Form 6-K SMART Technologies Inc. For: Feb 05

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February 5, 2015 4:16 PM EST

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�

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

�

FORM 6-K

�

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

under the Securities Exchange Act of 1934

For the month of February 2015

Commission File Number 001-34798

�

SMART TECHNOLOGIES INC.

�

3636 Research Road N.W.

Calgary, Alberta

Canada T2L 1Y1

(Address of principal executive offices)

�

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F��Form 40-F��x

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule�101(b)(1):��

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule�101(b)(7):��

THIS REPORT ON FORM 6-K SHALL BE DEEMED FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE �COMMISSION�) AND INCORPORATED BY REFERENCE INTO THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-181530) OF SMART TECHNOLOGIES INC. FILED WITH THE COMMISSION, AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED TO THE COMMISSION, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS THE REGISTRANT SUBSEQUENTLY FURNISHES TO OR FILES WITH THE COMMISSION.

�

DOCUMENTS FILED AS PART OF THIS FORM 6-K

In connection with its announcement of financial results for the quarter ended December�31, 2014, SMART Technologies Inc. is filing the following documents:

Management�s discussion and analysis;

Interim consolidated financial statements; and

Certificates of the principal executive and financial officers.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

�


SMART TECHNOLOGIES INC.

By:		/s/ Jeffrey A. Losch
Name:		Jeffrey A. Losch
Title:		Vice President, Legal and General Counsel, and Corporate Secretary

Date: Thursday February 5, 2015

Exhibit Index

�



99.1		Management�s Discussion and Analysis for the three and nine months ended December 31, 2014

99.2		Interim consolidated financial statements of SMART Technologies Inc. for the three and nine months ended December 31, 2014 and 2013

99.3		Rule 13a-14(a)/15d-14(a) Certification of principal executive officer of SMART Technologies Inc.

99.4		Rule 13a-14(a)/15d-14(a) Certification of principal financial officer of SMART Technologies Inc.

�

2015

�

��Third Quarter Report

�

��for the three and nine months ended December 31, 2014

�

MANAGEMENT�S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following interim management�s discussion and analysis (�MD&A�) should be read in conjunction with our unaudited interim consolidated financial statements and the accompanying notes of SMART Technologies Inc. (the �Company�) for the three and nine months ended December�31, 2014 and the Company�s audited consolidated financial statements and accompanying notes, MD&A and Annual Information Form for the fiscal year ended March�31, 2014. The consolidated financial statements have been presented in United States (�U.S.�) dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (�GAAP�). Unless the context otherwise requires, any reference to the �Company�, �SMART Technologies�, �SMART^��, �we�, �our�, �us� or similar terms refers to SMART Technologies Inc. and its subsidiaries. Because our fiscal year ends on March�31, references to a fiscal year refer to the fiscal year ended March�31 of the same calendar year. For example, when we refer to fiscal 2015, we mean our fiscal year ended March�31, 2015. Unless otherwise indicated, all references to �$� and �dollars� in this discussion and analysis mean U.S. dollars. Certain amounts in our MD&A may not add due to rounding. All percentages have been calculated using unrounded amounts.

The following table sets forth the period end and period average exchange rates for U.S. dollars expressed in Canadian dollars that are used in the preparation of our unaudited interim consolidated financial statements and this MD&A. These rates are based on the closing rates published by the Bank of America and the Bank of Canada.

�


�	��	Period�End Rate		�	��	Period�Average Rate		�
Year ended March�31, 2014	��	�	1.1060	��	��	�	1.0535	��
Monthly Fiscal 2015	��				��
April	��	�	1.0943	��	��	�	1.0995	��
May	��	�	1.0846	��	��	�	1.0894	��
June	��	�	1.0665	��	��	�	1.0833	��
July	��	�	1.0902	��	��	�	1.0725	��
August	��	�	1.0878	��	��	�	1.0924	��
September	��	�	1.1163	��	��	�	1.0999	��
October	��	�	1.1189	��	��	�	1.1210	��
November	��	�	1.1415	��	��	�	1.1327	��
December	��	�	1.1610	��	��	�	1.1541	��
Monthly Fiscal 2014	��				��
April	��	�	1.0114	��	��	�	1.0190	��
May	��	�	1.0297	��	��	�	1.0201	��
June	��	�	1.0519	��	��	�	1.0320	��
July	��	�	1.0305	��	��	�	1.0407	��
August	��	�	1.0537	��	��	�	1.0378	��
September	��	�	1.0305	��	��	�	1.0357	��
October	��	�	1.0480	��	��	�	1.0361	��
November	��	�	1.0612	��	��	�	1.0485	��
December	��	�	1.0648	��	��	�	1.0638	��

This MD&A includes forward-looking statements which reflect our current views with respect to future events and financial performance. These statements include forward-looking statements both with respect to us specifically and the technology product industry and business, demographic and other matters in general. Statements which include the words �expanding�, �expect�, �increase�, �intend�, �plan�, �believe�,

�project�, �estimate�, �anticipate�, �may�, �will�, �continue�, �further�, �seek� and similar words or statements of a future or forward-looking nature identify forward-looking statements for purposes of the applicable securities laws or otherwise. In particular and without limitation, this MD&A contains forward-looking statements pertaining to general market conditions, our strategy and prospects, including expectations of the education and enterprise markets for our products, our plans and objectives for future operations, productivity enhancements and cost savings, our future financial performance and financial condition, the addition of new products to our portfolio and enhancements to current products, our industry, opportunities in the education and enterprise markets and licensing opportunities, working capital requirements, our acquisition strategy, regulation, exchange rates and income tax considerations.

All forward-looking statements address matters that involve risks, uncertainties and assumptions. Accordingly, there are or will be important factors and assumptions that could cause our actual results and other circumstances and events to differ materially from those indicated in these statements. These risk factors and assumptions include, but are not limited to, the following:

�

competition in our industry;

�

our ability to maintain sales to the education market that is in decline;

�

our ability to successfully execute our strategy to grow in the enterprise market;

�

our reliance upon a strategic partnership with Microsoft;

�

our ability to successfully execute our strategy to monetize software;

�

possible changes in the demand for our products;

�

shifts in product mix from interactive whiteboards to interactive flat panels;

�

difficulty in predicting our sales and operating results;

�

our substantial debt could adversely affect our financial condition;

�

our ability to raise additional funds, manage cash flow, foreign exchange risk and working capital;

�

changes to our business model;

�

reduced spending by our customers due to changes in the spending policies or budget priorities for government funding;

�

our ability to enhance current products and develop and introduce new products;

�

our ability to grow our sales in foreign markets;

�

the development of the market for interactive learning and collaboration products;

�

the potential negative impact of product defects;

�

our ability to establish new relationships and to build on our existing relationships with our resellers and distributors;

�

our ability to attract, retain and motivate qualified personnel;

�

the continued service and availability of a limited number of key personnel;

�

our ability to successfully obtain patents or registration for other intellectual property rights or protect, maintain and enforce such rights;

�

third-party claims of infringement or violation of, or other conflicts with, intellectual property rights by us;

�

the reliability of component supply and product assembly and logistical services provided by third parties;

�

our ability to manage our systems, procedures and controls;

�

our ability to protect our brand;

�

our ability to manage risks inherent in foreign operations;

�

the potential of increased costs related to future restructuring and related charges;

�

our ability to achieve the benefits from and integrate the operations of businesses we acquire;

�

our ability to achieve the benefits of strategic partnerships;

�

the potential negative impact of system failures or cyber security attacks; and

�

our ability to manage, defend and settle litigation.

Overview

SMART Technologies Inc. is a leading provider of technology solutions that are redefining the way the world works and learns. SMART solutions include interactive large format displays, collaboration software and services that enable highly interactive, engaging and productive teaching, learning and work experiences in schools and workplaces around the world. SMART is differentiated by its complete integrated solutions, superior performance and ease of use. We introduced the world�s first interactive whiteboard in 1991 and we remain the global leader in the interactive display market with over 3.1�million interactive displays shipped to date. Our focus is on developing a variety of easy-to-use solutions that combine interactive displays with robust software solutions in order to free people from their desks and computer screens, making collaboration and learning digitally more natural and engaging. We sell our solutions to schools and enterprises globally. In education, our solutions have transformed teaching and learning in over 2.8�million classrooms worldwide, reaching over 66�million students and teachers based on an assumed average classroom size of 24 students. In enterprise, our solutions improve the way people work and collaborate, enabling them to be more productive and reduce costs.

We offer a number of interactive display products including SMART Board^� interactive whiteboards and integrated flat panels, SMART kapp^TM capture board, LightRaise^TM interactive projectors, the SMART Table^� interactive learning center and the SMART Podium^TM. By touching the surface of a SMART interactive display, the user can control computer applications, access the Internet and our learning content ecosystem, write in digital ink and save and distribute work. Our award-winning solutions are the result of more than 20 years of technological innovation supported by our core intellectual property. Our interactive displays serve as the focal point of a broad classroom and meeting room technology platform. We augment our interactive displays with a range of modular and integrated interactive technology products and solutions, including hardware, software and content created by both our user community and professional content developers. Our collaborative learning solutions for education combine collaboration software with a comprehensive line of interactive displays and other hardware, accessories and services that further enhance learning. Our solutions for enterprise include a set of comprehensive products that combine industry-leading interactive displays with powerful collaboration software and premium support services.

Reportable Segments

In fiscal 2013, the Company announced a plan to move to a new organizational structure to improve efficiency, execution and customer experience. The Company is now organized based on differences in type of customer. The Education and Enterprise segments provide interactive displays and related hardware, software and services focusing on education and enterprise customers. The NextWindow segment provided desktop and large format interactive display components. The Company�s reportable segments are based on its organizational structure and the internal management information reviewed by its Chief Operating Decision Maker (�CODM�). The Company�s CODM has been identified as its Chief Executive Officer, who reviews internal management information to make decisions about allocating resources and to evaluate segment performance. The CODM evaluates the performance of the reportable segments based on revenue and Adjusted EBITDA.

Highlights

�

Revenue decreased by $72 million from $465 million in the first nine months of fiscal 2014 to $393 million in the first nine months of fiscal 2015. Adjusted Revenue (defined in �Non-GAAP measures� section) decreased by $103 million from $450 million in the first nine months of fiscal 2014 to $347

�

million in the first nine months of fiscal 2015. Gross margin percentage was 46% in the first nine months of fiscal 2015 compared to 42% in the first nine months of fiscal 2014. Adjusted Gross Margin (defined in �Non-GAAP measures� section) percentage was 39% in the first nine months of fiscal 2015 compared to 40% in the first nine months of fiscal 2014. Adjusted EBITDA decreased by $37 million from $71 million in the first nine months of fiscal 2014 to $34 million in the first nine months of fiscal 2015. Adjusted Net Income decreased by $26 million from $33 million in the first nine months of fiscal 2014 to $6 million in the first nine months of fiscal 2015.

�

In April 2014, we announced the resignation of two of our directors and the resulting change in share structure. Commensurate with the resignations of our founders, Mr.�Martin and Ms.�Knowlton from the Company�s Board of Directors, all of the issued and outstanding Class B Shares were automatically converted into single vote Class�A Subordinate Voting shares. The Company no longer has any issued and outstanding Class B shares that carry multiple voting privileges and no further Class B shares are permitted to be issued by the Company. The Class�A Subordinate Voting Shares have been re-designated as Common Shares.

�

In the first quarter of fiscal 2015, we implemented additional cost reduction measures with the objective of improving our operating efficiencies. The restructuring plan included a change in Education sales staffing and business focus for specific regions within our Europe, Middle East and Africa (�EMEA�) operations and a reorganization of our North American sales team, to a leaner organizational structure with additional reliance placed on key channel partners. We accrued $2 million in employee termination and other restructuring costs related to the restructuring plan in the first quarter of fiscal 2015.

