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
March 1, 2011
Date of Report (Date of earliest event reported)
EXAR CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 0-14225 | 94-1741481 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS 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)
Not applicable
(Former name or former address, if changed since last report)
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 2.05. | Costs Associated with Exit or Disposal Activities. |
On March 1, 2011, after lengthy consideration, Exar Corporation (the “Company”) decided to change its plans to participate in the data center virtualization market and, in connection therewith, to stop development of its 10 gigabit Ethernet (10GbE) network adapter cards. The Company entered this market in March 2010 with its acquisition of Neterion and has experienced slower market adoption and higher development costs than initially expected. After review and discussion, the Company determined that the current economic and market environment did not provide the potential to deliver acceptable returns on the required investments in this product line. As a result, the Company has initiated reductions in headcount associated with this business in its offices in Ottawa, Ontario, Fremont, California and Morrisville, North Carolina, and expects that such actions will be substantially completed in the fourth quarter of fiscal 2011. The Company anticipates that these changes will enhance growth in its other product lines through allocation of additional resources to these lines, improve financial performance and generate improved returns for its shareholders. Upon completion of the initiative, the Company expects quarterly savings of approximately $3.0 million in Non-GAAP operating expenses, excluding one-time costs, beginning in the first quarter of fiscal 2012.
The Company expects to incur restructuring charges of approximately $3.8 million to $5.6 million primarily in the fourth quarter of fiscal 2011, consisting of $2.0 million to $2.5 million in costs associated with inventory, $1.3 million to $1.6 million in severance costs, and $0.5 million to $1.5 million in other costs, such as facility related expenses.
The restructuring charges discussed above include approximately $1.8 million to $3.7 million of expected cash expenditures, primarily employee-related costs. Restructuring cash outlays are projected to be incurred primarily in the fourth quarter of fiscal 2011 and first quarter of fiscal 2012.
In connection with the actions discussed above, the Company expects to record an impairment charge of approximately $8.0 million against intangible assets in the fourth quarter of fiscal 2011.
The above estimated costs and charges are preliminary and subject to a number of assumptions, and may vary materially based on various factors, including changes in management’s assumptions and projections. The Company may also incur other costs and charges not currently contemplated due to events that may occur as a result of, or which are associated with, the exit.
Further information regarding the restructuring is included in the press release issued by the Company on March 4, 2011. A copy of the press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.
Some of the matters discussed in this Current Report on Form 8-K (including Exhibit 99.1) contains forward looking information, consisting of statements regarding our estimates of future costs and expectations about the Company’s future financial performance. The cautionary statements regarding forward looking information contained in the press release furnished as Exhibit 99.1 hereto are incorporated herein by this reference from that press release and qualify the foregoing information contained herein.
| Item 2.06 | Material Impairments. |
The information set forth in Item 2.05 is incorporated by reference into this Item 2.06.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
| 99.1 | Press Release of Exar Corporation dated March 4, 2011 |
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: March 4, 2011 | /s/ Kevin Bauer | |||||||
| Kevin Bauer Vice President and Chief Financial Officer | ||||||||
EXHIBIT INDEX
| Exhibit |
Document | |
| 99.1 | Press Release of Exar Corporation dated March 4, 2011 |
Exhibit 99.1
EXAR Exits 10Gb Ethernet NIC Market
Fremont, California – March 4, 2011 – Exar Corporation (Nasdaq: EXAR) announced today it is changing its plans to participate in the data center virtualization market and will stop development of 10 Gigabit Ethernet Network Interface Cards. Products affected with this announcement are the Exar X3100 and Xframe acquired from Neterion in March 2010. This move to reduce expenses associated with the 10GbE NIC products allows Exar to focus on products with more significant market traction in the enterprise storage and communications infrastructure markets.
“We made this decision based on a combination of factors, including lack of revenue traction for our data center virtualization products, the increasing investment required for developing next generation 10GbE products, and our interest in ensuring that other better performing investments are properly funded,” said Pete Rodriguez, the company’s President and CEO. “Our objective is to continually direct our R&D efforts towards projects with the highest expected return on investment. We estimate this action will reduce Non-GAAP operating expenses going forward by approximately $3.0 million per quarter from our current quarterly guidance range as early as the June quarter, which we expect to enable Non-GAAP profitability in fiscal 2012.”
This action is expected to reduce our net sales for the current quarter by approximately $1.0 million. In addition, we estimate restructuring costs to be approximately $11.8 million to $13.6 million comprised of an approximately $8.0 million charge for the impairment of intangible assets and $3.8 million to $5.6 million primarily related to inventory and severance costs. For purposes of Non-GAAP reporting, we will exclude restructuring costs.
For fiscal 2012, we estimate that net sales will grow in line with industry growth expectations of 4% to 6% over Exar’s fiscal 2011 revenue.
Safe Harbor Statement
The Company’s statements about its future financial performance or operating plans are based on current information and expectations and the Company undertakes no duty to update such statements. These statements are forward-looking and actual results could differ materially due to various risks and uncertainties, some of which are described herein.
The Company’s statements about its future financial performance, changes in gross margins, net sales and operating expenses, operational initiatives, resource allocation and its impact on future performance and product development initiatives, design win conversion, distribution and OEM trends, supply chain issues, among others, are forward-looking statements that involve risks and uncertainties. For further discussion of other risks please see the Company’s SEC reports, including the Annual Report on Form 10-K for the year ended March 28, 2010 and the Quarterly Reports on Form 10-Q for the periods ended June 27, 2010, September 26, 2010, and December 26, 2010.
Generally Accepted Accounting Principles
The Company reports its financial results in accordance with GAAP. Additionally, the Company supplements reported GAAP financials with Non-GAAP measures which are included in related press releases and reports furnished to the SEC, copies of which are available at the Company’s website: http://www.exar.com or the SEC’s website at: http://www.sec.gov. These Non-GAAP measures are presented in part to enhance the understanding of the Company’s historical financial performance and comparability between reporting periods. The Company believes the Non-GAAP presentation, when shown in conjunction with the corresponding GAAP measures, provide relevant and useful information to analysts, investors, management and other interested parties following the semiconductor industry. For its internal purposes, the Company uses the foregoing Non-GAAP measures to evaluate performance across reporting periods, determine certain employee benefits as well as plan for and forecast the Company’s future periods. These Non-GAAP measures are not in accordance with, or an alternative for measures prepared in accordance with GAAP, and may be different from Non-GAAP measures used by other companies. In addition, these Non-GAAP measures are not based on any comprehensive set of accounting rules or principles. The Company believes that Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP. These measures should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures.
About Exar
Exar Corporation delivers highly differentiated silicon, software and subsystem solutions for industrial, datacom and storage applications. For nearly 40 years, Exar’s comprehensive knowledge of end-user markets along with the underlying analog, mixed signal and digital technology has enabled innovative solutions that meet the needs of the evolving connected world. Exar’s product portfolio includes power management and interface components, communications products, storage optimization solutions, network security and applied service processors. Exar has locations worldwide providing real-time customer support to drive rapid product development. For more information about Exar, visit: http://www.exar.com.
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