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8-K - FORM 8-K - SMART Modular Technologies (WWH), Inc. | c09835e8vk.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 First Quarter
Fiscal 2011 Results
NEWARK, CA, December 16, 2010 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 first quarter of fiscal 2011 ended
November 26, 2010.
First Quarter Fiscal 2011 Highlights:
| Net sales of $216.4 million |
||
| Gross profit of $44.0 million |
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| GAAP diluted EPS of $0.12 |
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| Non-GAAP diluted EPS of $0.27 |
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| Adjusted EBITDA of $29.6 million |
Net sales for the first quarter of fiscal 2011 were $216.4 million, as compared to $218.7 million
for the fourth quarter of fiscal 2010, and $123.1 million for the first quarter of fiscal 2010.
Gross profit for the first quarter of fiscal 2011 was $44.0 million, compared to $49.8 million for
the fourth quarter of fiscal 2010, and $28.8 million for the first quarter of fiscal 2010.
On a GAAP basis, net income for the first quarter of fiscal 2011 was $8.0 million or $0.12 per
diluted share, compared to $17.0 million or $0.26 per diluted share for the fourth quarter of
fiscal 2010, and $4.6 million or $0.07 per diluted share for the first quarter of fiscal 2010. The
first quarter of fiscal 2011 net income of $8.0 million includes a one-time technology access
charge of $7.5 million to accelerate our development of enterprise solid state drives.
On a non-GAAP basis, net income was $17.6 million or $0.27 per diluted share for the first quarter
of fiscal 2011, compared to $18.8 million or $0.29 per diluted share for the fourth quarter of
fiscal 2010, and net income of $5.4 million or $0.08 per diluted share for the first quarter of
fiscal 2010.
Adjusted EBITDA for the first quarter of fiscal 2011 was $29.6 million, compared to $33.2 million
for the fourth quarter of fiscal 2010, and $15.0 million for the first 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 pleased to have achieved our earnings per share guidance, notwithstanding significant
pricing pressures in the DRAM market, commented Iain MacKenzie, President and CEO of SMART. In
Brazil, despite a greater than 20% increase in module capacity, gross profit was slightly below
expectations due to end-of-quarter DRAM price declines. In our specialty memory business, end user
demand was somewhat weaker than we had anticipated due in part to delays in orders resulting from
the weaker DRAM pricing environment. Despite these pressures, we were able to lower overall
operating expenses and achieve our expectations for earnings per share.
Longer term, we continue to make progress with our enterprise solid state storage and Brazil flash
business initiatives, both of which are important drivers of our future growth. We were
particularly pleased with our second Enterprise XceedIOPS SSD design win, in this instance with
IBMs Power7 Supercomputing group. Although we are going through a period of significant DRAM
pricing declines, we expect such pricing declines to be temporary and we believe that our strong
customer relationships and operational excellence will enable us to remain solidly profitable and
successful as the year unfolds, concluded Mr. MacKenzie.
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.
SMART expects that the combination of the substantial DRAM price declines and the reduced number of
business days in the second fiscal quarter will put pressure on its second quarter results.
For the second quarter of fiscal 2011, SMART expects net sales will be in the range of $165 to $185
million and gross profit in the range of $31 to $34 million. Net income per diluted share is
expected to be in the range of $0.06 to $0.08 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 $0.11. The guidance for the second
quarter of fiscal 2011 includes an income tax provision expected to be in the range of $3.4 to $3.7
million. Please refer to the Non-GAAP Information section and the Reconciliation of Q2-11 Guidance
for Non-GAAP Financial Measures table below for further detail.
Conference Call Details
SMARTs first quarter fiscal 2011 teleconference and webcast is scheduled to begin at 1:30 p.m.
Pacific Standard Time (PST), or 4:30 p.m. Eastern Standard Time (EST), on Thursday, December 16,
2010. 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 4390981. 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 PST, December 30, 2010, by dialing (303)
590-3030 and entering passcode 4390981.
