UNITED STATES
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
February 1, 2017
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) |
(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)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. |
Results of Operations and Financial Condition |
On February 1, 2017, Exar Corporation (the “Company”) issued a press release announcing its financial results for the third fiscal quarter ended January 1, 2017. A copy of each of the press release and the supplemental financial information and commentary by Keith Tainsky, Chief Financial Officer of the Company regarding the Company’s third fiscal quarter ended January 1, 2017, is attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, and is incorporated herein by reference.
The information in this Current Report on Form 8-K and the Exhibits 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.
Item 5.08 |
Shareholder Director Nominations. |
The Board of Directors of the Company has established Tuesday, July 11, 2017 as the date of the Company’s 2017 Annual Meeting of Stockholders (the “2017 Annual Meeting”). Because the date of the 2017 Annual Meeting has advanced by more than 30 days from the anniversary date of the Company’s 2016 Annual Meeting of Stockholders (the “2016 Annual Meeting”), in accordance with Rule 14a-5(f) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is informing stockholders of such change.
Stockholders of record at the close of business on May 17, 2017 will be entitled to vote at the 2017 Annual Meeting. The time and location of the 2017 Annual Meeting will be as set forth in the Company’s proxy statement for the 2017 Annual Meeting. Because the date of the 2017 Annual Meeting has been changed by more than 30 days from the anniversary of the 2016 Annual Meeting, a new deadline has been set for submission of proposals by stockholders of the Company intended to be included in the Company’s 2017 proxy statement and form of proxy for its 2017 Annual Meeting.
Stockholders of the Company who wish to have a proposal considered for inclusion in the Company’s proxy materials for the 2017 Annual Meeting pursuant to Rule 14a-8 under the Exchange Act, must ensure that such proposal is received by the Company’s Secretary, at 48720 Kato Road, Fremont, California 94538, on or before the close of business on March 12, 2017, which the Company has determined to be a reasonable time before it expects to begin to print and send its proxy materials. Any such proposal must also meet the requirements set forth in the rules and regulations of the Securities and Exchange Commission in order to be eligible for inclusion in the proxy materials for the 2017 Annual Meeting. The March 12, 2017 deadline will also apply in determining whether notice of a shareholder proposal is timely for purposes of exercising discretionary voting authority with respect to proxies under Rule 14a-4(c) of the Exchange Act.
In addition, in accordance with the requirements contained in the Company’s Bylaws, stockholders of the Company who wish to bring business before the 2017 Annual Meeting outside of Rule 14a-8 of the Exchange Act or to nominate a person for election as a director must ensure that written notice of such proposal (including all of the information specified in the Company’s Bylaws) is received by the Company’s Secretary at the address specified above no later than the close of business on March 12, 2017. Any such proposal must meet the requirements set forth in the Company’s Bylaws in order to be brought before the 2017 Annual Meeting.
Item 9.01. |
Financial Statements and Exhibits |
|
(d) |
Exhibits. |
|
99.1 |
Press Release of Exar Corporation dated February 1, 2017. |
|
99.2 |
Supplemental Financial Information and Commentary. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
EXAR CORPORATION |
|
(Registrant) |
|
|
Date: February 1, 2017 |
/s/ Keith Tainsky |
|
Keith Tainsky
Chief Financial Officer |
EXHIBIT INDEX
Exhibit No. |
|
Description |
99.1 |
|
Press Release of Exar Corporation dated February 1, 2017. |
99.2 |
Supplemental Financial Information and Commentary. |
Exhibit 99.1
|
Press Release
Exar Corporation Announces Fiscal 2017 Third Quarter Financial Results
Fremont, CA – February 1, 2017 - Exar Corporation (NYSE: EXAR) a leading supplier of analog mixed-signal application specific technology solutions serving the Industrial, Infrastructure, Automotive, and Audio/Video markets, today announced financial results for the Company's fiscal year 2017 third quarter, which ended on January 1, 2017. Unless otherwise indicated, all non-GAAP financial results exclude the financial results of the iML Display business, which the Company has divested, and are presented in the GAAP results as discontinued operations.
Fiscal 2017 Third Quarter Highlights
● |
Net sales of $27.2 million, down 1% sequentially |
● |
GAAP gross margin of 49.4% (Non-GAAP gross margin of 53.4%) |
● |
GAAP operating loss of $0.6 million (Non-GAAP operating income of $3.5 million) |
● |
GAAP EPS from continuing operations of $(0.01) (Non-GAAP EPS of $0.07) |
● |
GAAP EPS from discontinued operations of $0.89 (Non-GAAP EPS of $0.02) |
● |
iML divestiture completed |
● |
Cash and equivalents, and short-term marketable securities of $228 million |
Ryan Benton, Exar’s Chief Executive Officer, commented, “Exar again delivered solid results for the third fiscal quarter of 2017. Sales grew 7.6% compared to the third quarter of fiscal 2016. Our financial results include reaching a non-GAAP gross margin of 53.4%, up 730 basis points from the same period a year ago, and at a level not seen at Exar in almost a decade.”
Mr. Benton added, “Our financial results reflect the success we are having in executing on our strategy. We are seeing the benefits of partnering with tier-one technology leaders to deliver high-value advanced power management and interface technology solutions. At the same time we have made tremendous improvements in our competitiveness by increasing the efficiency of our Company’s supply chain. Both of these efforts offer additional efficiencies going forward, and I am pleased with our continued progress.”
Fiscal 2017 Third Quarter Highlights (Continuing Operations Only):
The following highlights the Company's financial performance on both a GAAP and supplemental non-GAAP basis. The Company provides supplemental information regarding its operating performance on a non-GAAP basis that excludes certain gains, losses, and charges, which either occur relatively infrequently or which management considers to be outside our core operating results. Non-GAAP results are not in accordance with GAAP and may not be comparable to non-GAAP information provided by other companies. Non-GAAP information should be considered a supplement to, not a substitute for, financial statements prepared in accordance with GAAP. A complete reconciliation of GAAP to non-GAAP results is attached to this press release.
