-- Net sales of $160.1 million -- Gross profit of $42.0 million -- GAAP diluted EPS of $0.25 -- Non-GAAP diluted EPS of $0.23 -- Adjusted EBITDA of $28.4 millionNet sales for the second quarter of fiscal 2010 were $160.1 million, compared to $123.1 million for the first quarter of fiscal 2010, and $109.1 million for the second quarter of fiscal 2009. Gross profit for the second quarter of fiscal 2010 was $42.0 million, compared to $28.8 million for the first quarter of fiscal 2010, and $24.1 million for the second quarter of fiscal 2009. On a GAAP basis, net income for the second quarter of fiscal 2010 was $16.1 million, or $0.25 per diluted share, compared to net income of $4.6 million, or $0.07 per diluted share for the first quarter of fiscal 2010, and a net loss of $1.9 million, or a net loss of $0.03 per share for the second quarter of fiscal 2009. On a non-GAAP basis, net income was $14.9 million or $0.23 per diluted share for the second quarter of fiscal 2010, compared to net income of $5.4 million, or $0.08 per diluted share for the first quarter of fiscal 2010, and net income of $4.1 million, or $0.06 per diluted share for the second quarter of fiscal 2009. Adjusted EBITDA for the second quarter of fiscal 2010 was $28.4 million, compared to $15.0 million for the first quarter of fiscal 2010, and $10.2 million for the second quarter of fiscal 2009. Please refer to the Non-GAAP Information section and the "Reconciliation of Non-GAAP Financial Measures" table below for further detail on non-GAAP net income and Adjusted EBITDA. "In the second quarter of fiscal 2010 we saw robust demand for our products and services, driven by improvement in the overall economy and an improved DRAM pricing environment," commented Iain MacKenzie, President and CEO of SMART. "This increased demand, coupled with our operating leverage and efficient cost structure, is driving better financial performance. In the future we expect to benefit from the progress we are making in the expansion of our capacity in Brazil and Malaysia, and from our investment in Flash packaging in Brazil, which is targeted for launch in the early part of our fiscal 2011. In addition, we are ramping up our investment in our growing enterprise solid state storage business." 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 third quarter of fiscal 2010, SMART estimates net sales will be in the range of $175 million to $185 million, gross profit in the range of $38 million to $42 million, and net income per diluted share in the range of $0.15 to $0.19 on a GAAP basis. On a non-GAAP basis, SMART estimates net income per diluted share will be in the range of $0.18 to $0.22. The guidance for the third quarter of fiscal 2010 includes an income tax provision estimated in the range of $7.8 million to $8.4 million. Please refer to the Non-GAAP Information section and the "Reconciliation of Q3-10 Guidance for Non-GAAP Financial Measures" table below for further detail. Conference Call Details SMART's second quarter fiscal 2010 teleconference and webcast is scheduled to begin at 1:30 p.m. Pacific Time (PT), or 4:30 p.m. Eastern Time (ET), on Thursday, March 25, 2010. The call may be accessed U.S. toll free by calling (877) 941-4774 or U.S. toll by calling (480) 629-9760. Please join the conference call at least ten minutes early in order to register. The access code is 4250622. SMART will also offer a live and archived webcast of the conference call, accessible from the Company's website at http://www.smartm.com. A telephonic replay of the conference call will be available through midnight PT, April 8, 2010, by dialing (303) 590-3030 and entering passcode 4250622#. Forward-Looking Statements Statements contained in this press release, or in the teleconference or webcast, 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 expectations, 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 projections regarding the Company's financial performance and solid state storage growth strategy, benefits associated with operational efficiencies, the DRAM market, new product introductions, expansion of capacity in Brazil and Asia, launch of Flash packaging in Brazil, and customer demand for 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, production or manufacturing difficulties, competitive factors, new products and technological changes, difficulties with or delays in the introduction of new products, fluctuations in product prices and raw material costs and availability, dependence upon third-party vendors, customer demand, changes in industry standards or release plans, fluctuations in the quarterly effective tax rate and related tax provision, higher than anticipated costs from increasing capacity, changes in foreign currency exchange rates, intellectual property disputes and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission including the Company's recently filed Annual Report on Form 10-K for fiscal 2009 and its Quarterly Report on Form 10-Q for the quarter ended November 27, 2009. 