##### 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 November 26, 2010
 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
    
    
    28Item 4. Controls and Procedures
    
    
    28PART II. OTHER INFORMATION
    
    
    28Item 1. Legal Proceedings
    
    
    28Item 1A. Risk Factors
    
    
    28Item 6. Exhibits
    
    
    29SIGNATURES
    
    
    30Exhibit 10.38Exhibit 10.39Exhibit 10.40Exhibit 10.41Exhibit 10.42Exhibit 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)
 November 26,
    
    
    August 27,2010
    
    
    2010(In thousands, exceptshare data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    92,944
    
    
    $
    115,474Accounts receivable, net of allowances
of $1,773 and $1,660 as of November 26,
2010 and August 27, 2010, respectively
    
    
    178,887
    
    
    
    208,377Inventories
    
    
    103,464
    
    
    
    112,103Prepaid expenses and other current assets
    
    
    22,325
    
    
    
    33,488Total current assets
    
    
    397,620
    
    
    
    469,442Property and equipment, net
    
    
    49,179
    
    
    
    46,221Other non-current assets
    
    
    27,838
    
    
    
    21,217Other intangible assets, net
    
    
    6,220
    
    
    
    6,460Goodwill
    
    
    1,061
    
    
    
    1,061Total assets
    
    $
    481,918
    
    
    $
    544,401LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    81,681
    
    
    $
    151,885Accrued liabilities
    
    
    21,178
    
    
    
    29,318Total current liabilities
    
    
    102,859
    
    
    
    181,203Long-term debt
    
    
    55,072
    
    
    
    55,072Other long-term liabilities
    
    
    4,749
    
    
    
    4,546Total liabilities
    
    
    162,680
    
    
    
    240,821Commitments and contingenciesShareholders equity:Ordinary shares, $0.00016667 par value;
600,000,000 shares authorized; 63,090,207 and
62,740,650 shares issued and outstanding as of
November 26, 2010 and August 27, 2010,
respectively
    
    
    11
    
    
    
    10Additional paid-in capital
    
    
    121,269
    
    
    
    118,123Accumulated other comprehensive income
    
    
    16,202
    
    
    
    11,658Retained earnings
    
    
    181,756
    
    
    
    173,789Total shareholders equity
    
    
    319,238
    
    
    
    303,580Total liabilities and shareholders equity
    
    $
    481,918
    
    
    $
    544,401
   3




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##### Table of Contents



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

(Unaudited)
 Three Months EndedNovember 26,
    
    
    November 27,2010
    
    
    2009(In thousands, except per share data)Net sales
    
    $
    216,359
    
    
    $
    123,093Cost of sales (1)
    
    
    172,350
    
    
    
    94,327Gross profit
    
    
    44,009
    
    
    
    28,766Operating expenses:Research and development (1)
    
    
    8,160
    
    
    
    5,730Selling, general and administrative (1)
    
    
    14,848
    
    
    
    13,366Technology access charge
    
    
    7,534
    
    
    
    Total operating expenses
    
    
    30,542
    
    
    
    19,096Income from operations
    
    
    13,467
    
    
    
    9,670Interest expense, net
    
    
    (711
    )
    
    
    (1,663
    )Other income, net
    
    
    550
    
    
    
    1,292Total other expense
    
    
    (161
    )
    
    
    (371
    )Income before provision for income taxes
    
    
    13,306
    
    
    
    9,299Provision for income taxes
    
    
    5,339
    
    
    
    4,717Net income
    
    $
    7,967
    
    
    $
    4,582Net income per share, basic
    
    $
    0.13
    
    
    $
    0.07Net income per share, diluted
    
    $
    0.12
    
    
    $
    0.07Shares used in computing basic net income
per share
    
    
    62,899
    
    
    
    61,974Shares used in computing diluted net income per share
    
    
    65,760
    
    
    
    64,016(1)    Stock-based compensation by category:Cost of sales
    
    $
    238
    
    
    $
    157Research and development
    
    
    386
    
    
    
    297Selling, general and administrative
    
    
    1,521
    
    
    
