approximately $9.6 million, or $0.15 per diluted share related
to an increase in our tax provision necessary to fully reserve U.S.-based
deferred tax assets on the balance sheet. While the Company generated
profits from the U.S. portion of its business in fiscal years 2006 and
2007, the Company is now projecting a loss from its U.S. business in fiscal
2008, resulting in a cumulative loss for its U.S. business for fiscal years
2006 through 2008 and necessitating the tax provision increase. However,
on a worldwide, consolidated basis, the Company projects a profit for
fiscal 2008. Please refer to the "Non-GAAP Information" below for further
detail.
SMART ended the third quarter of fiscal 2008 with $117.3 million in cash
and cash equivalents, compared to $155.0 million at the end of the second
quarter of fiscal 2008, principally due to the cash used to acquire Adtron.
"As we announced in our press release of May 20, 2008, our results this
quarter were primarily impacted by the prolonged effect of the difficult
pricing environment faced by the DRAM industry over the past several
quarters and the resulting loss of lower density memory module sales to
certain semiconductor companies," commented Iain MacKenzie, President and
CEO of SMART. "With the recent introduction of AMD's Barcelona platform,
and the expected release of Intel's Nehalem-based platform early next year,
we are now seeing demand materialize for qualification samples of our high
density 8GB memory modules. We believe that we'll have a strong position
in the ramp-up of this business because of our broad product portfolio of
high density memory modules and the expected narrowing of the
price/performance gap between 2 to 4 GB modules and 8GB modules. We remain
focused on high value-add solutions across a full spectrum of DRAM module
businesses where we can leverage our technical expertise and global
manufacturing capabilities, a strategy that has served us well during this
challenging time in the DRAM market."
"Beyond our core memory business, in the third fiscal quarter, we grew our
non-DRAM business. For the third fiscal quarter, sales of our non-DRAM
products increased to 19% of total net sales. Our acquisition of Adtron,
which closed in March, positions us to excel in the fast growing segment of
the solid state storage (SSD) market, which is a key part of our overall
growth and diversification strategy. In particular, we announced in April
the release of our industrial-grade 2.5-inch SSD with Adtron. With the
latest 8Gb Flash technology, these new drives enable us to deliver an even
wider range of industrial-grade applications targeted for the defense and
industrial markets. In addition, they provide a foundation for higher
performance SSDs that we expect to release in the coming months. SMART's
Display and Embedded products continued to gain traction, particularly in
the kiosk and signage markets with high interest and continued testing of
our newly available samples of the new XceedPC/Dx family of embedded
computers. We believe that this positive customer interaction
substantiates that the feature set and price positioning of the XceedPC/Dx
resonate with customers in our target market segments," continued Mr.
MacKenzie.
"We remain confident in our ability to execute on our growth and
diversification strategies and believe we are positioned well for the long
term due to our leadership position in the high end, high value memory
module business, a recovery of the DRAM market, and continued traction in
our non-DRAM business," concluded Mr. MacKenzie.
Business Outlook
The following statements are based upon management's current expectations.
These statements are forward-looking, and actual results may differ
materially. The Company undertakes no obligation to update these
statements.
For the fourth quarter of fiscal 2008, SMART estimates net sales will be in
the range of $160 to $170 million, gross profit will be in the range of $27
to $29 million, and GAAP diluted net income per share will be in the range
of $0.06 to $0.07. The shares used in computing diluted net income per
ordinary share are estimated to be in the range of 63.4 million to 64.0
million.
Conference Call Details
SMART's third quarter, fiscal 2008 teleconference and webcast is scheduled
to begin at 1:30 p.m. Pacific Daylight Time (PDT), or 4:30 p.m. Eastern
Daylight Time (EDT), on Thursday, June 19, 2008. The call may be accessed
U.S. toll free by calling (800) 218-8862 or U.S. toll by calling (303)
262-2050. Please join the conference call at least ten minutes early in
order to register. The passcode for the call is "SMART." SMART will also
offer a live and archived webcast of the conference call, accessible from
the Company's website at www.smartm.com. A telephonic replay of the
conference call will be available through midnight PDT, July 3, 2008, by
dialing (800) 405-2236 and enter the passcode 11115129#. Callers outside
the U.S. and Canada may access the replay by dialing (303) 590-3000.
