##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended February 25, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 000-51771
 SMART MODULAR TECHNOLOGIES (WWH), INC.
  Cayman Islands
    
    20-2509518(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification Number)
 39870 Eureka Drive, Newark, California 94560
 (510) 623-1231
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



SMART MODULAR TECHNOLOGIES (WWH), INC.
 INDEX TO QUARTERLY REPORT
 TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4. Controls and Procedures
    
    
    29PART II. OTHER INFORMATION
    
    
    29Item 1. Legal Proceedings
    
    
    29Item 1A. Risk Factors
    
    
    29Item 6. Exhibits
    
    
    31SIGNATURES
    
    
    32Exhibit 31.1Exhibit 31.2Exhibit 32
   2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 February 25,
    
    
    August 27,2011
    
    
    2010(In thousands, exceptshare data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    134,426
    
    
    $
    115,474Accounts receivable, net of allowances of $1,863 and $1,660 as of
February 25, 2011 and August 27, 2010, respectively
    
    
    184,724
    
    
    
    208,377Inventories
    
    
    96,087
    
    
    
    112,103Prepaid expenses and other current assets
    
    
    29,108
    
    
    
    33,488Total current assets
    
    
    444,345
    
    
    
    469,442Property and equipment, net
    
    
    52,996
    
    
    
    46,221Other non-current assets
    
    
    26,066
    
    
    
    21,217Other intangible assets, net
    
    
    5,980
    
    
    
    6,460Goodwill
    
    
    1,061
    
    
    
    1,061Total assets
    
    $
    530,448
    
    
    $
    544,401LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    118,840
    
    
    $
    151,885Accrued liabilities
    
    
    24,649
    
    
    
    29,318Total current liabilities
    
    
    143,489
    
    
    
    181,203Long-term debt
    
    
    55,072
    
    
    
    55,072Other long-term liabilities
    
    
    6,225
    
    
    
    4,546Total liabilities
    
    
    204,786
    
    
    
    240,821Commitments and contingenciesShareholders equity:Ordinary shares, $0.00016667 par value;
600,000,000 shares authorized; 63,382,037
and 62,740,650 shares issued and outstanding
as of February 25, 2011 and August 27, 2010,
respectively
    
    
    11
    
    
    
    10Additional paid-in capital
    
    
    124,892
    
    
    
    118,123Accumulated other comprehensive income
    
    
    18,832
    
    
    
    11,658Retained earnings
    
    
    181,927
    
    
    
    173,789Total shareholders equity
    
    
    325,662
    
    
    
    303,580Total liabilities and shareholders equity
    
    $
    530,448
    
    
    $
    544,401
   3




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedFebruary 25,
    
    
    February 26,
    
    
    February 25,
    
    
    February 26,2011
    
    
    2010
    
    
    2011
    
    
    2010(In thousands, except per share data)Net sales
    
    $
    170,549
    
    
    $
    160,110
    
    
    $
    386,908
    
    
    $
    283,203Cost of sales (1)
    
    
    142,024
    
    
    
    118,097
    
    
    
    314,374
    
    
    
    212,424Gross profit
    
    
    28,525
    
    
    
    42,013
    
    
    
    72,534
    
    
    
    70,779Operating expenses:Research and development (1)
    
    
    7,852
    
    
    
    5,219
    
    
    
    16,012
    
    
    
    10,949Selling, general and administrative (1)
    
    
    15,169
    
    
    
    14,331
    
    
    
    30,017
    
    
    
    27,697Restructuring charges
    
    
    2,831
    
    
    
    
    
    
    
    2,831
    
    
    
    Technology access charge
    
    
    
    
    
    
    
    
    
    
    7,534
    
    
    
    Total operating expenses
    
    
    25,852
    
    
    
    19,550
    
    
    
    56,394
    
    
    
    38,646Income from operations
    
    
    2,673
    
    
    
    22,463
    
    
    
    16,140
    
    
    
    32,133Interest expense, net
    
    
    (230
    )
    
    
    (1,163
    )
    
    
    (941
    )
    
    
    (2,826
    )Other income, net
    
    
    285
    
    
    
    3,225
    
    
    
    835
    
    
    
    4,517Total other income (expense)
    
    
    55
    
    
    
    2,062
    
    
    
    (106
    )
    
