Exar Corporation Reports Fiscal 2011 Second Quarter Results

FREMONT, Calif., Oct. 28 /PRNewswire-FirstCall/ -- Exar Corporation (Nasdaq: EXAR) today reported financial results for its fiscal 2011 second quarter ended September 26, 2010.

Net sales for the second quarter of fiscal 2011 were $37.2 million compared to net sales of $39.6 million for the prior quarter and $31.6 million for the second quarter of fiscal 2010.

The GAAP gross margin for the second quarter of fiscal 2011 was 46.4% compared to 47.5% for the prior quarter and 44.6% in the second quarter of fiscal 2010.

On a non-GAAP basis, gross margin for the second quarter of fiscal 2011 was 50.8% compared to 52.1% for the prior quarter and 51.5% in the second quarter of fiscal 2010.

The GAAP net loss for the second quarter of fiscal 2011 was $4.5 million, or $0.10 net loss per share, compared to a net loss of $7.4 million, or $0.17 net loss per share, in the prior quarter, and a net loss of $8.2 million, or $0.19 net loss per share, for the second quarter of fiscal 2010.

On a non-GAAP basis, net income was breakeven for the second quarter of fiscal 2011, compared to a net loss of $0.8 million, or $0.02 net loss per share, in the previous quarter and a net loss of $2.7 million, or $0.06 net loss per share, in the second quarter of fiscal 2010.

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

"While our second quarter 2011 revenue was impacted by lower demand from telecommunications and networking customers, continued strength from the industrial segment enabled positive EBITDA and breakeven net income both on a non-GAAP basis," said Pete Rodriguez, the Company's president and chief executive officer. "During the quarter, we continued to build a strong foundation of design wins for our leading products, we significantly reduced operating expenses and we made progress on several operational initiatives that will positively impact gross margin in the next fiscal year."

For the third quarter of fiscal 2011 ending December 26, 2010, the Company projects that net sales will be between $36 million and $38 million.  The non-GAAP gross margin is currently expected to be between 49% and 51%.  Operating expenses are currently expected to be between $20.5 million and $21.5 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 second quarter of fiscal 2011, today, Thursday, October 28, 2010 at 1:30 p.m. PDT. To access the conference call, please dial (800) 700-7860 by 1:20 p.m. PDT and use conference ID number 174874. 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 the day of the call until 11:59 p.m. PDT on November 4, 2010. To access the replay, please dial (800) 475-6701 and use conference ID number 174874.

Product Line Highlights:

Safe Harbor Statement

The Company's statements about its future financial performance, changes in gross margins, net sales and operating expenses, operational initiatives, 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 and the Quarterly Report on Form 10-Q for the period ended June 27, 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 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)



                                                       SEPTEMBER 26,  MARCH 28,

                                                       2010           2010

ASSETS



Current assets:

Cash and cash equivalents                              $ 14,086       $ 25,486

Short-term marketable securities                       194,162        186,598

Accounts receivable (net of allowances of $793 and
$831)                                                  13,857         13,461

Accounts receivable, related party (net of allowances
of $342 and $605)                                      3,963          4,323

Inventories                                            22,601         15,000

Other current assets                                   3,177          5,106

Total current assets                                   251,846        249,974



Property, plant and equipment, net                     41,721         42,941

Goodwill                                               3,184          3,085

Intangible assets, net                                 26,009         31,957

Other non-current assets                               5,048          5,357



Total assets                                           $ 327,808      $ 333,314



LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:

Accounts payable                                       $ 11,845       $ 9,828

Accrued compensation and related benefits              7,161          6,619

Deferred income and allowances on sales to
distributors                                           5,712          4,227

Deferred income and allowances on sales to
distributors, related party                            11,018         10,650

Other accrued expenses                                 8,699          10,598

Total current liabilities                              44,435         41,922



Long-term lease financing obligations                  12,888         13,454

Other non-current obligations                          3,838          3,806



Total liabilities                                      61,161         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; 44,251,257 and

43,839,514 shares issued and outstanding at September
26, 2010

and March 28, 2010, respectively (net of treasury
shares)                                                4              4

