Exar Corporation Reports Fiscal 2010 First Quarter Results

FREMONT, Calif., July 30 /PRNewswire-FirstCall/ -- Exar Corporation (Nasdaq: EXAR), today reported financial results for its fiscal 2010 first quarter ended June 28, 2009.

Net sales for the first quarter of fiscal 2010 were $30.9 million compared to net sales of $23.9 million for the prior quarter and $32.2 million for the first quarter of fiscal 2009.

The GAAP gross margin for the first quarter of fiscal 2010 was 41.6% compared to 42.2% for the prior quarter and 44.9% for the first quarter of fiscal 2009.

On a non-GAAP basis, the gross margin for the first quarter of fiscal 2010 was 52.1% compared to 44.5% for the prior quarter and 48.8% for the first quarter of fiscal 2009.

The GAAP net loss for the first quarter of fiscal 2010 was $12.9 million, or a net loss per share of $0.30, compared to a net loss of $4.6 million, or a net loss per share of $0.11, in the prior quarter, and a net loss of $2.5 million, or a net loss per share of $0.06, for the first quarter of fiscal 2009. These results include acquisition-related costs of $4.5 million in the first quarter of fiscal 2010 as compared to $0.8 million in the prior quarter and $0.7 million for the first quarter of fiscal 2009.

On a non-GAAP basis, the net loss was $3.1 million, or a net loss per share of $0.07, for the first quarter of fiscal 2010, compared to a net loss of $2.1 million, or a net loss per share of $0.05, in the previous quarter, and net income of $0.8 million, or net earnings per share of $0.02, for the first quarter of fiscal 2009.

The Company ended the first quarter of fiscal 2010 with cash, cash equivalents and short-term marketable securities of $221.5 million.

"The stability of our business has improved but we are still below our pre-downturn order levels," said Pete Rodriguez, the Company's president and chief executive officer. "In mid-June we completed the acquisition of Galazar Networks which strengthens and extends our solutions for the TDM and carrier Ethernet communications infrastructure markets. We are also on track with our integration and product plans for Hifn. I am encouraged by the addition of the high value solutions of these newly acquired teams to our growing list of design wins and winning product releases," stated Mr. Rodriguez.

Business Outlook

For the second quarter of fiscal 2010, the Company expects that net sales will be between $31.0 million and $33.0 million, non-GAAP gross margin will be between 50% and 52% and non-GAAP operating expenses will be between $20.0 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 first quarter of fiscal 2010, today, Thursday, July 30, 2009 at 1:30 p.m. PDT. To access the conference call, please dial (800) 230-1085 by 1:20 p.m. PDT and use conference ID number 107238.

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.exar.com/news/investornews.aspx.

A taped replay of the conference call will be available starting at 5:00 p.m. PDT the day of the call until 11:59 p.m. PDT on August 6, 2009. To access the replay, please dial (800) 475-6701 and use conference ID number 107238.

Product Line Highlights

Interface

Exar Launches Industry's Fastest Universal Asynchronous Receiver Transmitter (UART) Series with USB 2.0 Compliant Bus Interface

http://www.exar.com/Common/Content/News.aspx?id=4832 http://www.exar.com/Common/Content/News.aspx?id=5392

Power Management

Exar Adds High Speed 3.3V RS-485 and RS-422 Family to Expanding Serial Transceiver Portfolio--

http://www.exar.com/Common/Content/News.aspx?id=5190

Exar Provides Simplest Full Color Spectrum LED Lighting Solution

http://www.exar.com/Common/Content/News.aspx?id=5314

Communications

Exar Adds Highly Integrated T1-E1-J1 Eight-Channel Devices to Communications Portfolio

http://www.exar.com/Common/Content/News.aspx?id=5352

Hifn Solutions

Hifn Delivers Plug-and-Play Data Deduplication for Windows(R) Servers

http://www.exar.com/Common/Content/News.aspx?id=5016

Safe Harbor Statement

The Company's statements about its future financial performance, changes in gross margins, net sales and operating expenses, resource allocation and its impact on future performance and product development initiatives, design win conversion, 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 29, 2009.

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, acquisition-related costs, separation costs of executive officers, impairment charges on investments, and income tax effects. 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, consumer, and enterprise applications. For nearly 40 years, Exar's comprehensive knowledge of end-user markets along with the underlying analog/mixed signal and digital technologies has enabled innovative solutions that meet the needs of the evolving connected world. Exar's technology portfolio includes solutions for power management, serial interfaces, packet-based and TDM wireline communications, enterprise storage optimization, and data security. Exar has locations worldwide providing real-time customer support to drive rapid product development. For more information about Exar, visit: www.exar.com.