    
    1,691Income before provision for
income taxes
    
    
    2,728
    
    
    
    24,525
    
    
    
    16,034
    
    
    
    33,824Provision for income taxes
    
    
    2,557
    
    
    
    8,433
    
    
    
    7,896
    
    
    
    13,150Net income
    
    $
    171
    
    
    $
    16,092
    
    
    $
    8,138
    
    
    $
    20,674Net income per share, basic
    
    $
    0.00
    
    
    $
    0.26
    
    
    $
    0.13
    
    
    $
    0.33Net income per share, diluted
    
    $
    0.00
    
    
    $
    0.25
    
    
    $
    0.12
    
    
    $
    0.32Shares used in computing net income
per ordinary share
    
    
    63,178
    
    
    
    62,211
    
    
    
    63,039
    
    
    
    62,092Shares used in computing net income
per diluted share
    
    
    66,087
    
    
    
    65,010
    
    
    
    65,923
    
    
    
    64,513(1)   Stock-based compensation by category:Cost of sales
    
    $
    223
    
    
    $
    162
    
    
    $
    461
    
    
    $
    319Research and development
    
    
    398
    
    
    
    307
    
    
    
    784
    
    
    
    604Selling, general and administrative
    
    
    1,627
    
    
    
    1,370
    
    
    
    3,148
    
    
    
    2,562
   4




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedFebruary 25,
    
    
    February 26,
    
    
    February 25,
    
    
    February 26,2011
    
    
    2010
    
    
    2011
    
    
    2010(In thousands)Net income
    
    $
    171
    
    
    $
    16,092
    
    
    $
    8,138
    
    
    $
    20,674Other comprehensive income:Net changes in unrealized
gain or loss on derivative
instruments accounted for
as cash flow hedges
    
    
    
    
    
    
    513
    
    
    
    
    
    
    
    988Foreign currency translation
    
    
    2,630
    
    
    
    (6,465
    )
    
    
    7,174
    
    
    
    (1,094
    )Comprehensive income
    
    $
    2,801
    
    
    $
    10,140
    
    
    $
    15,312
    
    
    $
    20,568
   5




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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Six Months EndedFebruary 25, 2011
    
    
    February 26, 2010(In thousands)Cash flows from operating activities:Net income
    
    $
    8,138
    
    
    $
    20,674Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    11,483
    
    
    
    7,525Stock-based compensation
    
    
    4,393
    
    
    
    3,485Provision for (recovery of) doubtful accounts receivable and sales returns
    
    
    203
    
    
    
    (711
    )Amortization of debt issuance costs
    
    
    199
    
    
    
    722(Gain) loss on sale of assets
    
    
    511
    
    
    
    (3
    )Deferred income tax provision
    
    
    286
    
    
    
    Gain on early repayment of long-term debt
    
    
    
    
    
    
    (1,178
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    24,032
    
    
    
    (50,406
    )Inventories
    
    
    17,085
    
    
    
    (27,825
    )Prepaid expenses and other assets
    
    
    (3,990
    )
    
    
    (4,932
    )Accounts payable
    
    
    (31,042
    )
    
    
    48,317Accrued expenses and other liabilities
    
    
    (2,343
    )
    
    
    9,249Net cash provided by operating activities
    
    
    28,955
    
    
    
    4,917Cash flows from investing activities:Capital expenditures
    
    
    (12,342
    )
    
    
    (7,991
    )Cash deposits on equipment
    
    
    (623
    )
    
    
    (2,107
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    276Net cash used in investing activities
    
    
    (12,965
    )
    
    
    (9,822
    )Cash flows from financing activities:Repayment of long-term debt
    
    
    
    
    
    
    (25,000
    )Proceeds from issuance of ordinary shares from stock option exercises
    
    
    2,377
    
    
    
    663Net cash provided by (used in) financing activities
    
    
    2,377
    
    
    
    (24,337
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    585
    
    
    
    259Net increase (decrease) in cash and cash equivalents
    
    
    18,952
    
    
    
    (28,983
    )Cash and cash equivalents at beginning of period
    
    
    115,474
    
    
    
    147,658Cash and cash equivalents at end of period
    
    $
    134,426
    
    
    $
    118,675Supplemental disclosures of cash flow information:Cash paid during the year:Interest
    
    $
    1,653
    
    
    $
    2,866Taxes
    
    
    11,483
    
    
    
