##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended May 27, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 000-51771
 SMART MODULAR TECHNOLOGIES (WWH), INC.
  Cayman Islands
    
    20-2509518(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification Number)
 39870 Eureka Drive, Newark, California 94560
 (510) 623-1231
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



SMART MODULAR TECHNOLOGIES (WWH), INC.
 INDEX TO QUARTERLY REPORT
 TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 4. Controls and Procedures
    
    
    31PART II. OTHER INFORMATION
    
    
    31Item 1. Legal Proceedings
    
    
    31Item 1A. Risk Factors
    
    
    32Item 6. Exhibits
    
    
    35SIGNATURES
    
    
    36Exhibit 31.1Exhibit 31.2Exhibit 32
   2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)
 May 27,
    
    
    August 27,2011
    
    
    2010(In thousands, exceptshare data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    131,737
    
    
    $
    115,474Accounts receivable, net of allowances
of $1,778 and $1,660 as of May 27, 2011
and August 27, 2010, respectively
    
    
    177,664
    
    
    
    208,377Inventories
    
    
    98,071
    
    
    
    112,103Prepaid expenses and other current assets
    
    
    22,670
    
    
    
    33,488Total current assets
    
    
    430,142
    
    
    
    469,442Property and equipment, net
    
    
    52,505
    
    
    
    46,221Other non-current assets
    
    
    32,719
    
    
    
    21,217Other intangible assets, net
    
    
    5,744
    
    
    
    6,460Goodwill
    
    
    1,061
    
    
    
    1,061Total assets
    
    $
    522,171
    
    
    $
    544,401LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    91,441
    
    
    $
    151,885Accrued liabilities
    
    
    21,977
    
    
    
    29,318Short-term debt
    
    
    55,072
    
    
    
    Total current liabilities
    
    
    168,490
    
    
    
    181,203Other long-term liabilities
    
    
    7,298
    
    
    
    4,546Long-term debt
    
    
    
    
    
    
    55,072Total liabilities
    
    
    175,788
    
    
    
    240,821Commitments and contingenciesShareholders equity:Ordinary shares, $0.00016667 par value;
600,000,000 shares authorized; 65,152,351 and
62,740,650 shares issued and outstanding as
of May 27, 2011 and August 27, 2010,
respectively
    
    
    11
    
    
    
    10Additional paid-in capital
    
    
    133,548
    
    
    
    118,123Accumulated other comprehensive income
    
    
    28,625
    
    
    
    11,658Retained earnings
    
    
    184,199
    
    
    
    173,789Total shareholders equity
    
    
    346,383
    
    
    
    303,580Total liabilities and shareholders equity
    
    $
    522,171
    
    
    $
    544,401
   3




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedMay 27,
    
    
    May 28,
    
    
    May 27,
    
    
    May 28,2011
    
    

2010
    
    

    2011
    
    
    2010(In thousands, except per share data)Net sales
    
    $
    164,479
    
    
    $
    201,235
    
    
    $
    551,387
    
    
    $
    484,438Cost of sales (1)
    
    
    132,100
    
    
    
    155,738
    
    
    
    446,474
    
    
    
    368,162Gross profit
    
    
    32,379
    
    
    
    45,497
    
    
    
    104,913
    
    
    
    116,276Operating expenses:Research and development (1)
    
    
    7,652
    
    
    
    6,657
    
    
    
    23,664
    
    
    
    17,606Selling, general and administrative
(1)
    
    
    15,224
    
    
    
    16,340
    
    
    
    45,241
    
    
    
    44,037Acquisition costs
    
    
    3,533
    
    
    
    
    
    
    
    3,533
    
    
    
    Restructuring charges
    
    
    480
    
    
    
    
    
    
    
    3,311
    
    
    
    Technology access charge
    
    
    
    
    
    
    
    
    
    
    7,534
    
    
    
    Total operating expenses
    
    
    26,889
    
    
    
    22,997
    
    
    
    83,283
    
    
    
    61,643Income from operations
    
    
    5,490
    
    
    
    22,500
    
    
    
    21,630
    
    
    
    54,633Interest income (expense), net
    
    
    179
    
    
    
    (837
    )
    
    
    (762
    )
    
    
    (3,663
    )Other income, net
    
    
    2,047
    
    
    
    608
    
    
    
    2,882
    
    
    
    5,125Total other income (expense)
    
    
    2,226
    
    
    
    (229
    )
    
    
    2,120
    
    
    
    1,462Income before provision for
income taxes
    
    
    7,716
    
    
    
    22,271
    
    
    
    23,750
    
    
    
    56,095Provision for income taxes
    
    
    5,444
    
    
    
    7,354
    
    
    
