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8-K - FORM 8-K - SMART Modular Technologies (WWH), Inc. | c14630e8vk.htm |
Exhibit 99.1
For More Information
Investor Contacts:
Investor Contacts:
Suzanne Craig
The Blueshirt Group for SMART Modular Technologies
415-217-7722
Suzanne@blueshirtgroup.com
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
CFO, Senior Vice President
SMART Modular Technologies
510-624-8134
Barry.Zwarenstein@smartm.com
SMART Modular Technologies Reports
Second Quarter Fiscal 2011 Results
NEWARK, CA, March 24, 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 second quarter of fiscal 2011 ended February 25,
2011.
Second Quarter Fiscal 2011 Highlights:
| Net sales of $170.5 million |
| Gross profit of $28.5 million |
| GAAP diluted EPS of $0.00 |
| Non-GAAP diluted EPS of $0.08 |
| Adjusted EBITDA of $13.6 million |
Net sales for the second quarter of fiscal 2011 were $170.5 million, compared to $216.4 million for
the first quarter of fiscal 2011, and $160.1 million for the second quarter of fiscal 2010.
Gross profit for the second quarter of fiscal 2011 was $28.5 million, compared to $44.0 million for
the first quarter of fiscal 2011, and $42.0 million for the second quarter of fiscal 2010.
On a GAAP basis, net income for the second quarter of fiscal 2011 was $0.2 million or $0.00 per
diluted share, compared to $8.0 million or $0.12 per diluted share for the first quarter of fiscal
2011, and $16.1 million, or $0.25 per diluted share for the second quarter of fiscal 2010. The
second quarter of fiscal 2011 net income of $0.2 million includes restructuring charges of $2.8
million related to the closure of the Companys Puerto Rico facility.
On a non-GAAP basis, net income was $5.2 million or $0.08 per diluted share for the second quarter
of fiscal 2011, compared to $17.6 million or $0.27 per diluted share for the first quarter of
fiscal 2011, and net income of $14.9 million or $0.23 per diluted share for the second quarter of
fiscal 2010.
Adjusted EBITDA for the second quarter of fiscal 2011 was $13.6 million, compared to $29.6 million
for the first quarter of fiscal 2011, and $28.4 million for the second 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.
We are delighted with the growing momentum in our enterprise solid state storage business,
commented Iain MacKenzie, President and CEO of SMART. We continue to have success at broadening
our engagements with enterprise customers and believe that we are positioned for meaningful
increases in this business during the second half of this fiscal year.
In the second fiscal quarter our gross profit was negatively impacted by the weaker than
anticipated DRAM pricing environment, which primarily affected our business in Brazil, Mr.
MacKenzie continued. Despite this impact, we were able to achieve non-GAAP diluted earnings per
share of $0.08, due in large part to the resilience of our business model, prudent cost controls
and our continued focus on operational excellence. Pricing in the DRAM market appears to have
stabilized, and we believe that our second fiscal quarter marked the trough with respect to
earnings.
Business Outlook
The following statements are based upon managements 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 2011, SMART expects net sales will be in the range of $160 to $180
million and gross profit will be in the range of $29 to $33 million. Net income per diluted share
is expected to be in the range of $0.04 to $0.07 on a GAAP basis. On a non-GAAP basis, SMART
expects net income per diluted share will be in the range of $0.09 to $0.12. The guidance for the
third quarter of fiscal 2011 includes an income tax provision expected to be in the range of $2.8
to $3.1 million. Please refer to the Non-GAAP Information section and the Reconciliation of Q3-11
Guidance for Non-GAAP Financial Measures table below for further detail.
Conference Call Details
SMARTs second quarter fiscal 2011 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 24, 2011.
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 4421390. SMART will also offer a live and archived webcast of the conference call,
accessible from the Companys website at http://www.smartm.com. A telephonic replay of the
conference call will be available through midnight PDT, April 7, 2011, by dialing (303) 590-3030
and entering passcode 4421390.
Forward-Looking Statements
Statements contained in this press release, or in the teleconference or webcast that are not
statements of historical fact, including quotations attributed to Mr. MacKenzie, and any statements
that use the words will, believes, anticipates, appears, estimates, expects, intends,
temporary, or similar words that describe the Companys or its managements 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 Companys financial performance, the
success of our strategic initiatives including investments in our solid state storage growth
strategy and the Brazil flash business, the benefits associated with operational efficiencies, the
DRAM market and its pricing trends, the temporary nature of pricing trends, new product
introductions, market growth, expansion of capacity and strength in markets in the United States,
Brazil and Asia, the launch of our flash initiatives in Brazil, customer relationships, and end
user and/or customer acceptance, qualification or 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, declines or fluctuations
in product prices and raw material costs and availability, supply shortages, dependence upon
third-party vendors, customer demand for or acceptance or qualification of products, 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 or new favorable tax treatment or
renewals of exemptions from or benefits relating to 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 Companys periodic report filings
with the Securities and Exchange Commission including the Companys Annual Report on Form 10-K for
fiscal 2010 and the Form 10-Qs filed for fiscal 2011. 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 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 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 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,
a technology access charge and other infrequent or unusual items. These non-GAAP financial measures
are provided to enhance the users 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 SMARTs 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.
