Exar Corporation Reports Fiscal 2010 Third Quarter Results

FREMONT, Calif., Jan. 28 /PRNewswire-FirstCall/ -- Exar Corporation (Nasdaq: EXAR), today reported financial results for its fiscal 2010 third quarter ended December 27, 2009.

Net sales for the third quarter of fiscal 2010 were $33.9 million compared to net sales of $31.6 million for the prior quarter and $26.3 million for the third quarter of fiscal 2009.

The GAAP gross margin for the third quarter of fiscal 2010 was 50.2% compared to 44.6% for the prior quarter and 40.7% in the third quarter of fiscal 2009.

On a non-GAAP basis, the gross margin for the third quarter of fiscal 2010 was 54.1% compared to 51.5% for the prior quarter and 45.3% in the third quarter of fiscal 2009.

The GAAP net loss for the third quarter of fiscal 2010 was $3.8 million, or $0.09 net loss per share, compared to a net loss of $8.2 million, or $0.19 net loss per share in the prior quarter, and a net loss of $63.8 million, or $1.49 net loss per share, for the third quarter of fiscal 2009.

On a non-GAAP basis, the net income was $0.1 million for the third quarter of fiscal 2010, compared to net loss of $2.7 million, or $0.06 net loss per share, in the previous quarter, and a net loss of $0.7 million, or $0.02 net loss per share, in the third quarter of fiscal 2009.

The Company ended the third quarter of fiscal 2010 with cash, cash equivalents and short-term marketable securities of $218.3 million.

"Revenue and gross margins continued to improve. We achieved breakeven non-GAAP net income and met our short term goal of returning to positive non-GAAP EBITDA. We expect continued improvement in both revenue and gross margins in the current quarter," said Pete Rodriguez, the Company's president and chief executive officer. "We released thirty-five new products in calendar 2009 and are excited about market reaction to our new products, especially Power XR.  We believe these new products will continue to gain traction and increasingly contribute to the Company's expected revenue growth."

For the fourth quarter of fiscal 2010 ending March 28, 2010, the Company projects that net sales will be between $35 million and $37 million. The non-GAAP gross margin is expected to be between 54% and 56%. Operating expenses are expected to be between $19.5 million and $20.5 million on a non-GAAP basis.

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 third quarter of fiscal 2010, today, Thursday, January 28, 2010 at 1:30 p.m. PST. To access the conference call, please dial (800) 230-1951 by 1:20 p.m. PST and use conference ID number 143156. 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. A replay of the call will be available starting at 5:00 p.m. PST this afternoon until 11:59 p.m. PST on February 4, 2010. To access the replay, please dial (800) 475-6701 and use conference ID number 143156.

Product Line Highlights:

Power Management

http://www.exar.com/Common/Content/News.aspx?id=5560

http://www.exar.com/Common/Content/News.aspx?id=5858

DataCom and Storage

http://www.exar.com/Common/Content/News.aspx?id=5572

http://www.exar.com/Common/Content/News.aspx?id=5570

Interface

http://www.exar.com/Common/Content/News.aspx?id=5640

http://www.exar.com/Common/Content/News.aspx?id=5638

http://www.exar.com/Common/Content/News.aspx?id=5738

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; 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 and the Quarterly Reports on Form 10-Q for the periods ended June 28, 2009 and September 27, 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, acceleration of depreciation on abandoned equipment, goodwill and other intangible asset impairment, 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)
    
                                               DECEMBER 27,       MARCH 29,
                                                  2009              2009
                                 ASSETS
    
    Current assets:
      Cash and cash equivalents                 $22,166           $89,002
      Short-term marketable securities          196,090           167,341
      Accounts receivable (net of allowances
       of $567 and $572)                         13,164             7,452
      Accounts receivable, related party (net
       of allowances of $492 and $736)            4,472             1,796
      Inventories                                13,623            15,678
      Other current assets                        4,975             3,274
      Deferred income taxes, net                    289                62
        Total current assets                    254,779           284,605
                                                        
    Property, plant and equipment, net           43,858            42,549
    Goodwill                                      2,621                 -
    Intangible assets, net                       24,917             7,359
    Other non-current assets                      4,851             1,876
                                                        
        Total assets                           $331,026          $336,389
                                                        
                LIABILITIES AND STOCKHOLDERS' EQUITY
    
    Current liabilities:
      Accounts payable                           $8,198            $5,391
      Accrued compensation and related benefits   5,533             4,773
      Deferred income and allowances on sales
       to distributors                            3,742             3,208
      Deferred income and allowances on sales
       to distributors, related party             9,353             7,040
      Other accrued expenses                      9,849             7,014
        Total current liabilities                36,675            27,426
                                                        
