Exar Corporation Reports Fiscal 2010 Fourth Quarter Results

Company Achieves Positive Non-GAAP Operating Income, Completes Neterion Acquisition

FREMONT, Calif., May 13 /PRNewswire-FirstCall/ -- Exar Corporation (Nasdaq: EXAR), today reported financial results for its fiscal 2010 fourth quarter ended March 28, 2010.

Net sales for the fourth quarter of fiscal 2010 were $38.5 million compared to net sales of $33.9 million for the prior quarter and $23.9 million for the fourth quarter of fiscal 2009.

The GAAP gross margin for the fourth quarter of fiscal 2010 was 50.4% compared to 50.2% for the prior quarter and 42.2% in the fourth quarter of fiscal 2009.

On a non-GAAP basis, the gross margin for the fourth quarter of fiscal 2010 was 54.0% compared to 54.1% for the prior quarter and 44.5% in the fourth quarter of fiscal 2009.

The GAAP net loss for the fourth quarter of fiscal 2010 was $3.3 million, or $0.08 net loss per share, compared to a net loss of $3.8 million, or $0.09 net loss per share in the prior quarter, and a net loss of $4.6 million, or $0.11 net loss per share, for the fourth quarter of fiscal 2009.

On a non-GAAP basis, the net income was $1.5 million for the fourth quarter of fiscal 2010 or $0.03 diluted earnings per share, compared to net income of $0.1 million in the previous quarter, and a net loss of $2.1 million, or $0.05 net loss per share, in the fourth quarter of fiscal 2009.

The Company ended the fourth quarter of fiscal 2010 with cash, cash equivalents and short-term marketable securities of $212.1 million.

"Our business is improving across all product lines and we achieved positive non-GAAP operating income for the first time since 2007," said Pete Rodriguez, the Company's president and chief executive officer. "We completed the Neterion transaction and are pleased with customer response to the acquisition and our leading 10G Ethernet solutions. The strength in the industrial, networking and storage segments when combined with over fifty key new products released in the past two years provides a healthy platform for growth."

For the first quarter of fiscal 2011 ending June 27, 2010, the Company currently projects that net sales will be between $39 million and $41 million. The non-GAAP gross margin is currently expected to be between 54% and 56%. Operating expenses are currently expected to be between $22.5 million and $23.5 million on a non-GAAP basis. We expect to achieve cost synergies in the current quarter that will reduce operating expenses starting in the September 2010 quarter. Our present expectations are that FY11 revenue will grow 20-30% over FY10 and we will attain operating profitability for FY11 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 fourth quarter of fiscal 2010, today, Thursday, May 13, 2010 at 1:30 p.m. PDT. To access the conference call, please dial (800) 230-1059 by 1:20 p.m. PDT and use conference ID number 155612. 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 3:00 p.m. PDT on May 13, 2010 until 11:59 p.m. PDT on May 21, 2010. To access the replay, please dial (800) 475-6701 and use conference ID number 155612.

Product Line Highlights:

Power Management

http://www.exar.com/Common/Content/News.aspx?id=7132

http://www.exar.com/Common/Content/News.aspx?id=7118

DataCom and Storage

http://www.exar.com/Common/Content/News.aspx?id=7100

http://www.exar.com/Common/Content/News.aspx?id=7134

Interface

http://www.exar.com/Common/Content/News.aspx?id=7090

http://www.exar.com/Common/Content/News.aspx?id=7156

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, September 27, 2009 and December 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 income (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)



                                                           MARCH 28,  MARCH 29,

                                                           2010       2009

ASSETS



Current assets:

Cash and cash equivalents                                  $ 25,486   $ 89,002

Short-term marketable securities                           186,598    167,341

Accounts receivable (net of allowances of $831 and $572)   13,461     7,452

Accounts receivable, related party (net of allowances of
$605 and $736)                                             4,323      1,796

Inventories                                                15,000     15,678

Other current assets                                       5,059      3,274

Deferred income taxes, net                                 47         62

Total current assets                                       249,974    284,605



Property, plant and equipment, net                         42,941     42,549

Goodwill                                                   3,085      -

Intangible assets, net                                     31,957     7,359

Other non-current assets                                   5,357      1,876



Total assets                                               $ 333,314  $ 336,389



LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:

Accounts payable                                           $ 9,828    $ 5,391

Accrued compensation and related benefits                  6,619      4,773

Deferred income and allowances on sales to distributors    4,227      3,208

Deferred income and allowances on sales to distributors,
related party                                              10,650     7,040

