8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

January 15, 2004

Date of Report (Date of earliest event reported)

Commission File No. 0-14225

EXAR CORPORATION

(Exact Name of registrant as specified in its charter)

Delaware	94-1741481
(State or other jurisdiction of incorporation or organization)	( I.R.S. Employer Identification Number)

48720 Kato Road, Fremont, CA 94538

(Address of principal executive offices, Zip Code)

(510) 668-7000

(Registrant’s telephone number, including area code)

INFORMATION TO BE INCLUDED IN THE REPORT:

ITEM 7. Financial Statements, Pro Forma Information and Exhibits

(c) Exhibits.

99.1 Press Release of Exar Corporation dated January 15, 2004.

ITEM 9. Results of Operations and Financial Condition

The information in this Form 8-K and the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

On January 15, 2004, Exar issued a press release announcing its results for the quarter ended December 31, 2003 and certain other information. A copy of the press release is attached as Exhibit 99.1 hereto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

EXAR CORPORATION
By:	/s/    RONALD W. GUIRE	Date: January 15, 2004
	Ronald W. Guire Executive Vice President, Chief Financial Officer, Assistant Secretary and Director (Principal Financial and Accounting Officer)

EXHIBIT INDEX

Exhibit
99.1	Press Release of Exar Corporation dated January 15, 2004

EX-99.1

Exhibit 99.1

PAGE 1 OF 7

Press Release

Contacts:

Ronald W. Guire, Exec. VP, CFO Thomas R. Melendrez, Vice President (510) 668-7000 For Release 8:00 a.m. EST January 15, 2004

Exar Corporation Reports Rise in Operating Income for Third Quarter Fiscal 2004

Fremont, California, January 15, 2004—Exar Corporation (NASDAQ: EXAR), a leading provider of high-performance, mixed-signal silicon solutions for the worldwide communications infrastructure, today reported third quarter fiscal 2004 results. Revenue for the quarter ended December 31, 2003 was $17.1 million up 5.2% sequentially from $16.2 million recorded in the prior quarter and up 13.7% from $15.0 million for the same period last year.

“We are encouraged by our ability to deliver sequential improvement in revenue, gross margins, and operating profitability for the third consecutive quarter,” said Donald L. Ciffone, chairman, president and chief executive officer. “The Company experienced solid bookings for its communications products in the quarter and secured another design win for its family of SONET mapping products with a major OEM customer.”

Third quarter fiscal 2004 operating income was $0.9 million compared to operating income of $0.3 million for the previous quarter and an operating loss of $1.2 million for the same period last year.

The net income for the third quarter of fiscal 2004 was $2.2 million, as compared to a net loss of $4.4 million or a Non-GAAP net income of $1.6 million for the previous quarter and net income of $0.8 million for the same period in the prior fiscal year. An explanation of Non-GAAP financial measures is discussed below and a reconciliation from the GAAP Condensed Consolidated Statements of Income to the Non-GAAP results appears in the financial statement portion of this release.

For the third quarter of fiscal 2004, EPS was $0.05 per diluted share, as compared to a loss per share of $0.11 and a Non-GAAP EPS of $0.04 per diluted share for the previous quarter and EPS of $0.02 per diluted share for the same period in the prior fiscal year.

PAGE 2 OF 7

A Non-GAAP financial measure is a numerical measure of the Company’s performance or financial position that either excludes or includes amounts that are not excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. The Company believes that the Non-GAAP measures as set forth herein are useful to investors for the performance of financial analysis. The Company’s management uses these measures internally to evaluate the Company’s operating performance and the measures are used for planning and forecasting of its future periods. However, Non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. Other companies may use different Non-GAAP measures and presentation of results.

Product Introductions

During the quarter, Exar released another next generation T1/E1/J1 combination device (four-channel) to its highly successful multi-channel device family that integrates a Line Interface Unit (LIU) and framer, plus combines both the physical-layer and access control layer into one highly-integrated solution. These devices leverage Exar’s R³ Technology^TM (Reconfigurable, Relayless Redundancy). R³ Technology is Exar’s proprietary design capability that provides key design flexibility benefits to OEM customers. Exar also introduced the industry’s smallest full featured single-channel Universal Asynchronous Receiver Transmitter (UART) for low voltage (2.25V) serial communications platforms. Available in the 32-pin QFN package (5x5x0.9mm), it is ideal for a variety of portable and handheld applications such as handheld data entry terminals and tablets, Point-of-Sale (POS) credit authorization terminals, global positioning systems (GPS) and data ports in cellular phones.

Regulatory Compliance/Current Business Outlook

Exar adheres to the Securities and Exchange Commission’s requirements governing public company reporting obligations. The Company intends to provide its investors, financial analysts, and the general public with guidance each quarter in its earnings news release and its conference calls. Exar will not provide any further guidance or updates on its performance during the quarter unless it does so in a news release, such as this one, or in such other manner that is compliant with Regulation FD and Regulation G, as the case may be, and other applicable laws, rules and regulations.

