-- Net sales of $123.1 million -- Gross profit of $28.8 million -- GAAP diluted EPS of $0.07 -- Non-GAAP diluted EPS of $0.08 -- Adjusted EBITDA of $15.0 millionNet sales for the first quarter of fiscal 2010 were $123.1 million, compared to $99.8 million for the fourth quarter of fiscal 2009, and $140.8 million for the first quarter of fiscal 2009. Gross profit for the first quarter of fiscal 2010 was $28.8 million, compared to $21.3 million for the fourth quarter of fiscal 2009, and $25.8 million for the first quarter of fiscal 2009. On a GAAP basis, net income for the first quarter of fiscal 2010 was $4.6 million, or $0.07 per diluted share, compared to a net loss of $0.3 million, or $0.00 per diluted share in the fourth quarter of fiscal 2009, and a net loss of $6.9 million, or $0.11 per share in the first quarter of fiscal 2009. On a non-GAAP basis, net income was $5.4 million or $0.08 per diluted share for the first quarter of fiscal 2010, compared to $3.1 million, or $0.05 per diluted share in the fourth quarter of fiscal 2009, and $3.0 million, or $0.05 per diluted share in the first quarter of fiscal 2009. Adjusted EBITDA for the first quarter of fiscal 2010 was $15.0 million, compared to $9.9 million for the fourth quarter of fiscal 2009, and $10.3 million for the first 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. "Our business improved during the first fiscal quarter, driven primarily by growth in PC and enterprise market end user demand, in combination with a better pricing environment for DRAM products. As a result, our financial performance was substantially better than our original guidance and came in at the upper end of our revised guidance," commented Iain MacKenzie, President and CEO of SMART. "In addition, our solid state storage growth strategy is proceeding as planned, and we continue to make progress with increased interest from key enterprise customers." 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 second quarter of fiscal 2010, SMART estimates net sales will be in the range of $125 million to $135 million, gross profit in the range of $30 million to $32 million, and net income per diluted share in the range of $0.06 to $0.08 on a GAAP basis. On a non-GAAP basis, SMART estimates net income per diluted share will be in the range of $0.09 to $0.11. The guidance for the second quarter of fiscal 2010 includes an income tax provision estimated in the range of $6.3 million to $6.8 million. Please refer to the Non-GAAP Information section and the "Reconciliation of Q2-10 Guidance for Non-GAAP Financial Measures" table below for further detail. Conference Call Details SMART's first quarter fiscal 2010 teleconference and webcast is scheduled to begin at 1:30 p.m. Pacific Time (PT), or 4:30 p.m. Eastern Time (ET), on Thursday, December 17, 2009. The call may be accessed U.S. toll free by calling (877) 941-4774 or U.S. toll by calling (480) 629-9760. Please join the conference call at least ten minutes early in order to register. The access code is 4186475. 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 PT, December 31, 2009, by dialing (303) 590-3030 and entering passcode 4186475#. 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 and solid state storage growth strategy, benefits associated with operational efficiencies, the DRAM market, new product introductions, 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, changes in industry standards or release plans, fluctuations in the quarterly effective tax rate and related tax provision, lower than anticipated cash savings from restructuring, 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 recently filed Annual Report on Form 10-K for fiscal 2009. 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, and other infrequent or unusual items, less net gain on repurchase of notes. 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, impairment charges, net gain on repurchase of notes 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 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. 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, telecommunications, aerospace and defense 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 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
----------------------------------------
November 27, August 28, November 28,
2009 2009 2008
------------ ------------ ------------
Net income (loss) $ 4,582 $ (289) $ (6,878)
Add:
Stock-based compensation
expense charged to
operating expense, net of tax 1,635 3,384 1,775
Gain on repurchase of notes, no
tax effect (1,178) - -
Loan fees written off on
repurchase of notes, no
tax effect 353 - -
Goodwill impairment, no tax
effect - - 7,210
Restructuring charges, net of
tax - - 886
------------ ------------ ------------
Non-GAAP net income $ 5,392 $ 3,095 $ 2,993
============ ============ ============
Non-GAAP net income per diluted
share $ 0.08 $ 0.05 $ 0.05
============ ============ ============
Shares used in computing non-GAAP
net income per diluted share: 64,016 63,626 63,330
============ ============ ============
Net income (loss) $ 4,582 $ (289) $ (6,878)
Interest expense, net 1,663* 1,530 1,752
Income taxes 4,717 1,763 2,177
Depreciation and amortization 3,617 3,491 3,328
------------ ------------ ------------
EBITDA 14,579 6,495 379
Adjustments:
Stock-based compensation
expense charged to
operating expense 1,646 3,398 1,787
Gain on repurchase of notes (1,178) - -
Goodwill impairment - - 7,210
Restructuring charges - - 886
------------ ------------ ------------
Adjusted EBITDA $ 15,047 $ 9,893 $ 10,262
============ ============ ============
* Includes $353K of loan fees written off on repurchase of notes.