    11,311Non-cash activities information:Change in indemnification receivable and payable for ICMS assessment
    
    $
    1,336
    
    
    $
    Change in fair value of derivative instruments
    
    
    
    
    
    
    (755
    )
   6




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




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Three Months Ended
    
    
    Six Months EndedFebruary 25,
    
    
    February 26,
    
    
    February 25,
    
    
    February 26,2011
    
    
    2010
    
    
    2011
    
    
    2010Service revenue, net
    
    $
    9,586
    
    
    $
    9,790
    
    
    $
    20,072
    
    
    $
    17,742Cost of sales  service (1)
    
    
    252,955
    
    
    
    211,390
    
    
    
    481,323
    
    
    
    364,994Gross billings for services
    
    
    262,541
    
    
    
    221,180
    
    
    
    501,395
    
    
    
    382,736Product net sales
    
    
    160,963
    
    
    
    150,320
    
    
    
    366,836
    
    
    
    265,461Gross billings to customers
    
    $
    423,504
    
    
    $
    371,500
    
    
    $
    868,231
    
    
    $
    648,197Product net sales
    
    $
    160,963
    
    
    $
    150,320
    
    
    $
    366,836
    
    
    $
    265,461Service revenue, net
    
    
    9,586
    
    
    
    9,790
    
    
    
    20,072
    
    
    
    17,742Net sales
    
    $
    170,549
    
    
    $
    160,110
    
    
    $
    386,908
    
    
    $
    283,203
 
 (1)
    
    Represents cost of sales associated with service revenue reported on a net basis. Recent Accounting Pronouncements
  Accounting for Transfers of Financial Assets
(FASB Statement No. 166, Accounting for Transfers of Financial Assets)
 Improvements to Financial Reporting by
Enterprises Involved with Variable Interest Entities (FASB Statement No. 167, Amendments to FASB
Interpretation No. 46 (R))
 Revenue
Recognition (Topic 605)  Multiple-Deliverable Revenue Arrangements Revenue Recognition-Multiple Element
Arrangements
 Software (Topic 985)  Certain Revenue
Arrangements that Include Software Elements Software-Revenue Recognition
  8




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NOTE 2  Stock-Based Compensation
 Compensation  Stock
Compensation
  Stock Options
   Summary of Assumptions and Activity for Stock Options
 .
 Six Months EndedFebruary 25,
    
    
    February 26,2011
    
    
    2010Stock options:Expected term (years)
    
    
    4.7
    
    
    
    4.7Expected volatility
    
    
    81
    %
    
    
    78
    %Risk-free interest rate
    
    
    2.16
    %
    
    
    2.33
    %Expected dividends
    
    
    
    
    
    
    
  9




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WeightedAverageWeighted
    
    
    RemainingAverage
    
    
    Contractual
    
    
    AggregateExercise
    
    
    Term
    
    
    IntrinsicShares
    
    
    Price
    
    
    (Years)
    
    
    ValueOptions outstanding at August 27, 2010
    
    
    8,434
    
    
    $
    4.39Options granted
    
    
    892
    
    
    
    6.34Options exercised
    
    
    (571
    )
    
    
    4.16Options forfeited and cancelled
    
    
    (327
    )
    
    
    6.70Options outstanding at February 25, 2011
    
    
    8,428
    
    
    $
    4.52
    
    
    
    6.56
    
    
    $
    23,193Options exercisable at February 25, 2011
    
    
    5,000
    
    
    $
    4.03
    
    
    
    5.51
    
    
    $
    16,746Options vested and expected to vest at February 25, 2011
    
    
    8,140
    
    
    $
    4.47
    
    
    
    6.47
    
    
    $
    22,807
   WeightedAverageGrant Date FairShares
    
    
    Value Per ShareNon-vested stock options at August 27, 2010
    
    
    3,739
    
    
    $
    2.61Stock options granted
    
    
    892
    
    
    $
    3.86Vested stock options
    
    
    (877
    )
    
    $
    2.16Forfeited and cancelled stock options
    
    
    (327
    )
    
    $
    3.89Non-vested stock options at February 25, 2011
    
    
    3,428
    
    
    $
    2.93
  Restricted Share Units (RSUs)
       10




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WeightedAverage
    
    
    AggregateGrant Date
    
    
    IntrinsicShares
    
    
    FairValue
    
    
    ValueAwards outstanding at August 27, 2010
    
    
    1,153
    
    
    $
    5.25Awards granted
    
    
    895
    
    
    
