Exar Corporation Reports Fiscal 2011 Third Quarter Results

FREMONT, Calif., Jan. 25, 2011 /PRNewswire/ -- Exar Corporation (Nasdaq: EXAR) today reported financial results for its fiscal 2011 third quarter ended December 26, 2010.

Net sales for the third quarter of fiscal 2011 were $35.4 million compared to net sales of $37.2 million for the prior quarter and $33.9 million for the third quarter of fiscal 2010.

The GAAP gross margin for the third quarter of fiscal 2011 was 45.5% compared to 46.4% for the prior quarter and 50.2% in the third quarter of fiscal 2010.

On a non-GAAP basis, gross margin for the third quarter of fiscal 2011 was 50.0% compared to 50.8% for the prior quarter and 54.1% in the third quarter of fiscal 2010.

The GAAP net loss for the third quarter of fiscal 2011 was $5.0 million, or $0.11 net loss per share, compared to a net loss of $4.5 million, or $0.10 net loss per share, in the prior quarter, and a net loss of $3.8 million, or $0.09 net loss per share, for the third quarter of fiscal 2010.

On a non-GAAP basis, net loss was $1.9 million for the third quarter of fiscal 2011, compared to breakeven in the previous quarter and net income of $0.1 million in the third quarter of fiscal 2010.

The Company ended the third quarter of fiscal 2011 with cash, cash equivalents and short-term marketable securities of $202.1 million.

"The impact of the industry wide inventory correction led to lower sales for the December quarter and is expected to continue to put downward pressure on business in the current quarter," said Pete Rodriguez, the Company's president and chief executive officer.  "Our design wins for the quarter were very strong and there are indications of improving demand in our June quarter."

For the fourth quarter of fiscal 2011 ending March 27, 2011, the Company projects that net sales will be between $33 million and $35 million.  The non-GAAP gross margin is currently expected to be between 45% and 47%.  Operating expenses are currently expected to be between $21 million and $22 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 2011, today, Tuesday, January 25, 2011 at 1:30 p.m. PST. To access the conference call, please dial (800) 230-1074 by 1:20 p.m. PST and use conference ID number 187843. 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. PST the day of the call until 11:59 p.m. PST on February 1, 2011. To access the replay, please dial (800) 475-6701 and use conference ID number 187843.

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 Reports on Form 10-Q for the periods ended June 27, 2010 and September 26, 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, 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 data communication, storage, consumer and industrial applications. For nearly 40 years, Exar's comprehensive knowledge of end-user markets along with the underlying analog, mixed signal and digital technology has enabled innovative solutions that meet the needs of the evolving connected world. Exar's product portfolio includes power management and interface components, communications products, storage optimization solutions, network security and applied service processors. 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 26,  MARCH 28,

                                                       2010          2010

ASSETS



Current assets:

Cash and cash equivalents                              $ 14,097      $ 25,486

Short-term marketable securities                       188,024       186,598

Accounts receivable (net of allowances of $607 and
$831)                                                  10,128        13,461

Accounts receivable, related party (net of allowances
of $314 and $605)                                      2,805         4,323

Inventories                                            27,292        15,000

Other current assets                                   3,947         5,106

Total current assets                                   246,293       249,974



Property, plant and equipment, net                     39,819        42,941

Goodwill                                               3,184         3,085

Intangible assets, net                                 24,847        31,957

Other non-current assets                               5,856         5,357



Total assets                                           $ 319,999     $ 333,314



LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:

Accounts payable                                       $ 12,726      $ 9,828

Accrued compensation and related benefits              6,042         6,619

Deferred income and allowances on sales to
distributors                                           5,371         4,227

Deferred income and allowances on sales to
distributors, related party                            9,734         10,650

Other accrued expenses                                 7,869         10,598

Total current liabilities                              41,742        41,922



Long-term lease financing obligations                  12,558        13,454

Other non-current obligations                          3,679         3,806



Total liabilities                                      57,979        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; 44,448,348 and

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

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

Additional paid-in capital                             726,493       720,455

Accumulated other comprehensive income                 (36)          1,282

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

Accumulated deficit                                    (215,458)     (198,626)

Total stockholders' equity                             262,020       274,132

Total liabilities and stockholders' equity             $ 319,999     $ 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                  NINE MONTHS ENDED

                DECEMBER   SEPTEMBER
                26,        26,        DECEMBER 27,  DECEMBER 26,  DECEMBER 27,

                2010       2010       2009          2010          2009







Net sales       $ 24,892   $ 25,885   $ 24,458      $ 79,142      $ 70,686

Net sales,
related party   10,473     11,348     9,473         33,092        25,695

Total net
sales           35,365     37,233     33,931        112,234       96,381



Cost of sales:

Cost of sales   12,742     13,205     11,273        40,026        36,005

Cost of sales,
related party   5,007      5,222      4,505         15,417        12,381

Amortization
of purchased
intangible
assets          1,533      1,515      1,108         4,601         4,015

Total cost of
sales           19,282     19,942     16,886        60,044        52,401



Gross profit    16,083     17,291     17,045        52,190        43,980



Operating
expenses:

Research and
development     12,071     11,840     11,674        38,354        36,256

Selling,
general and
administrative  10,298     11,083     10,688        34,338        37,175

Total
operating
expenses        22,369     22,923     22,362        72,692        73,431

Loss from
operations      (6,286)    (5,632)    (5,317)       (20,502)      (29,451)



Other income
and expense,
net:

Interest
income and
other, net      1,577      1,578      1,835         4,768         5,289

Interest
expense         (313)      (316)      (323)         (947)         (973)

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

Total other
income and
expense, net    1,264      1,200      1,512         3,759         3,999