    13,340
    
    
    
    20,504Net income
    
    $
    2,272
    
    
    $
    14,917
    
    
    $
    10,410
    
    
    $
    35,591Net income per share, basic
    
    $
    0.04
    
    
    $
    0.24
    
    
    $
    0.16
    
    
    $
    0.57Net income per share, diluted
    
    $
    0.03
    
    
    $
    0.23
    
    
    $
    0.16
    
    
    $
    0.55Shares used in computing net income
per ordinary share
    
    
    64,137
    
    
    
    62,463
    
    
    
    63,405
    
    
    
    62,216Shares used in computing net income
per diluted share
    
    
    67,648
    
    
    
    65,502
    
    
    
    66,498
    
    
    
    64,843(1)   Stock-based
compensation by category:Cost of sales
    
    $
    219
    
    
    $
    192
    
    
    $
    681
    
    
    $
    511Research and development
    
    
    426
    
    
    
    378
    
    
    
    1,209
    
    
    
    982Selling, general and administrative
    
    
    1,567
    
    
    
    1,338
    
    
    
    4,715
    
    
    
    3,900
   4




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedMay 27,
    
    
    May 28,
    
    
    May 27,
    
    
    May 28,2011
    
    
    2010
    
    
    2011
    
    
    2010(In thousands)Net income
    
    $
    2,272
    
    
    $
    14,917
    
    
    $
    10,410
    
    
    $
    35,591Other comprehensive income:Net changes in unrealized
gain or loss on derivative
instruments accounted for
as cash flow hedges
    
    
    
    
    
    
    161
    
    
    
    
    
    
    
    1,149Foreign currency translation
    
    
    9,793
    
    
    
    8,079
    
    
    
    16,967
    
    
    
    6,985Comprehensive income
    
    $
    12,065
    
    
    $
    23,157
    
    
    $
    27,377
    
    
    $
    43,725
   5




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
 Nine Months EndedMay 27,
    
    
    May 28,2011
    
    
    2010(In thousands)Cash flows from operating activities:Net income
    
    $
    10,410
    
    
    $
    35,591Adjustments to reconcile net income to net cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    16,935
    
    
    
    11,779Stock-based compensation
    
    
    6,605
    
    
    
    5,393Provision for (recovery of) doubtful accounts receivable
and sales returns
    
    
    118
    
    
    
    (19
    )Amortization of debt issuance costs
    
    
    298
    
    
    
    861Loss on sale of assets
    
    
    582
    
    
    
    430Deferred income tax provision (benefit)
    
    
    273
    
    
    
    31Gain on early repayment of long-term debt
    
    
    
    
    
    
    (1,178
    )Loss on display business divestiture
    
    
    
    
    
    
    486Changes in operating assets and liabilities:Accounts receivable
    
    
    32,547
    
    
    
    (79,732
    )Inventories
    
    
    16,195
    
    
    
    (46,314
    )Prepaid expenses and other assets
    
    
    (2,340
    )
    
    
    (17,434
    )Accounts payable
    
    
    (58,195
    )
    
    
    74,277Accrued expenses and other liabilities
    
    
    (3,624
    )
    
    
    11,755Net cash provided by (used in) operating activities
    
    
    19,804
    
    
    
    (4,136
    )Cash flows from investing activities:Capital expenditures
    
    
    (15,030
    )
    
    
    (15,384
    )Cash deposits on equipment
    
    
    (743
    )
    
    
    (2,157
    )Net proceeds from display business divestiture
    
    
    
    
    
    
    2,181Proceeds from sale of property and equipment
    
    
    
    
    
    
    326Net cash used in investing activities
    
    
    (15,773
    )
    
    
    (15,034
    )Cash flows from financing activities:Proceeds from issuance of ordinary shares from stock option
exercises
    
    
    8,641
    
    
    
    1,384Excess tax benefits from share-based compensation
    
    
    180
    
    
    
    Repayment of long-term debt
    
    
    
    
    
    
    (25,000
    )Net cash provided by (used in) financing activities
    
    
    8,821
    
    
    
    (23,616
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    3,411
    
    
    
    1,111Net increase (decrease) in cash and cash equivalents
    
    
    16,263
    
    
    
    (41,675
    )Cash and cash equivalents at beginning of period
    
    
    115,474
    
    
    
    147,658Cash and cash equivalents at end of period
    
    $
    131,737
    
    
    $
    105,981Supplemental disclosures of cash flow information:Cash paid during the year:Interest
    
    $
    2,510
    
    
    $
    4,217Taxes
    
    
    15,910
    
    
    
    19,361Non-cash activities information:Change in ICMS assessment payable and related
indemnification receivable
    
