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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 quarterly period ended June 30, 2000
[ ] 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
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(State or other jurisdiction of ( I.R.S. Employer
incorporation or organization) Identification No.)
48720 Kato Road, Fremont California 94538
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 668-7000
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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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 2000
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Common Stock, .0001 par value 18,777,777 shares net of treasury shares
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TABLE OF CONTENTS
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Page
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PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements..........................................3-5
Notes to Condensed Consolidated Financial Statements.................................6-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................................10-23
Item 3. Quantitative and Qualitative Disclosures About Market Risk...........................23-24
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders..................................24
Item 5. Other Information....................................................................24
Item 6. Exhibits and Reports on Form 8-K.....................................................24
Signatures...........................................................................25
EXHIBITS
Exhibit 27.0.........................................................................27
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
EXAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
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JUNE 30, MARCH 31,
2000 2000
(UNAUDITED)
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents 377,567 377,158
Short-term investments 12,433 3,000
Accounts receivable, net 11,569 11,550
Inventories 8,974 8,299
Prepaid expenses and other 3,027 3,012
Deferred income taxes 3,369 3,369
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Total current assets 416,939 406,388
PROPERTY AND EQUIPMENT, Net 27,083 26,653
OTHER ASSETS 4,962 5,392
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TOTAL ASSETS 448,984 438,433
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 5,255 3,497
Accrued compensation and related benefits 4,688 7,060
Other accrued expenses 2,287 1,096
Income taxes payable 3,084 1,165
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Total current liabilities 15,314 12,818
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LONG-TERM LIABILITIES 543 574
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STOCKHOLDERS' EQUITY:
Preferred stock; $.0001 par value; 2,250,000 shares authorized;
no shares outstanding - -
Common stock; $.0001 par value; 100,000,000 and 25,000,000
shares authorized; 18,710,159 and 18,582,975 shares outstanding 354,263 352,614
Cumulative translation adjustments 170 188
Retained earnings 78,694 72,239
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Total stockholders' equity 433,127 425,041
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 448,984 438,433
=============== =============
</TABLE>
See notes to condensed consolidated financial statements
3
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EXAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
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THREE MONTHS ENDED
JUNE 30,
2000 1999
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<S> <C> <C>
NET SALES $ 27,339 $ 16,251
COSTS AND EXPENSES:
Cost of goods sold 11,434 7,302
Research and development 5,785 5,251
Selling, general and administrative 6,025 5,914
Goodwill amortization - 126
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Total costs and expenses 23,244 18,593
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OPERATING INCOME (LOSS) 4,095 (2,342)
OTHER INCOME:
Interest income, net 6,072 1,016
Gain on sale of investment - 7,003
Other, net (2) 25
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Total other income, net 6,070 8,044
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INCOME BEFORE INCOME TAXES 10,165 5,702
INCOME TAXES 3,710 1,807
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NET INCOME $ 6,455 $ 3,895
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NET INCOME PER SHARE:
BASIC $ 0.35 $ 0.28
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DILUTED $ 0.30 $ 0.27
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SHARES USED IN COMPUTATION OF
NET INCOME PER SHARE:
BASIC 18,646 13,998
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DILUTED 21,332 14,614
============= =============
</TABLE>
See notes to condensed consolidated financial statements
4
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EXAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
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THREE MONTHS ENDED
JUNE 30,
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,455 $ 3,895
Reconciliation of net income to net cash used in operating activities:
Depreciation and amortization 925 992
Deferred income taxes - (320)
Gain on sale of investment - (7,003)
Changes in operating assets and liabilities:
Accounts receivable (19) 380
Inventories (675) 729
Prepaid expenses and other (15) (572)