RECONCILIATION OF Q2-10 GUIDANCE FOR NON-GAAP FINANCIAL MEASURES
(In millions, except per share data; unaudited)
Three Months Ending February 26, 2010
----------------------------------------------
GAAP Non-GAAP
Range of Range of
Estimates Estimates
------------- -------------
From To Adjustments From To
------ ------ ----------- ------ ------
Net income $ 3.9 $ 5.4 $ 1.7 (a) $ 5.6 $ 7.1
====== ====== ====== ======
Net income per
diluted share $ 0.06 $ 0.08 $ 0.09 $ 0.11
====== ====== ====== ======
Shares used in
computing net income per
diluted share 64.5 64.5 64.5 64.5
====== ====== ====== ======
(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
--------------------------
November 27, November 28,
2009 2008
------------ ------------
Net sales $ 123,093 $ 140,775
Cost of sales 94,327 114,959
------------ ------------
Gross profit 28,766 25,816
Research and development 5,730 5,436
Selling, general, and administrative 13,366 14,467
Restructuring charges - 886
Goodwill impairment - 7,210
------------ ------------
Total operating expenses 19,096 27,999
------------ ------------
Income (loss) from operations 9,670 (2,183)
Interest expense, net (1,663) (1,752)
Other income (expense), net 1,292 (766)
------------ ------------
Total other expense, net (371) (2,518)
------------ ------------
Income (loss) before provision for income taxes 9,299 (4,701)
Provision for income taxes 4,717 2,177
------------ ------------
Net income (loss) $ 4,582 ($ 6,878)
============ ============
Net income (loss) per share, basic $ 0.07 ($ 0.11)
============ ============
Net income (loss) per share, diluted $ 0.07 ($ 0.11)
============ ============
Shares used in computing net income (loss) per
ordinary share 61,974 61,507
============ ============
Shares used in computing net income (loss) per
diluted share 64,016 61,507
------------ ------------
SMART Modular Technologies (WWH), Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
November 27, August 28,
2009 2009
------------- -------------
(In thousands)
ASSETS
Cash and cash equivalents $ 129,102 $ 147,658
Accounts receivable, net of allowances of
$1,685 and $1,591 as of November 27, 2009
and August 28, 2009 127,388 130,953
Inventories 78,686 63,115
Prepaid expense and other current assets 15,917 12,628
------------- -------------
Total current assets 351,093 354,354
Property and equipment, net 35,867 36,263
Goodwill 1,061 1,061
Other intangible assets, net 7,208 7,475
Other non-current assets 5,710 4,585
------------- -------------
Total assets $ 400,939 $ 403,738
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 77,102 $ 68,928
Accrued expenses and other current liabilities 20,081 16,615
------------- -------------
Total current liabilities 97,183 85,543
Long-term debt 55,072 81,250
Other long-term liabilities 1,579 2,120
------------- -------------
Total liabilities 153,834 168,913
------------- -------------
Shareholders' equity:
Ordinary shares 10 10
Additional paid in capital 111,116 109,264
Accumulated other comprehensive income 10,179 4,333
Retained earnings 125,800 121,218
------------- -------------
Total shareholders' equity 247,105 234,825
------------- -------------
Total liabilities and shareholders'
equity $ 400,939 $ 403,738
============= =============
SMART Modular Technologies (WWH), Inc. and Subsidiaries
Summary Cash Flow Information
(Unaudited)
Three Months Ended
--------------------------
November 27, November 28,
2009 2008
------------ ------------
(In thousands)
Net cash provided by operating activities $ 7,700 $ 28,639
Net cash used in investing activities $ (2,895) $ (4,508)
Net cash provided by (used in) financing
activities $ (24,782) $ 439
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