    $
    2,416
    
    
    $
    Change in fair value of derivative instruments
    
    
    
    
    
    
    1,149
   6




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 1  Basis of Presentation and Principles of Consolidation
 Basis of Presentation
    Product and Service Revenue
 Revenue Recognition
   7




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedMay 27,
    
    
    May 28,
    
    
    May 27,
    
    
    May 28,2011
    
    
    2010
    
    
    2011
    
    
    2010Service revenue, net
    
    $
    8,255
    
    
    $
    10,751
    
    
    $
    28,327
    
    
    $
    28,493Cost of sales  service (1)
    
    
    267,106
    
    
    
    259,310
    
    
    
    748,429
    
    
    
    624,304Gross billings for services
    
    
    275,361
    
    
    
    270,061
    
    
    
    776,756
    
    
    
    652,797Product net sales
    
    
    156,224
    
    
    
    190,484
    
    
    
    523,060
    
    
    
    455,945Gross billings to customers
    
    $
    431,585
    
    
    $
    460,545
    
    
    $
    1,299,816
    
    
    $
    1,108,742Product net sales
    
    $
    156,224
    
    
    $
    190,484
    
    
    $
    523,060
    
    
    $
    455,945Service revenue, net
    
    
    8,255
    
    
    
    10,751
    
    
    
    28,327
    
    
    
    28,493Net sales
    
    $
    164,479
    
    
    $
    201,235
    
    
    $
    551,387
    
    
    $
    484,438
 
 (1)
    
    Represents cost of sales associated with service revenue reported on a net basis. Recent Accounting Pronouncements
  Accounting for Transfers of Financial Assets
(FASB Statement No. 166, Accounting for Transfers of Financial Assets)
 Improvements to Financial Reporting by
Enterprises Involved with Variable Interest Entities (FASB Statement No. 167, Amendments to FASB
Interpretation No. 46 (R))
 Revenue
Recognition (Topic 605)  Multiple-Deliverable Revenue Arrangements Revenue Recognition-Multiple Element
Arrangements
 Software (Topic 985)  Certain Revenue
Arrangements that Include Software Elements Software-Revenue Recognition
  8




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NOTE 2  Merger Agreement
         NOTE 3  Stock-Based Compensation
 Compensation  Stock
Compensation
   9




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Stock Options
   Summary of Assumptions and Activity for Stock Options
 .
 Nine Months EndedMay 27,
    
    
    May 28,2011
    
    
    2010Stock options:Expected term (years)
    
    
    4.4
    
    
    
    4.7Expected volatility
    
    
    81
    %
    
    
    78
    %Risk-free interest rate
    
    
    1.71
    %
    
    
    2.18
    %Expected dividends
    
    
    
    
    
    
    
  WeightedAverageWeighted
    
    
    RemainingAverage
    
    
    Contractual
    
    
    AggregateExercise
    
    
    Term
    
    
    IntrinsicShares
    
    
    Price
    
    
    (Years)
    
    
    ValueOptions outstanding at August 27, 2010
    
    
    8,434
    
    
    $
    4.39Options granted
    
    
    1,088
    
    
    
    6.60Options exercised
    
    
    (2,342
    )
    
    
    3.69Options forfeited and cancelled
    
    
    (469
    )
    
    
    6.19Options outstanding at May 27, 2011
    
    
    6,711
    
    
    $
    4.86
    
    
    
    6.83
    
    
    $
    29,752Options exercisable at May 27, 2011
    
    
    3,709
    
    
    $
    4.41
    
    
    
    5.63
    
    
    $
    18,322Options vested and expected to vest at May 27, 2011
    
    
    6,453
    
    
    $
    4.81
    
    
    
    6.74
    
    
    $
    28,951
   WeightedAverageGrant Date FairShares
    
    
    Value Per ShareNon-vested stock options at August 27, 2010
    
    
    3,739
    
    
    $
    2.61Stock options granted
    
    
    1,088
    
    
    $
    4.03Vested stock options
    
    
    (1,356
    )
    
    $
    2.33Forfeited and cancelled stock options
    
    
    (469
    )
    
    $
    3.50Non-vested stock options at May 27, 2011
    
    
    3,002
    
    
    $
    3.12
  10




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Restricted Share Units (RSUs)
       WeightedAverage
    
    
    AggregateGrant Date
    
    
    IntrinsicShares
    
    
    Fair Value
    
    
    ValueAwards outstanding at August 27, 2010
    
    
    1,153
    
    
    $
    5.25Awards granted
    
    
    895
    
    
    
    7.01Awards vested
    
    
    (70
    )
    
    
    5.09Awards forfeited and cancelled
    
    
    (133
    )
    
