Exar Corporation Announces Fourth Quarter and Fiscal Year 2015 Financial Results

Fourth Quarter Non-GAAP Operating Profit of $5.9 Million and EPS of $0.11;

Exar Also Announces Review of Strategic Alternatives

FREMONT, Calif., May 12, 2015 /PRNewswire/ -- Exar Corporation (NYSE: EXAR) a leading supplier of analog mixed-signal semiconductor components and system solutions serving the industrial and embedded, high-end consumer and infrastructure markets, today announced financial results for the Company's fourth fiscal quarter and fiscal year 2015, which ended on March 29, 2015.

Fiscal 2015 Financial Highlights and Outlook

For the fourth fiscal quarter, the Company reported revenue of $43.9 million, an increase of 57% versus the prior year, and non-GAAP earnings per diluted share of $0.11.  For the fourth fiscal quarter, GAAP loss per diluted share was ($0.06).

For fiscal year 2015, the Company reported Non-GAAP revenue of $164.1 million, an increase of 31% versus the prior year, and non-GAAP earnings per diluted share of $0.29.  Non-GAAP revenue has been adjusted to eliminate the impact of deferred revenue write-down under business combination accounting.  GAAP revenue for fiscal year 2015 was $162.1 million.  GAAP loss per diluted share was ($0.95).

Louis DiNardo, Exar's President and CEO, commented, "Our March quarter results reflect the great discipline and awareness our team has with regard to market conditions. Exar delivered solid earnings in a softening semiconductor environment. We will continue to align our field inventory with market conditions by reducing distribution inventory this quarter.  Operating expenses and manufacturing overhead remain well controlled."

For the first quarter ending June 28, 2015, the Company expects revenue to be in the range of $40.0 million to $43.0 million, and non-GAAP EPS on a fully diluted basis to be in the range of $0.10 to $0.12.

Exar also today announced that its Board of Directors has unanimously decided to undertake a comprehensive review of strategic alternatives to enhance value for stockholders.  Exar intends to conduct a thorough review and evaluation of strategic alternatives.  Cowen and Company, LLC is acting as financial advisor, and O'Melveny & Myers LLP is acting as legal counsel, to Exar in connection with its review of strategic alternatives.

"Following a detailed evaluation over the past several months, our Board of Directors has determined that it is prudent to undertake a wide review of strategic options to see which alternatives provide the best means to maximize stockholder value," said Mr. DiNardo. "Regardless of the outcome of the strategic alternatives review, the entire Exar team remains fully committed to meeting the needs of our customers and continuing to provide industry-leading solutions."

Conference Call and Prepared Remarks

Exar is providing a copy of prepared remarks in combination with its press release. These remarks are offered to provide stockholders and analysts with additional time and detail for analyzing results in advance of the Company's quarterly conference call. The remarks will be available at Exar's Investor webpage in conjunction with the press release.

As previously scheduled, the conference call will begin today, May 12, 2015 at 4:45 pm EDT (1:45 p.m. PDT). The prepared remarks will not be read on the call. To access the conference call, please dial (719) 325-2454 or (888) 455-2263.  In addition, a live webcast will be available on Exar's Investor webpage.

An archive of the conference call webcast will be available on Exar's Investor webpage after the conference call's conclusion.

About Exar

Exar Corporation designs, develops and markets high performance integrated circuits and system solutions for the industrial & embedded systems communications, high-end consumer and infrastructure markets. Exar's broad product portfolio includes analog, display, LED lighting, mixed-signal, power management, connectivity, data management and video processing solutions. Exar has locations worldwide providing real-time customer support. 

For more information, visit http://www.exar.com.