    1,192
   4




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##### Table of Contents



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

(Unaudited)
 Three Months EndedNovember 26,
    
    
    November 27,2010
    
    
    2009(In thousands)Net income
    
    $
    7,967
    
    
    $
    4,582Other comprehensive income:Net changes in unrealized gain or loss on
derivative instruments accounted for as
cash flow hedges
    
    
    
    
    
    
    475Foreign currency translation
    
    
    4,544
    
    
    
    5,371Comprehensive income
    
    $
    12,511
    
    
    $
    10,428
   5




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##### Table of Contents



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

(Unaudited)
 Three Months EndedNovember 26,
    
    
    November 27,2010
    
    
    2009(In thousands)Cash flows from operating activities:Net income
    
    $
    7,967
    
    
    $
    4,582Adjustments to reconcile net income to net cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    5,898
    
    
    
    3,615Stock-based compensation
    
    
    2,145
    
    
    
    1,646Provision for doubtful accounts receivable and sales returns
    
    
    113
    
    
    
    92Amortization of debt issuance costs
    
    
    99
    
    
    
    550(Gain) loss on sale of assets
    
    
    508
    
    
    
    (35
    )Deferred income tax provision
    
    
    151
    
    
    
    Gain on early repayment of long-term debt
    
    
    
    
    
    
    (1,178
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    29,377
    
    
    
    4,650Inventories
    
    
    9,328
    
    
    
    (14,580
    )Prepaid expenses and other assets
    
    
    4,062
    
    
    
    (2,676
    )Accounts payable
    
    
    (68,382
    )
    
    
    8,089Accrued expenses and other liabilities
    
    
    (7,447
    )
    
    
    2,948Net changes in operating assets and liabilities
    
    
    (33,062
    )
    
    
    (1,569
    )Net cash provided by (used in) operating activities
    
    
    (16,181
    )
    
    
    7,703Cash flows from investing activities:Capital expenditures
    
    
    (8,228
    )
    
    
    (1,410
    )Cash deposits on equipment
    
    
    691
    
    
    
    (1,630
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    145Net cash used in investing activities
    
    
    (7,537
    )
    
    
    (2,895
    )Cash flows from financing activities:Repayment of long-term debt
    
    
    
    
    
    
    (25,000
    )Proceeds from issuance of ordinary shares from stock option
exercises
    
    
    1,002
    
    
    
    218Net cash provided by (used in) financing activities
    
    
    1,002
    
    
    
    (24,782
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    186
    
    
    
    1,418Net decrease in cash and cash equivalents
    
    
    (22,530
    )
    
    
    (18,556
    )Cash and cash equivalents at beginning of period
    
    
    115,474
    
    
    
    147,658Cash and cash equivalents at end of period
    
    $
    92,944
    
    
    $
    129,102Supplemental disclosures of cash flow information:Cash paid during the period:Interest
    
    $
    841
    
    
    $
    1,648Taxes
    
    
    8,687
    
    
    
    4,081Non-cash activities information:Change in fair value of derivative instruments
    
    $
    
    
    
    $
    (350
    )
  
  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 EndedNovember 26,
    
    
    November 27,2010
    
    
    2009Service revenue, net
    
    $
    10,486
    
    
    $
    7,952Cost of sales  service (1)
    
    
    228,368
    
    
    
    153,604Gross billings for services
    
    
    238,854
    
    
    
    161,556Product net sales
    
    
    205,873
    
    
    
    115,141Gross billings to customers
    
    $
    444,727
    
    
    $
    276,697Product net sales
    
    $
    205,873
    
    
    $
    115,141Service revenue, net
    
    
    10,486
    
    
    
    7,952Net sales
    
    $
    216,359
    
    
    $
    123,093
 
 (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
   Option Exchange
    Summary of Assumptions and Activity for Stock Options
 .
 Three Months EndedNovember 26,
    
    
    November 27,2010
    
    
    2009Stock options:Expected term (years)
    
    
    4.7
    
    
    
    4.7Expected volatility
    
    
    76
    %
    
    
    70
    %Risk-free interest rate
    
    
    1.53
    %
    
    
    2.11
    %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
    
    
    789
    
    
    
    6.31Options exercised
    
    
    (280
    )
    
    
    3.58Options forfeited and cancelled
    
    
    (167
    )
    