    
    6.33Awards outstanding at May 27, 2011
    
    
    1,845
    
    
    $
    6.41
    
    
    $
    17,012
   NOTE 4  Goodwill and Other Intangible Assets, net
 Intangibles  Goodwill and Other
  Property,
Plant and Equipment
  11




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Weighted
    
    
    Value at
    
    
    As of May 27, 2011
    
    
    As of August 27, 2010Avg. Life
    
    
    Date of
    
    
    Accumulated
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying(years)
    
    
    Acquisition
    
    
    Amortization
    
    
    Value
    
    
    Amortization
    
    
    ValueAmortized intangible
assets:Customer relationships
    
    
    10
    
    
    $
    3,700
    
    
    $
    1,203
    
    
    $
    2,497
    
    
    $
    925
    
    
    $
    2,775Technology
    
    
    7
    
    
    
    2,800
    
    
    
    1,300
    
    
    
    1,500
    
    
    
    1,000
    
    
    
    1,800Company trade name
    
    
    20
    
    
    
    2,040
    
    
    
    331
    
    
    
    1,709
    
    
    
    255
    
    
    
    1,785Leasehold interest
    
    
    3
    
    
    
    260
    
    
    
    260
    
    
    
    
    
    
    
    203
    
    
    
    57Product names
    
    
    9
    
    
    
    60
    
    
    
    22
    
    
    
    38
    
    
    
    17
    
    
    
    43Total
    
    
    
    
    
    $
    8,860
    
    
    $
    3,116
    
    
    $
    5,744
    
    
    $
    2,400
    
    
    $
    6,460
   Fiscal Year:
    
    AmountRemainder of fiscal 2011
    
    $
    2202012
    
    
    8792013
    
    
    8792014
    
    
    8792015
    
    
    678Thereafter
    
    
    2,209Total
    
    $
    5,744
 NOTE 5  Net Income Per Share
   Three Months Ended
    
    
    Nine Months EndedMay 27,
    
    
    May 28,
    
    
    May 27,
    
    
    May 28,2011
    
    
    2010
    
    
    2011
    
    
    2010Numerator:Net income
    
    $
    2,272
    
    
    $
    14,917
    
    
    $
    10,410
    
    
    $
    35,591Denominator:Weighted average ordinary shares, basic
    
    
    64,137
    
    
    
    62,463
    
    
    
    63,405
    
    
    
    62,216Effect of dilutive securities:Stock options and RSUs
    
    
    3,511
    
    
    
    3,039
    
    
    
    3,093
    
    
    
    2,627Weighted average ordinary shares,
diluted
    
    
    67,648
    
    
    
    65,502
    
    
    
    66,498
    
    
    
    64,843Net income per ordinary share, basic
    
    $
    0.04
    
    
    $
    0.24
    
    
    $
    0.16
    
    
    $
    0.57Net income per ordinary share, diluted
    
    $
    0.03
    
    
    $
    0.23
    
    
    $
    0.16
    
    
    $
    0.55
   12




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NOTE 6  Balance Sheet Details
 Inventories
  May 27,
    
    
    August 27,2011
    
    
    2010Raw materials
    
    $
    43,911
    
    
    $
    44,180Work-in-process
    
    
    10,504
    
    
    
    13,309Finished goods
    
    
    43,656
    
    
    
    54,614Total inventories *
    
    $
    98,071
    
    
    $
    112,103
 
 *
    
    As of May 27, 2011 and August 27, 2010, inventory held under service
arrangements was approximately 41% of total inventories and of that,
the majority is classified
as finished goods. Prepaid Expenses and Other Current Assets
  May 27,
    
    
    August 27,2011
    
    
    2010Prepaid ICMS taxes in Brazil *
    
    $
    
    
    
    $
    11,277Indemnification receivable for ICMS assessment *
    
    
    
    
    
    
    4,115Prepayment for taxes on property and equipment
    
    
    6,936
    
    
    
    2,792Unbilled receivables
    
    
    6,586
    
    
    
    6,182Receivable from subcontractors
    
    
    3,293
    
    
    
    3,594Deferred and other income taxes
    
    
    1,911
    
    
    
    1,197Other prepaid expenses and other current assets
    
    
    3,944
    
    
    
    4,331Total prepaid expenses and other current assets
    
    $
    22,670
    
    
    $
    33,488
 
 *
    
    See Note 10  Commitments and Contingencies. Property and Equipment, net
  May 27,
    
    
    August 27,2011
    
    
    2010Office furniture, software, computers, and equipment
    
    $
    7,117
    
    
    $
    5,751Manufacturing equipment
    
    
    93,275
    
    
    