The Company reports its financial results in accordance with GAAP. Additionally, it supplements the GAAP financials with Non-GAAP measures included in this press release and 8-K filed with the SEC today.

The Company’s statements about its future financial performance are based on current information and expectations and the Company undertakes no duty to update such statements. The statements are forward-looking and actual results could differ materially due to various risks and uncertainties, some of which are described below. For the fourth fiscal quarter ending March 31, 2004, Exar is forecasting revenue to be $17.1 million to $18.0 million, which reflects anticipated growth in communications products offset by a decline in video and imaging product revenue. The Company projects EPS to be approximately $0.05 per diluted share for the fourth fiscal quarter of 2004.

PAGE 3 OF 7

Earnings Conference Call

Exar invites investors, financial analysts, and the general public to listen to its conference call discussing the Company’s financial results for the third quarter fiscal 2004, today, Thursday, January 15, at 1:30 p.m. EST. To access the conference call, please dial (877) 221-5858 by 1:20 p.m. EST. In addition, a live webcast will also be available. To access the webcast, please go to Exar’s investors’ homepage at: http://www.exar.com. A replay of the call will be available starting at 5:30 p.m. EST today until 8:00 p.m. EST on January 22, 2004. To access the replay, please dial (800) 642-1687 and use conference ID number 1312627.

Safe Harbor Statement

In addition to the Company’s statements about its future financial performance, this release contains forward-looking statements that involve risks and uncertainties, including global economic and industry conditions, such as the level of capital spending, specifically in the telecommunications, data communications and video and imaging markets; possible disruption in commercial activities as a consequence of terrorist activity, armed conflict or health issues, such as, SARs; successful development, market acceptance and demand for the Company’s products; competitive factors, such as pricing or competing solutions, customer ordering patterns; 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 31, 2003, and Quarterly Report on Form 10-Q for the quarters ended June 30, 2003 and September 30, 2003.

About Exar

Exar Corporation (NASDAQ: EXAR) designs, develops and markets high-performance, analog and mixed-signal silicon solutions for the worldwide communications infrastructure. Leveraging its industry-proven analog expertise, system-level knowledge and standard CMOS process technologies, Exar provides OEMs innovative, highly integrated ICs that facilitate the transport and aggregation of signals in access, metro and wide area networks. The Company’s physical layer silicon solutions address transmission standards such as T/E carrier, ATM and SONET. The Company also provides one of the industry’s most comprehensive family of serial communications solutions. Within this product offering, the low voltage and multi-channel universal asynchronous receiver transmitters (UARTs) are particularly well suited to support high data rate and increasing data transfer efficiency requirements for various industrial, telecom and computer server applications. In addition, the Company designs, develops and markets IC products that address select applications for the video and imaging markets. The Company is based in Fremont, CA, had fiscal 2003 revenues of $67.0 million, and employs approximately 265 people worldwide. For more information about Exar visit: www.exar.com.

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PAGE 4 OF 7

EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

	THREE MONTHS ENDED								NINE MONTHS ENDED DECEMBER 31,
	DECEMBER 31,		SEPTEMBER 30,			DECEMBER 31,
	2003		2003			2002			2003			2002
Net sales	$	17,088	$	16,237		$	15,029		$	49,334		$	51,961
Cost of sales		5,981		5,848			6,312			17,668			24,597
Gross profit		11,107		10,389			8,717			31,666			27,364
Operating expenses:
Research and development		5,338		5,433			5,344			16,296			16,742
Selling, general and administrative		4,874		4,636			4,581			14,210			14,444
Total operating expenses		10,212		10,069			9,925			30,506			31,186
Income (loss) from operations		895		320			(1,208	)		1,160			(3,822	)
Interest income and other, net		1,745		1,737			2,339			5,460			7,120
Loss on other long-term investments		—		(6,000	)		—			(6,000	)		(35,886	)
Total other income (loss), net		1,745		(4,263	)		2,339			(540	)		(28,766	)
Income (loss) before income taxes		2,640		(3,943	)		1,131			620			(32,588	)
Provision for income taxes		448		453			339			1,324			836
Net income (loss)	$	2,192	$	(4,396	)	$	792		$	(704	)	$	(33,424	)
Earnings (loss) per share:
Basic earnings (loss) per share	$	0.05	$	(0.11	)	$	0.02		$	(0.02	)	$	(0.84	)
Diluted earnings (loss) per share	$	0.05	$	(0.11	)	$	0.02		$	(0.02	)	$	(0.84	)
Shares used in the computation of earnings (loss) per share:
Basic		40,715		40,481			39,788			40,488			39,566
Diluted		42,604		40,481			41,180			40,488			39,566

1. The above Condensed Consolidated Statements of Income reflect the following:

(a) For purposes of calculating diluted loss per share, the assumed exercise of options into common stock are not taken into consideration as the effect is anti-dilutive for the three months ended September 30, 2003 and nine months ended December 31, 2003 and December 31, 2002.

