SOURCE: SMART Modular Technologies

SMART Modular Technologies

June 21, 2011 16:01 ET

SMART Modular Technologies Reports Third Quarter Fiscal 2011 Results

NEWARK, CA--(Marketwire - Jun 21, 2011) - SMART Modular Technologies (WWH), Inc. ("SMART" or the "Company") (NASDAQ: SMOD), a leading independent manufacturer of memory modules and solid state storage products, today reported financial results for the third quarter of fiscal 2011 ended May 27, 2011.

Third Quarter Fiscal 2011 Highlights:

--  Net sales of $164.5 million
--  Gross profit of $32.4 million
--  GAAP diluted EPS of $0.03
--  Non-GAAP diluted EPS of $0.10
--  Adjusted EBITDA of $17.8 million

Net sales for the third quarter of fiscal 2011 were $164.5 million, compared to $170.5 million for the second quarter of fiscal 2011, and $201.2 million for the third quarter of fiscal 2010.

Gross profit for the third quarter of fiscal 2011 was $32.4 million compared to $28.5 million for the second quarter of fiscal 2011, and $45.5 million for the third quarter of fiscal 2010.

On a GAAP basis, net income for the third quarter of fiscal 2011 was $2.3 million or $0.03 per diluted share, compared to $0.2 million or $0.00 per diluted share for the second quarter of fiscal 2011, and $14.9 million or $0.23 per diluted share for the third quarter of fiscal 2010.

On a non-GAAP basis, net income was $7.1 million or $0.10 per diluted share for the third quarter of fiscal 2011, compared to $5.2 million or $0.08 per diluted share for the second quarter of fiscal 2011, and net income of $17.3 million or $0.26 per diluted share for the third quarter of fiscal 2010.

Adjusted EBITDA for the third quarter of fiscal 2011 was $17.8 million, compared to $13.6 million for the second quarter of 2011, and $29.8 million for the third quarter of fiscal 2010.

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.

No conference call will be held in conjunction with this third quarter earnings 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 plus net interest expense, income tax expense, depreciation and amortization expense, stock-based compensation expense, restructuring charges, a technology access charge, and other infrequent or unusual items. 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 flows 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, a technology access charge 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 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 U.S. GAAP. 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 Reconciliation of Non-GAAP Financial Measures table below for more detail on Adjusted EBITDA and non-GAAP calculations.

Additional Information and Where to Find It

All parties desiring details regarding the previously announced merger transaction are urged to review the definitive merger agreement available on the Company's website at http://www.smartm.com, and the SEC's website at http://www.sec.gov. In connection with the proposed transaction, SMART has filed with the SEC a preliminary proxy statement and other documents relating to the transaction and will file with the SEC a definitive proxy statement, and may file with the SEC other documents regarding the proposed transaction. INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT AND OTHER FILED DOCUMENTS CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Shareholders will be able to obtain a free-of-charge copy of the proxy statement and other relevant documents (when available) filed with the SEC from the SEC's website at http://www.sec.gov. Shareholders will also be able to obtain a free-of charge copy of the proxy statement and other relevant documents (when available) by directing a request by mail or telephone to The Blueshirt Group, Attention: Suzanne Craig or from SMART's website, http://www.smartm.com. SMART and certain of its directors, executive officers and other members of management and employees may, under the rules of the SEC, be deemed to be "participants" in the solicitation of proxies from stockholders of SMART in favor of the proposed merger. Information regarding SMART's directors and executive officers is contained in SMART's definitive proxy statement filed with the SEC on December 3, 2010 (the "Annual General Meeting Proxy Statement"). Additional information regarding the interests of such potential participants will be included in the proxy statement and the other relevant documents filed and to be filed with the SEC (when available).

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, enterprise, 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
                        ----------------------------  ------------------
                         May 27, February 25, May 28,  May 27,   May 28,
                          2011      2011       2010     2011      2010
                        --------  --------- --------- --------  --------
Net income              $  2,272  $     171 $  14,917 $ 10,410  $ 35,591
Add:
  Stock-based
   compensation expense
   charged  to
   operating expenses,
   net of tax              2,200      2,232     1,896    6,565     5,358
  Acquisition costs, no
   tax effect              3,533          -         -    3,533         -
  Restructuring
   charges, no tax
   effect                    480      2,831         -    3,311         -
  Technology access
   charge, no tax
   effect                      -          -         -    7,534         -
  Display business
   divestiture, no tax
   effect                      -          -       486        -       486
  Gain from insurance
   settlement, no tax
   effect                 (1,435)         -         -   (1,435)        -
  Gain from legal
   settlement, no tax
   effect                      -          -         -        -    (3,044)
  Gain from repurchase
   of notes, no tax
   effect                      -          -         -        -    (1,178)
  Loan fees written off
   on repurchase of
   notes, no tax effect        -          -         -        -       353
                        --------  --------- --------- --------  --------
Non-GAAP net income     $  7,050  $   5,234 $  17,299 $ 29,918  $ 37,566
                        ========  ========= ========= ========  ========

Non-GAAP net income per
 diluted share          $   0.10  $    0.08 $    0.26 $   0.45  $   0.58
                        ========  ========= ========= ========  ========
Shares used in
 computing non-GAAP net
 income per diluted
 share:                   67,648     66,087    65,502   66,498    64,843
                        ========  ========= ========= ========  ========

Net income              $  2,272  $     171 $  14,917 $ 10,410  $ 35,591
  Interest expense, net     (179)       230       837      762     3,663  *
  Income taxes             5,444      2,557     7,354   13,340    20,504
  Depreciation and
   amortization            5,452      5,585     4,250   16,935    11,779
                        --------  --------- --------- --------  --------
EBITDA                    12,989      8,543    27,358   41,447    71,537
Adjustments:
  Stock-based
   compensation expense
   charged to operating
   expenses                2,212      2,248     1,908    6,605     5,393
  Acquisition costs        3,533          -         -    3,533         -
  Restructuring charges      480      2,831         -    3,311         -
  Technology access
   charge                      -          -         -    7,534         -
  Display business
   divestiture                 -          -       486        -       486
  Gain from insurance
   settlement             (1,435)         -         -   (1,435)        -
  Gain from legal
   settlement                  -          -         -        -    (3,044)
  Gain from repurchase
   of notes                    -          -         -        -    (1,178)
                        --------  --------- --------- --------  --------
Adjusted EBITDA         $ 17,779  $  13,622 $  29,752 $ 60,995  $ 73,194
                        ========  ========= ========= ========  ========

 * Includes $353K of loan fees written off on repurchase of notes.