    
    6.22Options outstanding at November 26, 2010
    
    
    8,776
    
    
    $
    4.55
    
    
    
    6.9
    
    
    $
    14,946Options exercisable at November 26, 2010
    
    
    4,875
    
    
    $
    4.04
    
    
    
    5.7
    
    
    $
    11,449Options vested and expected to vest at
November 26, 2010
    
    
    8,432
    
    
    $
    4.50
    
    
    
    6.8
    
    
    $
    14,758
   WeightedAverageGrant Date FairShares
    
    
    Value Per ShareNon-vested stock options at August 27, 2010
    
    
    3,739
    
    
    $
    2.61Stock options granted
    
    
    789
    
    
    $
    3.82Vested stock options
    
    
    (460
    )
    
    $
    2.28Forfeited and cancelled stock options
    
    
    (167
    )
    
    $
    3.42Non-vested stock options at November 26, 2010
    
    
    3,901
    
    
    $
    2.86
  Restricted Share Units (RSUs)
       10




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WeightedAverage
    
    
    AggregateGrant Date Fair
    
    
    IntrinsicShares
    
    
    Value
    
    
    ValueAwards outstanding at August 27, 2010
    
    
    1,153
    
    
    $
    5.25Awards granted
    
    
    862
    
    
    
    7.05Awards vested
    
    
    (70
    )
    
    
    5.09Awards forfeited and cancelled
    
    
    (21
    )
    
    
    6.31Awards outstanding at November 26, 2010
    
    
    1,924
    
    
    $
    6.09
    
    
    $
    11,027
   NOTE 3  Goodwill and Other Intangible Assets, net
 Intangibles  Goodwill and Other
  Property,
Plant and Equipment
  As of November 26, 2010
    
    
    As of August 27, 2010Weighted
    
    
    Value atAvg. Life
    
    
    Date of
    
    
    Accumulated
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying(years)
    
    
    Acquisition
    
    
    Amortization
    
    
    Value
    
    
    Amortization
    
    
    ValueAmortized intangible
assets:Customer relationships
    
    
    10
    
    
    $
    3,700
    
    
    $
    1,018
    
    
    $
    2,682
    
    
    $
    925
    
    
    $
    2,775Technology
    
    
    7
    
    
    
    2,800
    
    
    
    1,100
    
    
    
    1,700
    
    
    
    1,000
    
    
    
    1,800Company trade name
    
    
    20
    
    
    
    2,040
    
    
    
    281
    
    
    
    1,759
    
    
    
    255
    
    
    
    1,785Leasehold interest
    
    
    3
    
    
    
    260
    
    
    
    223
    
    
    
    37
    
    
    
    203
    
    
    
    57Product names
    
    
    9
    
    
    
    60
    
    
    
    18
    
    
    
    42
    
    
    
    17
    
    
    
    43Total
    
    
    
    
    
    $
    8,860
    
    
    $
    2,640
    
    
    $
    6,220
    
    
    $
    2,400
    
    
    $
    6,460
   11




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Fiscal Year:
    
    AmountRemainder of fiscal 2011
    
    $
    6952012
    
    
    8792013
    
    
    8792014
    
    
    8792015
    
    
    678Thereafter
    
    
    2,210Total
    
    $
    6,220
 NOTE 4  Net Income Per Share
   Three Months EndedNovember 26,
    
    
    November 27,2010
    
    
    2009Numerator:Net income
    
    $
    7,967
    
    
    $
    4,582Denominator:Weighted average ordinary shares, basic
    
    
    62,899
    
    
    
    61,974Effect of dilutive securities:Stock options and RSUs
    
    
    2,861
    
    
    
    2,042Weighted average ordinary shares, diluted
    
    
    65,760
    
    
    
    64,016Net income per ordinary share, basic
    
    $
    0.13
    
    
    $
    0.07Net income per ordinary share, diluted
    
    $
    0.12
    
    
    $
    0.07
  NOTE 5  Balance Sheet Details
 Inventories
  November 26,
    
    
    August 27,2010
    
    
    2010Raw materials
    
    $
    38,518
    
    
    $
    44,180Work-in-process
    
    
    16,577
    
    
    
