UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2003
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
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 No.) |
48720 Kato Road, Fremont, CA 94538
(Address of principal executive offices, Zip Code)
(510) 668-7000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
As of December 31, 2003, 40,890,163 shares of Common Stock, par value $0.0001, were issued and outstanding, net of 247,110 treasury shares.
EXAR CORPORATION AND SUBSIDIARIES
INDEX TO
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED DECEMBER 31, 2003
| Page | ||||
| PART I – FINANCIAL INFORMATION | ||||
| Item 1. |
Financial Statements (Unaudited) | |||
| 3 | ||||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 6 | ||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk | 33 | ||
| Item 4. |
Controls and Procedures | 33 | ||
| PART II – OTHER INFORMATION | ||||
| Item 6. |
Exhibits and Reports on Form 8-K | 35 | ||
| 36 | ||||
2
PART I – FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
EXAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
| December 31, 2003 |
March 31, 2003 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 300,846 | $ | 231,007 | ||||
| Short-term marketable securities |
131,093 | 136,844 | ||||||
| Accounts receivable (net of allowances of $1,103 and $1,142, respectively) |
5,720 | 4,275 | ||||||
| Inventories |
2,787 | 2,893 | ||||||
| Prepaid expenses and other |
2,072 | 2,384 | ||||||
| Deferred income taxes, net |
3,233 | 3,233 | ||||||
| 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: |
||||||||
| Accounts payable |
$ | 1,258 | $ | 2,295 | ||||
| Accrued compensation and related benefits |
3,089 | 3,269 | ||||||
| Accrued sales commissions |
748 | 740 | ||||||
| Other accrued expenses |
2,549 | 1,336 | ||||||
| Income taxes payable |
5,344 | 4,507 | ||||||
| Total current liabilities |
12,988 | 12,147 | ||||||
| Long-term obligations |
278 | 312 | ||||||
| Total liabilities |
13,266 | 12,459 | ||||||
| Commitments and contingencies (Note 8) |
||||||||
| 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; 41,137,273 and 40,329,609 shares outstanding |
404,210 | 398,606 | ||||||
| Accumulated other comprehensive income |
92 | 372 | ||||||
| Retained earnings |
71,695 | 72,399 | ||||||
| Treasury stock: 247,110 and 245,000 shares of common stock at cost |
(4,650 | ) | (4,611 | ) | ||||
| Total stockholders’ equity |
471,347 | 466,766 | ||||||
| Total liabilities and stockholders’ equity |
$ | 484,613 | $ | 479,225 | ||||
See Notes to Condensed Consolidated Financial Statements.
3
EXAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended December 31, |
Nine Months Ended December 31, |
||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
||||||||||||
| Net sales |
$ | 17,088 | $ | 15,029 | $ | 49,334 | $ | 51,961 | |||||||
| Cost of sales |
5,981 | 6,312 | 17,668 | 24,597 | |||||||||||
| Gross profit |
11,107 | 8,717 | 31,666 | 27,364 | |||||||||||
| Operating expenses: |
|||||||||||||||
| Research and development |
5,338 | 5,344 | 16,296 | 16,742 | |||||||||||
| Selling, general and administrative |
4,874 | 4,581 | 14,210 | 14,444 | |||||||||||
| Total operating expenses |
10,212 | 9,925 | 30,506 | 31,186 | |||||||||||
| Income (loss) from operations |
895 | (1,208 | ) | 1,160 | (3,822 | ) | |||||||||
| Other income (loss), net |
|||||||||||||||
| Interest income and other, net |
1,745 | 2,339 | 5,460 | 7,120 | |||||||||||
| Net loss on other long-term investments |
— | — | (6,000 | ) | (35,886 | ) | |||||||||
| Total other income (loss), net |
1,745 | 2,339 | (540 | ) | (28,766 | ) | |||||||||
| Income (loss) before income taxes |
2,640 | 1,131 | 620 | (32,588 | ) | ||||||||||
| Provision for income taxes |
448 | 339 | 1,324 | 836 | |||||||||||
| Net income (loss) |
$ | 2,192 | $ | 792 | $ | (704 | ) | $ | (33,424 | ) | |||||
| Income (loss) per share: |
|||||||||||||||
| Basic income (loss) per share |
$ | 0.05 | $ | 0.02 | $ | (0.02 | ) | $ | (0.84 | ) | |||||
| Diluted income (loss) per share |
$ | 0.05 | $ | 0.02 | $ | (0.02 | ) | $ | (0.84 | ) | |||||
| Shares used in the computation of income (loss) per share: |
|||||||||||||||
| Basic |
40,715 | 39,788 | 40,488 | 39,566 | |||||||||||
| Diluted |
42,604 | 41,180 | 40,488 | 39,566 | |||||||||||
See Notes to Condensed Consolidated Financial Statements.
4
EXAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Nine Months Ended December 31, |
||||||||
| 2003 |
2002 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (704 | ) | $ | (33,424 | ) | ||
| Reconciliation of net loss to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
3,689 | 2,891 | ||||||
| Provision for doubtful accounts receivable and sales returns |
1,834 | 1,371 | ||||||
| Provision for excess inventory |
— | 2,311 | ||||||
| Other than temporary decline in the value of other long-term investments |
6,000 | 35,886 | ||||||
| Deferred income taxes, net |
(41 | ) | 4,677 | |||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(3,279 | ) | (1,485 | ) | ||||
| Inventory |
106 | 1,903 | ||||||
| Prepaid expenses and other |
299 | (1,135 | ) | |||||
| Accounts payable |
(1,037 | ) | (1,421 | ) | ||||
| Accrued compensation and related benefits |
(180 | ) | (440 | ) | ||||
| Accrued sales commissions and other accrued expenses |
1,187 | (441 | ) | |||||
| Income taxes payable |
1,017 | 578 | ||||||
| Net cash provided by operating activities |
8,891 | 11,271 | ||||||
| Cash flows from investing activities: |
||||||||
| Purchases of property, plant and equipment |
(3,712 | ) | (4,474 | ) | ||||
| Purchases of short-term marketable securities |
(171,435 | ) | (75,512 | ) | ||||
| Proceeds from maturities of short-term marketable securities |
176,703 | 61,624 | ||||||
| Purchases of long-term marketable securities |
— | (107,314 | ) | |||||
| Proceeds from maturities of long-term marketable securities |
54,186 | 22,518 | ||||||
| Other long-term investments |
(455 | ) | (266 | ) | ||||
| Net cash provided by (used in) investing activities |
55,287 | (103,424 | ) | |||||
| Cash flows from financing activities: |
||||||||
| Proceeds from issuance of common stock |
5,565 | 5,773 | ||||||
| Net cash provided by financing activities |
5,565 | 5,773 | ||||||
| Effect of exchange rate changes on cash |
96 | 112 | ||||||
| Net increase (decrease) in cash and cash equivalents |
69,839 | (86,268 | ) | |||||
| Cash and cash equivalents at the beginning of period |
231,007 | 317,429 | ||||||
| Cash and cash equivalents at the end of period |
$ | 300,846 | $ | 231,161 | ||||
| Supplemental disclosure of cash flow information: |
||||||||
| Cash paid for income taxes |
$ | 330 | $ | 434 | ||||
See Notes to Condensed Consolidated Financial Statements.
5
| I TEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION