Exar Corporation Reports Fiscal 2009 Fourth Quarter Results

FREMONT, Calif., May 14 /PRNewswire-FirstCall/ -- Exar Corporation (Nasdaq: EXAR), today reported financial results for its fiscal 2009 fourth quarter ended March 29, 2009.

Net sales for the fourth quarter of fiscal 2009 were $23.9 million compared to net sales of $26.3 million for the prior quarter and $28.3 million for the fourth quarter of fiscal 2008.

The GAAP gross margin for the fourth quarter of fiscal 2009 was 42.2% compared to 40.7% for the prior quarter and 37.9% for the fourth quarter of fiscal 2008. On a non-GAAP basis, the gross margin for the fourth quarter of fiscal 2009 was 44.5% compared to 45.3% for the prior quarter and 45.3% in the fourth quarter of fiscal 2008.

The GAAP net loss for the fourth quarter of fiscal 2009 was $4.6 million, or a net loss per share of $0.11, compared to a net loss of $63.8 million, or a net loss per share of $1.49, in the prior quarter, and a net loss of $172.4 million, or a net loss per share of $3.77, for the fourth quarter of fiscal 2008. These prior period results include non-cash charges of $60.9 million for the impairment of goodwill and intangible assets, and for the acceleration of depreciation on abandoned equipment in the third quarter of fiscal 2009 and $165.2 million for the impairment of goodwill and intangible assets in the fourth quarter of fiscal 2008.

On a non-GAAP basis, the net loss was $2.1 million, or a net loss per share of $0.05, for the fourth quarter of fiscal 2009, compared to a net loss of $0.7 million, or a net loss per share of $0.02, in the previous quarter, and a net loss of $1.7 million, or a net loss per share of $0.04, in the fourth quarter of fiscal 2008.

The Company ended the fourth quarter of fiscal 2009 with cash, cash equivalents and short-term marketable securities of $256.3 million.

"Our visibility has improved and orders started to strengthen after Chinese New Year, but overall we had another challenging quarter," said Pete Rodriguez, the Company's president and chief executive officer. "While this was the eighth consecutive quarter in reducing operating expenses, we will continue to be cautious in how we manage the business. I am excited about our acquisition of Hifn, which will broaden our key product offerings in the growing Datacom and Storage markets. Combined with our continued focus on developing winning products, I remain confident that we will emerge stronger from this economic downturn," remarked Mr. Rodriguez.

Business Outlook

For the first quarter of fiscal 2010 ending June 28, 2009, the Company expects that net sales will be between $30.0 million and $32.0 million, non-GAAP gross margin will be between 49% and 51% and non-GAAP operating expenses will be between $19.0 million and $21.0 million.

The Company's statements about its future financial performance or operating plans are based on current information and expectations and the Company undertakes no duty to update such statements. These statements are forward-looking and actual results could differ materially due to various risks and uncertainties, some of which are described herein.

Results Conference Call

The Company invites investors, financial analysts, and the general public to listen to its conference call discussing the Company's financial results for the fourth quarter of fiscal 2009, today, Thursday, May 14, 2009 at 1:30 p.m. PDT To access the conference call, please dial (877) 209-9922 by 1:20 p.m. PDT and use conference ID number 998825.

In addition, a live webcast will also be available. To access the webcast, please go to the Company's Investor Relations Homepage at: http://www.videonewswire.com/event.asp?id=58965.

A replay of the call will be available starting at 5:00 p.m. PDT today until 11:59 p.m. PDT on May 21, 2009. To access the replay, please dial (800) 475-6701 and use conference ID number 998825.