    13,309Finished goods
    
    
    48,369
    
    
    
    54,614Total inventories *
    
    $
    103,464
    
    
    $
    112,103
 
 *
    
    As of November 26, 2010 and August 27, 2010, 41% of total inventories
represented inventory held under service arrangements.  12




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Prepaid Expenses and Other Current Assets
  November 26,
    
    
    August 27,2010
    
    
    2010Prepaid ICMS taxes in Brazil *
    
    $
    2,708
    
    
    $
    11,277Indemnification receivable for ICMS assessment *
    
    
    4,325
    
    
    
    4,115Prepayment for property and equipment taxes
    
    
    2,585
    
    
    
    2,122Unbilled receivables
    
    
    5,300
    
    
    
    6,182Receivable from subcontractor
    
    
    1,745
    
    
    
    3,594Deferred and other income taxes
    
    
    1,117
    
    
    
    1,197Other prepaid expenses and other current assets
    
    
    4,545
    
    
    
    5,001Total prepaid expenses and other current assets
    
    $
    22,325
    
    
    $
    33,488
 
 *
    
    See Note 9  Commitments and Contingencies. Property and Equipment, net
  November 26,
    
    
    August 27,2010
    
    
    2010Office furniture, software, computers, and equipment
    
    $
    5,703
    
    
    $
    5,751Manufacturing equipment
    
    
    87,804
    
    
    
    78,901Leasehold improvements
    
    
    19,098
    
    
    
    18,317112,605
    
    
    
    102,969Less accumulated depreciation and amortization
    
    
    63,426
    
    
    
    56,748Property and equipment, net
    
    $
    49,179
    
    
    $
    46,221
  Other Non-Current Assets
  November 26,
    
    
    August 27,2010
    
    
    2010Prepaid ICMS taxes in Brazil *
    
    $
    13,154
    
    
    $
    6,358Judicial deposit related to Brazil ICMS assessment *
    
    
    4,325
    
    
    
    4,115Prepayment for property and equipment taxes
    
    
    5,040
    
    
    
    4,114Deposits on property and equipment
    
    
    2,385
    
    
    
    3,076Capitalized loan costs
    
    
    538
    
    
    
    637Other
    
    
    2,396
    
    
    
    2,917Total other non-current assets
    
    $
    27,838
    
    
    $
    21,217
 
 *
    
    See Note 9  Commitments and Contingencies. Accrued Liabilities
  November 26,
    
    
    August 27,2010
    
    
    2010Accrued employee compensation
    
    $
    9,623
    
    
    $
    15,406VAT and other transaction taxes payable
    
    
    4,459
    
    
    
    5,966Income taxes payable
    
    
    334
    
    
    
    3,145Accrued warranty reserve
    
    
    1,085
    
    
    
    732Other accrued liabilities
    
    
    5,677
    
    
    
    4,069Total accrued liabilities
    
    $
    21,178
    
    
    $
    29,318
  13




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NOTE 6  Income Taxes
  Three Months EndedNovember 26,
    
    
    November 27,2010
    
    
    2009Current
    
    $
    5,201
    
    
    $
    4,728Deferred
    
    
    138
    
    
    
    (11
    )Total
    
    $
    5,339
    
    
    $
    4,717
  Three Months EndedNovember 26,
    
    
    November 27,2010
    
    
    2009U.S.
    
    $
    (12,387
    )
    
    $
    (4,263
    )Non-U.S.
    
    
    25,693
    
    
    
    13,562Total
    
    $
    13,306
    
    
    $
    9,299
    NOTE 7  Indebtedness
     14




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NOTE 8  Fair Value Measurements
 Fair Value Measurements and Disclosures,
   
    
    Level 1. Valuations based on quoted prices in active markets for identical assets or
liabilities that an entity has the ability to access. The Companys Level 1 assets include
money market funds and certificates of deposit that are classified as cash equivalents.
 
    
    Level 2.Valuations based on quoted prices for similar assets or liabilities, quoted prices
for identical assets or liabilities in markets that are not active, or other inputs that are
observable or can be corroborated by observable data for substantially the full term of the
assets and liabilities. The Company does not have any assets or liabilities measured under
Level 2.
 