PAGE 5 OF 7

EXAR CORPORATION AND SUBSIDIARIES

NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

	THREE MONTHS ENDED							NINE MONTHS ENDED DECEMBER 31,
	DECEMBER 31, 2003		SEPTEMBER 30, 2003		DECEMBER 31, 2002
								2003		2002
Net sales	$	17,088	$	16,237	$	15,029		$	49,334	$	51,961
Cost of sales		5,981		5,848		6,312			17,668		22,286
Gross profit		11,107		10,389		8,717			31,666		29,675
Operating expenses:
Research and development		5,338		5,433		5,344			16,296		16,742
Selling, general and administrative		4,874		4,636		4,581			14,210		14,444
Total operating expenses		10,212		10,069		9,925			30,506		31,186
Income (loss) from operations		895		320		(1,208	)		1,160		(1,511	)
Interest income and other, net		1,745		1,737		2,339			5,460		7,120
Loss on other long-term investments		—		—		—			—		(513	)
Total other income, net		1,745		1,737		2,339			5,460		6,607
Income before income taxes		2,640		2,057		1,131			6,620		5,096
Provision for income taxes		448		453		339			1,324		1,529
Net income	$	2,192	$	1,604	$	792		$	5,296	$	3,567
Earnings per share:
Basic earnings per share	$	0.05	$	0.04	$	0.02		$	0.13	$	0.09
Diluted earnings per share—as adjusted	$	0.05	$	0.04	$	0.02		$	0.13	$	0.09
Shares used in the computation of earnings per share:
Basic		40,715		40,481		39,788			40,488		39,566
Diluted		42,604		42,292		41,180			42,275		41,598

1. The calculation above is not a GAAP presentation, except for the three months ended December 31, 2003 and December 31, 2002.

2. The above Non-GAAP Condensed Consolidated Statements of Income reflects the following:

(a) For purposes of calculating diluted earning per share—as adjusted, certain Non-GAAP adjustments have been made and are included in the Reconciliation of Unaudited Condensed Consolidated Statements of Income to the Non-GAAP Condensed Consolidated Statements of Income.

(b) For purposes of calculating diluted earning per share—as adjusted, options that are in the money for the three months ended September 30, 2003 of 1,811,000 and nine months ended December 31, 2003 of 1,787,000 are included for consistent presentation.

(c) For purposes of calculating diluted earning per share—as adjusted, options that are in the money for the nine months ended December 31, 2002 of 2,032,000 are included for consistent presentation.

PAGE 6 OF 7

EXAR CORPORATION AND SUBSIDIARIES

RECONCILIATION OF CONDENSED CONSOLIDATED STATEMENTS OF INCOME TO THE

NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

	THREE MONTHS ENDED					NINE MONTHS ENDED
	DECEMBER 31, 2003		SEPTEMBER 30, 2003			DECEMBER 31, 2003			DECEMBER 31, 2002
Net income (loss), Condensed Consolidated Statements of Income	$	2,192	$	(4,396	)	$	(704	)	$	(33,424	)
Inventory write-off		—		—			—			2,311
Impairment on other long-term investments		—		6,000			6,000			35,373
Difference in income taxes		—		—			—			(693	)
Net Income, Non-GAAP Condensed Consolidated Statements of Income	$	2,192	$	1,604		$	5,296		$	3,567

1. The purpose of the above reconciliation is to reconcile GAAP ("Generally Accepted Accounting Principles") basis net loss for the three ended September 30, 2003 and nine months ended December 31, 2003 and December 31, 2002 from the Condensed Consolidated Statements of Income to the Non-GAAP Condensed Consolidated Statements of Income.

PAGE 7 OF 7

EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	DECEMBER 31, 2003		MARCH 31, 2003
ASSETS
Current assets
Cash, cash equivalents and marketable securities	$	431,939	$	367,851
Accounts receivable, net		5,720		4,275
Inventory		2,787		2,893
Other current assets		5,305		5,617
Total current assets		445,751		380,636
Property, plant and equipment, net		28,077		28,054
Long-term marketable securities		—		54,259
Other long-term investments		3,214		8,759
Deferred income taxes, net		7,523		7,482
Other non-current assets		48		35
Total assets	$	484,613	$	479,225
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities	$	12,988	$	12,147
Long-term obligations		278		312
Total liabilities		13,266		12,459
Total stockholders' equity		471,347		466,766
Total liabilities and stockholders' equity	$	484,613	$	479,225