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. SMARTs 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)
Reconciliation of Non-GAAP Financial Measures
(In thousands, except per share data; unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||||||
February 25, | November 26, | February 26, | February 25, | February 26, | ||||||||||||||||
2011 | 2010 | 2010 | 2011 | 2010 | ||||||||||||||||
Net income |
$ | 171 | $ | 7,967 | $ | 16,092 | $ | 8,138 | $ | 20,674 | ||||||||||
Add: |
||||||||||||||||||||
Stock-based compensation expense charged to operating expenses, net of tax |
2,232 | 2,133 | 1,827 | 4,365 | 3,462 | |||||||||||||||
Restructuring charges, no tax effect |
2,831 | | | 2,831 | | |||||||||||||||
Technology access charge, no tax effect |
| 7,534 | | 7,534 | | |||||||||||||||
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 | |||||||||||||||
Non-GAAP net income |
$ | 5,234 | $ | 17,634 | $ | 14,875 | $ | 22,868 | $ | 20,267 | ||||||||||
Non-GAAP net income per diluted share |
$ | 0.08 | $ | 0.27 | $ | 0.23 | $ | 0.35 | $ | 0.31 | ||||||||||
Shares used in computing non-GAAP net income per diluted share: |
66,087 | 65,760 | 65,010 | 65,923 | 64,513 | |||||||||||||||
Net income |
$ | 171 | $ | 7,967 | $ | 16,092 | $ | 8,138 | $ | 20,674 | ||||||||||
Interest expense, net |
230 | 711 | 1,163 | 941 | 2,826 | * | ||||||||||||||
Income taxes |
2,557 | 5,339 | 8,433 | 7,896 | 13,150 | |||||||||||||||
Depreciation and amortization |
5,585 | 5,898 | 3,912 | 11,483 | 7,529 | |||||||||||||||
EBITDA |
8,543 | 19,915 | 29,600 | 28,458 | 44,179 | |||||||||||||||
Adjustments: |
||||||||||||||||||||
Stock-based compensation expense charged to operating expenses |
2,248 | 2,145 | 1,839 | 4,393 | 3,485 | |||||||||||||||
Restructuring charges |
2,831 | | | 2,831 | | |||||||||||||||
Technology access charge |
| 7,534 | | 7,534 | | |||||||||||||||
Gain on legal settlement |
| | (3,044 | ) | | (3,044 | ) | |||||||||||||
Gain on repurchase of notes |
| | | | (1,178 | ) | ||||||||||||||
Adjusted EBITDA |
$ | 13,622 | $ | 29,594 | $ | 28,395 | $ | 43,216 | $ | 43,442 | ||||||||||
* | Includes $353K of loan fees written off on repurchase of notes. |
Reconciliation of Q3-11 Guidance for Non-GAAP Financial Measures
(In millions, except per share data; unaudited)
(In millions, except per share data; unaudited)
Three Months Ending May 27, 2011 | ||||||||||||||||||||
GAAP | Non-GAAP | |||||||||||||||||||
Range of Estimates | Range of Estimates | |||||||||||||||||||
From | To | Adjustments | From | To | ||||||||||||||||
Net income |
$ | 2.8 | $ | 4.5 | $ | 3.2 | (a) | $ | 6.0 | $ | 7.7 | |||||||||
Net income per diluted share |
$ | 0.04 | $ | 0.07 | $ | 0.09 | $ | 0.12 | ||||||||||||
Shares used in computing net income per diluted share |
66.5 | 66.5 | 66.5 | 66.5 | ||||||||||||||||
(a) | Reflects estimated adjustments for $2.2 million stock-based compensation expense and $1.0 million restructuring charges. |
SMART Modular Technologies (WWH), Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(In thousands, except per share data; unaudited)
Condensed Consolidated Statements of Income
(In thousands, except per share data; unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||||||
February 25, | November 26, | February 26, | February 25, | February 26, | ||||||||||||||||
2011 | 2010 | 2010 | 2011 | 2010 | ||||||||||||||||
Net sales |
$ | 170,549 | $ | 216,359 | $ | 160,110 | $ | 386,908 | $ | 283,203 | ||||||||||
Cost of sales |
142,024 | 172,350 | 118,097 | 314,374 | 212,424 | |||||||||||||||
