##### 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 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
(State or other jurisdiction of incorporation or organization)
    
    20-2509518
(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 o
    
    Non-accelerated filer þ
(Do not check if a smaller
reporting company)
    
    Smaller reporting company o
 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
    
    
    19Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    27Item 4. Controls and Procedures
    
    
    28PART II. OTHER INFORMATION
    
    
    28Item 1. Legal Proceedings
    
    
    28Item 1A. Risk Factors
    
    
    28Item 5. Other Information
    
    
    28Item 6. Exhibits
    
    
    29SIGNATURES
    
    
    30Exhibit 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 26,
    
    
    August 28,2010
    
    
    2009(In thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    118,675
    
    
    $
    147,658Accounts receivable, net of allowances of
$884 and $1,591 as of February 26, 2010 and
August 28, 2009, respectively
    
    
    181,481
    
    
    
    130,953Inventories
    
    
    90,443
    
    
    
    63,115Prepaid expenses and other current assets
    
    
    16,839
    
    
    
    12,628Total current assets
    
    
    407,438
    
    
    
    354,354Property and equipment, net
    
    
    37,054
    
    
    
    36,263Goodwill
    
    
    1,061
    
    
    
    1,061Other intangible assets, net
    
    
    6,940
    
    
    
    7,475Other non-current assets
    
    
    6,489
    
    
    
    4,585Total assets
    
    $
    458,982
    
    
    $
    403,738LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    117,445
    
    
    $
    68,928Accrued expenses
    
    
    25,867
    
    
    
    16,615Total current liabilities
    
    
    143,312
    
    
    
    85,543Long-term debt
    
    
    55,072
    
    
    
    81,250Other long-term liabilities
    
    
    1,069
    
    
    
    2,120Total liabilities
    
    $
    199,453
    
    
    $
    168,913Commitments and contingenciesShareholders equity:Ordinary shares, $0.00016667 par value;
600,000,000 shares authorized; 62,330,335 and
61,904,788 shares issued and outstanding as of
February 26, 2010 and August 28, 2009,
respectively
    
    
    10
    
    
    
    10Additional paid-in capital
    
    
    113,400
    
    
    
    109,264Accumulated other comprehensive income
    
    
    4,227
    
    
    
    4,333Retained earnings
    
    
    141,892
    
    
    
    121,218Total shareholders equity
    
    
    259,529
    
    
    
    234,825Total liabilities and shareholders equity
    
    $
    458,982
    
    
    $
    403,738
   3




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedFebruary 26,
    
    
    February 27,
    
    
    February 26,
    
    
    February 27,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands, except per share data)Net sales
    
    $
    160,110
    
    
    $
    109,089
    
    
    $
    283,203
    
    
    $
    249,864Cost of sales (1)
    
    
    118,097
    
    
    
    85,022
    
    
    
    212,424
    
    
    
    199,981Gross profit
    
    
    42,013
    
    
    
    24,067
    
    
    
    70,779
    
    
    
    49,883Operating expenses:Research and development (1)
    
    
    5,219
    
    
    
    5,142
    
    
    
    10,949
    
    
    
    10,578Selling, general and administrative
(1)
    
    
    14,331
    
    
    
    13,782
    
    
    
    27,697
    
    
    
    28,249Goodwill impairment
    
    
    
    
    
    
    3,206
    
    
    
    
    
    
    
    10,416Restructuring charges
    
    
    
    
    
    
    935
    
    
    
    
    
    
    
    1,821Total operating expenses
    
    
    19,550
    
    
    
    23,065
    
    
    
    38,646
    
    
    
    51,064Income (loss) from operations
    
    
    22,463
    
    
    
    1,002
    
    
    
    32,133
    
    
    
    (1,181
    )Interest expense, net
    
    
    (1,163
    )
    
    
    (1,698
    )
    
    
    (2,826
    )
    
    
    (3,450
    )Other income (expense), net
    
    
    3,225
    
    
    
    109
    
    
    
    4,517
    
    
    
    (657
    )Total other income (expense)
    
    
    2,062
    
    
    
    (1,589
    )
    
    
    1,691
    
    
    
    (4,107
    )Income (loss) before provision for
income taxes
    
    
    24,525
    
    
    