● |
Net Sales |
o |
Third quarter net sales of $27.2 million decreased $0.4 million, or 1.4%, from the previous quarter’s $27.6 million, and increased 7.6% from the $25.3 million from the same period a year ago. |
● |
Gross Margin |
o |
GAAP gross margin of 49.4% increased from 47.8% reported in the previous quarter and the 43.4% reported in the third quarter last year. |
o |
Non-GAAP gross margin of 53.4% increased from 51.9% reported in the previous quarter and the 46.1% reported in the third quarter last year. |
● |
Operating Expenses |
o |
GAAP operating expenses of $14.1 million increased $1.0 million and decreased $0.1 million from the previous quarter’s expenses of $13.1 million and the same period a year ago expenses of $14.2 million, respectively. Fiscal 2017 third quarter operating expenses included: |
■ |
Charges of (i) $3.2 million stock-based compensation expense and (ii) $0.7 million amortization of purchased intangibles. |
o |
Non-GAAP operating expenses of $11.0 million increased by $0.4 million and $0.3 million from the previous quarter’s operating expenses of $10.6 million and from the same quarter in the prior year’s expenses of $10.7 million, respectively. |
● |
Net Income/Loss |
o |
GAAP net loss was $0.3 million, compared to net income of $0.1 million reported in the previous quarter, and compared to a net loss of $2.0 million reported in the third quarter of fiscal 2016. Note that the continuing operations do not include a gain of $45.4 million related to the divestiture of our iML subsidiary, which is classified as part of discontinued operations. |
o |
Non-GAAP net income of $3.4 million decreased $0.4 million from the previous quarter’s net income of $3.8 million and increased $2.5 million from the $0.9 million reported in the third quarter of fiscal 2016. |
● |
Earnings/Loss Per Share |
o |
GAAP loss per share was $0.01, compared to $0.00 reported in the previous quarter and a loss per share of $0.04 reported in the same period a year ago. |
o |
Non-GAAP diluted earnings per share were $0.07, compared to $0.08 reported in the previous quarter, and the $0.02 reported in the third period a year ago. |
Keith Tainsky, Exar’s Chief Financial Officer, stated, “We remain committed to our goal of delivering predictable operating results and increasing shareholder value. Our continued efforts to drive efficiency and increased competitiveness through the supply chain are paying enormous dividends.” Mr. Tainsky continued, “Even as the funnel of advanced product design wins grows, we will keep the pressure and focus on continual improvement in our supply chain.”
Fiscal 2017 Fourth Quarter Guidance:
For the fiscal 2017 fourth quarter ending April 2, 2017, the Company expects results to be as follows:
● |
Net sales: $27.7 million, plus or minus $0.5 million |
● |
GAAP gross margin: 50.0% to 52.0% (Non-GAAP 53.0% to 55.0%) |
● |
GAAP operating expenses: $13.0 million to $14.0 million (Non-GAAP $11.0 million to $11.5 million) |
● |
GAAP EPS: $0.00 to $0.03 (Non-GAAP $0.07 to $0.09) |
Conference Call and Prepared Remarks
Exar is providing a copy of prepared remarks in conjunction with its press release. These remarks are offered to provide stockholders and analysts with additional time and detail for analyzing results in advance of the Company’s quarterly conference call. The remarks will be available at Exar’s Investor webpage in conjunction with this press release.
As previously scheduled, the conference call will begin today, February 1, 2017 at 4:45 p.m. EST (1:45 p.m. PST). To access the conference call, please dial (918) 534-8424 or (844) 359-0802. The passcode for the live call is 49098807. In addition, a live webcast will be available on Exar's Investor webpage.
An archive of the conference call webcast will be available on Exar's Investor webpage after the conference call's conclusion.
About Exar
Exar’s mission is to leverage our extensive analog and mixed-signal portfolio, experience and IP to deliver leading-edge application specific technology solutions to target markets where operational excellence and reliability are valued. We service the Industrial, Infrastructure, Automotive, and Audio/Video markets by acting as an extension of the customer’s own technology organization and singularly focusing on exceeding customer expectations. For more information, visit http://www.exar.com.
Forward-Looking Statements Safe Harbor Disclosure
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, including statements that the Company will continue to execute on its strategies, increase design wins, and keeping pressure and focus on continual improvements in our supply chain and the Company’s financial outlook expectations for the fourth quarter ending April 2, 2017. 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. Therefore, actual outcomes and results may differ materially from what is expressed herein. For a discussion of these risks and uncertainties, the Company urges investors to review in detail the risks and uncertainties and other factors described in its Securities and Exchange Commission (SEC) filings, including, but not limited to, the “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 filed with the SEC on May 27, 2016 and our Form 10-Q filed with the SEC on August 10, 2016, and available on our Investor webpage and on the SEC website at www.sec.gov.
Discussion of Non-GAAP Financial Measures
The Company’s non-GAAP measures exclude charges related to stock-based compensation, amortization of acquired intangible assets, impairment charges, gain upon closing sale-leaseback of our corporate headquarters, restructuring charges and exit costs which include costs for personnel whose positions have been eliminated as part of a restructuring or are in the process of being eliminated as part of the discontinuation of a product line, severance costs associated with the former CEO, the financial results of the iML Display business as well as the gain recognized from the sale of the iML business, accruals for and proceeds received from dispute resolutions and patent litigation, merger and acquisition and related integration costs, certain income tax benefits and credits, 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. 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 provide further clarity on its profitability.
Unless otherwise indicated, all non-GAAP financial results exclude the financial results of the iML Display business, which the Company has divested, and are presented in the GAAP results as discontinued operations.
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 competitors who employ and disclose similar non-GAAP measures. However, the manner in which we calculate these non-GAAP financial measures 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 material limitation associated with the use of the non-GAAP financial measures is that the non-GAAP measures may not reflect the full economic impact of Exar’s activities. Accordingly, investors are cautioned not to place undue reliance on non-GAAP information. 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.
Investors should refer to the reconciliation of Non-GAAP Results to GAAP Results, which is contained in this press release.
For more information, visit http://www.exar.com
For Press Inquiries Contact: press@exar.com
For Investor Relations Contact:
|
Keith Tainsky, CFO Phone: (510) 668-7201 Email: investorrelations@exar.com |
Laura Guerrant-Oiye, Investor Relations Phone: (510) 668-7201 Email: laura.guerrant@exar.com |
-Tables follow-
Unless otherwise indicated, all financial results presented in the following tables exclude the financial results of the iML Display business, which the Company has divested, and are presented as discontinued operations.