-Tables follow-

FINANCIAL COMPARISON

(In thousands, except per share amounts) (Unaudited)

















Non-GAAP Results


THREE MONTHS ENDED


TWELVE MONTHS ENDED



 MARCH 29, 2015 


 DECEMBER 28, 2014 


 MARCH 30, 2014 


 MARCH 29, 2015 


 MARCH 30, 2014 

Industrial & Embedded Systems


$  20,021

46%


$  20,506

46%


$  19,588

70%


$    79,050

48%


$    72,458

58%

High-End Consumer


16,072

36%


16,202

37%


43

- %


53,968

33%


462

- %

Infrastructure


7,764

18%


7,607

17%


8,356

30%


31,103

19%


52,402

42%

Net Sales


$  43,857

100%


$  44,315

100%


$  27,987

100%


$  164,121

100%


$  125,322

100%

















Gross Profit


$  21,348

48.7%


$  21,971

49.6%


$  12,837

45.9%


$    79,334

48.3%


$    62,496

49.9%

Operating Expenses


$  15,490

35.3%


$  16,403

37.0%


$  12,671

45.3%


$    64,730

39.4%


$    51,165

40.8%

Income from operations


$    5,858

13.4%


$    5,568

12.6%


$       166

0.6%


$    14,604

8.9%


$    11,331

9.0%

Net income


$    5,642

12.9%


$    5,415

12.2%


$       676

2.4%


$    14,420

8.8%


$    12,585

10.0%

Net income per share
















  Basic 


$      0.12



$      0.11



$      0.01



$         0.31



$         0.27


  Diluted 


$      0.11



$      0.11



$      0.01



$         0.29



$         0.25


































GAAP Results


THREE MONTHS ENDED


TWELVE MONTHS ENDED



 MARCH 29, 2015 


 DECEMBER 28, 2014 


 MARCH 30, 2014 


 MARCH 29, 2015 


 MARCH 30, 2014 

Industrial & Embedded Systems


$  20,021

46%


$  20,506

46%


$  19,588

70%


$    79,050

49%


$    72,458

58%

High-End Consumer


16,072

36%


16,202

37%


43

- %


51,897

32%


462

- %

Infrastructure


7,764

18%


7,607

17%


8,356

30%


31,103

19%


52,402

42%

Net Sales


$  43,857

100%


$  44,315

100%


$  27,987

100%


$  162,050

100%


$  125,322

100%

















Gross Profit


$  17,948

40.9%


$  16,890

38.1%


$    8,422

30.1%


$    49,926

30.8%


$    50,654

40.4%

Operating Expenses


$  20,294

46.3%


$  23,425

52.9%


$    8,733

31.2%


$    92,989

57.4%


$    54,355

43.4%

Loss from operations


$  (2,346)

-5.3%


$  (6,535)

-14.7%


$     (311)

-1.1%


$  (43,063)

-26.6%


$    (3,701)

-3.0%

Net income (loss)


$  (2,914)

-6.6%


$  (6,599)

-14.9%


$       147

0.5%


$  (44,970)

-27.8%


$       5,801

4.6%

Net income (loss) per share
















  Basic 


$    (0.06)



$    (0.14)



$      0.00



$       (0.95)



$         0.12


  Diluted 


$    (0.06)



$    (0.14)



$      0.00



$       (0.95)



$         0.12


 

Except for historical information contained herein, this press release and matters discussed on the conference call contain forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. In particular, the statements regarding the demand for our products and the anticipated trends in our sales and profits, future opportunities that are available to the Company, existence of any viable strategic alternatives and whether any future decisions by the Company will enhance stockholder value, are forward-looking statements. The forward-looking statements are dependent on certain risks and uncertainties. Therefore, actual outcomes and results may differ materially from what is expressed herein. For a discussion of these risks and uncertainties, the Company urges investors to review in detail the risks and uncertainties and other factors described in its Securities and Exchange Commission, or SEC, filings, including, but not limited to, the "Risk Factors", "Forward-Looking Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our public reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended March 30, 2014 and the Quarterly Reports on Form 10-Q for the quarters ended June 29, 2014, September 28, 2014 and December 28, 2014 which are on file with the SEC and are available on our Investor webpage and on the SEC website at www.sec.gov, and the risks and uncertainties of whether any strategic alternative will be identified by the Board of Directors, whether it will be pursued, whether it will receive Board of Directors and stockholder approval if necessary, whether it will be consummated and, if consummated, whether it will enhance value for all stockholders of Exar.  The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

There can be no assurance that Exar's review of strategic alternatives will result in any specific action.  Exar does not currently intend to disclose further developments with respect to this process unless and until its Board of Directors approves a specific action or otherwise concludes the review of strategic alternatives.

