-- 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 Restructuring
Fiscal 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, 2008
Net 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