FINANCIAL COMPARISON
(In thousands, except per share amounts) (Unaudited)
GAAP Results |
THREE MONTHS ENDED |
NINE MONTHS ENDED |
||||||||||||||||||||||||||||||||||||||
JANUARY 1, 2017 |
OCTOBER 2, 2016 |
DECEMBER 27, 2015 |
JANUARY 1, 2017 |
DECEMBER 27, 2015 |
||||||||||||||||||||||||||||||||||||
Industrial |
$ | 19,141 | 70 | % | $ | 19,042 | 69 | % | $ | 16,851 | 66 | % | $ | 56,619 | 69 | % | $ | 53,450 | 70 | % | ||||||||||||||||||||
Infrastructure |
4,034 | 15 | % | 5,065 | 18 | % | 4,308 | 17 | % | 14,695 | 18 | % | 11,006 | 14 | % | |||||||||||||||||||||||||
Audio/Video |
2,721 | 10 | % | 1,840 | 7 | % | 2,764 | 11 | % | 6,413 | 8 | % | 6,726 | 9 | % | |||||||||||||||||||||||||
Automotive |
772 | 3 | % | 961 | 3 | % | 920 | 4 | % | 2,512 | 3 | % | 2,725 | 4 | % | |||||||||||||||||||||||||
Other |
554 | 2 | % | 693 | 3 | % | 467 | 2 | % | 1,720 | 2 | % | 2,341 | 3 | % | |||||||||||||||||||||||||
Net Sales |
$ | 27,222 | 100 | % | $ | 27,601 | 100 | % | $ | 25,310 | 100 | % | $ | 81,959 | 100 | % | $ | 76,248 | 100 | % | ||||||||||||||||||||
Gross Profit |
$ | 13,456 | 49 | % | $ | 13,193 | 48 | % | $ | 10,975 | 43 | % | $ | 40,011 | 49 | % | $ | 32,406 | 43 | % | ||||||||||||||||||||
Operating Expenses |
$ | 14,073 | 52 | % | $ | 13,112 | 48 | % | $ | 14,154 | 56 | % | $ | 32,677 | 40 | % | $ | 44,087 | 58 | % | ||||||||||||||||||||
Income (loss) from operations |
$ | (617 | ) | -2 | % | $ | 81 | 0 | % | $ | (3,179 | ) | -13 | % | $ | 7,334 | 9 | % | $ | (11,681 | ) | -15 | % | |||||||||||||||||
Net income (loss) from continuing operations |
$ | (281 | ) | -1 | % | $ | 83 | 0 | % | $ | (2,045 | ) | -8 | % | $ | 7,345 | 9 | % | $ | (6,489 | ) | -9 | % | |||||||||||||||||
Net income (loss) per share from continuing operations |
||||||||||||||||||||||||||||||||||||||||
Basic |
$ | (0.01 | ) | $ | 0.00 | $ | (0.04 | ) | $ | 0.15 | $ | (0.13 | ) | |||||||||||||||||||||||||||
Diluted |
$ | (0.01 | ) | $ | 0.00 | $ | (0.04 | ) | $ | 0.15 | $ | (0.13 | ) |
Non-GAAP Results |
THREE MONTHS ENDED |
NINE MONTHS ENDED |
||||||||||||||||||||||||||||||||||||||
JANUARY 1, 2017 |
OCTOBER 2, 2016 |
DECEMBER 27, 2015 |
JANUARY 1, 2017 |
DECEMBER 27, 2015 |
||||||||||||||||||||||||||||||||||||
Gross Profit |
$ | 14,523 | 53 | % | $ | 14,331 | 52 | % | $ | 11,667 | 46 | % | $ | 42,924 | 52 | % | $ | 33,737 | 44 | % | ||||||||||||||||||||
Operating Expenses |
$ | 11,040 | 41 | % | $ | 10,605 | 38 | % | $ | 10,677 | 42 | % | $ | 31,732 | 39 | % | $ | 34,685 | 45 | % | ||||||||||||||||||||
Income from operations |
$ | 3,483 | 13 | % | $ | 3,726 | 13 | % | $ | 990 | 4 | % | $ | 11,192 | 14 | % | $ | (948 | ) | -1 | % | |||||||||||||||||||
Net income (loss) from continuing operations |
$ | 3,434 | 13 | % | $ | 3,839 | 14 | % | $ | 888 | 4 | % | $ | 11,071 | 14 | % | $ | (1,233 | ) | -2 | % | |||||||||||||||||||
Net income (loss) per share from continuing operations |
||||||||||||||||||||||||||||||||||||||||
Basic |
$ | 0.07 | $ | 0.08 | $ | 0.02 | $ | 0.22 | $ | (0.03 | ) | |||||||||||||||||||||||||||||
Diluted |
$ | 0.07 | $ | 0.08 | $ | 0.02 | $ | 0.22 | $ | (0.03 | ) |
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 27, |
JANUARY 1, |
DECEMBER 27, |
||||||||||||||||
2017 |
2016 |
2015 |
2017 |
2015 |
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Net sales |
$ | 18,845 | $ | 20,400 | $ | 16,884 | $ | 58,881 | $ | 47,740 | ||||||||||
Net sales, related party |
8,377 | 7,201 | 8,426 | 23,078 | 28,508 | |||||||||||||||
Total net sales |
27,222 | 27,601 | 25,310 | 81,959 | 76,248 | |||||||||||||||
Cost of sales: |
||||||||||||||||||||
Cost of sales (1) |
10,054 | 11,008 | 9,716 | 31,473 | 29,922 | |||||||||||||||
Cost of sales, related party |
3,118 | 2,581 | 4,025 | 8,468 | 12,847 | |||||||||||||||
Restructuring charges and exit costs |
- | 225 | - | 225 | 740 | |||||||||||||||
Proceeds from legal settlement |
- | - | - | - | (1,500 | ) | ||||||||||||||
Amortization of purchased intangible assets |
594 | 594 | 594 | 1,782 | 1,833 | |||||||||||||||
Total cost of sales |
13,766 | 14,408 | 14,335 | 41,948 | 43,842 | |||||||||||||||
Gross profit |
13,456 | 13,193 | 10,975 | 40,011 | 32,406 | |||||||||||||||
Operating expenses: |
49.4 | % | 47.8 | % | 43.4 | % | 48.8 | % | 42.5 | % | ||||||||||
Research and development (2) |
4,964 | 4,945 | 4,734 | 14,840 | 17,007 | |||||||||||||||
Selling, general and administrative (3) |
9,109 | 7,752 | 6,781 | 23,425 | 21,690 | |||||||||||||||
Restructuring charges and exit costs |
- | - | 2,639 | 923 | 4,846 | |||||||||||||||
Merger and acquisition costs |
- | 415 | - | 1,270 | 544 | |||||||||||||||
Impairment of design tools |
- | - | - | 1,519 | - | |||||||||||||||
Gain on disposal of property |
- | - | - | (9,300 | ) | - | ||||||||||||||
Total operating expenses |
14,073 | 13,112 | 14,154 | 32,677 | 44,087 | |||||||||||||||
Income (loss) from operations |