    (587
    )
    
    
    33,824
    
    
    
    (5,288
    )Provision for income taxes
    
    
    8,433
    
    
    
    1,263
    
    
    
    13,150
    
    
    
    3,440Net income (loss)
    
    $
    16,092
    
    
    $
    (1,850
    )
    
    $
    20,674
    
    
    $
    (8,728
    )Net income (loss) per share, basic
    
    $
    0.26
    
    
    $
    (0.03
    )
    
    $
    0.33
    
    
    $
    (0.14
    )Net income (loss) per share, diluted
    
    $
    0.25
    
    
    $
    (0.03
    )
    
    $
    0.32
    
    
    $
    (0.14
    )Shares used in computing net income
(loss) per ordinary share
    
    
    62,211
    
    
    
    61,673
    
    
    
    62,092
    
    
    
    61,595Shares used in computing net income
(loss) per diluted share
    
    
    65,010
    
    
    
    61,673
    
    
    
    64,513
    
    
    
    61,595(1)     Stock-based compensation by category:Cost of sales
    
    $
    162
    
    
    $
    187
    
    
    $
    319
    
    
    $
    388Research and development
    
    
    307
    
    
    
    451
    
    
    
    604
    
    
    
    882Selling, general and administrative
    
    
    1,370
    
    
    
    1,162
    
    
    
    2,562
    
    
    
    2,317
   4




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedFebruary 26,
    
    
    February 27,
    
    
    February 26,
    
    
    February 27,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)Net income (loss)
    
    $
    16,092
    
    
    $
    (1,850
    )
    
    $
    20,674
    
    
    $
    (8,728
    )Other comprehensive income (loss):Net changes in unrealized gain or
(loss) on derivative instruments
accounted for as cash flow hedges
    
    
    513
    
    
    
    (6
    )
    
    
    988
    
    
    
    (351
    )Foreign currency translation
    
    
    (6,465
    )
    
    
    (4,805
    )
    
    
    (1,094
    )
    
    
    (22,713
    )Comprehensive income (loss)
    
    $
    10,140
    
    
    $
    (6,661
    )
    
    $
    20,568
    
    
    $
    (31,792
    )
   5




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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Six Months EndedFebruary 26,
    
    
    February 27,2010
    
    
    2009(In thousands)Cash flows from operating activities:Net income (loss)
    
    $
    20,674
    
    
    $
    (8,728
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Depreciation and amortization
    
    
    7,525
    
    
    
    6,445Stock-based compensation
    
    
    3,485
    
    
    
    3,587Changes in allowances for accounts receivable and
sales returns
    
    
    (711
    )
    
    
    (374
    )Amortization of debt issuance costs
    
    
    722
    
    
    
    555(Gain) loss on sale of assets
    
    
    (3
    )
    
    
    215Gain on early repayment of long-term debt
    
    
    (1,178
    )
    
    
    Goodwill impairment
    
    
    
    
    
    
    10,416Changes in operating assets and liabilities:Accounts receivable
    
    
    (50,406
    )
    
    
    73,370Inventories
    
    
    (27,825
    )
    
    
    (26,604
    )Prepaid expenses and other assets
    
    
    (4,932
    )
    
    
    823Accounts payable
    
    
    48,317
    
    
    
    (33,597
    )Accrued expenses and other liabilities
    
    
    9,249
    
    
    
    (1,527
    )Net cash provided by operating activities
    
    
    4,917
    
    
    
    24,581Cash flows from investing activities:Capital expenditures
    
    
    (7,991
    )
    
    
    (9,133
    )Cash deposits on equipment
    
    
    (2,107
    )
    
    
    (795
    )Proceeds from sale of property and equipment
    
    
    276
    
    
    
    60Payment for contingent consideration
    
    
    
    
    
    
    (1,500
    )Net cash used in investing activities
    
    
    (9,822
    )
    
    
    (11,368
    )Cash flows from financing activities:Repayment of long-term debt
    
    
    (25,000
    )
    
    
    Proceeds from issuance of ordinary shares from stock
option exercises
    
    
    663
    
    
    
    464Net cash (used in) provided by financing activities
    
    
    (24,337
    )
    
