##### 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 1934For the Quarterly Period Ended
    February 24, 2006ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to          .   Commission file number
    000-51771
      SMART MODULAR TECHNOLOGIES
    (WWH), INC.
 (Exact Name of Registrant as
    Specified in Its Charter)
  Cayman Islands

20-2509518(State or Other Jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    Identification Number)4211 Starboard Drive
    Fremont, CA(Address of Principal
    Executive Offices)

94538(Zip
    code)   (510) 623-1231
 Registrants Telephone Number, Including Area Code
      þ o
   Large
    accelerated
    filer o  Accelerated
    filer o  Non-accelerated
    filer þ  Rule 12b-2 o þ




---



##### 



SMART
    MODULAR TECHNOLOGIES (WWH), INC.
  INDEX TO QUARTERLY REPORT
  TABLE OF
    CONTENTS
  PagePART I.  FINANCIAL
    INFORMATION


2Item 1.

Financial
    Statements


2Item 2.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


18Item 3.

Quantitative and
    Qualitative Disclosures About Market Risk


28Item 4.

Controls and
    Procedures


28PART II.  OTHER
    INFORMATION


29Item 1.

Legal
    Proceedings


29Item 1A.

Risk Factors


29Item 2.

Unregistered Sales
    of Equity Securities and Use of Proceeds


29Item 6.

Exhibits


29SIGNATURES


30EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32   1




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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 28,


August 31,2006


2005(In thousands)ASSETSCash and cash equivalents

$
137,162


$
75,970Short term investments






5,071Accounts receivable, net of
    allowances of $2,520 and $2,629 as of February 28, 2006 and
    August 31, 2005, respectively


158,368



144,760Inventories


55,243



53,122Prepaid expenses and other current
    assets


11,449



9,459Total current assets


362,222



288,382Property and equipment, net


21,361



11,309Goodwill


3,198



2,248Intangible assets, net


7,369



9,142Other non-current assets


13,862



9,980Total assets

$
408,012


$
321,061LIABILITIES AND
    SHAREHOLDERS EQUITYAccounts payable

$
131,869


$
125,305Accrued expenses and other current
    liabilities


24,326



29,912Advance from customer






1,000Total current liabilities


156,195



156,217Long-term debt


125,000



125,000Other long-term liabilities


773



961Total liabilities


281,968



282,178Shareholders equity:Ordinary shares


10



8Additional paid-in capital


84,318



9,490Deferred stock-based compensation


(741
)


(1,126
)Accumulated other comprehensive
    income


2,717



900Retained earnings


39,740



29,611Total shareholders equity


126,044



38,883Total liabilities and
    shareholders equity

$
408,012


$
321,061    2




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
    (Unaudited)
  Three Months


Three Months


Six Months


Six MonthsEnded


Ended


Ended


EndedFebruary 28,


February 28,


February 28,


February 28,2006


2005


2006


2005(In thousands, except per share
    data)Net sales

$
163,732


$
164,417


$
321,994


$
318,907Cost of sales


133,987



140,092



261,648



272,737Gross profit*


29,745



24,325



60,346



46,170Research and development


3,912



2,209



7,380



4,828Selling, general and administrative


12,862



11,000



25,764



22,264Advisory service agreements
    fees


9,553



625



10,303



1,250Restructuring and impairment costs














880Total operating expenses*


26,327



13,834



43,447



29,222Income from operations


3,418



10,491



16,899



16,948Interest expense, net


(2,891
)


(562
)


(5,873
)


(1,105
)Other income, net


246



412



377



161Total other expense, net


(2,645
)


(150
)


(5,496
)


(944
)Income before provision (benefit)
    for income taxes


773



10,341



11,403



16,004Provision (benefit) for income taxes


(10
)


2,565



1,274



4,038Net income

$
783


$
7,776


$
10,129


$
11,966Net income per ordinary share, basic

$
0.02


$
0.16


$
0.20


$
0.24Shares used in computing basic net
    income per
    ordinary share


51,273



48,872



50,166



48,872Net income per ordinary share,
    diluted

$
0.01


$
0.15


$
0.18


$
0.22Shares used in computing diluted
    net income per
    ordinary share


56,304



53,518



55,015



53,311* Stock-based compensation
    by category:Cost of sales

$
41


$



$
71


$
Research and development


128







223



Selling, general and administrative


279







590



$
448


$



$
884


$
    3




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##### Table of Contents



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


Three Months


Six Months


Six MonthsEnded


Ended


Ended


EndedFebruary 28,


February 28,


February 28,


February 28,2006


2005


2006


2005(In thousands)Net income

$
783


$
7,776


$
10,129


$
11,966Other comprehensive income, net of
    tax:Changes in fair value of
    derivative instruments accounted for as cash flow hedges