Product Line Highlights

Interface

Exar Launches Highest Performance Universal Asynchronous Receiver Transmitter (UART) Series with VLIO Bus Interface -- http://www.exar.com/Common/Content/News.aspx?id=4832

Power Management

Exar Provides New Scalable Evolutionary Solutions for Driving High Power Light Emitting Diodes (LEDs) -- http://www.exar.com/Common/Content/News.aspx?id=4972

Safe Harbor Statement

The Company's statements about its future financial performance, changes in gross margins, revenues and operating expenses, resource allocation and its impact on future performance and product development internal initiatives, distribution and OEM trends, supply chain issues among others, are forward-looking statements that involve risks and uncertainties. These risks and uncertainties include global financial volatility, economic recession, and industry and market conditions, such as customer and distributor relationships; limited visibility associated with customer or distributor demand for the Company's products; the possible loss of, or decrease in orders from, an important customer; adjustments in interest rates and cash balances; vendor capacity, quality or throughput constraints; successful integration of acquired businesses; possible disruption in commercial activities as a consequence of terrorist activity, natural disasters, armed conflict or health issues; successful development, market acceptance and demand for the Company's products, including those for which the Company has achieved design wins; competitive factors, such as pricing or competing solutions; customer ordering patterns; accounting considerations related to impairment analyses or acquisition related issues; the level of inventories maintained at the Company's OEMs and distributors; and the Company's successful execution of internal performance plans, as well as the other risks detailed from time to time in the Company's SEC reports, including the Annual Report on Form 10-K for the year ended March 30, 2008 and Quarterly Reports on Form 10-Q for the periods ended June 29, 2008, September 28, 2008 and December 28, 2008.

Generally Accepted Accounting Principles

The Company reports its financial results in accordance with GAAP. Additionally, the Company supplements reported GAAP financials with non-GAAP measures which are included in related press releases and reports furnished to the SEC, copies of which are available at the Company's website: http://www.exar.com or the SEC's website at: http://www.sec.gov. For the periods presented, we are disclosing non-GAAP gross margin, non-GAAP research and development expenses, non-GAAP selling, general and administrative expenses, non-GAAP operating expenses, non-GAAP operating loss, non-GAAP net income (loss), and non-GAAP diluted earnings (loss) per share, which are adjusted to exclude from our GAAP results all stock-based compensation expense, amortization of acquired intangible assets, fair value adjustment of acquired inventories, acquired in-process research and development expenses, acquisition related costs, separation costs of executive officers, accelerated depreciation on abandoned equipment, goodwill and other intangible asset impairment, impairment charges on investments, income tax effects, a charge to establish deferred tax asset valuation allowance, and an income tax benefit from the closure of federal tax audit. These non-GAAP measures are presented in part to enhance the understanding of the Company's historical financial performance and comparability between reporting periods. The Company believes the non-GAAP presentation, when shown in conjunction with the corresponding GAAP measures, provide relevant and useful information to analysts, investors, management and other interested parties following the semiconductor industry. For its internal purposes, the Company uses the foregoing non-GAAP measures to evaluate performance across reporting periods, determine certain employee benefits as well as plan for and forecast the Company's future periods. These non-GAAP measures are not in accordance with, or an alternative for measures prepared in accordance with GAAP, and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP. These measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures.

About Exar

Exar Corporation delivers highly differentiated silicon, software and subsystem solutions for industrial, datacom and storage applications. For nearly 40 years, Exar's comprehensive knowledge of end-user markets along with the underlying analog, mixed signal and digital technology has enabled innovative solutions that meet the needs of the evolving connected world. Exar's product portfolio includes power management and interface components, communications products, storage optimization solutions, network security and applied service processors. Exar has locations worldwide providing real-time customer support to drive rapid product development. For more information about Exar, visit: http://www.exar.com.

                        EXAR CORPORATION AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                      (In thousands, except share amounts)
                                   (Unaudited)

                                                        MARCH 29,  MARCH 30,
                                                          2009       2008
                                                          ----       ----
                          ASSETS

    Current assets:
      Cash and cash equivalents                          $89,002   $122,016
      Short-term marketable securities                   167,341    146,844
      Accounts receivable (net of
       allowances of $572 and $714)                        7,452      9,943
      Accounts receivable, related party (net of
       allowances of $736 and $1,421)                      1,796      3,712
      Inventories                                         15,678     14,201
      Interest receivable and prepaid expenses             3,274      3,889
      Deferred income taxes, net                              62        507
                                                             ---        ---
            Total current assets                         284,605    301,112

    Property, plant and equipment, net                    42,549     46,130
    Goodwill                                                   -     47,626
    Intangible assets, net                                 7,359     26,019
    Other non-current assets                               1,876      3,333
                                                           -----      -----