    
    464Effect of exchange rate changes on cash and cash equivalents
    
    
    259
    
    
    
    (4,278
    )Net (decrease) increase in cash and cash equivalents
    
    
    (28,983
    )
    
    
    9,399Cash and cash equivalents at beginning of period
    
    
    147,658
    
    
    
    115,994Cash and cash equivalents at end of period
    
    $
    118,675
    
    
    $
    125,393Supplemental disclosures of cash flow information:Cash paid during the year:Interest
    
    $
    2,866
    
    
    $
    3,854Taxes
    
    
    11,311
    
    
    
    3,211Non-cash activities information:Change in fair value of derivative instruments
    
    $
    (755
    )
    
    $
    351
   6




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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
    Generally Accepted Accounting Principles FASB
Accounting Standards Codification
 Product and Service Revenue
 Revenue Recognition
   7




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedFebruary 26,
    
    
    February 27,
    
    
    February 26,
    
    
    February 27,2010
    
    
    2009
    
    
    2010
    
    
    2009Service revenue
    
    $
    9,790
    
    
    $
    8,899
    
    
    $
    17,742
    
    
    $
    20,874Cost of sales  service (1)
    
    
    211,390
    
    
    
    143,913
    
    
    
    364,994
    
    
    
    330,123Gross billings for services
    
    
    221,180
    
    
    
    152,812
    
    
    
    382,736
    
    
    
    350,997Plus: Product net sales
    
    
    150,320
    
    
    
    100,190
    
    
    
    265,461
    
    
    
    228,990Gross billings to customers
    
    $
    371,500
    
    
    $
    253,002
    
    
    $
    648,197
    
    
    $
    579,987Product net sales
    
    $
    150,320
    
    
    $
    100,190
    
    
    $
    265,461
    
    
    $
    228,990Service revenue
    
    
    9,790
    
    
    
    8,899
    
    
    
    17,742
    
    
    
    20,874Net sales
    
    $
    160,110
    
    
    $
    109,089
    
    
    $
    283,203
    
    
    $
    249,864
 
 (1)
    
    Represents cost of sales associated with service revenue reported on a net basis. Recent Accounting Pronouncements
  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
 Financial Instruments,
 Business Combinations
 NOTE 2  Stock-Based Compensation
 Compensation  Stock
Compensation
   8




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##### Table of Contents



Stock Options
   Option Exchange
    Summary of Assumptions and Activity
 .
 Six Months EndedFebruary 26,
    
    
    February 27,2010
    
    
    2009Stock options:Expected term (years)
    
    
    4.7
    
    
    
    5.3Expected volatility
    
    
    78
    %
    
    
    57
    %Risk-free interest rate
    
    
    2.33
    %
    
    
    2.01
    %Expected dividends
    
    
    
    
    
    
    
  WeightedAverageWeighted
    
    
    RemainingAverage
    
    
    Contractual
    
    
    AggregateExercise
    
    
    Term
    
    
    IntrinsicShares
    
    
    Price
    
    
    (Years)
    
    
    ValueOptions outstanding at August 28, 2009
    
    
    8,796
    
    
    $
    4.99Options granted
    
    
    2,809
    *
    
    
    5.45Options exercised
    
    
    (423
    )
    
    
    1.57Options forfeited and cancelled
    
    
    (2,672
    )**
    
    
    8.36Options outstanding at February 26, 2010
    
    
    8,510
    
    
    $
    4.25
    
    
    
    7.3
    
    
    $
    21,357Options exercisable at February 26, 2010
    
    
    3,973
    
    
    $
    3.54
    
    
    
    6.1
    
    
    $
    13,619Options vested and expected to vest at February 26, 2010
    
    
    8,124
    
    
    $
    4.23
    
    
    
    7.2
    
    
    $
    20,677
 *
    
    Includes new options granted (1,864) in connection with the Option Exchange.**
    
    Includes options cancelled (2,450) in connection with the Option Exchange.  9




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##### Table of Contents



Weighted AverageGrant Date FairShares
    
    
    Value Per ShareNon-vested stock options at August 28, 2009
    
    
    3,738
    
    
    $
    2.87Non-vested stock options granted
    
    
    2,809
    *
    
    
    2.69Vested stock options
    
    
    (748
    )
    