    7.01Awards vested
    
    
    (70
    )
    
    
    5.09Awards forfeited and cancelled
    
    
    (42
    )
    
    
    6.43Awards outstanding at February 25, 2011
    
    
    1,936
    
    
    $
    6.42
    
    
    $
    13,650
   NOTE 3  Goodwill and Other Intangible Assets, net
 Intangibles  Goodwill and Other
  Property,
Plant and Equipment
  Weighted
    
    
    Value at
    
    
    As of February 25, 2011
    
    
    As of August 27, 2010Avg. Life
    
    
    Date of
    
    
    Accumulated
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying(years)
    
    
    Acquisition
    
    
    Amortization
    
    
    Value
    
    
    Amortization
    
    
    ValueAmortized intangible assets:Customer relationships
    
    
    10
    
    
    $
    3,700
    
    
    $
    1,110
    
    
    $
    2,590
    
    
    $
    925
    
    
    $
    2,775Technology
    
    
    7
    
    
    
    2,800
    
    
    
    1,200
    
    
    
    1,600
    
    
    
    1,000
    
    
    
    1,800Company trade name
    
    
    20
    
    
    
    2,040
    
    
    
    306
    
    
    
    1,734
    
    
    
    255
    
    
    
    1,785Leasehold interest
    
    
    3
    
    
    
    260
    
    
    
    244
    
    
    
    16
    
    
    
    203
    
    
    
    57Product names
    
    
    9
    
    
    
    60
    
    
    
    20
    
    
    
    40
    
    
    
    17
    
    
    
    43Total
    
    
    
    
    
    $
    8,860
    
    
    $
    2,880
    
    
    $
    5,980
    
    
    $
    2,400
    
    
    $
    6,460
   11




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##### Table of Contents



Fiscal Year:
    
    AmountRemainder of fiscal 2011
    
    $
    4552012
    
    
    8792013
    
    
    8792014
    
    
    8792015
    
    
    678Thereafter
    
    
    2,210Total
    
    $
    5,980
 NOTE 4  Net Income Per Share
   Three Months Ended
    
    
    Six Months EndedFebruary 25,
    
    
    February 26,
    
    
    February 25,
    
    
    February 26,2011
    
    
    2010
    
    
    2011
    
    
    2010Numerator:Net income
    
    $
    171
    
    
    $
    16,092
    
    
    $
    8,138
    
    
    $
    20,674Denominator:Weighted average ordinary shares, basic
    
    
    63,178
    
    
    
    62,211
    
    
    
    63,039
    
    
    
    62,092Effect of dilutive securities:Stock options and RSUs
    
    
    2,909
    
    
    
    2,799
    
    
    
    2,884
    
    
    
    2,421Weighted average ordinary shares, diluted
    
    
    66,087
    
    
    
    65,010
    
    
    
    65,923
    
    
    
    64,513Net income per ordinary share, basic
    
    $
    0.00
    
    
    $
    0.26
    
    
    $
    0.13
    
    
    $
    0.33Net income per ordinary share, diluted
    
    $
    0.00
    
    
    $
    0.25
    
    
    $
    0.12
    
    
    $
    0.32
  NOTE 5  Balance Sheet Details
 Inventories
  February 25,
    
    
    August 27,2011
    
    
    2010Raw materials
    
    $
    38,243
    
    
    $
    44,180Work-in-process
    
    
    8,552
    
    
    
    13,309Finished goods
    
    
    49,292
    
    
    
    54,614Total inventories *
    
    $
    96,087
    
    
    $
    112,103
 
 *
    
    As of February 25, 2011 and August 27, 2010, inventory held under service
arrangements was approximately 46% and 41% of total inventories, respectively, and
is primarily classified as finished goods.  12




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Prepaid Expenses and Other Current Assets
  February 25,
    
    
    August 27,2011
    
    
    2010Prepaid ICMS taxes in Brazil *
    
    $
    3,958
    
    
    $
    11,277Indemnification receivable for ICMS assessment *
    
    
    4,473
    
    
    
    4,115Prepayment for property and equipment taxes
    
    
    2,393
    
    
    