            Total assets                                $336,389   $424,220
                                                        ========   ========

           LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:
      Accounts payable                                    $5,391     $8,801
      Accrued compensation and related benefits            4,773      5,744
      Deferred income and allowances on
       sales to distributors                               3,208      3,253
      Deferred income and allowances on sales to
       distributors, related party                         7,040      9,118
      Other accrued expenses                               7,014      8,136
                                                           -----      -----
                   Total current liabilities              27,426     35,052

    Long-term lease financing obligations                 15,633     16,379
    Other non-current obligations                          1,236      1,712
                                                           -----      -----

            Total liabilities                             44,295     53,143
                                                          ------     ------

    Total stockholders' equity
      Preferred stock, $.0001 par value; 2,250,000
       shares authorized; no shares outstanding                -          -
      Common stock, $.0001 par value; 100,000,000
       shares authorized; 43,036,271 and
       43,928,762 shares issued and outstanding
       at March 29,2009 and March 30, 2008,
       respectively (net of treasury shares)                   4          4
      Additional paid-in capital                         710,787    702,218
      Accumulated other comprehensive income                 802      1,873
      Treasury stock at cost, 19,924,369 and
       18,288,021 shares at March 29, 2009
       and March 30, 2008, respectively                 (248,983)  (235,538)
      Accumulated deficit                               (170,516)   (97,480)
                                                        --------    -------
            Total stockholders' equity                   292,094    371,077
                                                         -------    -------
            Total liabilities and stockholders' equity  $336,389   $424,220
                                                        ========   ========



                          EXAR CORPORATION AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share amounts)
                                     (Unaudited)

                            THREE MONTHS ENDED         TWELVE MONTHS ENDED
                        MARCH     DECEMBER    MARCH     MARCH      MARCH
                          29,        28,        30,       29,        30,
                         2009       2008       2008      2009       2008
                         ----       ----       ----      ----       ----
    Net sales          $15,667    $17,201    $18,356   $74,620    $67,925
    Net sales, related
     party               8,187      9,104      9,906    40,498     21,818
                         -----      -----      -----    ------     ------
       Total net sales  23,854     26,305     28,262   115,118     89,743
                        ------     ------     ------   -------     ------

    Cost of sales:
      Cost of sales      8,472     10,821     10,798    41,811     33,773
      Cost of sales,
       related party     4,880      3,998      5,244    19,933     10,406
      Amortization of
       purchased
       intangible assets   436        782      1,515     3,129      5,452
                           ---        ---      -----     -----      -----
       Total cost of
        sales           13,788     15,601     17,557    64,873     49,631
                        ------     ------     ------    ------     ------
    Gross profit        10,066     10,704     10,705    50,245     40,112
                        ------     ------     ------    ------     ------

    Operating expenses:
      Research and
       development       7,512      8,092      8,259    31,829     30,660
      Acquired in-
       process research
       and development       -          -          -         -      8,800
      Goodwill and other
       intangible asset
       impairment            -     59,676    165,191    59,676    165,191
      Selling, general and
        administrative   8,816      9,099     11,793    38,962     37,899
                         -----      -----     ------    ------     ------
       Total operating
        expenses        16,328     76,867    185,243   130,467    242,550
    Loss from
     Operations         (6,262)   (66,163)  (174,538)  (80,222)  (202,438)

    Other income, net:
      Interest income
       and other, net    1,918      2,570      3,266     9,693     16,037
      Interest expense    (326)      (266)      (344)   (1,253)      (771)
      Impairment charges
       on investments     (301)       (34)      (142)   (1,789)      (591)
                          ----        ---       ----    ------       ----
       Total other
        income and
        expense, net     1,291      2,270      2,780     6,651     14,675

    Loss before income
     taxes              (4,971)   (63,893)  (171,758)  (73,571)  (187,763)
    Provision (benefit)
     for income taxes     (406)       (70)       640      (535)     8,116
                          ----        ---        ---      ----      -----

    Net loss           $(4,565)  $(63,823) $(172,398) $(73,036) $(195,879)
                       =======   ========  =========  ========  =========

    Loss per share:
      Basic loss per
       share            $(0.11)    $(1.49)    $(3.77)   $(1.70)    $(4.55)
                        ======     ======     ======    ======     ======

      Diluted loss per
       share            $(0.11)    $(1.49)    $(3.77)   $(1.70)    $(4.55)
                        ======     ======     ======    ======     ======

    Shares used in the
     computation of loss
     per share:
      Basic             42,950     42,889     45,712    42,887     43,090
                        ======     ======     ======    ======     ======

      Diluted           42,950     42,889     45,712    42,887     43,090
                        ======     ======     ======    ======     ======

    Note: Certain amounts previously reported above have been reclassified
    to conform to the current periods' presentation.