569







1,354



Foreign currency translation
    adjustments


189



300



463



440Comprehensive income

$
1,541


$
8,076


$
11,946


$
12,406    4




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##### Table of Contents



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


Six MonthsEnded


EndedFebruary 28,


February 28,2006


2005(In thousands)Cash flows from operating
    activities:Net cash (used in) provided by
    operating activities

$
(5,239
)

$
34,258Cash flows from investing
    activities:Capital expenditures


(12,338
)


(3,868
)Sale of short term investments


5,071



Cash paid for acquisition of
    businesses, net of cash acquired


(680
)


(2,260
)Proceeds from sale of assets


130



Other, net






304Net cash used in investing
    activities


(7,817
)


(5,824
)Cash flows from financing
    activities:Net repayment on revolving line of
    credit






(10,141
)Net repayments on other debt






(1,524
)Repayment of customer advance


(1,000
)


Proceeds from issuance of ordinary
    shares from stock option exercises


49



Proceeds from issuance of ordinary
    shares in an initial public offering, net of offering expenses
    paid


75,233



Net cash provided by (used in)
    financing activities


74,282



(11,665
)Effect of exchange rate changes on
    cash and cash equivalents


(34
)


33Net increase in cash and cash
    equivalents


61,192



16,802Cash and cash equivalents at
    beginning of period


75,970



36,747Cash and cash equivalents at end
    of period

$
137,162


$
53,549Supplemental disclosures of cash
    flow information:Cash paid during the period for:Interest


6,171



1,283Income taxes


910



489    5




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##### Table of Contents



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
  Form 10-K
  53-week
    Product
    and Service Revenue
  Revenue Recognition.
  No. 99-19, Reporting Revenue Gross as a Principal versus Net as an
    Agent.
 6




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
   NOTES TO CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Recent
    Accounting Pronouncements
  Inventory Costs, an amendment of ARB
    No. 43, Chapter 4.
  Accounting Changes and Error Corrections Accounting Changes Reporting
    Accounting Changes in Interim Financial Statements.
  NOTE 2  Initial
    Public Offering
    NOTE 3  Stock-Based
    Compensation
  Change
    in Accounting Principle
  Share-Based Payment Accounting for Stock Issued to
    Employees
  Accounting for
    Stock-Based Compensation
 7




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
   NOTES TO CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Plan
    Description
  10-year
  Summary
    of Assumptions and Activity
  Share-Based
    Payment.
  Six MonthsEndedFebruary 28, 2006Stock options:Expected term (years)


6.25Expected volatility


81
%Risk-free interest rate


4.38 - 4.60
%Expected dividends


     WeightedAverageWeighted


RemainingAverage


Contractual


AggregateExercise


Term


IntrinsicShares


Price


(Years)


ValueOptions outstanding at
    September 1, 2005


5,478


$
0.29Options granted


1,693



4.17Options exercised


(284
)


(0.17
)Options forfeited


(207
)


(1.06
)Options outstanding at
    February 28, 2006


6,680



1.25



8.7


$
2,740Options exercisable at
    February 28, 2006


1,976


$
0.41



8.4


$
408    8




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
   NOTES TO CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Weighted AverageGrant Date FairShares


Value per ShareNon-vested stock options at
    September 1, 2005


4,202


$
0.36Non-vested stock options granted


1,693



3.94Vested stock options


(984
)


(0.82
)Forfeited stock options


(207
)


(1.34
)Non-vested stock options at
    February 28, 2006


4,704


$
1.50       NOTE 4  Net
    Income Per Share
   9




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
   NOTES TO CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Three Months


Three Months


Six Months


Six MonthsEnded


Ended


Ended


EndedFebruary 28,


February 28,


February 28,


February 28,2006


2005


2006


2005Numerator:Net income

$
783


$
7,776


$
10,129


$
11,966Denominator:Weighted average ordinary shares


51,273



48,872



50,166



48,872Effect of dilutive
    securities:Stock options


5,031



4,646



4,849



4,439Total ordinary shares, diluted


56,304



53,518



55,015



53,311Net income per ordinary share,
    basic

$
0.02


$
0.16


$
0.20


$
0.24Net income per ordinary share,
    diluted

$
0.01


$
0.15


$
0.18


$
0.22     NOTE 5  Acquisitions
       10




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
   NOTES TO CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    NOTE 6  Intangible
    Assets
    February 28,


August 31,Life


2006


2005Customer relationships


5


$
11,797


$
11,797Technology


3



1,826



1,826Trademark


7



4,680



4,680Total






18,303



18,303Accumulated amortization






(4,999
)


(3,774
)Other deductions






(5,935
)