    
    2.60Non-vested stock options forfeited and cancelled
    
    
    (1,262
    )**
    
    
    4.37Non-vested stock options at February 26, 2010
    
    
    4,537
    
    
    $
    2.48
 *
    
    Includes new options granted (1,864) in connection with the Option Exchange.**
    
    Includes unvested options cancelled (1,040) in connection with the Option Exchange.  Restricted Share Units (RSUs)
       WeightedAverage
    
    
    AggregateGrant Date
    
    
    IntrinsicShares
    
    
    Fair Value
    
    
    ValueAwards outstanding at August 28, 2009
    
    
    68
    
    
    $
    2.95Awards granted
    
    
    1,114
    
    
    
    5.88Awards vested
    
    
    (5
    )
    
    
    2.84Awards forfeited and cancelled
    
    
    (6
    )
    
    
    5.20Awards outstanding at February 26, 2010
    
    
    1,171
    
    
    $
    5.75
    
    
    $
    7,498
  10




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##### Table of Contents



NOTE 3  Goodwill and Other Intangible Assets, net
 Intangibles  Goodwill and Other
     Weighted
    
    
    Value at
    
    
    As of February 26, 2010
    
    
    As of August 28, 2009Avg. Life
    
    
    Date of
    
    
    Accumulated
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying(years)
    
    
    Acquisition
    
    
    Amortization
    
    
    Value
    
    
    Amortization
    
    
    ValueAmortized intangible assets:Customer relationships
    
    
    10
    
    
    $
    3,700
    
    
    $
    740
    
    
    $
    2,960
    
    
    $
    555
    
    
    $
    3,145Technology
    
    
    7
    
    
    
    2,800
    
    
    
    800
    
    
    
    2,000
    
    
    
    600
    
    
    
    2,200Company trade name
    
    
    20
    
    
    
    2,040
    
    
    
    204
    
    
    
    1,836
    
    
    
    153
    
    
    
    1,887Leasehold interest
    
    
    3
    
    
    
    260
    
    
    
    163
    
    
    
    97
    
    
    
    122
    
    
    
    138Non-compete agreement
    
    
    2
    
    
    
    220
    
    
    
    220
    
    
    
    
    
    
    
    165
    
    
    
    55Product names
    
    
    9
    
    
    
    60
    
    
    
    13
    
    
    
    47
    
    
    
    10
    
    
    
    50Total
    
    
    11
    
    
    $
    9,080
    
    
    $
    2,140
    
    
    $
    6,940
    
    
    $
    1,605
    
    
    $
    7,475
   11




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##### Table of Contents



Fiscal Year:
    
    AmountRemainder of fiscal 2010
    
    $
    4802011
    
    
    9362012
    
    
    8792013
    
    
    8792014
    
    
    879Thereafter
    
    
    2,887Total
    
    $
    6,940
 NOTE 4  Net Income (Loss) Per Share
   Three Months Ended
    
    
    Six Months EndedFebruary 26,
    
    
    February 27,
    
    
    February 26,
    
    
    February 27,2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator:Net income (loss)
    
    $
    16,092
    
    
    $
    (1,850
    )
    
    $
    20,674
    
    
    $
    (8,728
    )Denominator:Weighted average ordinary shares, basic
    
    
    62,211
    
    
    
    61,673
    
    
    
    62,092
    
    
    
    61,595Effect of dilutive securities:Stock options and RSUs
    
    
    2,799
    
    
    
    
    
    
    
    2,421
    
    
    
    Weighted average ordinary shares, diluted
    
    
    65,010
    
    
    
    61,673
    
    
    
    64,513
    
    
    
    61,595Net income (loss) per ordinary share, basic
    
    $
    0.26
    
    
    $
    (0.03
    )
    
    $
    0.33
    
    
    $
    (0.14
    )Net income (loss) per ordinary share, diluted
    
    $
    0.25
    
    
    $
    (0.03
    )
    
    $
    0.32
    
    
    $
    (0.14
    )
  NOTE 5  Balance Sheet Detail
 Inventories
  February 26,
    
    
    August 28,2010
    
    
    2009Raw materials
    
    $
    36,859
    
    
    $
    20,207Work-in process
    
    
    11,493
    
    
    
