Exar Corporation Reports Fiscal 2012 Third Quarter Results

FREMONT, Calif., Feb. 1, 2012 /PRNewswire/ -- Exar Corporation (Nasdaq: EXAR) today reported financial results for the third quarter of fiscal 2012 ending January 1, 2012.

Net sales for the third quarter of fiscal 2012 were $29.7 million compared to net sales of $36.1 million for the prior quarter and $35.4 million in the third quarter of fiscal 2011.

The GAAP gross margin for the third quarter of fiscal 2012 was 45.0% compared to 46.3% for the prior quarter and 45.5% in the third quarter of fiscal 2011.

On a non-GAAP basis, the gross margin for the third quarter of fiscal 2012 was 48.4% compared to 49.0% for the prior quarter and 50.0% in the third quarter of fiscal 2011.

The GAAP net loss for the third quarter of fiscal 2012 was $4.7 million, or $0.11 net loss per share, compared to a net loss of $1.1 million, or $0.02 net loss per share in the prior quarter, and a net loss of $5.0 million, or $0.11 net loss per share in the third quarter of fiscal 2011.

On a non-GAAP basis, net loss was $1.9 million for the third quarter of fiscal 2012 or $0.04 net loss per share, compared to net income of $1.4 million in the prior quarter, or $0.03 diluted earnings per share, and a net loss of $1.9 million, or $0.04 net loss per share in the third quarter of fiscal 2011.

The Company ended the third quarter of fiscal 2012 with cash, cash equivalents and short-term marketable securities of $198.5 million.

"We expect 2012 will be a year of focus on revenue growth and profitability," said Louis DiNardo, the Company's president and chief executive officer.  "Our data and storage products serve a vibrant market in cloud computing, storage and big data and our component products support a diverse set of customer requirements in the industrial, computing and communications markets.  As we rationalize and prioritize our investment in new product development, we will align our workforce and contain spending.  This quarter marks the start of a process to demonstrate clear progress in refining our markets, developing feature rich products and leveraging our customer and channel partner relationships."

For the fourth quarter of fiscal 2012 ending April 1, 2012, the Company projects that net sales will be between $26 million and $28 million.  The non-GAAP gross margin is currently expected to be between 44% and 46%.  Operating expenses are currently expected to be between $16.5 million and $17.5 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 third quarter of fiscal 2012, today, Wednesday, February 1 at 1:30 p.m. PST. To access the conference call, please dial (800) 230-1096 by 1:20 p.m. PST and use conference ID number 232627. In addition, a live webcast will also be available.

To access the webcast, please go to the Company's Investors' Relations Homepage at: http://www.exar.com/news/investornews.aspx. A replay of the call will be available starting at 3:00 p.m. PST on February 1, 2012 until 11:59 p.m. PST on February 8, 2012. To access the replay, please dial (800) 475-6701 and use conference ID number 232627.

Product Line Highlights:

Interface

http://www.exar.com/Common/Content/News.aspx?id=9632

Power Management

http://www.exar.com/Common/Content/News.aspx?id=9806

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 27, 2011 and the Quarterly Reports on Form 10-Q for the periods ended July 3, 2011 and October 2, 2011.

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, amortization of acquired intangible assets, fair value adjustment of acquired inventories, acquisition-related costs, exit 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 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 and per share amounts)

(Unaudited)








JANUARY 1,


MARCH 27,



2012


2011

ASSETS










Current assets:





Cash and cash equivalents


$           9,745


$         15,039

Short-term marketable securities


188,724


185,960

Accounts receivable (net of allowances of $635 and $1,165)


9,493


9,776

Accounts receivable, related party (net of allowances of $315 and $358)


2,268


3,194

Inventories


21,948


21,962

Other current assets


5,900


3,562

Total current assets


238,078


239,493






Property, plant and equipment, net


29,970


38,009

Goodwill


3,184


3,184

Intangible assets, net


12,541


15,390

Other non-current assets


2,519


2,139






Total assets


$       286,292


$       298,215






LIABILITIES AND STOCKHOLDERS' EQUITY










Current liabilities:





Accounts payable


$           9,986


$           8,794

Accrued compensation and related benefits


5,135


6,069

Deferred income and allowances on sales to distributors


3,443


4,632

Deferred income and allowances on sales to distributors, related party


11,087


10,680

Other accrued expenses


8,109


7,062

            Total current liabilities


37,760


37,237






Long-term lease financing obligations


4,086


12,558

Other non-current obligations


3,767


3,841






Total liabilities


45,613


53,636






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;  44,888,248 and





    44,519,663 shares issued and outstanding at January 1, 2012 and March 27, 2011,





           respectively (net of treasury shares)