(5,387
)Carrying value





$
7,369


$
9,142         NOTE 7  Related
    Party Information
     11




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
   NOTES TO CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        NOTE 8  Inventories
    February 28, 2006


August 31, 2005Raw materials

$
24,064


$
23,765Work-in process


7,281



5,680Finished goods


23,898



23,677$
55,243


$
53,122     NOTE 9  Income
    Taxes (Benefit)
    Three Months


Three Months


Six Months


Six MonthsEnded


Ended


Ended


EndedFebruary 28, 2006


February 28, 2005


February 28, 2006


February 28, 2005Current

$
145


$
2,658


$
1,516


$
4,211Deferred


(155
)


(93
)


(242
)


(173
)Total

$
(10
)

$
2,565


$
1,274


$
4,038     Three Months


Three Months


Six Months


Six MonthsEnded


Ended


Ended


EndedFebruary 28, 2006


February 28, 2005


February 28, 2006


February 28, 2005U.S. income (loss)

$
(1,711
)

$
3,864


$
(1,325
)

$
5,387Non-U.S. income


2,484



6,477



12,728



10,617Total

$
773


$
10,341


$
11,403


$
16,004   NOTE 10  Long-Term
    Debt
  Senior
    Secured Floating Rate Notes
   12




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
   NOTES TO CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
           Revolving
    Line of Credit
       13




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
   NOTES TO CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    NOTE 11  Financial
    Instruments
  Fair
    Value of Financial Instruments
    Derivative
    Instruments
  3-month
      NOTE 12  Commitments
    and Contingencies
  Product
    Warranty
      Six MonthsEndedFebruary 28, 2006Balance of accrual at
    August 31, 2005

$
1,044Warranty claims


(828
)Warranty accruals


290Balance of accrual at
    February 28, 2006

$
506      14




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
   NOTES TO CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Legal
    Matters
    NOTE 13  Restructuring
    and Impairment
    Six MonthsEndedFebruary 28, 2005Impairment of equipment

$
65Severance and benefit costs


420Exit costs


340Other


55Total

$
880     Restructuring
    Accrual
    SeveranceandBenefits


Other


TotalBalance of accrual at
    August 31, 2005

$
99


$
108


$
207Cash payments


(99
)






(99
)Balance of accrual at
    February 28, 2006

$



$
108


$
108     NOTE 14  Segment
    and Geographic Information
   15




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
   NOTES TO CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Three Months


Three Months


Six Months


Six MonthsEnded


Ended


Ended


EndedFebruary 28, 2006


February 28, 2005


February 28, 2006


February 28, 2005Geographic net
    sales:U.S.A.

$
102,727


$
102,960


$
204,484


$
214,858Other North and Latin America


17,562



23,840



33,262



36,672Europe


16,007



16,232



30,910



25,386Asia


27,436



21,385



53,338



41,991$
163,732


$
164,417


$
321,994


$
318,907   February 28, 2006


August 31, 2005Long-lived assets:U.S.A.

$
4,265


$
4,240Brazil


10,906



1,494Other North and Latin America


698



658Europe


30



36Malaysia


4,591



4,117Other Asia


871



764$
21,361


$
11,309   NOTE 15  Major
    Customers
    Six MonthsThree Months


Three Months


Six Months


EndedEnded


Ended


Ended


February 28,February 28, 2006


February 28, 2005


February 28, 2006


2005Customer A


45
%


43
%


44
%


45
%Customer B


16
%


18
%


15
%


17
%    16




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
   NOTES TO CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    NOTE 16  Interest
    Expense, Net
    Three Months


Three Months


Six Months


Six MonthsEnded


Ended


Ended


EndedFebruary 28, 2006


February 28, 2005


February 28, 2006


February 28, 2005Interest income

$
439


$
132


$
703


$
203Interest expense


(3,330
)


(694
)


(6,576
)


(1,308
)Interest expense, net

$
(2,891
)

$
(562
)

$
(5,873
)

$
(1,105
)   NOTE 17  Subsidiary
    Guarantors
    NOTE 18  Subsequent
    Event
   17




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-Q,
  Executive
    Overview
       18




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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
   19




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##### Table of Contents



Revenue
    Recognition
    No. 99-19,
    Three Months Ended


Six Months EndedFebruary 28,


February 28,2006


2005


2006


2005Product net sales

$
152,106


$
153,047


$
299,965


$
299,383Service revenue


11,626



11,370



22,029



19,524Net sales


163,732



164,417



321,994



318,907Plus: Cost of sales(1)


173,464



206,282



349,462



397,965Gross billing to customers

$
337,196


$
370,699


$
671,456


$
716,872     (1)
    Represents cost of sales associated with service revenue
    accounted for on an agency basis.  Accounts
    Receivable
    Inventory
    Valuation
  first-in,
 20