    78,901Leasehold improvements
    
    
    20,535
    
    
    
    18,317120,927
    
    
    
    102,969Less accumulated depreciation and amortization
    
    
    68,422
    
    
    
    56,748Property and equipment, net
    
    $
    52,505
    
    
    $
    46,221
   13




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Other Non-Current Assets
  May 27,
    
    
    August 27,2011
    
    
    2010Prepaid ICMS taxes in Brazil *
    
    $
    17,360
    
    
    $
    6,358Judicial deposit and indemnification receivable
related to Brazil ICMS assessment *
    
    
    6,888
    
    
    
    4,115Prepayment for taxes on property and equipment
    
    
    4,564
    
    
    
    4,114Deposits on property and equipment
    
    
    740
    
    
    
    3,076Other
    
    
    3,167
    
    
    
    3,554Total other non-current assets
    
    $
    32,719
    
    
    $
    21,217
 
 *
    
    See Note 10  Commitments and Contingencies. Accrued Liabilities
  May 27,
    
    
    August 27,2011
    
    
    2010Accrued employee compensation
    
    $
    8,387
    
    
    $
    15,406VAT and other transaction taxes payable
    
    
    5,413
    
    
    
    5,966Accrued joint research and development services *
    
    
    2,754
    
    
    
    Accrued warranty reserve
    
    
    1,207
    
    
    
    732Income taxes payable
    
    
    
    
    
    
    3,145Other accrued liabilities
    
    
    4,216
    
    
    
    4,069Total accrued liabilities
    
    $
    21,977
    
    
    $
    29,318
 
 *
    
    See Note 10  Commitments and Contingencies. NOTE 7  Income Taxes
  Three Months Ended
    
    
    Nine Months EndedMay 27,
    
    
    May 28,
    
    
    May 27,
    
    
    May 28,2011
    
    
    2010
    
    
    2011
    
    
    2010Current
    
    $
    5,457
    
    
    $
    7,364
    
    
    $
    13,067
    
    
    $
    20,535Deferred
    
    
    (13
    )
    
    
    (10
    )
    
    
    273
    
    
    
    (31
    )Total
    
    $
    5,444
    
    
    $
    7,354
    
    
    $
    13,340
    
    
    $
    20,504
  Three Months Ended
    
    
    Nine Months EndedMay 27,
    
    
    May 28,
    
    
    May 27,
    
    
    May 28,2011
    
    
    2010
    
    
    2011
    
    
    2010U.S. loss
    
    $
    (4,788
    )
    
    $
    (2,296
    )
    
    $
    (22,283
    )
    
    $
    (8,290
    )Non-U.S. income
    
    
    12,504
    
    
    
    24,567
    
    
    
    47,033
    
    
    
    64,385Total
    
    $
    7,716
    
    
    $
    22,271
    
    
    $
    23,750
    
    
    $
    56,095
   14




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##### Table of Contents



NOTE 8  Indebtedness
     15




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##### Table of Contents



NOTE 9  Fair Value Measurements
 Fair Value Measurements and Disclosures,
   
    
    Level 1. Valuations based on quoted prices in active markets for identical assets or
liabilities that an entity has the ability to access. The Companys Level 1 assets include
money market funds and certificates of deposit that are classified as cash equivalents.
 
    
    Level 2.Valuations based on quoted prices for similar assets or liabilities, quoted prices
for identical assets or liabilities in markets that are not active, or other inputs that are
observable or can be corroborated by observable data for substantially the full term of the
assets and liabilities. The Company does not have any assets or liabilities measured under
Level 2.
 
    
    Level 3. Valuations based on inputs that are supported by little or no market activity and
that are significant to the fair value of the assets or liabilities. The Company does not
have any assets or liabilities measured under Level 3.
  16




---



##### Table of Contents



Quoted Prices in
    
    
    Observable/Active Markets
    
    
    Unobservablefor Identical
    
    
    Inputs
    
    
    SignificantAssets or
    
    
    Corroborated by
    
    
    UnobservableLiabilities
    
    
    Market Data
    
    
    InputsLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalBalances as of May 27, 2011:Assets:Cash
    
    $
    118,569
    
    
    $
    
    
    
    $
    
    
    
    $
    118,569Money market funds
    
    
    13,168
    
    
    
    
    
    
    
    
    
    
    
    13,168Total assets
measured at fair
value
(1)
    
    $
    131,737
    
    
    $
    
    
    
    $
    
    
    
    $
    131,737Balances as of August 27, 2010:Assets:Cash
    
    $
    45,657
    
    
    $
    
    
    
    $
    
    
    
    $
    45,657Money market funds
    
    
    69,817
    
    
    
    
    