(617 | ) | 81 | (3,179 | ) | 7,334 | (11,681 | ) | ||||||||||||
Other income and expense, net: |
||||||||||||||||||||
Interest income and other, net |
212 | 85 | (12 | ) | 299 | (60 | ) | |||||||||||||
Interest expense and other, net |
(80 | ) | (29 | ) | (65 | ) | (147 | ) | (158 | ) | ||||||||||
Total other income (expense), net |
132 | 56 | (77 | ) | 152 | (218 | ) | |||||||||||||
Income (loss) before income taxes |
(485 | ) | 137 | (3,256 | ) | 7,486 | (11,899 | ) | ||||||||||||
Provision for (benefit from) income taxes |
(204 | ) | 54 | (1,211 | ) | 141 | (5,410 | ) | ||||||||||||
Net income (loss) from continuing operations |
(281 | ) | 83 | (2,045 | ) | 7,345 | (6,489 | ) | ||||||||||||
Net income (loss) from discontinued operations |
45,660 | 925 | (5,092 | ) | 47,982 | (7,355 | ) | |||||||||||||
Net income (loss) |
$ | 45,379 | $ | 1,008 | $ | (7,137 | ) | $ | 55,327 | $ | (13,844 | ) | ||||||||
Income (loss) per share — basic |
||||||||||||||||||||
From continuing operations |
$ | (0.01 | ) | $ | 0.00 | $ | (0.04 | ) | $ | 0.15 | $ | (0.13 | ) | |||||||
From discontinued operations |
0.91 | 0.02 | (0.11 | ) | 0.97 | (0.15 | ) | |||||||||||||
Income (loss) per share — basic |
$ | 0.90 | $ | 0.02 | $ | (0.15 | ) | $ | 1.12 | $ | (0.28 | ) | ||||||||
Income (loss) per share — diluted |
||||||||||||||||||||
From continuing operations |
$ | (0.01 | ) | $ | 0.00 | $ | (0.04 | ) | $ | 0.15 | $ | (0.13 | ) | |||||||
From discontinued operations |
0.89 | 0.02 | (0.11 | ) | 0.95 | (0.15 | ) | |||||||||||||
Income (loss) per share — diluted |
$ | 0.88 | $ | 0.02 | $ | (0.15 | ) | $ | 1.10 | $ | (0.28 | ) | ||||||||
Shares used in the computation of net income (loss) per share: |
||||||||||||||||||||
Basic |
50,409 | 49,614 | 48,386 | 49,548 | 48,146 | |||||||||||||||
Diluted |
51,365 | 50,434 | 48,386 | 50,261 | 48,146 | |||||||||||||||
(1) Stock-based compensation included in cost of sales |
$ | 473 | $ | 301 | $ | 98 | $ | 888 | $ | 257 | ||||||||||
(2) Stock-based compensation included in R&D |
926 | 524 | 116 | 1,696 | 508 | |||||||||||||||
(3) Stock-based compensation included in SG&A |
2,234 | 1,579 | 597 | 4,546 | 3,045 |
EXAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
JANUARY 1, |
OCTOBER 2, |
MARCH 27, |
||||||||||
2017 |
2016 |
2016 |
||||||||||
ASSETS |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 102,023 | $ | 96,382 | $ | 55,070 | ||||||
Short term marketable securities |
125,621 | - | - | |||||||||
Accounts receivable, net |
12,842 | 15,693 | 16,130 | |||||||||
Accounts receivable, related party, net |
4,977 | 3,184 | 3,247 | |||||||||
Inventories |
24,221 | 23,245 | 20,807 | |||||||||
Other current assets |
3,081 | 2,000 | 1,922 | |||||||||
Assets held for sale |
- | 89,745 | 93,911 | |||||||||
Total current assets |
272,765 | 230,249 | 191,087 | |||||||||
Property, plant and equipment, net |
3,926 | 4,984 | 20,299 | |||||||||
Goodwill |
31,613 | 31,613 | 31,613 | |||||||||
Intangible assets, net |
9,602 | 10,307 | 11,735 | |||||||||
Other non-current assets |
5,605 | 972 | 639 | |||||||||
Total assets |
$ | 323,511 | $ | 278,125 | $ | 255,373 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||||||
Current liabilities: |
||||||||||||
Accounts payable |
$ | 9,558 | $ | 7,200 | $ | 11,258 | ||||||
Accrued compensation and related benefits |
2,276 | 2,839 | 2,984 | |||||||||
Deferred income and allowances on sales to distributors |
3,221 | 3,017 | 3,053 | |||||||||
Deferred income and allowances on sales to distributors, related party |
2,988 | 3,357 | 4,683 | |||||||||
Other current liabilities |
10,200 | 11,800 | 10,669 | |||||||||
Liabilities held for sale |
- | 7,376 | 3,470 | |||||||||
Total current liabilities |
28,243 | 35,589 | 36,117 | |||||||||
Long-term lease financing obligations |
- | 428 | 1,285 | |||||||||
Other non-current obligations |
3,536 | 4,094 | 3,422 | |||||||||
Total liabilities |
31,779 | 40,111 | 40,824 | |||||||||
Stockholders' equity |
291,732 | 238,014 | 214,549 | |||||||||
Total liabilities and stockholders' equity |
$ | 323,511 | $ | 278,125 | $ | 255,373 |
EXAR CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(In thousands, except per share amounts)
(Unaudited)
THREE MONTHS ENDED JANUARY 1, 2017 |
||||||||||||||||||||||||||||
Gross Margin |
Oper. Expenses |
Income/Loss from Oper. |
Net Income from Cont. Operations |
Oper. Income from Disc. Operations |
Net Income from Disc. Operations |
Net Income |
||||||||||||||||||||||
GAAP amount |
$ | 13,456 | $ | 14,073 | $ | (617 | ) | $ | (281 | ) | $ | 136 | $ | 45,660 | $ | 45,379 | ||||||||||||
Adjustments to GAAP amounts: |
||||||||||||||||||||||||||||
Amortization of purchased intangible assets |
594 | (108 | ) | 702 | 702 | - | - | 702 | ||||||||||||||||||||
Stock-based compensation |
473 | (3,160 | ) | 3,633 | 3,633 | 209 | 209 | 3,842 | ||||||||||||||||||||
