##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED August 28, 2009
 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
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    39870 Eureka Drive
Newark, CA 94560
(Address of Principal Executive Offices)
    
    20-2509518
(I.R.S. Employer
Identification Number)
 (510) 623-1231
  Title of Each Class
    
    Name of Each Exchange on Which RegisteredOrdinary Shares, $0.00016667 par value
    
    NASDAQ Global Select Market
 None
 Yes o No þ
 Yes o No þ
 þ o
 o þ
 þ
  Large accelerated filer o

Accelerated filer
o

Non-accelerated filer
þ

Smaller reporting company o
 Yes o No þ
  DOCUMENTS INCORPORATED BY REFERENCE




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##### 



SMART MODULAR TECHNOLOGIES (WWH), INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED AUGUST 28, 2009
TABLE OF CONTENTS
 PagePART I
    
    
    2Item 1. Business
    
    
    2Item 1A. Risk Factors
    
    
    9Item 1B. Unresolved Staff Comments
    
    
    30Item 2. Properties
    
    
    31Item 3. Legal Proceedings
    
    
    31Item 4. Submission of Matters to a Vote of Security Holders
    
    
    32PART II
    
    
    33Item 5. Market for the Registrants Common Equity, Related Shareholder Matters and
Issuer Purchases of Equity Securities
    
    
    33Item 6. Selected Financial Data
    
    
    34Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    36Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    47Item 8. Financial Statements and Supplementary Data
    
    
    48Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
    
    
    48Item 9A. Controls and Procedures
    
    
    48Item 9B. Other Information
    
    
    49PART III
    
    
    49Item 10. Directors, Executive Officers and Corporate Governance
    
    
    49Item 11. Executive Compensation
    
    
    49Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    49Item 13. Certain Relationships and Related Transactions and Director
Independence
    
    
    49Item 14. Principal Accountant Fees and Services
    
    
    49PART IV
    
    
    50Item 15. Exhibits and Financial Statement Schedules
    
    
    50SIGNATURES
    
    
    85Exhibit 21.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32
    i




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PART I
 
 Item 1.
    
    Business
 FORWARD-LOOKING STATEMENTS
  Overview
    2




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Our Products and Services
  Memory, Display & Embedded Segment
 Memory Products
 DRAM Modules.
 Flash Memory Cards and Modules.
 SRAM.
  3




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eFlashTools and FlashTools.
 Embedded Computing Products
   Display Products
   Product-Related Logistics and Services
   4




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Adtron Segment
  
    
    XceedLite  low power requirement appropriate for mobile applications
    
    XceedUltra, XceedUltraX and Xceed IOPs  high sequential performance appropriate
for streaming data applications found in medical, transportation, industrial
automation, server, aerospace and various storage applications
 
    
    XceedSecure   unique data security technology appropriate for defense and aerospace
applications
 
    
    XceedSCSI  appropriate for interfacing with certain discontinued hard disk drive
products targeted at the legacy Small Computer System Interface (SCSI) market
 
    
    Xcel-10  high IOPs performance and industrial temperate range (iTemp) appropriate
for performance and temperature sensitive applications.
 Design, Manufacturing and Test
 Design
  Manufacturing
  Test
   5




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Suppliers
  Customers
  Sales, Support and Marketing
     Research and Development
   6




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Intellectual Property
  Backlog
  Competition
     7




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Employees
  Environmental Matters
  Financial Information About Geographic Area
  Available Information
 www.sec.gov
  8




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Item 1A.
    
    Risk Factors
   Risks Related to Our Business
 We are subject to the cyclical nature of the markets in which we compete and downturns adversely
affect our business, results of operations and financial condition.
     We have experienced quarterly losses in the past and a loss for this fiscal year, and may
experience periodic losses in the future.
   9




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Declines in memory component prices and our average selling prices may result in declines in our
net sales and gross profit.
  Sales to a limited number of customers represent a significant portion of our net sales, and the
loss of any key customer or key program would materially harm our business.
     10




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Our customers are primarily in the computing, networking, communications, printer, storage and
industrial markets, and the current and future fluctuations in demand in these markets are and may
continue to adversely affect sales of our products.
  Customer demand is difficult to accurately forecast and, as a result, we may be unable to optimally
match purchasing and production to meet customer demand which in turn can have an adverse impact on
our business, our results of operations and our financial condition.
  Worldwide economic conditions and other factors may adversely affect our operations, cause
fluctuations in demand for our products and have an adverse impact on our business, our results of
operations and our financial condition.
   11




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
    
    a downturn in the server and computing industries, networking and telecommunications
industries;
 
    
    changes in consumer confidence caused by changes in market conditions, including changes
in the credit market, expectations for inflation, and energy prices;
    
    changes in the level of customers components inventory;
 
    
    competitive pressures, including pricing pressures, from companies that have competing
products, architectures, manufacturing technologies, and marketing programs;
 
    
    changes in customer product needs;
 
    
    strategic actions taken by our competitors; and
 
    
    market acceptance of our products.
  The recent financial crisis
could negatively affect our business, results of operations and
financial condition.
  Order cancellations or reductions, product returns, selling price decreases and product
obsolescence could result in lower net sales and substantial inventory write-downs.
   12




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Our logistics business requires us to make inventory purchases based on customer forecasts which
can be unpredictable and which can in turn cause us to have significant increases in inventory from
time to time resulting in a negative impact on our cash flow and possibly resulting in inventory
write-downs which would have a negative impact on our results of operations and our financial
condition.
  New product development, particularly our solid state storage products, requires significant
investment and if we fail to develop new or enhanced products and introduce them in a timely
manner, this could have a negative impact on our competitiveness, our business and our results of
operations.
    Transitions to newer technologies can result in inventory write-offs, product shortages and can
cause our manufacturing equipment to become obsolete in a shorter period of time than the initially
estimated useful life causing us to incur impairment charges, all of which can have a negative
impact on our results of operations and financial condition.
   13




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Our dependence on a small number of sole or limited source suppliers subjects us to certain risks
and our results of operations would be adversely affected if we are unable to obtain adequate
supplies in a timely manner.
   An increasing number of our OEM customers may design standard modules into their products which
could reduce demand for our higher-priced customized memory solutions.
  The flash memory market is constantly evolving and increasingly competitive, and we may not have
rights to manufacture and sell certain types of products utilizing emerging flash formats, or we
may be required to pay a royalty to sell products utilizing these formats.
   14




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In addition to the memory market, we also compete in the highly competitive embedded computing and
display markets.
  Our growth initiatives require significant capital investments and we cannot be assured that we
will realize a positive return on these investments.
  Industry consolidation and company failures could adversely affect our business by reducing the
number of potential customers, increasing our reliance on our existing key customers and reducing
the competitiveness of our supplier base.
  We may make acquisitions which involve numerous risks. If we are not successful in integrating the
technologies, operations and personnel of acquired businesses or fail to realize the anticipated
benefits of an acquisition, our operations and financial results may be adversely affected.
  
    
    problems integrating the purchased operations, technologies or products;
 
    
    unanticipated costs or expenses associated with an acquisition or investment including
write-offs of goodwill or other intangible assets;
 
    
    negative effects on profitability resulting from an acquisition or investment;
 
    
    adverse effects on existing business relationships with suppliers and customers;
 
    
    risks associated with entering markets in which we have no or limited prior experience
and government markets with complex regulations;
    
    loss of key employees of the acquired business; and
 
    
    litigation arising from an acquired companys operations.
  15




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We may not be able to maintain or improve our competitive position because of the intense
competition in the markets we serve.
      16




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Our success is dependent on achieving design wins into commercially successful OEM systems and the
failure to achieve design wins or the failure of OEM customers to incorporate our products into
their systems could adversely affect our operating results and prospects.
  Our business is dependent upon our OEM customers continuing to outsource the design and
manufacturing of value added subsystems.
  Our future success is dependent on our ability to retain key personnel, including our executive
officers, and to attract qualified personnel. If we lose the services of these individuals or are
unable to attract new talent, our business may be adversely affected.
   17




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We rely on third-party sales representatives to assist in selling our products, and the failure of
these representatives to perform as expected could reduce our future sales.
  Disruption of our operations at our manufacturing facilities would substantially harm our business.
  As a result of our acquisition of Adtron, certain of our sales are dependent on defense-related
companies and changes in military spending levels and patterns could negatively affect us.
  The competitive bid process for, and the terms and conditions of, government contracts may
negatively affect us.
   18




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If we fail to maintain an effective system of internal controls or discover material weaknesses in
our internal controls over financial reporting, we may not be able to report our financial results
accurately or detect fraud, which could harm our business, our results of operations and our
financial condition and the trading price of our ordinary shares.
  Compliance with Section 404 of the Sarbanes-Oxley Act of 2002 and other regulations and
requirements, including corporate governance and public disclosure, is costly and may result in
additional expenses.
   19




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Changes in, or interpretations of, tax regulations or rates or changes in the geographic dispersion
of our revenues may adversely affect our effective tax rates.
   We receive certain beneficial tax treatment as a result of being a Cayman Islands company. Changes
in that treatment could have a material adverse effect on our net income, our cash flow and our
financial condition.
  If our goodwill or intangible assets become impaired, we may be required to record a significant
charge to earnings.
   20




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Our indemnification obligations to our customers and suppliers for product defects could require us
to pay substantial damages.
  Our operations in foreign countries subject us to political and economic risks, which could have a
material adverse effect on our operating results.
    Our operations in foreign countries are more difficult to manage which may expose us to additional
risks that may not exist in the United States, which in turn could have a negative impact on our
business, our results of operations and our financial condition.
  Worldwide political conditions may adversely affect our operations and demand for our products.
   21




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Unfavorable currency exchange rate fluctuations could result in our products becoming relatively
more expensive to our overseas customers or increase our manufacturing costs, each of which could
adversely affect our business and our profitability.
  Our worldwide operations could be subject to natural disasters and other business disruptions,
which could materially adversely affect our business and increase our costs and expenses.
  Our ability to compete successfully and achieve future growth will depend, in part, on our ability
to protect our intellectual property, as well as our ability to operate without infringing upon the
intellectual property of others.
  
    
    prevent our competitors from independently developing similar products, duplicating our
products or designing around the patents owned by us;
 
    
    prevent third-party patents from having an adverse effect on our ability to do business;
 
    
    provide adequate protection for our intellectual property rights;
 
    
    prevent disputes with third parties regarding ownership of our intellectual property
rights;
  22




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
    
    prevent disclosure of our trade secrets and know-how to third parties or into the public
domain;
 
    
    prevent the challenge, invalidation or circumvention of our existing patents;
 
    
    result in patents that lead to commercially viable products or provide competitive
advantages for our products; or
 
    
    result in issued patents or registered trademarks from any of our pending applications.
    Our indemnification obligations for the infringement by our products of the intellectual property
rights of others could require us to pay substantial damages.
   23