                          EXAR CORPORATION AND SUBSIDIARIES
               SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP RESULTS
                       (In thousands, except per share amounts)
                                    (Unaudited)

                                 THREE MONTHS ENDED        TWELVE MONTHS ENDED
                            MARCH    DECEMBER     MARCH      MARCH     MARCH
                             29,         28,        30,       29,        30,
                            2009        2008       2008      2009       2008
                            ----        ----       ----      ----       ----

     GAAP gross margin      42.2%       40.7%      37.9%     43.6%      44.7%
       Stock-based
        compensation         0.5%        0.5%       0.5%      0.5%       0.7%
       Amortization of
        acquired
        intangible
        assets               1.8%        3.0%       5.4%      2.7%       6.1%
       Fair value
        adjustment of
        acquired
        inventories            -           -        1.5%        -        2.5%
       Acquisition-
        related costs          -           -        0.1%      0.1%       0.1%
       Acceleration of
        depreciation
        on abandoned
        equipment              -         1.1%         -       0.3%         -
                             ---         ---        ---       ---        ---
    Non-GAAP gross
     margin                 44.5%       45.3%      45.3%     47.2%      54.0%
                            ====        ====       ====      ====       ====

    GAAP research
     and development
     expenses             $7,512      $8,092     $8,259   $31,829    $30,660
       Stock-based
        compensation         383         392        270     1,614      1,207
       Amortization of
        acquired
        intangible
        assets                72         200          -       798          -
       Acquisition-
        related costs          -           -        131         -        393
       Acceleration of
        depreciation
        on abandoned
        equipment              -         437          -       437          -
                             ---         ---        ---       ---        ---
    Non-GAAP research
     and development
     expenses             $7,057      $7,063     $7,858   $28,980    $29,060
                          ======      ======     ======   =======    =======

    GAAP selling,
     general and
     administrative
     expenses             $8,816      $9,099    $11,793   $38,962    $37,899
       Stock-based
        compensation         713         768        884     2,725      3,366
       Amortization of
        acquired
        intangible
        assets                44         122        266       490        936
       Acquisition-
        related costs        778           -        717     1,319      1,992
       Separation
        costs of
        executive
        officers               -           -          -         -        465
       Acceleration of
        depreciation
        on abandoned
        equipment              -         437          -       437          -
                             ---         ---        ---       ---        ---
    Non-GAAP selling,
     general and
     administrative
     expenses             $7,281      $7,772     $9,926   $33,991    $31,140
                          ======      ======     ======   =======    =======

    GAAP operating
     expenses            $16,328     $76,867   $185,243  $130,467   $242,550
       Stock-based
        compensation       1,096       1,160      1,154     4,339      4,573
       Amortization of
        acquired
        intangible
        assets               116         322        266     1,288        936
       Acquired in-
        process
        research and
        development            -           -          -         -      8,800
       Acquisition-
        related costs        778           -        848     1,319      2,385
       Separation
        costs of
        executive
        officers               -           -          -         -        465
       Acceleration of
        depreciation
        on abandoned
        equipment              -         874          -       874          -
       Goodwill and
        other
        intangible
        asset impairment       -      59,676    165,191    59,676    165,191
                             ---      ------    -------    ------    -------
       Non-GAAP
        operating
        expenses         $14,338     $14,835    $17,784   $62,971    $60,200
                         =======     =======    =======   =======    =======