Additional paid-in capital                             724,899        720,455

Accumulated other comprehensive income                 1,226          1,282

Treasury stock at cost, 19,924,369 shares at
September 26, 2010 and March 28, 2010                  (248,983)      (248,983)

Accumulated deficit                                    (210,499)      (198,626)

Total stockholders' equity                             266,647        274,132

Total liabilities and stockholders' equity             $ 327,808      $ 333,314





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






EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)



                THREE MONTHS ENDED               SIX MONTHS ENDED

                SEPTEMBER             SEPTEMBER
                26,        JUNE 27,   27,        SEPTEMBER 26,  SEPTEMBER 27,

                2010       2010       2009       2010           2009







Net sales       $ 25,885   $ 28,365   $ 23,118   $ 54,250       $ 46,228

Net sales,
related party   11,348     11,271     8,470      22,619         16,222

Total net
sales           37,233     39,636     31,588     76,869         62,450



Cost of sales:

Cost of sales   13,205     14,079     11,843     27,284         24,732

Cost of sales,
related party   5,222      5,188      4,088      10,410         7,876

Amortization
of purchased
intangible
assets          1,515      1,553      1,567      3,068          2,907

Total cost of
sales           19,942     20,820     17,498     40,762         35,515



Gross profit    17,291     18,816     14,090     36,107         26,935



Operating
expenses:

Research and
development     11,840     14,443     12,288     26,283         24,582

Selling,
general and
administrative  11,083     12,957     11,375     24,040         26,487

Total
operating
expenses        22,923     27,400     23,663     50,323         51,069

Loss from
operations      (5,632)    (8,584)    (9,573)    (14,216)       (24,134)



Other income
and expense,
net:

Interest
income and
other, net      1,578      1,613      1,700      3,191          3,454

Interest
expense         (316)      (318)      (326)      (634)          (650)

Impairment
charges on
investments     (62)       -          (245)      (62)           (317)

Total other
income and
expense, net    1,200      1,295      1,129      2,495          2,487



Loss before
income taxes    (4,432)    (7,289)    (8,444)    (11,721)       (21,647)

Provision for
(benefit from)
income taxes    27         125        (281)      152            (609)



Net loss        $ (4,459)  $ (7,414)  $ (8,163)  $ (11,873)     $ (21,038)





Loss per
share:

Basic loss per
share           $ (0.10)   $ (0.17)   $ (0.19)   $ (0.27)       $ (0.48)



Diluted loss
per share       $ (0.10)   $ (0.17)   $ (0.19)   $ (0.27)       $ (0.48)



Shares used in
the
computation of
loss per
share:



Basic           44,173     43,897     43,550     44,035         43,432



Diluted         44,173     43,897     43,550     44,035         43,432





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






EXAR CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(In thousands, except per share amounts)

(Unaudited)



                     THREE MONTHS ENDED                  SIX MONTHS ENDED

                     SEPTEMBER 26, JUNE 27,   SEPTEMBER  SEPTEMBER    SEPTEMBER
                                              27,        26,          27,

                     2010          2010       2009       2010         2009



Net Sales            $ 37,233      $ 39,636   $ 31,588   $ 76,869     $ 62,450



GAAP gross profit    $ 17,291      $ 18,816   $ 14,090   $ 36,107     $ 26,935

GAAP gross margin    46.4%         47.5%      44.6%      47.0%        43.1%

Stock-based
compensation         98            220        151        318          267

Amortization of
acquired intangible
assets               1,515         1,553      1,567      3,068        2,907

Fair value
adjustment of
acquired
inventories          -             42         447        42           2,234

Acquisition-related
costs                -             -          18         -            24

Non-GAAP gross
profit               18,904        20,631     16,273     39,535       32,367

Non-GAAP gross
margin               50.8%         52.1%      51.5%      51.4%        51.7%



GAAP research and
development
expenses             $ 11,840      $ 14,443   $ 12,288   $ 26,283     $ 24,582

Stock-based
compensation         665           1,556      748        2,221        1,234