Transition service and retention charges for disposal group |
- | (163 | ) | 163 | 163 | 621 | 621 | 784 | ||||||||||||||||||||
Gain on disposal of property |
- | 398 | (398 | ) | (398 | ) | - | - | (398 | ) | ||||||||||||||||||
Gain on divestiture of Integrated Memory Logic |
- | - | - | - | - | (45,384 | ) | (45,384 | ) | |||||||||||||||||||
Income tax effects |
- | - | - | (385 | ) | - | - | (385 | ) | |||||||||||||||||||
Non-GAAP amount |
$ | 14,523 | $ | 11,040 | $ | 3,483 | $ | 3,434 | $ | 966 | $ | 1,106 | $ | 4,540 | ||||||||||||||
% of revenue |
53.4 | % | 40.6 | % | 12.8 | % | 12.6 | % | N/A | |||||||||||||||||||
Non-GAAP net income per share |
$ | 0.07 | $ | 0.02 | ||||||||||||||||||||||||
Shares used in the computation of Non-GAAP net income per share |
52,394 | 52,394 |
THREE MONTHS ENDED OCTOBER 2, 2016 |
||||||||||||||||||||||||||||
Gross Margin |
Oper. Expenses |
Income from Oper. |
Net Income from Cont. Operations |
Oper. Income from Disc. Operations |
Net Income from Disc. Operations |
Net Income |
||||||||||||||||||||||
GAAP amount |
$ | 13,193 | $ | 13,112 | $ | 81 | $ | 83 | $ | 1,034 | $ | 925 | $ | 1,008 | ||||||||||||||
Adjustments to GAAP amounts: |
||||||||||||||||||||||||||||
Amortization of purchased intangible assets |
594 | (108 | ) | 702 | 702 | - | - | 702 | ||||||||||||||||||||
Restructuring charges and other non-GAAP exit costs, net |
243 | - | 243 | 243 | - | - | 243 | |||||||||||||||||||||
Stock-based compensation |
301 | (2,103 | ) | 2,404 | 2,404 | 761 | 761 | 3,165 | ||||||||||||||||||||
Merger and acquisition costs |
- | (415 | ) | 415 | 415 | - | - | 415 | ||||||||||||||||||||
Transition service and retention charges for disposal group |
- | (279 | ) | 279 | 279 | 965 | 965 | 1,244 | ||||||||||||||||||||
Gain on disposal of property |
- | 398 | (398 | ) | (398 | ) | - | - | (398 | ) | ||||||||||||||||||
Income tax effects |
- | - | - | 111 | - | 112 | 223 | |||||||||||||||||||||
Non-GAAP amount |
$ | 14,331 | $ | 10,605 | $ | 3,726 | $ | 3,839 | $ | 2,760 | $ | 2,763 | $ | 6,602 | ||||||||||||||
% of revenue |
51.9 | % | 38.4 | % | 13.5 | % | 13.9 | % | N/A | |||||||||||||||||||
Non-GAAP net income per share |
$ | 0.08 | $ | 0.05 | ||||||||||||||||||||||||
Shares used in the computation of Non-GAAP net income per share |
51,165 | 51,165 |
THREE MONTHS ENDED DECEMBER 27, 2015 |
||||||||||||||||||||||||||||
Gross Margin |
Oper. Expenses |
Oper. Income (Expense) |
Net Income (Loss) from Cont. Operations |
Oper. Income from Disc. Operations |
Net Income (Loss) from Disc. Operations |
Net Income (Loss) |
||||||||||||||||||||||
GAAP amount |
$ | 10,975 | $ | 14,154 | $ | (3,179 | ) | $ | (2,045 | ) | $ | (3,675 | ) | $ | (5,092 | ) | $ | (7,137 | ) | |||||||||
Adjustments to GAAP amounts: |
||||||||||||||||||||||||||||
Amortization of purchased intangible assets |
594 | (125 | ) | 719 | 719 | 2,677 | 2,677 | 3,396 | ||||||||||||||||||||
Restructuring charges and other non-GAAP exit costs, net |
- | (2,639 | ) | 2,639 | 2,639 | 7 | 7 | 2,646 | ||||||||||||||||||||
Stock-based compensation |
98 | (713 | ) | 811 | 811 | 231 | 231 | 1,042 | ||||||||||||||||||||
Accruals for legal settlement and associated costs |
- | - | - | - | 1,498 | 1,498 | 1,498 | |||||||||||||||||||||
Impairment of intangible assets |
- | - | - | - | 1,807 | 1,807 | 1,807 | |||||||||||||||||||||
Income tax effects |
- | - | - | (1,236 | ) | - | 1,361 | 125 | ||||||||||||||||||||
Non-GAAP amount |
$ | 11,667 | $ | 10,677 | $ | 990 | $ | 888 | $ | 2,545 | $ | 2,489 | $ | 3,377 | ||||||||||||||
% of revenue |
46.1 | % | 42.2 | % | 3.9 | % | 3.5 | % | N/A | |||||||||||||||||||
Non-GAAP net income per share |
$ | 0.02 | $ | 0.05 | ||||||||||||||||||||||||
Shares used in the computation of Non-GAAP net income (loss) per share |
49,064 | 49,064 |
EXAR CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(In thousands, except per share amounts)
(Unaudited)
NINE MONTHS ENDED JANUARY 1, 2017 |
||||||||||||||||||||||||||||
Gross Margin |
Oper. Expenses |
Oper. Income |
Net Income from Cont. Operations |
Oper. Income from Disc. Operations |
Net Income from Disc. Operations |
Net Income |
||||||||||||||||||||||
GAAP amount |
$ | 40,011 | $ | 32,677 | $ | 7,334 | $ | 7,345 | $ | 2,663 | $ | 47,982 | $ | 55,327 | ||||||||||||||
Adjustments to GAAP amounts: |
||||||||||||||||||||||||||||
Amortization of purchased intangible assets |
1,782 | (341 | ) | 2,123 | 2,123 | 1,806 | 1,806 | 3,929 | ||||||||||||||||||||
Restructuring charges and other non-GAAP exit costs, net |
243 | (923 | ) | 1,166 | 1,166 | 109 | 109 | 1,275 | ||||||||||||||||||||
Stock-based compensation |
888 | (6,242 | ) | 7,130 | 7,130 | 918 | 918 | 8,048 | ||||||||||||||||||||
Merger and acquisition costs |
- | (1,270 | ) | 1,270 | 1,270 | - | - | 1,270 | ||||||||||||||||||||