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, 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, 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 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. 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, 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, 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
and gains, 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 | ||||||||||||
November 26, | August 27, | November 27, | ||||||||||
2010 | 2010 | 2009 | ||||||||||
Net income |
$ | 7,967 | $ | 16,980 | $ | 4,582 | ||||||
Add: |
||||||||||||
Stock-based compensation expense charged
to operating expense, net of tax |
2,133 | 1,815 | 1,635 | |||||||||
Technology access charge, no tax effect |
7,534 | | | |||||||||
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 |
$ | 17,634 | $ | 18,795 | $ | 5,392 | ||||||
Non-GAAP net income per diluted share |
$ | 0.27 | $ | 0.29 | $ | 0.08 | ||||||
Shares used in computing non-GAAP net
income per diluted share: |
65,760 | 65,175 | 64,016 | |||||||||
Net income |
$ | 7,967 | $ | 16,980 | $ | 4,582 | ||||||
Interest expense, net |
711 | 747 | 1,663 | * | ||||||||
Income taxes |
5,339 | 8,434 | 4,717 | |||||||||
Depreciation and amortization |
5,898 | 5,225 | 3,617 | |||||||||
EBITDA |
19,915 | 31,386 | 14,579 | |||||||||
Adjustments: |
||||||||||||
Stock-based compensation expense charged
to operating expenses |
2,145 | 1,827 | 1,646 | |||||||||
Gain on repurchase of notes |
| | (1,178 | ) | ||||||||
Technology access charge |
7,534 | | | |||||||||
Adjusted EBITDA |
$ | 29,594 | $ | 33,213 | $ | 15,047 | ||||||
* | Includes $353K of loan fees written off on repurchase of notes. |
RECONCILIATION OF Q2-11 GUIDANCE FOR NON-GAAP FINANCIAL MEASURES
(In millions, except per share data; unaudited)
(In millions, except per share data; unaudited)
Three Months Ending February 25, 2011 | ||||||||||||||||||||
GAAP | Non-GAAP | |||||||||||||||||||
Range of Estimates | Range of Estimates | |||||||||||||||||||
From | To | Adjustments | From | To | ||||||||||||||||
Net income |
$ | 3.8 | $ | 5.1 | $ | 2.2 | (a) | $ | 6.0 | $ | 7.3 | |||||||||
Net income per diluted share |
$ | 0.06 | $ | 0.08 | $ | 0.09 | $ | 0.11 | ||||||||||||
Shares used in computing net
income per diluted share |
66.0 | 66.0 | 66.0 | 66.0 | ||||||||||||||||
(a) | Reflects estimated adjustment for $2.2 million stock-based compensation expense. |
SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data; unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data; unaudited)
Three Months Ended | ||||||||||||
November 26, | August 27, | November 27, | ||||||||||
2010 | 2010 | 2009 | ||||||||||
Net sales |
$ | 216,359 | $ | 218,652 | $ | 123,093 | ||||||
Cost of sales |
172,350 | 168,872 | 94,327 | |||||||||
Gross profit |
44,009 | 49,780 | 28,766 | |||||||||
Operating expenses: |
||||||||||||
Research and development |
8,160 | 7,496 | 5,730 | |||||||||
Selling, general and administrative |
14,848 | 16,083 | 13,366 | |||||||||
Technology access charge |
7,534 | | | |||||||||
Total operating expenses |
30,542 | 23,579 | 19,096 | |||||||||
Income from operations |
13,467 | 26,201 | 9,670 | |||||||||
Interest expense, net |
(711 | ) | (747 | ) | (1,663 | ) | ||||||
Other income (expense), net |
550 | (40 | ) | 1,292 | ||||||||
Total other expense |
(161 | ) | (787 | ) | (371 | ) | ||||||
Income before provision for income taxes |
13,306 | 25,414 | 9,299 | |||||||||
Provision for income taxes |
5,339 | 8,434 | 4,717 | |||||||||
Net income |
$ | 7,967 | $ | 16,980 | $ | 4,582 | ||||||
Net income per share, basic |
$ | 0.13 | $ | 0.27 | $ | 0.07 | ||||||
Net income per share, diluted |
$ | 0.12 | $ | 0.26 | $ | 0.07 | ||||||
Shares used in computing net income
per ordinary share |
62,899 | 62,662 | 61,974 | |||||||||
Shares used in computing net income
per diluted share |
65,760 | 65,175 | 64,016 | |||||||||
SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
November 26, | August 27, | |||||||
2010 | 2010 | |||||||
(In thousands) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 92,944 | $ | 115,474 | ||||
Accounts receivable, net of allowances of
$1,773 and $1,660 as of November 26, 2010
and August 27, 2010, respectively |
178,887 | 208,377 | ||||||
Inventories |
103,464 | 112,103 | ||||||
Prepaid expense and other current assets |
22,325 | 33,488 | ||||||
Total current assets |
397,620 | 469,442 | ||||||
Property and equipment, net |
49,179 | 46,221 | ||||||
Other non-current assets |
27,838 | 21,217 | ||||||
Other intangible assets, net |
6,220 | 6,460 | ||||||
Goodwill |
1,061 | 1,061 | ||||||
Total assets |
$ | 481,918 | $ | 544,401 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 81,681 | $ | 151,885 | ||||
Accrued liabilities |
21,178 | 29,318 | ||||||
Total current liabilities |
102,859 | 181,203 | ||||||
Long-term debt |
55,072 | 55,072 | ||||||
Other long-term liabilities |
4,749 | 4,546 | ||||||
Total liabilities |
162,680 | 240,821 | ||||||
Shareholders equity: |
||||||||
Ordinary shares |
11 | 10 | ||||||
Additional paid in capital |
121,269 | 118,123 | ||||||
Accumulated other comprehensive income |
16,202 | 11,658 | ||||||
Retained earnings |
181,756 | 173,789 | ||||||
Total shareholders equity |
319,238 | 303,580 | ||||||
Total liabilities and shareholders equity |
$ | 481,918 | $ | 544,401 | ||||
SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
SUMMARY CASH FLOW INFORMATION
(Unaudited)
SUMMARY CASH FLOW INFORMATION
(Unaudited)
Three Months Ended | ||||||||
November 26, | November 27, | |||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Net cash provided by (used in) operating activities |
$ | (16,182 | ) | $ | 7,703 | |||
Net cash used in investing activities |
$ | (7,537 | ) | $ | (2,895 | ) | ||
Net cash provided by (used in) financing activities |
$ | 1,002 | $ | (24,782 | ) |
END