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We could incur substantial costs or liabilities as a result of violations of environmental laws.
  We are subject to a variety of federal, state and international laws and regulatory regimes.
Failure to comply with governmental laws and regulations could subject us to, among other things,
mandatory product recalls, penalties and investigation and legal expenses which could have an
adverse effect on our business.
      24




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We are currently contemplating additional restructuring plans, we may not be able to effectively
implement prior or future restructuring plans, and our restructuring plans may not result in the
expected benefits, any of which would negatively impact our future results of operations.
   Risks Related to Our Debt
 Restrictive covenants contained in our senior secured revolving line of credit facility (the WF
Credit Facility) and the indenture relating to our senior secured floating rate notes (the
Notes) may restrict our current and future operations, particularly our ability to respond to
changes or to take some actions, and our failure to comply with such covenants, whether due to
events beyond our control or otherwise, could result in an event of default which could materially
and adversely affect our operating results and our financial condition.
     25




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Disruption in the financial markets may adversely impact the availability and cost of credit and
cause other disruptions.
  Our indebtedness could impair our financial condition and harm our ability to operate our business.
   
    
    it may limit our ability to service all of our debt obligations;
 
    
    it may impair our ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, general corporate purposes or other purposes;
 
    
    a significant portion of our cash flow from operations must be dedicated to the payment
of interest and principal on our debt which would reduce the funds available to us for our
operations;
 
    
    some of our debt is and will continue to be at variable rates of interest, which would
result in higher interest expense in the event of increases in those interest rates;
 
    
    our debt agreements contain, and any agreements to refinance or amend the terms of our
debt likely will contain, financial and restrictive covenants, and our failure to comply
with them may result in an event of default which, if not cured or waived, could have a
material adverse effect on our business and our financial condition;
 
    
    it may increase our vulnerability to general economic downturns and adverse industry
conditions; and
 
    
    it may limit our flexibility in planning for, or reacting to, changes in our business
and our industry.
 To service our debt, we will require a significant amount of cash and we may not be able to
generate sufficient cash flow from operations to satisfy these obligations or to refinance these
obligations on acceptable terms, or at all.
    26




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Our existing debt is subject to floating interest rates, which may cause our interest expense to
increase and decrease cash available for operations and other purposes.
  Risks Related to Our Ordinary Shares
 The price of our ordinary shares may be volatile and subject to wide fluctuations.
  
    
    actual or anticipated variations in quarterly operating results;
 
    
    changes in financial estimates by us or by any securities analysts, or our failure to
meet the estimates made by securities analysts;
 
    
    changes in the market valuations of other companies operating in our industry;
 
    
    announcements by us or our competitors of significant technology changes, acquisitions,
strategic partnerships, divestitures, or restructuring initiatives, or other events that
affect us or companies in our industry;
 
    
    loss of a key customer or significant business of a major customer;
 
    
    additions or departures of key personnel; and
 
    
    a general downturn or uptick in the stock market.
   27




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We may experience significant period-to-period, quarterly and annual fluctuations in our net sales
and operating results, which may result in volatility in our share price.
   
    
    the timing and volume of orders from our customers;
 
    
    the rate of acceptance of our products by our customers, including the rate of design
wins;
 
    
    the demand for and life cycles of customer products incorporating our products;
 
    
    the rate of adoption of our products in the end markets we target;
 
    
    cancellations or deferrals of customer orders or commitments in anticipation of lower
pricing, new products or product enhancements from us or our competitors or other
providers;
 
    
    changes in product mix;
 
    
    the rate at which new markets emerge for products we are currently developing or for
which our design expertise can be utilized to develop products for new markets;
 
    
    production levels of our suppliers or other factors impacting our ability to procure the
components we need to manufacture our products;
 
    
    changes in the cost or availability of components;
 
    
    significant volatility in prices of DRAMs and other components;
 
    
    the timing and acceptance of our new or enhanced products, our competitors and/or our
suppliers;
 
    
    changes in the average selling prices of our products;
 
    
    fluctuations in demand for our products;
 
    
    changes in supply and demand conditions;
 
    
    order cancellations, product returns, inventory buildups by customers and inventory
write-downs;
 
    
    manufacturing inefficiencies associated with the start-up of new products and low volume
production;
 
    
    expenses associated with strategic transactions, including acquisitions, joint ventures
and capital investments; and
 
    
    increases in research and development and sales and marketing expenses in connection
with new product initiatives.
   28




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Although we are no longer a controlled company within the meaning of the rules of the NASDAQ,
some of our principal investors continue to exert substantial influence over us.
   Our articles of association do not provide for shareholder proposals other than nominations to our
board of directors and do not explicitly provide for periodic elections of our directors, each of
which could negatively affect the ability of shareholders to exercise control over us.
  Our principal investors and the persons whom they nominate to our board of directors may have
interests that conflict with our interests and the interests of our other shareholders.
   29




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Future sales of shares or issuances of shares in connection with acquisitions could depress our
share price.
  Anti-takeover provisions in our organizational documents may discourage our acquisition by a third
party, which could limit your opportunity to sell your shares at a premium.
  We are a Cayman Islands company and, because the rights of shareholders under Cayman Islands law
differ from those under U.S. law, shareholders may have difficulty protecting their shareholder
rights.
   
    
    to recognize or enforce against us judgments of courts of the United States based on
certain civil liability provisions of U.S. securities laws; or
 
    
    to impose liabilities against us, in original actions brought in the Cayman Islands,
based on certain civil liability provisions of U.S. securities laws that are penal in
nature.
   
 Item 1B.
    
    Unresolved Staff Comments
   30




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Item 2.
    
    Properties
  Building Size
    
    
    Leased orLocation
    
    (Sq. Feet)
    
    
    Owned
    
    
    Expiration
    
    
    CapabilitiesNewark, California
    
    
    79,500
    
    
    Leased
    
    April 2016
    
    Manufacturing,
Design & SalesPenang, Malaysia
    
    
    90,000
    
    
    Owned
    
    
    N/A
    
    
    Manufacturing & SalesAtibaia, Brazil
    
    
    72,000
    
    
    Leased
    
    September 2012
    
    Manufacturing & SalesAguada, Puerto Rico
    
    
    51,000
    
    
    Leased
    
    June 2013
    
    Manufacturing & SalesPhoenix, Arizona
    
    
    20,600
    
    
    Leased
    
    May 2011
    
    Design & SalesTewksbury, Massachusetts
    
    
    10,700
    
    
    Leased
    
    March 2011
    
    Design & SalesGunpo, South Korea
    
    
    8,500
    
    
    Owned
    
    
    N/A
    
    
    Design & SalesGunpo, South Korea
    
    
    7,000
    
    
    Leased
    
    May  July 2010
    
    ManufacturingIrvine, California
    
    
    4,400
    
    
    Leased
    
    August 2012
    
    Design & Sales
  
 Item 3.
    
    Legal Proceedings
    31




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
 
 
   
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
   Votes For
    
    Votes Against
    
    Abstain50,188,458
    
    2,805,953
    
    1,717,394
  32




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PART II
 
 Item 5.
    
    Market for the Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
 Unregistered Sales of Equity Securities
  MaximumTotal number
    
    
    approximateof shares
    
    
    dollar value ofAverage
    
    
    purchased as
    
    
    shares that mayTotal number
    
    
    Price paid
    
    
    part of publicly
    
    
    yet be purchasedof shares
    
    
    per
    
    
    announced plans or
    
    
    under the planspurchased
    
    
    share
    
    
    programs
    
    
    or programsApril 2009
    
    
    45,250
    
    
    $
    1.82
    
    
    
    45,250
    
    
    $
    9,916,000Total
    
    
    45,250
  Market for Our Common Stock and Related Shareholder Matters
  High
    
    
    LowFiscal Year 2009:First quarter
    
    $
    3.36
    
    
    $
    0.76Second quarter
    
    $
    2.65
    
    
    $
    0.76Third quarter
    
    $
    2.99
    
    
    $
    1.04Fourth quarter
    
    $
    4.20
    
    
    $
    2.10Fiscal Year 2008:First quarter
    
    $
    10.62
    
    
    $
    6.86Second quarter
    
    $
    10.94
    
    
    $
    6.63Third quarter
    
    $
    6.81
    
    
    $
    4.90Fourth quarter
    
    $
    5.42
    
    
    $
    3.10
  Dividend Policy
    33




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Stock Performance Graph
  Cumulative Total Return*
 
 *
    
    Assumes reinvestment of dividends, if any 
 Item 6.
    
    Selected Financial Data
  Accounting for
Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109
  34




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Fiscal Year EndedAugust 28,
    
    
    August 29,
    
    
    August 31,
    
    
    August 25,
    
    
    August 26,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(In thousands, except per share amounts)Statement
of Operations Data:Net sales
    
    $
    441,317
    
    
    $
    670,151
    
    
    $
    844,627
    
    
    $
    727,206
    
    
    $
    607,299Cost of sales
    
    
    351,478
    
    
    
    550,420
    
    
    
    695,054
    
    
    
    600,632
    
    
    
    505,461Gross profit
    
    
    89,839
    
    
    
    119,731
    
    
    
    149,573
    
    
    
    126,574
    
    
    
    101,838Operating expenses:Research and development
    
    
    19,811
    
    
    
    20,164
    
    
    
    16,383
    
    
    
    15,545
    
    
    
    9,697Selling, general and administrative
    
    
    55,505
    
    
    
    59,849
    
    
    
    59,552
    
    
    
    54,917
    
    
    
    46,636Goodwill impairment
    
    
    10,416
    
    
    
    3,187
    
    
    
    
    
    
    
    
    
    
    
    Restructuring charges
    
    
    2,810
    
    
    
    1,938
    
    
    
    
    
    
    
    
    
    
    
    880In-process research and development
charge
    
    
    
    
    
    
    4,400
    
    
    
    
    
    
    
    
    
    
    
    Advisory service agreements fees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,303
    
    
    
    2,588Total operating expenses
    
    
    88,542
    
    
    
    89,538
    
    
    
    75,935
    
    
    
    80,765
    
    
    
    59,801Income from operations
    
    
    1,297
    
    
    
    30,193
    
    
    
    73,638
    
    
    
    45,809
    
    
    
    42,037Interest expense, net
    
    
    (6,609
    )
    
    
    (5,355
    )
    
    
    (7,381
    )
    
    
    (15,153
    )
    
    
    (6,998
    )Other income (expense), net
    
    
    (520
    )
    
    
    2,557
    
    
    
    934
    
    
    
    2,567
    
    
    
    481Total other expense
    
    
    (7,129
    )
    
    
    (2,798
    )
    
    
    (6,447
    )
    
    
    (12,586
    )
    
    
    (6,517
    )Income (loss) before provision for
income taxes
    
    
    (5,832
    )
    
    
    27,395
    
    
    
    67,191
    
    
    
    33,223
    
    
    