Transition service and retention charges for disposal group |
- | (746 | ) | 746 | 746 | 1,586 | 1,586 | 2,332 | ||||||||||||||||||||
Impairment of design tools |
- | (1,519 | ) | 1,519 | 1,519 | - | - | 1,519 | ||||||||||||||||||||
Gain on disposal of property |
- | 10,096 | (10,096 | ) | (10,096 | ) | - | - | (10,096 | ) | ||||||||||||||||||
Gain on divestiture of Integrated Memory Logic |
- | - | - | - | - | (45,384 | ) | (45,384 | ) | |||||||||||||||||||
Income tax effects |
- | - | - | (132 | ) | - | 272 | 140 | ||||||||||||||||||||
Non-GAAP amount |
$ | 42,924 | $ | 31,732 | $ | 11,192 | $ | 11,071 | $ | 7,082 | $ | 7,289 | $ | 18,360 | ||||||||||||||
% of revenue |
52.4 | % | 38.7 | % | 13.7 | % | 13.5 | % | N/A | |||||||||||||||||||
Non-GAAP net income per share |
$ | 0.22 | $ | 0.14 | ||||||||||||||||||||||||
Shares used in the computation of Non-GAAP net income per share |
50,960 | 50,960 |
NINE MONTHS ENDED DECEMBER 27, 2015 |
||||||||||||||||||||||||||||
Gross Margin |
Oper. Expenses |
Oper. Income (Expense) |
Net Income (Loss) from Cont. Operations |
Oper. Income from Disc. Operations |
Net Income (Loss) from Disc. Operations |
Net Income (Loss) |
||||||||||||||||||||||
GAAP amount |
$ | 32,406 | $ | 44,087 | $ | (11,681 | ) | $ | (6,489 | ) | $ | (2,763 | ) | $ | (7,355 | ) | $ | (13,844 | ) | |||||||||
Adjustments to GAAP amounts: |
||||||||||||||||||||||||||||
Amortization of purchased intangible assets |
1,833 | (394 | ) | 2,227 | 2,227 | 7,936 | 7,936 | 10,163 | ||||||||||||||||||||
Restructuring charges and other non-GAAP exit costs, net |
740 | (4,869 | ) | 5,609 | 5,609 | 752 | 752 | 6,361 | ||||||||||||||||||||
Stock-based compensation |
258 | (3,552 | ) | 3,810 | 3,810 | 621 | 621 | 4,431 | ||||||||||||||||||||
Accruals for legal settlement and associated costs |
(1,500 | ) | - | (1,500 | ) | (1,500 | ) | 1,699 | 1,699 | 199 | ||||||||||||||||||
Impairment of intangible assets |
- | - | 1,807 | 1,807 | 1,807 | |||||||||||||||||||||||
Merger and acquisition costs |
- | (587 | ) | 587 | 587 | 124 | 124 | 711 | ||||||||||||||||||||
Income tax effects |
- | - | - | (5,477 | ) | - | 4,394 | (1,083 | ) | |||||||||||||||||||
Non-GAAP amount |
$ | 33,737 | $ | 34,685 | $ | (948 | ) | $ | (1,233 | ) | $ | 10,176 | $ | 9,978 | $ | 8,745 | ||||||||||||
% of revenue |
44.2 | % | 45.5 | % | -1.2 | % | -1.6 | % | N/A | |||||||||||||||||||
Non-GAAP net income (loss) per share |
$ | (0.03 | ) | $ | 0.20 | |||||||||||||||||||||||
Shares used in the computation of Non-GAAP net income (loss) per share |
48,146 | 49,512 |
###
Exhibit 99.2
EXAR CORPORATION
THIRD QUARTER FISCAL YEAR 2017 EARNINGS ANNOUNCEMENT
PREPARED CONFERENCE CALL REMARKS
Exar Corporation is providing a copy of these prepared remarks in conjunction with our fiscal year 2017 third quarter press release in order to provide shareholders and analysts with additional time and detail for analyzing our financial results in advance of our quarterly conference call. The conference call will begin today, February 1, 2017 at 4:45 p.m. EST (1:45 p.m. PST). To access the conference call, please dial (918) 534-8424 or (844) 359-0802. The passcode for the live call is 49098807. In addition, a live webcast will be available on Exar's Investor webpage and an archive of the conference call webcast will be available after the conclusion of the conference call.
Please see the section “Discussion of Non-GAAP Financial Measures” later in this document for more details on non-GAAP data. Investors should also refer to the reconciliation of Non-GAAP Results to GAAP Results, which is contained in our press release. Unless otherwise indicated, all non-GAAP financial results presented exclude the financial results of the iML Display business, which the Company has divested, and are presented in the GAAP results as discontinued operations.
Discussion of GAAP Operating Results
Today we reported the following GAAP results for our third quarter fiscal 2017.
THREE MONTHS ENDED |
||||||||||||||||||||||||
JANUARY 1, 2017 |
OCTOBER 2, 2016 |
DECEMBER 27, 2015 |
||||||||||||||||||||||
Net Sales |
$ | 27,222 | 100 | % | $ | 27,601 | 100 | % | $ | 25,310 | 100 | % | ||||||||||||
Cost of Sales |
13,766 | 51 | % | 14,408 | 52 | % | 14,335 | 57 | % | |||||||||||||||
Gross Profit |
$ | 13,456 | 49 | % | $ | 13,193 | 48 | % | $ | 10,975 | 43 | % | ||||||||||||
Operating Expenses |
14,073 | 52 | % | 13,112 | 48 | % | 14,154 | 56 | % | |||||||||||||||
Income (loss) from operations |
$ | (617 | ) | -2 | % | $ | 81 | 0 | % | $ | (3,179 | ) | -13 | % |
Third quarter net sales decreased $0.4 million, or 1.4% sequentially, as expected, pending key product ramps at multiple Infrastructure customers. Third quarter net sales increased $1.9 million, or 7.6%, from the third quarter a year ago. For additional commentary on net sales, see comments regarding sales by end markets below.
