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SMART Modular Technologies: SMART Modular Technologies Reports Second Quarter Fiscal 2009 Results and Announces $10 Million Sha

^{Published on 2009-03-26 14:06:02, Last Modified on 2009-11-03 18:35:14 - Market Wire}
 

FREMONT, CA--(Marketwire - March 26, 2009) - SMART Modular Technologies (WWH), Inc. ("SMART" or the "Company") (NASDAQ: [ SMOD ]), a leading independent manufacturer of memory modules, solid state drives, embedded computing subsystems, and TFT-LCD display products, today reported financial results for the second quarter of fiscal 2009.

 Second Quarter Fiscal 2009 Highlights: -- Net Sales of $109.1 Million -- Gross Profit of $24.1 Million -- Adjusted EBITDA of $10.2 Million -- GAAP EPS of ($0.03) -- Non-GAAP Diluted EPS of $0.06 -- Year-to-date Operating Cash Flow of $24.6 million -- Cash and Cash Equivalents of $125.4 million 

Net sales for the second quarter of fiscal 2009 were $109.1 million, compared to $140.8 million for the first quarter of fiscal 2009, and $164.5 million for the second quarter of fiscal 2008.

Gross profit for the second quarter of fiscal 2009 was $24.1 million, compared to $25.8 million for the first quarter of fiscal 2009, and $32.9 million for the second quarter of fiscal 2008.

GAAP net income (loss) for the second quarter of fiscal 2009 was ($1.9) million, or ($0.03) per share, compared to ($6.9) million, or ($0.11) per share for the first quarter of fiscal 2009, and $11.4 million, or $0.18 per diluted share for the second quarter of fiscal 2008.

Non-GAAP net income was $4.1 million or $0.06 per diluted share for the second quarter of fiscal 2009, compared to $3.0 million, or $0.05 per diluted share for the first quarter of fiscal 2009, and $13.3 million, or $0.21 per diluted share for the second quarter of fiscal 2008. Non-GAAP net income excludes charges related to goodwill impairment, restructuring, and stock-based compensation. Please refer to the "Non-GAAP Information" below for further detail.

Adjusted EBITDA for the second quarter of fiscal 2009 was $10.2 million, compared to $10.3 million for the first quarter of fiscal 2009, and $19.1 million for the second quarter of fiscal 2008. Adjusted EBITDA is defined as GAAP net income (loss) plus net interest expense, income tax expense, depreciation and amortization expense, goodwill impairment charges, restructuring charges, and stock-based compensation expense.

Operating cash outflow for the second quarter of fiscal 2009 was $4.1 million mainly due to working capital changes. Year-to-date operating cash flow was $24.6 million. Cash and cash equivalents at the end of the second quarter of fiscal 2009 was $125.4 million and long-term debt, due in 2012, remained at $81.3 million.

The Company also announced that its Board of Directors has authorized the repurchase of up to $10 million of the Company's ordinary shares. The timing, duration, and the exact number of shares to be purchased will be at the Company's discretion. Under the repurchase program, depending on price, regulatory requirements, market conditions and other factors, shares may be purchased on the open market or in privately negotiated transactions. The Company intends to repurchase shares using its available cash. At the end of its second fiscal quarter, SMART had 61,730,661 ordinary shares outstanding. Purchases under the program may be commenced, suspended, or terminated at any time without prior notice.

"The Board's approval of this share repurchase program reflects its confidence in the long-term growth of SMART's business and an ongoing commitment to deliver shareholder value. The Board and management believe that SMART's shares are currently undervalued relative to SMART's long-term earning potential," commented Iain MacKenzie, President and CEO of SMART.

"For the second quarter of fiscal 2009, we are proud to report that gross profit and non-GAAP EPS surpassed the high-end of our guidance, driven by a favorable mix shift towards higher margin businesses in combination with prudent financial management," added Mr. MacKenzie. "These accomplishments were achieved even with lower net sales which were impacted by challenging macro economic conditions and weak market demand. Despite this relatively strong performance and our strong balance sheet, and despite our confidence in the eventual resumption of growth, we remain mindful of the current overall weak environment and have decided to take further steps to help protect long-term profitability. These steps include salary reductions in the U.S., shortened work weeks internationally, a suspension of our 401(k) matching program and a reduction in Board compensation. We expect that these cost-reductions, along with our leading market position and focus on financial controls, will enable us to endure these challenging times," concluded Mr. MacKenzie.