    
    Level 3. Valuations based on inputs that are supported by little or no market activity and
that are significant to the fair value of the assets or liabilities. The Company does not
have any assets or liabilities measured under Level 3.
  15




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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 November 26, 2010:Assets:Cash
    
    $
    76.5
    
    
    $
    
    
    
    $
    
    
    
    $
    76.5Money market funds
    
    
    15.4
    
    
    
    
    
    
    
    
    
    
    
    15.4Certificates of deposit
    
    
    1.0
    
    
    
    
    
    
    
    
    
    
    
    1.0Total assets measured at fair value (1)
    
    $
    92.9
    
    
    $
    
    
    
    $
    
    
    
    $
    92.9Balances 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 unaudited condensed consolidated balance sheets. NOTE 9  Commitments and Contingencies
 Product Warranty and Indemnities
   Three Months EndedNovember 26,2010Balance of accrual at August 27, 2010
    
    $
    732Settlement of warranty claims
    
    
    (242
    )Provision for product warranties
    
    
    595Balance of accrual at November 26, 2010
    
    $
    1,085
   Technology Access and Development Agreements
   16




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Legal Matters
  Tessera
    Ring Technology
   17




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##### Table of Contents



Contingencies
 Brazil ICMS Assessment
   Prepaid ICMS Taxes in Brazil
     18




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NOTE 10  Segment and Geographic Information
   Three Months EndedNovember 26,
    
    
    November 27,2010
    
    
    2009Geographic net sales:U.S.
    
    $
    48,213
    
    
    $
    43,104Brazil
    
    
    119,408
    
    
    
    44,005Asia
    
    
    37,446
    
    
    
    24,892Europe
    
    
    6,548
    
    
    
    8,630Other Americas
    
    
    4,744
    
    
    
    2,462$
    216,359
    
    
    $
    123,093
 November 26,
    
    
    August 27,2010
    
    
    2010Property and equipment, net:U.S.
    
    $
    6,219
    
    
    $
    6,298Brazil
    
    
    34,868
    
    
    
    32,175Malaysia
    
    
    8,038
    
    
    
    7,705Other
    
    
    54
    
    
    
    43$
    49,179
    
    
    $
    46,221
 NOTE 11  Major Customers
  Three Months EndedNovember 26,
    
    
    November 27,2010
    
    
    2009Customer A
    
    
    21
    %
    
    
    23
    %Customer B
    
    
    14
    %
    
    
    18
    %Customer C
    
    
    16
    %
    
    
    12
    %
  NOTE 12  Other Income, net
  Three Months EndedNovember 26,
    
    
    November 27,2010
    
    
    2009Foreign currency gains (losses)
    
    $
    133
    
    
    $
    (50
    )Gain on early repayment of long-term debt
    
    
    
    
    
    
    1,178Other income
    
    
    417
    
    
    
    164Total
    
    $
    550
    
    
    $
    1,292
  19




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
   Overview
    20




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##### Table of Contents



Key Business Metrics
  Net Sales
  Cost of Sales
  Research and Development Expenses
  Selling, General and Administrative Expenses
   21




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##### Table of Contents



Critical Accounting Policies
   Revenue Recognition
    Three Months EndedNovember 26,
    
    
    November 27,2010
    
    
    2009Service revenue, net
    
    $
    10,486
    
    
    $
    7,952Cost of sales  service (1)
    
    
    228,368
    
    
    
    153,604Gross billings for services
    
    
    238,854
    
    
    
    161,556Product net sales
    
    
    205,873
    
    
    
    115,141Gross billings to customers
    
    $
    444,727
    
    
    $
    276,697Product net sales
    
    $
    205,873
    
    
    $
    115,141Service revenue, net
    
    
    10,486
    
    
    
    7,952Net sales
    
    $
    216,359
    
    
    $
    123,093
 
 (1)
    
    Represents cost of sales associated with service revenue reported on a net
basis. Accounts Receivable
    22




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##### Table of Contents



Inventory Valuation
  Income Taxes
    Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed
  Stock-Based Compensation
 Compensation  Stock Compensation
  23