    Long-term lease financing obligations        14,527            15,633
    Other non-current obligations                 3,977             1,236
                                                        
        Total liabilities                        55,179            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; 
       43,794,381 and 43,036,271 shares
       issued and outstanding
       at December 27, 2009 and March 29,
       2009, respectively (net of
       treasury shares)                               4                 4
      Additional paid-in capital                718,651           710,787
      Accumulated other comprehensive income      1,491               802
      Treasury stock at cost, 19,924,369
       shares at December 27, 2009 and
       March 29, 2009                          (248,983)         (248,983)
      Accumulated deficit                      (195,316)         (170,516)
        Total stockholders' equity              275,847           292,094
        Total liabilities and stockholders'
         equity                                $331,026          $336,389
    
    
    
                      EXAR CORPORATION AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   (In thousands, except per share amounts)
                                   (Unaudited)
    
                            THREE MONTHS ENDED           NINE MONTHS ENDED
                      DECEMBER  SEPTEMBER  DECEMBER    DECEMBER     DECEMBER
                      27, 2009  27, 2009   28, 2008    27, 2009     28, 2008
    
    Net sales         $24,458   $23,118    $17,201     $70,686     $58,953
    Net sales,
     related
     party              9,473     8,470      9,104      25,695      32,311
        Total net
         sales         33,931    31,588     26,305      96,381      91,264
    
    Cost of sales:
      Cost of
       sales           11,273    11,843     10,821      36,005      33,339
      Cost of
       sales,
       related
       party            4,505     4,088      3,998      12,381      15,053
      Amortization of
       purchased
       intangible
       assets           1,108     1,567        782       4,015       2,693
        Total cost
         of sales      16,886    17,498     15,601      52,401      51,085
                              
    Gross
     profit            17,045    14,090     10,704      43,980      40,179
    
    Operating
     expenses:
      Research and
       development     11,674    12,288      8,092      36,256      24,317
      Goodwill and
       other intangible
       asset impairment     -         -     59,676           -      59,676
      Selling, general
       and
       administrative  10,688    11,375      9,099      37,175      30,146
        Total operating
         expenses      22,362    23,663     76,867      73,431     114,139
    Loss from
     operations        (5,317)   (9,573)   (66,163)    (29,451)    (73,960)
    
    Other income and
     expense, net:
      Interest income
       and other, net   1,835     1,700      2,570       5,289       7,775
      Interest expense   (323)     (326)      (266)       (973)       (927)
      Impairment
       charges on
       investments          -      (245)       (34)       (317)     (1,488)
        Total other
         income and
         expense, net   1,512     1,129      2,270       3,999       5,360
    
    Loss before income
     taxes             (3,805)   (8,444)   (63,893)    (25,452)    (68,600)
    Benefit from income
     taxes                (43)     (281)       (70)       (652)       (129)
    
    Net loss          $(3,762)  $(8,163)  $(63,823)   $(24,800)   $(68,471)
    
    Loss per share:
      Basic loss per
       share           $(0.09)   $(0.19)    $(1.49)     $(0.57)     $(1.60)
    
      Diluted loss per
       share           $(0.09)   $(0.19)    $(1.49)     $(0.57)     $(1.60)
                              
    Shares used in the
     computation of
     loss per share:
    
      Basic            43,648    43,550     42,889      43,504      42,866
    
      Diluted          43,648    43,550     42,889      43,504      42,866
    
    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           NINE MONTHS ENDED
                      DECEMBER  SEPTEMBER  DECEMBER    DECEMBER     DECEMBER
                      27, 2009  27, 2009   28, 2008    27, 2009     28, 2008
    GAAP gross
     margin              50.2%     44.6%     40.7%       45.6%      44.0%
      Stock-based
       compensation       0.3%      0.5%      0.5%        0.4%       0.5%
      Amortization of
       acquired
       intangible
       assets             3.3%      5.0%      3.0%        4.2%       3.0%
      Fair value
       adjustment of
       acquired
       inventories        0.3%      1.4%        -         2.4%         - 
      Acquisition-
       related costs        -       0.1%        -           -        0.1%
      Acceleration of
       depreciation
       on abandoned
       equipment            -         -       1.1%          -        0.3%
    Non-GAAP gross
     margin              54.1%     51.5%     45.3%       52.6%      48.0%
    
    GAAP research and
     development
     expenses         $11,674   $12,288    $8,092     $36,256    $24,317
      Stock-based
       compensation       467       748       392       1,701      1,231
      Amortization of
       acquired
       intangible
       assets             635       635       200       1,858        726
      Acquisition-
       related costs      128       192         -         877          - 
      Acceleration of
       depreciation on
       abandoned
       equipment            -         -       437           -        437
    Non-GAAP research
     and development
     expenses         $10,444   $10,713    $7,063     $31,820    $21,923
                              