On a GAAP basis, third quarter gross margin of 49.4% increased from the 47.8% reported in the second quarter, largely as a result of the continued realization of cost of goods sold reductions, despite the reduction in advanced product revenue mix, and increased from the 43.4% reported in the same period a year ago, largely as a result of our strategic initiative to lower our cost of goods sold and increased advanced product sales, which generally sell at higher margins.
Third quarter GAAP operating expenses were $14.1 million, compared with $13.1 million reported in the second quarter and $14.2 million reported in the same period a year ago. Third quarter GAAP operating expenses included charges of (i) $3.2 million stock-based compensation expense, (ii) $0.1 million amortization of purchased intangibles, and (iii) $0.4 million accretion of gain from the sale-leaseback of the Fremont facility. Second quarter GAAP operating expenses included (i) $2.1 million in stock-based compensation expense, (ii) $0.4 million mergers and acquisitions costs, and (iii) $0.4 million accretion of gain from the sale-leaseback of the Fremont facility.
Third quarter GAAP net loss from continuing operations was $0.3 million, or a loss of $0.01 per share, compared to net income of $0.1 million, or $0.00 per diluted share, reported in the second quarter, and a net loss of $2.0 million, or a loss of $0.04 per share reported in the same period a year ago.
Third quarter GAAP net income from discontinued operations was $45.7 million, or $0.89 per diluted share, compared to $0.9 million, or $0.02 per diluted share, reported in the second quarter, and a net loss of $5.1 million, or a loss of $0.11 per diluted share reported in the same period a year ago.
Discussion of Business and Non-GAAP Financial Highlights (Continuing Operations Only)
The Company’s non-GAAP measures exclude certain recurring charges, such as stock-based compensation, amortization and impairment of acquired intangible assets, as well as certain one-time or non-recurring charges, such as charges from restructuring. Please see the section “Discussion of Non-GAAP Financial Measures” later in this document for more details on non-GAAP data.
We reported the following non-GAAP results for our third quarter fiscal 2017:
● |
Net sales of $27.2 million decreased $0.4 million, or 1.4%, from the previous quarter. |
● |
Gross margin of 53.4% increased from 51.9% reported in the previous quarter. |
● |
Operating expenses of $11.0 million increased by $0.4 million from the previous quarter’s operating expenses of $10.6 million. |
● |
Operating income was $3.5 million, down $0.2 million from the fiscal 2017 second quarter and up $2.5 million from the same period a year ago. |
● |
Net income of $3.4 million decreased $0.4 million from the previous quarter’s net income of $3.8 million and increased $2.5 million from the $0.9 million reported in the same period a year ago. |
● |
Diluted earnings per share were $0.07, compared to $0.08 reported in the previous quarter, and $0.02 reported in the same period a year ago. |
Our net sales by end market in dollars and as a percentage of total net sales were as follows for the periods presented (in thousands, except percentages):
THREE MONTHS ENDED |
||||||||||||||||||||||||
JANUARY 1, 2017 |
OCTOBER 2, 2016 |
DECEMBER 27, 2015 |
||||||||||||||||||||||
Industrial |
$ | 19,141 | 70 | % | $ | 19,042 | 69 | % | $ | 16,851 | 66 | % | ||||||||||||
Infrastructure |
4,034 | 15 | % | 5,065 | 18 | % | 4,308 | 17 | % | |||||||||||||||
Audio/Video |
2,721 | 10 | % | 1,840 | 7 | % | 2,764 | 11 | % | |||||||||||||||
Automotive |
772 | 3 | % | 961 | 3 | % | 920 | 4 | % | |||||||||||||||
Other |
554 | 2 | % | 693 | 3 | % | 467 | 2 | % | |||||||||||||||
Net Sales |
$ | 27,222 | 100 | % | $ | 27,601 | 100 | % | $ | 25,310 | 100 | % |
Industrial. Fiscal 2017 third quarter Industrial revenue was $19.1 million, which represented 70% of sales, essentially the same as compared with the $19.0 million reported in the previous quarter.
Infrastructure. Fiscal 2017 third quarter Infrastructure revenue was $4.0 million, which represented 15% of sales, a decrease of 20% compared to the $5.1 million reported in the previous quarter. This decrease was mostly attributable to an anticipated reduction from a large data storage customer.
Audio/Video. Fiscal 2017 third quarter Audio/Video revenue was $2.7 million, which represented 10% of sales, an increase of 48% compared to the $1.8 million reported in the previous quarter. This increase was attributable to higher demand for video processor products from multiple customers.
Automotive. Fiscal 2017 third quarter Automotive revenue was $0.7 million, which represented 3% of sales, a decrease of 20% compared to the $1.0 million reported in the previous quarter. This decrease was attributable to a single part that has been selling well in the China market and for which customer demand for the quarter was greater than could be supplied.
Discussion of Non-GAAP Gross Margins, Operating Expenses and Operating Margins (Continuing Operations Only)
On a non-GAAP basis, our net sales and operating results as a percentage of net sales were as follows for the periods presented (in thousands, except percentages):
THREE MONTHS ENDED |
||||||||||||||||||||||||
JANUARY 1, 2017 |
OCTOBER 2, 2016 |
DECEMBER 27, 2015 |
||||||||||||||||||||||
Net Sales |
$ | 27,222 | 100 | % | $ | 27,601 | 100 | % | $ | 25,310 | 100 | % | ||||||||||||
Cost of Sales |
12,699 | 47 | % | 13,270 | 48 | % | 13,643 | 54 | % | |||||||||||||||
Gross Profit |
$ | 14,523 | 53 | % | $ | 14,331 | 52 | % | $ | 11,667 | 46 | % | ||||||||||||
Operating Expenses |
11,040 | 41 | % | 10,605 | 38 | % | 10,677 | 42 | % | |||||||||||||||
Income (loss) from operations |
$ | 3,483 | 13 | % | $ | 3,726 | 13 | % | $ | 990 | 4 | % |
Gross Margin
On a non-GAAP basis, third quarter gross margin of 53.4% increased from 51.9% reported in the previous quarter. This equates to a non-GAAP gross profit of $14.5 million for the third quarter, compared with $14.3 million last quarter. The sequential gross margin increase was attributable to continued cost savings flow through from cost reduction initiative.