    GAAP operating loss  $(6,262)   $(66,163) $(174,538) $(80,222) $(202,438)
       Stock-based
        compensation       1,207       1,278      1,282     4,934      5,196
       Amortization of
        acquired
        intangible
        assets               552       1,105      1,781     4,417      6,388
       Fair value
        adjustment of
        acquired
        inventories            -           -        432         -      2,231
       Acquired in-
        process
        research and
        development            -           -          -         -      8,800
       Acquisition-
        related costs        778           -        884     1,434      2,437
       Separation
        costs of
        executive
        officers               -           -          -         -        465
       Acceleration of
        depreciation
        on abandoned
        equipment              -       1,174          -     1,174          -
       Goodwill and
        other
        intangible
        asset impairment       -      59,676    165,191    59,676    165,191
                             ---      ------    -------    ------    -------
    Non-GAAP operating
     loss                $(3,725)    $(2,930)   $(4,968)  $(8,587)  $(11,730)
                         =======     =======    =======   =======   ========

    GAAP net loss        $(4,565)   $(63,823) $(172,398) $(73,036) $(195,879)
       Stock-based
        compensation       1,207       1,278      1,282     4,934      5,196
       Amortization of
        acquired
        intangible
        assets               552       1,105      1,781     4,417      6,388
       Fair value
        adjustment of
        acquired
        inventories            -           -        432         -      2,231
       Acquired in-
        process
        research and
        development            -           -          -         -      8,800
       Acquisition-
        related costs        778           -        884     1,434      2,437
       Separation
        costs of
        executive
        officers               -           -          -         -        465
       Acceleration of
        depreciation
        on abandoned
        equipment              -       1,174          -     1,174          -
       Goodwill and
        other
        intangible
        asset impairment       -      59,676    165,191    59,676    165,191
       Impairment
        charges on
        investments          301          34        142     1,789        591
       Income tax
        effects             (413)       (103)     1,035      (535)       304
       Charge to
        establish
        deferred tax
        asset
        valuation
        allowance              -           -          -         -      8,323
       Income tax
        benefit from
        the closure of
        federal tax
        audit                  -           -          -         -     (1,933)
                             ---         ---        ---       ---     ------
    Non-GAAP net
     income (loss)       $(2,140)      $(659)   $(1,651)    $(147)    $2,114
                         =======       =====    =======     =====     ======

    GAAP loss per share   $(0.11)     $(1.49)    $(3.77)   $(1.70)    $(4.55)
       Stock-based
        compensation        0.03        0.03       0.03      0.12       0.12
       Amortization of
        acquired
        intangible
        assets              0.01        0.03       0.04      0.10       0.16
       Fair value
        adjustment of
        acquired
        inventories            -           -       0.01         -       0.05
       Acquired in-
        process
        research and
        development            -           -          -         -       0.21
       Acquisition-
        related costs       0.02           -       0.02      0.03       0.06
       Separation
        costs of
        executive
        officers               -           -          -         -       0.01
       Acceleration of
        depreciation
        on abandoned
        equipment              -        0.03          -      0.03          -
       Goodwill and
        other
        intangible
        asset impairment       -        1.39       3.61      1.39       3.80
       Impairment
        charges on
        investments         0.01           -          -      0.04       0.01
       Income tax
        effects            (0.01)          -       0.02     (0.01)      0.01
       Charge to
        establish
        deferred tax
        asset
        valuation
        allowance              -           -          -         -       0.20
       Income tax
        benefit from
        the closure of
        federal tax
        audit                  -           -          -         -      (0.04)
                             ---         ---        ---       ---      -----
    Non-GAAP diluted
     earnings (loss)
     per share            $(0.05)     $(0.02)    $(0.04)    $0.00      $0.05
                          ======      ======     ======     =====      =====

    Shares used in
     earnings (loss)
     per share ---
     GAAP                 42,950      42,889     45,712    42,887     43,090
       The effect of
        dilutive
        potential
        common shares
        due to
        reporting
        Non-GAAP
        net income             -           -          -         -        540
                             ---         ---        ---       ---        ---
    Shares used in
     diluted earnings
     per share ---
     Non-GAAP             42,950      42,889     45,712    42,887     43,630
                          ======      ======     ======    ======     ======

    Notes: Certain amounts may not total due to rounding. Certain amounts
    previously reported above have been reclassified to conform to the current
    periods' presentation.



SOURCE Exar Corporation