    2,122Unbilled receivables
    
    
    7,515
    
    
    
    6,182Receivable from subcontractors
    
    
    2,228
    
    
    
    3,594Deferred and other income taxes
    
    
    897
    
    
    
    1,197Other prepaid expenses and other current assets
    
    
    7,644
    
    
    
    5,001Total prepaid expenses and other current assets
    
    $
    29,108
    
    
    $
    33,488
 
 *
    
    See Note 9  Commitments and Contingencies. Property and Equipment, net
  February 25,
    
    
    August 27,2011
    
    
    2010Office furniture, software, computers, and equipment
    
    $
    6,774
    
    
    $
    5,751Manufacturing equipment
    
    
    90,517
    
    
    
    78,901Leasehold improvements
    
    
    19,280
    
    
    
    18,317116,571
    
    
    
    102,969Less accumulated depreciation and amortization
    
    
    63,575
    
    
    
    56,748Property and equipment, net
    
    $
    52,996
    
    
    $
    46,221
  Other Non-Current Assets
  February 25,
    
    
    August 27,2011
    
    
    2010Prepaid ICMS taxes in Brazil *
    
    $
    12,194
    
    
    $
    6,358Judicial deposit and indemnification receivable related to Brazil ICMS assessment *
    
    
    5,809
    
    
    
    4,115Prepayment for property and equipment taxes
    
    
    4,487
    
    
    
    4,114Deposits on property and equipment
    
    
    623
    
    
    
    3,076Other
    
    
    2,953
    
    
    
    3,554Total other non-current assets
    
    $
    26,066
    
    
    $
    21,217
 
 *
    
    See Note 9  Commitments and Contingencies.  13




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Accrued Liabilities
  February 25,
    
    
    August 27,2011
    
    
    2010Accrued employee compensation
    
    $
    7,891
    
    
    $
    15,406VAT and other transaction taxes payable
    
    
    5,210
    
    
    
    5,966Accrued restructuring
    
    
    2,831
    
    
    
    Accrued warranty reserve
    
    
    1,097
    
    
    
    732Income taxes payable
    
    
    788
    
    
    
    3,145Other accrued liabilities
    
    
    6,832
    
    
    
    4,069Total accrued liabilities
    
    $
    24,649
    
    
    $
    29,318
 NOTE 6  Income Taxes
  Three Months Ended
    
    
    Six Months EndedFebruary 25,
    
    
    February 26,
    
    
    February 25,
    
    
    February 26,2011
    
    
    2010
    
    
    2011
    
    
    2010Current
    
    $
    2,409
    
    
    $
    8,443
    
    
    $
    7,610
    
    
    $
    13,171Deferred
    
    
    148
    
    
    
    (10
    )
    
    
    286
    
    
    
    (21
    )Total
    
    $
    2,557
    
    
    $
    8,433
    
    
    $
    7,896
    
    
    $
    13,150
  Three Months Ended
    
    
    Six Months EndedFebruary 25,
    
    
    February 26,
    
    
    February 25,
    
    
    February 26,2011
    
    
    2010
    
    
    2011
    
    
    2010U.S. loss
    
    $
    (6,108
    )
    
    $
    (1,731
    )
    
    $
    (18,495
    )
    
    $
    (5,994
    )Non-U.S. income
    
    
    8,836
    
    
    
    26,256
    
    
    
    34,529
    
    
    
    39,818Total
    
    $
    2,728
    
    
    $
    24,525
    
    
    $
    16,034
    
    
    $
    33,824
      14




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NOTE 7  Indebtedness
     NOTE 8  Fair Value Measurements
 Fair Value Measurements and Disclosures,
   15




---



##### Table of Contents




    
    Level 1. Valuations based on quoted prices in active markets for identical assets or
liabilities that an entity has the ability to access. The Companys Level 1 assets include
money market funds and certificates of deposit that are classified as cash equivalents.
 
    
    Level 2.Valuations based on quoted prices for similar assets or liabilities, quoted prices
for identical assets or liabilities in markets that are not active, or other inputs that are
observable or can be corroborated by observable data for substantially the full term of the
assets and liabilities. The Company does not have any assets or liabilities measured under
Level 2.
 