Results of Operations

Revenue

�

��

Three�months�ended
December�31,

�

��

Percentage
Change

�

Nine�months� ended
December�31,

�

��

Percentage
Change

�

��

��2014��

�

��

��2013��

�

��

�

��2014��

�

��

��2013��

�

��

Revenue by segment

��

�

��

Education

��

100.0

��

111.4

��

�

(10.2

)%�

�

318.9

��

348.9

��

�

(8.6

)%�

Enterprise

��

�

26.6

��

�

33.5

��

�

(20.5

)%�

�

68.2

��

�

68.1

��

�

0.2

%�

NextWindow

��

�

��

�

13.1

��

�

(100.0

)%�

�

6.2

��

�

48.0

��

�

(87.1

)%�

��

�

��

�

��

�

��

�

��

�

��

126.6

��

158.0

��

�

(19.9

)%�

�

393.3

��

464.9

��

�

(15.4

)%�

��

�

��

�

��

�

��

�

��

�

Adjusted Revenue⁽¹⁾ by segment

��

�

��

Education

��

84.3

��

96.7

��

�

(12.8

)%�

�

273.2

��

334.0

��

�

(18.2

)%�

Enterprise

��

�

26.4

��

�

33.6

��

�

(21.3

)%�

�

67.5

��

�

67.6

��

�

(0.1

)%�

NextWindow

��

�

��

�

13.1

��

�

(100.0

)%�

�

6.2

��

�

48.0

��

�

(87.1

)%�

��

�

��

�

��

�

��

�

��

�

��

110.7

��

143.4

��

�

(22.8

)%�

�

347.0

��

449.6

��

�

(22.8

)%�

��

�

��

�

��

�

��

�

��

�

Revenue by geographic location

��

�

��

North America

��

73.9

��

86.4

��

�

(14.4

)%�

�

239.8

��

265.5

��

�

(9.7

)%�

Europe, Middle East and Africa

��

�

43.0

��

�

46.7

��

�

(7.9

)%�

�

111.7

��

�

124.4

��

�

(10.2

)%�

Rest of World

��

�

9.7

��

�

24.9

��

�

(61.1

)%�

�

41.8

��

�

75.1

��

�

(44.3

)%�

��

�

��

�

��

�

��

�

��

�

��

126.6

��

158.0

��

�

(19.9

)%�

�

393.3

��

464.9

��

�

(15.4

)%�

��

�

��

�

��

�

��

�

��

�

Adjusted Revenue⁽¹⁾ by geographic location

��

�

��

North America

��

65.0

��

77.2

��

�

(15.8

)%�

�

211.9

��

256.3

��

�

(17.3

)%�

Europe, Middle East and Africa

��

�

37.4

��

�

42.4

��

�

(11.7

)%�

�

97.5

��

�

119.5

��

�

(18.4

)%�

Rest of World

��

�

8.3

��

�

23.8

��

�

(65.1

)%�

�

37.5

��

�

73.9

��

�

(49.2

)%�

��

�

��

�

��

�

��

�

��

�

��

110.7

��

143.4

��

�

(22.8

)%�

�

347.0

��

449.6

��

�

(22.8

)%�

��

�

��

�

��

�

��

�

��

�

(1)	This is a non-GAAP measure. See �Non-GAAP measures� section for additional information.

Revenue decreased by $31 million in the third quarter of fiscal 2015 and $72 million in the first nine months of fiscal 2015 compared to the same periods in fiscal 2014. The change in deferred revenue, primarily due to the change in accounting estimate as a result of the reduction in the support period for previously sold products, positively impacted revenue by $16 million in the third quarter of fiscal 2015 and $46 million in the first nine months of fiscal 2015. Adjusted Revenue decreased by $33 million in the third quarter of fiscal 2015 and $103 million in the first nine months of fiscal 2015 compared to the same periods in fiscal 2014.

Education revenue decreased by $11 million in the third quarter of fiscal 2015 and $30 million in the first nine months of fiscal 2015 compared to the same periods in fiscal 2014. The change in deferred revenue, primarily due to the change in accounting estimate as a result of the reduction in the support period for previously sold products, positively impacted education revenue by $16 million in the third quarter of fiscal 2015 and $46 million in the first nine months of fiscal 2015. Education Adjusted Revenue decreased by $12 million in the third quarter of fiscal 2015 and $61 million in the first nine months of fiscal 2015 compared to the same periods in fiscal 2014, primarily due to lower revenue from interactive whiteboards and associated projectors, interactive projectors and attachment products, partly offset by strong period-over-period increases in revenue from interactive flat panels. Education revenue was impacted by high penetration rates in our core markets and competition for budget dollars from other classroom technologies, such as tablets and network infrastructure.

Enterprise revenue decreased by $7 million in the third quarter of fiscal 2015 and remained flat in the first nine months of fiscal 2015 compared to the same periods in fiscal 2014. The change in deferred revenue did not significantly impact enterprise revenue in the third quarter of fiscal 2015 and positively impacted revenue by $1 million in the first nine months of fiscal 2015. Enterprise Adjusted Revenue decreased by $7 million in the third quarter of fiscal 2015 and remained flat in the first nine months of fiscal 2015 compared to the same periods in fiscal 2014. The quarter-over-quarter decline was primarily due to lower revenue from interactive whiteboards and an initial channel stocking order with a new global distributor in the third quarter of fiscal 2014. In the first nine months of fiscal 2015 declines in interactive whiteboard sales were partly offset by growth in interactive flat panels compared to the same prior-year period.

NextWindow revenue and Adjusted Revenue decreased by $13 million in the third quarter of fiscal 2015 and $42 million in the first nine months of fiscal 2015 compared to the same periods in fiscal 2014. Sales of optical touch components were exceptionally strong in the prior-year periods, and in the third quarter of fiscal 2014 we made the decision to exit the optical touch sensor business for desktop displays and wind down our NextWindow segment. Sales ceased in the second quarter of fiscal 2015.

Revenues in North America and EMEA were negatively impacted by declines in the Education segment. The decrease in Adjusted Revenue in Rest of World was driven largely by strong sales of our optical touch components in the prior-year period.

In the third quarter of fiscal 2015 revenue was negatively impacted by foreign exchange movements of approximately $3 million compared to the same period in fiscal 2014 primarily as a result of the strengthening of the U.S. dollar against the Canadian dollar, Euro and British pound sterling (�GBP�). In the first nine months of fiscal 2015 revenue was negatively impacted by foreign exchange movements of approximately $2 million compared to the same period in fiscal 2014, primarily as a result of the strengthening of the U.S. dollar against the Canadian dollar and Euro, partly offset by the strengthening of the GBP against the U.S. dollar.

Gross Margin

�

��

Three�months� ended
December�31,

�

Percentage
Change

�

Nine�months� ended
December�31,

�

Percentage
Change

�

��

��2014��

�

�� 2013⁽¹⁾��

�

��2014��

�

�� 2013⁽¹⁾��

�

Gross margin

��

57.1

��

�

67.7

��

�

(15.6

)%�

�

182.5

��

�

196.9

��

�

(7.3

)%�

Gross margin percentage

��

�

45.1

%�

�

42.8

%�

�

2.3

pt�

�

46.4

%�

�

42.3

%�

�

4.1

pt�

Adjusted Gross Margin⁽²⁾

��

41.3

��

�

53.1

��

�

(22.2

)%�

�

136.2

��

�

181.5

��

�

(25.0

)%�

Adjusted Gross Margin percentage⁽²⁾

��

�

37.3

%�

�

37.0

%�

�

0.3

pt�

�

39.3

%�

�

40.4

%�

�

(1.1

)pt�

�

(1)	Certain reclassifications have been made to prior periods� figures to conform to the current period�s presentation.

(2)	These are non-GAAP measures. See �Non-GAAP measures� section for additional information.

Gross margin decreased by $11 million in the third quarter of fiscal 2015 and $14 million in the first nine months of fiscal 2015 compared to the same periods in fiscal 2014. The change in deferred revenue, primarily due to the change in accounting estimate as a result of the reduction in the support period for previously sold products, positively impacted gross margin by $16 million in the third quarter of fiscal 2015 and $46 million in the first nine months of fiscal 2015. Adjusted Gross Margin decreased by $12 million in the third quarter of fiscal 2015 and $45 million in the first nine months of fiscal 2015 compared to the same periods in fiscal 2014. The decrease in Adjusted Gross Margin percentage in the first nine months of fiscal 2015 compared to fiscal 2014 was due to a shift in product mix from interactive whiteboards to lower margin interactive flat panels. Gross margin was negatively impacted by foreign exchange movements of approximately $3 million in the third quarter of fiscal 2015 compared to the third quarter of fiscal 2014, primarily as a result of the strengthening of the U.S. dollar against the Euro which negatively impacted our revenue. Gross margin was negatively impacted by foreign exchange movements of approximately $1 million in the first nine months of fiscal 2015 compared to the first nine months of fiscal 2014, primarily as a result of the strengthening of the U.S. dollar against the Canadian dollar and Euro, which negatively impacted our revenue and positively impacted our cost of sales, partly offset by the weakening of the U.S. dollar against the GBP which positively impacted our revenue.

Operating Expenses

Selling, Marketing and Administration

�

��

Three�months� ended
December�31,

�

Percentage
Change

�

Nine�months� ended
December�31,

�

Percentage
Change

�

��

��2014��

�

�� 2013⁽¹⁾��

�

��2014��

�

�� 2013⁽¹⁾��

�

Selling, marketing and administration

��

23.2

��

�

29.3

��

�

(21.0

)%�

�

76.4

��

�

90.1

��

�

(15.2

)%�

As a percent of revenue

��

�

18.3

%�

�

18.6

%�

�

(0.3

)pt�

�

19.4

%�

�

19.4

%�

�

0.0

pt�

As a percent of Adjusted Revenue^�(2)

��

�

20.9

%�

�

20.5

%�

�

0.4

pt�

�

22.0

%�

�

20.0

%�

�

2.0

pt�

�

(1)	Certain reclassifications have been made to prior periods� figures to conform to the current period�s presentation.

(2)	This is a non-GAAP measure. See �Non-GAAP measures� section for additional information.

The decrease in selling, marketing and administration expenses in the third quarter and first nine months of fiscal 2015 compared to the same periods in fiscal 2014 was due to the impact of the restructuring activities which resulted in reductions in discretionary spending and compensation costs. Selling, marketing and administration expenses were positively impacted by foreign exchange movements of approximately $1 million in the third quarter of fiscal 2015 and $3 million in the first nine months of fiscal 2015 compared to the same periods in fiscal 2014, primarily as a result of the strengthening of the U.S. dollar relative to the Canadian dollar.

Research and Development

�

��

Three�months� ended
December�31,

�

Percentage
Change

�

Nine�months� ended
December�31,

�

Percentage
Change

�

��

��2014��

�

�� 2013⁽¹⁾��

�

��2014��

�

�� 2013⁽¹⁾��

�

Research and development

��

9.8

��

�

9.1

��

�

8.2

%�

�

32.6

��

�

29.5

��

�

10.5

%�

As a percent of revenue

��

�

7.8

%�

�

5.7

%�

�

2.1

pt�

�

8.3

%�

�

6.3

%�

�

2.0

pt�

As a percent of Adjusted Revenue^�(2)

��

�

8.9

%�

�

6.3

%�

�

2.6

pt�

�

9.4

%�

�

6.6

%�

�

2.8

pt�

�

(1)	Certain reclassifications have been made to prior periods� figures to conform to the current period�s presentation.

(2)	This is a non-GAAP measure. See �Non-GAAP measures� section for additional information.

Research and development remains a core focus and we continue to invest in product innovation and new technologies. Research and development expenses were positively impacted by foreign exchange movements of approximately $1 million in the third quarter of fiscal 2015 and $2 million in the first nine months of fiscal 2015 compared to the same periods in fiscal 2014, primarily as a result of the strengthening of the U.S. dollar relative to the Canadian dollar.

Depreciation and Amortization

�

��

Three�months� ended
December�31,

�

��

Percentage
Change

�

Nine�months�ended
December�31,

�

��

Percentage
Change

�

��

��2014��

�

��

��2013��

�

��

�

��2014��

�

��

��2013��

�

��

Depreciation and amortization of property and equipment

��

2.8

��

4.1

��

�

(32.4

)%�

�

8.8

��

12.7

��

�

(30.4

)%�

Amortization of intangible assets

��

0.0

��

8.5

��

�

(99.8

)%�

�

0.1

��

13.2

��

�

(99.6

)%�

The decrease in depreciation and amortization of property and equipment in the third quarter and first nine months of fiscal 2015 compared to the same periods in fiscal 2014 was due to decreases in capital expenditures and certain capital assets becoming fully depreciated. The decrease in the first nine months of fiscal 2015 compared to the first nine months of fiscal 2014 was also impacted by the wind down of NextWindow operations. The decrease in amortization of intangible assets in the third quarter and first nine months of fiscal 2015 compared to the same periods in fiscal 2014 was due to the change in accounting estimate in fiscal 2014 related to intangible assets which decreased the useful lives due to a decline in the optical touch sensor market for desktop displays, resulting in the decision to wind down the NextWindow operations.