          SMART Modular Technologies (WWH), Inc. and Subsidiaries
                Condensed Consolidated Statements of Income
             (In thousands, except per share data; unaudited)

                           Three Months Ended           Nine Months Ended
                     -------------------------------- --------------------
                      May 27,  February 25, May 28,    May 27,    May 28,
                       2011       2011       2010       2011       2010
                     ---------- ---------  ---------  ---------  ---------

Net sales            $  164,479 $ 170,549  $ 201,235  $ 551,387  $ 484,438
Cost of sales           132,100   142,024    155,738    446,474    368,162
                     ---------- ---------  ---------  ---------  ---------
  Gross profit           32,379    28,525     45,497    104,913    116,276
                     ---------- ---------  ---------  ---------  ---------

Operating expenses:
  Research and
   development            7,652     7,852      6,657     23,664     17,606
  Selling, general
   and administrative    15,224    15,169     16,340     45,241     44,037
  Acquisition costs       3,533         -          -      3,533          -
  Restructuring
   charges                  480     2,831          -      3,311          -
  Technology access
   charge                     -         -          -      7,534          -
                     ---------- ---------  ---------  ---------  ---------
     Total operating
      expenses           26,889    25,852     22,997     83,283     61,643
                     ---------- ---------  ---------  ---------  ---------
     Income from
      operations          5,490     2,673     22,500     21,630     54,633
Interest income
 (expense), net             179      (230)      (837)      (762)    (3,663)
Other income, net         2,047       285        608      2,882      5,125
                     ---------- ---------  ---------  ---------  ---------
     Total other
      income
      (expense)           2,226        55       (229)     2,120      1,462
                     ---------- ---------  ---------  ---------  ---------
Income before
 provision for
 income taxes             7,716     2,728     22,271     23,750     56,095
Provision for income
 taxes                    5,444     2,557      7,354     13,340     20,504
                     ---------- ---------  ---------  ---------  ---------
     Net income      $    2,272 $     171  $  14,917  $  10,410  $  35,591
                     ========== =========  =========  =========  =========

Net income per
 share, basic        $     0.04 $    0.00  $    0.24  $    0.16  $    0.57
                     ========== =========  =========  =========  =========
Net income per
 share, diluted      $     0.03 $    0.00  $    0.23  $    0.16  $    0.55
                     ========== =========  =========  =========  =========
Shares used in
 computing net
 income per
 ordinary share          64,137    63,178     62,463     63,405     62,216
                     ========== =========  =========  =========  =========
Shares used in
 computing net
 income per diluted
 share                   67,648    66,087     65,502     66,498     64,843
                     ========== =========  =========  =========  =========




          SMART Modular Technologies (WWH), Inc. and Subsidiaries
                  Condensed Consolidated Balance Sheets
                                (Unaudited)

                                                  May 27,      August 27,
                                                    2011          2010
                                                ------------- -------------
ASSETS                                                (In thousands)
Current assets:
  Cash and cash equivalents                     $     131,737 $     115,474
  Accounts receivable, net of allowances of
   $1,778 and $1,660 as of May 27, 2011 and
   August 27, 2010, respectively                      177,664       208,377
  Inventories                                          98,071       112,103
  Prepaid expense and other current assets             22,670        33,488
                                                ------------- -------------
      Total current assets                            430,142       469,442
 Property and equipment, net                           52,505        46,221
 Other non-current assets                              32,719        21,217
 Other intangible assets, net                           5,744         6,460
 Goodwill                                               1,061         1,061
                                                ------------- -------------
      Total assets                              $     522,171 $     544,401
                                                ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable                              $      91,441 $     151,885
  Accrued liabilities                                  21,977        29,318
  Short-term debt                                      55,072             -
                                                ------------- -------------
      Total current liabilities                       168,490       181,203
 Other long-term liabilities                            7,298         4,546
 Long-term debt                                             -        55,072
                                                ------------- -------------
    Total liabilities                                 175,788       240,821
                                                ------------- -------------
 Shareholders' equity:
  Ordinary shares                                          11            10
  Additional paid in capital                          133,548       118,123
  Accumulated other comprehensive income               28,625        11,658
  Retained earnings                                   184,199       173,789
                                                ------------- -------------
      Total shareholders' equity                      346,383       303,580
                                                ------------- -------------
      Total liabilities and shareholders'
       equity                                   $     522,171 $     544,401
                                                ============= =============




          SMART Modular Technologies (WWH), Inc. and Subsidiaries
                      Summary Cash Flow Information
                                (Unaudited)

                                                    Nine Months Ended
                                                --------------------------
                                                  May 27,       May 28,
                                                    2011          2010
                                                ------------  ------------
                                                      (In thousands)
Net cash provided by (used in) operating
 activities                                     $     19,804  $     (4,136)
Net cash used in investing activities           $    (15,773) $    (15,034)
Net cash provided by (used in) financing
 activities                                     $      8,821  $    (23,616)

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