    
    Level 3. Valuations based on inputs that are supported by little or no market activity and
that are significant to the fair value of the assets or liabilities. The Company does not
have any assets or liabilities measured under Level 3.
  Quoted Prices in
    
    
    Observable/Active Markets
    
    
    Unobservablefor Identical
    
    
    Inputs
    
    
    SignificantAssets or
    
    
    Corroborated by
    
    
    UnobservableLiabilities
    
    
    Market Data
    
    
    InputsLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalBalances as of February 25, 2011:Assets:Cash
    
    $
    76.8
    
    
    $
    
    
    
    $
    
    
    
    $
    76.8Money market funds
    
    
    54.6
    
    
    
    
    
    
    
    
    
    
    
    54.6Certificates of deposit
    
    
    3.0
    
    
    
    
    
    
    
    
    
    
    
    3.0Total assets measured at fair value (1)
    
    $
    134.4
    
    
    $
    
    
    
    $
    
    
    
    $
    134.4Balances as of August 27, 2010:Assets:Cash
    
    $
    45.7
    
    
    $
    
    
    
    $
    
    
    
    $
    45.7Money market funds
    
    
    69.8
    
    
    
    
    
    
    
    
    
    
    
    69.8Total assets measured at fair value (1)
    
    $
    115.5
    
    
    $
    
    
    
    $
    
    
    
    $
    115.5
 
 (1)
    
    Included in cash and cash equivalents on the Companys condensed consolidated balance sheets. NOTE 9  Commitments and Contingencies
 Product Warranty and Indemnities
   Six Months EndedFebruary 25,2011Balance of accrual at August 27, 2010
    
    $
    732Settlement of warranty claims
    
    
    (489
    )Provision for product warranties
    
    
    854Balance of accrual at February 25, 2011
    
    $
    1,097
    16




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##### Table of Contents



Technology Access and Development Agreements
   Legal Matters
  Tessera
    Creative Mobile Technologies
   17




---



##### Table of Contents



Contingencies
 Brazil ICMS Assessment
   Prepaid ICMS Taxes in Brazil
    18




---



##### Table of Contents



NOTE 10  Segment and Geographic Information
   Three Months Ended
    
    
    Six Months EndedFebruary 25,
    
    
    February 26,
    
    
    February 25,
    
    
    February 26,2011
    
    
    2010
    
    
    2011
    
    
    2010Geographic net sales:U.S.
    
    $
    38,813
    
    
    $
    47,950
    
    
    $
    87,026
    
    
    $
    91,054Brazil
    
    
    82,821
    
    
    
    66,668
    
    
    
    202,229
    
    
    
    110,673Asia
    
    
    38,861
    
    
    
    30,984
    
    
    
    76,307
    
    
    
    55,876Europe
    
    
    5,554
    
    
    
    9,832
    
    
    
    12,102
    
    
    
    18,462Other Americas
    
    
    4,500
    
    
    
    4,676
    
    
    
    9,244
    
    
    
    7,138$
    170,549
    
    
    $
    160,110
    
    
    $
    386,908
    
    
    $
    283,203
 February 25,
    
    
    August 27,2011
    
    
    2010Property and equipment, net:U.S.
    
    $
    6,300
    
    
    $
    6,298Brazil
    
    
    38,788
    
    
    
    32,175Malaysia
    
    
    7,712
    
    
    
    7,705Other
    
    
    196
    
    
    
    43$
    52,996
    
    
    $
    46,221
 NOTE 11  Major Customers
  Percent of Net SalesThree Months Ended
    
    
    Six Months EndedFebruary 25,
    
    
    February 26,
    
    
    February 25,
    
    
    February 26,2011
    
    
    2010
    
    
    2011
    
    
    2010Customer A
    
    
    21
    %
    
    
    22
    %
    
    
    21
    %
    
    
    22
    %Customer B
    
    
    14
    %
    
    
    18
    %
    
    
    14
    %
    
    
    18
    %Customer C
    
    
    17
    %
    
    
    13
    %
    
    
    17
    %
    
    
    12
    %
   19




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##### Table of Contents



NOTE 12  Restructuring
   Severance andBenefits
    
    
    TotalAccrual as of August 27, 2010
    
    $
    
    
    
    $
    Restructuring charges
    
    
    2,831
    
    
    
    2,831Payments
    
    
    
    
    