    35,520Provision for income taxes
    
    
    5,571
    
    
    
    18,421
    
    
    
    9,458
    
    
    
    914
    
    
    
    8,802Net income (loss)
    
    $
    (11,403
    )
    
    $
    8,974
    
    
    $
    57,733
    
    
    $
    32,309
    
    
    $
    26,718Net income (loss) per ordinary share,
basic
    
    $
    (0.18
    )
    
    $
    0.15
    
    
    $
    0.97
    
    
    $
    0.60
    
    
    $
    0.55Net income (loss) per ordinary share,
diluted
    
    $
    (0.18
    )
    
    $
    0.14
    
    
    $
    0.91
    
    
    $
    0.55
    
    
    $
    0.50Shares used in computing net income
(loss) per ordinary share, basic
    
    
    61,699
    
    
    
    60,985
    
    
    
    59,636
    
    
    
    54,265
    
    
    
    48,872Shares used in computing net income
(loss) per ordinary share, diluted
    
    
    61,699
    
    
    
    63,555
    
    
    
    63,782
    
    
    
    59,189
    
    
    
    53,531
 August 28,
    
    
    August 29,
    
    
    August 31,
    
    
    August 25,
    
    
    August 26,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(In thousands)Balance Sheet Data:Cash and cash equivalents
    
    $
    147,658
    
    
    $
    115,994
    
    
    $
    144,147
    
    
    $
    85,620
    
    
    $
    75,970Working capital
    
    
    268,811
    
    
    
    269,709
    
    
    
    251,459
    
    
    
    184,799
    
    
    
    135,930Total assets
    
    
    403,738
    
    
    
    447,148
    
    
    
    453,077
    
    
    
    426,456
    
    
    
    321,061Total long-term debt
    
    
    81,250
    
    
    
    81,250
    
    
    
    81,250
    
    
    
    81,250
    
    
    
    125,000Total shareholders equity
    
    
    234,825
    
    
    
    246,906
    
    
    
    221,426
    
    
    
    150,663
    
    
    
    42,648
  35




---



##### Table of Contents



Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion should be read in conjunction with the audited financial statements
and related notes and other financial information, which appear elsewhere in this Annual Report.
The following discussion contains forward-looking statements that involve risks and uncertainties.
See the disclosure regarding Forward-Looking Statements in Item 1 of this Annual Report. Our
actual results could differ materially from the results contemplated by these forward-looking
statements due to certain factors, including those factors discussed below and elsewhere in this
Annual Report including in the Risk Factors section in Item 1A of this Annual Report.
 We use a 52- to 53-week fiscal year ending on the last Friday in August. Financial information
for one of our subsidiaries, SMART Modular Technologies Indústria de Componentes Eletrônicos Ltda.,
is included in our consolidated financial statements on a one month lag. The effects of the one
month lag for the operations of SMART Modular Technologies Indústria de Componentes Eletrônicos
Ltda. is not material to our financial position and results of operations. Certain prior period
amounts have been reclassified to conform to the current year presentation.
 Overview
      36




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##### Table of Contents



Key Business Metrics
  Net Sales
  Cost of Sales
  Research and Development Expenses
  Selling, General and Administrative Expenses
  Critical Accounting Policies
    37




---



##### Table of Contents



Revenue Recognition
  Reporting Revenue Gross as a Principal versus Net as an Agent.
  Fiscal Year EndedAugust 28,
    
    
    August 29,
    
    
    August 31,2009
    
    
    2008
    
    
    2007Product net sales
    
    $
    404,474
    
    
    $
    628,791
    
    
    $
    794,397Service revenue
    
    
    36,843
    
    
    
    41,360
    
    
    
    50,230Net sales
    
    
    441,317
    
    
    
    670,151
    
    
    
    844,627Plus: Cost of sales (1)
    
    
    625,635
    
    
    
    875,839
    
    
    
    1,085,715Gross billings to customers
    
    $
    1,066,952
    
    
    $
    1,545,990
    
    
    $
    1,930,342
 
 (1)
    
    Represents cost of sales associated with service revenue reported on a net basis. Accounts Receivable
    38




---



##### Table of Contents



Inventory Valuation
  Restructuring Charges
  Income Taxes
     39




---



##### Table of Contents



Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed
  Impairment of Goodwill
 Goodwill and Other Intangible Assets
  Stock-Based Compensation
 Share-Based Payment
  40




---



##### Table of Contents



Results of Operations
  Fiscal Year EndedAugust 28,
    
    
    % of
    
    
    August 29,
    
    
    % of
    
    
    August 31,
    
    
    % of2009
    
    
    sales
    
    
    2008
    
    
    sales
    
    
    2007
    
    
    salesNet sales
    
    $
    441.3
    
    
    
    100
    %
    
    $
    670.2
    
    
    
    100
    %
    
    $
    844.6
    
    
    
    100
    %Cost of sales
    
    
    351.5
    
    
    
    80
    %
    
    
    550.4
    
    
    
    82
    %
    
    
    695.1
    
    
    
    82
    %Gross profit (1)
    
    
    89.8
    
    
    
    20
    %
    
    
    119.7
    
    
    
    18
    %
    
    
    149.6
    
    
    
    18
    %Research and development
    
    
    19.8
    
    
    
    4
    %
    
    
    20.2
    
    
    
    3
    %
    
    
    16.4
    
    
    
    2
    %Selling, general, and administrative
    
    
    55.5
    
    
    
    13
    %
    
    
    59.8
    
    
    
    9
    %
    
    
    59.6
    
    
    
    7
    %Goodwill impairment
    
    
    10.4
    
    
    
    2
    %
    
    
    3.2
    
    
    
    
    
    
    
    
    
    
    
    Restructuring charges
    
    
    2.8
    
    
    
    1
    %
    
    
    1.9
    
    
    
    
    
    
    
    
    
    
    
    In process research and development charge
    
    
    
    
    
    
    
    
    
    
    4.4
    
    
    
    1
    %
    
    
    
    
    
    
    Total operating expenses
    
    
    88.5
    
    
    
    20
    %
    
    
    89.5
    
    
    
    13
    %
    
    
    76.0
    
    
    
    9
    %Income from operations
    
    
    1.3
    
    
    
    
    
    
    
    30.2
    
    
    
    5
    %
    
    
    73.4
    
    
    
    9
    %Interest expense, net
    
    
    (6.6
    )
    
    
    -2
    %
    
    
    (5.4
    )
    
    
    -1
    %
    
    
    (7.4
    )
    
    
    -1
    %Other income (expense), net
    
    
    (0.5
    )
    
    
    
    
    
    
    2.6
    
    
    
    
    
    
    
    0.9
    
    
    
    Total other income (expense) (1)
    
    
    (7.1
    )
    
    
    -2
    %
    
    
    (2.8
    )
    
    
    
    
    
    
    (6.4
    )
    
    
    -1
    %Income (loss) before provision for income taxes
    
    
    (5.8
    )
    
    
    -1
    %
    
    
    27.4
    
    
    
    4
    %
    
    
    67.0
    
    
    
    8
    %Provision for income taxes
    
    
    5.6
    
    
    
    1
    %
    
    
    18.4
    
    
    
    3
    %
    
    
    9.5
    
    
    
    1
    %Net income (loss) (1)
    
    $
    (11.4
    )
    
    
    -3
    %
    
    $
    9.0
    
    
    
    1
    %
    
    $
    57.5
    
    
    
    7
    %
 
 (1)
    
    Summations may not compute precisely due to rounding. Fiscal Year Ended August 28, 2009 Compared to Fiscal Year Ended August 29, 2008
 Net Sales.
 Cost of Sales.
  41




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##### Table of Contents



Gross Profit.
 Research and Development Expenses and Write-off of Acquired In-process Research and
Development.
 Selling, General and Administrative Expenses.
 Restructuring Charges
   Goodwill Impairment.
 Interest Expense, Net.
  42




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##### Table of Contents



Other Income (Expense), Net.
 Provision for Income Taxes.
 Out of Period Adjustment.
 Fiscal Year Ended August 29, 2008 Compared to Fiscal Year Ended August 31, 2007
 Net Sales.
 Cost of Sales.
 Gross Profit.
 Research and Development Expenses and Write-off of Acquired In-process Research and
Development.
 Selling, General and Administrative Expenses.
  43




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##### Table of Contents



Restructuring and Goodwill Impairment Charges
 Interest Expense, Net.
 Other Income, Net.
 Provision for Income Taxes.
  Liquidity and Capital Resources
  Debt Service
  Senior Secured Floating Rate Exchange Notes Due April 2012 (the Notes).
  44




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##### Table of Contents



Senior Secured Revolving Line of Credit Facility.
 Capital Expenditures
  Sources and Uses of Funds
    Historical Trends
  Cash Flows from Operating Activities.
   45




---



##### Table of Contents



Cash Flows from Investing Activities.
 Cash Flows from Financing Activities.
 Share Repurchase Program
  Contractual Obligations
  Payments Due by PeriodAfter 51 Year
    
    
    23 Years
    
    
    45 Years
    
    
    Years
    
    
    Total(In millions)Total debt
    
    $
    
    
    
    $
    81.3
    
    
    $
    
    
    
    $
    
    
    
    $
    81.3Interest expense in connection with
long-term debt and related interest rate
swap
    
    
    6.4
    
    
    
    10.2
    
    
    
    
    
    
    
    
    
    
    
    16.6Operating leases
    
    
    1.6
    
    
    
    3.1
    
    
    
    1.2
    
    
    
    1.0
    
    
    
    6.9Non-cancellable product purchase commitments
    
    
    2.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.1Total contractual obligations
    
    $
    10.1
    
    
    $
    94.6
    
    
    $
    1.2
    
    
    $
    1.0
    
    
    $
    106.9
  46




---



##### Table of Contents



Off-Balance Sheet Arrangements
   Inflation
  Recent Accounting Pronouncements
 (v)
 
 Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
  Foreign Exchange Risks
  Interest Rate Risk
   47




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##### Table of Contents



Item 8.
    
    Financial Statements and Supplementary Data
  
 Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A.
    
    Controls and Procedures
   Internal Control-Integrated Framework
  Evaluation of Disclosure Controls and Procedures
   48




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##### Table of Contents



Changes in Internal Control Over Financial Reporting
  
 Item 9B.
    
    Other Information
  
 PART III
 
 Item 10.
    
    Directors, Executive Officers and Corporate Governance
  www.smartm.com
 
 Item 11.
    
    Executive Compensation
  
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13.
    
    Certain Relationships and Related Transactions and Director Independence
  
 Item 14.
    
    Principal Accountant Fees and Services
   49




---



##### Table of Contents



PART IV
 
 Item 15.
    