4


4

Additional paid-in capital


732,112


728,139

Accumulated other comprehensive loss


(924)


(287)

  Treasury stock at cost, 19,924,369 shares at January 1, 2012 and March 27, 2011


(248,983)


(248,983)

Accumulated deficit


(241,530)


(234,294)

Total stockholders' equity


240,679


244,579

Total liabilities and stockholders' equity


$       286,292


$       298,215








EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)














THREE MONTHS ENDED


NINE MONTHS ENDED



JANUARY 1,


OCTOBER 2,


DECEMBER 26,


JANUARY 1,


DECEMBER 26,



2012


2011


2010


2012


2010


































Net sales


$                   20,749


$                   25,910


$                   24,892


$                   71,732


$                79,142

Net sales, related party


8,930


10,210


10,473


31,045


33,092

              Total net sales


29,679


36,120


35,365


102,777


112,234












Cost of sales:











 Cost of sales


11,130


13,661


12,742


38,280


40,026

 Cost of sales, related party


4,299


4,825


5,007


14,867


15,417

 Amortization of purchased intangible assets


905


905


1,533


2,715


4,601

              Total cost of sales


16,334


19,391


19,282


55,862


60,044












Gross profit


13,345


16,729


16,083


46,915


52,190












Operating expenses:











 Research and development


8,871


8,838


12,071


27,104


38,354

 Selling, general and administrative


9,909


9,373


10,298


28,882


34,338

              Total operating expenses


18,780


18,211


22,369


55,986


72,692

Loss from operations


(5,435)


(1,482)


(6,286)


(9,071)


(20,502)












Other income and expense, net:











  Interest income and other, net


593


715


1,577


2,019


4,768

  Interest expense


(60)


(61)


(313)


(181)


(947)

  Impairment charges on investments


-


-


-


-


(62)

             Total other income and expense, net


533


654


1,264


1,838


3,759












Loss before income taxes


(4,902)


(828)


(5,022)


(7,233)


(16,743)

Provision for (benefit from)  income taxes


(169)


249


(63)


3


89












Net loss


$                    (4,733)


$                    (1,077)


$                    (4,959)


$                    (7,236)


$              (16,832)























Loss per share:











 Basic loss per share


$                      (0.11)


$                      (0.02)


$                      (0.11)


$                      (0.16)


$                  (0.38)












 Diluted loss per share


$                      (0.11)


$                      (0.02)


$                      (0.11)


$                      (0.16)


$                  (0.38)












Shares used in the computation of loss per share:






