    4,716Finished goods
    
    
    42,091
    
    
    
    38,192Total inventory *
    
    $
    90,443
    
    
    $
    63,115
 
 *
    
    As of February 26, 2010
and August 28, 2009, total inventory included approximately 36%
and 47% of service inventory, respectively.  12




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##### Table of Contents



Property and Equipment, Net
  February 26,
    
    
    August 28,2010
    
    
    2009Buildings
    
    $
    583
    
    
    $
    539Office furniture, software, computers and equipment
    
    
    5,287
    
    
    
    5,409Manufacturing equipment
    
    
    62,377
    *
    
    
    56,926Leasehold improvements
    
    
    17,089
    
    
    
    16,89385,336
    
    
    
    79,767Less: accumulated depreciation and amortization
    
    
    48,282
    *
    
    
    43,504Property and equipment, net
    
    $
    37,054
    
    
    $
    36,263
 
 *
    
    In the second quarter of fiscal 2010, the Company reduced the depreciable life by
1 year of certain manufacturing equipment with net book value of $1 million to reflect
its updated estimate of the remaining useful life; this resulted in additional
depreciation expense of $120 thousand in the quarter and will continue through the end
of calendar 2011. NOTE 6  Income Taxes
  Three Months Ended
    
    
    Six Months EndedFebruary 26,
    
    
    February 27,
    
    
    February 26,
    
    
    February 27,2010
    
    
    2009
    
    
    2010
    
    
    2009Current
    
    $
    8,443
    
    
    $
    1,287
    
    
    $
    13,171
    
    
    $
    3,479Deferred
    
    
    (10
    )
    
    
    (24
    )
    
    
    (21
    )
    
    
    (39
    )Total
    
    $
    8,433
    
    
    $
    1,263
    
    
    $
    13,150
    
    
    $
    3,440
  Three Months Ended
    
    
    Six Months EndedFebruary 26,
    
    
    February 27,
    
    
    February 26,
    
    
    February 27,2010
    
    
    2009
    
    
    2010
    
    
    2009U.S. loss
    
    $
    (1,731
    )
    
    $
    (8,056
    )
    
    $
    (5,994
    )
    
    $
    (20,387
    )Non-U.S. income
    
    
    26,256
    
    
    
    7,469
    
    
    
    39,818
    
    
    
    15,099Total
    
    $
    24,525
    
    
    $
    (587
    )
    
    $
    33,824
    
    
    $
    (5,288
    )
    13




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##### Table of Contents



NOTE 7  Indebtedness
    Financial Instruments
 NOTE 8  Fair Value Measurements
 Fair Value Measurements and
Disclosures,
   14




---



##### 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s Level 2 liabilities include its current
variable-to-fixed interest rate swap.
 
    
    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
    
    
    InputsAssets or
    
    
    CorroboratedLiabilities
    
    
    by Market DataLevel 1
    
    
    Level 2
    
    
    TotalBalances as of February 26, 2010:Assets: (1)Money market funds (2)
    
    $
    29.7
    
    
    $
    
    
    
    $
    29.7Certificates of deposit (2)
    
    
    18.5
    
    
    
    
    
    
    
    18.5Total assets measured at fair value (3)
    
    $
    48.2
    
    
    $
    
    
    
    $
    48.2Liabilities:Current variable-to-fixed interest rate swap
    
    $
    
    
    
    $
    (0.5
    )
    
    $
    (0.5
    )Total liabilities measured at fair value
    
    $
    
    
    
    $
    (0.5
    )
    
    $
    (0.5
    )Balances as of August 28, 2009:Assets: (1)Money market funds (2)
    
    $
    79.2
    
    
    $
    
    
    
    $
    79.2Certificates of deposit (2)
    
    
    24.0
    
    
    
    
    
    
    
    24.0Total assets measured at fair value (3)
    
    $
    103.2
    
    
    $
    
    
    
    $
    103.2Liabilities:Current variable-to-fixed interest rate swap
    
    $
    
    
    
    $
    (1.3
    )
    
    $
    (1.3
    )Total liabilities measured at fair value
    
    $
    
    
    
    $
    (1.3
    )
    
    $
    (1.3
    )
 
