Exar Corporation Announces Fourth Quarter and Fiscal 2014 Results - WBOC-TV 16, Delmarvas News Leader, FOX 21 -

Exar Corporation Announces Fourth Quarter and Fiscal 2014 Results

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SOURCE Exar Corporation

Company Reports Fiscal 2014 Revenue of $125.3 Million and Non-GAAP Operating Income of $11.3 Million

FREMONT, Calif., May 5, 2014 /PRNewswire/ -- Exar Corporation (NYSE: EXAR), a leading supplier of high performance analog mixed-signal components, video and data management solutions, today announced financial results for the Company's fourth quarter of fiscal year 2014 and fiscal year 2014, ended March 30, 2014.  Fiscal year 2014 revenue of $125.3 million increased 3% from $122.0 million in the prior year. On a non-GAAP basis, gross margin for fiscal year 2014 was 50% versus 49% in the prior year, and non-GAAP operating income of $11.3 million was up 3% compared to $11.0 million in the prior year. 

Revenue of $28.0 million for the fourth quarter of fiscal year 2014 decreased from $30.7 million in the previous quarter and $31.2 million in the same quarter a year ago.  On a non-GAAP basis, fourth quarter 2014 gross margin was 46% and non-GAAP net income was $0.7 million, or $0.01 per fully diluted share. On a GAAP basis, fourth quarter net income was $0.1 million, or $0.00 earnings per share.

Louis DiNardo, the Company's President and CEO, commented,  "Our financial results for the quarter continued to be impacted by supply chain inventory exceeding demand in the networking market, as well as timing issues in certain contracts for proprietary high reliability products and technology licenses.  We expect the inventory to be consumed over the next several months and a return to prior levels.  Design win momentum for our new power management and connectivity products is strong and we are building a trend and momentum with new and existing customers for our video processor products.

"Our recent announcement of an agreement to acquire Integrated Memory Logic through a tender offer and merger represents a transformative transaction for Exar.  The combined company will have greater scale, increased profitability and broader markets to support future growth.  We expect the tender offer to be successful and that we will close the transaction during our second fiscal quarter," concluded Mr. DiNardo

For the first quarter of fiscal year 2015 the Company expects revenue to be in the range of $28.0 to $31.0 million and expects non-GAAP gross margin to be in the range of 46% to 48%.

Company officials will be discussing these results in greater detail in a conference call today, Monday, May 5, 2014 at 7:30 a.m. PDT (10:30 a.m. EDT).  To access the conference call, please dial (877) 941-2068 or (480) 629-9712.  In addition, a live webcast will be available on Exar's Investor webpage.  An archive of the webcast will be available after its conclusion. 

Exar Corporation designs, develops and markets high performance, analog mixed-signal integrated circuits and advanced sub-system solutions for the Networking & Storage, Industrial & Embedded Systems, and Communications Infrastructure markets.  Exar's product portfolio includes power management and connectivity components, communications products, and network security and storage optimization solutions. Exar has locations worldwide providing real-time customer support. For more information about Exar, visit http://www.exar.com or contact: investorrelations@exar.com

-Tables follow-

 

FINANCIAL COMPARISON

(In thousands, except per share amounts) (Unaudited)

















Non-GAAP Results


THREE MONTHS ENDED


TWELVE MONTHS ENDED



 MARCH 30, 2014 


 DECEMBER 29, 2013 


 MARCH 31, 2013 


 MARCH 30, 2014 


 MARCH 31, 2013 

Net sales


$ 27,987



$ 30,690



$ 31,154



$125,322



$122,026


Gross margin


45.9%



48.6%



52.7%



49.9%



48.9%


Income from operations


$      166



$   1,748



$   4,316



$  11,331



$  10,994


Net income


$      676



$   1,977



$   4,770



$  12,585



$  13,116


Net income per share
















  Basic 


$     0.01



$     0.04



$     0.10



$      0.27



$      0.29


  Diluted 


$     0.01



$     0.04



$     0.10



$      0.25



$      0.28


















GAAP Results


THREE MONTHS ENDED


TWELVE MONTHS ENDED



 MARCH 30, 2014 


 DECEMBER 29, 2013 


 MARCH 31, 2013 


 MARCH 30, 2014 


 MARCH 31, 2013 

Net sales


$ 27,987



$ 30,690



$ 31,154



$125,322



$122,026


Gross margin


30.1%



41.8%



49.1%



40.4%



45.6%


Income (loss) from operations

$     (311)



