SOURCE: SMART Modular Technologies

March 20, 2008 16:05 ET

SMART Modular Technologies Reports Second Quarter Fiscal 2008 Results

Net Sales of $160.0 Million; GAAP Diluted EPS of $0.17; Gross Profit of $32.4 Million

FREMONT, CA--(Marketwire - March 20, 2008) - SMART Modular Technologies (WWH), Inc. ("SMART" or the "Company") (NASDAQ: SMOD), a leading independent manufacturer of memory modules, embedded computing subsystems, and TFT-LCD display products, today reported financial results for the second quarter of fiscal 2008.

Second Quarter Fiscal 2008 Results:

--  Net Sales of $160.0 Million, down 9% from the previous quarter
--  Gross Profit of $32.4 Million, down 3% from the previous quarter
--  GAAP diluted EPS of $0.17, vs. $0.18 in the previous quarter
    

Net sales for the second quarter of fiscal 2008 were $160.0 million, down 9% compared to $175.0 million for the first quarter of fiscal 2008, and down 33% compared to $239.1 million for the second quarter of fiscal 2007.

Gross profit for the second quarter of fiscal 2008 was $32.4 million, down 3% compared to $33.5 million for the first quarter of fiscal 2008, and down 21% compared to $41.2 million for the second quarter of fiscal 2007.

Net income for the second quarter of fiscal 2008 was $11.0 million, or $0.17 per diluted share, compared to net income of $11.5 million, or $0.18 per diluted share for the first quarter of fiscal 2008, and $14.0 million, or $0.22 per diluted share for the second quarter of fiscal 2007.

SMART ended the second quarter of fiscal 2008 with $155.0 million in cash and cash equivalents.

"Our results this quarter were affected by the difficult pricing environment that remained challenging for us as well as others in the industry and slower growth than expected from high density server modules, partially due to delayed product introductions by our customers. As we discussed last quarter, we believed unit growth would improve, and density growth would be necessary to contribute to our improved financial performance. Unit growth in the quarter did improve, but density growth did not, and therefore our results were negatively impacted," explained Iain MacKenzie, President and CEO of SMART.

"We were, however, successful in growing our non-DRAM businesses, in particular, the Flash and embedded and display businesses, where revenues grew from 11% to 13% of revenues in the quarter. In addition, we closed the Adtron acquisition on March 3, 2008 and look forward to moving ahead together, to serve the fast-growing solid state flash market where our combined portfolio of products positions us well. The acquisition of Adtron is an additional step towards diversifying the business away from DRAM by broadening our product portfolio and leveraging our core technology and product competencies, manufacturing and test capabilities, and global footprint. We are excited about the future as we jointly address the non-commodity segment of the high-end, enterprise, telecom, industrial, and military market for solid state flash," 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 third 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 $33 to $35 million, and GAAP diluted net income per share will be approximately the same as reported above for the second quarter of fiscal 2008. The shares used in computing diluted net income per ordinary share are estimated to be in the range of 63.6 million to 64.4 million.

Conference Call Details

SMART's second 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, March 20, 2008. The call may be accessed U.S. toll free by calling (800) 240-8621 or U.S. toll by calling (303) 262-2194. 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, April 3, 2008, by dialing (800) 405-2236 and enter the passcode 11109700#. 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 the company's financial performance, technical capabilities, business strategies and product plans.

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. 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.

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 flash disk 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      Three       Six        Six
                                  Months     Months     Months     Months
                                  Ended      Ended      Ended      Ended
                               February 29, March 2, February 29, March 2,
                                  2008        2007      2008        2007
                                ---------  ---------  ---------  ---------
                                   (In thousands, except per share data)
Net sales                       $ 159,566  $ 239,137  $ 334,517  $ 476,307
Cost of sales                     127,170    197,975    268,599    397,233
                                ---------  ---------  ---------  ---------
Gross profit                       32,396     41,162     65,918     79,074
                                ---------  ---------  ---------  ---------
Research and development            4,624      4,450      9,309      8,490
Selling, general and
 administrative                    14,331     16,756     29,392     31,010
                                ---------  ---------  ---------  ---------
   Total operating expenses        18,955     21,206     38,701     39,500
                                ---------  ---------  ---------  ---------
Income from operations             13,441     19,956     27,217     39,574
Interest expense, net              (1,327)    (2,336)    (2,351)    (4,423)
Other (expense) income, net           373       (265)     1,795       (336)
                                ---------  ---------  ---------  ---------
   Total other expense, net          (954)    (2,601)      (556)    (4,759)
                                ---------  ---------  ---------  ---------
Income before provision
 (benefit) for income taxes        12,487     17,355     26,661     34,815
Provision (benefit) for income
 taxes                              1,539      3,385      4,220      6,292
                                ---------  ---------  ---------  ---------
Net income                      $  10,948  $  13,970  $  22,441  $  28,523
                                =========  =========  =========  =========
Net income per ordinary share,
 basic                          $    0.18  $    0.24  $    0.37  $    0.48
                                =========  =========  =========  =========
Shares used in computing basic
 net income per ordinary share     60,869     59,396     60,782     59,043
                                =========  =========  =========  =========
Net income per ordinary share,
 diluted                        $    0.17  $    0.22  $    0.35  $    0.45
                                =========  =========  =========  =========
Shares used in computing
 diluted net income per
 ordinary share                    63,713     63,790     63,684     63,653
                                =========  =========  =========  =========



          SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES

                  CONDENSED CONSOLIDATED BALANCE SHEETS
                                (Unaudited)

                                                  February 29,  August 31,
                                                      2008        2007
                                                  -----------  -----------
                                                       (In thousands)
ASSETS
Cash and cash equivalents                         $   155,018  $   144,147
Accounts receivable, net of allowances of $2,019
 and $2,517 as of February 29, 2008 and August
 31, 2007, respectively                               162,637      184,391
Inventories                                            61,856       65,105
Prepaid expenses and other current assets               9,803        8,217
                                                  -----------  -----------
  Total current assets                                389,314      401,860
Property and equipment, net                            38,957       33,588
Goodwill                                                3,187        3,187
Other non-current assets                               13,029       14,442
                                                  -----------  -----------
  Total assets                                    $   444,487  $   453,077
                                                  ===========  ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable                                  $    96,441  $   131,937
Accrued expenses and other current liabilities         21,353       24,043
                                                  -----------  -----------
  Total current liabilities                           117,794      155,980
Long-term debt                                         81,250       81,250
Other long-term liabilities                             2,018            -
                                                  -----------  -----------
  Total liabilities                               $   201,062  $   237,230
                                                  -----------  -----------
Shareholders’ equity:
Ordinary shares                                            10           10
Additional paid-in capital                             95,894       92,250
Deferred stock-based compensation                        (202)        (335)
Accumulated other comprehensive income                  7,214        6,083
Retained earnings                                     140,509      117,839
                                                  -----------  -----------
  Total shareholders' equity                          243,425      215,847
                                                  -----------  -----------
  Total liabilities and shareholders' equity      $   444,487  $   453,077
                                                  ===========  ===========

Contact Information

  • For More Information
    Investor Contacts:

    Jack A. Pacheco
    Senior Vice President & Chief Financial Officer
    SMART Modular Technologies
    510-624-8134

    Suzanne Craig
    The Blueshirt Group for SMART Modular Technologies
    415-217-4962
    Email Contact