-- Net sales of $201.2 million -- Gross profit of $45.5 million -- GAAP diluted EPS of $0.23 -- Non-GAAP diluted EPS of $0.26 -- Adjusted EBITDA of $29.8 millionNet sales for the third quarter of fiscal 2010 were $201.2 million, compared to $160.1 million for the second quarter of fiscal 2010, and $91.6 million for the third quarter of fiscal 2009. Gross profit for the third quarter of fiscal 2010 was $45.5 million, compared to $42.0 million for the second quarter of fiscal 2010, and $18.6 million for the third quarter of fiscal 2009. On a GAAP basis, net income for the third quarter of fiscal 2010 was $14.9 million or $0.23 per diluted share, compared with $16.1 million, or $0.25 per diluted share for the second quarter of fiscal 2010, and a net loss of $2.4 million, or a net loss of $0.04 per share for the third quarter of fiscal 2009. On a non-GAAP basis, net income was $17.3 million or $0.26 per diluted share for the third quarter of fiscal 2010, compared with $14.9 million or $0.23 per diluted share for the second quarter of fiscal 2010, and net income of $0.9 million or $0.01 per diluted share for the third quarter of fiscal 2009. Adjusted EBITDA for the third quarter of fiscal 2010 was $29.8 million, compared to $28.4 million for the second quarter of fiscal 2010, and $5.2 million for the third 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. "The strength of SMART's third quarter fiscal 2010 provides continued evidence of the success of our strategic initiatives and the strength of end user demand in our key markets in the U.S., Brazil and Asia. This end user demand, combined with a stable DRAM market and our enhanced operating efficiencies, have combined to drive our better than expected financial results," commented Iain MacKenzie, President and CEO of SMART. "During the quarter we continued to ramp our investment in Brazil as well as in our enterprise solid state storage business in order to solidify and grow our position within these rapidly expanding markets." 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 2010, SMART estimates net sales will be in the range of $200 to $210 million, gross profit in the range of $44 to $47 million, and net income per diluted share in the range of $0.19 to $0.21 on a GAAP basis. On a non-GAAP basis, SMART estimates net income per diluted share will be in the range of $0.22 to $0.24. The guidance for the fourth quarter of fiscal 2010 includes an income tax provision estimated in the range of $8.0 to $8.4 million. Please refer to the Non-GAAP Information section and the "Reconciliation of Q4-10 Guidance for Non-GAAP Financial Measures" table below for further detail. Conference Call Details SMART's third quarter fiscal 2010 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 17, 2010. The call may be accessed U.S. toll free by calling (877) 941-2068 or U.S. toll by calling (480) 629-9712. Please join the conference call at least ten minutes early in order to register. The access code is 4313196. 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, July 1, 2010, by dialing (303) 590-3030 and entering passcode 4313196. 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, the success of our strategic initiatives including investments in our solid state storage growth strategy, the benefits associated with operational efficiencies, the DRAM market, new product introductions, expansion of capacity and strength in markets in the U.S., Brazil and Asia, the launch of Flash packaging in Brazil, and end user 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, end user markets, changes in industry standards or release plans, fluctuations in the quarterly effective tax rate and related tax provision, failure to receive continued favorable tax treatment or renewals of exemptions from certain taxes in foreign countries, 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 Annual Report on Form 10-K for fiscal 2009 and its Quarterly Reports on Form 10-Q for the quarters ended November 27, 2009 and February 26, 2010. 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, display business divestiture, and other infrequent or unusual items, less net gain on repurchase of notes and gain 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, gain 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, to plan and forecast future periods, and to assess performance of certain executives for compensation purposes. 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, or 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 Nine Months Ended
-------------------------------- --------------------
February
May 28, 26, May 29, May 28, May 29,
2010 2009 2009 2010 2009
---------- --------- --------- --------- ---------
Net income (loss) $ 14,917 $ 16,092 $ (2,386) $ 35,591 $ (11,114)
Add:
Stock-based
compensation
expense charged
to operating
expense, net of
tax 1,896 1,827 1,478 5,358 5,040
Display business
divestiture, no
tax effect 486 - - 486 -
Gain on legal
settlement, no
tax effect - (3,044) - (3,044) -
Gain on repurchase
of notes, no tax
effect - - - (1,178) -
Loan fees written
off on repurchase
of notes, no tax
effect - - - 353 -
Relocation of
corporate
headquarter
charges, net of
tax - - 820 - 820
Goodwill
impairment, no
tax effect - - - - 10,416
Restructuring
charges, net of
tax - - 945 - 2,756
---------- --------- --------- --------- ---------
