Fremont, Calif., Jan. 26 -- Exar Corporation (Nasdaq: EXAR) today reported operating results for the third quarter fiscal 1999. Revenue for the third quarter of fiscal 1999 was $15.8 million compared to third quarter fiscal 1998 revenue of $26.6 million. Net income for the third quarter of fiscal 1999 was $0.6 million or $0.06 per diluted share after a pre-tax restructuring charge of $0.7 million related primarily to the divestiture of the Silicon Microstructures Division. Net income for the third quarter of fiscal 1998 was $2.3 million or $0.23 per diluted share.
Third quarter fiscal 1999 revenue decreased 18.0% from $19.2 million in the preceding quarter. Net income in the third quarter of fiscal 1999 decreased by $1.2 million from net income of $1.8 million in the second quarter. Gross margin in the third quarter of fiscal 1999 was 53.9%, compared to 52.4% in the preceding quarter, and 49.4% in the third quarter of fiscal 1998.
Revenue for the nine months ended September 30, 1998 was $56.8 million, compared to $76.9 million for the first nine months of fiscal 1998. Net income for the first nine months of fiscal 1999 was $4.7 million, or $0.49 per diluted share, compared to $5.7 million, or $0.59 per diluted share, for the first nine months of fiscal 1998.
"The revenue decline in the third quarter resulted from the sudden closure of an external foundry for legacy products, the sale of the Silicon Microstructures Division, and weaker turns business (business booked and shipped in the same quarter)," said Donald L. Ciffone, president and chief executive officer, Exar Corporation. "Operating expenses were reduced during the quarter in response to these conditions, resizing support organizations to the levels needed to support the focus businesses going forward. We are maintaining a cautious outlook through the current quarter. The current outlook is for increasing demand in the first half of fiscal 2000, as new communications products ramp up and overall market conditions in Asia begin to recover."
In November of 1998, Exar announced the sale of the Silicon Microstructures Division to OSI Systems Inc. for $2.6 million, with additional contingent performance-based payments of up to $3.9 million over the next two years. With the conclusion of the sale, Exar's employee base was reduced by about 25%, and support organizations were streamlined to the levels necessary to support Exar's operating model as a 100% fabless semiconductor company.
As previously announced, the unexpected business failure and abrupt external fab closure in November at one of Exar's foundry suppliers for several older custom products negatively impacted revenue in the third quarter by about $0.7 million. This event is expected to result in a further decline in revenue from legacy product of about $1.3 million in the fourth quarter of fiscal 1999, and $1.0 million per quarter through most of fiscal year 2000.
During the quarter, the Communications division introduced two new devices for E3, DS3, and STS-1 high-speed, broadband communications applications, the XRT7300 transceiver and XRT7250 framer. With these devices, Exar now offers a single silicon source for DS3/E3 networks for both TDM and ATM applications, and the leadership product portfolio for these markets. Sampling has been initiated for the new products to leading telecommunications and networking companies worldwide, and a design win has been achieved with the world's largest data networking company.
Exar currently has approximately $8.8 million authorized for its stock buyback program.
Except for the historical information contained herein, this news release contains forward-looking statements that involve risks and uncertainties, including industry and market conditions impacting price, availability of raw materials and inventory, manufacturing costs and yields, transition issues related to transfer of the Company's test operations, competitive factors 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 report on Form 10-K for the year ended March 31, 1998, and the report on Form 10-Q for the quarter ended September 30, 1998.
Exar Corporation designs, develops and markets innovative, system-oriented analog and mixed-signal integrated circuits for video & imaging and communications markets. The Company, based in Fremont, CA, had fiscal 1998 revenue of $102.0 million and employs about 270 people worldwide.
EXAR CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
December 31, December 31,
1998 1997 1998 1997
NET SALES $15,808 $26,577 $56,770 $76,910
COSTS AND EXPENSES:
Cost of sales 7,292 13,455 26,504 39,737
Research and development 3,360 3,953 10,349 11,675
and administrative 4,475 5,982 14,789 17,392
Goodwill amortization 146 293 515 878
Restructuring and other charges 731 -- 731 --
16,004 23,683 52,888 69,682
INCOME (LOSS) FROM OPERATIONS (196) 2,894 3,882 7,228
OTHER INCOME, NET 1,182 844 3,697 2,138
INCOME BEFORE INCOME TAXES 986 3,738 7,579 9,366
INCOME TAXES 402 1,431 2,874 3,637
NET INCOME $584 $2,307 $4,705 $5,729
NET INCOME PER SHARE:
BASIC $0.06 $0.25 $0.50 $0.62
DILUTED $0.06 $0.23 $0.49 $0.59
SHARES USED IN COMPUTATION OF
NET INCOME PER SHARE:
BASIC 9,303 9,365 9,418 9,289
DILUTED 9,435 9,933 9,674 9,734
EXAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, March 31,
Cash and short-term investments $78,152 $79,307
Accounts receivable, net 12,749 16,764
Inventories 6,536 6,781
Other current assets 6,863 6,738
Total Current Assets 104,300 109,590
Property and equipment, net 27,640 26,746
Other assets 6,439 7,333
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $12,652 $19,195
Non-current liabilities 684 745
Stockholders' equity 125,043 123,729
Linda Prosser, VP, Marketing
Exar Corporation, 510-668-7000