Exar Corporation Reports Fiscal 2011 First Quarter Results

Quarterly revenue of $39.6M - highest level achieved in over a decade

FREMONT, Calif., July 29 /PRNewswire-FirstCall/ -- Exar Corporation (Nasdaq: EXAR), today reported financial results for its fiscal 2011 first quarter ended June 27, 2010.

Net sales for the first quarter of fiscal 2011 were $39.6 million compared to net sales of $38.5 million for the prior quarter and $30.9 million for the first quarter of fiscal 2010.

The GAAP gross margin for the first quarter of fiscal 2011 was 47.5% compared to 50.4% for the prior quarter and 41.6% in the first quarter of fiscal 2010.

On a non-GAAP basis, the gross margin for the first quarter of fiscal 2011 was 52.1% compared to 54.0% for the prior quarter and 52.1% in the first quarter of fiscal 2010.

The GAAP net loss for the first quarter of fiscal 2011 was $7.4 million, or $0.17 net loss per share, compared to a net loss of $3.3 million, or $0.08 net loss per share in the prior quarter, and a net loss of $12.9 million, or $0.30 net loss per share, for the first quarter of fiscal 2010.

On a non-GAAP basis, the net loss was $0.8 million for the first quarter of fiscal 2011 or $0.02 net loss per share, compared to net income of $1.5 million in the prior quarter, or $0.03 diluted earnings per share, and a net loss of $3.1 million, or $0.07 net loss per share, in the first quarter of fiscal 2010.

The Company ended the first quarter of fiscal 2011 with cash, cash equivalents and short-term marketable securities of $208.2 million.

"We achieved the highest quarterly revenue in more than 15 years and a Company record of more than 100 million units shipped during the first fiscal quarter of 2011," said Pete Rodriguez, the Company's president and chief executive officer.  "During the quarter, we exited the low margin Optical business and made solid progress in reducing operating expenses.  Our overall bookings remain strong and we will drive to attain non-GAAP operating profitability in the current quarter."

For the second quarter of fiscal 2011 ending September 26, 2010, the Company projects that net sales will be between $40 million and $42 million.  The non-GAAP gross margin is currently expected to be between 52.5% and 54.5%.  Operating expenses are currently expected to be between $21.0 million and $22.0 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 first quarter of fiscal 2011, today, Thursday, July 29, 2010 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 165055. 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 July 29, 2010 until 11:59 p.m. PDT on August 5, 2010. To access the replay, please dial (800) 475-6701 and use conference ID number 165055.

Product Line Highlights:

DataCom and Storage

http://www.exar.com/Common/Content/News.aspx?id=7888

http://www.exar.com/Common/Content/News.aspx?id=7886

http://www.exar.com/Common/Content/News.aspx?id=7792

Power Management

http://www.exar.com/Common/Content/News.aspx?id=7466

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 28, 2010.

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 profit, 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, 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 27,    MARCH 28,

                                                          2010        2010

ASSETS



Current assets:

Cash and cash equivalents                                 $ 9,063     $ 25,486

Short-term marketable securities                          199,098     186,598

Accounts receivable (net of allowances of $726 and $831)  14,606      13,461

Accounts receivable, related party (net of allowances of
$288 and $605)                                            3,590       4,323

Inventories                                               18,814      15,000

Other current assets                                      5,307       5,106

Total current assets                                      250,478     249,974



Property, plant and equipment, net                        43,407      42,941

Goodwill                                                  3,184       3,085

Intangible assets, net                                    29,088      31,957

Other non-current assets                                  4,944       5,357



Total assets                                              $ 331,101   $ 333,314



LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:

Accounts payable                                          $ 11,179    $ 9,828

Accrued compensation and related benefits                 6,454       6,619

Deferred income and allowances on sales to distributors   4,645       4,227

Deferred income and allowances on sales to distributors,
related party                                             11,103      10,650

Other accrued expenses                                    10,764      10,598

Total current liabilities                                 44,145      41,922



Long-term lease financing obligations                     13,447      13,454

Other non-current obligations                             3,815       3,806



Total liabilities                                         61,407      59,182



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;
43,974,981 and 43,839,514 shares issued and outstanding
at June 27, 2010
and March 28, 2010, respectively (net of treasury
shares)                                                    4          4

Additional paid-in capital                                 723,929    720,455

Accumulated other comprehensive income                     784        1,282

Treasury stock at cost, 19,924,369 shares at June 27, 2010
and March 28, 2010                                         (248,983)  (248,983)

Accumulated deficit                                        (206,040)  (198,626)

Total stockholders' equity                                 269,694    274,132

Total liabilities and stockholders' equity                 $ 331,101  $ 333,314





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






EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)



                                             THREE MONTHS ENDED

                                             JUNE 27,   MARCH 28,  JUNE 28,

                                             2010       2010       2009







Net sales                                    $ 28,365   $ 26,990   $ 23,110

Net sales, related party                     11,271     11,507     7,752

Total net sales                              39,636     38,497     30,862



Cost of sales:

Cost of sales                                14,079     12,723     12,889

Cost of sales, related party                 5,188      5,200      3,788

Amortization of purchased intangible assets  1,553      1,172      1,340

Total cost of sales                          20,820     19,095     18,017



Gross profit                                 18,816     19,402     12,845



Operating expenses:

Research and development                     14,443     12,255     12,294

Selling, general and administrative          12,957     11,686     15,112

Total operating expenses                     27,400     23,941     27,406

Loss from operations                         (8,584)    (4,539)    (14,561)



Other income and expense, net:

Interest income and other, net               1,613      1,741      1,754

Interest expense                             (318)      (323)      (324)

Impairment charges on investments            -          -          (72)

Total other income and expense, net          1,295      1,418      1,358



Loss before income taxes                     (7,289)    (3,121)    (13,203)

Provision for (benefit from) income taxes    125        189        (328)



Net loss                                     $ (7,414)  $ (3,310)  $ (12,875)





Loss per share:

Basic loss per share                         $ (0.17)   $ (0.08)   $ (0.30)



Diluted loss per share                       $ (0.17)   $ (0.08)   $ (0.30)



Shares used in the computation of loss per
share:



Basic                                        43,897     43,822     43,314

                                             43,822

Diluted                                      43,897     43,822     43,314





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

                                              JUNE 27,   MARCH 28,  JUNE 28,

                                              2010       2010       2009



Net Sales                                     $ 39,636   $ 38,497   $ 30,862



GAAP gross profit                             $ 18,816   $ 19,402   $ 12,845

GAAP gross margin                             47.5%      50.4%      41.6%

Stock-based compensation                      220        144        116

Amortization of acquired intangible assets    1,553      1,172      1,340

Fair value adjustment of acquired
inventories                                   42         72         1,787

Acquisition-related costs                     -          -          6

Non-GAAP gross profit                         20,631     20,790     16,094

Non-GAAP gross margin                         52.1%      54.0%      52.1%



GAAP research and development expenses        $ 14,443   $ 12,255   $ 12,294

Stock-based compensation                      1,556      624        486

Amortization of acquired intangible assets    1,074      927        588

Acquisition-related costs                     -          10         557

Non-GAAP research and development expenses    $ 11,813   $ 10,694   $ 10,663



GAAP selling, general and administrative
expenses                                      $ 12,957   $ 11,686   $ 15,112

Stock-based compensation                      1,546      887        707

Amortization of acquired intangible assets    298        198        142

Acquisition-related costs                     328        542        3,926

Separation costs of executive officers        -          -          162

Acceleration of depreciation on abandoned
equipment                                     -          50         -

Non-GAAP selling, general and administrative
expenses                                      $ 10,785   $ 10,009   $ 10,175



GAAP operating expenses                       $ 27,400   $ 23,941   $ 27,406

Stock-based compensation                      3,102      1,511      1,193

Amortization of acquired intangible assets    1,372      1,125      730

Acquisition-related costs                     328        552        4,483

Separation costs of executive officers        -          -          162

Acceleration of depreciation on abandoned
equipment                                     -          50         -

Non-GAAP operating expenses                   $ 22,598   $ 20,703   $ 20,838



GAAP operating loss                           $ (8,584)  $ (4,539)  $ (14,561)

Stock-based compensation                      3,322      1,655      1,309

Amortization of acquired intangible assets    2,925      2,297      2,070

Fair value adjustment of acquired
inventories                                   42         72         1,787

Acquisition-related costs                     328        552        4,489

Separation costs of executive officers        -          -          162

Acceleration of depreciation on abandoned
equipment                                     -          50         -

Non-GAAP operating income (loss)              $ (1,967)  $ 87       $ (4,744)



GAAP net loss                                 $ (7,414)  $ (3,310)  $ (12,875)

Stock-based compensation                      3,322      1,655      1,309

Amortization of acquired intangible assets    2,925      2,297      2,070

Fair value adjustment of acquired
inventories                                   42         72         1,787

Acquisition-related costs                     328        552        4,489

Separation costs of executive officers        -          -          162

Acceleration of depreciation on abandoned
equipment                                     -          50         -

Impairment charges on investments             -          -          72

Income tax effects                            33         141        (152)

Non-GAAP net income (loss)                    $ (764)    $ 1,457    $ (3,138)



GAAP loss per share                           $ (0.17)   $ (0.08)   $ (0.30)

Stock-based compensation                      0.08       0.04       0.03

Amortization of acquired intangible assets    0.07       0.05       0.05

Fair value adjustment of acquired
inventories                                   -          -          0.04

Acquisition-related costs                     0.01       0.01       0.10

Separation costs of executive officers        -          -          -

Acceleration of depreciation on abandoned
equipment                                     -          -          -

Impairment charges on investments             -          -          -

Income tax effects                            -          -          -

Non-GAAP diluted earnings (loss) per share    $ (0.02)   $ 0.03     $ (0.07)





Shares used in earnings (loss) per share ---
GAAP                                          43,897     43,822     43,314

The effect of dilutive potential common
shares due to
reporting Non-GAAP net income                 -          262        -

The effect of removing stock-based
compensation
expense under SFAS 123R for Non-GAAP
presentation
purpose                                       -          (28)       -

Shares used in diluted earnings per share
--- Non-GAAP                                  43,897     44,056     43,314





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