 (1)
    
    There were no assets or liabilities measured under Level 3.(2)
    
    Included in cash and cash equivalents on the Companys consolidated balance sheet.(3)
    
    The total in Level 1 does not include $70.5 million and $44.5 million of cash
balances from checking and savings accounts on February 26, 2010 and August 28, 2009, respectively. Derivative Instruments
 Derivatives and Hedging
   15




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##### Table of Contents



NOTE 9  Commitments and Contingencies
 Product Warranty
   Six Months EndedFebruary 26,2010Balance of accrual at August 28, 2009
    
    $
    694Warranty claims
    
    
    (309
    )Provision for product warranties
    
    
    247Balance of accrual at February 26, 2010
    
    $
    632
   Legal Matters
  Tessera
  
 
  16




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##### Table of Contents




   Ring Technology
  Contingencies
   17




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##### Table of Contents



NOTE 10  Segment and Geographic Information
   Three Months Ended
    
    
    Six Months EndedFebruary 26,
    
    
    February 27,
    
    
    February 26,
    
    
    February 27,2010
    
    
    2009
    
    
    2010
    
    
    2009Geographic net sales:U.S.
    
    $
    47,950
    
    
    $
    47,873
    
    
    $
    91,054
    
    
    $
    105,074Other Americas
    
    
    71,344
    
    
    
    26,968
    
    
    
    117,811
    
    
    
    70,056Europe
    
    
    9,832
    
    
    
    14,424
    
    
    
    18,462
    
    
    
    30,732Asia
    
    
    30,984
    
    
    
    19,824
    
    
    
    55,876
    
    
    
    44,002Total
    
    $
    160,110
    
    
    $
    109,089
    
    
    $
    283,203
    
    
    $
    249,864
 Three Months Ended
    
    
    Six Months EndedFebruary 26,
    
    
    February 27,
    
    
    February 26,
    
    
    February 27,2010
    
    
    2009
    
    
    2010
    
    
    2009Product net sales
    
    $
    150,320
    
    
    $
    100,190
    
    
    $
    265,461
    
    
    $
    228,990Service revenue
    
    
    9,790
    
    
    
    8,899
    
    
    
    17,742
    
    
    
    20,874Net sales
    
    $
    160,110
    
    
    $
    109,089
    
    
    $
    283,203
    
    
    $
    249,864
 February 26,
    
    
    August 28,2010
    
    
    2009Property and equipment, net:U.S.
    
    $
    6,557
    
    
    $
    7,724Other Americas
    
    
    23,595
    
    
    
    22,654Europe
    
    
    30
    
    
    
    40Asia
    
    
    6,872
    
    
    
    5,845Total
    
    $
    37,054
    
    
    $
    36,263
 NOTE 11  Major Customers
  Percent of Net SalesThree Months Ended
    
    
    Six Months EndedFebruary 26,
    
    
    February 27,
    
    
    February 26,
    
    
    February 27,2010
    
    
    2009
    
    
    2010
    
    
    2009Customer A
    
    
    22
    %
    
    
    30
    %
    
    
    22
    %
    
    
    32
    %Customer B
    
    
    18
    %
    
    
    12
    %
    
    
    18
    %
    
    
    12
    %Customer C
    
    
    13
    %
    
    
    *
    
    
    
    12
    %
    
    
    *
 
 *
    
    Less than 10%   18




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##### Table of Contents



NOTE 12  Restructuring
  NOTE 13  Subsidiary Guarantors
  NOTE 14 Other Income (Expense), Net
  Three Months Ended
    
    
    Six Months EndedFebruary 26,
    
    
    February 27,
    
    
    February 26,
    
    
    February 27,2010
    
    
    2009
    
    
    2010
    
    
    2009Gain on legal settlement*
    
    $
    3,044
    
    
    $
    
    
    
    $
    3,044
    
    
    $
    Gain on early repayment of long-term debt
    
    
    
    
    
    
    
    
    
    
    1,178
    
    
    
    Foreign currency gains (losses)
    
    
    2
    
    
    
    97
    
    
    
    (48
    )
    
    
    (703
    )Other
    
    
    179
    
    
    
    12
    
    
    
    343
    
    
    