    Exhibits and Financial Statement Schedules.
 (a)(1) Financial Statements
  PageAudited Financial Statements:Reports of Independent Registered Public Accounting Firm
    
    
    51Consolidated Balance Sheets
    
    
    53Consolidated Statements of Operations
    
    
    54Consolidated Statements of Shareholders Equity and Other Comprehensive Income (Loss)
    
    
    55Consolidated Statements of Cash Flows
    
    
    56Notes to Consolidated Financial Statements
    
    
    57
 (a)(2) Financial Statement Schedules
  Schedules:
 Schedule II  Valuation and Qualifying Accounts
    
    
    84
 (a)(3) Exhibits
   50




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Accounting for
Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109
 Internal Control  Integrated
Framework
 
  51




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal Control  Integrated Framework,
    Internal Control  Integrated
Framework
  
  52




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 August 28,
    
    
    August 29,2009
    
    
    2008(In thousands,except share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    147,658
    
    
    $
    115,994Accounts receivable, net of allowances
of $1,591 and $1,517 as of August 28,
2009 and August 29, 2008, respectively
    
    
    130,953
    
    
    
    193,736Inventories
    
    
    63,115
    
    
    
    62,430Prepaid expenses and other current assets
    
    
    12,628
    
    
    
    14,973Total current assets
    
    
    354,354
    
    
    
    387,133Property and equipment, net
    
    
    36,263
    
    
    
    39,317Goodwill
    
    
    1,061
    
    
    
    7,210Other intangible assets, net
    
    
    7,475
    
    
    
    8,545Other non-current assets
    
    
    4,585
    
    
    
    4,943Total assets
    
    $
    403,738
    
    
    $
    447,148LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    68,928
    
    
    $
    93,482Accrued expenses
    
    
    16,615
    
    
    
    23,942Total current liabilities
    
    
    85,543
    
    
    
    117,424Long-term debt
    
    
    81,250
    
    
    
    81,250Other long-term liabilities
    
    
    2,120
    
    
    
    1,568Total liabilities
    
    
    168,913
    
    
    
    200,242Commitments and contingenciesShareholders equity:Ordinary shares, $0.00016667 par value; 600,000,000 shares
authorized; 61,904,788 and 61,361,137 shares issued and outstanding
as of August 28, 2009 and August 29, 2008, respectively
    
    
    10
    
    
    
    10Additional paid-in capital
    
    
    109,264
    
    
    
    100,234Deferred stock-based compensation
    
    
    
    
    
    
    (91
    )Accumulated other comprehensive income
    
    
    4,333
    
    
    
    14,132Retained earnings
    
    
    121,218
    
    
    
    132,621Total shareholders equity
    
    
    234,825
    
    
    
    246,906Total liabilities and shareholders equity
    
    $
    403,738
    
    
    $
    447,148
   53




---



##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year EndedAugust 28,
2009
    
    
    August 29,
2008
    
    
    August 31,
2007(In thousands, except per share data)Net sales
    
    $
    441,317
    
    
    $
    670,151
    
    
    $
    844,627Cost of sales (1)
    
    
    351,478
    
    
    
    550,420
    
    
    
    695,054Gross profit
    
    
    89,839
    
    
    
    119,731
    
    
    
    149,573Operating expenses:Research and development (1)
    
    
    19,811
    
    
    
    20,164
    
    
    
    16,383Selling, general, and administrative (1)
    
    
    55,505
    
    
    
    59,849
    
    
    
    59,552Goodwill impairment
    
    
    10,416
    
    
    
    3,187
    
    
    
    Restructuring charges
    
    
    2,810
    
    
    
    1,938
    
    
    
    In-process research and development charge
    
    
    
    
    
    
    4,400
    
    
    
    Total operating expenses
    
    
    88,542
    
    
    
    89,538
    
    
    
    75,935Income from operations
    
    
    1,297
    
    
    
    30,193
    
    
    
    73,638Interest expense, net
    
    
    (6,609
    )
    
    
    (5,355
    )
    
    
    (7,381
    )Other income (expense), net
    
    
    (520
    )
    
    
    2,557
    
    
    
    934Total other expense
    
    
    (7,129
    )
    
    
    (2,798
    )
    
    
    (6,447
    )Income (loss) before provision for income taxes
    
    
    (5,832
    )
    
    
    27,395
    
    
    
    67,191Provision for income taxes
    
    
    5,571
    
    
    
    18,421
    
    
    
    9,458Net income (loss)
    
    $
    (11,403
    )
    
    $
    8,974
    
    
    $
    57,733Net income (loss) per share, basic
    
    $
    (0.18
    )
    
    $
    0.15
    
    
    $
    0.97Net income (loss) per share, diluted
    
    $
    (0.18
    )
    
    $
    0.14
    
    
    $
    0.91Shares used in computing basic net income
(loss) per share
    
    
    61,699
    
    
    
    60,985
    
    
    
    59,636Shares used in computing diluted net income (loss)
per share
    
    
    61,699
    
    
    
    63,555
    
    
    
    63,782
 
 (1)
    
    Stock-based compensation by category: Cost of sales
    
    $
    868
    
    
    $
    809
    
    
    $
    521Research and development
    
    
    2,095
    
    
    
    1,746
    
    
    
    1,156Selling, general and administrative
    
    
    5,512
    
    
    
    4,716
    
    
    
    3,014
   54




---



##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 
 CONSOLIDATED
STATEMENTS OF SHAREHOLDERS EQUITY AND OTHER COMPREHENSIVE INCOME (LOSS)
 (Dollars in thousands)
 AccumulatedAdditional

    
    
    Deferred
    
    
    OtherOrdinary Shares
    
    
    Paid-In
    
    
    Stock-Based
    
    
    Comprehensive
    
    
    Retained
    
    
    Shareholders
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Income (Loss)
    
    
    Earnings
    
    
    Equity
    
    
    Income (Loss)Balances as of August 25, 2006
    
    
    58,430,803
    
    
    $
    10
    
    
    $
    85,251
    
    
    $
    (555
    )
    
    $
    272
    
    
    $
    65,685
    
    
    $
    150,663
    
    
    $
    31,681Stock option exercises
    
    
    2,233,660
    
    
    
    
    
    
    
    1,926
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,926Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    4,471
    
    
    
    220
    
    
    
    
    
    
    
    
    
    
    
    4,691Net changes in unrealized loss on
derivative instruments accounted for
as cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,812
    
    
    
    
    
    
    
    5,812
    
    
    
    5,812Tax benefit for stock option exercises
    
    
    
    
    
    
    
    
    
    
    602
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    602Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,733
    
    
    
    57,733
    
    
    
    57,733Balances as of August 31, 2007
    
    
    60,664,463
    
    
    
    10
    
    
    
    92,250
    
    
    
    (335
    )
    
    
    6,083
    
    
    
    123,418
    
    
    
    221,426
    
    
    
    63,544FIN 48 initial adoption adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    229
    
    
    
    229Stock option exercises
    
    
    696,674
    
    
    
    
    
    
    
    934
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    934Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    7,027
    
    
    
    244
    
    
    
    
    
    
    
    
    
    
    
    7,271Net changes in unrealized loss on
derivative instruments accounted for
as cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (666
    )
    
    
    
    
    
    
    (666
    )
    
    
    (666
    )Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,715
    
    
    
    
    
    
    
    8,715
    
    
    
    8,715Tax benefit for stock option exercises
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,974
    
    
    
    8,974
    
    
    
    8,974Balances as of August 29, 2008
    
    
    61,361,137
    
    
    
    10
    
    
    
    100,234
    
    
    
    (91
    )
    
    
    14,132
    
    
    
    132,621
    
    
    
    246.906
    
    
    
    17,023Repurchase
of ordinary shares
    
    
    (45,250
    )
    
    
    
    
    
    
    (84
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (84
    )Stock option exercises
    
    
    588,901
    
    
    
    
    
    
    
    729
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    729Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    8,384
    
    
    
    91
    
    
    
    
    
    
    
    
    
    
    
    8,475Net changes in unrealized gain on
derivative instruments accounted for
as cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    222
    
    
    
    
    
    
    
    222
    
    
    
    222Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,021
    )
    
    
    
    
    
    
    (10,021
    )
    
    
    (10,021
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,403
    )
    
    
    (11,403
    )
    
    
    (11,403
    )Balances as of August 28, 2009
    
    
    61,904,788
    
    
    $
    10
    
    
    $
    109,264
    
    
    $
    
    
    
    $
    4,333
    
    
    $
    121,218
    
    
    $
    234,825
    
    
    $
    (21,202
    )
   55




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year EndedAugust 28,
    
    
    August 29,
    
    
    August 31,2009
    
    
    2008
    
    
    2007(In thousands)Cash flows from operating activities:Net income (loss)
    
    $
    (11,403
    )
    
    $
    8,974
    
    
    $
    57,733Adjustments to reconcile net income (loss) to net cash provided by
operating activities:Depreciation and amortization
    
    
    13,077
    
    
    
    12,700
    
    
    
    9,031Stock-based compensation
    
    
    8,475
    
    
    
    7,271
    
    
    
    4,691Changes in allowances for accounts receivable and sales return
    
    
    74
    
    
    
    (1,000
    )
    
    
    (75
    )Amortization of debt issuance costs
    
    
    973
    
    
    
    800
    
    
    
    741Loss on sale of assets
    
    
    635
    
    
    
    27
    
    
    
    Write-off of acquired in-process technology
    
    
    
    
    
    
    4,400
    
    
    
    Goodwill impairment
    
    
    10,416
    
    
    
    3,187
    
    
    
    Non-cash restructuring expense
    
    
    (7
    )
    
    
    967
    
    
    
    Deferred income tax provision
    
    
    (47
    )
    
    
    9,343
    
    
    
    270Changes in operating assets and liabilities:Accounts receivable
    
    
    59,942
    
    
    
    (4,238
    )
    
    
    18,649Inventories
    
    
    (3,479
    )
    
    
    5,845
    
    
    
    3,907Prepaid expenses and other assets
    
    
    1,381
    
    
    
    (7,587
    )
    
    
    12,222Accounts payable
    
    
    (23,746
    )
    
    
    (36,665
    )
    
    
    (35,525
    )Accrued expenses and other liabilities
    
    
    (3,773
    )
    
    
    526
    
    
    
    (1,908
    )Net cash provided by operating activities
    
    
    52,518
    
    
    
    4,550
    
    
    
    69,736Cash flows from investing activities:Cash paid for acquisition of business, net of cash acquired
    
    
    
    
    
    
    (20,284
    )
    
    
    Capital expenditures
    
    
    (14,609
    )
    
    
    (13,313
    )
    
    
    (14,059
    )Cash deposits on equipment
    
    
    (362
    )
    
    
    (533
    )
    
    
    (391
    )Proceeds from sale of property and equipment
    
    
    459
    
    
    
    311
    
    
    
    Payment of contingent consideration
    
    
    (6,562
    )
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    3Net cash used in investing activities
    
    
    (21,074
    )
    
    
    (33,819
    )
    
    
    (14,447
    )Cash flows from financing activities:Excess tax benefits from share-based compensation
    