Other accrued expenses                                     10,598     7,014

Total current liabilities                                  41,922     27,426



Long-term lease financing obligations                      13,454     15,633

Other non-current obligations                              3,806      1,236



Total liabilities                                          59,182     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; 43,839,514 and

43,036,271 shares issued and outstanding at March 28,
2010

and March 29, 2009, respectively (net of treasury shares)  4          4

Additional paid-in capital                                 720,455    710,787

Accumulated other comprehensive income                     1,282      802

Treasury stock at cost, 19,924,369 shares at March 28,
2010 and March 29, 2009                                    (248,983)  (248,983)

Accumulated deficit                                        (198,626)  (170,516)

Total stockholders' equity                                 274,132    292,094

Total liabilities and stockholders' equity                 $ 333,314  $ 336,389








EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)



                   THREE MONTHS ENDED                  TWELVE MONTHS ENDED

                   MARCH 28,  DECEMBER 27,  MARCH 29,  MARCH 28,   MARCH 29,

                   2010       2009          2009       2010        2009







Net sales          $ 26,990   $ 24,458      $ 15,667   $ 97,676    $ 74,620

Net sales,
related party      11,507     9,473         8,187      37,202      40,498

Total net sales    38,497     33,931        23,854     134,878     115,118



Cost of sales:

Cost of sales      12,723     11,273        8,472      48,728      41,811

Cost of sales,
related party      5,200      4,505         4,880      17,581      19,933

Amortization of
purchased
intangible assets  1,172      1,108         436        5,187       3,129

Total cost of
sales              19,095     16,886        13,788     71,496      64,873



Gross profit       19,402     17,045        10,066     63,382      50,245



Operating
expenses:

Research and
development        12,255     11,674        7,512      48,511      31,829

Goodwill and
other intangible
asset impairment   -          -             -          -           59,676

Selling, general
and
administrative     11,686     10,688        8,816      48,861      38,962

Total operating
expenses           23,941     22,362        16,328     97,372      130,467

Loss from
operations         (4,539)    (5,317)       (6,262)    (33,990)    (80,222)



Other income and
expense, net:

Interest income
and other, net     1,741      1,835         1,918      7,030       9,693

Interest expense   (323)      (323)         (326)      (1,296)     (1,253)

Impairment
charges on
investments        -          -             (301)      (317)       (1,789)

Total other
income and
expense, net       1,418      1,512         1,291      5,417       6,651



Loss before
income taxes       (3,121)    (3,805)       (4,971)    (28,573)    (73,571)

Provision for
(benefit from)
income taxes       189        (43)          (406)      (463)       (535)



Net loss           $ (3,310)  $ (3,762)     $ (4,565)  $ (28,110)  $ (73,036)





Loss per share:

Basic loss per
share              $ (0.08)   $ (0.09)      $ (0.11)   $ (0.64)    $ (1.70)



Diluted loss per
share              $ (0.08)   $ (0.09)      $ (0.11)   $ (0.64)    $ (1.70)



Shares used in
the computation
of loss per
share:



Basic              43,822     43,648        42,950     43,584      42,887



Diluted            43,822     43,648        42,950     43,584      42,887





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

                                 DECEMBER
                     MARCH 28,   27,         MARCH 29,   MARCH 28,   MARCH 29,

                     2010        2009        2009        2010        2009



GAAP gross margin    50.4%       50.2%       42.2%       47.0%       43.6%

Stock-based
compensation         0.4%        0.3%        0.5%        0.4%        0.5%

Amortization of
acquired intangible
assets               3.0%        3.3%        1.8%        3.8%        2.7%

Fair value
adjustment of
acquired
inventories          0.2%        0.3%        -           1.8%        -

Acquisition-related
costs                -           -           -           -           0.1%

Acceleration of
depreciation on
abandoned equipment  -           -           -           -           0.3%

Non-GAAP gross
margin               54.0%       54.1%       44.5%       53.0%       47.2%



GAAP research and
development
expenses             $ 12,255    $ 11,674    $ 7,512     $ 48,511    $ 31,829

Stock-based
compensation         624         467         383         2,325       1,614

Amortization of
acquired intangible
assets               927         635         72          2,785       798

Acquisition-related
costs                10          128         -           887         -

Acceleration of
depreciation on
abandoned equipment  -           -           -           -           437