$  (3,321)



$   1,309



$   (3,701)



$      (583)


Net income (loss)


$       147



$  (1,634)



$   1,672



$     5,801



$     2,882


Net income (loss) per share
















  Basic 


$     0.00



$    (0.03)



$     0.04



$      0.12



$      0.06


  Diluted 


$     0.00



$    (0.03)



$     0.04



$      0.12



$      0.06


















Supplemental Sales Information

(In thousands) (Unaudited)

















By End Market


THREE MONTHS ENDED


TWELVE MONTHS ENDED



 MARCH 30, 2014 


 DECEMBER 29, 2013 


 MARCH 31, 2013 


 MARCH 30, 2014 


 MARCH 31, 2013 

Industrial & Embedded Systems

$ 19,588

70%


$ 18,429

60%


$ 15,265

49%


$  72,458

58%


$  63,395

52%

Networking & Storage


3,310

12%


7,104

23%


9,346

30%


30,594

25%


32,737

27%

Communications Infrastructure

5,046

18%


5,089

17%


6,231

20%


21,808

17%


24,966

20%

Other


43

-


68

-


312

1%


462

-


928

1%

Net Sales


$ 27,987

100%


$ 30,690

100%


$ 31,154

100%


$125,322

100%


$122,026

100%

 

Except for historical information contained herein, this press release and matters discussed on the conference call contain forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. In particular, the statements regarding the demand for our products and the anticipated trends in our sales and profits are forward-looking statements. The forward-looking statements are dependent on certain risks and uncertainties. Therefore, actual outcomes and results may differ materially from what is expressed herein. The Company urges investors to review in detail the risks and uncertainties and other factors described in its Securities and Exchange Commission, or SEC, filings, including, but not limited to, under the captions "Risk Factors", "Forward-Looking Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our public reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2013 and the Quarterly Reports on Form 10-Q for the quarterly periods ended June 30, 2013, September 29, 2013, and December 29, 2013 which are on file with the SEC and are available on our Investor webpage and on the SEC website at www.sec.gov.  The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

The Company's non-GAAP measures exclude charges related to stock-based compensation, amortization of acquired intangible assets and inventory step-up, impairment charges, restructuring charges and exit costs, provisions for dispute resolutions, merger and acquisition and related integration costs, certain income tax benefits and credits, certain warranty charges, net change in the fair value of contingent consideration, and related income tax effects on certain excluded items. The Company excludes these items primarily because they are significant special expense and gain estimates, which management separates for consideration when evaluating and managing business operations. The Company's management uses non-GAAP net income and non-GAAP earnings per share to evaluate its current operating results and financial results and to compare them against historical financial results.  Additionally, we disclose below the non-GAAP measure of free cash flow, which is derived from our net cash provided (used) by operations, less purchases of fixed assets and IP, plus proceeds from the sale of IP.  Management believes these non-GAAP measures are useful to investors because they are frequently used by securities analysts, investors and other interested parties in evaluating the Company and provides further clarity on its profitability. 

In addition, the Company believes that providing investors with these non-GAAP measurements enhances their ability to compare the Company's business against that of its many competitors who employ and disclose similar non-GAAP measures.  This financial measure may be different from non-GAAP methods of accounting and reporting used by the Company's competitors to the extent their non-GAAP measures include or exclude other items.  The presentation of this additional information should not be considered a substitute for net income or net income per diluted share or other measures prepared in accordance with GAAP.