Restructuring Costs

�

��

Three�months� ended
December�31,

�

��

Percentage
Change

�

��

Nine�months� ended
December�31,

�

��

Percentage
Change

�

��

��2014��

�

��2013��

�

��

��2014��

�

��

��2013��

�

��

Restructuring costs

��

(0.0

)�

�

3.7

��

�

N/A

��

2.3

��

3.0

��

�

(25.4

)%�

In the first quarter of fiscal 2015, we incurred $2 million in employee termination and other restructuring costs related to the fiscal 2015 restructuring plan.

Non-Operating Expenses (Income)

�

��

Three�months�ended
December�31,

�

Percentage
Change

�

Nine�months� ended
December�31,

�

Percentage
Change

�

��

��2014��

�

��

��2013��

�

��2014��

�

��2013��

�

Interest expense

��

5.0

��

5.5

��

�

(9.1

)%�

�

15.2

��

�

16.1

��

�

(5.8

)%�

Foreign exchange loss

��

3.9

��

3.7

��

�

6.9

%�

�

3.9

��

�

6.6

��

�

(40.1

)%�

Other expense (income)

��

0.1

��

(0.2

)�

�

N/A

��

�

(0.5

)�

�

(0.4

)�

�

24.4

%�

��

�

��

�

��

9.0

��

9.0

��

�

0.2

%�

�

18.6

��

�

22.3

��

�

(16.5

)%�

��

�

��

�

Interest Expense

The decrease in interest expense in the third quarter of fiscal 2015 compared to the third quarter of fiscal 2014 was due to repayments on the long term debt facility. The decrease in the first nine months of fiscal 2015 compared to the first nine months of fiscal 2014 was due to deferred financing fees expensed in the prior-year period offset by higher interest payments on the Term loan in the current year.

Foreign Exchange Loss

The change in foreign exchange loss is primarily related to the conversion of our U.S. dollar-denominated debt into our functional currency of Canadian dollars. From October�1, 2014 to December�31, 2014, the U.S dollar strengthened by 4.0% against the Canadian dollar from CDN$1.12 to CDN$1.16 compared to a 3.3% strengthening against the Canadian dollar for the same period last year. From March�31, 2014 to December�31, 2014, the U.S dollar strengthened by 5.0% against the Canadian dollar from CDN$1.11 to CDN$1.16 compared to a 4.8% strengthening against the Canadian dollar for the same period last year.

Other Expense (Income)

Other expense (income) in the first nine months of fiscal 2015 includes a reclassification of currency translation adjustment as a result of the liquidation of a foreign subsidiary.

Provision for Income Taxes

�

��

Three�months� ended
December�31,

�

Percentage
Change

�

Nine�months� ended
December�31,

�

Percentage
Change

�

��

��2014��

�

��2013��

�

��2014��

�

��2013��

�

Provision for income taxes

��

3.1

��

�

0.1

��

�

5270.2

%�

�

10.1

��

�

2.1

��

�

392.4

%�

Effective tax rate

��

�

24.7

%�

�

1.4

%�

�

23.3

pt�

�

23.1

%�

�

7.9

%�

�

15.2

pt�

The increase in income tax expense in the third quarter and first nine months of fiscal 2015 compared to the same periods in fiscal 2014 was due to the increase in income, unrealized foreign exchange losses, the release of valuation allowance and reduction in SR&ED tax credits. The tax provision also includes investment tax credits of $1 million in the third quarter of fiscal 2015 and $2 million in the first nine months of fiscal 2015, compared to $1 million in the third quarter of fiscal 2014 and $5 million in the first nine months of fiscal 2014.

Our tax provision is weighted towards Canadian income tax rates as substantially all our taxable income is Canadian-based. In calculating the tax provision, we adjust income before income taxes by the unrealized foreign exchange loss from the revaluation of the U.S. dollar-denominated debt. This is treated as a capital item for income tax purposes.

Adjusted EBITDA by segment

�

��

Three�months� ended
December�31,

�

Percentage
Change

�

Nine�months� ended
December�31,

�

Percentage
Change

�

��

��2014��

�

��2013��

�

��2014��

�

��2013��

�

Adjusted EBITDA⁽¹⁾ by segment

��

�

Education

��

23.3

��

�

32.6

��

�

(28.6

)%�

�

83.2

��

�

125.2

��

�

(33.6

)%�

Enterprise

��

�

5.4

��

�

9.9

��

�

(45.4

)%�

�

7.8

��

�

10.6

��

�

(26.4

)%�

NextWindow

��

�

0.4

��

�

(1.3

)�

�

N/A

��

�

3.3

��

�

5.1

��

�

(35.0

)%�

Corporate⁽²⁾

��

�

(18.7

)�

�

(22.0

)�

�

15.2

%�

�

(60.3

)�

�

(69.7

)�

�

13.4

%�

��

�

��

10.4

��

�

19.2

��

�

(45.8

)%�

�

34.0

��

�

71.2

��

�

(52.3

)%�

��

�

(1)	This is a non-GAAP measure. See �Non-GAAP measures� section for additional information.

(2)	Certain corporate level activity is not allocated to segments including research and development, corporate marketing expenses, general and administrative costs such as management, finance, legal, information systems and human resources, and restructuring costs.

The decrease in Education Adjusted EBITDA in the third quarter and first nine months of fiscal 2015 compared to the same periods in fiscal 2014 was due to lower revenue as discussed previously.

The decrease in Enterprise Adjusted EBITDA in the third quarter of fiscal 2015 compared to the same period in fiscal 2014 was due to lower revenue as discussed previously. The decrease in Enterprise Adjusted EBITDA in the first nine months of fiscal 2015 compared to the same period in fiscal 2014 was primarily due to an increase in operating expenses as we invest in future growth areas.

The increase in NextWindow Adjusted EBITDA in the third quarter of fiscal 2015 compared to the same period in fiscal 2014 was primarily due to a negative gross margin in the third quarter of fiscal 2014 related to accelerated manufacturing depreciation and inventory provisions as a result of the wind down. The decrease in NextWindow Adjusted EBITDA in the first nine months of fiscal 2015 compared to the same period in fiscal 2014 was primarily due to lower revenue as a result of the wind down.

Non-GAAP measures

We define Adjusted Revenue as revenue adjusted for the change in deferred revenue balances during the period.

We define Adjusted Gross Margin as gross margin adjusted for the change in deferred revenue balances during the period.

We define Adjusted EBITDA as net income before interest, income taxes, depreciation and amortization, as well as adjusting for the following items: foreign exchange gains or losses, net change in deferred revenue, stock-based compensation, costs of restructuring, impairment of goodwill, impairment of property and equipment, other income and gains or losses related to the sales of long-lived assets.

We define Adjusted Net Income as net income before stock-based compensation, costs of restructuring, foreign exchange gains or losses, net change in deferred revenue, amortization of intangible assets, impairment of goodwill, impairment of property and equipment, gains or losses related to the liquidation of foreign subsidiaries and gains or losses related to the sale of long-lived assets, all net of tax.

Adjusted Revenue, Adjusted Gross Margin, Adjusted EBITDA and Adjusted Net Income are non-GAAP measures and should not be considered as an alternative to net income or any other measure of financial performance calculated and presented in accordance with GAAP. Adjusted Revenue, Adjusted Gross Margin, Adjusted EBITDA, Adjusted Net Income and other non-GAAP measures have inherent limitations and therefore, you should not place undue reliance on them.

Due to the change in accounting estimate as a result of the reduction in the support period for previously sold products, discussed in Note 1(a) in the consolidated financial statements, management shows the non-GAAP measures, Adjusted Revenue and Adjusted Gross Margin. We use Adjusted Revenue and Adjusted Gross Margin as key measures to provide additional insights into the operational performance of the Company and to help clarify trends affecting the Company�s business.

We use Adjusted EBITDA as a key measure to assess the core operating performance of our business removing the effects of our leveraged capital structure and the volatility associated with the foreign exchange on our U.S. dollar-denominated debt. We also use Adjusted Net Income to assess the performance of the business removing the after-tax impact of stock-based compensation, costs of restructuring, impairment of goodwill, impairment of property and equipment, foreign exchange gains and losses, revenue deferral, amortization of intangible assets, and gains or losses related to the sale of long-lived assets. We use both of these measures to assess business performance when we evaluate our results in comparison to budgets, forecasts, prior-year financial results and other companies in our industry. Many of these companies use similar non-GAAP measures to supplement their GAAP disclosures but such measures may not be directly comparable. In addition to its use by management in the assessment of business performance, Adjusted EBITDA is used by our Board of Directors in assessing management�s performance and is a key metric in the determination of incentive plan payments. We believe Adjusted EBITDA and Adjusted Net Income may be useful to investors in evaluating our operating performance because securities analysts use metrics similar to Adjusted EBITDA and Adjusted Net Income as supplemental measures to evaluate the overall operating performance of companies.

Adjusted EBITDA and Adjusted Net Income are not impacted by the change in accounting estimate related to revenue recognition.

The following table shows the reconciliation of revenue to Adjusted Revenue and gross margin to Adjusted Gross Margin in millions of dollars.

�

��

Three�months� ended
December�31,

�

Nine�months� ended
December�31,

�

��

��2014��

�

��2013��

�

��2014��

�

��2013��

�

Adjusted Revenue

��

�

Revenue

��

126.6

��

�

158.0

��

�

393.3

��

�

464.9

��

Deferred revenue recognized�accelerated amortization

��

�

(15.3

)�

�

(16.8

)�

�

(47.7

)�

�

(17.5

)�

Net change on remaining deferred revenue

��

�

(0.5

)�

�

2.2

��

�

1.4

��

�

2.2

��

�

Adjusted Revenue

��

110.7

��

�

143.4

��

�

347.0

��

�

449.6

��

�

Adjusted Gross Margin

��

�

Gross margin

��

57.1

��

�

67.7

��

�

182.5

��

�

196.9

��

Deferred revenue recognized�accelerated amortization

��

�

(15.3

)�

�

(16.8

)�

�

(47.7

)�

�

(17.5

)�

Net change on remaining deferred revenue

��

�

(0.5

)�

�

2.2

��

�

1.4

��

�

2.2

��

�

Adjusted Gross Margin

��

41.3

��

�

53.1

��

�

136.2

��

�

181.5

��

�

Certain reclassifications have been made to prior periods� figures to conform to the current period�s presentation.

The following table shows the reconciliations of net income to Adjusted Net Income and Adjusted EBITDA in millions of dollars and basic and diluted earnings per share to Adjusted Net Income per share.

�

��

Three�months� ended
December�31,

�

Nine�months� ended
December�31,

�

��

��2014��

�

��2013��

�

��2014��

�

��2013��

�

Net income

��

9.3

��

�

4.0

��

�

33.7

��

�

24.1

��

Adjustments to net income

��

�

Amortization of intangible assets

��

�

0.0

��

�

8.5

��

�

0.1

��

�

13.2

��

Foreign exchange loss

��

�

3.9

��

�

3.7

��

�

3.9

��

�

6.6

��

Change in deferred revenue⁽¹⁾

��

�

(15.8

)�

�

(14.6

)�

�

(46.3

)�

�

(15.3

)�

Stock-based compensation

��

�

0.9

��

�

0.7

��

�

2.7

��

�

2.3

��

Costs of restructuring

��

�

(0.0

)�

�

3.7

��

�

2.3

��

�

3.0

��

Gain on liquidation of foreign subsidiary⁽²⁾

��

�

��

�

��

�

(0.4

)�

�

��

Loss (gain) on sale of long-lived assets⁽³⁾

��

�

0.0

��

�

(0.0

)�

�

(0.1

)�

�

(0.0

)�

��

�

��

�

(11.1

)�

�

2.0

��

�

(37.8

)�

�

9.9

��

Tax impact on adjustments⁽⁴⁾⁽⁵⁾

��

�

(3.5

)�

�

(3.0

)�

�

(10.5

)�

�

1.0

��

�

Adjustments to net income, net of tax

��

�

(7.6

)�

�

5.0

��

�

(27.3

)�

�

8.9

��

�

Adjusted Net Income

��

1.7

��

�

9.0

��

�

6.5

��

�

33.0

��

Additional adjustments to net income

��

�

Income tax (recovery) expense⁽⁶⁾

��

�

(0.4

)�

�

(3.0

)�

�

(0.4

)�

�

3.0

��

Depreciation in cost of sales

��

�

1.3

��

�

3.8

��

�

4.0

��

�

6.9

��

Depreciation of property and equipment

��

�

2.8

��

�

4.1

��

�

8.8

��

�

12.7

��

Interest expense

��

�

5.0

��

�

5.5

��

�

15.2

��

�

16.1

��

Other expense (income)⁽²⁾

��

�

0.1

��

�

(0.2

)�

�

(0.1

)�

�

(0.4

)�

��

�

Adjusted EBITDA

��

10.4

��

�

19.2

��

�

34.0

��

�

71.2

��

�

As a percent of revenue⁽⁷⁾

��

�

9.4

%�

�

13.4

%�

�

9.8

%�

�

15.8

%�

Adjusted Net Income per share

��

�

Earnings per share�basic

��

0.08

��

�

0.03

��

�

0.28

��

�

0.20

��

Adjustments to net income, net of tax, per share

��

�

(0.07

)�

�

0.04

��

�

(0.23

)�

�

0.07

��

�

Adjusted Net Income per share�basic

��

0.01

��

�

0.07

��

�

0.05

��

�

0.27

��

�

Earnings per share�diluted

��

0.07

��

�

0.03

��

�

0.27

��

�

0.19

��

Adjustments to net income, net of tax, per share

��

�

(0.06

)�

�

0.04

��

�

(0.22

)�

�

0.07

��

�

Adjusted Net Income per share�diluted

��

0.01

��

�

0.07

��

�

0.05

��

�

0.26

��

�

(1)

Change in deferred revenue is calculated as the difference between deferred revenue and deferred revenue recognized. In accordance with our revenue recognition policy, deferred revenue represents the portion of our sales that we do not recognize in the period. Deferred revenue recognized represents the portion of our revenue deferred in a prior period that we recognized in the current period.

