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Exar Corporation Reports Fiscal 2012 Second Quarter Results
Oct 25, 2011 (04:10 PM EDT)


FREMONT, Calif., Oct. 25, 2011 /PRNewswire/ -- Exar Corporation (Nasdaq: EXAR), today reported financial results for the second quarter of fiscal 2012 ending October 2, 2011.

Net sales for the second quarter of fiscal 2012 were $36.1 million compared to net sales of $37.0 million for the prior quarter and $37.2 million for the second quarter of fiscal 2011.

The GAAP gross margin for the second quarter of fiscal 2012 was 46.3% compared to 45.5% for the prior quarter and 46.4% in the second quarter of fiscal 2011.

On a non-GAAP basis, the gross margin for the second quarter of fiscal 2012 was 49.0% compared to 48.6% for the prior quarter and 50.8% in the second quarter of fiscal 2011.

The GAAP net loss for the second quarter of fiscal 2012 was $1.1 million, or $0.02 net loss per share, compared to a net loss of $1.4 million, or $0.03 net loss per share in the prior quarter, and a net loss of $4.5 million, or $0.10 net loss per share, for the second quarter of fiscal 2011.

On a non-GAAP basis, net income was $1.4 million for the second quarter of fiscal 2012 or $0.03 diluted earnings per share, compared to net income of $0.7 million in the prior quarter, or $0.02 diluted earnings per share, and breakeven in the second quarter of fiscal 2011.

The Company ended the second quarter of fiscal 2012 with cash, cash equivalents and short-term marketable securities of $203.1 million.

"We doubled non-GAAP net income quarter on quarter despite a weaker macroeconomic environment," said Pete Rodriguez, the Company's president and chief executive officer.  "Samples of our exciting OTN MXP2 product shipped on time and gained early design wins.  Softness in the communications and industrial markets was mostly offset by continued revenue traction of our DX family of data reduction and compression products used in data centers and cloud storage.  While global economic uncertainty remains, the breadth of the markets we serve coupled with increasing demand for our DX family and our PowerXR products give us optimism for growth in revenue and operating margin in the medium term."

For the third quarter of fiscal 2012 ending January 1, 2012, the Company projects that net sales will be between $32 million and $34 million.  The non-GAAP gross margin is currently expected to be between 49% and 51%.  Operating expenses are currently expected to be between $17 million and $18 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 2012, today, Tuesday, October 25, 2011 at 1:30 p.m. PDT. To access the conference call, please dial (800) 288-8961 by 1:20 p.m. PDT and use conference ID number 220712. 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. PDT on October 25, 2011 until 11:59 p.m. PDT on November 1, 2011. To access the replay, please dial (800) 475-6701 and use conference ID number 220712.

Product Line Highlights:

DataCom and Storage

http://www.exar.com/Common/Content/News.aspx?id=9430

Interface

http://www.exar.com/Common/Content/News.aspx?id=9572

Power Management

http://www.exar.com/Common/Content/News.aspx?id=9568

http://www.exar.com/Common/Content/News.aspx?id=9570

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 Report on Form 10-Q for the period ended July 3, 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 expense, amortization of acquired intangible assets, fair value adjustment of acquired inventories, acquisition-related costs, exit costs, 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 over 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 and per share amounts)

(Unaudited)








OCTOBER 2,


MARCH 27,



2011


2011

ASSETS










Current assets:





Cash and cash equivalents


$         7,681


$         15,039

Short-term marketable securities


195,406


185,960

Accounts receivable (net of allowances of $821 and $1,165)


13,890


9,776

Accounts receivable, related party (net of allowances of $963 and $358)


1,115


3,194

Inventories


19,456


21,962

Other current assets


4,964


3,562

Total current assets


242,512


239,493






Property, plant and equipment, net


23,325


38,009

Goodwill


3,184


3,184

Intangible assets, net


13,752


15,390

Other non-current assets


2,778


2,139






Total assets


$     285,551


$       298,215






LIABILITIES AND STOCKHOLDERS' EQUITY










Current liabilities:





Accounts payable


$       11,732


$           8,794

Accrued compensation and related benefits


4,830


6,069

Deferred income and allowances on sales to distributors


3,742


4,632

Deferred income and allowances on sales to distributors, related party


11,978


10,680

Other accrued expenses


5,278


7,062

            Total current liabilities


37,560


37,237






Long-term lease financing obligations


-


12,558

Other non-current obligations


3,905


3,841






Total liabilities


41,465


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;  44,805,430 and





    44,519,663 shares issued and outstanding at October 2, 2011 and March 27, 2011,





           respectively (net of treasury shares)


4


4

Additional paid-in capital


730,444


728,139

Accumulated other comprehensive loss


(582)


(287)

  Treasury stock at cost, 19,924,369 shares at October 2, 2011 and March 27, 2011


(248,983)


(248,983)

Accumulated deficit


(236,797)


(234,294)

Total stockholders' equity


244,086


244,579

Total liabilities and stockholders' equity


$     285,551


$       298,215



EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)














THREE MONTHS ENDED


SIX MONTHS ENDED



OCTOBER 2,


JULY 3,  


SEPTEMBER 26,


OCTOBER 2,


SEPTEMBER 26,



2011


2011


2010


2011


2010


































Net sales


$      25,910


$     25,073


$     25,885


$       50,983


$      54,250

Net sales, related party


10,210


11,905


11,348


22,115


22,619

              Total net sales


36,120


36,978


37,233


73,098


76,869












Cost of sales:











 Cost of sales


13,661


13,489


13,205


27,150


27,284

 Cost of sales, related party


4,825


5,743


5,222


10,568


10,410

 Amortization of purchased intangible assets


905


905


1,515


1,810


3,068

              Total cost of sales


19,391


20,137


19,942


39,528


40,762












Gross profit


16,729


16,841


17,291


33,570


36,107












Operating expenses:











 Research and development


8,838


9,395


11,840


18,233


26,283

 Selling, general and administrative


9,373


9,600


11,083


18,973


24,040

              Total operating expenses


18,211


18,995


22,923


37,206


50,323

Loss from operations


(1,482)


(2,154)


(5,632)


(3,636)


(14,216)












Other income and expense, net:











  Interest income and other, net


715


711


1,578


1,426


3,191

  Interest expense


(61)


(60)


(316)


(121)


(634)

  Impairment charges on investments


-


-


(62)


-


(62)

             Total other income and expense, net


654


651


1,200


1,305


2,495












Loss before income taxes


(828)


(1,503)


(4,432)


(2,331)


(11,721)

Provision for (benefit from)  income taxes


249


(77)


27


172


152












Net loss


$      (1,077)


$     (1,426)


$     (4,459)


$       (2,503)


$    (11,873)























Loss per share:











 Basic loss per share


$       (0.02)


$      (0.03)


$       (0.10)


$        (0.06)


$       (0.27)












 Diluted loss per share


$      (0.02)


$     (0.03)


$       (0.10)


$       (0.06)


$      (0.27)












Shares used in the computation of loss per share:






