    
    
    
    
    
    
    69,817Total assets
measured at fair
value
(1)
    
    $
    115,474
    
    
    $
    
    
    
    $
    
    
    
    $
    115,474
 
 (1)
    
    Included in cash and cash equivalents on the Companys
condensed consolidated balance sheets. NOTE 10  Commitments and Contingencies
 Product Warranty and Indemnities
   Nine Months EndedMay 27,2011Balance of accrual at August 27, 2010
    
    $
    732Settlement of warranty claims
    
    
    (687
    )Provision for product warranties
    
    
    1,162Balance of accrual at May 27, 2011
    
    $
    1,207
   Technology Access and Development Agreements
   17




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##### Table of Contents



Legal Matters
  Tessera
    Creative Mobile Technologies
     18




---



##### Table of Contents



Litigation Related to Potential Acquisition
 Walpole v. SMART Modular Technologies, Inc. et al. Walpole Peters v. Ajay Shah et al. Marder v. SMART Modular
Technologies, Inc. et al. Wilkes v. Ajay Shah et
al. Walpole
 Contingencies
 Brazil ICMS Assessment
       19




---



##### Table of Contents



Prepaid ICMS Taxes in Brazil
      NOTE 11  Segment and Geographic Information
   20




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedMay 27,
    
    
    May 28,
    
    
    May 27,
    
    
    May 28,2011
    
    
    2010
    
    
    2011
    
    
    2010Geographic net
sales:U.S.
    
    $
    41,819
    
    
    $
    59,040
    
    
    $
    128,845
    
    
    $
    150,094Brazil
    
    
    68,578
    
    
    
    88,897
    
    
    
    270,807
    
    
    
    199,570Asia
    
    
    43,226
    
    
    
    38,178
    
    
    
    119,533
    
    
    
    94,054Europe
    
    
    6,247
    
    
    
    9,626
    
    
    
    18,349
    
    
    
    28,088Other Americas
    
    
    4,609
    
    
    
    5,494
    
    
    
    13,853
    
    
    
    12,632$
    164,479
    
    
    $
    201,235
    
    
    $
    551,387
    
    
    $
    484,438
 May 27,
    
    
    August 27,2011
    
    
    2010Property and equipment, net:U.S.
    
    $
    6,105
    
    
    $
    6,298Brazil
    
    
    38,535
    
    
    
    32,175Malaysia
    
    
    7,671
    
    
    
    7,705Other
    
    
    194
    
    
    
    43$
    52,505
    
    
    $
    46,221
 NOTE 12  Major Customers
  Percent of Net SalesThree Months Ended
    
    
    Nine Months EndedMay 27,
    
    
    May 28,
    
    
    May 27,
    
    
    May 28,2011
    
    
    2010
    
    
    2011
    
    
    2010Customer A
    
    
    19
    %
    
    
    21
    %
    
    
    20
    %
    
    
    22
    %Customer B
    
    
    12
    %
    
    
    15
    %
    
    
    13
    %
    
    
    16
    %Customer C
    
    
    12
    %
    
    
    15
    %
    
    
    15
    %
    
    
    14
    %
  NOTE 13  Restructuring
   Severance and
    
    
    Assets/FacilityBenefits
    
    
    Related
    
    
    Other
    
    
    TotalAccrual as of August 27, 2010
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Restructuring charges
    
    
    2,831
    
    
    
    
    
    
    
    
    
    
    
    2,831Accrual as of February 25, 2011
    
    
    2,831
    
    
    
    
    
    
    
    
    
    
    
    2,831Restructuring charges
    
    
    16
    
    
    
    303
    
    
    
    161
    
    
    
    480Non-cash charges
    
    
    
    
    
    
    (42
    )
    
    
    
    
    
    
    (42
    )Cash payment
    
    
    (2,761
    )
    
    
    (210
    )
    
    
    (47
    )
    
    
    (3,018
    )Accrual as of May 27, 2011
    
    $
    86
    
    
    $
    51
    
    
    $
    114
    
    
    $
    251
  21




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##### Table of Contents



NOTE 14  Other Income, net
  Three Months Ended
    
    
    Nine Months EndedMay 27,
    
    
    May 28,
    
    
    May 27,
    
    
    May 28,2011
    
    
    2010
    
    
    2011
    
    
    2010Foreign currency gains
    
    $
    433
    
    
    $
    385
    
    
    $
    521
    
    
    $
    338Insurance settlement*
    
    
    1,435
    
    
    
    
    
    
    
    1,435
    
    
    
    Legal settlement**
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,044Gain on early repayment of long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,178Other
    
    
    179
    
    
    
    223
    
    
    
    926
    
    
    