(2)	Included in Other expense (income) in the consolidated statements of operations.

(3)	In fiscal 2014, we updated our definition of Adjusted Net Income to adjust for gains or losses on sale of long-lived assets. Prior periods� figures have been adjusted to reflect the change.

(4)

Reflects the tax impact on the adjustments to net income. A key driver of our foreign exchange loss is the conversion of our U.S. dollar-denominated debt into our functional currency of Canadian dollars. Our new credit facility refinancing that closed on July�31, 2013 was incurred at a rate of 1.03. Prior to July�31, 2013, our U.S. dollar-denominated debt was originally incurred at a rate of 1.05. When the unrealized foreign exchange amount on U.S. dollar-denominated debt is in a net gain position as measured against the original exchange rate, the gain is tax-effected at current rates. When the unrealized foreign exchange amount on the U.S. dollar-denominated debt is in a net loss position as measured against the original exchange rate and the loss cannot be carried back to a previous year, a valuation allowance is taken against it and as a result no net tax effect is recorded.

(5)	Prior periods� figures have been adjusted to reflect a change in the tax treatment of the change in deferred revenue.

(6)

Income tax expense of $3.1 million and $10.1 million (2013 � $0.1 million and $2.1 million) per consolidated statement of operations, net of tax impact on adjustments to Adjusted Net Income of $3.5 million and $10.5 million for the three and nine months ending December�31, 2014 (2013 � $3.0 million and ($1.0) million).

(7)	Adjusted EBITDA as a percent of revenue is calculated by dividing Adjusted EBITDA by revenue after adding back the net change in deferred revenue.

Selected Quarterly Financial Data

The following table shows a summary of the Company�s unaudited quarterly financial information and non-GAAP measures for each of the eight most recent quarters, including the quarter ended December�31, 2014. The information in the table below has been derived from our unaudited interim consolidated financial statements. Our quarterly operating results have varied substantially in the past and may vary substantially in the future. Accordingly, the information below is not necessarily indicative of future results. Data for the periods are indicated in millions of dollars, except for per share amounts.

�

��

Fiscal Year 2015

�

Fiscal Year 2014

�

��

Fiscal�Year�2013

�

��

Third
Quarter

�

��

Second
Quarter

�

��

First
Quarter

�

Fourth
Quarter

�

Third
Quarter

�

��

Second
Quarter

�

��

First
Quarter

�

��

Fourth
Quarter

�

Revenue

��

126.6

��

129.2

��

137.5

��

�

124.2

��

�

158.0

��

151.1

��

155.9

��

105.2

��

Gross margin

��

�

57.1

��

�

62.5

��

�

62.9

��

�

52.2

��

�

67.7

��

�

62.8

��

�

66.4

��

�

44.5

��

Net income (loss)

��

�

9.3

��

�

12.3

��

�

12.1

��

�

(3.6

)�

�

4.0

��

�

10.8

��

�

9.2

��

�

(18.7

)�

Earnings (loss) per share

��

�

��

Basic

��

0.08

��

0.10

��

0.10

��

�

(0.03

)�

�

0.03

��

0.09

��

0.08

��

(0.15

)�

Diluted

��

0.07

��

0.10

��

0.10

��

�

(0.03

)�

�

0.03

��

0.09

��

0.07

��

(0.15

)�

Non-GAAP measures:

��

�

��

Adjusted Revenue

��

110.7

��

113.4

��

122.8

��

�

108.7

��

�

143.4

��

150.4

��

155.9

��

100.8

��

Adjusted Gross Margin

��

�

41.3

��

�

46.7

��

�

48.2

��

�

36.7

��

�

53.1

��

�

62.1

��

�

66.4

��

�

40.1

��

Adjusted EBITDA

��

�

10.4

��

�

13.3

��

�

10.3

��

�

3.2

��

�

19.2

��

�

24.5

��

�

27.5

��

�

(8.8

)�

Adjusted�Net�Income�(Loss)

��

�

1.7

��

�

5.0

��

�

(0.3

)�

�

(5.8

)�

�

9.0

��

�

7.2

��

�

16.9

��

�

(12.9

)�

Adjusted Net Income (Loss) per share

��

�

��

Basic

��

0.01

��

0.04

��

(0.00

)�

�

(0.05

)�

�

0.07

��

0.06

��

0.14

��

(0.10

)�

Diluted

��

0.01

��

0.04

��

(0.00

)�

�

(0.05

)�

�

0.07

��

0.06

��

0.13

��

(0.10

)�

�

Certain reclassifications have been made to prior periods� figures to conform to the current period�s presentation.

Liquidity and Capital Resources

As of December�31, 2014 we held cash and cash equivalents of $74 million. Our primary source of cash flow is generated from sales of interactive displays and related attachment products. We believe that ongoing operations and associated cash flow in addition to our cash resources and revolving credit facilities provide sufficient liquidity to support our business operations for at least the next 12 months.

As of December�31, 2014, our outstanding debt balance was as follows:

�

��

Issue�Date

��

Maturity�Date

�

��

Interest�Rate

�

Amount�Outstanding

�

Term loan, net of unamortized debt discount of $4.8 million

��

July�31,�2013

��

�

Jan�31,�2018

��

�

LIBOR�+�9.25

%�

�

108.4�million

��

In July 2013, the Company closed its credit facility refinancing. The Company entered into a four-and-a-half year, $125 million senior secured term loan (the �Term loan�) and a four-year, $50 million asset-based loan credit facility (the �ABL�). The Term loan bears interest at LIBOR plus 9.25% with a LIBOR floor of 1.25% and will amortize at 7.5%�per annum during the first two-and-a-half years and 10% in the last two years. The ABL bears interest at LIBOR plus 2.5% and was undrawn as of December�31, 2014.

All debt and credit facilities are denominated in U.S. dollars.

The following table shows a summary of our cash flows provided by operating activities, financing activities and investing activities for the periods indicated.

�


�	��	Nine months ended December�31,						�
�	��	��2014��		�	�	��2013��		�
Net cash provided by operating activities	��	$	30.5	��	�	$	15.5	��
Net cash (used in) provided by investing activities	��	$	(4.4	)�	�	$	68.2	��
Net cash used in financing activities	��	$	(7.7	)�	�	$	(177.9	)�

Net Cash Provided by Operating Activities

Net cash provided by operating activities increased due to a net decrease in period-over-period working capital. The decrease in working capital in the first nine months of fiscal 2015 is due to decreases in accounts payable and accrued liabilities partly offset by decreases in inventory and trade receivables.

Net Cash (Used In) Provided By Investing Activities

Net cash used in investing activities decreased due to lower capital expenditures in the first nine months of fiscal 2015 and proceeds received from the sale of our global headquarters building in the first nine months of fiscal 2014.

Net Cash Used In Financing Activities

Net cash used in financing activities increased in the first nine months of fiscal 2014 as we closed our credit facility refinancing. We entered into a $125 million senior secured Term loan and repaid the balance of the First lien facility.

Contractual Obligations, Commitments, Guarantees and Contingencies

Contractual Obligations and Commitments

We have certain fixed contractual obligations and commitments that include future estimated payments for general operating purposes. Changes in our business needs, contractual cancellation provisions, fluctuating

foreign exchange and interest rates, and other factors may result in actual payments differing from estimates. The following table summarizes our outstanding contractual obligations in millions of dollars as of December�31, 2014.

�

��

12 Months Ending December�31,

�

��

�

��

2015

�

��

2016

�

��

2017

�

��

2018

�

��

2019

�

��

2020 and
thereafter

�

��

Total

�

Operating leases

��

2.1

��

2.2

��

1.9

��

1.8

��

1.7

��

0.4

��

10.1

��

Capital lease

��

�

5.1

��

�

5.1

��

�

5.1

��

�

5.4

��

�

5.5

��

�

80.5

��

�

106.7

��

Long-term debt repayments

��

Long-term debt

��

�

9.4

��

�

12.5

��

�

12.5

��

�

78.9

��

�

��

�

��

�

113.3

��

Future interest obligations on long-term debt

��

�

11.7

��

�

10.6

��

�

9.2

��

�

0.7

��

�

��

�

��

�

32.2

��

Purchase commitments

��

�

50.4

��

�

0.7

��

�

0.0

��

�

��

�

��

�

��

�

51.1

��

�

��

�

��

�

��

�

��

�

��

�

��

�

Total

��

78.7

��

31.1

��

28.7

��

86.8

��

7.2

��

80.9

��

313.4

��

�

��

�

��

�

��

�

��

�

��

�

��

�

The operating lease commitments relate primarily to office and warehouse space and represent the minimum commitments under these agreements.

The capital lease commitment relates to our headquarters building and represents our minimum capital lease payments (including amounts representing interest) under the lease agreement and management fees.

Long-term debt commitments represent the minimum principal repayments required under our long-term debt facility.

Our purchase commitments are for finished goods from contract manufacturers and certain information systems and licensing costs.

Commitments have been calculated using foreign exchange rates and interest rates in effect at December�31, 2014. Fluctuations in these rates may result in actual payments differing from those in the above table.

Guarantees and Contingencies

Legal Proceedings

The Company is subject to litigation, claims, investigations and audits arising from time to time in the ordinary course of our business. Although legal proceedings are inherently unpredictable, the Company believes that it has valid defenses with respect to any matters currently pending against the Company and intends to defend itself vigorously. The outcome of these matters, individually and in the aggregate, is not expected to have a material impact on the Company�s cash flows, results of operations, or financial position.

Indemnities and Guarantees

In the normal course of business, we enter into guarantees that provide indemnification and guarantees to counterparties to secure sales agreements and purchase commitments. Should we be required to act under such agreements, it is expected that no material loss would result.

Off-Balance Sheet Arrangements

As of December�31, 2014, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.

Changes in Internal Control Over Financial Reporting

During the nine months ended December�31, 2014, no changes were made to the Company�s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company�s internal control over financial reporting.

Quantitative and Qualitative Disclosures about Market and Other Financial Risks

In the normal course of our business, we engage in operating and financing activities that generate risks in the following primary areas.

Foreign Currency Risk

Foreign currency risk is the risk that fluctuations in foreign exchange rates could impact our results from operations. We are exposed to foreign exchange risk primarily between the Canadian dollar and both the U.S. dollar and the Euro. This exposure relates to our U.S. dollar denominated debt, the sale of our products to customers globally and purchases of goods and services in foreign currencies. A large portion of our revenue and purchases of materials and components are denominated in U.S. dollars. However, a substantial portion of our revenue is denominated in other foreign currencies, primarily the Canadian dollar, Euro and British pound sterling. If the value of any of these currencies depreciates relative to the U.S. dollar, our foreign currency revenue will decrease when translated to U.S. dollars for financial reporting purposes. In addition, a portion of our cost of goods sold, operating costs and capital expenditures are incurred in other currencies, primarily the Canadian dollar and the Euro. If the value of either of these currencies appreciates relative to the U.S. dollar, our expenses will increase when translated to U.S. dollars for financial reporting purposes.