    
    
    
    
    
    24
    
    
    
    602Repayment of acquired line of credit
    
    
    
    
    
    
    (940
    )
    
    
    Borrowings under revolving line of credit
    
    
    
    
    
    
    
    
    
    
    110,953Repayments on revolving line of credit
    
    
    
    
    
    
    
    
    
    
    (111,271
    )Proceeds from issuance of ordinary shares from stock option exercises
    
    
    729
    
    
    
    934
    
    
    
    1,926Payments for share repurchase
    
    
    (84
    )
    
    
    
    
    
    
    Net cash provided by financing activities
    
    
    645
    
    
    
    18
    
    
    
    2,210Effect of exchange rate changes on cash and cash equivalents
    
    
    (425
    )
    
    
    1,098
    
    
    
    1,028Net (decrease) increase in cash and cash equivalents
    
    
    31,664
    
    
    
    (28,153
    )
    
    
    58,527Cash and cash equivalents at beginning of period
    
    
    115,994
    
    
    
    144,147
    
    
    
    85,620Cash and cash equivalents at end of period
    
    $
    147,658
    
    
    $
    115,994
    
    
    $
    144,147Supplemental disclosures of cash flow information:Cash paid during the year:Interest
    
    $
    7,264
    
    
    $
    8,350
    
    
    $
    9,376Taxes
    
    
    6,267
    
    
    
    9,405
    
    
    
    9,999Non-cash activities information:Change in fair value of derivative instruments
    
    $
    342
    
    
    $
    933
    
    
    $
    963Accrued earn-out payments for acquisition of business
    
    
    
    
    
    
    1,500
    
    
    
    
   56




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 August 28, 2009, August 29, 2008 and August 31, 2007
 (1) Summary of Significant Accounting Policies
 (a) Organization and Operations of the Company
   (b) Basis of Presentation
  (c) Acquisition of Business
  (d) Year-End
   57




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (e) Use of Estimates
  (f) Revenue Recognition
 Revenue Recognition
 Reporting Revenue Gross as a Principal versus Net as an Agent
  Fiscal Year EndedAugust 28,
    
    
    August 29,
    
    
    August 31,2009
    
    
    2008
    
    
    2007Product net sales
    
    $
    404,474
    
    
    $
    628,791
    
    
    $
    794,397Service revenue
    
    
    36,843
    
    
    
    41,360
    
    
    
    50,230Net sales
    
    
    441,317
    
    
    
    670,151
    
    
    
    844,627Plus: Cost of sales (1)
    
    
    625,635
    
    
    
    875,839
    
    
    
    1,085,715Gross billings to customers
    
    $
    1,066,952
    
    
    $
    1,545,990
    
    
    $
    1,930,342
 
 (1)
    
    Represents cost of sales associated with service revenue reported on a net basis.  58




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (g) Cash and Cash Equivalents
  (h) Allowance for Doubtful Accounts
  (i) Inventories
  (j) Property and Equipment
  Asset
    
    PeriodBuildings
    
    
    20 to 50 yearsManufacturing equipment
    
    
    3 to 5 yearsOffice furniture, software, computers, and equipment
    
    
    2 to 5 yearsLeasehold improvements
    
    
    2 to 52 years
 (k) Goodwill
 Goodwill and Other Intangible Assets
   59




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   August 29,
    
    
    
    
    
    
    
    
    
    
    August 28,2008
    
    
    Addition
    
    
    Impairment
    
    
    2009Reporting unit:Memory, Display
& Embedded
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Adtron
    
    
    7,210
    
    
    
    4,267
    
    
    
    (10,416
    )
    
    
    1,061Total Goodwill
    
    $
    7,210
    
    
    $
    4,267
    
    
    $
    (10,416
    )
    
    $
    1,061
 (l) Other Intangible Assets, net
  Weighted
    
    
    Value at
    
    
    
    
    
    Carrying ValueAvg. Life
    
    
    Date of
    
    
    Accumulated
    
    
    at August 28,(years)
    
    

Acquisition
    
    

Amortization
    
    

2009Amortized intangible assets:Customer relationships
    
    
    10
    
    
    $
    3,700
    
    
    $
    555
    
    
    $
    3,145Technology
    
    
    7
    
    
    
    2,800
    
    
    
    600
    
    
    
    2,200Company trade name
    
    
    20
    
    
    
    2,040
    
    
    
    153
    
    
    
    1,887Leasehold interest
    
    
    3
    
    
    
    260
    
    
    
    122
    
    
    
    138Non-compete agreement
    
    
    2
    
    
    
    220
    
    
    
    165
    
    
    
    55Product names
    
    
    9
    
    
    
    60
    
    
    
    10
    
    
    
    50Total
    
    
    11
    
    
    $
    9,080
    
    
    $
    1,605
    
    
    $
    7,475
   Estimated Amortization Expense:
    
    
    Amount2010
    
    $
    1,0152011
    
    
    9362012
    
    
    8792013
    
    
    8792014
    
    
    879Thereafter
    
    
    2,887Total
    
    $
    7,475
  60




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (m) Impairment of Long-Lived Assets
 Accounting for the Impairment or Disposal of Long-Lived Assets Accounting for the Impairment or Disposal of Long-Lived
Assets
 (n) Income Taxes
  (o) Foreign Currency Translation
    (p) Stock-Based Compensation
   61




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Share-Based
Payment
  Summary of Assumptions and Activity
  Year EndedAugust 28,
2009
    
    
    August 29,
2008
    
    
    August 31,
2007Stock options:Expected term (years)
    
    
    5.2
    
    
    
    5.1
    
    
    
    6.25Expected volatility
    
    
    69
    %
    
    
    51
    %
    
    
    68
    %Risk-free interest rate
    
    
    2.26
    %
    
    
    3.56
    %
    
    
    4.61
    %Expected dividends
    
    
    
    
    
    
    
    
    
    
    
  WeightedAverageWeighted
    
    
    RemainingAverage
    
    
    Contractual
    
    
    AggregateExercise
    
    
    Term
    
    
    IntrinsicShares
    
    
    Price
    
    
    (Years)
    
    
    ValueOptions outstanding at August 25, 2006
    
    
    6,791
    
    
    $
    1.68Options granted
    
    
    2,036
    
    
    
    10.80Options exercised
    
    
    (2,234
    )
    
    
    0.86Options forfeited
    
    
    (234
    )
    
    
    5.56Options outstanding at August 31, 2007
    
    
    6,359
    
    
    $
    4.75
    
    
    
    7.9
    
    
    $
    40,521Options exercisable at August 31, 2007
    
    
    2,565
    
    
    $
    2.42
    
    
    
    7.4
    
    
    $
    21,893Options vested and expected to vest at August 31, 2007
    
    
    6,138
    
    
    $
    4.63
    
    
    
    7.9
    
    
    $
    39,810Options outstanding at August 31, 2007
    
    
    6,359
    
    
    $
    4.75Options granted
    
    
    3,490
    
    
    
    7.01Options exercised
    
    
    (697
    )
    
    
    1.34Options forfeited
    
    
    (694
    )
    
    
    7.75Options outstanding at August 29, 2008
    
    
    8,458
    
    
    $
    5.72
    
    
    
    7.8
    
    
    $
    6,584Options exercisable at August 29, 2008
    
    
    4,131
    
    
    $
    3.80
    
    
    
    3.4
    
    
    $
    6,327Options vested and expected to vest at August 29, 2008
    
    
    8,064
    
    
    $
    5.62
    
    
    
    7.8
    
    
    $
    6,575Options outstanding at August 29, 2008
    
    
    8,458
    
    
    $
    5.72Options granted
    
    
    2,361
    
    
    
    2.84Options exercised
    
    
    (589
    )
    
    
    1.24Options forfeited
    
    
    (1,434
    )
    
    
    7.29Options outstanding at August 28, 2009
    
    
    8,796
    
    
    $
    4.99
    
    
    
    7.3
    
    
    $
    9,734Options exercisable at August 28, 2009
    
    
    5,058
    
    
    $
    4.68
    
    
    
    6.4
    
    
    $
    7,654Options vested and expected to vest at August 28, 2009
    
    
    8,507
    
    
    $
    5.01
    
    
    
    7.2
    
    
    $
    9,516
  62




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    WeightedAverageGrant Date FairShares
    
    
    Value Per ShareNon-vested stock options at August 29, 2008
    
    
    4,327
    
    
    $
    4.38Non-vested stock options granted
    
    
    2,361
    
    
    $
    1.49Vested stock options
    
    
    (1,516
    )
    
    $
    3.44Forfeited stock options
    
    
    (1,434
    )
    
    $
    4.32Non-vested stock options at August 28, 2009
    
    
    3,738
    
    
    $
    2.87
  Restricted Stock Units (RSUs)
    63




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (q) Loss Contingencies
  (r) Comprehensive Income (Loss)
  (s) Concentration of Credit Risk
  (t) Net Income (Loss) Per Share
   64




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Year EndedAugust 28,
2009
    
    
    August 29,
2008
    
    
    August 31,
2007Numerator:Net income (loss)
    
    $
    (11,403
    )
    
    $
    8,974
    
    
    $
    57,733Denominator:Weighted average ordinary shares
    
    
    61,699
    
    
    
    60,985
    
    
    
    59,636Effect of dilutive ordinary shares:Stock options
    
    
    
    
    
    
    2,570
    
    
    
    4,146Weighted average ordinary shares, diluted
    
    
    61,699
    
    
    
    63,555
    
    
    
    63,782Net income (loss) per ordinary share, basic
    
    $
    (0.18
    )
    
    $
    0.15
    
    
    $
    0.97Net income (loss) per ordinary share, diluted
    
    $
    (0.18
    )
    
    $
    0.14
    
    
    $
    0.91
  (u) Correction of an Out of Period Error
  Fiscal Year
    
    
    Nine MonthsEnded
    
    
    EndedAugust 31,
    
    
    August 29,
    
    
    May 29,Additional stock compensation expense
    
    2007
    
    
    2008
    
    
    2009
    
    
    TotalCost of sales
    
    $
    25,450
    
    
    $
    52,295
    
    
    $
    91,504
    
    
    $
    169,249Research and development
    
    
    136,001
    
    
    
    97,366
    
    
    
    199,899
    
    
    
    433,266Selling, general and administrative
    
    
    296,282
    
    
    
    305,370
    
    
    
    531,611
    
    
    
    1,133,263Total charge
    
    $
    457,733
    
    
    $
    455,031
    
    
    $
    823,014
    
    
    $
    1,735,778
  65




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (w) New Accounting Pronouncements
 Fair
Value Measurement Accounting for Leases
       The Fair Value Option for Financial Assets and
Financial Liabilities
 Accounting for Nonrefundable Advance
Payments for Goods or Services Received for Use in Future Research and Development Activities
 Business Combinations
  66




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Noncontrolling Interests in Consolidated
Financial Statements
 Disclosure about Derivative Instruments and
Hedging Activities
 Determination of the Useful Life of Intangible
Assets
 Revenue Arrangements with Multiple
Deliverables. Revenue Arrangements with Multiple Deliverables
 Instruments Determining the Fair Value When the Volume and Level of Activity for the Asset
or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly Fair
Value Measurements
  67




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Subsequent Events
 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principlesa replacement of FASB Statement No. 162.
  (2) Related Party Information
     68




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (3) Inventories
  August 28,
2009
    
    
    August 29,
2008Raw materials
    
    $
    20,207
    
    
    $
    28,122Work in process
    
    
    4,716
    
    
    
    4,899Finished goods
    
    
    38,192
    
    
    
    29,409$
    63,115
    
    
    $
    62,430
 (4) Net Property and Equipment
  August 28,
2009
    
    
    August 29,
2008Buildings
    
    $
    539
    
    
    $
    622Office furniture, software, computers, and equipment
    
    
    5,409
    
    
    
    5,156Manufacturing equipment
    
    
    56,926
    
    
    
    55,727Leasehold improvements
    
    
    16,893
    
    
    
    13,41079,767
    
    
    
    74,915Less accumulated depreciation and amortization
    
    
    43,504
    
    
    
    35,598Net property and equipment
    
    $
    36,263
    
    
    $
    39,317
  (5) Income Taxes
  Year EndedAugust 28,
2009
    
    
    August 29,
2008
    
    
    August 31,
2007U.S.
    