Operating Expenses
Third quarter non-GAAP operating expenses of $11.0 million increased by $0.4 million from the previous quarter’s operating expenses of $10.6 million, and $0.3 million from the same quarter in the prior year’s expenses of $10.7 million. Third quarter R&D expenses were $4.0 million, a 2.4% decrease compared with the $4.1 million reported in the second quarter and a 12.5% decrease from the $4.6 million reported a year ago. Third quarter SG&A expenses were $7.0 million, a 15.4% increase compared with the $6.1 million reported in the second quarter and a 15.5% increase from the $6.1 million reported a year ago. The sequential SG&A increase was largely the result of bad debt expense recored in the quarter for a distributor whose relationship has been terminated.
Operating Margin
Third quarter non-GAAP operating income and operating margin were $3.5 million and 12.8%, respectively. This compares to $3.7 million and 13.5% in the previous quarter, and $1.0 million and 3.9% from the same quarter a year ago, also respectively.
EBITDA
Third quarter non-GAAP EBITDA and EBITDA margin were $4.2 million or 15.6%, respectively, compared to $4.2 million or 15.2% in the previous second quarter, and $2.3 million or 9.3% from the same quarter a year ago.
Discussion of Non-GAAP Net Income/EPS (Continuing Operations Only)
Net Income
Third quarter non GAAP net income of $3.4 million decreased $0.4 million from the previous quarter’s net income of $3.8 million, and increased $2.5 million on a year-over-year basis.
EPS
Third quarter non-GAAP diluted earnings per share of $0.07 decreased from the $0.08 reported in the previous quarter and increased $0.05 compared with the same quarter a year ago.
Consolidated Balance Sheet and Cash Flow Highlights
Cash and Equivalents and Short Term Marketable Securities
We ended the fiscal 2017 third quarter with $227.6 million in cash and cash equivalents and short term marketable securities, up from $96.4 million reported in the second quarter.
Net Accounts Receivable
Third quarter net accounts receivable decreased to $17.8 million from $18.9 million last quarter. Third quarter DSO decreased to 60 days, compared to 62 days last quarter.
Net Inventory
Third quarter net inventory increased to $24.2 million from $23.2 million in the previous quarter. Third quarter days inventory was 157 days, compared to 143 days last quarter.
Deferred Margin
Third quarter deferred margin decreased to $6.2 million, compared with $6.4 million in the previous quarter.
Cash Flow from Continuing Operations
Third quarter total depreciation and amortization was $1.5 million, of which $0.8 million was included in the non-GAAP results. Cash provided by operations for the third quarter was $5.9 million. This compares to cash used by operations of $0.8 million for the second quarter.
Capital Structure
The number of shares used in the third quarter calculation of non-GAAP results was 52.4 million, compared with 51.2 million used in the previous second quarter.
Sale of Integrated Memory Logic Limited Completed
On November 9, 2016, the Company completed the divestiture of its wholly-owned subsidiary Integrated Memory Logic Limited (iML) to Beijing E-Town Chipone Technology Co., Ltd., a consortium comprised of Beijing-based IC design and solutions manufacturer Chipone Technology Co., Ltd and its financial partner Beijing E-Town International Investment & Development Co., Ltd. The Company recorded a net gain on the transaction of $45.4 million which is presented as part of discontinued operations results. This gain effectively removes the assets and liabilities previously recorded as held for sale.
Discussion of Fiscal 2017 Fourth Quarter Guidance for Continuing Operations
For the fiscal 2017 fourth quarter ending April 2, 2017, the Company expects results to be as follows:
● |
Net sales: $27.7 million, plus or minus $0.5 million |
● |
GAAP gross margin: 50.0% to 52.0% (Non-GAAP 53.0% to 55.0%) |
● |
GAAP operating expenses: $13.0 million to $14.0 million (Non-GAAP $11.0 million to $11.5 million) |
● |
GAAP EPS: $0.00 to $0.03 (Non-GAAP $0.07 to $0.09) |
Forward-Looking Statements Safe Harbor Disclosure
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, including statements that the Company will continue to execute on its strategies, increase design wins, and keeping pressure and focus on continual improvements in our supply chain and the Company’s financial outlook expectations for the fourth quarter ending April 2, 2017. 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. Therefore, actual outcomes and results may differ materially from what is expressed herein. For a discussion of these risks and uncertainties, the Company urges investors to review in detail the risks and uncertainties and other factors described in its Securities and Exchange Commission (SEC) filings, including, but not limited to, the “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 filed with the SEC on May 27, 2016 and our Form 10-Q filed with the SEC on August 10, 2016, and available on our Investor webpage and on the SEC website at www.sec.gov.
Discussion of Non-GAAP Financial Measures
The Company’s non-GAAP measures exclude charges related to stock-based compensation, amortization of acquired intangible assets, impairment charges, gain upon closing sale-leaseback of our corporate headquarters, restructuring charges and exit costs which include costs for personnel whose positions have been eliminated as part of a restructuring or are in the process of being eliminated as part of the discontinuation of a product line, severance costs associated with the former CEO, the financial results of the iML Display business as well as the gain recognized from the sale of the iML business, accruals for and proceeds received from dispute resolutions and patent litigation, merger and acquisition and related integration costs, certain income tax benefits and credits, 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. 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 provide further clarity on its profitability.
Unless otherwise indicated, all non-GAAP financial results exclude the financial results of the iML Display business, which the Company has divested, and are presented in the GAAP results as discontinued operations.
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 competitors who employ and disclose similar non-GAAP measures. However, the manner in which we calculate these non-GAAP financial measures 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 material limitation associated with the use of the non-GAAP financial measures is that the non-GAAP measures may not reflect the full economic impact of Exar’s activities. Accordingly, investors are cautioned not to place undue reliance on non-GAAP information. 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.
Investors should refer to the reconciliation of Non-GAAP Results to GAAP Results, which is contained in our press release.
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