    
    Accrual as of February 25, 2011
    
    $
    2,831
    
    
    $
    2,831
  NOTE 13  Other Income, net
  Three Months Ended
    
    
    Six Months EndedFebruary 25,
    
    
    February 26,
    
    
    February 25,
    
    
    February 26,2011
    
    
    2010
    
    
    2011
    
    
    2010Foreign currency gains (losses)
    
    $
    (45
    )
    
    $
    2
    
    
    $
    88
    
    
    $
    (48
    )Gain on legal settlement*
    
    
    
    
    
    
    3,044
    
    
    
    
    
    
    
    3,044Gain on early repayment of long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,178Other
    
    
    330
    
    
    
    179
    
    
    
    747
    
    
    
    343Total other income, net
    
    $
    285
    
    
    $
    3,225
    
    
    $
    835
    
    
    $
    4,517
 
 *
    
    In December 2009, the Company received this settlement as a non-active
participant, class member in a class action against certain component suppliers
initiated in 2002. 
 Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    20




---



##### Table of Contents



Overview
        21




---



##### Table of Contents



Key Business Metrics
  Net Sales
  Cost of Sales
  Research and Development Expenses
  Selling, General and Administrative Expenses
  Critical Accounting Policies
   Revenue Recognition
    22




---



##### Table of Contents



Three Months Ended
    
    
    Six Months EndedFebruary 25,
    
    
    February 26,
    
    
    February 25,
    
    
    February 26,2011
    
    
    2010
    
    
    2011
    
    
    2010Service revenue, net
    
    $
    9,586
    
    
    $
    9,790
    
    
    $
    20,072
    
    
    $
    17,742Cost of sales  service (1)
    
    
    252,955
    
    
    
    211,390
    
    
    
    481,323
    
    
    
    364,994Gross billings for services
    
    
    262,541
    
    
    
    221,180
    
    
    
    501,395
    
    
    
    382,736Product net sales
    
    
    160,963
    
    
    
    150,320
    
    
    
    366,836
    
    
    
    265,461Gross billings to customers
    
    $
    423,504
    
    
    $
    371,500
    
    
    $
    868,231
    
    
    $
    648,197Product net sales
    
    $
    160,963
    
    
    $
    150,320
    
    
    $
    366,836
    
    
    $
    265,461Service revenue, net
    
    
    9,586
    
    
    
    9,790
    
    
    
    20,072
    
    
    
    17,742Net sales
    
    $
    170,549
    
    
    $
    160,110
    
    
    $
    386,908
    
    
    $
    283,203
 
 (1)
    
    Represents cost of sales associated with service revenue reported on a net
basis. Accounts Receivable
   Inventory Valuation
  Income Taxes
    23




---



##### Table of Contents



Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed
  Stock-Based Compensation
 Compensation  Stock Compensation
 Results of Operations
  Three Months Ended(1)
    
    
    Six Months Ended(1)February 25,
    
    
    % of
    
    
    February 26,
    
    
    % of
    
    
    February 25,
    
    
    % of
    
    
    February 26,
    
    
    % of2011
    
    
    sales
    
    
    2010
    
    
    sales
    
    
    2011
    
    
    sales
    
    
    2010
    
    
    salesNet sales
    
    $
    170.5
    
    
    
    100
    %
    
    $
    160.1
    
    
    
    100
    %
    
    $
    386.9
    
    
    
    100
    %
    
    $
    283.2
    
    
    
    100
    %Cost of sales
    
    
    142.0
    
    
    
    83
    %
    
    
    118.1
    
    
    
    74
    %
    
    
    314.4
    
    
    
    81
    %
    
    
    212.4
    
    
    
    75
    %Gross profit
    
    
    28.5
    
    
    
    17
    %
    
    
    42.0
    
    
    
    26
    %
    
    
    72.5
    
    
    
    19
    %
    
    
    70.8
    
    
    
    25
    %Research and development
    
    
    7.9
    
    
    
    5
    %
    
    
    5.2
    
    
    
    3
    %
    
    
    16.0
    
    
    
    4
    %
    
    
    10.9
    
    
    
    4
    %Selling, general and administrative
    
    
    15.2
    
    
    
    9
    %
    
    
    14.3
    
    
    
    9
    %
    
    
    30.0
    
    
    
    8
    %
    
    
    27.7
    
    
    
    10
    %Restructuring charges
    
    
    2.8
    
    
    
    2
    %
    
    
    
