Exar Corporation Reports Fiscal 2011 Second Quarter Results

Oct 28, 2010, 16:05 ET from Exar Corporation

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 26,

JUNE 27,

SEPTEMBER 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 27,

SEPTEMBER 26,

SEPTEMBER 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



RELATED LINKS

http://www.exar.com