We continually monitor foreign exchange rates and periodically enter into forward contracts and other derivative contracts to convert a portion of our forecasted foreign currency denominated cash flows into Canadian dollars for the purpose of paying our Canadian dollar denominated operating costs. We target to cover between 25% and 75% of our expected Canadian dollar cash needs for the next 12 months through the use of forward contracts and other derivatives with the actual percentage determined by management based on the changing exchange rate environment. We may also enter into forward contracts and other derivative contracts to manage our cash flows in other currencies. We do not use derivative financial instruments for speculative purposes. We have also entered into and continue to look for opportunities within our supply chain to match our cost structures to our foreign currency revenues.

These programs reduce, but do not entirely eliminate, the impact of currency exchange movements. Our current practice is to use foreign currency derivatives without hedge accounting designation. The maturity of these instruments generally occurs within 12 months. Gains or losses resulting from the fair valuing of these instruments are reported in foreign exchange loss on the consolidated statements of operations.

Interest Rate Risk

Interest rate risk is the risk that the value of a financial instrument will be affected by changes in market interest rates. Our financing includes long-term debt and revolving credit facilities that bear interest based on floating market rates. Changes in these rates result in fluctuations in the required cash flows to service this debt. In the past, we have partially mitigated this risk by periodically entering into interest rate swap agreements to fix the interest rate on certain long-term variable-rate debt, and may continue to do so in the future. Our current practice is to use interest rate derivatives without hedge accounting designation. Changes in the fair value of these interest rate derivatives are included in interest expense in our consolidated statement of operations.

Credit Risk

Credit risk is the risk that the counterparty to a financial instrument fails to meet its contractual obligations, resulting in a financial loss to us.

We sell to a diverse customer base over a global geographic area. We evaluate collectability of specific customer receivables based on a variety of factors including currency risk, geopolitical risk, payment history, customer stability and other economic factors. Collectability of receivables is reviewed on an ongoing basis by management and the allowance for doubtful receivables is adjusted as required. Account balances are charged against the allowance for doubtful receivables when we determine that it is probable that the receivable will not be recovered. We believe that the geographic diversity of the customer base, combined with our established credit approval practices and ongoing monitoring of customer balances, mitigates this counterparty risk.

We may also be exposed to certain losses in the event that counterparties to the derivative financial instruments are unable to meet the terms of the contracts. Our credit exposure is limited to those counterparties holding derivative contracts with positive fair values at the reporting date. We manage this counterparty credit risk by entering into contracts with large established counterparties.

Liquidity Risk

Liquidity risk is the risk that we will not be able to meet our financial obligations as they come due. We continually monitor our actual and projected cash flows and believe that our internally generated cash flows, combined with our revolving credit facilities, will provide us with sufficient funding to meet all working capital and financing needs for at least the next 12 months.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with GAAP requires us to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. We base our estimates on historical experience and various other assumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates and such differences may be material.

We believe our critical accounting policies and estimates are those related to revenue recognition, inventory valuation and purchase commitments, warranty costs, income taxes, restructuring costs and legal and other contingencies. We consider these policies critical because they are both important to the portrayal of our financial condition and operating results, and they require us to make judgments and estimates about inherently uncertain matters. Our company�s critical accounting policies and estimates used in the preparation of our financial statements are reviewed regularly by management and have not changed from those disclosed in the March�31, 2014 audited consolidated financial statements, except as disclosed in Note 1�Basis of presentation and significant accounting policies in the consolidated financial statements for the three and nine months ended December�31, 2014.

�

Interim Consolidated Financial Statements of

SMART Technologies Inc.

Three and nine months ended December�31, 2014 and 2013

�

SMART Technologies Inc.

Consolidated Statements of Operations (unaudited)

(thousands of U.S. dollars, except number of shares)

�

��

Three months ended
December�31,

�

Nine months ended
December�31,

�

��

2014

�

2013

�

2014

�

2013

�

Revenue (note 1(a))

��

126,577

��

�

157,971

��

�

393,271

��

�

464,941

��

Cost of sales

��

�

69,457

��

�

90,308

��

�

210,762

��

�

268,067

��

�

Gross margin

��

�

57,120

��

�

67,663

��

�

182,509

��

�

196,874

��

Operating expenses

��

�

Selling, marketing and administration

��

�

23,182

��

�

29,328

��

�

76,418

��

�

90,084

��

Research and development

��

�

9,828

��

�

9,081

��

�

32,575

��

�

29,471

��

Depreciation and amortization of property and equipment

��

�

2,753

��

�

4,074

��

�

8,810

��

�

12,666

��

Amortization of intangible assets

��

�

��

�

8,463

��

�

��

�

13,236

��

Restructuring costs (note 2)

��

�

(26

)�

�

3,707

��

�

2,269

��

�

3,042

��

Loss (gain) on sale of long-lived assets

��

�

��

�

(18

)�

�

(85

)�

�

)�

��

�

��

�

35,758

��

�

54,635

��

�

120,042

��

�

148,491

��

�

Operating income

��

�

21,362

��

�

13,028

��

�

62,467

��

�

48,383

��

Non-operating expenses (income)

��

�

Interest expense

��

�

4,989

��

�

5,490

��

�

15,168

��

�

16,101

��

Foreign exchange loss

��

�

3,924

��

�

3,671

��

�

3,946

��

�

6,589

��

Other expense (income)

��

�

��

�

(200

)�

�

(525

)�

�

(422

)�

��

�

��

�

8,981

��

�

8,961

��

�

18,589

��

�

22,268

��

�

Income before income taxes

��

�

12,381

��

�

4,067

��

�

43,878

��

�

26,115

��

Income tax expense (recovery) (note 7)

��

�

Current

��

�

(630

)�

�

(1,029

)�

�

(1,550

)�

�

3,730

��

Deferred

��

�

3,691

��

�

1,086

��

�

11,688

��

�

(1,671

)�

��

�

��

�

3,061

��

�

��

�

10,138

��

�

2,059

��

�

Net income

��

9,320

��

�

4,010

��

�

33,740

��

�

24,056

��

�

Earnings per share (note 9)

��

�

Basic

��

0.08

��

�

0.03

��

�

0.28

��

�

0.20

��

Diluted

��

0.07

��

�

0.03

��

�

0.27

��

�

0.19

��

�

See accompanying notes to consolidated financial statements

SMART Technologies Inc.

Consolidated Statements of Comprehensive Income (unaudited)

(thousands of U.S. dollars)

�

��

Three�months� ended
December�31,

�

��

Nine months ended
December�31,

�

��

2014

�

2013

�

��

2014

�

2013

�

Net income

��

9,320

��

�

4,010

��

33,740

��

�

24,056

��

Other comprehensive income

��

�

��

�

Unrealized (losses) gains on translation of consolidated financial statements to U.S. dollar reporting currency

��

�

(180

)�

�

1,005

��

�

(671

)�

�

2,007

��

Unrealized gains on translation of foreign subsidiaries to Canadian dollar functional currency, net of income taxes of ($135) and $222 for the three and nine months ended December�31, 2014 (($81) and ($96) for the three and nine months ended December�31, 2013).

��

�

1,438

��

�

1,722

��

�

2,254

��

�

2,695

��

Reclassification of cumulative currency translation adjustments relating to liquidated subsidiary to Other expense (income), net of income taxes of $0 for the nine months ended December�31, 2014.

��

�

��

�

��

�

(422

)�

�

��

�

��

�

��

�

1,258

��

�

2,727

��

�

1,161

��

�

4,702

��

�

��

�

Total comprehensive income

��

10,578

��

�

6,737

��

34,901

��

�

28,758

��

�

��

�

See accompanying notes to consolidated financial statements

SMART Technologies Inc.

Consolidated Balance Sheets (unaudited)

(thousands of U.S. dollars, except number of shares)

�


�	��	December�31, 2014		�	�	March�31, 2014		�
ASSETS	��				�
Current assets	��				�
Cash and cash equivalents	��	$	74,410	��	�	$	58,146	��
Trade receivables, net of allowance for doubtful accounts of $4,844 and $3,182	��	�	69,364	��	�	�	86,809	��
Other current assets	��	�	6,511	��	�	�	9,228	��
Income taxes recoverable	��	�	9,434	��	�	�	2,996	��
Inventory (note 3)	��	�	49,354	��	�	�	78,191	��
Deferred income taxes	��	�	13,968	��	�	�	27,045	��
	��	�	�	�	�	�	�	�
	��	�	223,041	��	�	�	262,415	��

Property and equipment (note 4)	��	�	61,092	��	�	�	73,615	��
Intangible assets, net of accumulated amortization of $50,663 and $50,569	��	�	310	��	�	�	449	��
Deferred income taxes	��	�	7,248	��	�	�	6,788	��
Deferred financing fees	��	�	2,937	��	�	�	3,859	��
Other long-term assets	��	�	388	��	�	�	407	��
	��	�	�	�	�	�	�	�
	��	$	295,016	��	�	$	347,533	��
	��	�	�	�	�	�	�	�
LIABILITIES AND SHAREHOLDERS� EQUITY (DEFICIT)	��				�
Current liabilities	��				�
Accounts payable	��	$	26,563	��	�	$	31,075	��
Accrued and other current liabilities	��	�	48,397	��	�	�	82,936	��
Deferred revenue	��	�	26,892	��	�	�	74,115	��
Current portion of capital lease obligation	��	�	1,185	��	�	�	1,184	��
Current portion of long-term debt (note 5)	��	�	9,375	��	�	�	9,375	��
	��	�	�	�	�	�	�	�
	��	�	112,412	��	�	�	198,685	��

Long-term debt (note 5)	��	�	99,071	��	�	�	104,923	��
Capital lease obligation	��	�	59,072	��	�	�	62,950	��
Deferred revenue	��	�	15,437	��	�	�	9,745	��
Other long-term liabilities	��	�	155	��	�	�	201	��
	��	�	�	�	�	�	�	�
	��	�	286,147	��	�	�	376,504	��
Shareholders� equity (deficit)	��				�
Share capital (note 6)	��				�
Common Shares�no par value; unlimited shares authorized; outstanding 122,185,913 and 42,172,275	��	�	696,083	��	�	�	456,474	��
Class B Shares�no par value; unlimited shares authorized; outstanding 0 and 79,464,195	��	�	��	��	�	�	238,407	��
Treasury Shares (Common Shares)�outstanding 410,502	��	�	(840	)�	�	�	(840	)�
Accumulated other comprehensive loss	��	�	(303	)�	�	�	(1,464	)�
Additional paid-in capital	��	�	45,475	��	�	�	43,738	��
Deficit	��	�	(731,546	)�	�	�	(765,286	)�
	��	�	�	�	�	�	�	�
	��	�	8,869	��	�	�	(28,971	)�
	��	�	�	�	�	�	�	�
	��	$	295,016	��	�	$	347,533	��
	��	�	�	�	�	�	�	�

See accompanying notes to consolidated financial statements

SMART Technologies Inc.

Consolidated Statements of Shareholders� Equity (Deficit) (unaudited)

(thousands of U.S. dollars)

�


�	��	Nine months ended December�31,						�
�	��	2014		�	�	2013		�
Share capital stated amount (note 6)	��				�
Balance, beginning of period	��	$	694,041	��	�	$	692,270	��
Participant Equity Loan Plan	��	�	181	��	�	�	556	��
Shares issued under stock plans	��	�	1,021	��	�	�	1,054	��
	��	�	�	�	�	�	�	�
Balance, end of period	��	�	695,243	��	�	�	693,880	��

Accumulated other comprehensive loss	��				�
Balance, beginning of period	��	�	(1,464	)�	�	�	(8,737	)�
Other comprehensive income	��	�	1,161	��	�	�	4,702	��
	��	�	�	�	�	�	�	�
Balance, end of period	��	�	(303	)�	�	�	(4,035	)�

Additional paid-in capital	��				�
Balance, beginning of period	��	�	43,738	��	�	�	41,281	��
Stock-based compensation expense	��	�	2,739	��	�	�	2,337	��
Shares issued under stock plans	��	�	(1,002	)�	�	�	(1,042	)�
	��	�	�	�	�	�	�	�
Balance, end of period	��	�	45,475	��	�	�	42,576	��

Deficit	��				�
Balance, beginning of period	��	�	(765,286	)�	�	�	(785,830	)�
Net income	��	�	33,740	��	�	�	24,056	��
	��	�	�	�	�	�	�	�
Balance, end of period	��	�	(731,546	)�	�	�	(761,774	)�
	��	�	�	�	�	�	�	�
Total shareholders� equity (deficit)	��	$	8,869	��	�	$	(29,353	)�
	��	�	�	�	�	�	�	�

�

See accompanying notes to consolidated financial statements

SMART Technologies Inc.