    
    
    
    
    
    
    
    2.8
    
    
    
    1
    %
    
    
    
    
    
    
    Technology access charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.5
    
    
    
    2
    %
    
    
    
    
    
    
    Total operating expenses
    
    
    25.9
    
    
    
    15
    %
    
    
    19.6
    
    
    
    12
    %
    
    
    56.4
    
    
    
    15
    %
    
    
    38.6
    
    
    
    14
    %Income from operations
    
    
    2.7
    
    
    
    2
    %
    
    
    22.5
    
    
    
    14
    %
    
    
    16.1
    
    
    
    4
    %
    
    
    32.1
    
    
    
    11
    %Interest expense, net
    
    
    (0.2
    )
    
    
    0
    %
    
    
    (1.2
    )
    
    
    -1
    %
    
    
    (0.9
    )
    
    
    0
    %
    
    
    (2.8
    )
    
    
    -1
    %Other income, net
    
    
    0.3
    
    
    
    0
    %
    
    
    3.2
    
    
    
    2
    %
    
    
    0.8
    
    
    
    0
    %
    
    
    4.5
    
    
    
    2
    %Total other income (expense)
    
    
    0.1
    
    
    
    0
    %
    
    
    2.1
    
    
    
    1
    %
    
    
    (0.1
    )
    
    
    0
    %
    
    
    1.7
    
    
    
    1
    %Income before provision for income taxes
    
    
    2.7
    
    
    
    2
    %
    
    
    24.5
    
    
    
    15
    %
    
    
    16.0
    
    
    
    4
    %
    
    
    33.8
    
    
    
    12
    %Provision for income taxes
    
    
    2.6
    
    
    
    1
    %
    
    
    8.4
    
    
    
    5
    %
    
    
    7.9
    
    
    
    2
    %
    
    
    13.2
    
    
    
    5
    %Net income
    
    $
    0.2
    
    
    
    0
    %
    
    $
    16.1
    
    
    
    10
    %
    
    $
    8.1
    
    
    
    2
    %
    
    $
    20.7
    
    
    
    7
    %
 
 (1)
    
    Summations may not compute precisely due to rounding.  24




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##### Table of Contents



Three and Six Months Ended February 25, 2011 as Compared to the Three and Six Months
Ended February 26, 2010
 Net Sales
  Cost of Sales
   Gross Profit
   Research and Development Expenses
  Selling, General and Administrative Expenses
    25




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##### Table of Contents



Restructuring Charges
  Technology Access Charge
  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).
  26




---



##### Table of Contents



Senior Secured Revolving Line of Credit Facility.
 Capital Expenditures
  Sources and Uses of Funds
      Historical Trends
   27




---



##### Table of Contents



Cash Flows from Operating Activities.
  Cash Flows from Investing Activities . .
 Cash Flows from Financing Activities .
 Contractual Obligations
  Off-Balance Sheet Arrangements
   Inflation
  Recent Accounting Pronouncements
   28




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##### Table of Contents



Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
  Foreign Exchange Risks
  Interest Rate Risk
  
 Item 4.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
 Changes in Internal Control Over Financial Reporting
 
 PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
  Worldwide political conditions, civil unrest, armed conflicts and threats of terrorist attacks may
adversely affect our business, the cost of and demand for our products and our results of
operations.
   29




---



##### Table of Contents



Natural disasters in certain regions could adversely affect our supply chain which, in turn, could
have a negative impact on our business, the cost of and demand for our products and our results of
operations.
  Our dependence on a small number of sole or limited source suppliers and technology partners
subjects us to certain risks and our results of operations would be materially and adversely
affected if we are unable to obtain adequate supplies and technology development in a timely
manner.
     30




---



##### Table of Contents



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 material adverse impact on our competitiveness, our results of operations
and our financial condition.
    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, reducing the
competitiveness of our supplier base and/or increasing the competitive advantages of our
competitors.
    
 Item 6.
    
    Exhibits
  Exhibit No.
    
    Exhibit Title31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or
15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or
15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 200232
    
    
    Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
  31




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##### Table of Contents



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

(Principal Executive Officer)By:
    /s/ BARRY ZWARENSTEINName:
    Barry ZwarensteinTitle:
    Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)Date: April 1, 2011  32




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Exhibit Title31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or
15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or
15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 200232
    
    
    Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
  33