Exar Corporation Reports Fiscal 2011 Fourth Quarter Results

FREMONT, Calif., May 5, 2011 /PRNewswire/ -- Exar Corporation (Nasdaq: EXAR) today reported financial results for its fiscal 2011 fourth quarter ended March 27, 2011.

Net sales for the fourth quarter of fiscal 2011 were $33.8 million compared to net sales of $35.4 million for the prior quarter and $38.5 million for the fourth quarter of fiscal 2010.  

The GAAP gross margin for the fourth quarter of fiscal 2011 was 35.0% compared to 45.5% for the prior quarter and 50.4% in the fourth quarter of fiscal 2010.

On a non-GAAP basis, the gross margin for the fourth quarter of fiscal 2011 was 46.1% compared to 50.0% for the prior quarter and 54.0% in the fourth quarter of fiscal 2010.

The GAAP net loss for the fourth quarter of fiscal 2011 was $18.8 million, or $0.42 net loss per share, compared to a net loss of $5.0 million, or $0.11 net loss per share in the prior quarter, and a net loss of $3.3 million, or $0.08 net loss per share, for the fourth quarter of fiscal 2010.

On a non-GAAP basis, the net loss was $4.6 million for the fourth quarter of fiscal 2011 or $0.10 net loss per share, compared to net loss of $1.9 million, or $0.04 net loss per share in the previous quarter, and the net income of $1.5 million, or $0.03 earnings per share, in the fourth quarter of fiscal 2010.

The Company ended the fourth quarter of fiscal 2011 with cash, cash equivalents and short-term marketable securities of $201 million.

"We completed fiscal 2011 with revenue growth of 8.2% year over year.  As the fourth quarter progressed we saw momentum in new orders and shipments," said Pete Rodriguez, the Company's president and chief executive officer.  "During the period we exited the 10 Gigabit Ethernet Network Interface Card market as announced on March 4, 2011.  We reduced our quarterly operating expenses by approximately $3 million, thereby significantly reducing our revenue breakeven point."

For the first quarter of fiscal 2012 ending July 3, 2011, the Company projects that net sales will be between $34 million and $36 million. The non-GAAP gross margin is expected to be between 47% and 49%. Operating expenses are expected to be between $18 million and $19 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 fourth quarter of fiscal 2011, today, Thursday, May 5, 2011 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 201781. 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 5, 2011 until 11:59 p.m. PDT on May 12, 2011. To access the replay, please dial (800) 475-6701 and use conference ID number 201781.

Product Line Highlights:

Power Management

http://www.exar.com/Common/Content/News.aspx?id=8366

Datacom and Storage

http://www.exar.com/Common/Content/News.aspx?id=8342

http://www.exar.com/Common/Content/News.aspx?id=8390

Interface

http://www.exar.com/Common/Content/News.aspx?id=8364

http://www.exar.com/Common/Content/News.aspx?id=8398

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; 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, September 26, 2010 and December 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 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, exit costs, separation costs of executive officers, acceleration of depreciation on abandoned equipment, impairment of purchased intangible assets, 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, datacom and storage applications. For over 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: http://www.exar.com.


EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)



                                                          MARCH 27,  MARCH 28,

                                                          2011       2010

ASSETS



Current assets:

Cash and cash equivalents                                 $ 15,039   $ 25,486

Short-term marketable securities                          185,960    186,598

Accounts receivable (net of allowances of $1,165 and
$831)                                                     9,776      13,461

Accounts receivable, related party (net of allowances of
$358 and $605)                                            3,194      4,323

Inventories                                               21,962     15,000

Other current assets                                      3,562      5,106

Total current assets                                      239,493    249,974



Property, plant and equipment, net                        38,009     42,941

Goodwill                                                  3,184      3,085

Intangible assets, net                                    15,390     31,957

Other non-current assets                                  2,139      5,357



Total assets                                              $ 298,215  $ 333,314



LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:

Accounts payable                                          $ 8,794    $ 9,828

Accrued compensation and related benefits                 6,069      6,619

Deferred income and allowances on sales to distributors   4,632      4,227

Deferred income and allowances on sales to distributors,
related party                                             10,680     10,650

Other accrued expenses                                    7,062      10,598

Total current liabilities                                 37,237     41,922



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

Other non-current obligations                             3,841      3,806



Total liabilities                                         53,636     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;