The Company's non-GAAP measures exclude charges related to stock-based compensation, amortization of acquired intangible assets and inventory step-up, impairment charges, technology licenses, restructuring charges and exit costs, provisions for dispute resolutions, merger and acquisition and related integration costs, certain income tax benefits and credits, certain warranty charges, net change in the fair value of contingent consideration, the write-down of deferred revenue under business combination accounting, and related income tax effects on certain excluded items. The Company excludes these items primarily because they are significant special expense and gain estimates, which management separates for consideration when evaluating and managing business operations. The Company's management uses non-GAAP net income and non-GAAP earnings per share to evaluate its current operating results and financial results and to compare them against historical financial results.  Additionally, we disclose below the non-GAAP measure of free cash flow, which is derived from our net cash provided (used) by operations, less purchases of fixed assets and IP, plus proceeds from the sale of IP.  Management believes these non-GAAP measures are useful to investors because they are frequently used by securities analysts, investors and other interested parties in evaluating the Company and provides further clarity on its profitability. 

In addition, the Company believes that providing investors with these non-GAAP measurements enhances their ability to compare the Company's business against that of its many competitors who employ and disclose similar non-GAAP measures.  This financial measure may be different from non-GAAP methods of accounting and reporting used by the Company's competitors to the extent their non-GAAP measures include or exclude other items.  The presentation of this additional information should not be considered a substitute for net income or net income per diluted share or other measures prepared in accordance with GAAP.

 

 EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)














THREE MONTHS ENDED


TWELVE MONTHS ENDED



 MARCH 29, 


 DECEMBER 28, 


 MARCH 30, 


 MARCH 29, 


 MARCH 30, 



2015


2014


2014


2015


2014


































Net sales


$           33,805


$                  35,919


$           18,913


$         125,791


$           89,595

Net sales, related party


10,052


8,396


9,074


36,259


35,727

               Total net sales


43,857


44,315


27,987


162,050


125,322












Cost of sales:











  Cost of sales (1) 


19,012


20,113


11,491


71,139


48,067

  Cost of sales, related party


3,951


3,099


4,119


14,359


15,738

  Amortization of purchased intangible assets and inventory step-up cost


2,525


2,533


2,254


11,740


7,600

  Restructuring charges and exit costs


1,213


2,052


65


7,597


187

  Impairment of intangible assets


-


-


1,636


8,367


1,636

  Warranty reserve


(792)


(372)


-


(1,078)


1,440

               Total cost of sales


25,909


27,425


19,565


112,124


74,668

Gross profit


17,948


16,890


8,422


49,926


50,654












  Research and development(2) 


8,534


10,035


6,803


37,181


27,048

  Selling, general and administrative (3)


10,291


11,793


7,496


43,758


33,055

  Merger and acquisition costs


393


179


1,014


7,348


1,880

  Restructuring charges and exit costs, net


537


1,418


1,438


4,589


2,827

  Impairment of intangible assets


539


-


-


4,456


-

  Net change in fair value of contingent consideration


-


-


(8,018)


(4,343)


(10,455)

               Total operating expenses


20,294


23,425


8,733


92,989


54,355

Loss from operations


(2,346)


(6,535)


(311)


(43,063)


(3,701)












Other income and expense, net:











   Interest income and other, net


16


81


523


571


1,503

   Interest expense and other, net


(56)


(46)


(39)


(1,082)


(156)

   Impairment of long term investment


(509)


(28)


(323)


(544)


(323)

              Total other income and expense, net


(549)


7


161


(1,055)