    GAAP selling,
     general and
     administrative
     expenses         $10,688   $11,375    $9,099     $37,175    $30,146
      Stock-based
       compensation       751       767       768       2,225      2,012
      Amortization
       of acquired
       intangible
       assets             178       179       122         499        446
      Acquisition-
       related costs      297       620         -       4,843        541
      Separation
       costs of
       executive
       officers             -         -         -         162          - 
      Acceleration
       of depreciation
       on abandoned
       equipment            -         -       437           -        437
    Non-GAAP selling,
     general and
     administrative
     expenses          $9,462    $9,809    $7,772     $29,446    $26,710
    
    GAAP operating
     expenses         $22,362   $23,663   $76,867     $73,431   $114,139
      Stock-based
       compensation     1,218     1,515     1,160       3,926      3,243
      Amortization of
       acquired
       intangible
       assets             813       814       322       2,357      1,172
      Acquisition-
       related costs      425       812         -       5,720        541
      Separation costs
       of executive
       officers             -         -         -         162          - 
      Acceleration of
       depreciation on
       abandoned
       equipment            -         -       874           -        874
      Goodwill and
       other
       intangible
       asset
       impairment           -         -    59,676           -     59,676
    Non-GAAP
     operating
     expenses         $19,906   $20,522   $14,835     $61,266    $48,633
    
    GAAP operating
     loss             $(5,317)  $(9,573) $(66,163)   $(29,451)  $(73,960)
      Stock-based
       compensation     1,335     1,666     1,278       4,310      3,727
      Amortization
       of acquired
       intangible
       assets           1,921     2,381     1,105       6,372      3,865
      Fair value
       adjustment of
       acquired
       inventories         92       447         -       2,326          - 
      Acquisition-
       related costs      425       830         -       5,744        656
      Separation costs of
       executive
       officers             -         -         -         162          - 
      Acceleration
       of depreciation
       on abandoned
       equipment            -         -     1,174           -      1,174
      Goodwill
       and other
       intangible
       asset impairment     -         -    59,676           -     59,676
    Non-GAAP operating
     loss             $(1,544)  $(4,249)  $(2,930)   $(10,537)   $(4,862)
                              
    GAAP net loss     $(3,762)  $(8,163) $(63,823)   $(24,800)  $(68,471)
      Stock-based
       compensation     1,335     1,666     1,278       4,310      3,727
      Amortization of
       acquired
       intangible
       assets           1,921     2,381     1,105       6,372      3,865
      Fair value
       adjustment
       of acquired
       inventories         92       447         -       2,326          - 
      Acquisition-
       related costs      425       830         -       5,744        656
      Separation costs
       of executive
       officers             -         -         -         162          - 
      Acceleration of
       depreciation
       on abandoned
       equipment            -         -     1,174           -      1,174
      Goodwill and
       other intangible
       asset
       impairment           -         -    59,676           -     59,676
      Impairment
       charges on
       investments          -       245        34         317      1,488
      Income tax
       effects            107      (136)     (103)       (181)      (122)
    Non-GAAP net
     income (loss)       $118   $(2,730)    $(659)    $(5,750)    $1,993
                              
    GAAP loss per
     share             $(0.09)   $(0.19)   $(1.49)     $(0.57)    $(1.60)
      Stock-based
       compensation      0.03      0.04      0.03        0.10       0.09
      Amortization
       of acquired
       intangible
       assets            0.04      0.05      0.03        0.15       0.09
      Fair value
       adjustment
       of acquired
       inventories          -      0.01         -        0.05          -
      Acquisition-
       related costs     0.01      0.02         -        0.13       0.02
      Separation costs
       of executive
       officers             -         -         -        0.00          -
      Acceleration of
       depreciation
       on abandoned
       equipment            -         -      0.03           -       0.03
      Goodwill and
       other
       intangible
       asset
       impairment           -         -      1.39           -       1.39
      Impairment
       charges on
       investments          -      0.01      0.00        0.01       0.03
    Non-GAAP diluted
     earnings (loss)
     per share          $0.00    $(0.06)   $(0.02)     $(0.13)     $0.05
    
    Shares used in
     earnings (loss)
     per share ---
     GAAP              43,648    43,550    42,889      43,504     42,866
      The effect of
       dilutive 
       potential
       common shares
       due to
       reporting
       Non-GAAP
       net income         314         -         -           -          -
      The effect
       of removing
       stock-based
       compensation
       expense
       under SFAS
       123R for
       Non-GAAP
       presentation
       purpose           (109)        -         -           -          -
    Shares used
     in diluted
     earnings
     per share --- 
     Non-GAAP          43,853    43,550    42,889      43,504     42,866
    
    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