Forward-Looking Statements
Statements contained in this press release, including the quotations
attributed to Mr. MacKenzie, that are not statements of historical fact,
including any statements that use the words "will," "believes,"
"anticipates," "estimates," "expects," "intends" or similar words that
describe the company's or its management's future plans, objectives, or
goals, are "forward-looking statements" and are made pursuant to the
safe-harbor provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements include those related to the
Company's financial performance, technical capabilities, business
strategies and product plans, and the market for the Company's products.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that could cause the actual results of the
Company to be materially different from the historical results and/or from
any future results or outcomes expressed or implied by such forward-looking
statements. Factors that would cause or contribute to such differences
include, but are not limited to, the post-closing integration of the
businesses and product lines of SMART and Adtron, production or
manufacturing difficulties, competitive factors, new products and
technological changes, fluctuations in product prices and raw material
costs, dependence upon third-party vendors, customer demand, changes in
industry standards or release plans, and other risks detailed in the
Company's periodic report filings with the Securities and Exchange
Commission, including the Company's Form 10-K for the fiscal year ended
August 31, 2007, its Form 10-Q for the quarter ended November 30, 2007,
Form 10-Q for the quarter ended February 29, 2008, and its Form 10-Q for
the quarter ended May 30, 2008, to be filed with the SEC. Such risk factors
as outlined in these reports may not constitute all factors that could
cause actual results to differ materially from those discussed in any
forward-looking statement. The Company operates in a continually changing
business environment and new factors emerge from time to time. The Company
cannot predict such factors, nor can it assess the impact, if any, from
such factors on the company or its results. Accordingly, forward-looking
statements should not be relied upon as a prediction of actual results. The
Company is not obligated to revise or update any forward-looking statements
in order to reflect events or circumstances that may arise after the date
of this press release.
Non-GAAP Information
Certain non-GAAP financial measures are included in this press release,
including non-GAAP net income and non-GAAP diluted net income per ordinary
share. Non-GAAP financial results do not include restructuring costs,
impairment charges and other infrequent or unusual items. These non-GAAP
financial measures are provided to enhance the user's overall understanding
of our financial performance. By excluding these charges, as well as the
related tax effects, our non-GAAP results provide information to management
and investors that is useful in assessing SMART's core operating
performance and in evaluating and comparing our results of operations on a
consistent basis from period to period. These non-GAAP financial measures
are also used by management to evaluate financial results and to plan and
forecast future periods. The presentation of this additional information
is not meant to be a substitute for the corresponding financial measures
prepared in accordance with generally accepted accounting principles.
Investors are encouraged to review the reconciliations of GAAP to non-GAAP
financial measures, which are included below.
(Unaudited)
(In thousands)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
May 30, June 1, May 30, June 1,
2008 2007 2008 2007
----------- ----------- ----------- -----------
Net (loss) income $ (11,003) $ 14,556 $ 13,347 $ 43,066
Add:
Deferred tax assets
valuation allowance
increase, net of tax 9,630 -- 9,630 --
One-time charge to
In-process R&D expenses
related to Adtron
acquisition, (no tax
effect) 4,400 -- 4,400 --
----------- ----------- ----------- -----------
Non-GAAP net income $ 3,027 $ 14,556 $ 27,377 $ 43,066
=========== =========== =========== ===========
Non-GAAP diluted net
income per ordinary share $ 0.05 $ 0.23 $ 0.43 $ 0.68
=========== =========== =========== ===========
Shares used in computing
diluted net income per
ordinary share 63,449 63,894 63,606 63,725
=========== =========== =========== ===========
About SMART
SMART is a leading independent designer, manufacturer and supplier of
electronic subsystems to original equipment manufacturers, or OEMs. SMART
offers more than 500 standard and custom products to OEMs engaged in the
computer, industrial, networking, gaming, telecommunications, and embedded
application markets. Taking innovations from the design stage through
manufacturing and delivery, SMART has developed a comprehensive memory
product line that includes DRAM, SRAM, and Flash memory in various form
factors. Through its subsidiary, Adtron Corporation, SMART offers high
performance, high capacity solid state drives for enterprise,
defense/aerospace, industrial automation, medical, and transportation
markets. Its Embedded Products Division develops embedded computing
subsystems, backed by design and manufacturing, for markets supporting test
equipment, 3G infrastructure, and network processing applications. SMART's
Display Products Group designs, manufactures, and sells thin film
transistors (TFT) liquid crystal display (LCD) solutions to customers
developing casino gaming systems as well as embedded applications such as
kiosk, ATM, point-of-service, and industrial control systems. SMART's
presence in the U.S., Europe, Asia, and Latin America enables it to provide
its customers with proven expertise in international logistics, asset
management, and supply-chain management worldwide. See www.smartm.com for
more information.
SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
May 30, June 1, May 30, June 1,
2008 2007 2008 2007
---------- ---------- ---------- ----------
(In thousands, except per share data)
Net sales (1) $ 167,615 $ 189,247 $ 509,485 $ 675,958
Cost of sales (1)(2) 139,803 151,941 413,846 559,591
---------- ---------- ---------- ----------
Gross profit 27,812 37,306 95,639 116,367
---------- ---------- ---------- ----------
Research and development 5,418 4,107 14,727 12,597
Selling, general and
administrative 15,393 14,207 44,785 45,217
In-process research and
development charge 4,400 -- 4,400 --
---------- ---------- ---------- ----------
Total operating expenses 25,211 18,314 63,912 57,814
---------- ---------- ---------- ----------
Income from operations 2,601 18,992 31,727 58,553
Interest expense, net (1,468) (1,775) (3,819) (6,198)
Other income, net 255 696 2,050 360
---------- ---------- ---------- ----------
Total other expense, net (1,213) (1,079) (1,769) (5,838)
---------- ---------- ---------- ----------
Income before provision for
income taxes 1,388 17,913 29,958 52,715
Provision for income taxes 12,391 3,357 16,611 9,649
---------- ---------- ---------- ----------
Net income (loss)(2) $ (11,003) $ 14,556 $ 13,347 $ 43,066
========== ========== ========== ==========
Net income (loss) per
ordinary share, basic $ (0.18) $ 0.24 $ 0.22 $ 0.73
========== ========== ========== ==========
Shares used in computing
basic net income (loss)
per ordinary share 61,027 60,015 60,864 59,359
========== ========== ========== ==========
Net income (loss) per
ordinary share, diluted $ (0.18) $ 0.23 $ 0.21 $ 0.68
========== ========== ========== ==========
Shares used in computing
diluted net income (loss)
per ordinary share 61,027 63,894 63,606 63,725
========== ========== ========== ==========
(1) The consolidated statements of operations for the nine months ended
June 1, 2007 and May 30, 2008 have been revised to increase both net sales
and cost of sales by $13,173 thousand and $7,353 thousand, respectively, to
correct immaterial classification errors in fiscal years 2007 and 2008.
The consolidated statement of operations for the three months ended June 1,
2007 has been revised to increase both net sales and cost of sales by
$2,768 thousand to correct immaterial classification errors for that
period.
(2) The consolidated statements of operations for the nine months
ended June 1, 2007 and May 30, 2008 have been revised to reflect decreases
of $360 thousand and $1,594 thousand, respectively, in cost of sales, to
correct immaterial errors in fiscal years 2007 and 2008. The consolidated
statement of operations for the three months ended June 1, 2007 has been
revised to reflect a decrease of $372 thousand in cost of sales to correct
immaterial errors for that period.
SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
May 30, August 31,
2008 2007
----------- -----------
(In thousands)
ASSETS
Cash and cash equivalents $ 117,299 $ 144,147
Accounts receivable, net of allowances of $1,733
and $2,253 as of May 30, 2008 and August 31,
2007, respectively 186,437 184,391
Inventories 68,028 65,105
Prepaid expenses and other current assets 11,088 8,217
----------- -----------
Total current assets 382,852 401,860
Property and equipment, net 38,927 33,588
Goodwill 9,471 3,187
Other non-current assets 13,362 14,442
----------- -----------
Total assets $ 444,612 $ 453,077
=========== ===========
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable (1) $ 99,647 $ 127,203
Accrued expenses and other current liabilities 17,731 24,043
----------- -----------
Total current liabilities 117,378 151,246
Long-term debt 81,250 81,250
Other long-term liabilities 1,583 -
----------- -----------
Total liabilities 200,211 232,496
----------- -----------
Shareholders’ equity:
Ordinary shares 10 10
Additional paid-in capital 98,388 92,250
Deferred stock-based compensation (162) (335)
Accumulated other comprehensive income 10,016 6,083
Retained earnings (1) 136,149 122,573
----------- -----------
Total shareholders’ equity 244,401 220,581
----------- -----------
Total liabilities and shareholders’ equity $ 444,612 $ 453,077
=========== ===========
(1) The consolidated balance sheet as of August 31, 2007 has been revised
to reflect a decrease of $4,734 thousand in accounts payable and a
corresponding increase in retained earnings to correct immaterial errors
related to an over-accrual of accounts payable as of the end of fiscal year
2007.
Contact Information: For More Information Investor Contact: Suzanne Craig The Blueshirt Group for SMART Modular Technologies 415-217-7722