44,519,663 and 43,839,514 shares issued and outstanding

at March 27, 2011 and March 28, 2010, respectively

(net of treasury shares)                                  4          4

Additional paid-in capital                                728,139    720,455

Accumulated other comprehensive income (loss)             (287)      1,282

Treasury stock at cost, 19,924,369 shares at March 27,
2011

and March 28, 2010                                        (248,983)  (248,983)

Accumulated deficit                                       (234,294)  (198,626)

Total stockholders' equity                                244,579    274,132

Total liabilities and stockholders' equity                $ 298,215  $ 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                   TWELVE MONTHS ENDED

                    MARCH 27,   DECEMBER 26,  MARCH 28,  MARCH 27,   MARCH 28,

                    2011        2010          2010       2011        2010







Net sales           $ 22,579    $ 24,892      $ 26,990   $ 101,721   $ 97,676

Net sales, related
party               11,192      10,473        11,507     44,284      37,202

Total net sales     33,771      35,365        38,497     146,005     134,878



Cost of sales:

Cost of sales       14,966      12,742        12,723     54,992      48,728

Cost of sales,
related party       5,555       5,007         5,200      20,972      17,581

Amortization of
purchased

intangible assets   1,443       1,533         1,172      6,044       5,187

Total cost of
sales               21,964      19,282        19,095     82,008      71,496

Gross profit        11,807      16,083        19,402     63,997      63,382



Operating
expenses:

Research and

development         12,744      12,071        12,255     51,098      48,511

Selling, general
and

administrative      11,094      10,298        11,686     45,432      48,861

Impairment of
purchased

intangible assets   7,485       -             -          7,485       -

Total operating

expenses            31,323      22,369        23,941     104,015     97,372

Loss from
operations          (19,516)    (6,286)       (4,539)    (40,018)    (33,990)



Other income and

expense, net:

Interest income
and

other, net          1,157       1,577         1,741      5,925       7,030

Interest expense    (311)       (313)         (323)      (1,258)     (1,296)

Impairment charges

on investments      -           -             -          (62)        (317)

Total other income

and expense, net    846         1,264         1,418      4,605       5,417



Loss before income
taxes               (18,670)    (5,022)       (3,121)    (35,413)    (28,573)

Provision for
(benefit from)

income taxes        166         (63)          189        255         (463)



Net loss            $ (18,836)  $ (4,959)     $ (3,310)  $ (35,668)  $ (28,110)





Loss per share:

Basic loss per
share               $ (0.42)    $ (0.11)      $ (0.08)   $ (0.81)    $ (0.64)



Diluted loss per
share               $ (0.42)    $ (0.11)      $ (0.08)   $ (0.81)    $ (0.64)



Shares used in the
computation

of loss per share:



Basic               44,503      44,300        43,822     44,218      43,584

Diluted             44,503      44,300        43,822     44,218      43,584





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                   TWELVE MONTHS ENDED

                    MARCH 27,   DECEMBER 26,  MARCH 28,  MARCH 27,   MARCH 28,

                    2011        2010          2010       2011        2010



Net Sales           $ 33,771    $ 35,365      $ 38,497   $ 146,005   $ 134,878



GAAP gross profit   $ 11,807    $ 16,083      $ 19,402   $ 63,997    $ 63,382

GAAP gross margin   35.0%       45.5%         50.4%      43.8%       47.0%

Stock-based
compensation        93          78            144        489         528

Amortization of
acquired intangible
assets              1,443       1,533         1,172      6,044       5,187

Fair value
adjustment of
acquired
inventories         -           -             72         42          2,398

Acquisition-related
costs               -           -             -          -           24

Exit costs          2,212       -             -          2,212       -

Non-GAAP gross
profit              15,555      17,694        20,790     72,784      71,519

Non-GAAP gross
margin              46.1%       50.0%         54.0%      49.9%       53.0%



GAAP research and
development
expenses            $ 12,744    $ 12,071      $ 12,255   $ 51,098    $ 48,511

Stock-based
compensation        375         645           624        3,241       2,325

Amortization of
acquired intangible
assets              72          72            927        2,292       2,785

Acquisition-related
costs               -           -             10         -           887

Exit costs          1,210       -             -          1,210       -

Non-GAAP research
and development
expenses            $ 11,087    $ 11,354      $ 10,694   $ 44,355    $ 42,514