Consolidated Statements of Cash Flows (unaudited)

(thousands of U.S. dollars)

�


�	��	Nine months ended December�31,						�
�	��	2014		�	�	2013		�
Cash provided by (used in)	��				�
Operations	��				�
Net income	��	$	33,740	��	�	$	24,056	��
Adjustments to reconcile net income to cash provided by operating activities	��				�
Depreciation and amortization of property and equipment	��	�	12,840	��	�	�	19,586	��
Amortization of intangible assets	��	�	123	��	�	�	13,309	��
Amortization of deferred financing fees	��	�	790	��	�	�	3,135	��
Non-cash interest expense (recovery) on long-term debt	��	�	935	��	�	�	(53	)�
Non-cash restructuring costs in other long-term liabilities	��	�	(23	)�	�	�	(3,875	)�
Stock-based compensation expense	��	�	2,739	��	�	�	2,337	��
Unrealized loss on foreign exchange	��	�	3,714	��	�	�	6,126	��
Deferred income tax expense (recovery)	��	�	11,688	��	�	�	(1,671	)�
Gain on liquidation of foreign subsidiary	��	�	(422	)�	�	�	��	��
Gain on sale of long-lived assets	��	�	(85	)�	�	�	(8	)�
Trade receivables	��	�	15,437	��	�	�	(36,864	)�
Other current assets	��	�	2,702	��	�	�	(840	)�
Inventory	��	�	26,220	��	�	�	(18,753	)�
Income taxes recoverable and payable	��	�	(7,087	)�	�	�	17,300	��
Accounts payable, accrued and other current liabilities	��	�	(33,434	)�	�	�	7,195	��
Deferred revenue	��	�	(39,389	)�	�	�	(14,700	)�
Other long-term assets	��	�	��	��	�	�	(778	)�
	��	�	�	�	�	�	�	�
Cash provided by operating activities	��	�	30,488	��	�	�	15,502	��

Investing	��				�
Proceeds from sale of long-lived assets	��	�	116	��	�	�	39	��
Capital expenditures	��	�	(4,561	)�	�	�	(8,072	)�
Proceeds from sale-leaseback, net	��	�	��	��	�	�	76,216	��
	��	�	�	�	�	�	�	�
Cash (used in) provided by investing activities	��	�	(4,445	)�	�	�	68,183	��

Financing	��				�
Proceeds from credit facilities and long-term borrowings	��	�	5,000	��	�	�	127,950	��
Repayment of credit facilities and long-term borrowings	��	�	(12,031	)�	�	�	(300,569	)�
Financing fees paid	��	�	(12	)�	�	�	(4,786	)�
Repayment of capital lease obligation	��	�	(882	)�	�	�	(1,076	)�
Common shares issued	��	�	19	��	�	�	12	��
Participant equity loan plan, net	��	�	179	��	�	�	525	��
	��	�	�	�	�	�	�	�
Cash used in financing activities	��	�	(7,727	)�	�	�	(177,944	)�

Effect of exchange rate changes on cash and cash equivalents	��	�	(2,052	)�	�	�	(1,144	)�
	��	�	�	�	�	�	�	�
Net increase (decrease) in cash and cash equivalents	��	�	16,264	��	�	�	(95,403	)�
Cash and cash equivalents, beginning of period	��	�	58,146	��	�	�	141,383	��
	��	�	�	�	�	�	�	�
Cash and cash equivalents, end of period	��	$	74,410	��	�	$	45,980	��
	��	�	�	�	�	�	�	�
Cash and cash equivalents are comprised as follows	��				�
Cash	��	$	29,915	��	�	$	29,606	��
Cash equivalents	��	�	44,495	��	�	�	16,374	��
	��	�	�	�	�	�	�	�
	��	$	74,410	��	�	$	45,980	��
	��	�	�	�	�	�	�	�
Supplemental cash flow disclosures	��				�
Interest paid	��	$	11,475	��	�	$	10,354	��
Interest received	��	$	379	��	�	$	401	��
Income taxes paid	��	$	7,892	��	�	$	2,185	��
Amount of non-cash capital expenditures in accounts payable and accrued and other current liabilities	��	$	586	��	�	$	577	��
Non-cash acquisition of asset under capital lease	��	$	��	��	�	$	70,936	��

See accompanying notes to consolidated financial statements

SMART Technologies Inc.

Notes to Consolidated Financial Statements (unaudited)

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the nine months ended December�31, 2014 and 2013

1. Basis of presentation and significant accounting policies

The interim consolidated financial statements of SMART Technologies Inc. (the �Company�) have been prepared by management in accordance with accounting principles generally accepted in the United States of America (�GAAP�) applied on a basis consistent with those disclosed in our annual audited consolidated financial statements except as discussed below. They do not include all the disclosures required by GAAP for annual financial statements and should be read in conjunction with the Company�s audited consolidated financial statements for the year ended March�31, 2014, which have been prepared in accordance with GAAP. All normal recurring adjustments considered necessary for fair presentation have been included in these financial statements.

(a) Revenue recognition for arrangements with multiple deliverables

In the year ended March�31, 2014, the Company decreased the period over which deferred revenue for technical support services and unspecified software upgrades is amortized. The Company determined that this adjustment was a change in accounting estimate and accounted for the change prospectively commencing from September�24, 2013. For the three months ended December�31, 2014, the effect of this change on operating income and net income was an increase of $9,456 and $7,092 (2013 � $9,643 and $7,232) respectively and the impact on earnings per share was $0.06 (2013 � $0.06) on a basic and diluted basis. For the nine months ended December�31, 2014, the effect of this change on operating income and net income was an increase of $29,173 and $21,880 (2013 � $10,367 and $7,775) respectively and the impact on earnings per share was $0.18 and $0.17 (2013 � $0.06 and $0.06) on a basic and diluted basis respectively. The effect of this change on future operating income and net income is estimated to be an increase of approximately CDN$11,000 and CDN$8,250 respectively for the fourth quarter of fiscal 2015.

(b) Recent accounting guidance adopted

In March 2013, the Financial Accounting Standards Board (�FASB�) issued guidance on a parent�s accounting for the cumulative translation adjustment upon derecognition of a subsidiary or group of assets within a foreign entity. This new guidance requires that the parent release any related cumulative translation adjustment into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. This guidance was adopted beginning April�1, 2014, and has been applied for the reclassification of the currency translation adjustment into net income as a result of the liquidation of a foreign subsidiary in the first quarter of fiscal 2015.

In May 2014, the FASB issued a comprehensive new revenue recognition standard which will supersede previous existing revenue recognition guidance. The standard creates a five-step model for revenue recognition that requires companies to exercise judgment when considering contract terms and relevant facts and circumstances. The five-step model includes (1)�identifying the contract, (2)�identifying the separate performance obligations in the contract, (3)�determining the transaction price, (4)�allocating the transaction price to the separate performance obligations and (5)�recognizing revenue when each performance obligation has been satisfied. The standard also requires expanded disclosures surrounding revenue recognition. The standard is effective for fiscal periods beginning after December�15, 2016 and allows for either full retrospective or modified retrospective adoption. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.

SMART Technologies Inc.

Notes to Consolidated Financial Statements (unaudited)

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the nine months ended December�31, 2014 and 2013

�

2. Restructuring costs

(a) Fiscal 2015 restructuring

In the first quarter of fiscal 2015, the Company implemented additional cost reduction measures with the objective of improving its operating efficiencies. The restructuring plan included a change in Education sales staffing and business focus for specific regions within the Europe, Middle East and Africa operations and a reorganization of the North American sales team, to a leaner organizational structure with additional reliance placed on key channel partners. The restructuring plan was substantially completed in the second quarter of fiscal 2015. Employee termination and other restructuring costs are expected to be paid out through the remainder of fiscal 2015.

Changes in the accrued restructuring obligation associated with the fiscal 2015 restructuring activities were as follows:

�

��

Nine months ended December�31, 2014

�

��

Employee
Termination
Costs

�

Other
Restructuring
Costs

�

Total

�

Restructuring costs incurred

��

1,764

��

�

497

��

�

2,261

��

Restructuring costs paid

��

�

(1,556

)�

�

(91

)�

�

(1,647

)�

Adjustments

��

�

(69

)�

�

(98

)�

�

(167

)�

Currency translation adjustment

��

�

(56

)�

�

(18

)�

�

(74

)�

��

�

Accrued restructuring obligation at end of period

��

�

290

��

�

373

��

�

At December�31, 2014, the accrued fiscal 2015 restructuring obligation of $373 was included in accrued and other current liabilities.

(b) Other restructuring activities

Other fiscal 2012 to fiscal 2014 restructuring activities included the closure of the Ottawa business location, the exit of the optical touch sensor business for desktop displays and restructuring of NextWindow, increased focus on target markets, streamlined corporate support functions and cost reductions and the transfer of interactive display assembly operations to contract manufacturers.

Changes in the accrued restructuring obligation associated with the other restructuring activities were as follows:

�

��

Nine months ended December�31, 2014

�

��

Employee
Termination
Costs

�

Facilities
Costs

�

Other
Restructuring
Costs

�

Total

�

Accrued restructuring obligation at beginning of period

��

5,191

��

�

4,129

��

�

��

�

9,320

��

Restructuring costs incurred

��

�

221

��

�

��

�

284

��

�

505

��

Accretion expense

��

�

��

�

��

�

��

�

��

Restructuring costs paid

��

�

(2,942

)�

�

(4,046

)�

�

(242

)�

�

(7,230

)�

Adjustments

��

�

(320

)�

�

��

�

(42

)�

�

(338

)�

Currency translation adjustment

��

�

(43

)�

�

��

�

��

�

��

�

Accrued restructuring obligation at end of period

��

2,107

��

�

184

��

�

��

�

2,291

��

�

SMART Technologies Inc.

Notes to Consolidated Financial Statements (unaudited)

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the nine months ended December 31, 2014 and 2013

�

��

Nine months ended December�31, 2013

�

��

Employee
Termination
Costs

�

Facilities
Costs

�

Other
Restructuring
Costs

�

Total

�

Accrued restructuring obligation at beginning of period

��

5,890

��

�

7,518

��

�

��

�

13,492

��

Restructuring costs incurred

��

�

3,036

��

�

235

��

�

610

��

�

3,881

��

Accretion expense

��

�

��

�

206

��

�

��

�

206

��

Restructuring costs paid

��

�

(4,140

)�

�

(3,021

)�

�

(323

)�

�

(7,484

)�

Adjustments

��

�

(1,606

)�

�

755

��

�

(194

)�

�

(1,045

)�

Currency translation adjustment

��

�

(150

)�

�

(275

)�

�

(12

)�

�

(437

)�

��

�

Accrued restructuring obligation at end of period

��

3,030

��

�

5,418

��

�

165

��

�

8,613

��

�

The Company has incurred total restructuring costs to date of $40,215, comprised of employee termination benefits of $26,153, facilities costs of $11,692 and other restructuring costs of $2,370 for the restructuring activities discussed above.

At December�31, 2014, $2,107 (March 31, 2014 � $9,320) of the accrued other restructuring obligation was included in accrued and other current liabilities and $184 (March 31, 2014 � $200) was included in other long-term liabilities.

3. Inventory

The components of inventories were as follows:

�


�	��	December�31, 2014		�	�	March�31, 2014		�
Finished goods	��	$	50,889	��	�	$	77,212	��
Raw materials	��	�	1,738	��	�	�	10,369	��
Provision for obsolescence	��	�	(3,273	)�	�	�	(9,390	)�
	��	�	�	�	�	�	�	�
	��	$	49,354	��	�	$	78,191	��
	��	�	�	�	�	�	�	�

The provision for obsolescence is related to finished goods and raw materials inventory.

SMART Technologies Inc.