 Basic


44,830


44,759


44,300


44,726


44,123

 Diluted


44,830


44,759


44,300


44,726


44,123














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



JANUARY 1,


OCTOBER 2,


DECEMBER 26,


JANUARY 1,


DECEMBER 26,



2012


2011


2010


2012


2010












Net Sales


$                   29,679


$                   36,120


$                   35,365


$                 102,777


$              112,234












GAAP gross profit


$                   13,345


$                   16,729


$                   16,083


$                   46,915


$                52,190

GAAP gross margin


45.0%


46.3%


45.5%


45.6%


46.5%

  Stock-based compensation


104


69


78


232


396

  Amortization of acquired intangible assets


905


905


1,533


2,715


4,601

  Fair value adjustment of acquired inventories


-


-


-


-


42

  Exit costs


-


-


-


152


-

Non-GAAP gross profit


14,354


17,703


17,694


50,014


57,229

Non-GAAP gross margin


48.4%


49.0%


50.0%


48.7%


51.0%












GAAP research and development expenses


$                     8,871


$                     8,838


$                   12,071


$                   27,104


$                38,354

  Stock-based compensation


576


488


645


1,366


2,866

  Amortization of acquired intangible assets


-


-


72


-


2,220

  Exit costs


-


-


-


115


-

Non-GAAP research and development expenses


$                     8,295


$                     8,350


$                   11,354


$                   25,623


$                33,268












GAAP selling, general and administrative expenses


$                     9,909


$                     9,373


$                   10,298


$                   28,882


$                34,338

  Stock-based compensation


653


620


585


1,796


2,882

  Amortization of acquired intangible assets


174


174


294


522


889

  Acquisition-related costs


-


-


-


-


328

  Exit costs


-


-


-


58


-

  Separation costs of executive officers


575


-


-


575


-

Non-GAAP selling, general and administrative expenses


$                     8,507


$                     8,579


$                     9,419


$                   25,931


$                30,239












GAAP operating expenses


$                   18,780


$                   18,211


$                   22,369


$                   55,986


$                72,692

  Stock-based compensation


1,229


1,108


1,230


3,162


5,748

  Amortization of acquired intangible assets


174


174


366


522


3,109

  Acquisition-related costs


-


-


-


-


328

  Exit costs


-


-


-


173


-

  Separation costs of executive officers


575


-


-


575


-

Non-GAAP operating expenses


$                   16,802


$                   16,929


$                   20,773


$                   51,554


$                63,507












GAAP operating loss


$                    (5,435)


$                    (1,482)


$                    (6,286)


$                    (9,071)


$              (20,502)

  Stock-based compensation


1,333


1,177


1,308


3,394


6,144

  Amortization of acquired intangible assets


1,079


1,079


1,899


3,237


7,710

  Fair value adjustment of acquired inventories


-


-


-


-


42

  Acquisition-related costs


-


-


-


-


328

  Exit costs


-


-


-


325


-

  Separation costs of executive officers


575


-


-


575


-

Non-GAAP operating income (loss)


$                    (2,448)


$                        774


$                    (3,079)


$                    (1,540)


$                (6,278)












GAAP net loss


$                    (4,733)


$                    (1,077)


$                    (4,959)


$                    (7,236)


$              (16,832)

  Stock-based compensation


1,333


1,177


1,308


3,394


6,144

  Amortization of acquired intangible assets


1,079


1,079


1,899


3,237


7,710

  Fair value adjustment of acquired inventories


-


-


-


-


42

  Acquisition-related costs


-


-


-


-


328

  Exit costs


-


-


-


325


-

  Separation costs of executive officers


575


-


-


575


-

  Impairment charges on investments


-


-


-


-


62

  Income tax effects


(194)


221


(118)


(115)


(53)

Non-GAAP net income (loss)


$                    (1,940)


$                     1,400


$                    (1,870)


$                        180


$                (2,599)












GAAP loss per share


$                      (0.11)


$                      (0.02)


$                      (0.11)


$                      (0.16)


$                  (0.38)

  Stock-based compensation


0.03


0.03


0.03


0.08


0.14

  Amortization of acquired intangible assets


0.02


0.02


0.04


0.07


0.17

  Fair value adjustment of acquired inventories


-


-


-


-


0.00

  Acquisition-related costs


-


-


-


-


0.01

  Exit costs


-


-


-


0.01


-

  Separation costs of executive officers


0.01


-


-


0.01


-

  Impairment charges on investments


-


-


-


-


0.00

  Income tax effects


(0.00)


0.00


(0.00)


(0.00)


(0.00)

Non-GAAP diluted earnings (loss) per share


$                      (0.04)


$                       0.03


$                      (0.04)


$                       0.00


$                  (0.06)























Shares used in earnings (loss) per share -- GAAP


44,830


44,759


44,300


44,726


44,123

  The effect of dilutive potential common shares due to











     reporting Non-GAAP net income


-


99


-


210


-

  The effect of removing stock-based compensation expense









     under SFAS 123R for Non-GAAP presentation purpose

-


(15)


-


(131)


-

Shares used in diluted earnings per share ---  Non-GAAP


44,830


44,843


44,300


44,805


44,123























Note:  Certain amounts may not total due to rounding.



EXAR CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE

(In millions)














GUIDANCE FOR THE QUARTER ENDING APRIL 1, 2012





ADJUSTMENTS





NON-GAAP


STOCK-BASED

COMPENSATION


AMORTIZATION OF

ACQUIRED

INTANGIBLE ASSETS


ESTIMATED CASH AND

NON-CASH COSTS OF

ALIGNMENT ACTIONS*


GAAP












Net Sales


$26.0 - $28.0








$26.0 - $28.0












Gross Margin


44.0% - 46.0%


<0.4%


3.2% - 3.5%


5.4% - 5.8%


34.5% - 37.0%












Operating expenses


$16.5 - $17.5


$1.3


$0.2


$5.5


$23.5 - $24.5












* Estimate of $3.5M cash costs and $3.5M non-cash charges









SOURCE Exar Corporation