1,024












Loss before income taxes


(2,895)


(6,528)


(150)


(44,118)


(2,677)

Provision for (benefit from) income taxes


19


71


(297)


889


(8,478)












Net income (loss) before non-controlling interests


(2,914)


(6,599)


147


(45,007)


5,801












Net income (loss) attributable to non-controlling interests


-


-


-


(37)


-












Net income (loss) attributable to Exar


$           (2,914)


$                  (6,599)


$                147


$         (44,970)


$             5,801












Net income (loss) per share:











  Basic


$             (0.06)


$                    (0.14)


$               0.00


$             (0.95)


$               0.12

  Diluted


$             (0.06)


$                    (0.14)


$               0.00


$             (0.95)


$               0.12












Shares used in the computation of net income (loss) per share:











  Basic


47,516


47,119


47,328


47,253


47,291

  Diluted


47,516


47,119


48,778


47,253


48,823












(1)Stock based compensation included in Cost of sales


$                122


$                       496


$                195


$             1,105


$                714

(2)Stock based compensation included in R&D


537


442


579


2,661


1,974

(3)Stock based compensation included in SG&A


2,006


3,284


811


9,848


6,164

 

EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS  

(In thousands, except share amounts)

(Unaudited)











 MARCH 29, 


 DECEMBER 28, 


MARCH 30,




2015


2014


2014


ASSETS
















Current assets:








Cash and cash equivalents


$           55,233


$                  52,622


$        14,614


Short-term marketable securities


-


-


152,420


Accounts receivable, net


27,459


28,688


15,023


Accounts receivable, net related party


1,663


865


3,309


Inventories


30,767


33,066


28,982


Other current assets


3,090


5,487


3,549


Total current assets


118,212


120,728


217,897










Property, plant and equipment, net


26,077


20,673


21,280


Goodwill


44,871


44,871


30,410


Intangible assets, net


86,102


89,888


31,390


Other non-current assets


7,838


1,306


1,240










Total assets


$         283,100


$                277,466


$      302,217










LIABILITIES AND STOCKHOLDERS' EQUITY
















Current liabilities: 








Accounts payable


$           13,526


$                  17,504


$        15,488


Accrued compensation and related benefits


5,649


6,283


4,174


Deferred income and allowances on sales to distributors


3,362


3,585


1,765


Deferred income and allowances on sales to distributors, related party


6,982


8,110


9,349


Other current liabilities


21,287


14,387


11,370


             Total current liabilities


50,806


49,869


42,146










Long-term lease financing obligations


5,069


1,479


70


Other non-current obligations 


4,393


5,405


6,626










Total liabilities


60,268


56,753


48,842










Stockholders' equity


222,832


220,713


253,375


Total liabilities and stockholders' equity


$         283,100


$                277,466


$      302,217


 

 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 29, 


 DECEMBER 28, 


 MARCH 30, 


 MARCH 29, 


 MARCH 30, 



2015


2014


2014


2015


2014












GAAP net sales


$           43,857


$                  44,315


$           27,987


$         162,050


$         125,322

   Deferred revenue write-down


-


-


$                    -


2,071


-

Non-GAAP net sales


$           43,857


$                  44,315


$           27,987


$         164,121


$         125,322












GAAP gross profit


$           17,948


$                  16,890


$             8,422


$           49,926


$           50,654

GAAP gross margin


40.9%


38.1%


30.1%


30.8%


40.4%

   Stock-based compensation


122


496


195


1,105


714

   Amortization of purchased intangible assets and inventory step-up


2,525


2,533


2,254


11,740


7,600

   Warranty reserve


(460)


-


-


(460)