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 third quarter of fiscal 2009, SMART estimates net sales will be in the range of $95 million to $105 million, gross profit in the range of $17 million to $19 million, and net (loss) per share will be in the range of ($0.05) to ($0.04) on a GAAP basis. On a non-GAAP basis, excluding charges related to restructuring, stock-based compensation, and other non-recurring items, such as estimated costs associated with the planned relocation of its corporate headquarters, the Company expects net income per diluted share will be in the range of $0.00 to $0.01.

Conference Call Details

SMART's second quarter, fiscal 2009 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 26, 2009. The call may be accessed US toll free by calling (800) 240-4186 or US toll by calling (303) 228-2960. 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, April 9, 2009, by dialing (800) 405-2236 and entering passcode 11127425#. 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 and financial condition, the share repurchase program, the benefits of cost-reduction measures, and the Company's market position.

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, DRAM supply and demand, production or manufacturing difficulties, competitive factors, new products and technological changes (or rate of adoption), fluctuations in product prices and raw material costs, dependence upon third-party vendors, customer demand, changes in industry standards or release plans, the timing, duration, number of repurchased shares (if any), price, regulatory requirements, and market conditions, 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 29, 2008 and Form 10-Q for the quarter ended November 28, 2008. Such risk factors as outlined in this press release and the Company's periodic report filings 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 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, and stock-based compensation expense. Non-GAAP net income and non-GAAP net income per diluted share do not include goodwill impairment charges, restructuring charges, stock-based compensation expense, and other infrequent or unusual items, such as estimated costs associated with the planned relocation of its corporate headquarters. 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 Six Six Months Months Months Months Months Ended Ended Ended Ended Ended February November February February February 27, 2009 28, 2008 29, 2008 27, 2009 29, 2008 -------- -------- --------- -------- --------- Net income (loss) $ (1,850) $ (6,878) $ 11,440 $ (8,728) $ 23,505 Add: Goodwill impairment, no tax effect 3,206 7,210 - 10,416 - Restructuring charges, net of tax 925 886 - 1,811 - Stock-based compensation expense charged to operating expenses, net of tax 1,787 1,775 1,823 3,562 3,451 -------- -------- --------- -------- --------- Non-GAAP net income $ 4,068 $ 2,993 $ 13,263 $ 7,061 $ 26,956 ======== ======== ========= ======== ========= Non-GAAP net income per diluted share $ 0.06 $ 0.05 $ 0.21 $ 0.11 $ 0.42 ======== ======== ========= ======== ========= Shares used in computing net income per diluted share 63,326 63,330 63,713 63,328 63,684 ======== ======== ========= ======== ========= -------- -------- --------- -------- --------- Net income (loss) $ (1,850) $ (6,878) $ 11,440 $ (8,728) $ 23,505 Interest expense, net 1,698 1,752 1,327 3,450 2,351 Income taxes 1,263 2,177 1,539 3,440 4,220 Depreciation and amortization 3,115 3,330 2,953 6,445 5,570 -------- -------- --------- -------- --------- EBITDA $ 4,226 $ 381 $ 17,259 $ 4,607 $ 35,646 Adjustments: Goodwill impairment 3,206 7,210 - 10,416 - Restructuring charges 935 886 - 1,821 - Stock-based compensation expense charged to operating expenses 1,800 1,787 1,835 3,587 3,474 -------- -------- --------- -------- --------- Adjusted EBITDA $ 10,167 $ 10,264 $ 19,094 $ 20,431 $ 39,120 ======== ======== ========= ======== ========= RECONCILIATION OF Q3-09 GUIDANCE FOR NON-GAAP FINANCIAL MEASURES (In millions, except per share data; unaudited) Three Months Ending May 29, 2009 ----------------------------------------------- Non-GAAP Range of GAAP Range of Estimate Estimate ------------------ ---------------- From To Adjustments From To ----------- Net income (loss) $ 0.2 $ 0.5 $ 3.0(a) $ (2.8) $ (2.5) ======== ======== ======= ======= Net income (loss) per share $ 0.00 $ 0.01 $ (0.05) $ (0.04) ======== ======== ======= ======= Shares used in computing net income (loss) per diluted share 63.3 63.3 61.7 61.7 ======== ======== ======= ======= (a) Reflects estimated adjustment for restructuring charges, stock-based compensation, and relocating corporate headquarters. 

