Exar Corporation Announces 2016 Fourth Quarter and Fiscal

Exar Corporation Announces 2016 Fourth Quarter and Fiscal Year-End Financial Results

The Company's non-GAAP measures exclude charges related to stock-based compensation, amortization of acquired intangible assets and inventory step-up, impairment charges, technology licenses, 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, severance costs associated with the former CEO, accruals for and proceeds received from dispute resolutions and patent litigation, 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, the write-down of deferred revenue under business combination accounting, 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. 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.

EXAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

	THREE MONTHS ENDED			TWELVE MONTHS ENDED
	MARCH 27,	DECEMBER 27,	MARCH 29,	MARCH 27,	MARCH 29,
	2016	2015	2015	2016	2015

Net sales	$ 29,492	$ 29,013	$ 33,805	$ 113,587	$ 125,791
Net sales, related party	7,283	8,426	10,052	35,791	36,259
Total net sales	36,775	37,439	43,857	149,378	162,050

Cost of sales:
Cost of sales ⁽¹⁾	16,353	16,261	19,012	64,662	71,139
Cost of sales, related party	3,082	4,025	3,951	15,929	14,359
Amortization of purchased intangible assets and inventory step-up costs	2,462	2,461	2,525	9,884	11,740
Restructuring charges and exit costs	105	-	1,213	845	7,597
Proceeds from legal settlement	-	-	-	(1,500)	-
Impairment of intangibles	-	-	-	-	8,367
Reversal of warranty reserve	-	-	(792)	-	(1,078)
Total cost of sales	22,002	22,747	25,909	89,820	112,124
Gross profit	14,773	14,692	17,948	59,558	49,926
Operating expenses:
Research and development ⁽²⁾	7,197	7,230	8,534	31,403	37,181
Selling, general and administrative ⁽³⁾	9,570	10,280	10,291	39,235	43,758
Restructuring charges and exit costs	96	2,228	537	3,646	4,589
Merger and acquisition costs	-	-	393	-	7,348
Impairment of intangibles	-	1,807	539	1,807	4,456
Net change in fair value of contingent consideration	-	-	-	-	(4,343)
Total operating expenses	16,863	21,545	20,294	76,091	92,989
Loss from operations	(2,090)	(6,853)	(2,346)	(16,533)	(43,063)

Other income and expense, net:
Interest income and other, net	74	(7)	16	34	571
Interest expense	(42)	(69)	(56)	(212)	(1,082)
Impairment of long term investment	-	-	(509)	-	(544)
Total other income and expense, net	32	(76)	(549)	(178)	(1,055)

Loss before income taxes	(2,058)	(6,929)	(2,895)	(16,711)	(44,118)
Provision for (benefit from) income taxes	124	208	19	(685)	889

Net loss before noncontrolling interest	(2,182)	(7,137)	(2,914)	(16,026)	(45,007)

Net income (loss) attributable to noncontrolling interest	-	-	-	-	(37)

Net loss attributable to Exar	$ (2,182)	$ (7,137)	$ (2,914)	$ (16,026)	$ (44,970)

Net loss per share:
Basic	$ (0.04)	$ (0.15)	$ (0.06)	$ (0.33)	$ (0.95)
Diluted	$ (0.04)	$ (0.15)	$ (0.06)	$ (0.33)	$ (0.95)

Shares used in the computation of net loss per share:
Basic	48,523	48,386	47,516	48,240	47,253
Diluted	48,523	48,386	47,516	48,240	47,253

⁽¹⁾ Stock-based compensation included in cost of sales	$ 103	$ 104	$ 122	379	$ 1,105
⁽²⁾ Stock-based compensation included in R&D	293	269	537	1,216	2,661
⁽³⁾ Stock-based compensation included in SG&A	754	669	2,006	3,986	9,848

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