-- Net Sales of $160.7 Million -- Gross Profit of $24.9 Million -- GAAP EPS of ($0.06) -- Non-GAAP Diluted EPS of $0.05 -- Initiated Company-wide RestructuringFiscal 2008 Highlights:
-- Net Sales of $670.2 Million -- Gross Profit of $119.7 Million -- GAAP Diluted EPS of $0.14 -- Non-GAAP Diluted EPS of $0.55 -- Cash and Cash Equivalents of $116.0 Million -- Completed the Acquisition of Adtron Corporation on March 3, 2008Net sales for the fourth quarter of fiscal 2008 were $160.7 million, compared to $167.6 million for the third quarter of fiscal 2008, and $168.7 million for the fourth quarter of fiscal 2007. Net sales for the fiscal year were $670.2 million, compared to $844.6 million for fiscal year 2007. Gross profit for the fourth quarter of fiscal 2008 was $24.9 million, compared to $27.8 million in the third quarter of fiscal 2008, and $32.2 million in the fourth quarter of fiscal 2007. Gross profit for fiscal year 2008 was $119.7 million, compared to $149.6 million in fiscal 2007. GAAP net income for the fourth quarter of fiscal 2008 was ($3.5) million, or ($0.06) per share, compared to ($11.0) million, or ($0.18) per share in the third quarter of fiscal 2008, and $13.6 million, or $0.21 per diluted share in the fourth quarter of fiscal 2007. For fiscal year 2008, SMART reported GAAP net income of $9.0 million, or $0.14 per diluted share, compared to $57.7 million, or $0.91 per diluted share in fiscal 2007. Non-GAAP net income was $3.4 million or $0.05 per diluted share for the fourth quarter of fiscal 2008, compared to $4.9 million, or $0.08 per diluted share in the third quarter of fiscal 2008, and $12.1 million, or $0.19 per diluted share in the fourth quarter of fiscal 2007. For fiscal year 2008, SMART reported non-GAAP net income of $35.2 million, or $0.55 per diluted share, compared to $58.5 million, or $0.92 per diluted share in fiscal 2007. Non-GAAP net income excludes charges related to restructuring, goodwill impairment, in-process research and development, and other infrequent or unusual items, as well as stock-based compensation. Please refer to the "Non-GAAP Information" below for further detail. "Fiscal 2008 was a difficult period for the memory industry as a whole and challenging for SMART," commented Iain MacKenzie, President and CEO of SMART. "Despite facing pressure stemming from the unprecedented and prolonged decline in DRAM ASPs and the macroeconomic environment, not only were we able to achieve profitability in fiscal 2008 but we also were able to meet our diversification goal with non-DRAM revenues growing to 15% of our overall business for the full fiscal year. We remain optimistic about our prospects for growth and confident in our competitive position. However, in these difficult times we have conducted a comprehensive review to identify ways to best serve our customers while positioning the company for profitability going forward. We have therefore begun implementing a company-wide restructuring program that encompasses a workforce reduction as well a consolidation of certain operations in Asia and the Caribbean. In particular, we are exiting our China and India operations, and have announced the closure of our Dominican Republic facility. We expect to achieve approximately $11.8 million in annualized cash savings from this restructuring plan once it is fully implemented, which we expect to be in the second quarter of fiscal 2009, primarily due to reduced compensation-related expenses. Going forward we intend to focus our spending on the markets and products that we believe offer the best opportunity for sustainable and profitable growth. "Throughout fiscal 2008 our sales performance in Brazil was strong, reflecting the investments that we have made and the strength of the Brazilian economy. We are also making solid progress in the SSD market with several design wins to date. Our acquisition of Adtron in March has strengthened our SSD product offering and complements our existing product roadmap. In August we announced a group of six new industrial grade SSD products which is our second generation of both the Ultra and the Lite SATA SSDs. These products are targeted at embedded, industrial, defense and server applications and expand our presence in these new and demanding storage markets. We also continue to make solid progress with our Display and Embedded products as demonstrated by recent key design wins in Europe. While we expect continued challenges in the near-term for the DRAM market, we believe we are well-positioned for the long-term given our size, worldwide sales and customer service, global manufacturing footprint, and technology expertise," concluded Mr. MacKenzie. Restructuring Plan On September 10, 2008, the Company announced a restructuring plan to better serve its customers and improve its operating performance. The restructuring will result in the elimination of approximately 320 positions, or about 19 percent of the Company's global workforce and the consolidation of certain operations in Asia and the Caribbean. The majority of the workforce reduction is expected to be completed by the end of the next fiscal quarter. Under this restructuring plan, the Company estimates cash savings of approximately $11.8 million annually, principally due to reduced compensation-related expenses. The Company estimates that it will incur approximately $2.3 million in cash expenditures and recognize approximately $1.0 million in non-cash charges related to the restructuring. Of the total $3.3 million, the Company recorded approximately $1.9 million ($1.8 million, net of tax) in the fourth quarter of fiscal 2008, and is expected to record the remainder in fiscal 2009. A breakdown of the charges the Company expects to record by major type of cost is shown below:
Employee termination and other employee costs $1.6 million Asset write-downs (non-cash) $1.0 million Lease termination, facilities, and other related costs $0.7 million ------------ Total (pre-tax) $3.3 million ============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 first quarter of fiscal 2009, SMART estimates net sales will be in the range of $157 million to $167 million, gross profit in the range of $24 million to $26 million, and net income per share will be in the range of ($0.04) to ($0.03) on a GAAP basis. On a non-GAAP basis, excluding charges related to stock-based compensation, restructuring, amortization of intangible assets, in-process research and development and other non-recurring items, if any, the Company expects net income per diluted share will be in the range of $0.01 to $0.02. The guidance for the first quarter includes an income tax provision estimated in the range of $0.02 to $0.03 and a foreign currency loss related to Brazil estimated at $0.02 per share. Please refer to the "Non-GAAP Information" and the reconciliation of guidance for non-GAAP financial measures below for further detail. Conference Call Details SMART's fourth quarter and 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, September 25, 2008. The call may be accessed U.S. toll free by calling (800) 218-0204 or U.S. toll by calling (303) 205-0033. 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 http://www.smartm.com. A telephonic replay of the conference call will be available through midnight PDT, October 9, 2008, by dialing (800) 405-2236 and entering passcode 11119315#. 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 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, costs and benefits associated with restructuring, the timing of such costs and benefits, the DRAM market, new product introductions, and customer demand for its 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, fluctuations in the quarterly effective tax rate, possible increases in the estimated restructuring charges, lower than anticipated cash savings from the restructuring, changes in foreign currency exchange rates 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. 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 net income per diluted share. Non-GAAP financial results do not include stock-based compensation expense, in-process research and development charge, 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:
SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (In thousands, except per share data; unaudited) Three Three Three Twelve Twelve Months Months Months Months Months Ended Ended Ended Ended Ended August May August August August 29, 30, 31, 29, 31, 2008 2008 2007 2008 2007 -------- -------- ------- -------- ------- Net (loss) income $(3,497) $(11,003) $13,622(*) $9,005(*) $57,733(*) Add: Deferred tax assets valuation allowance increase (release) - 9,630 (2,433) 9,630 (2,433) Goodwill impairment, no tax effect 3,187 - - 3,187 - Restructuring charges, net of tax 1,795 - - 1,795 - Stock-based compensation expense charged to operating expense, net of tax 1,899 874 7,224 3,153 In-process R&D expenses, no tax effect - 4,400(**) - 4,400 - ------- -------- ------- -------- ------- Non-GAAP net income $ 3,384 $ 4,902 $12,063 $ 35,241 $58,453 ======= ======== ======= ======== ======= Non-GAAP net income per diluted share $ 0.05 $ 0.08 $ 0.19 $ 0.55 $ 0.92 ======= ======== ======= ======== ======= Shares used in computing net income per diluted share 63,403 63,449 63,975 63,555 63,782 ======= ======== ======= ======== ======= (*) Prior period amounts revised to correct immaterial errors. (**) The purchase price allocation for the acquisition of Adtron was recorded in the third quarter of fiscal 2008 based upon a preliminary analysis. That analysis will be updated prior to filing the 2008 Form 10-K and adjustments may result. SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES RECONCILIATION OF GUIDANCE FOR NON-GAAP FINANCIAL MEASURES (In $ million, except per share data; unaudited) Three Months Ending November 28, 2008 ----------------------------------------------------------- Non-GAAP Range of Estimate GAAP Range of Estimate ----------------------- ---------------------- From To Adjustments From To ----------- Net income (loss) $ 0.5 $ 1.1 $ 3.1 (a) $ (2.6) $ (2.0) =========== =========== ========== ========== Net income per share $ 0.01 $ 0.02 $ (0.04) $ (0.03) =========== =========== ========== ========== Shares used in computing net income per share 64.0 64.0 61.4 61.4 =========== =========== ========== ========== (a) Reflects estimated adjustments as follows: Adjustments ----------- Stock compensation 2.0 Restructuring charges 1.1 ----------- Total Adjustments 3.1 ===========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. (TABLES TO FOLLOW)
SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Three Twelve Twelve Months Months Months Months Ended Ended Ended Ended August 29, August 31, August 29, August 31, 2008 2007 2008 2007 --------- --------- --------- --------- (In thousands, except per share data) Net sales (1) $ 160,666 $ 168,669 $ 670,151 $ 844,627 Cost of sales (1) (2) 135,729 136,508 550,420 695,054 --------- --------- --------- --------- Gross profit 24,937 32,161 119,731 149,573 --------- --------- --------- --------- Research and development 5,457 3,786 20,184 16,383 Selling, general and administrative 15,013 14,335 59,798 59,552 Restructuring charges 1,938 -- 1,938 -- Goodwill impairment 3,187 -- 3,187 -- In-process research and development charge -- -- 4,400 -- --------- --------- --------- --------- Total operating expenses 25,595 18,121 89,507 75,935 --------- --------- --------- --------- Income (loss) from operations (658) 14,040 30,224 73,638 Interest expense, net (1,536) (1,183) (5,355) (7,381) Other income, net 507 574 2,557 934 --------- --------- --------- --------- Total other expense, net (1,029) (609) (2,798) (6,447) --------- --------- --------- --------- Income (loss) before provision for income taxes (1,687) 13,431 27,426 67,191 Provision (benefit) for income taxes 1,810 (191) 18,421 9,458 --------- --------- --------- --------- Net income (loss) (2) $ (3,497) $ 13,622 $ 9,005 $ 57,733 ========= ========= ========= ========= Net income (loss) per share, basic $ (0.06) $ 0.23 $ 0.15 $ 0.97 ========= ========= ========= ========= Shares used in computing net income per ordinary share 61,348 60,487 60,985 59,636 ========= ========= ========= ========= Net income (loss) per share, diluted $ (0.06) $ 0.21 $ 0.14 $ 0.91 ========= ========= ========= ========= Shares used in computing net income (loss) per diluted share 61,348 63,975 63,555 63,782 ========= ========= ========= ========= (1) The consolidated statements of operations for the twelve months ended August 31, 2007 and August 29, 2008 have been revised to reflect a reclassification to increase both net sales and cost of sales by $16,255 and $7,353, respectively, to correct immaterial classification errors in fiscal years 2007 and 2008. The consolidated statement of operations for the three months ended August 31, 2007 has been revised to reflect a reclassification to increase both net sales and cost of sales by $3,082 to correct immaterial classification errors for that period. (2) The consolidated statements of operations for the twelve months ended August 31, 2007 and August 29, 2008 have been revised to reflect decreases of $1,811 and $1,064, 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 August 31, 2007 has been revised to reflect a decrease of $406 in cost of sales to correct immaterial errors for that period. SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) August 29, August 31, 2008 2007 ---------- ---------- (In thousands) ASSETS Cash and cash equivalents $ 115,994 $ 144,147 Accounts receivable, net of allowances of $1,517 and $2,253 as of August 29, 2008 and August 31, 2007, respectively 193,736 184,391 Inventories 62,430 65,105 Prepaid expenses and other current assets 11,783 8,217 ---------- ---------- Total current assets 383,943 401,860 Property and equipment, net 39,317 33,588 Goodwill 7,765 3,187 Other intangible assets, net 8,856 - Other non-current assets 4,541 14,442 ---------- ---------- Total assets $ 444,422 $ 453,077 ========== ========== LIABILITIES AND SHAREHOLDERS EQUITY Accounts payable (1) $ 93,482 $ 126,358 Accrued expenses and other current liabilities 20,716 24,043 ---------- ---------- Total current liabilities 114,198 150,401 Long-term debt 81,250 81,250 Other long-term liabilities 2,037 - ---------- ---------- Total liabilities 197,485 231,651 ---------- ---------- Shareholders equity: Ordinary shares 10 10 Additional paid-in capital 100,234 92,250 Deferred stock-based compensation (91) (335) Accumulated other comprehensive income 14,132 6,083 Retained earnings (1) 132,652 123,418 ---------- ---------- Total shareholders equity 246,937 221,426 ---------- ---------- Total liabilities and shareholders equity $ 444,422 $ 453,077 ========== ========== (1) The consolidated balance sheet as of August 31, 2007 has been revised to reflect a decrease of $5,579 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 Contacts: Suzanne Craig The Blueshirt Group for SMART Modular Technologies 415-217-7722 Barry Zwarenstein CFO, Senior Vice President SMART Modular Technologies 510-624-8134