Non-GAAP net income $ 17,299 $ 14,875 $ 857 $ 37,566 $ 7,918
========== ========= ========= ========= =========
Non-GAAP net income
per diluted share $ 0.26 $ 0.23 $ 0.01 $ 0.58 $ 0.12
========== ========= ========= ========= =========
Shares used in
computing non-GAAP
net income per
diluted share: 65,502 65,010 63,489 64,843 63,381
========== ========= ========= ========= =========
Net income (loss) $ 14,917 $ 16,092 $ (2,386) $ 35,591 $ (11,114)
Interest expense,
net 837 1,163 1,629 3,663 5,079
Income taxes 7,354 8,433 368 20,504 3,808
Depreciation and
amortization 4,250 3,912 3,142 11,779 9,586
---------- --------- --------- --------- ---------
EBITDA 27,358 29,600 2,753 71,537 7,359
Adjustments:
Stock-based
compensation
expense charged
to operating
expense 1,908 1,839 1,490 5,393 5,077
Display business
divestiture
expenses 486 - - 486 -
Gain on legal
settlement - (3,044) - (3,044) -
Gain on repurchase
of notes - - - (1,178) -
Goodwill
impairment - - - - 10,416
Restructuring
charges - - 989 - 2,810
---------- --------- --------- --------- ---------
Adjusted EBITDA $ 29,752 $ 28,395 $ 5,232 $ 73,194 $ 25,662
========== ========= ========= ========= =========
Reconciliation of Q4-10 Guidance for Non-GAAP Financial Measures
(In millions, except per share data; unaudited)
Three Months Ending August 27, 2010
--------------------------------------------
GAAP Non-GAAP
Range of Range of
Estimates Estimates
------------- -------------
From To Adjustments From To
------ ------ ------------ ------ ------
Net income $ 12.4 $ 14.0 $ 1.9 (a) $ 14.3 $ 15.9
====== ====== ====== ======
Net income per diluted share $ 0.19 $ 0.21 $ 0.22 $ 0.24
====== ====== ====== ======
Shares used in computing net
income per diluted share 66.0 66.0 66.0 66.0
====== ====== ====== ======
(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 Nine Months Ended
-------------------- --------------------
May 28, May 29, May 28, May 29,
2010 2009 2010 2009
--------- --------- --------- ---------
Net sales $ 201,235 $ 91,645 $ 484,438 $ 341,509
Cost of sales 155,738 73,008 368,162 272,989
--------- --------- --------- ---------
Gross profit 45,497 18,637 116,276 68,520
Operating expenses:
Research and development 6,657 4,478 17,606 15,056
Selling, general and
administrative 16,340 13,585 44,037 41,834
Restructuring charges - 989 - 2,810
Goodwill impairment - - - 10,416
--------- --------- --------- ---------
Total operating expenses 22,997 19,052 61,643 70,116
--------- --------- --------- ---------
Income (loss) from
operations 22,500 (415) 54,633 (1,596)
Interest expense, net (837) (1,629) (3,663) (5,079)
Other income (expense), net 608 26 5,125 (631)
--------- --------- --------- ---------
Total other income
(expense) (229) (1,603) 1,462 (5,710)
--------- --------- --------- ---------
Income (loss) before provision
for income taxes 22,271 (2,018) 56,095 (7,306)
Provision for income taxes 7,354 368 20,504 3,808
--------- --------- --------- ---------
Net income (loss) $ 14,917 $ (2,386) $ 35,591 $ (11,114)
========= ========= ========= =========
Net income (loss) per share,
basic $ 0.24 $ (0.04) $ 0.57 $ (0.18)
========= ========= ========= =========
Net income (loss) per share,
diluted $ 0.23 $ (0.04) $ 0.55 $ (0.18)
========= ========= ========= =========
Shares used in computing net
income (loss) per ordinary
share 62,463 61,738 62,216 61,640
========= ========= ========= =========
Shares used in computing net
income (loss) per diluted
share 65,502 61,738 64,843 61,640
========= ========= ========= =========
SMART Modular Technologies (WWH), Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
May 28, August 28,
2010 2009
---------- ----------
ASSETS (In thousands)
Current assets:
Cash and cash equivalents $ 105,981 $ 147,658
Accounts receivable, net of allowances of $1,574
and $1,591 as of May 28, 2010 and August 28, 2009 212,426 130,953
Inventories 110,191 63,115
Prepaid expense and other current assets 29,222 12,628
---------- ----------
Total current assets 457,820 354,354
Property and equipment, net 44,045 36,263
Goodwill 1,061 1,061
Other intangible assets, net 6,700 7,475
Other non-current assets 7,497 4,585
---------- ----------
Total assets $ 517,123 $ 403,738
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 146,783 $ 68,928
Accrued expenses and other current liabilities 29,512 16,615
---------- ----------
Total current liabilities 176,295 85,543
Long-term debt 55,072 81,250
Other long-term liabilities 441 2,120
---------- ----------
Total liabilities 231,808 168,913
---------- ----------
Shareholders' equity:
Ordinary shares 10 10
Additional paid in capital 116,029 109,264
Accumulated other comprehensive income 12,467 4,333
Retained earnings 156,809 121,218
---------- ----------
Total shareholders' equity 285,315 234,825
---------- ----------
Total liabilities and shareholders' equity $ 517,123 $ 403,738
========== ==========
SMART Modular Technologies (WWH), Inc. and Subsidiaries
Summary Cash Flow Information
(Unaudited)
Nine Months Ended
---------------------
May 28, May 29,
2010 2009
--------- ---------
(In thousands)
Net cash provided by (used in) operating activities $ (4,136) $ 44,595
Net cash used in investing activities $ (15,034) $ (18,603)
Net cash provided by (used in) financing activities $ (23,616) $ 414
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