Notes to Consolidated Financial Statements (unaudited)

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the nine months ended December 31, 2014 and 2013

�

4. Property and equipment

The components of property and equipment were as follows:

�


�	��	December�31,�2014		�	��	March�31,�2014		�
Cost	��				��
Asset under capital lease, net	��	$	50,093	��	��	$	52,059	��
Information systems, hardware and software	��	�	61,070	��	��	�	60,660	��
Assembly equipment, furniture, fixtures and other	��	�	32,093	��	��	�	38,234	��
Assets under construction	��	�	1,056	��	��	�	3,965	��
	��	�	�	�	��	�	�	�
	��	$	144,312	��	��	$	154,918	��
Accumulated depreciation and amortization	��				��
Asset under capital lease, net	��	$	5,144	��	��	$	2,946	��
Information systems, hardware and software	��	�	51,752	��	��	�	49,197	��
Assembly equipment, furniture, fixtures and other	��	�	26,324	��	��	�	29,160	��
	��	�	�	�	��	�	�	�
	��	$	83,220	��	��	$	81,303	��
Net book value	��				��
Asset under capital lease, net	��	$	44,949	��	��	$	49,113	��
Information systems, hardware and software	��	�	9,318	��	��	�	11,463	��
Assembly equipment, furniture, fixtures and other	��	�	5,769	��	��	�	9,074	��
Assets under construction	��	�	1,056	��	��	�	3,965	��
	��	�	�	�	��	�	�	�
	��	$	61,092	��	��	$	73,615	��
	��	�	�	�	��	�	�	�

5. Long-term debt and credit facilities

The components of long-term debt were as follows:

�


�	��	December�31,�2014		�	�	March�31,�2014		�
Term loan	��	$	113,281	��	�	$	120,313	��
Unamortized debt discount	��	�	(4,835	)�	�	�	(6,015	)�
Current portion of long-term debt	��	�	(9,375	)�	�	�	(9,375	)�
	��	�	�	�	�	�	�	�
	��	$	99,071	��	�	$	104,923	��
	��	�	�	�	�	�	�	�

All debt and credit facilities are U.S. dollar facilities.

The Term loan matures on January�31, 2018 and currently bears interest at LIBOR plus 9.25% with a LIBOR floor of 1.25%. The Company also has a $50,000 asset-based loan facility (the �ABL�) that bears interest at LIBOR plus 2.5%. The ABL matures on July�31, 2017 and was undrawn as of December�31, 2014.

6. Share capital

In April 2014, the Company announced the conversion of 79,464,195 Class B Shares into single vote Class�A Subordinate Voting Shares effective April�17, 2014. The Company no longer has any issued and outstanding Class B Shares that carry multiple voting privileges and no further Class B Shares are permitted to be issued by the Company. The Class�A Subordinate Voting Shares have been re-designated as Common Shares.

SMART Technologies Inc.

Notes to Consolidated Financial Statements (unaudited)

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the nine months ended December 31, 2014 and 2013

�

The Company�s authorized share capital consists of an unlimited number of Common Shares and an unlimited number of Preferred Shares issuable in series.

The share capital activity was as follows:

�


�	��	Stated�amount		�	�	Shares�outstanding		�
Common Shares	��				�
Balance, March�31, 2014	��	$	456,474	��	�	�	42,172,275	��
April 2014 share conversion	��	�	238,407	��	�	�	79,464,195	��
Participant Equity Loan Plan	��	�	181	��	�	�	��	��
Shares issued under stock plans	��	�	1,021	��	�	�	549,443	��
	��	�	�	�	�	�	�	�
Balance, December�31, 2014	��	$	696,083	��	�	�	122,185,913	��

Common Shares�Treasury Shares	��				�
Balance, March�31, 2014	��	$	(840	)�	�	�	(410,502	)�
	��	�	�	�	�	�	�	�
Balance, December�31, 2014	��	$	(840	)�	�	�	(410,502	)�

Class B Shares	��				�
Balance, March�31, 2014	��	$	238,407	��	�	�	79,464,195	��
April 2014 share conversion	��	�	(238,407	)�	�	�	(79,464,195	)�
	��	�	�	�	�	�	�	�
Balance, December�31, 2014	��	$	��	��	�	�	��	��
	��	�	�	�	�	�	�	�
Total share capital	��	$	695,243	��	�	�	121,775,411	��
	��	�	�	�	�	�	�	�

7. Income taxes

Income tax expense differs from the amount that would be computed by applying the combined Canadian federal and provincial statutory income tax rates to income before income taxes.

The reasons for these differences are as follows:

�


�	��	Nine�months�ended�December�31,						�
�	��	��2014��		�	�	��2013��		�
Income before income taxes	��	$	43,878	��	�	$	26,115	��
Combined tax rate	��	�	25.00	%�	�	�	25.00	%�
	��	�	�	�	�	�	�	�
Expected income tax expense	��	$	10,970	��	�	$	6,529	��
Adjustments	��				�
Non-deductible, non-taxable items	��	�	1,519	��	�	�	809	��
Variation in foreign tax rates	��	�	1,383	��	�	�	555	��
Change in valuation allowance	��	�	(893	)�	�	�	(526	)�
Investment tax credits�current year	��	�	(1,833	)�	�	�	(3,272	)�
Investment tax credits�prior years	��	�	(375	)�	�	�	(1,379	)�
Other	��	�	(633	)�	�	�	(657	)�
	��	�	�	�	�	�	�	�
Income tax expense	��	$	10,138	��	�	$	2,059	��
	��	�	�	�	�	�	�	�

The Company and its Canadian subsidiaries file federal and provincial income tax returns in Canada, its U.S. subsidiary files federal and state income tax returns in the U.S. and its other foreign subsidiaries file income tax returns in their respective foreign jurisdictions. The Company and its subsidiaries are generally no longer subject to income tax examinations by tax authorities for years before March�31, 2007. Tax authorities in various

SMART Technologies Inc.

Notes to Consolidated Financial Statements (unaudited)

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the nine months ended December 31, 2014 and 2013

�

jurisdictions are conducting examinations of local tax returns for taxation years ending after March�31, 2007. Notwithstanding management�s belief in the merit of the Company�s tax filing position, it is possible that the final outcome of any audits by taxation authorities may differ from estimates and assumptions used in determining the Company�s consolidated tax provision and accruals, which could result in a material effect on the consolidated income tax provision and the net income for the period in which such determinations are made.

The Company does not recognize tax benefits associated with uncertain tax positions unless the position is more likely than not to be sustained upon examination.

8. Product warranty

Changes in the accrued warranty obligation, which is included in accrued and other current liabilities, were as follows:

�

��

Three months ended
December�31,

�

Nine months ended
December�31,

�

��

2014

�

2013

�

2014

�

2013

�

Accrued warranty obligation at beginning of period

��

17,825

��

�

21,688

��

�

17,775

��

�

19,794

��

Actual warranty costs incurred

��

�

(3,394

)�

�

(2,088

)�

�

(7,412

)�

�

(8,968

)�

Warranty provision

��

�

2,263

��

�

��

�

6,493

��

�

8,956

��

Currency translation adjustment

��

�

(639

)�

�

(778

)�

�

(801

)�

�

(881

)�

��

�

Accrued warranty obligation at end of period

��

16,055

��

�

18,901

��

�

16,055

��

�

18,901

��

�

9. Earnings per share amounts

Basic earnings per share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options, deferred share units and restricted share units.

The components of basic and diluted earnings per share were as follows:

�

��

Three months ended December�31,

�

��

Nine months ended December�31,

�

��

2014

�

��

2013

�

��

2014

�

��

2013

�

Net income available for common shareholders

��

9,320

��

4,010

��

33,740

��

24,056

��

Weighted-average shares outstanding

��

�

121,664,950

��

�

121,082,799

��

�

121,517,441

��

�

120,942,301

��

Effect of dilutive securities

��

�

4,661,774

��

�

5,847,550

��

�

5,114,515

��

�

5,658,476

��

�

��

�

��

�

��

�

Weighted-average diluted shares

��

�

126,326,724

��

�

126,930,349

��

�

126,631,956

��

�

126,600,777

��

�

��

�

��

�

��

�

Basic earnings per share

��

0.08

��

0.03

��

0.28

��

0.20

��

Diluted earnings per share

��

0.07

��

0.03

��

0.27

��

0.19

��

Anti-dilutive securities excluded from the calculations of diluted earnings per share were 187,261 and 700,737 for the three and nine months ended December�31, 2014 (6,540 and 0 for the three and nine months ended December�31, 2013).

SMART Technologies Inc.

Notes to Consolidated Financial Statements (unaudited)

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the nine months ended December 31, 2014 and 2013

�

10. Segment disclosure

In fiscal 2013, the Company announced a plan to move to a new organizational structure to improve efficiency, execution and customer experience. The Company is now organized based on differences in type of customer. The Education and Enterprise segments provide interactive displays and related hardware, software and services focusing on education and enterprise customers. The NextWindow segment provided desktop and large format interactive display components. The Company�s reportable segments are based on its organizational structure and the internal management information reviewed by its Chief Operating Decision Maker (�CODM�). The Company�s CODM has been identified as its Chief Executive Officer, who reviews internal management information to make decisions about allocating resources and to evaluate segment performance. Comparative periods have been restated to reflect the new organizational structure.

The Company derives the segment results directly from its internal management reporting system. The accounting policies of the segments are the same as those described in Note 1 � Basis of presentation and significant accounting policies. The CODM evaluates the performance of the reportable segments based on Revenue and Adjusted EBITDA.

Adjusted EBITDA is defined as net income before interest income and expense, income taxes, depreciation and amortization as well as adjusting for the following items: foreign exchange gains or losses, the difference between deferred revenue and deferred revenue recognized (�change in deferred revenue�), stock-based compensation, costs of restructuring, impairment of property and equipment and gains or losses on sale of long-lived assets. The definition of Adjusted EBITDA is consistent for all periods presented.

Management allocates some overhead costs to cost of sales in determining segment Adjusted EBITDA. Certain operating expenses are not allocated to segments because they are separately managed at the corporate level. These unallocated costs include research and development, corporate marketing expenses, general and administrative costs, such as management, finance, legal, information systems and human resources and restructuring costs. Intercompany transactions are not included in segment financial information as they are not provided to the CODM. Asset data is not reviewed by the CODM at the segment level.

The financial information by reportable segment was as follows:

�

��

Three months ended
December�31,

�

Nine months ended
December�31,

�

��

2014

�

2013

�

2014

�

2013

�

Revenue:

��

�

Education

��

99,980

��

�

111,387

��

�

318,879

��

�

348,890

��

Enterprise

��

�

26,597

��

�

33,462

��

�

68,183

��

�

68,055

��

NextWindow

��

�

��

�

13,122

��

�

6,209

��

�

47,996

��

�

��

126,577

��

�

157,971

��

�

393,271

��

�

464,941

��

�

Adjusted EBITDA:

��

�

Education

��

23,264

��

�

32,600

��

�

83,162

��

�

125,225

��

Enterprise

��

�

5,399

��

�

9,905

��

�

7,769

��

�

10,563

��

NextWindow

��

�

432

��

�

(1,265

)�

�

3,339

��

�

5,133

��

Corporate⁽¹⁾

��

�

(18,689

)�

�

(22,030

)�

�

(60,304

)�

�

(69,687

)�

��

�

��

10,406

��

�

19,210

��

�

33,966

��

�

71,234

��

�

(1)	Certain corporate level activity is not allocated to segments including research and development, corporate marketing expenses, general and administrative costs such as management, finance, legal, information systems and human resources, and restructuring costs.

SMART Technologies Inc.

Notes to Consolidated Financial Statements (unaudited)

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the nine months ended December 31, 2014 and 2013

�

The reconciliation from Adjusted EBITDA to the consolidated financial statements was as follows:

�

��

Three months ended
December�31,

�

Nine months ended
December�31,

�

��

2014

�

2013

�

2014

�

2013

�

Adjusted EBITDA

��

10,406

��

�

19,210

��

�

33,966

��

�

71,234

��

Adjustments:

��

�

Change in deferred revenue

��

�

(15,829

)�

�

(14,602

)�

�

(46,319

)�

�

(15,342

)�

Stock-based compensation expense

��

�

854

��

�

748

��

�

2,739

��

�

2,337

��

Depreciation in cost of sales

��

�

1,271

��

�

3,810

��

�

4,030

��

�

6,920

��

Depreciation and amortization

��

�

2,771

��

�

12,537

��

�

8,865

��

�

25,902

��

Restructuring costs

��

�

(26

)�

�

3,707

��

�

2,269

��

�

3,042

��

Loss (gain) on sale of long-lived assets

��

�

��

�

(18

)�

�

(85

)�

�

)�

Interest expense

��

�

4,989

��

�

5,490

��

�

15,168

��

�

16,101

��

Foreign exchange loss

��

�

3,924

��

�

3,671

��

�

3,946

��

�

6,589

��

Other expense (income)

��

�

��

�

(200

)�

�

(525

)�

�

(422

)�

��

�

Income before income taxes

��

12,381

��

�

4,067

��

�

43,878

��

�

26,115

��

�

Revenue information relating to the geographic locations in which the Company sells products was as follows:

�

��

Three months ended
December�31,

�

��

Nine months ended
December�31,

�

��

2014

�

��

2013

�

��

2014

�

��

2013

�

Revenue

��

United States

��

65,976

��

67,814

��

210,798

��

224,468

��

Canada

��

�

7,938

��

�

18,576

��

�

29,007

��

�

40,994

��

Europe, Middle East and Africa

��

�

42,974

��

�

46,679

��

�

111,663

��

�

124,376

��

Rest of World

��

�

9,689

��

�

24,902

��

�

41,803

��

�

75,103

��

�

��

�

��

�

��

�

��

126,577

��

157,971

��

393,271

��

464,941

��

�

��

�

��

�

��

�

11. Financial instruments

The Company�s financial instruments consist of foreign exchange and interest rate derivative instruments and other financial instruments including cash and cash equivalents, trade receivables, accounts payable, accrued and other current liabilities, capital lease obligation and long-term debt.

The Company uses derivatives to partially offset its exposure to foreign exchange risk and interest rate risk. The Company enters into derivative transactions with high credit quality counterparties and, by policy, seeks to limit the amount of credit exposure to any one counterparty based on an analysis of the counterparty�s relative credit standing. The Company does not use derivative financial instruments for trading or speculative purposes.

�

(a)

Foreign exchange rate risk

Foreign exchange rate risk is the risk that fluctuations in foreign exchange rates could impact the Company. The Company operates globally and is exposed to significant foreign exchange risk, primarily between the Canadian dollar and both the U.S. dollar (�USD�), and the Euro (�EUR�). This exposure relates to our U.S. dollar-denominated debt, the sale of our products to customers globally and purchases of goods and services in

SMART Technologies Inc.

Notes to Consolidated Financial Statements (unaudited)

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the nine months ended December 31, 2014 and 2013

�

foreign currencies. The Company seeks to manage its foreign exchange risk by monitoring foreign exchange rates, forecasting its net foreign currency cash flows and periodically entering into forward contracts and other derivative contracts to convert a portion of its forecasted foreign currency denominated cash flows into Canadian dollars for the purpose of paying Canadian dollar denominated operating costs. The Company may also enter into forward contracts and other derivative contracts to manage its cash flows in other currencies.

These programs reduce, but do not entirely eliminate, the impact of currency exchange movements. The Company currently does not apply hedge accounting to its currency derivatives. The maturity of these instruments generally occurs within 12 months. Gains or losses resulting from the fair valuing of these instruments are reported in foreign exchange loss (gain) in the consolidated statements of operations.

(b) Interest rate risk

Interest rate risk is the risk that the value of a financial instrument will be affected by changes in market interest rates. The Company�s financing includes long-term debt and revolving credit facilities that bear interest based on floating market rates. Changes in these rates result in fluctuations in the required cash flows to service this debt. In the past, the Company has partially mitigated this risk by periodically entering into interest rate swap agreements to fix the interest rate on certain long-term variable-rate debt, and may continue to do so in the future. The Company currently does not apply hedge accounting to its interest rate derivatives. Changes in the fair value of these interest rate derivatives are included in interest expense in the consolidated statements of operations.

Credit risk is the risk that the counterparty to a financial instrument fails to meet its contractual obligations, resulting in a financial loss to the Company.

The Company sells hardware and software that enables group collaboration and learning to a diverse customer base over a global geographic area. The Company evaluates collectability of specific customer receivables based on a variety of factors including currency risk, geopolitical risk, payment history, customer stability and other economic factors. Collectability of receivables is reviewed on an ongoing basis by management and receivables accounts are adjusted as required. Receivables balances are charged against the allowance when the Company determines that it is probable that the receivable will not be recovered. The geographic diversity of the customer base, combined with the Company�s established credit approval practices and ongoing monitoring of customer balances, partially mitigates this counterparty risk.

Fair value measurements

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a three-tier value hierarchy, which prioritizes the inputs in the valuation methodologies in measuring fair value:

Level 1�Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets.

Level 2�Observable inputs other than quoted market prices included in level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active; or inputs that are observable or can be corroborated by observable market data.

SMART Technologies Inc.

Notes to Consolidated Financial Statements (unaudited)

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the nine months ended December 31, 2014 and 2013

�

Level 3�Significant unobservable inputs which are supported by little or no market activity and typically reflect management�s estimates of assumptions that market participants would use in pricing the asset or liability.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The following table presents the Company�s assets and liabilities that are measured at fair value on a recurring basis.

�

December�31, 2014

�

��

Level 1

�

��

Level�2

�

��

Level�3

�

��

Total

�

Assets

��

Money market funds

��

44,495

��

44,495

��

Derivative instruments

��

�

��

�

695

��

�

��

�

695

��

�

��

�

��

�

��

�

Total assets

��

44,495

��

695

��

45,190

��

�

��

�

��

�

��

�

Liabilities

��

Derivative instruments

��

213

��

213

��

�

��

�

��

�

��

�

Total liabilities

��

213

��

213

��

�

��

�

��

�

��

�

March�31, 2014

�

��

Level 1

�

��

Level 2

�

��

Level�3

�

��

Total

�

Assets

��

Money market funds

��

26,712

��

26,712

��

Derivative instruments

��

�

��

�

197

��

�

��

�

197

��

�

��

�

��

�

��

�

Total assets

��

26,712

��

197

��

26,909

��

�

��

�

��

�

��

�

Liabilities

��

Derivative instruments

��

2,492

��

2,492

��

�

��

�

��

�

��

�

Total liabilities

��

2,492

��

2,492

��

�

��

�

��

�

��

�

SMART Technologies Inc.

Notes to Consolidated Financial Statements (unaudited)

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the nine months ended December 31, 2014 and 2013

�

(a) Fair value of derivative contracts

�


December�31, 2014
�	�	Fair�value		�	�	Contract expiry	�	Rates	�	Notional amounts of quantity
Foreign exchange forward derivative contracts	�	$ � �	(134 553 63	)� �� ��	�	Jan 2015 to Nov 2015 Jan 2015 to Nov 2015 Jan 2015 to Nov 2015	�	1.1294 - 1.1698 1.4101 - 1.5652 1.7906 - 1.8645	�	USD 10,000 EUR 14,500 GBP 8,000
	�	�	�	�	�		�		�
	�	$	482	��	�		�		�
	�	�	�	�	�		�		�

�


March�31, 2014
�	�	Fair�value		�	�	Contract expiry	�	Rates	�	Notional amounts of quantity
Foreign exchange forward derivative contracts	�	$ � �	(430 (694 (928	)� )� )�	�	Apr 2014 to Nov 2014 Apr 2014 to Feb 2015 Apr 2014 to Feb 2015	�	1.0367 - 1.0946 1.3624 - 1.5652 1.5979 - 1.8645	�	USD 14,000 EUR 16,500 GBP 10,500
	�	�	�	�	�		�		�
	�	$	(2,052	)�	�		�		�
	�	�	�	�	�		�		�
Interest rate derivative contracts	�	$	(242	)�	�	Aug 2014	�	0.785% - 0.850%	�	83% of the outstanding principal on the first lien term loan over the contract term
	�	�	�	�	�		�		�
	�				�		�		�
	�				�		�		�
	�				�		�		�

The Company enters into foreign exchange forward derivative contracts to economically hedge its risks in the movement of foreign currencies against the Company�s functional currency of the Canadian dollar. The fair value of foreign exchange derivative contracts of $695 are included in other current assets at December�31, 2014 (March 31, 2014 � $197). The fair value of foreign exchange derivative contracts of $213 are included in accrued and other current liabilities at December�31, 2014 (March 31, 2014 � $2,250). Changes in the fair value of these contracts are included in foreign exchange loss (gain). The Company recorded losses of $917 and $1,907 for the three months ended December�31, 2014 and 2013, respectively and a gain of $1,113 and a loss of $4,154 for the nine months ended December�31, 2014 and 2013, respectively.

The fair value of interest rate derivative contracts included in accrued and other current liabilities are nil at December�31, 2014 (March 31, 2014 � $242). Changes in the fair value of these contracts are included in interest expense. The Company recorded gains of $0 and $347 for the three months ended December�31, 2014 and 2013, respectively and gains of $242 and $599 for the nine months ended December�31, 2014 and 2013, respectively.

The estimated fair values of foreign exchange and interest rate derivative contracts are derived using complex financial models with inputs such as benchmark yields, time to maturity, reported trades, broker/dealer quotes, issuer spreads and discount rates.

Considerable judgment is required in developing the estimates of fair value. Therefore, estimates are not necessarily indicative of the amounts the Company could expect to realize in a liquidation or unwinding of an existing contract.

SMART Technologies Inc.

Notes to Consolidated Financial Statements (unaudited)

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the nine months ended December 31, 2014 and 2013

�

(b) Long-term debt

The estimated fair value of the Company�s long-term debt has been determined based on current market conditions by discounting future cash flows under current financing arrangements at borrowing rates believed to be available to the Company for debt with similar terms and remaining maturities.

The fair value of debt was measured utilizing Level 3 inputs. The Level 3 fair value measurements utilize a discounted cash flow model. This model utilizes observable inputs such as contractual repayment terms and benchmark forward yield curves and other inputs such as a discount rate that is intended to represent our credit risk for secured or unsecured obligations. The Company estimates its credit risk based on the corporate credit rating and the credit rating on its variable-rate long-term debt and utilizes benchmark yield curves that are widely used in the financial industry.

The carrying value and fair value of the Company�s long-term debt were as follows:

�

��

December�31, 2014

�

��

March�31, 2014

�

��

Carrying�amount

�

��

Fair value

�

��

Carrying�amount

�

��

Fair value

�

Variable-rate long-term debt

��

113,281

��

113,575

��

120,313

��

122,747

��

�

��

�

��

�

��

�

The fair values of cash and cash equivalents, trade receivables, accounts payable and accrued and other current liabilities approximate their carrying amounts due to the short-term maturity of these instruments. A portion of these items are denominated in currencies other than the Canadian dollar functional currency of the Company including the U.S. dollar, Euro and British pound sterling and are translated at the exchange rate in effect at the balance sheet date.

12. Comparative figures

Certain reclassifications have been made to prior periods� figures to conform to the current period�s presentation.

Exhibit 99.3

Certification of Chief Executive Officer pursuant to Rule�13a-14(a) or 15d-14 (a)

of the Securities Exchange Act of 1934

CERTIFICATION

I, Neil Gaydon, certify that:

�

1)	I have reviewed the interim financial statements and interim MD&A (together, the �quarterly report�) of SMART Technologies Inc. for the third quarter ending December�31, 2014;

�

2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

�

3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the period presented in this report;

�

The issuer�s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the issuer and have:

�

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

�

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

�

Evaluated the effectiveness of the issuer�s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

�

Disclosed in this report any change in the issuer�s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer�s internal control over financial reporting; and

�

5)	The issuer�s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer�s auditors and the audit committee of issuer�s board of directors (or persons performing the equivalent functions):

�

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer�s ability to record, process, summarize and report financial information; and

�

Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer�s internal control over financial reporting.

Dated this 5^th day of February, 2015.

�


By:		/s/ Neil Gaydon
		Neil Gaydon
		President & Chief Executive Officer

Exhibit 99.4

Certification of Chief Financial Officer pursuant to Rule�13a-14(a) or 15d-14 (a)

of the Securities Exchange Act of 1934

CERTIFICATION

I, Kelly Schmitt, certify that:

�

1)	I have reviewed the interim financial statements and interim MD&A (together, the �quarterly report�) of SMART Technologies Inc. for the third quarter ending December�31, 2014;

�

2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

�

3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the period presented in this report;

�

5)	The issuer�s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer�s auditors and the audit committee of issuer�s board of directors (or persons performing the equivalent functions):

�

Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer�s internal control over financial reporting.

Dated this 5^th day of February, 2015.

�


By:		/s/ Kelly Schmitt
		Kelly Schmitt
		Vice President, Finance & Chief Financial Officer

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Form 6-K SMART Technologies Inc. For: Feb 05

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