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##### Table of Contents



Results of Operations
  Three Months Ended (1)November 26,
    
    
    % of
    
    
    November 27,
    
    
    % of2010
    
    
    sales
    
    
    2009
    
    
    salesNet sales
    
    $
    216.4
    
    
    
    100
    %
    
    $
    123.1
    
    
    
    100
    %Cost of sales
    
    
    172.4
    
    
    
    80
    %
    
    
    94.3
    
    
    
    77
    %Gross profit
    
    
    44.0
    
    
    
    20
    %
    
    
    28.8
    
    
    
    23
    %Research and development
    
    
    8.2
    
    
    
    4
    %
    
    
    5.7
    
    
    
    5
    %Selling, general and administrative
    
    
    14.8
    
    
    
    7
    %
    
    
    13.4
    
    
    
    11
    %Technology access charge
    
    
    7.5
    
    
    
    3
    %
    
    
    
    
    
    
    Total operating expenses
    
    
    30.5
    
    
    
    14
    %
    
    
    19.1
    
    
    
    16
    %Income from operations
    
    
    13.5
    
    
    
    6
    %
    
    
    9.7
    
    
    
    8
    %Interest expense, net
    
    
    (0.7
    )
    
    
    0
    %
    
    
    (1.7
    )
    
    
    -1
    %Other income, net
    
    
    0.6
    
    
    
    0
    %
    
    
    1.3
    
    
    
    1
    %Total other expense
    
    
    (0.2
    )
    
    
    0
    %
    
    
    (0.4
    )
    
    
    0
    %Income before provision for income taxes
    
    
    13.3
    
    
    
    6
    %
    
    
    9.3
    
    
    
    8
    %Provision for income taxes
    
    
    5.3
    
    
    
    2
    %
    
    
    4.7
    
    
    
    4
    %Net income
    
    $
    8.0
    
    
    
    4
    %
    
    $
    4.6
    
    
    
    4
    %
 
 (1)
    
    Summations may not compute precisely due to rounding. Three Months Ended November 26, 2010 as Compared to the Three Months Ended November 27,
2009
 Net Sales
  Cost of Sales
  Gross Profit
    24




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##### Table of Contents



Research and Development Expenses
  Selling, General and Administrative Expenses
  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).
  25




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##### Table of Contents



Senior Secured Revolving Line of Credit Facility.
 Capital Expenditures
  Sources and Uses of Funds
       26




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##### Table of Contents



Historical Trends
  Cash Flows from Operating Activities.
  Cash Flows from Investing Activities .
 Cash Flows from Financing Activities .
 Contractual Obligations
  Off-Balance Sheet Arrangements
   Inflation
  Recent Accounting Pronouncements
   27




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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
  Declines in memory component prices and our selling prices may result in declines in our net sales
and gross profit and could have a material adverse affect on our business, our results of
operations and our financial condition.
   28




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##### Table of Contents



Worldwide political conditions, armed conflicts and threats of terrorist attacks may adversely
affect our operations and demand for our products.
    
 Item 6.
    
    Exhibits
  Exhibit No.
    
    Exhibit Title10.38
    
    
    Severance and Change of Control Agreement for Iain MacKenzie, dated December 10, 201010.39
    
    
    Severance and Change of Control Agreement for Barry Zwarenstein, dated December 10, 201010.40
    
    
    Severance and Change of Control Agreement for Alan Marten, dated December 10, 201010.41
    
    
    Severance and Change of Control Agreement for Wayne Eisenberg, dated December 10, 201010.42
    
    
    Severance and Change of Control Agreement for John Moyer, dated December 10, 201031.1
    
    
    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
  29




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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: January 4, 2011  30




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Exhibit Title10.38
    
    
    Severance and Change of Control Agreement for Iain MacKenzie, dated December 10, 201010.39
    
    
    Severance and Change of Control Agreement for Barry Zwarenstein, dated December 10, 201010.40
    
    
    Severance and Change of Control Agreement for Alan Marten, dated December 10, 201010.41
    
    
    Severance and Change of Control Agreement for Wayne Eisenberg, dated December 10, 201010.42
    
    
    Severance and Change of Control Agreement for John Moyer, dated December 10, 201031.1
    
    
    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