 

EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)














THREE MONTHS ENDED


TWELVE MONTHS ENDED



 MARCH 30, 


 DECEMBER 29, 


 MARCH 31, 


 MARCH 30, 


 MARCH 31, 



2014


2013


2013


2014


2013


































Net sales


$          18,913


$                  21,846


$          22,646


$          89,595


$          85,856

Net sales, related party


9,074


8,844


8,508


35,727


36,170

               Total net sales


27,987


30,690


31,154


125,322


122,026












Cost of sales:











  Cost of sales (1) 


11,491


12,393


11,097


48,067


45,943

  Cost of sales, related party


4,119


3,556


3,819


15,738


16,716

  Amortization of purchased intangible assets and inventory step-up cost


2,254


1,898


801


7,600


3,379

  Warranty reserve


-


-


-


1,440


-

  Impairment of intangible assets


1,636


-


-


1,636


-

  Restructuring charges and exit costs


65


17


141


187


301

               Total cost of sales


19,565


17,864


15,858


74,668


66,339

Gross profit


8,422


12,826


15,296


50,654


55,687

Operating expenses:











  Research and development(2) 


6,803


6,929


5,778


27,048


22,376

  Selling, general and administrative (3)


7,496


8,829


8,465


33,055


32,531

  Restructuring charges and exit costs, net


1,438


74


(366)


2,827


1,253

  Merger and acquisition costs


1,014


257


110


1,880


110

  Net change in fair value of contingent consideration


(8,018)


58


-


(10,455)


-

               Total operating expenses


8,733


16,147


13,987


54,355


56,270

Income (loss) from operations


(311)


(3,321)


1,309


(3,701)


(583)












Other income and expense, net:











   Interest income and other, net


523


321


535


1,503


2,441

   Interest expense


(39)


(39)


(37)


(156)


(165)

   Impairment of long term investment


(323)


-


-


(323)


-

              Total other income and expense, net


161


282


498


1,024


2,276












Income (loss) before income taxes


(150)


(3,039)


1,807


(2,677)


1,693

Provision for (benefit from) income taxes


(297)


(1,405)


135


(8,478)


(1,189)












Net income (loss)


$               147


$                  (1,634)


$            1,672


$            5,801


$            2,882

Net income (loss) per share:











  Basic


$              0.00


$                    (0.03)


$              0.04


$              0.12


$              0.06

  Diluted


$              0.00


$                    (0.03)


$              0.04


$              0.12


$              0.06












Shares used in the computation of net income (loss) per share:











  Basic


47,328


47,529


46,219


47,291


45,809

  Diluted


48,778


47,529


47,379


48,823


46,476












(1)Equity compensation included in cost of sales


$               195


$                       165


$               180


$               714


$               400

(2)Equity compensation included in R&D


579


566


352


1,974


790

(3)  Equity compensation included in SG&A


811


1,826


1,246


6,164


3,511

 

EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS  

(In thousands)

(Unaudited)










MARCH 30,


DECEMBER 29,


MARCH 31,



2014


2013


2013

ASSETS














Current assets:







Cash and cash equivalents


$       14,614


$               21,070


$       14,718

Short-term marketable securities


152,420


154,702


190,587

Accounts receivable (net of allowances of $1,178, $570 and $944)

15,023


21,699


12,614

Accounts receivable, related party (net of allowances of $608, $462 and $346)

3,309


1,685


3,374

Inventories


28,982


24,950


19,430

Other current assets


3,549


3,645


3,177

Total current assets


217,897


227,751


243,900








Property, plant and equipment, net


21,280


21,867


24,100

Goodwill


30,410


29,573


10,356

Intangible assets, net


31,390


28,063


13,338

Other non-current assets


1,240


1,442


1,474








Total assets


$     302,217


$             308,696


$     293,168








LIABILITIES AND STOCKHOLDERS' EQUITY














Current liabilities: 







Accounts payable


$       15,488


$               14,824


$         9,455

Accrued compensation and related benefits


4,174


4,352


3,624

Deferred income and allowances on sales to distributors


1,765


1,861


2,399

Deferred income and allowances on sales to distributors, related party

9,349


8,017


9,475

Other current liabilities


11,370


11,151


15,215

             Total current liabilities


42,146


40,205


40,168








Long-term lease financing obligations


70


106


1,342

Other non-current obligations 


6,626


11,530


11,204








Total liabilities


48,842


51,841


52,714








Stockholders' equity


253,375


256,855


240,454

Total liabilities and stockholders' equity


$     302,217


$             308,696


$     293,168

 