Amortization of
acquired intangible
assets               1,074         1,074      635        2,148        1,223

Acquisition-related
costs                -             -          192        -            749

Non-GAAP research
and development
expenses             $ 10,101      $ 11,813   $ 10,713   $ 21,914     $ 21,376



GAAP selling,
general and
administrative
expenses             $ 11,083      $ 12,957   $ 11,375   $ 24,040     $ 26,487

Stock-based
compensation         751           1,546      767        2,297        1,474

Amortization of
acquired intangible
assets               297           298        179        595          321

Acquisition-related
costs                -             328        620        328          4,546

Separation costs of
executive officers   -             -          -          -            162

Non-GAAP selling,
general and
administrative
expenses             $ 10,035      $ 10,785   $ 9,809    $ 20,820     $ 19,984



GAAP operating
expenses             $ 22,923      $ 27,400   $ 23,663   $ 50,323     $ 51,069

Stock-based
compensation         1,416         3,102      1,515      4,518        2,708

Amortization of
acquired intangible
assets               1,371         1,372      814        2,743        1,544

Acquisition-related
costs                -             328        812        328          5,295

Separation costs of
executive officers   -             -          -          -            162

Non-GAAP operating
expenses             $ 20,136      $ 22,598   $ 20,522   $ 42,734     $ 41,360



GAAP operating loss                                      $            $
                     $ (5,632)     $ (8,584)  $ (9,573)  (14,216)     (24,134)

Stock-based
compensation         1,514         3,322      1,666      4,836        2,975

Amortization of
acquired intangible
assets               2,886         2,925      2,381      5,811        4,451

Fair value
adjustment of
acquired
inventories          -             42         447        42           2,234

Acquisition-related
costs                -             328        830        328          5,319

Separation costs of
executive officers   -             -          -          -            162

Non-GAAP operating
loss                 $ (1,232)     $ (1,967)  $ (4,249)  $ (3,199)    $ (8,993)



GAAP net loss                                            $            $
                     $ (4,459)     $ (7,414)  $ (8,163)  (11,873)     (21,038)

Stock-based
compensation         1,514         3,322      1,666      4,836        2,975

Amortization of
acquired intangible
assets               2,886         2,925      2,381      5,811        4,451

Fair value
adjustment of
acquired
inventories          -             42         447        42           2,234

Acquisition-related
costs                -             328        830        328          5,319

Separation costs of
executive officers   -             -          -          -            162

Impairment charges
on investments       62            -          245        62           317

Income tax effects   32            33         (136)      65           (288)

Non-GAAP net income
(loss)               $ 35          $ (764)    $ (2,730)  $ (729)      $ (5,868)



GAAP loss per share  $ (0.10)      $ (0.17)   $ (0.19)   $ (0.27)     $ (0.48)

Stock-based
compensation         0.03          0.08       0.04       0.11         0.07

Amortization of
acquired intangible
assets               0.07          0.07       0.05       0.13         0.10

Fair value
adjustment of
acquired
inventories          -             0.00       0.01       0.00         0.05

Acquisition-related
costs                -             0.01       0.02       0.01         0.12

Separation costs of
executive officers   -             -          -          -            0.00

Impairment charges
on investments       0.00          -          0.01       0.00         0.01

Income tax effects   0.00          0.00       (0.00)     0.00         (0.01)

Non-GAAP diluted
earnings (loss) per
share                $ 0.00        $ (0.02)   $ (0.06)   $ (0.02)     $ (0.14)





Shares used in
earnings (loss) per
share --- GAAP       44,173        43,897     43,550     44,035       43,432

The effect of
dilutive potential
common shares due
to reporting
Non-GAAP net income  261           -          -          -            -

The effect of
removing
stock-based
compensation
expense under SFAS
123R for Non-GAAP
presentation
purpose              (329)         -          -          -            -

Shares used in
diluted earnings
per share ---
Non-GAAP             44,105        43,897     43,550     44,035       43,432





Notes: Certain amounts may not total due to rounding.

Certain amounts previously reported above have been reclassified to conform to
the current period presentation.





SOURCE Exar Corporation