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##### Table of Contents



Restructuring
    Charges
    Income
    Taxes
    Impairment
    of Long-Lived Assets and Long-Lived Assets to be
    Disposed
    Stock-Based
    Compensation
   21




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##### Table of Contents



Results
    of Operations
    Three Months Ended


Six Months EndedFebruary 28,


February 28,2006


2005


2006


2005Net sales

$
163.7


$
164.4


$
322.0


$
318.9Cost of sales


134.0



140.1



261.6



272.7Gross profit(1)


29.7



24.3



60.3



46.2Research and development


3.9



2.2



7.4



4.8Selling, general and administrative


12.9



11.0



25.8



22.3Advisory service agreements
    fees


9.6



0.6



10.3



1.3Restructuring and impairment costs














0.9Total operating expenses(1)


26.3



13.8



43.4



29.2Income from operations(1)


3.4



10.5



16.9



16.9Interest expense, net


(2.9
)


(0.6
)


(5.9
)


(1.1
)Other income, net


0.2



0.4



0.4



0.2Total other expense, net(1)


(2.6
)


(0.2
)


(5.5
)


(0.9
)Income before provision for income
    taxes


0.8



10.3



11.4



16.0Provision for income taxes






2.6



1.3



4.0Net income(1)

$
0.8


$
7.8


$
10.1


$
12.0     (1)
    Summations may not compute precisely due to rounding.  Three
    and Six Months Ended February 28, 2006 as Compared to the
    Three and Six Months Ended February 28, 2005
  Net
    Sales
      Cost of
    Sales
   22




---



##### Table of Contents



Gross
    Profit
      Research
    and Development Expenses
      Selling,
    General and Administrative Expenses
     23




---



##### Table of Contents



Advisory
    Service Agreements Fees
      Restructuring
    and Impairment Costs
    Interest
    Expense, Net
      Other
    Income, Net
      Provision
    for Income Taxes
   24




---



##### Table of Contents



Liquidity
    and Capital Resources
    Debt
    Service
    Senior Secured Credit Facility.
  Senior Secured Floating Rate Exchange Notes Due April
    2012.
    Capital
    Expenditures
   25




---



##### Table of Contents



Sources
    of Funds
      Historical
    Trends
    Cash Flows from Operating Activities.
  Cash Flows from Investing Activities.
  Cash Flows from Financing Activities.
 26




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##### Table of Contents



Contractual
    Obligations
    Payments
    Due by Period
  Less Than








After1 Year


1-3 Years


4-5 Years


5 Years


Total(In millions)Total debt(1)

$
43.8


$



$



$
81.2


$
125.0Interest expense cash obligations
    in connection with long-term debt(2)


8.0



24.0



16.0



0.7



48.7Operating leases


1.9



4.4



1.3







7.6Total contractual cash obligations

$
53.7


$
28.4


$
17.3


$
81.9


$
181.3     (1)
    On March 10, 2006, we used approximately $49.0 million
    of our proceeds from the initial public offering to redeem
    $43.75 million of our senior secured floating rate exchange
    notes. This redemption payment included approximately
    $4.4 million and $0.8 million in redemption premium
    and accrued interest, respectively, and we expect to incur a
    redemption loss of approximately $5.9 million in this
    transaction due to the above redemption premium of
    $4.4 million, as well as a write off of approximately
    $1.5 million of unamortized debt issuance costs related to
    the debt redeemed.(2)
    Interest expense cash obligations are estimated based on the
    current interest rates in effect for our long-term debt as of
    February 28, 2006.  Off-Balance
    Sheet Arrangements
    Inflation
    Recent
    Accounting Pronouncements
  Inventory Costs, an amendment
    of ARB No. 43, Chapter 4.
  APB
    No. 20, Accounting Changes and SFAS No. 3,
    Reporting Accounting Changes in Interim Financial
    Statements.
 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. Rules 13a-15(e) 15d-15(e)) Rules 13a-15 15d-15.
  Changes in Internal Control Over Financial
    Reporting. Rules 13a-15 15d-15
 28




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##### Table of Contents



PART II.  OTHER
    INFORMATION  Item 1.
    Legal
    Proceedings    Item 1A.
    Risk
    Factors  Form 10-Q
  Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds      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  29




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##### Table of Contents



SMART
    MODULAR TECHNOLOGIES (WWH), INC.
  SIGNATURES
      By:
    /s/  IAIN
    MACKENZIE    Title:
    President and Chief Executive Officer  By:
    /s/  JACK
    A. PACHECO    Title:
    Vice President and Chief Financial Officer    30




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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