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 30, 


 DECEMBER 29, 


 MARCH 31, 


 MARCH 30, 


 MARCH 31, 



2014


2013


2013


2014


2013












 Net Sales


$          27,987


$                  30,690


$          31,154


$        125,322


$        122,026












 GAAP gross profit


$            8,422


$                  12,826


$          15,296


$          50,654


$          55,687

 GAAP gross margin


30.1%


41.8%


49.1%


40.4%


45.6%

   Stock-based compensation


195


165


180


714


400

   Amortization of purchased intangible assets and inventory step-up cost


2,254


1,898


801


7,600


3,335

   Warranty reserve


-


-


-


1,440


-

   Impairment Charges


1,901


-


-


1,901


-

   Restructuring charges and exit costs


65


17


141


187


301

Non-GAAP gross profit 


$          12,837


$                  14,906


$          16,418


$          62,496


$          59,723

Non-GAAP gross margin 


45.9%


48.6%


52.7%


49.9%


48.9%












GAAP operating expenses


$            8,733


$                  16,147


$          13,987


$          54,355


$          56,270

   Stock-based compensation - R&D


579


566


352


1,974


790

   Stock-based compensation - SG&A


811


1,826


1,246


6,164


3,511

   Amortization of purchased intangible assets 


238


208


107


800


441

   Restructuring charges and exit costs, net


1,438


74


(366)


2,827


1,253

   Merger and acquisition costs


1,014


257


110


1,880


110

   Provision for dispute resolution


-


-


436


-


1,436

   Net change in fair value of contingent consideration


(8,018)


58


-


(10,455)


-

Non-GAAP operating expenses


$          12,671


$                  13,158


$          12,102


$          51,165


$          48,729












GAAP operating income (loss)


$             (311)


$                  (3,321)


$            1,309


$          (3,701)


$             (583)

   Stock-based compensation 


1,585


2,557


1,778


8,852


4,701

   Amortization of purchased intangible assets and inventory step-up cost


2,492


2,106


908


8,400


3,776

   Warranty reserve


-


-


-


1,440


-

   Impairment Charges


1,901


-


-


1,901


-

   Restructuring charges and exit costs, net


1,503


91


(225)


3,014


1,554

   Merger and acquisition costs


1,014


257


110


1,880


110

   Provision for dispute resolution


-


-


436


-


1,436

   Net change in fair value of contingent consideration


(8,018)


58


-


(10,455)


-

Non-GAAP operating income 


$               166


$                    1,748


$            4,316


$          11,331


$          10,994












GAAP net income (loss)


$               147


$                  (1,634)


$            1,672


$            5,801


$            2,882

   Stock-based compensation 


1,585


2,557


1,778


8,852


4,701

   Amortization of purchased intangible assets and inventory step-up cost


2,492


2,106


908


8,400


3,776

   Warranty reserve


-


-


-


1,440


-

   Impairment Charges


2,224


-


-


2,224


-

   Restructuring charges and exit costs, net


1,503


91


(225)


3,014


1,554

   Merger and acquisition costs


1,014


257


110


1,880


110

   Provision for dispute resolution


-


-


436


-


1,436

   Net change in fair value of contingent consideration


(8,018)


58


-


(10,455)


-

   Income tax effects


(271)


(1,458)


91


(8,571)


(1,343)

Non-GAAP net income 


$               676


$                    1,977


$            4,770


$          12,585


$          13,116












GAAP net income (loss) per share











  Basic


$              0.00


$                    (0.03)


$              0.04


$              0.12


$              0.06

  Diluted


$              0.00


$                    (0.03)


$              0.04


$              0.12


$              0.06












Non-GAAP net income (loss) per share 











  Basic


$              0.01


$                      0.04


$              0.10


$              0.27


$              0.29

  Diluted


$              0.01


$                      0.04


$              0.10


$              0.25


$              0.28












Shares used in the computation of Non-GAAP net income (loss) per share:







  Basic


47,328


47,529


46,219


47,291


45,809

  Diluted


50,220


50,400


48,557


50,168


47,389























Net cash provided (used) by operations


$            1,708


$                  (5,409)


$            3,712


$               851


$            7,366

   Less purchases of fixed assets and IP


(983)


(926)


(132)


(2,658)


(1,385)

   Add proceeds from sale of IP




-


125


125


375

Free cash flow


$               725


$                  (6,335)


$            3,705


$          (1,682)


$            6,356

 

 

 

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