Loss before
income taxes    (5,022)    (4,432)    (3,805)       (16,743)      (25,452)

Provision for
(benefit from)
income taxes    (63)       27         (43)          89            (652)



Net loss        $ (4,959)  $ (4,459)  $ (3,762)     $ (16,832)    $ (24,800)





Loss per
share:

Basic loss per
share           $ (0.11)   $ (0.10)   $ (0.09)      $ (0.38)      $ (0.57)



Diluted loss
per share       $ (0.11)   $ (0.10)   $ (0.09)      $ (0.38)      $ (0.57)



Shares used in
the
computation of
loss per
share:



Basic           44,300     44,173     43,648        44,123        43,504

Diluted         44,300     44,173     43,648        44,123        43,504





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               NINE MONTHS ENDED

                     DECEMBER   SEPTEMBER  DECEMBER   DECEMBER
                     26,        26,        27,        26,         DECEMBER 27,

                     2010       2010       2009       2010        2009



Net Sales            $ 35,365   $ 37,233   $ 33,931   $ 112,234   $ 96,381



GAAP gross profit    $ 16,083   $ 17,291   $ 17,045   $ 52,190    $ 43,980

GAAP gross margin    45.5%      46.4%      50.2%      46.5%       45.6%

Stock-based
compensation         78         98         117        396         384

Amortization of
acquired intangible
assets               1,533      1,515      1,108      4,601       4,015

Fair value
adjustment of
acquired
inventories          -          -          92         42          2,326

Acquisition-related
costs                -          -          -          -           24

Non-GAAP gross
profit               17,694     18,904     18,362     57,229      50,729

Non-GAAP gross
margin               50.0%      50.8%      54.1%      51.0%       52.6%



GAAP research and
development
expenses             $ 12,071   $ 11,840   $ 11,674   $ 38,354    $ 36,256

Stock-based
compensation         645        665        467        2,866       1,701

Amortization of
acquired intangible
assets               72         1,074      635        2,220       1,858

Acquisition-related
costs                -          -          128        -           877

Non-GAAP research
and development
expenses             $ 11,354   $ 10,101   $ 10,444   $ 33,268    $ 31,820



GAAP selling,
general and
administrative
expenses             $ 10,298   $ 11,083   $ 10,688   $ 34,338    $ 37,175

Stock-based
compensation         585        751        751        2,882       2,225

Amortization of
acquired intangible
assets               294        297        178        889         499

Acquisition-related
costs                -          -          297        328         4,843

Separation costs of
executive officers   -          -          -          -           162

Non-GAAP selling,
general and
administrative
expenses             $ 9,419    $ 10,035   $ 9,462    $ 30,239    $ 29,446



GAAP operating
expenses             $ 22,369   $ 22,923   $ 22,362   $ 72,692    $ 73,431

Stock-based
compensation         1,230      1,416      1,218      5,748       3,926

Amortization of
acquired intangible
assets               366        1,371      813        3,109       2,357

Acquisition-related
costs                -          -          425        328         5,720

Separation costs of
executive officers   -          -          -          -           162

Non-GAAP operating
expenses             $ 20,773   $ 20,136   $ 19,906   $ 63,507    $ 61,266



GAAP operating loss  $ (6,286)  $ (5,632)  $ (5,317)  $ (20,502)  $ (29,451)

Stock-based
compensation         1,308      1,514      1,335      6,144       4,310

Amortization of
acquired intangible
assets               1,899      2,886      1,921      7,710       6,372

Fair value
adjustment of
acquired
inventories          -          -          92         42          2,326

Acquisition-related
costs                -          -          425        328         5,744

Separation costs of
executive officers   -          -          -          -           162

Non-GAAP operating
loss                 $ (3,079)  $ (1,232)  $ (1,544)  $ (6,278)   $ (10,537)



GAAP net loss        $ (4,959)  $ (4,459)  $ (3,762)  $ (16,832)  $ (24,800)

Stock-based
compensation         1,308      1,514      1,335      6,144       4,310

Amortization of
acquired intangible
assets               1,899      2,886      1,921      7,710       6,372

Fair value
adjustment of
acquired
inventories          -          -          92         42          2,326

Acquisition-related
costs                -          -          425        328         5,744

Separation costs of
executive officers   -          -          -          -           162

Impairment charges
on investments       -          62         -          62          317

Income tax effects   (118)      32         107        (53)        (181)

Non-GAAP net income
(loss)               $ (1,870)  $ 35       $ 118      $ (2,599)   $ (5,750)



GAAP loss per share  $ (0.11)   $ (0.10)   $ (0.09)   $ (0.38)    $ (0.57)

Stock-based
compensation         0.03       0.03       0.03       0.14        0.10

Amortization of
acquired intangible
assets               0.04       0.07       0.04       0.17        0.15

Fair value
adjustment of
acquired
inventories          -          -          -          0.00        0.05

Acquisition-related
costs                -          -          0.01       0.01        0.13

Separation costs of
executive officers   -          -          -          -           0.00

Impairment charges
on investments       -          0.00       -          0.00        0.01

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

Non-GAAP diluted
earnings (loss) per
share                $ (0.04)   $ 0.00     $ 0.00     $ (0.06)    $ (0.13)





Shares used in
earnings (loss) per
share --- GAAP       44,300     44,173     43,648     44,123      43,504

The effect of
dilutive potential
common shares due
to

reporting Non-GAAP
net income                      261        314        -           -

The effect of
removing
stock-based
compensation
expense

under SFAS 123R for
Non-GAAP
presentation
purpose                         (329)      (109)      -           -

Shares used in
diluted earnings
per share ---
Non-GAAP             44,300     44,105     43,853     44,123      43,504





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