GAAP selling,
general and

administrative
expenses            $ 11,094    $ 10,298      $ 11,686   $ 45,432    $ 48,861

Stock-based
compensation        769         585           887        3,651       3,112

Amortization of
acquired intangible
assets              254         294           198        1,143       697

Acquisition-related
costs               -           -             542        328         5,385

Exit costs          165         -             -          165         -

Separation costs of
executive officers  -           -             -          -           162

Acceleration of
depreciation on

abandoned equipment -           -             50         -           50

Non-GAAP selling,
general and

administrative
expenses            $ 9,906     $ 9,419       $ 10,009   $ 40,145    $ 39,455



GAAP operating
expenses            $ 31,323    $ 22,369      $ 23,941   $ 104,015   $ 97,372

Stock-based
compensation        1,144       1,230         1,511      6,892       5,437

Amortization of
acquired intangible
assets              326         366           1,125      3,435       3,482

Acquisition-related
costs               -           -             552        328         6,272

Exit costs          1,375       -             -          1,375       -

Separation costs of
executive officers  -           -             -          -           162

Acceleration of
depreciation on
abandoned

equipment           -           -             50         -           50

Impairment of
purchased
intangible assets   7,485       -             -          7,485       -

Non-GAAP operating
expenses            $ 20,993    $ 20,773      $ 20,703   $ 84,500    $ 81,969



GAAP operating loss $ (19,516)  $ (6,286)     $ (4,539)  $ (40,018)  $ (33,990)

Stock-based
compensation        1,237       1,308         1,655      7,381       5,965

Amortization of
acquired intangible
assets              1,769       1,899         2,297      9,479       8,669

Fair value
adjustment of
acquired
inventories         -           -             72         42          2,398

Acquisition-related
costs               -           -             552        328         6,296

Exit costs          3,587       -             -          3,587       -

Separation costs of
executive officers  -           -             -          -           162

Acceleration of
depreciation on
abandoned

equipment           -           -             50         -           50

Impairment of
purchased
intangible assets   7,485       -             -          7,485       -

Non-GAAP operating
income (loss)       $ (5,438)   $ (3,079)     $ 87       $ (11,716)  $ (10,450)



GAAP net loss       $ (18,836)  $ (4,959)     $ (3,310)  $ (35,668)  $ (28,110)

Stock-based
compensation        1,237       1,308         1,655      7,381       5,965

Amortization of
acquired intangible
assets              1,769       1,899         2,297      9,479       8,669

Fair value
adjustment of
acquired
inventories         -           -             72         42          2,398

Acquisition-related
costs               -           -             552        328         6,296

Exit costs          3,587       -             -          3,587       -

Separation costs of
executive officers  -           -             -          -           162

Acceleration of
depreciation on
abandoned

equipment           -           -             50         -           50

Impairment of
purchased
intangible assets   7,485       -             -          7,485       -

Impairment charges
on investments      -           -             -          62          317

Income tax effects  129         (118)         141        76          (40)

Non-GAAP net income
(loss)              $ (4,629)   $ (1,870)     $ 1,457    $ (7,228)   $ (4,293)



GAAP loss per share $ (0.42)    $ (0.11)      $ (0.08)   $ (0.81)    $ (0.64)

Stock-based
compensation        0.03        0.03          0.04       0.17        0.14

Amortization of
acquired intangible
assets              0.04        0.04          0.05       0.21        0.20

Fair value
adjustment of
acquired
inventories         -           -             0.00       0.00        0.06

Acquisition-related
costs               -           -             0.01       0.01        0.14

Exit costs          0.08        -             -          0.08        -

Separation costs of
executive officers  -           -             -          -           0.00

Acceleration of
depreciation on
abandoned

equipment           -           -             0.00       -           0.00

Impairment of
purchased
intangible assets   0.17        -             -          0.17        -

Impairment charges
on investments      -           -             -          0.00        0.01

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

Non-GAAP diluted
earnings (loss) per
share               $ (0.10)    $ (0.04)      $ 0.03     $ (0.16)    $ (0.10)



Shares used in
earnings (loss) per

share --- GAAP      44,503      44,300        43,822     44,218      43,584

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  44,503      44,300        44,056     44,218      43,584





Notes: Exit costs are primarily excess inventory and severance charges in
connection with exiting the 10GbE virtualization market.

Certain amounts may not total due to rounding.





SOURCE Exar Corporation