    46Total other income (expense), net
    
    $
    3,225
    
    
    $
    109
    
    
    $
    4,517
    
    
    $
    (657
    )
 
 *
    
    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
   Executive Overview
   19




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##### Table of Contents



Key Business Metrics
  Net Sales
  Cost of Sales
  Research and Development Expenses
   20




---



##### Table of Contents



Selling, General and Administrative Expenses
  Critical Accounting Policies
   Revenue Recognition
    Three Months Ended
    
    
    Six Months EndedFebruary 26,
    
    
    February 27,
    
    
    February 26,
    
    
    February 27,2010
    
    
    2009
    
    
    2010
    
    
    2009Service revenue
    
    $
    9,790
    
    
    $
    8,899
    
    
    $
    17,742
    
    
    $
    20,874Cost of sales  service (1)
    
    
    211,390
    
    
    
    143,913
    
    
    
    364,994
    
    
    
    330,123Gross billings for services
    
    
    221,180
    
    
    
    152,812
    
    
    
    382,736
    
    
    
    350,997Plus: Product net sales
    
    
    150,320
    
    
    
    100,190
    
    
    
    265,461
    
    
    
    228,990Gross billings to customers
    
    $
    371,500
    
    
    $
    253,002
    
    
    $
    648,197
    
    
    $
    579,987Product net sales
    
    $
    150,320
    
    
    $
    100,190
    
    
    $
    265,461
    
    
    $
    228,990Service revenue
    
    
    9,790
    
    
    
    8,899
    
    
    
    17,742
    
    
    
    20,874Net sales
    
    $
    160,110
    
    
    $
    109,089
    
    
    $
    283,203
    
    
    $
    249,864
 
 (1)
    
    Represents cost of sales associated with service revenue reported on a net basis. Accounts Receivable
    21




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##### Table of Contents



Inventory Valuation
  Restructuring Charges
  Income Taxes
    Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed
   22




---



##### Table of Contents



Impairment of Goodwill
 Intangibles  Goodwill and Other
  Stock-Based Compensation
 Compensation  Stock Compensation
 Results of Operations
  Three Months Ended
    
    
    Six Months EndedFebruary 26,
    
    
    % of
    
    
    February 27,
    
    
    % of
    
    
    February 26,
    
    
    % of
    
    
    February 27,
    
    
    % of2010
    
    
    sales
    
    
    2009
    
    
    sales
    
    
    2010
    
    
    sales
    
    
    2009
    
    
    salesNet sales
    
    $
    160.1
    
    
    
    100
    %
    
    $
    109.1
    
    
    
    100
    %
    
    $
    283.2
    
    
    
    100
    %
    
    $
    249.9
    
    
    
    100
    %Cost of sales
    
    
    118.1
    
    
    
    74
    %
    
    
    85.0
    
    
    
    78
    %
    
    
    212.4
    
    
    
    75
    %
    
    
    200.0
    
    
    
    80
    %Gross profit
    
    
    42.0
    
    
    
    26
    %
    
    
    24.1
    
    
    
    22
    %
    
    
    70.8
    
    
    
    25
    %
    
    
    49.9
    
    
    
    20
    %Research and development
    
    
    5.2
    
    
    
    3
    %
    
    
    5.1
    
    
    
    5
    %
    
    
    10.9
    
    
    
    4
    %
    
    
    10.6
    
    
    
    4
    %Selling, general and administrative
    
    
    14.3
    
    
    
    9
    %
    
    
    13.8
    
    
    
    13
    %
    
    
    27.7
    
    
    
    10
    %
    
    
    28.2
    
    
    
    11
    %Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    3.2
    
    
    
    3
    %
    
    
    
    
    
    
    
    
    
    
    10.4
    
    
    
    4
    %Restructuring charges
    
    
    
    
    
    
    
    
    
    
    0.9
    
    
    
    1
    %
    
    
    
    
    
    
    
    
    
    
    1.8
    
    
    
    1
    %Total
operating expenses
(1)
    
    
    19.6
    
    
    
    12
    %
    
    
    23.1
    
    
    
    21
    %
    
    
    38.6
    
    
    
    14
    %
    
    
    51.1
    
    
    
    20
    %Income (loss) from operations (1)
    
    
    22.5
    
    
    