    $
    (28,915
    )
    
    $
    (19,017
    )
    
    $
    6,830Non-U.S.
    
    
    23,083
    
    
    
    46,412
    
    
    
    60,361Total
    
    $
    (5,832
    )
    
    $
    27,395
    
    
    $
    67,191
  69




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Year EndedAugust 28,
2009
    
    
    August 29,
2008
    
    
    August 31,2007Current:Federal
    
    $
    (21
    )
    
    $
    (102
    )
    
    $
    (340
    )State
    
    
    93
    
    
    
    56
    
    
    
    293Foreign
    
    
    5,546
    
    
    
    9,124
    
    
    
    9,2355,618
    
    
    
    9,078
    
    
    
    9,188Deferred:Federal and state
    
    
    
    
    
    
    9,630
    
    
    
    699Foreign
    
    
    (47
    )
    
    
    (287
    )
    
    
    (429
    )(47
    )
    
    
    9,343
    
    
    
    270$
    5,571
    
    
    $
    18,421
    
    
    $
    9,458
  Year EndedAugust 28,
2009
    
    
    August 29,
2008
    
    
    August 31,
2007Statutory tax rate
    
    
    (35.0
    %)
    
    
    35.0
    %
    
    
    35.0
    %Foreign income taxes at different rates
    
    
    4.9
    
    
    
    (17.2
    )
    
    
    (12.1
    )State income tax, net of federal tax benefit
    
    
    1.6
    
    
    
    
    
    
    
    0.8Tax holiday  Malaysia
    
    
    (45.1
    )
    
    
    (10.7
    )
    
    
    (5.6
    )Change in valuation allowance
    
    
    168.4
    
    
    
    54.2
    
    
    
    (3.6
    )Non-deductible in process research and
development
    
    
    
    
    
    
    5.6
    
    
    
    Other, net
    
    
    0.8
    
    
    
    0.3
    
    
    
    95.6
    %
    
    
    67.2
    %
    
    
    14.5
    %
  2009
    
    
    2008Deferred tax assets:Accruals and allowances
    
    $
    2,663
    
    
    $
    3,407Stock-based compensation
    
    
    6,337
    
    
    
    4,269Credits carryover
    
    
    2,237
    
    
    
    1,434Property and equipment
    
    
    115
    
    
    
    Net operating loss carryover
    
    
    20,572
    
    
    
    20,305Deferred tax assets
    
    
    31,924
    
    
    
    29,415Valuation allowance
    
    
    (28,358
    )
    
    
    (25,221
    )Net deferred tax assets
    
    
    3,566
    
    
    
    4,194Deferred tax liabilities:Property and equipment
    
    
    
    
    
    
    (165
    )Purchase accounting intangibles
    
    
    (2,915
    )
    
    
    (3,333
    )Deferred tax assets:Deferred tax liabilities
    
    
    (2,915
    )
    
    
    (3,498
    )Net deferred tax assets
    
    $
    651
    
    
    $
    696
  70




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
         71




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    AmountBalance as of August 30, 2008
    
    $
    0.3Increase in unrecognized tax benefits related to prior year tax positions
    
    
    Decreases in unrecognized tax benefits related to prior year tax positions
    
    
    Increase in unrecognized tax benefits related to current year tax positions
    
    
    0.2Decrease in unrecognized tax benefits related to settlements with tax authorities
    
    
    Reductions in unrecognized tax benefits due to lapse of applicable statue of limitations
    
    
    (0.2
    )Balance as of August 28, 2009
    
    $
    0.3
     72




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (6) Accrued Expenses
  August 28,
2009
    
    
    August 29,
2008Accrued employee compensation
    
    $
    6,158
    
    
    $
    8,251Income taxes payable
    
    
    87
    
    
    
    824Accrued warranty
    
    
    694
    
    
    
    765Other accrued liabilities
    
    
    9,676
    
    
    
    14,102Total
    
    $
    16,615
    
    
    $
    23,942
 (7) Long Term Debt
 Senior Secured Floating Rate Notes
    Senior Secured Revolving Line of Credit
   73




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    (8) Financial Instruments
 Fair Value of Financial Instruments
   74




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Quoted Prices in
    
    
    Observable/Active Markets
    
    
    Unobservablefor Identical
    
    
    InputsAssets or
    
    
    Corroborated byLiabilities
    
    
    Market DataLevel 1
    
    
    Level 2
    
    
    TotalAssets: (1)Money market funds (2)
    
    $
    79.2
    
    
    $
    
    
    
    $
    79.2Certificates of deposit (2)
    
    
    24.0
    
    
    
    
    
    
    
    24.0Liabilities:Non-current variable-to-fixed interest rate swap
    
    
    
    
    
    
    (1.3
    )
    
    
    (1.3
    )Total (3)
    
    $
    103.2
    
    
    $
    (1.3
    )
    
    $
    101.9
 
 (1)
    
    There were no assets or liabilities measured under Level 3 that had unobservable inputs.(2)
    
    Included in cash and cash equivalents on the Companys Consolidated Balance Sheet.(3)
    
    The total in Level 1 does not include $44.5 million of cash balances from checking and savings accounts. Derivative Instruments
 Accounting for Derivative Instruments and Hedging Activities
   (9) Employee Benefit Plans
 (a) Stock Option Plan
   75




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Options Outstanding
    
    
    Options VestedWeightedAverageRemaining
    
    
    Weighted
    
    
    
    
    
    
    WeightedRange of Exercise
    
    Options
    
    
    Contractual Life
    
    
    Average Exercise
    
    
    
    
    
    
    Average ExercisePrices
    
    Outstanding
    
    
    (Years)
    
    
    Price
    
    
    Shares Vested
    
    
    Price$0.17
    
    
    1,624
    
    
    
    4.82
    
    
    $
    0.17
    
    
    
    1,624
    
    
    $
    0.17$0.93  $2.72
    
    
    563
    
    
    
    6.87
    
    
    $
    1.60
    
    
    
    389
    
    
    $
    1.50$2.84
    
    
    1,592
    
    
    
    9.03
    
    
    $
    2.84
    
    
    
    369
    
    
    $
    2.84$2.95  $4.92
    
    
    924
    
    
    
    7.82
    
    
    $
    4.11
    
    
    
    459
    
    
    $
    4.69$5.85  $7.28
    
    
    989
    
    
    
    7.33
    
    
    $
    6.52
    
    
    
    330
    
    
    $
    6,63$7.5
    
    
    1,336
    
    
    
    8.08
    
    
    $
    7.50
    
    
    
    613
    
    
    $
    7.50$7.84  $9.39
    
    
    417
    
    
    
    6.64
    
    
    $
    8.64
    
    
    
    316
    
    
    $
    8.60$9.97
    
    
    1,036
    
    
    
    7.07
    
    
    $
    9.97
    
    
    
    748
    
    
    $
    9.97$11.35  $14.96
    
    
    306
    
    
    
    7.57
    
    
    $
    12.60
    
    
    
    203
    
    
    $
    12.76$15.01
    
    
    8
    
    
    
    7.80
    
    
    $
    15.01
    
    
    
    4
    
    
    $
    15.01$0.17  15.01
    
    
    8,796
    
    
    
    7.26
    
    
    $
    4.99
    
    
    
    5,058
    
    
    $
    4.68
 (b) Savings and Retirement Program
  (10) Commitments and Contingencies
 (a) Commitments
    76




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Year Ending 
August2010
    
    $
    1,6142011
    
    
    1,6702012
    
    
    1,3982013
    
    
    6602014
    
    
    5252015 and thereafter
    
    
    1,049$
    6,916
 (b) Product Warranties
   Year EndedAugust 28,
2009
    
    
    August 29,
2008
    
    
    August 31,
2007Beginning accrued warranty reserve
    
    $
    765
    
    
    $
    722
    
    
    $
    505Warranty claims
    
    
    (1,046
    )
    
    
    (1,208
    )
    
    
    (1,361
    )Provision for product warranties
    
    
    975
    
    
    
    1,251
    
    
    
    1,578Ending accrued warranty reserve
    
    $
    694
    
    
    $
    765
    
    
    $
    722
   (c) Legal Matters
   77




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (d) Commitments
 Adtron Earn-Out Consideration
  (e) Contingencies
   (11) Restructuring
 Accounting for
the Impairment or Disposal of Long-Lived Assets Employers Accounting for Postemployment Benefits Accounting for Costs Associated with Exit or
Disposal Activities
  78




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Severance and
    
    
    Assets/FacilityBenefits
    
    
    Related
    
    
    Other
    
    
    TotalProvision
    
    $
    712
    
    
    $
    966
    
    
    $
    260
    
    
    $
    1,938Non-cash charges
    
    
    
    
    
    
    (966
    )
    
    
    
    
    
    
    (966
    )Cash payment
    
    
    (140
    )
    
    
    
    
    
    
    (2
    )
    
    
    (142
    )Accrual as of August 28, 2008
    
    
    572
    
    
    
    
    
    
    
    258
    
    
    
    830Provision
    
    
    2,260
    
    
    
    179
    
    
    
    371
    
    
    
    2,810Non-cash charges
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    (7
    )Cash payment
    
    
    (2,822
    )
    
    
    (179
    )
    
    
    (622
    )
    
    
    (3,623
    )Accrual as of August 28, 2009
    
    $
    10
    
    
    $
    
    
    
    $
    
    
    
    $
    10
  (12) Segment Information and Geographic Information
   79




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   Year EndedAugust 28,
2009
    