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, our future results may differ materially from projections and investors are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements should not be relied upon as a prediction of actual results. These forward-looking statements are made as of today, and the Company does not currently intend, and has no obligation, to update or revise 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 Adjusted EBITDA, non-GAAP net income and non-GAAP net income per diluted share. We define Adjusted EBITDA as GAAP net income (loss) plus net interest expense, income tax expense, depreciation and amortization expense, goodwill impairment charges, restructuring charges, stock-based compensation expense, and other infrequent or unusual items, less net gain on repurchase of notes and receipt from legal settlement. Adjusted EBITDA is not a measure of financial performance calculated in accordance with U.S. GAAP, and should be viewed as a supplement to, not a substitute for, our results of operations presented on the basis of U.S. GAAP. Adjusted EBITDA also does not purport to represent cash flow provided by, or used in, operating activities in accordance with U.S. GAAP and should not be used as a measure of liquidity. Non-GAAP financial results do not include stock-based compensation expense, restructuring charges, goodwill impairment charges, net gain on repurchase of notes, receipt from legal settlement 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 and gains, as well as any 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. In addition, these measures may not be used similarly by other companies and therefore may not be comparable between companies. Investors are encouraged to review the reconciliations of GAAP to non-GAAP financial measures, which are included below. 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, defense, aerospace 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. SMART also offers high performance, high capacity solid state drives (SSDs) for enterprise, defense, aerospace, industrial automation, medical, and transportation markets. 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
Reconciliation of Non-GAAP Financial Measures
(In thousands, except per share data; unaudited)
Three Months Ended Six Months Ended
--------------------------------- --------------------
February November February February February
26, 27, 27, 26, 27,
2010 2009 2009 2010 2009
--------- --------- --------- --------- ---------
Net income (loss) $ 16,092 $ 4,582 $ (1,850) $ 20,674 $ (8,728)
Add:
Stock-based
compensation
expense charged
to operating
expense,
net of tax 1,827 1,635 1,787 3,462 3,562
Gain on legal
settlement, no
tax effect (3,044) - - (3,044) -
Gain on
repurchase of
notes, no tax
effect - (1,178) - (1,178) -
Loan fees
written off on
repurchase of
notes, no
tax effect - 353 - 353 -
Goodwill
impairment, no
tax effect - - 3,206 - 10,416
Restructuring
charges, net of
tax - - 925 - 1,811
--------- --------- --------- --------- ---------
Non-GAAP net
income $ 14,875 $ 5,392 $ 4,068 $ 20,267 $ 7,061
========= ========= ========= ========= =========
Non-GAAP net
income per
diluted share $ 0.23 $ 0.08 $ 0.06 $ 0.31 $ 0.11
========= ========= ========= ========= =========
Shares used in
computing
non-GAAP net
income per
diluted share: 65,010 64,016 63,326 64,513 63,328
========= ========= ========= ========= =========
Net income (loss) $ 16,092 $ 4,582 $ (1,850) $ 20,674 $ (8,728)
Interest
expense, net 1,163 1,663 * 1,698 2,826 3,450
Income taxes 8,433 4,717 1,263 13,150 3,440
Depreciation and
amortization 3,912 3,617 3,116 7,529 6,444
--------- --------- --------- --------- ---------
EBITDA 29,600 14,579 4,227 44,179 4,606
Adjustments:
Stock-based
compensation
expense charged
to operating
expense 1,839 1,646 1,800 3,485 3,587
Gain on legal
settlement (3,044) - - (3,044) -
Gain on
repurchase of
notes - (1,178) - (1,178) -
Goodwill
impairment - - 3,206 - 10,416
Restructuring
charges - - 935 - 1,821
--------- --------- --------- --------- ---------
Adjusted EBITDA $ 28,395 $ 15,047 $ 10,168 $ 43,442 $ 20,430
========= ========= ========= ========= =========
* Includes $353K of loan fees written off on repurchase of notes.
Reconciliation of Q3-10 Guidance for Non-GAAP Financial Measures
(In millions, except per share data; unaudited)
Three Months Ending May 28, 2010
--------------------------------------------
GAAP Non-GAAP
Range of Range of
Estimates Estimates
------------- -------------
From To Adjustments From To
------ ------ ------------ ------ ------
Net income $ 10.0 $ 12.5 $ 1.9 (a) $ 11.9 $ 14.4
====== ====== ====== ======
Net income per diluted share $ 0.15 $ 0.19 $ 0.18 $ 0.22
====== ====== ====== ======
Shares used in computing net
income per diluted share 65.5 65.5 65.5 65.5
====== ====== ====== ======
(a) Reflects estimated adjustment for stock-based compensation expense.