Gross profit |
28,525 | 44,009 | 42,013 | 72,534 | 70,779 | |||||||||||||||
Operating expenses: |
||||||||||||||||||||
Research and development |
7,852 | 8,160 | 5,219 | 16,012 | 10,949 | |||||||||||||||
Selling, general and administrative |
15,169 | 14,848 | 14,331 | 30,017 | 27,697 | |||||||||||||||
Restructuring charges |
2,831 | | | 2,831 | | |||||||||||||||
Technology access charge |
| 7,534 | | 7,534 | | |||||||||||||||
Total operating expenses |
25,852 | 30,542 | 19,550 | 56,394 | 38,646 | |||||||||||||||
Income from operations |
2,673 | 13,467 | 22,463 | 16,140 | 32,133 | |||||||||||||||
Interest expense, net |
(230 | ) | (711 | ) | (1,163 | ) | (941 | ) | (2,826 | ) | ||||||||||
Other income, net |
285 | 550 | 3,225 | 835 | 4,517 | |||||||||||||||
Total other income (expense) |
55 | (161 | ) | 2,062 | (106 | ) | 1,691 | |||||||||||||
Income before provision for income taxes |
2,728 | 13,306 | 24,525 | 16,034 | 33,824 | |||||||||||||||
Provision for income taxes |
2,557 | 5,339 | 8,433 | 7,896 | 13,150 | |||||||||||||||
Net income |
$ | 171 | $ | 7,967 | $ | 16,092 | $ | 8,138 | $ | 20,674 | ||||||||||
Net income per share, basic |
$ | 0.00 | $ | 0.13 | $ | 0.26 | $ | 0.13 | $ | 0.33 | ||||||||||
Net income per share, diluted |
$ | 0.00 | $ | 0.12 | $ | 0.25 | $ | 0.12 | $ | 0.32 | ||||||||||
Shares used in computing net income
per ordinary share |
63,178 | 62,899 | 62,211 | 63,039 | 62,092 | |||||||||||||||
Shares used in computing net income
per diluted share |
66,087 | 65,760 | 65,010 | 65,923 | 64,513 | |||||||||||||||
SMART Modular Technologies (WWH), Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
Condensed Consolidated Balance Sheets
(Unaudited)
February 25, | August 27, | |||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 134,426 | $ | 115,474 | ||||
Accounts receivable, net of allowances of $1,863 and $1,660 as of February 25, 2011 and August 27, 2010, respectively |
184,724 | 208,377 | ||||||
Inventories |
96,087 | 112,103 | ||||||
Prepaid expense and other current assets |
29,108 | 33,488 | ||||||
Total current assets |
444,345 | 469,442 | ||||||
Property and equipment, net |
52,996 | 46,221 | ||||||
Other non-current assets |
26,066 | 21,217 | ||||||
Other intangible assets, net |
5,980 | 6,460 | ||||||
Goodwill |
1,061 | 1,061 | ||||||
Total assets |
$ | 530,448 | $ | 544,401 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 118,840 | $ | 151,885 | ||||
Accrued liabilities |
24,649 | 29,318 | ||||||
Total current liabilities |
143,489 | 181,203 | ||||||
Long-term debt |
55,072 | 55,072 | ||||||
Other long-term liabilities |
6,225 | 4,546 | ||||||
Total liabilities |
204,786 | 240,821 | ||||||
Shareholders equity: |
||||||||
Ordinary shares |
11 | 10 | ||||||
Additional paid in capital |
124,892 | 118,123 | ||||||
Accumulated other comprehensive income |
18,832 | 11,658 | ||||||
Retained earnings |
181,927 | 173,789 | ||||||
Total shareholders equity |
325,662 | 303,580 | ||||||
Total liabilities and shareholders equity |
$ | 530,448 | $ | 544,401 | ||||
SMART Modular Technologies (WWH), Inc. and Subsidiaries
Summary Cash Flow Information
(Unaudited)
Summary Cash Flow Information
(Unaudited)
Six Months Ended | ||||||||
February 25, | February 26, | |||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Net cash provided by operating activities |
$ | 28,955 | $ | 4,917 | ||||
Net cash used in investing activities |
$ | (12,965 | ) | $ | (9,822 | ) | ||
Net cash provided by (used in) financing activities |
$ | 2,377 | $ | (24,337 | ) |
END