About SMART

SMART Modular Technologies is a leading provider of memory products, offering more than 500 standard and custom products to top-tier OEMs in the computer, industrial, networking, and telecommunications sectors. Taking innovations from the design stage through manufacturing and delivery, SMART has developed a comprehensive memory product line that includes DRAM, SRAM, and Flash 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. SMART's Display and Embedded 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 US, Europe, Asia, and Latin America enables it to provide its customers with proven expertise in international logistics, asset management, and supply-chain management worldwide. More information on SMART can be obtained at [ www.smartm.com ].

 SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Three Months Six Months Six Months Ended Ended Ended Ended February 27, February 29, February 27, February 29, 2009 2008 2009 2008 ----------- ----------- ----------- ----------- (In thousands, except per share data) Net sales $ 109,089 $ 164,497 $ 249,864 $ 341,870 Cost of sales 85,022 131,609 199,981 274,888 ----------- ----------- ----------- ----------- Gross profit 24,067 32,888 49,883 66,982 ----------- ----------- ----------- ----------- Research and development 5,142 4,624 10,578 9,309 Selling, general and administrative 13,782 14,331 28,249 29,392 Restructuring charges 935 -- 1,821 -- Goodwill impairment 3,206 -- 10,416 -- ----------- ----------- ----------- ----------- Total operating expenses 23,065 18,955 51,064 38,701 ----------- ----------- ----------- ----------- Income (loss) from operations 1,002 13,933 (1,181) 28,281 Interest expense, net (1,698) (1,327) (3,450) (2,351) Other income (expense), net 109 373 (657) 1,795 ----------- ----------- ----------- ----------- Total other expense, net (1,589) (954) (4,107) (556) ----------- ----------- ----------- ----------- Income (loss) before provision for income taxes (587) 12,979 (5,288) 27,725 Provision for income taxes 1,263 1,539 3,440 4,220 ----------- ----------- ----------- ----------- Net income (loss) $ (1,850) $ 11,440 $ (8,728) $ 23,505 =========== =========== =========== =========== Net income (loss) per share, basic $ (0.03) $ 0.19 $ (0.14) $ 0.38 =========== =========== =========== =========== Shares used in computing net income per ordinary share 61,673 60,869 61,590 60,782 =========== =========== =========== =========== Net income (loss) per share, diluted $ (0.03) $ 0.18 $ (0.14) $ 0.37 =========== =========== =========== =========== Shares used in computing net income (loss) per diluted share 61,673 63,713 61,590 63,684 =========== =========== =========== =========== SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) February 27, August 29, 2009 2008 ----------- ----------- (In thousands) ASSETS Cash and cash equivalents $ 125,393 $ 115,994 Accounts receivable, net of allowances of $1,143 and $1,517 as of February 27, 2009 and August 29, 2008, respectively 115,591 193,736 Inventories 84,610 62,430 Prepaid expenses and other current assets 12,889 14,973 ----------- ----------- Total current assets 338,483 387,133 Property and equipment, net 33,099 39,317 Goodwill -- 7,210 Other intangible assets, net 8,010 8,545 Other non-current assets 4,014 4,943 ----------- ----------- Total assets $ 383,606 $ 447,148 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable $ 58,950 $ 93,482 Accrued expenses and other current liabilities 22,070 23,942 ----------- ----------- Total current liabilities 81,020 117,424 Long-term debt 81,250 81,250 Other long-term liabilities 2,171 1,568 ----------- ----------- Total liabilities 164,441 200,242 ----------- ----------- Shareholders' equity: Ordinary shares 10 10 Additional paid-in capital 104,228 100,234 Deferred stock-based compensation (34) (91) Accumulated other comprehensive income (loss) (8,932) 14,132 Retained earnings 123,893 132,621 ----------- ----------- Total shareholders' equity 219,165 246,906 ----------- ----------- Total liabilities and shareholders' equity $ 383,606 $ 447,148 =========== =========== SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES SUMMARY CASH FLOW INFORMATION (Unaudited) Six Months Six Months Ended Ended February 27, February 29, 2009 2008 ------------ ------------ (In thousands) Net cash provided by operating activities $ 24,581 $ 19,764 Net cash used in investing activities $ (11,368) $ (9,621) Net cash provided by financing activities $ 464 $ 305