    
    August 29,
2008Property and equipment, net:Memory, Display & Embedded
    
    $
    35,752
    
    
    $
    38,772Adtron
    
    
    511
    
    
    
    545Total property and equipment, net
    
    $
    36,263
    
    
    $
    39,317
 Memory,Display &Embedded
    
    
    Adtron(1)
    
    
    TotalYear
Ended August 28, 2009:Net sales
    
    $
    426,445
    
    
    $
    14,872
    
    
    $
    441,317Gross profit
    
    
    82,540
    
    
    
    7,299
    
    
    
    89,839Depreciation and amortization
    
    
    11,896
    
    
    
    1,181
    
    
    
    13,077Income (loss) from operations
    
    
    14,682
    
    
    
    (13,385
    )
    
    
    1,297Year
Ended August 29, 2008:Net sales
    
    $
    662,781
    
    
    $
    7,370
    
    
    $
    670,151Gross profit
    
    
    116,589
    
    
    
    3,142
    
    
    
    119,731Depreciation and amortization
    
    
    12,113
    
    
    
    587
    
    
    
    12,700Income (loss) from operations
    
    
    36,365
    
    
    
    (6,172
    )
    
    
    30,193Year
Ended August 31, 2007 (2):Net sales
    
    $
    844,627
    
    
    $
    
    
    
    $
    844,627Gross profit
    
    
    149,573
    
    
    
    
    
    
    
    149,573Depreciation and amortization
    
    
    9,031
    
    
    
    
    
    
    
    9,031Income from operations
    
    
    73,638
    
    
    
    
    
    
    
    73,638
 
 (1)
    
    Adtron was acquired in March 2008. The results of Adtron are for periods post
acquisition. In fiscal 2009, loss from operations includes goodwill impairment charges of
$10.4 million. In fiscal 2008, loss from operations includes In-process research and
development charge of $4.4 million.(2)
    
    In fiscal year 2007, we had one segment.  Year EndedAugust 28,
2009
    
    
    August 29,
2008
    
    
    August 31,
2007Geographic net sales:U.S.A.
    
    $
    190,306
    
    
    $
    367,502
    
    
    $
    521,961Other North and Latin America
    
    
    125,803
    
    
    
    134,955
    
    
    
    153,617Europe
    
    
    42,693
    
    
    
    67,266
    
    
    
    56,090Asia
    
    
    82,515
    
    
    
    100,428
    
    
    
    112,959$
    441,317
    
    
    $
    670,151
    
    
    $
    844,627
 August 28,
2009
    
    
    August 29,
2008Property and equipment, net:U.S.A.
    
    $
    7,724
    
    
    $
    6,679Other North and Latin America
    
    
    22,654
    
    
    
    28,492Europe
    
    
    40
    
    
    
    59Asia
    
    
    5,845
    
    
    
    4,087$
    36,263
    
    
    $
    39,317
  80




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (13) Major Customers
  Year EndedAugust 28,
2009
    
    
    August 29,
2008
    
    
    August 31,
2007Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentCustomer A
    
    $
    122,665
    
    
    
    28
    %
    
    $
    259,639
    
    
    
    39
    %
    
    $
    394,202
    
    
    
    47
    %Customer B
    
    $
    59,258
    
    
    
    13
    %
    
    $
    83,710
    
    
    
    12
    %
    
    $
    107,739
    
    
    
    13
    %Customer C
    
    $
    41,571
    
    
    
    9
    %
    
    $
    39,067
    
    
    
    6
    %
    
    $
    48,954
    
    
    
    6
    %
  (14) Other Income (Loss), Net
  Year EndedAugust 28,
2009
    
    
    August 29,
2008
    
    
    August 31,
2007Foreign currency gains (losses)
    
    $
    (868
    )
    
        $
    2,415
    
    
        $
    922Other
    
    
    348
    
    
    
    142
    
    
    
    12Total
    
    $
    (520
    )
    
    $
    2,557
    
    
    $
    934
 (15) Subsidiary Guarantors
  (16) Subsequent Events
   81




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (17) Selected Quarterly Financial Data (Unaudited)
  Three Months EndedNov. 30,
    
    
    Feb. 29,
    
    
    May 30,
    
    
    Aug. 29,
    
    
    Nov. 28,
    
    
    Feb. 27,
    
    
    May 29,
    
    
    Aug. 28,2007
    
    
    2008
    
    
    2008
    
    
    2008
    
    
    2008
    
    
    2009
    
    
    2009
    
    
    2009(In thousands, except for per share data)Statement of
Operations Data:Net sales
    
    $
    177,373
    
    
    $
    164,497
    
    
    $
    167,615
    
    
    $
    160,666
    
    
    $
    140,775
    
    
    $
    109,089
    
    
    $
    91,645
    
    
    $
    99,808Cost of sales
    
    
    143,279
    
    
    
    131,609
    
    
    
    139,803
    
    
    
    135,729
    
    
    
    114,959
    
    
    
    85,022
    
    
    
    73,008
    
    
    
    78,489Gross profit
    
    
    34,094
    
    
    
    32,888
    
    
    
    27,812
    
    
    
    24,937
    
    
    
    25,816
    
    
    
    24,067
    
    
    
    18,637
    
    
    
    21,319Operating expenses:Research and
development
    
    
    4,685
    
    
    
    4,624
    
    
    
    5,418
    
    
    
    5,437
    
    
    
    5,436
    
    
    
    5,142
    
    
    
    4,478
    
    
    
    4,755Selling, general and
administrative
    
    
    15,061
    
    
    
    14,331
    
    
    
    15,393
    
    
    
    15,064
    
    
    
    14,467
    
    
    
    13,782
    
    
    
    13,585
    
    
    
    13,671Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,187
    
    
    
    7,210
    
    
    
    3,206
    
    
    
    
    
    
    
    Restructuring charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,938
    
    
    
    886
    
    
    
    935
    
    
    
    989
    
    
    
    In process R&D charge
    
    
    
    
    
    
    
    
    
    
    4,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total operating
expenses
    
    
    19,746
    
    
    
    18,955
    
    
    
    25,211
    
    
    
    25,626
    
    
    
    27,999
    
    
    
    23,065
    
    
    
    19,052
    
    
    
    18,426Income (loss) from
operations
    
    
    14,348
    
    
    
    13,933
    
    
    
    2,601
    
    
    
    (689
    )
    
    
    (2,183
    )
    
    
    1,002
    
    
    
    (415
    )
    
    
    2,893Interest expense, net
    
    
    (1,024
    )
    
    
    (1,327
    )
    
    
    (1,468
    )
    
    
    (1,536
    )
    
    
    (1,752
    )
    
    
    (1,698
    )
    
    
    (1,629
    )
    
    
    (1,530
    )Other income (expense),
net
    
    
    1,422
    
    
    
    373
    
    
    
    255
    
    
    
    507
    
    
    
    (766
    )
    
    
    109
    
    
    
    26
    
    
    
    111Total other income
(expense)
    
    
    398
    
    
    
    (954
    )
    
    
    (1,213
    )
    
    
    (1,029
    )
    
    
    (2,518
    )
    
    
    (1,589
    )
    
    
    (1,603
    )
    
    
    (1,419
    )Income (loss) before
provision for income
taxes
    
    
    14,746
    
    
    
    12,979
    
    
    
    1,388
    
    
    
    (1,718
    )
    
    
    (4,701
    )
    
    
    (587
    )
    
    
    (2,018
    )
    
    
    1,474Provision for income
taxes
    
    
    2,681
    
    
    
    1,539
    
    
    
    12,391
    
    
    
    1,810
    
    
    
    2,177
    
    
    
    1,263
    
    
    
    368
    
    
    
    1,763Net income (loss)
    
    $
    12,065
    
    
    $
    11,440
    
    
    $
    (11,003
    )
    
    $
    (3,528
    )
    
    $
    (6,878
    )
    
    $
    (1,850
    )
    
    $
    (2,386
    )
    
    $
    (289
    )Net income (loss) per
ordinary share, basic
    
    $
    0.20
    
    
    $
    0.19
    
    
    $
    (0.18
    )
    
    $
    (0.06
    )
    
    $
    (0.11
    )
    
    $
    (0.03
    )
    
    $
    (0.04
    )
    
    $
    (0.00
    )Net income (loss) per
ordinary share, diluted
    
    $
    0.19
    
    
    $
    0.18
    
    
    $
    (0.18
    )
    
    $
    (0.06
    )
    
    $
    (0.11
    )
    
    $
    (0.03
    )
    
    $
    (0.04
    )
    
    $
    (0.00
    )Shares used in
computing basic net
income (loss) per
ordinary share
    
    
    60,695
    
    
    
    60,869
    
    
    
    61,027
    
    
    
    61,348
    
    
    
    61,507
    
    
    
    61,673
    
    
    
    61,738
    
    
    
    61,863Shares used in
computing diluted
income (loss) per
ordinary share
    
    
    63,656
    
    
    
    63,713
    
    
    
    61,027
    
    
    
    61,348
    
    
    
    61,507
    
    
    
    61,673
    
    
    
    61,738
    
    
    
    61,863
  82




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    83




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CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
 The consolidated financial statement Schedule II  VALUATION AND QUALIFYING ACCOUNTS is filed
as part of this Annual Report on Form 10-K.
 SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 
 SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
 Balance atbeginning of
    
    
    Charged to
    
    
    
    
    
    
    Balance atDescription
    
    Year
    
    
    Operations
    
    
    (Deductions)
    
    
    End of Year(In thousands)Year ended August 28, 2009:Allowance for doubtful accounts
receivable, credits and returns
    
    $
    1,517
    
    
    $
    1,801
    
    
    $
    (1,727
    )
    
    $
    1,591Year ended August 29, 2008:Allowance for doubtful accounts
receivable, credits and returns
    
    $
    2,517
    
    
    $
    1,160
    
    
    $
    (2,160
    )
    
    $
    1,517Year ended August 31, 2007:Allowance for doubtful accounts
receivable, credits and returns
    
    $
    2,592
    
    
    $
    2,550
    
    
    $
    (2,625
    )
    
    $
    2,517
  84




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SMART MODULAR TECHNOLOGIES (WWH), INC.
 