SMART Modular Technologies (WWH), Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data; unaudited)
Three Months Ended Six Months Ended
-------------------- --------------------
February February February February
26, 27, 26, 27,
2010 2009 2010 2009
--------- --------- --------- ---------
Net sales $ 160,110 $ 109,089 $ 283,203 $ 249,864
Cost of sales 118,097 85,022 212,424 199,981
--------- --------- --------- ---------
Gross profit 42,013 24,067 70,779 49,883
Operating expenses:
Research and development 5,219 5,142 10,949 10,578
Selling, general and
administrative 14,331 13,782 27,697 28,249
Goodwill impairment - 3,206 - 10,416
Restructuring charges - 935 - 1,821
--------- --------- --------- ---------
Total operating expenses 19,550 23,065 38,646 51,064
--------- --------- --------- ---------
Income (loss) from
operations 22,463 1,002 32,133 (1,181)
Interest expense, net (1,163) (1,698) (2,826) (3,450)
Other income (expense), net 3,225 109 4,517 (657)
--------- --------- --------- ---------
Total other income
(expense) 2,062 (1,589) 1,691 (4,107)
--------- --------- --------- ---------
Income (loss) before provision
for income taxes 24,525 (587) 33,824 (5,288)
Provision for income taxes 8,433 1,263 13,150 3,440
--------- --------- --------- ---------
Net income (loss) $ 16,092 $ (1,850) $ 20,674 $ (8,728)
========= ========= ========= =========
Net income (loss) per share,
basic $ 0.26 $ (0.03) $ 0.33 $ (0.14)
========= ========= ========= =========
Net income (loss) per share,
diluted $ 0.25 $ (0.03) $ 0.32 $ (0.14)
========= ========= ========= =========
Shares used in computing net
income (loss) per ordinary
share 62,211 61,673 62,092 61,595
========= ========= ========= =========
Shares used in computing net
income (loss) per diluted
share 65,010 61,673 64,513 61,595
========= ========= ========= =========
SMART Modular Technologies (WWH), Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
February 26, August 28,
2010 2009
------------ ------------
ASSETS (In thousands)
Current assets:
Cash and cash equivalents $ 118,675 $ 147,658
Accounts receivable, net of allowances of
$884 and $1,591 as of February 26, 2010 and
August 28, 2009 181,481 130,953
Inventories 90,443 63,115
Prepaid expense and other current assets 16,839 12,628
------------ ------------
Total current assets 407,438 354,354
Property and equipment, net 37,054 36,263
Goodwill 1,061 1,061
Other intangible assets, net 6,940 7,475
Other non-current assets 6,489 4,585
------------ ------------
Total assets $ 458,982 $ 403,738
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 117,445 $ 68,928
Accrued expenses and other current liabilities 25,867 16,615
------------ ------------
Total current liabilities 143,312 85,543
Long-term debt 55,072 81,250
Other long-term liabilities 1,069 2,120
------------ ------------
Total liabilities 199,453 168,913
------------ ------------
Shareholders' equity:
Ordinary shares 10 10
Additional paid in capital 113,400 109,264
Accumulated other comprehensive income 4,227 4,333
Retained earnings 141,892 121,218
------------ ------------
Total shareholders' equity 259,529 234,825
------------ ------------
Total liabilities and shareholders'
equity $ 458,982 $ 403,738
============ ============
SMART Modular Technologies (WWH), Inc. and Subsidiaries
Summary Cash Flow Information
(Unaudited)
Six Months Ended
--------------------------
February 26, February 27,
2010 2009
------------ ------------
(In thousands)
Net cash provided by operating activities $ 4,917 $ 24,581
Net cash used in investing activities $ (9,822) $ (11,368)
Net cash provided by (used in) financing
activities $ (24,337) $ 464
Contact Information: For More Information Investor Contacts: Suzanne Craig The Blueshirt Group for SMART Modular Technologies 415-217-7722 Suzanne@blueshirtgroup.com Barry Zwarenstein CFO, Senior Vice President SMART Modular Technologies 510-624-8134 Barry.Zwarenstein@smartm.com