1,440

   Deferred revenue write-down and associated costs


-


-


-


1,059


-

   Impairment of intangibles


-


-


1,901


8,367


1,901

   Restructuring charges and exit costs 


1,213


2,052


65


7,597


187

Non-GAAP gross profit 


$           21,348


$                  21,971


$           12,837


$           79,334


$           62,496

Non-GAAP gross margin 


48.7%


49.6%


45.9%


48.3%


49.9%












GAAP operating expenses


$           20,294


$                  23,425


$             8,733


$           92,989


$           54,355

   Stock-based compensation - R&D


537


442


579


2,661


1,974

   Stock-based compensation - SG&A


2,006


3,284


811


9,848


6,164

   Amortization of purchased intangible assets and technology license


792


1,699


238


3,700


800

   Impairment of intangibles


539


-


-


4,456


-

   Restructuring charges and exit costs, net


537


1,418


1,438


4,589


2,827

   Merger and acquisition costs


393


179


1,014


7,348


1,880

   Net change in fair value of contingent consideration


-


-


(8,018)


(4,343)


(10,455)

Non-GAAP operating expenses


$           15,490


$                  16,403


$           12,671


$           64,730


$           51,165












GAAP operating loss


$           (2,346)


$                  (6,535)


$              (311)


$         (43,063)


$           (3,701)

   Stock-based compensation 


2,665


4,222


1,585


13,614


8,852

   Amortization of purchased intangible assets, technology license and inventory step-up 


3,317


4,232


2,492


15,440


8,400

   Warranty reserve


(460)


-


-


(460)


1,440

   Deferred revenue write-down and associated costs


-


-


-


1,059


-

   Impairment of intangibles


539


-


1,901


12,823


1,901

   Restructuring charges and exit costs, net


1,750


3,470


1,503


12,186


3,014

   Merger and acquisition costs


393


179


1,014


7,348


1,880

   Net change in fair value of contingent consideration


-


-


(8,018)


(4,343)


(10,455)

Non-GAAP operating income 


$             5,858


$                    5,568


$                166


$           14,604


$           11,331












GAAP net income (loss) attributable to Exar


$           (2,914)


$                  (6,599)


$                147


$         (44,970)


$             5,801

   Stock-based compensation 


2,665


4,222


1,585


13,614


8,852

   Amortization of purchased intangible assets, technology license and inventory step-up 


3,317


4,232


2,492


15,440


8,400

   Warranty reserve


(460)


-


-


(460)


1,440

   Deferred revenue write-down and associated costs


-


-


-


1,059


-

   Impairment charges


1,048


28


2,224


13,367


2,224

   Restructuring charges and exit costs, net 


1,750


3,470


1,503


12,186


3,014

   Merger and acquisition costs


393


189


1,014


8,260


1,880

   Net change in fair value of contingent consideration


-


-


(8,018)


(4,343)


(10,455)

   Net income attributable to non-controlling interest


-


-


-


(37)


-

   Income tax effects


(157)


(127)


(271)


304


(8,571)

Non-GAAP net income attributable to Exar


$             5,642


$                    5,415


$                676


$           14,420


$           12,585












GAAP net income (loss) per share











  Basic


$             (0.06)


$                    (0.14)


$               0.00


$             (0.95)


$               0.12

  Diluted


$             (0.06)


$                    (0.14)


$               0.00


$             (0.95)


$               0.12












Non-GAAP net income per share 











  Basic


$               0.12


$                      0.11


$               0.01


$               0.31


$               0.27

  Diluted


$               0.11


$                      0.11


$               0.01


$               0.29


$               0.25












Shares used in the computation of Non-GAAP net income per share











  Basic


47,516


47,119


47,328


47,253


47,291

  Diluted


49,877


49,180


50,220


49,722


50,168












Net cash provided (used) by operations


$             2,370


$                  (5,914)


$             1,708


$         (13,641)


$                851

   Less purchases of fixed assets and IP


(1,478)


(1,791)


(983)


(3,925)


(2,658)

   Add proceeds from sale of IP


-


-


-


-


125

Free cash flow


$                892


$                  (7,705)


$                725


$         (17,566)


$           (1,682)

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/exar-corporation-announces-fourth-quarter-and-fiscal-year-2015-financial-results-300082133.html

SOURCE Exar Corporation