Non-GAAP research
and development
expenses             $ 10,694    $ 10,444    $ 7,057     $ 42,514    $ 28,980



GAAP selling,
general and
administrative
expenses             $ 11,686    $ 10,688    $ 8,816     $ 48,861    $ 38,962

Stock-based
compensation         887         751         713         3,112       2,725

Amortization of
acquired intangible
assets               198         178         44          697         490

Acquisition-related
costs                542         297         778         5,385       1,319

Separation costs of
executive officers   -           -           -           162         -

Acceleration of
depreciation on
abandoned equipment  50          -           -           50          437

Non-GAAP selling,
general and
administrative
expenses             $ 10,009    $ 9,462     $ 7,281     $ 39,455    $ 33,991



GAAP operating
expenses             $ 23,941    $ 22,362    $ 16,328    $ 97,372    $ 130,467

Stock-based
compensation         1,511       1,218       1,096       5,437       4,339

Amortization of
acquired intangible
assets               1,125       813         116         3,482       1,288

Acquisition-related
costs                552         425         778         6,272       1,319

Separation costs of
executive officers   -           -           -           162         -

Acceleration of
depreciation on
abandoned equipment  50          -           -           50          874

Goodwill and other
intangible asset
impairment           -           -           -           -           59,676

Non-GAAP operating
expenses             $ 20,703    $ 19,906    $ 14,338    $ 81,969    $ 62,971



GAAP operating loss  $ (4,539)   $ (5,317)   $ (6,262)   $ (33,990)  $ (80,222)

Stock-based
compensation         1,655       1,335       1,207       5,965       4,934

Amortization of
acquired intangible
assets               2,297       1,921       552         8,669       4,417

Fair value
adjustment of
acquired
inventories          72          92          -           2,398       -

Acquisition-related
costs                552         425         778         6,296       1,434

Separation costs of
executive officers   -           -           -           162         -

Acceleration of
depreciation on
abandoned equipment  50          -           -           50          1,174

Goodwill and other
intangible asset
impairment           -           -           -           -           59,676

Non-GAAP operating
income (loss)        $ 87        $ (1,544)   $ (3,725)   $ (10,450)  $ (8,587)



GAAP net loss        $ (3,310)   $ (3,762)   $ (4,565)   $ (28,110)  $ (73,036)

Stock-based
compensation         1,655       1,335       1,207       5,965       4,934

Amortization of
acquired intangible
assets               2,297       1,921       552         8,669       4,417

Fair value
adjustment of
acquired
inventories          72          92          -           2,398       -

Acquisition-related
costs                552         425         778         6,296       1,434

Separation costs of
executive officers   -           -           -           162         -

Acceleration of
depreciation on
abandoned equipment  50          -           -           50          1,174

Goodwill and other
intangible asset
impairment           -           -           -           -           59,676

Impairment charges
on investments       -           -           301         317         1,789

Income tax effects   141         107         (413)       (40)        (535)

Non-GAAP net income
(loss)               $ 1,457     $ 118       $ (2,140)   $ (4,293)   $ (147)



GAAP loss per share  $ (0.08)    $ (0.09)    $ (0.11)    $ (0.64)    $ (1.70)

Stock-based
compensation         0.04        0.03        0.03        0.14        0.12

Amortization of
acquired intangible
assets               0.05        0.04        0.01        0.20        0.10

Fair value
adjustment of
acquired
inventories          -           -           -           0.06        -

Acquisition-related
costs                0.01        0.01        0.02        0.14        0.03

Separation costs of
executive officers   -           -           -           -           -

Acceleration of
depreciation on
abandoned equipment  -           -           -           -           0.03

Goodwill and other
intangible asset
impairment           -           -           -           -           1.39

Impairment charges
on investments       -           -           0.01        0.01        0.04

Income tax effects   -           -           (0.01)      -           (0.01)

Non-GAAP diluted
earnings (loss) per
share                $ 0.03      $ 0.00      $ (0.05)    $ (0.10)    $ (0.00)





Shares used in
earnings (loss) per
share --- GAAP       43,822    - 43,648    - 42,950    - 43,584      42,887

The effect of
dilutive potential
common shares due
to

reporting Non-GAAP
net income           262         314         -           -           -

The effect of
removing
stock-based
compensation
expense

under SFAS 123R for
Non-GAAP
presentation
purpose              (28)        (109)       -           -           -

Shares used in
diluted earnings
per share ---
Non-GAAP             44,056      43,853      42,950      43,584      42,887





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