    565Total other income, net
    
    $
    2,047
    
    
    $
    608
    
    
    $
    2,882
    
    
    $
    5,125
 
 *
    
    In May 2011, the Company received an insurance settlement from a claim filed in
fiscal 2009.**
    
    In December 2009, the Company received a legal settlement as a non-active
participant, class member in a class action against certain component suppliers
initiated in 2002. 
 Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
   Overview
   22




---



##### Table of Contents



Key Business Metrics
  Net Sales
   23




---



##### Table of Contents



Cost of Sales
  Research and Development Expenses
  Selling, General and Administrative Expenses
  Critical Accounting Policies
   Revenue Recognition
    24




---



##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedMay 27,
    
    
    May 28,
    
    
    May 27,
    
    
    May 28,2011
    
    
    2010
    
    
    2011
    
    
    2010Service revenue, net
    
    $
    8,255
    
    
    $
    10,751
    
    
    $
    28,327
    
    
    $
    28,493Cost of sales  service (1)
    
    
    267,106
    
    
    
    259,310
    
    
    
    748,429
    
    
    
    624,304Gross billings for services
    
    
    275,361
    
    
    
    270,061
    
    
    
    776,756
    
    
    
    652,797Product net sales
    
    
    156,224
    
    
    
    190,484
    
    
    
    523,060
    
    
    
    455,945Gross billings to customers
    
    $
    431,585
    
    
    $
    460,545
    
    
    $
    1,299,816
    
    
    $
    1,108,742Product net sales
    
    $
    156,224
    
    
    $
    190,484
    
    
    $
    523,060
    
    
    $
    455,945Service revenue, net
    
    
    8,255
    
    
    
    10,751
    
    
    
    28,327
    
    
    
    28,493Net sales
    
    $
    164,479
    
    
    $
    201,235
    
    
    $
    551,387
    
    
    $
    484,438
 
 (1)
    
    Represents cost of sales associated with service revenue reported on a net basis. Accounts Receivable
  Inventory Valuation
  Income Taxes
    25




---



##### Table of Contents



Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed
  Stock-Based Compensation
 Compensation  Stock Compensation
 Results of Operations
  Three Months Ended(1)
    
    
    Nine Months Ended(1)May 27,
    
    
    % of
    
    
    May 28,
    
    
    % of
    
    
    May 27,
    
    
    % of
    
    
    May 28,
    
    
    % of2011
    
    
    sales
    
    
    2010
    
    
    sales
    
    
    2011
    
    
    sales
    
    
    2010
    
    
    salesNet sales
    
    $
    164.5
    
    
    
    100
    %
    
    $
    201.2
    
    
    
    100
    %
    
    $
    551.4
    
    
    
    100
    %
    
    $
    484.4
    
    
    
    100
    %Cost of sales
    
    
    132.1
    
    
    
    80
    %
    
    
    155.7
    
    
    
    77
    %
    
    
    446.5
    
    
    
    81
    %
    
    
    368.2
    
    
    
    76
    %Gross profit
    
    
    32.4
    
    
    
    20
    %
    
    
    45.5
    
    
    
    23
    %
    
    
    104.9
    
    
    
    19
    %
    
    
    116.3
    
    
    
    24
    %Research and development
    
    
    7.7
    
    
    
    5
    %
    
    
    6.7
    
    
    
    3
    %
    
    
    23.7
    
    
    
    4
    %
    
    
    17.6
    
    
    
    4
    %Selling, general and
administrative
    
    
    15.2
    
    
    
    9
    %
    
    
    16.3
    
    
    
    8
    %
    
    
    45.2
    
    
    
    8
    %
    
    
    44.0
    
    
    
    9
    %Acquisition costs
    
    
    3.5
    
    
    
    2
    %
    
    
    
    
    
    
    
    
    
    
    3.5
    
    
    
    1
    %
    
    
    
    
    
    
    Restructuring charges
    
    
    0.5
    
    
    
    0
    %
    
    
    
    
    
    
    
    
    
    
    3.3
    
    
    
    1
    %
    
    
    
    
    
    
    Technology access charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.5
    
    
    
    1
    %
    
    
    
    
    
    
    Total operating expenses
    
    
    26.9
    
    
    
    16
    %
    
    
    23.0
    
    
    
    11
    %
    
    
    83.3
    
    
    
    15
    %
    
    
    61.6
    
    
    
    13
    %Income from operations
    
    
    5.5
    
    
    
    3
    %
    
    
    22.5
    
    
    
    11
    %
    
    
    21.6
    
    
    
    4
    %
    
    
    54.6
    
    
    
    11
    %Interest income
(expense), net
    
    
    0.2
    
    
    