    14
    %
    
    
    1.0
    
    
    
    1
    %
    
    
    32.1
    
    
    
    11
    %
    
    
    (1.2
    )
    
    
    0
    %Interest expense, net
    
    
    (1.2
    )
    
    
    -1
    %
    
    
    (1.7
    )
    
    
    -2
    %
    
    
    (2.8
    )
    
    
    -1
    %
    
    
    (3.5
    )
    
    
    -1
    %Other income (expense), net
    
    
    3.2
    
    
    
    2
    %
    
    
    0.1
    
    
    
    0
    %
    
    
    4.5
    
    
    
    2
    %
    
    
    (0.7
    )
    
    
    0
    %Total other income (expense) (1)
    
    
    2.1
    
    
    
    1
    %
    
    
    (1.6
    )
    
    
    -1
    %
    
    
    1.7
    
    
    
    1
    %
    
    
    (4.1
    )
    
    
    -2
    %Income (loss) before provision
for income taxes (1)
    
    
    24.5
    
    
    
    15
    %
    
    
    (0.6
    )
    
    
    -1
    %
    
    
    33.8
    
    
    
    12
    %
    
    
    (5.3
    )
    
    
    -2
    %Provision for income taxes
    
    
    8.4
    
    
    
    5
    %
    
    
    1.3
    
    
    
    1
    %
    
    
    13.2
    
    
    
    5
    %
    
    
    3.4
    
    
    
    1
    %Net income (loss) (1)
    
    $
    16.1
    
    
    
    10
    %
    
    $
    (1.9
    )
    
    
    -2
    %
    
    $
    20.7
    
    
    
    7
    %
    
    $
    (8.7
    )
    
    
    -3
    %
 
 (1)
    
    Summations may not compute precisely due to rounding. Three and Six Months Ended February 26, 2010 as Compared to the Three and Six Months Ended
February 27, 2009
 Net Sales
   23




---



##### Table of Contents



Cost of Sales
    Gross Profit
   Research and Development Expenses
  Selling, General and Administrative Expenses
    24




---



##### Table of Contents



Goodwill Impairment and Restructuring Charges
  Interest Expense, Net
   Other Income (Expense), net
   Provision for Income Taxes
   Liquidity and Capital Resources
  Debt Service
   25




---



##### Table of Contents



Senior Secured Floating Rate Exchange Notes Due April 2012 (the Notes as referenced above).
 Senior Secured Revolving Line of Credit Facility
 Capital Expenditures
  Sources and Uses of Funds
    Historical Trends
  Cash Flows from Operating Activities.
  26




---



##### Table of Contents



Cash Flows from Investing Activities .
 Cash Flows from Financing Activities .
 Contractual Obligations
  Off-Balance Sheet Arrangements
   Inflation
  Recent Accounting Pronouncements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Foreign Exchange Risks
   27




---



##### Table of Contents



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
  
 Item 5. Other Information
 Submission of Matters to a Vote of Security Holders
  Nominee
    
    Votes For
    
    
    Votes Withheld
    
    
    Non-VotesIain MacKenzie
    
    
    52,907,582
    
    
    
    230,377
    
    
    
    5,589,855Ajay Shah
    
    
    52,913,890
    
    
    
    224,069
    
    
    
    5,589,855Harry W. (Webb) McKinney
    
    
    52,944,586
    
    
    
    193,373
    
    
    
    5,589,855Kimberly E. Alexy
    
    
    52,816,656
    
    
    
    321,303
    
    
    
    5,589,855Dennis McKenna
    
    
    52,946,886
    
    
    
    191,073
    
    
    
    5,589,855Dr. C.S. Park
    
    
    51,980,754
    
    
    
    1,157,205
    
    
    
    5,589,855Mukesh Patel
    
    
    52,919,090
    
    
    
    218,869
    
    
    
    5,589,855Clifton Thomas Weatherford
    
    
    52,806,948
    
    
    
    331,011
    
    
    
    5,589,855
  Votes For
    
    
    Votes Against
    
    
    
    Abstain58,128,359
    
    
    461,685
    
    
    
    137,770
  28




---



##### Table of Contents



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




---



##### 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 7, 2010  30




---



##### 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
  31