 SIGNATURES
  SMART MODULAR TECHNOLOGIES (WWH), INC.By:
    /s/ IAIN MACKENZIEName:
    Iain MacKenzieTitle:
    President and Chief Executive Officer   Signature
    
    Title
    
    Date/s/ IAIN MacKENZIE


Iain MacKenzie
    
    President, Chief Executive
Officer and Director
(Principal Executive Officer)
    
    November 9, 2009(Principal Executive Officer)/s/ BARRY ZWARENSTEIN


Barry Zwarenstein
    
    Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
    
    November 9, 2009(Principal Accounting Officer)/s/ AJAY SHAH
    
    Chairman of the Board of
Directors
    
    November 9, 2009Ajay Shah/s/ EUGENE FRANTZ
    
    Director
    
    November 9, 2009Eugene Frantz/s/ HARRY W. (WEBB) McKINNEY
    
    Director
    
    November 9, 2009Harry W. (Webb) McKinney/s/ CHONG SUP PARK
    
    Director
    
    November 9, 2009Chong Sup Park/s/ MUKESH PATEL
    
    Director
    
    November 9, 2009Mukesh Patel/s/ CLIFTON THOMAS WEATHERFORD
    
    Director
    
    November 9, 2009Clifton Thomas Weatherford/s/ DENNIS McKENNA
    
    Director
    
    November 9, 2009Dennis McKenna/s/ KIMBERLY E. ALEXY
    
    Director
    
    November 9, 2009Kimberly E. Alexy
  85




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Exhibit No.

    
    Document2.1
*
    
    Transaction Agreement, dated February 11, 2004, by and among Solectron Corporation,
Solectron Global Holdings L.P., Solectron Serviços E Manufactura Do Brasil Ltda., SMART
Modular Technologies, Inc., Modular, Inc., Modular Merger Corporation and Modular
(Cayman) Inc.3.1
*(1)
    
    Form of Amended and Restated Memorandum of Association of the Company3.2
*(1)
    
    Form of Amended and Restated Articles of Association of the Company4.1
*(2)
    
    Indenture, dated as of March 28, 2005, among the Company, the guarantors party thereto
and U.S. Bank National Association, as trustee4.2
*(2)
    
    Registration Rights Agreement dated as of March 28, 2005 between the Company, the
guarantors party thereto, Citigroup Global Markets Inc. and Lehman Brothers, Inc.4.3
*(2)
    
    Form of Note (included in Exhibit 4.1)4.4
*(2)
    
    Form of Exchange Note (included in Exhibit 4.1)4.5
*(2)
    
    Security Agreement, dated as of March 28, 2005, among the Company, the guarantors party
thereto and U.S. Bank National Association, as trustee4.6
*(2)
    
    Intercreditor Agreement, dated as of March 28, 2005, among Wells Fargo Foothill, Inc.,
as Credit Agent, U.S. Bank National Association, as trustee, and the Company4.7
*(2)
    
    Intercompany Subordination Agreement, dated as of March 28, 2005, among U.S. Bank
National Association, as trustee, the Company and the other obligors party thereto4.8
*(1)
    
    Form of Shareholders Agreement among the Company and certain other parties named therein4.9

    
    [Reserved]4.10
(2)
    
    Amended and Restated Loan and Security Agreement, dated as of March 28, 2005, by and
among the Company, SMART Modular Technologies (Europe) Limited, SMART Modular
Technologies (Puerto Rico) Inc., Wells Fargo Foothill, Inc., as Arranger and
Administrative Agent, and certain other persons named therein4.11
(2)
    
    Amended and Restated Intercompany Subordination Agreement, dated as of March 28, 2005,
by and among the Company, SMART Modular Technologies, Inc., SMART Modular Technologies
(Europe) Limited, SMART Modular Technologies (Puerto Rico), Inc., Wells Fargo Foothill,
Inc., as Agent, and certain other persons named therein4.12
*(2)
    
    First Amendment to Guaranty, dated April 20, 2005, among Wells Fargo Foothill, Inc., as
Agent, and certain other persons named therein10.1
(2)
    
    Form of Indemnification Agreement10.2
*(1)
    
    Form of Amended and Restated Stock Incentive Plan10.3
*(1)
    
    Form of Stock Option Agreement10.4
*(2)
    
    Offer Letter, dated February 11, 2004, from Modular, L.L.C. to Iain MacKenzie10.5
*(2)
    
    Offer Letter, dated April 13, 2004, from Modular, L.L.C. to Alan Marten10.6
*(2)
    
    Offer Letter, dated April 13, 2004, from Modular, L.L.C. to Wayne Eisenberg10.7
*(2)
    
    Offer Letter, dated April 13, 2004, from Modular, L.L.C. to Michael Rubino10.8
*(2)
    
    Offer Letter, dated February 12, 2004, from Modular, L.L.C. to Jack A. Pacheco10.9
*(2)
    
    USD $40,000,000 Interest Rate Swap Transaction, dated April 26, 2005, between the
Company and Wells Fargo Foothill, Inc.10.10
*(2)
    
    USD $41,250,000 Interest Rate Swap Transaction, dated April 26, 2005, between the
Company and Wells Fargo Foothill, Inc.
  86




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##### Table of Contents



Exhibit No.
    
    Document10.11
    *(2)
    
    ISDA Master Agreement, dated as of April 20, 2005, between Wells Fargo
Foothill, Inc. and SMART Modular Technologies (WWH), Inc.10.12
    *(2)
    
    Lease Agreement, dated April 16, 2004, by and between Solectron USA,
Inc. and SMART Modular Technologies, Inc., as amended (relating to the
property at 4211 Starboard Drive, Fremont, California)10.13
    *(3)
    
    Corporate Purchase Agreement, dated as of May 1, 2001, by Compaq
Computer Corporation and by SMART Modular Technologies, Inc.10.14
    *(4)
    
    Amendment to Corporate Purchase Agreement, dated September 1, 2004,
between SMART Modular Technologies, Inc. and Hewlett-Packard Company10.15
    *(4)
    
    Amendment Number 2 to Corporate Purchase Agreement, dated January 20,
2005, between SMART Modular Technologies, Inc. and Hewlett-Packard
Company10.16
    *(2)
    
    Advisory Agreement, dated April 16, 2004, between SCP Management
Company, L.L.C. and SMART Modular Technologies, Inc.10.17
    *(2)
    
    Letter Amendment, dated June 17, 2005, to Advisory Agreement dated
April 16, 2004, between SCP Management Company, L.L.C. and SMART
Modular Technologies, Inc.10.18
    *(2)
    
    Advisory Agreement, dated April 16, 2004, among SMART Modular
Technologies, Inc., T3 GenPar II, L.P., TPG GenPar III, L.P., and TPG
GenPar IV, L.P.10.19
    *(2)
    
    Advisory Agreement, dated April 16, 2004, between SMART Modular
Technologies, Inc. and Francisco Partners, L.P.10.20
    *(1)
    
    Form of Amendment No. 2 to the Advisory Agreement filed as Exhibit 10.1610.21
    *(1)
    
    Form of Amendment No. 1 to the Advisory Agreement filed as Exhibit 10.1810.22
    *(1)
    
    Form of Amendment No. 1 to the Advisory Agreement filed as Exhibit 10.1910.23
    *(1)
    
    Form of Amended and Restated Indemnification Agreement10.23
    *(5)
    
    Employment Agreement of Iain MacKenzie, dated December 18, 200710.24
    *(6)
    
    Agreement and Plan of Merger, dated February 12, 2008, by and among
Adtron Corporation, SMART Modular Technologies, Inc., and Armor
Acquisition Corporation (Merger Sub) and Alan Fitzgerald (Equity
Holders Representative)10.25
    *(7)
    
    Consulting Agreement, effective as of April 30, 2008, between SMART
Modular Technologies (WWH), Inc. and FLG Partners, LLC10.26
    *(8)
    
    Employment Agreement of Barry Zwarenstein, dated July 19, 200810.27
    *(9)
    
    SMART Modular Technologies, Inc. 2009 RSU Time-based Agreement10.28
    *(9)
    
    SMART Modular Technologies, Inc. 2009 Performance-based Agreement10.29
    *(10)
    
    First Amendment to Second Amended and Restated Loan and Security
Agreement dated November 26, 200810.30
    *(11)
    
    Lease Agreement, dated March 18, 2009, by and between Newark Eureka
Industrial Capital LLC and Smart Modular Technologies, Inc.10.31
    *(12)
    
    Second Amendment to Second Amended and Restated Loan and Security
Agreement, dated August 14, 2009.10.32
    *(13)
    
    Termination Agreement dated September 11, 2009, by and among Smart
Modular Technologies (WWH), Inc. and certain Shareholders named
therein.14.1
    *(14)
    
    SMART Modular Technologies Code of Ethics for Officers and Directors21.1
    
    
    Subsidiaries of the Company23.1
    
    
    Consent of Independent Registered Public Accounting Firm31.1
    
    
    Certification of Principal Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Principal Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 200232
    
    
    Certification of Principal Executive Officer and Principal Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 *
    
    Incorporated by reference to the Exhibits filed with Amendment No.
1 to the Companys Registration Statement on Form S-1, filed on
November 30, 2005 (File No. 333-129134).*(1)
    
    Incorporated by reference to the Exhibits filed with Amendment No.
3 to the Companys Registration Statement on Form S-1, filed on
January 10, 2006 (File No. 333-129134).  87




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##### Table of Contents



*(2)
    
    Incorporated by reference to the Exhibits filled with the
Companys Registration Statement on Form S-4, filed on August 11,
2005 (File No. 333-127442).*(3)
    
    Incorporated by reference to the Exhibits filed with Amendment No.
2 to the Companys Registration Statement on Form S-1, filed on
December 20, 2005 (File No. 333-129134).*(4)
    
    Incorporated by reference to the Exhibits filed with the Companys
Registration Statement on Form S-1, filed on October 19, 2005
(File No. 333-129134).*(5)
    
    Incorporated by reference to the Exhibit filed with the Companys
Quarterly Report on Form 10-Q, filed on January 4, 2008 (File No.
000-51771)*(6)
    
    Incorporated by reference to the Exhibit filed with the Companys
Quarterly Report on Form 10-Q, filed on April 4, 2008 (File No.
000-51771)*(7)
    
    Incorporated by reference to the Exhibit filed with the Companys
Current Report on Form 8-K, filed on April 30 2008 (File No.
000-51771)*(8)
    
    Incorporated by reference to the Exhibit filed with the Companys
Current Report on Form 8-K, filed on September 10 2008 (File No.
000-51771)*(9)
    
    Incorporated by reference to
the Exhibit filed with the Companys Annual Report on Form 10-K,
filed on November 12, 2008 (File No.
000-51771)*(10)
    
    Incorporated by reference to the Exhibit filed with the Companys
Current Report on Form 8-K, filed on December 3, 2008 (File No.
000-51771)*(11)
    
    Incorporated by reference to the Exhibit filed with the Companys
Quarterly Report on Form 10-Q, filed on April 7, 2009 (File No.
000-51771)*(12)
    
    Incorporated by reference to the Exhibit filed with the Companys
Quarterly Report on Form 10-Q, filed on August 18, 2009 (File No.
000-51771)*(13)
    
    Incorporated by reference to the Exhibit filed with the Companys
Current Report on Form 8-K, filed on September 16, 2009 (File No.
000-51771)*(14)
    
    Incorporated by reference to
the Exhibit filed with the Companys Annual Report on Form 10-K,
filed on November 13, 2007 (File No.
000-51771)  88