 Basic


44,759


44,599


44,173


44,676


44,035

 Diluted


44,759


44,599


44,173


44,676


44,035














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



OCTOBER 2,


JULY 3,


SEPTEMBER 26,


OCTOBER 2,


SEPTEMBER 26,



2011


2011


2010


2011


2010












Net Sales


$        36,120


$      36,978


$       37,233


$                   73,098


$        76,869












GAAP gross profit


$        16,729


$      16,841


$       17,291


$     33,570


$        36,107

GAAP gross margin


46.3%


45.5%


46.4%


45.9%


47.0%

  Stock-based compensation


69


59


98


128


318

  Amortization of acquired intangible assets


905


905


1,515


1,810


3,068

  Fair value adjustment of acquired inventories


-


-


-


-


42

  Exit costs


-


152


-


152


-

Non-GAAP gross profit


17,703


17,957


18,904


35,660


39,535

Non-GAAP gross margin


49.0%


48.6%


50.8%


48.8%


51.4%












GAAP research and development expenses


$          8,838


$        9,395


$       11,840


$     18,233


$        26,283

  Stock-based compensation


488


302


665


790


2,221

  Amortization of acquired intangible assets


-


-


1,074


-


2,148

  Exit costs


-


115


-


115


-

Non-GAAP research and development expenses


$          8,350


$        8,978


$       10,101


$     17,328


$        21,914












GAAP selling, general and administrative expenses


$          9,373


$        9,600


$       11,083


$     18,973


$        24,040

  Stock-based compensation


620


523


751


1,143


2,297

  Amortization of acquired intangible assets


174


174


297


348


595

  Acquisition-related costs


-


-


-


-


328

  Exit costs


-


58


-


58


-

Non-GAAP selling, general and administrative expenses


$          8,579


$        8,845


$       10,035


$     17,424


$        20,820












GAAP operating expenses


$        18,211


$      18,995


$       22,923


$     37,206


$        50,323

  Stock-based compensation


1,108


825


1,416


1,933


4,518

  Amortization of acquired intangible assets


174


174


1,371


348


2,743

  Acquisition-related costs


-


-


-


-


328

  Exit costs


-


173


-


173


-

Non-GAAP operating expenses


$        16,929


$      17,823


$       20,136


$     34,752


$        42,734












GAAP operating loss


$        (1,482)


$      (2,154)


$       (5,632)


$     (3,636)


$      (14,216)

  Stock-based compensation


1,177


884


1,514


2,061


4,836

  Amortization of acquired intangible assets


1,079


1,079


2,886


2,158


5,811

  Fair value adjustment of acquired inventories


-


-


-


-


42

  Acquisition-related costs


-


-


-


-


328

  Exit costs


-


325


-


325


-

Non-GAAP operating income (loss)


$            774


$          134


$      (1,232)


$         908


$        (3,199)












GAAP net loss


$       (1,077)


$     (1,426)


$     (4,459)


$    (2,503)


$     (11,873)

  Stock-based compensation


1,177


884


1,514


2,061


4,836

  Amortization of acquired intangible assets


1,079


1,079


2,886


2,158


5,811

  Fair value adjustment of acquired inventories


-


-


-


-


42

  Acquisition-related costs


-


-


-


-


328

  Exit costs


-


325


-


325


-

  Impairment charges on investments


-


-


62


-


62

  Income tax effects


221


(142)


32


79


65

Non-GAAP net income (loss)


$        1,400


$         720


$           35


$     2,120


$          (729)












GAAP loss per share


$        (0.02)


$      (0.03)


$      (0.10)


$     (0.06)


$        (0.27)

  Stock-based compensation


0.03


0.02


0.03


0.05


0.11

  Amortization of acquired intangible assets


0.02


0.02


0.07


0.05


0.13

  Fair value adjustment of acquired inventories


-


-


-


-


0.00

  Acquisition-related costs


-


-


-


-


0.01

  Exit costs


-


0.01


-


0.01


-

  Impairment charges on investments


-


-


0.00


-


0.00

  Income tax effects


0.00


(0.00)


0.00


0.00


0.00

Non-GAAP diluted earnings (loss) per share


$         0.03


$       0.02


$       0.00


$      0.05


$       (0.02)























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


44,759


44,599


44,173


44,676


44,035

  The effect of dilutive potential common shares due to











     reporting Non-GAAP net income


99


206


261


204


-

  The effect of removing stock-based compensation expense









     under SFAS 123R for Non-GAAP presentation purpose

(15)


(183)


(329)


(124)


-

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


44,843


44,622


44,105


44,756


44,035














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.



EXAR CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE

(In millions)











GUIDANCE FOR THE QUARTER ENDING JANUARY 1, 2012


ADJUSTMENTS




NON-GAAP


STOCK-BASED COMPENSATION

AMORTIZATION OF ACQUIRED INTANGIBLE ASSETS

GAAP










Net Sales


$32.0 - $34.0






$32.0 - $34.0










Gross Margin


49% - 51%


<0.1%


2.6% - 2.8%


46.2% - 48.4%










Operating Expenses


$17.0 - $18.0


$1.3


$0.2


$18.5 - $19.5























SOURCE Exar Corporation