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

                                                          JUNE 28,   MARCH 29,
                                                            2009         2009
                                                            ----         ----
                                ASSETS

    Current assets:
     Cash and cash equivalents                           $41,915      $89,002
     Short-term marketable securities                    179,553      167,341
     Accounts receivable (net of allowances of
      $516 and $572)                                      11,894        7,452
     Accounts receivable, related party (net of
      allowances of $356 and $736)                         2,456        1,796
     Inventories                                          15,584       15,678
     Other current assets                                  4,836        3,274
     Deferred income taxes, net                              361           62
                                                             ---           --
     Total current assets                                256,599      284,605

    Property, plant and equipment, net                    43,342       42,549
    Goodwill                                               2,621            -
    Intangible assets, net                                28,067        7,359
    Other non-current assets                               3,339        1,876
                                                           -----        -----

     Total assets                                       $333,968     $336,389
                                                        ========     ========

                 LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:
     Accounts payable                                     $5,233       $5,391
     Accrued compensation and related benefits             5,425        4,773
     Deferred income and allowances on sales to
      distributors                                         3,444        3,208
     Deferred income and allowances on sales to
      distributors, related party                          7,340        7,040
     Other accrued expenses                               11,675        7,014
                                                          ------        -----
                  Total current liabilities               33,117       27,426

    Long-term lease financing obligations                 15,217       15,633
    Other non-current obligations                          1,630        1,236
                                                           -----        -----

     Total liabilities                                    49,964       44,295
                                                          ------       ------

    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; 43,515,088 and
         43,036,271 shares issued and outstanding  at
           June 28, 2009 and March 29, 2009,
         respectively (net of treasury shares)                 4            4
     Additional paid-in capital                          715,159      710,787
     Accumulated other comprehensive income                1,215          802
     Treasury stock at cost, 19,924,369 shares at
      June 28, 2009 and March 29, 2009,
      respectively                                      (248,983)    (248,983)
     Accumulated deficit                                (183,391)    (170,516)
                                                        --------     --------
     Total stockholders' equity                          284,004      292,094
                                                         -------      -------
     Total liabilities and stockholders' equity         $333,968     $336,389
                                                        ========     ========


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

                                              THREE MONTHS ENDED
                                              ------------------
                                         JUNE 28,   MARCH 29,    JUNE 29,
                                           2009       2009         2008
                                           ----       ----         ----



    Net sales                            $23,110    $15,667      $20,171
    Net sales, related
     party                                 7,752      8,187       12,040
                                           -----      -----       ------
                   Total net sales        30,862     23,854       32,211
                                          ------     ------       ------

    Cost of sales:
      Cost of sales                       12,889      8,472       10,939
      Cost of sales, related
       party                               3,788      4,880        5,847
      Amortization of
       purchased intangible
       assets                              1,340        436          955
                                           -----        ---          ---
                   Total cost of sales    18,017     13,788       17,741

    Gross profit                          12,845     10,066       14,470
                                          ------     ------       ------

    Operating expenses:
      Research and
       development                        12,294      7,512        8,092
      Selling, general and
       administrative                     15,112      8,816       11,301
                                          ------      -----       ------
                   Total operating
                    expenses              27,406     16,328       19,393
    Loss from operations                 (14,561)    (6,262)      (4,923)

    Other income, net:
       Interest income and
        other, net                         1,754      1,918        2,670
       Interest expense                     (324)      (326)        (331)
       Impairment charges on
        investments                          (72)      (301)           -
                                             ---       ----            -
                  Total other income and
                   expense, net            1,358      1,291        2,339

    Loss before income
     taxes                               (13,203)    (4,971)      (2,584)
    Benefit from income
     taxes                                  (328)      (406)        (123)
                                            ----       ----         ----

    Net loss                            $(12,875)   $(4,565)     $(2,461)
                                        ========    =======      =======


    Loss per share:
      Basic loss per share                $(0.30)    $(0.11)      $(0.06)
                                          ======     ======       ======

      Diluted loss per share              $(0.30)    $(0.11)      $(0.06)
                                          ======     ======       ======

    Shares used in the
     computation of loss
     per share:

      Basic                               43,314     42,950       42,973
                                          ======     ======       ======

      Diluted                             43,314     42,950       42,973
                                          ======     ======       ======


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

                                                      THREE MONTHS ENDED
                                                      ------------------
                                              JUNE 28,     MARCH 29,  JUNE 29,
                                                2009          2009       2008
                                                ----          ----       ----


     GAAP gross margin                         41.6%          42.2%      44.9%
       Stock-based compensation                 0.4%           0.5%       0.6%
       Amortization of acquired
        intangible assets                       4.3%           1.8%       3.0%
       Fair value adjustment of
        acquired inventories                    5.8%             -          -
       Acquisition-related
        costs                                     -              -        0.4%
                                                 --             --        ---
    Non-GAAP gross margin                      52.1%          44.5%      48.8%
                                               ====           ====       ====

    GAAP research and
     development expenses                   $12,294         $7,512     $8,092
       Stock-based compensation                 486            383        358
       Amortization of acquired
        intangible assets                       588             72        263
       Acquisition-related
        costs                                   557              -          -
                                                ---             --         --
    Non-GAAP research and
     development expenses                   $10,663         $7,057     $7,471
                                            =======         ======     ======

    GAAP selling, general
     and administrative
     expenses                               $15,112         $8,816    $11,301
       Stock-based compensation                 707            713        809
       Amortization of acquired
        intangible assets                       142             44        162
       Acquisition-related
        costs                                 3,926            778        541
       Separation costs of
        executive officers                      162              -
                                                ---             --         --
    Non-GAAP selling,
     general and
     administrative expenses                $10,175         $7,281     $9,789
                                            =======         ======     ======

    GAAP operating expenses                 $27,406        $16,328    $19,393
       Stock-based compensation               1,193          1,096      1,167
       Amortization of acquired
        intangible assets                       730            116        425
       Acquisition-related
        costs                                 4,483            778        541
       Separation costs of
        executive officers                      162              -          -
                                                ---             --         --
       Non-GAAP operating
        expenses                            $20,838        $14,338    $17,260
                                            =======        =======    =======

    GAAP operating loss                    $(14,561)       $(6,262)   $(4,923)
       Stock-based compensation               1,309          1,207      1,359
       Amortization of acquired
        intangible assets                     2,070            552      1,380
       Fair value adjustment of
        acquired inventories                  1,787              -          -
       Acquisition-related
        costs                                 4,489            778        656
       Separation costs of
        executive officers                      162              -          -
                                                ---             --         --
    Non-GAAP operating loss                 $(4,744)       $(3,725)   $(1,528)
                                           ========        =======   ========

    GAAP net loss                          $(12,875)       $(4,565)   $(2,461)
       Stock-based compensation               1,309          1,207      1,359
       Amortization of acquired
        intangible assets                     2,070            552      1,380
       Fair value adjustment of
        acquired inventories                  1,787              -          -
       Acquisition-related
        costs                                 4,489            778        656
       Separation costs of
        executive officers                      162              -          -
       Impairment charges on
        investments                              72            301          -
       Income tax effects                      (152)          (413)      (161)
                                               ----           ----       ----
    Non-GAAP net income
     (loss)                                 $(3,138)       $(2,140)      $773
                                           ========        =======       ====

    GAAP loss per share                      $(0.30)        $(0.11)    $(0.06)
       Stock-based compensation                0.03           0.03       0.03
       Amortization of acquired
        intangible assets                      0.05           0.01       0.03
       Fair value adjustment of
        acquired inventories                   0.04              -          -
       Acquisition-related
        costs                                  0.10           0.02       0.02
       Separation costs of
        executive officers                        -              -          -
       Impairment charges on
        investments                               -           0.01          -
       Income tax effects                         -          (0.01)         -
                                                ---          -----        ---
    Non-GAAP diluted
     earnings (loss) per
     share                                   $(0.07)        $(0.05)     $0.02
                                             ======         ======      =====

    Shares used in earnings
     (loss) per share ---
     GAAP                                    43,314         42,950     42,973
       The effect of dilutive
        potential common shares
        due to
          reporting Non-GAAP net
           income                                 -              -        260
       The effect of removing
        stock-based
        compensation expense
          under SFAS 123R for
           Non-GAAP presentation
           purpose                                -              -        (81)
                                                ---            ---        ---
    Shares used in diluted
     earnings (loss) per
     share ---  Non-GAAP                     43,314         42,950     43,152
                                             ======         ======     ======

    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