    0
    %
    
    
    (0.8
    )
    
    
    0
    %
    
    
    (0.8
    )
    
    
    0
    %
    
    
    (3.7
    )
    
    
    -1
    %Other income, net
    
    
    2.0
    
    
    
    1
    %
    
    
    0.6
    
    
    
    0
    %
    
    
    2.9
    
    
    
    1
    %
    
    
    5.1
    
    
    
    1
    %Total other income
(expense)
    
    
    2.2
    
    
    
    1
    %
    
    
    (0.2
    )
    
    
    0
    %
    
    
    2.1
    
    
    
    0
    %
    
    
    1.5
    
    
    
    0
    %Income before provision
for income taxes
    
    
    7.7
    
    
    
    5
    %
    
    
    22.3
    
    
    
    11
    %
    
    
    23.8
    
    
    
    4
    %
    
    
    56.1
    
    
    
    12
    %Provision for income taxes
    
    
    5.4
    
    
    
    3
    %
    
    
    7.4
    
    
    
    4
    %
    
    
    13.3
    
    
    
    2
    %
    
    
    20.5
    
    
    
    4
    %Net income
    
    $
    2.3
    
    
    
    1
    %
    
    $
    14.9
    
    
    
    7
    %
    
    $
    10.4
    
    
    
    2
    %
    
    $
    35.6
    
    
    
    7
    %
 
 (1)
    
    Summations may not compute precisely due to rounding. Three and Nine Months Ended May 27, 2011 as Compared to the Three and Nine Months Ended
May 28, 2010
 Net Sales
   26




---



##### Table of Contents



Cost of Sales
   Gross Profit
   Research and Development Expenses
  Selling, General and Administrative Expenses
    27




---



##### Table of Contents



Acquisition costs
  Restructuring Charges
  Technology Access Charge
  Interest Income (Expense), net
   Other Income, net
   Provision for Income Taxes
  Liquidity and Capital Resources
   28




---



##### Table of Contents



Debt Service
  Senior Secured Floating Rate Exchange Notes Due April 2012 (the Notes).
 Senior Secured Revolving Line of Credit Facility.
 Capital Expenditures
  Sources and Uses of Funds
    29




---



##### Table of Contents



Historical Trends
  Cash Flows from Operating Activities.
  Cash Flows from Investing Activities . .
 Cash Flows from Financing Activities .
 Contractual Obligations
  Off-Balance Sheet Arrangements
   30




---



##### Table of Contents



Inflation
  Recent Accounting Pronouncements
  
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
  Foreign Exchange Risks
  Interest Rate Risk
  
 Item 4.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
 Changes in Internal Control Over Financial Reporting
 
 PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
   31




---



##### Table of Contents



Item 1A.
    
    Risk Factors
  There are risks and uncertainties associated with the proposed Merger.
     Our business could be adversely impacted as a result of uncertainty related to the proposed Merger.
  
 
 
  32




---



##### Table of Contents



Changes in, or interpretations of, tax regulations or rates, or changes in the geographic
dispersion of our revenues, or changes in other tax benefits, may adversely affect our income,
value-added and other taxes, which may in turn have a material adverse effect on our cash flow and
financial condition.
       33




---



##### Table of Contents



34




---



##### Table of Contents



Item 6.
    
    Exhibits
  Exhibit No.
    
    Exhibit Title2.1
    
    
    Agreement and Plan of Merger dated as of April 26, 2011, by
and among SMART Modular Technologies (WWH), Inc., Saleen
Holdings, Inc. and Saleen Acquisition, Inc. (Incorporated by
reference to Exhibit 2.1 of the Companys Current Report on
Form 8-K filed with the SEC on April 28, 2011).31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule
13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 200231.2
    
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 200232
    
    
    Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  35




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC.
 
 SIGNATURES
  SMART MODULAR TECHNOLOGIES (WWH), INC.By:
    
    /s/ IAIN MACKENZIEName:
    
    Iain MacKenzieTitle:
    
    President and Chief Executive Officer(Principal Executive Officer)By:
    
    /s/ BARRY ZWARENSTEINName:
    
    Barry ZwarensteinTitle:
    
    Senior Vice President and Chief Financial Officer(Principal Financial and Accounting Officer)Date: June 30, 2011
  36




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Exhibit Title2.1
    
    
    Agreement and Plan of Merger dated as of April 26, 2011, by and among SMART Modular
Technologies (WWH), Inc., Saleen Holdings, Inc. and Saleen Acquisition, Inc.
(Incorporated by reference to Exhibit 2.1 of the Companys Current Report on Form
8-K filed with the SEC on April 28, 2011).31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of
the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of
the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232
    
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
  37