Accounts payable 1,758 (1,103)
Accrued compensation and related benefits (2,372) 1,911
Other accrued expenses 26 (616)
Income taxes payable 3,084 982
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Net cash provided by (used in) operating activities 9,167 (725)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and leasehold improvements (1,355) (275)
Purchases of short-term investments (12,433) -
Proceeds from maturities of short-term investments 3,000 13,080
Other assets 430 64
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Net cash provided by (used in) investing activities (10,358) 12,869
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CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term liabilities (31) (21)
Proceeds from issuance of common stock 1,649 823
Acquisition of common stock - (234)
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Net cash provided by financing activities 1,618 568
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EFFECT OF EXCHANGE RATE CHANGES ON CASH (18) (7)
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NET INCREASE IN CASH AND EQUIVALENTS 409 12,705
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 377,158 79,154
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CASH AND EQUIVALENTS AT END OF PERIOD $ 377,567 $ 91,859
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 77 $ 118
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Cash paid for interest $ - $ 725
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</TABLE>
See notes to condensed consolidated financial statements
5
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EXAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
QUARTERS ENDED JUNE 30, 2000 AND 1999
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NOTE 1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the
accounts of Exar Corporation and its wholly-owned subsidiaries ("Exar" or the
"Company"). Such financial statements have been prepared in conformity with
generally accepted accounting principles consistent with those reflected in the
Company's 2000 annual report on Form 10-K, and include all adjustments
(consisting only of normal, recurring adjustments) necessary for a fair
presentation of financial position, results of operations and cash flows. The
results of operations for the three months ended June 30, 2000 are not
necessarily indicative of the results of operations to be expected for the full
year. These financial statements should be read in conjunction with the audited
financial statements for the fiscal year ended March 31, 2000 included in the
Company's annual report to security holders furnished to the Securities and
Exchange Commission pursuant to Rule 14a-3(b) in connection with the Company's
2000 Annual Meeting of Stockholders.
Exar designs, develops and markets high-performance, high-bandwidth mixed-signal
(analog and digital) silicon solutions for the worldwide communications
infrastructure. The Company uses its high-speed, analog and mixed-signal design
expertise, system-level knowledge and standard CMOS process technologies to
offer integrated circuits, or ICs, for the communications markets that address
asynchronous transmission standards, such as T/E carrier and ATM. The Company is
leveraging this expertise to develop products based on optical transmission
standards, such as SONET/SDH. Additionally, Exar provides solutions for the
serial communications market as well as the video and imaging markets. Exar's
largest customers include Alcatel, Cisco, Hewlett-Packard, Lucent, Nokia and
Tellabs.
NOTE 2. INVENTORIES
Inventories consist of the following (in thousands):
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June 30, March 31,
2000 2000
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Work-in-process $ 4,204 $ 5,064
Finished goods 4,770 3,235
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$ 8,974 $ 8,299
================= ===============
</TABLE>
NOTE 3. GAIN ON SALE OF INVESTMENT
The gain on investment of $7.0 million in the first quarter of fiscal 2000 was
related to the Company's minority equity investment in IC Works, Inc. ("IC
Works"), which had a net book value of $6.1 million. In April 1999, the Company
received in excess of 1.1 million shares of common stock in Cypress
Semiconductor, Inc. ("Cypress") in exchange for the Company's investment in IC
Works due to the merger of Cypress and IC Works. The Company sold the majority
of this stock at a fair market value of $13.1 million during the first quarter
of fiscal 2000 resulting in a pre-tax gain of $7.0 million in other income and a
related employee benefits expense of $3.0 million in Costs and Expenses.
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NOTE 4. NET INCOME PER SHARE
Statement of Financial Accounting Standards ("SFAS") No. 128 requires a dual
presentation of basic and diluted earnings per share (EPS). Basic EPS excludes
dilution and is computed by dividing net income by the weighted average of
common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock.
A summary of the Company's EPS is as follows (in thousands, except per share
amounts):
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THREE MONTHS ENDED
JUNE 30,
2000 1999
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NET INCOME $ 6,455 $ 3,895
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SHARES USED IN COMPUTATION:
Weighted average common shares outstanding used in
computation of basic net income per share 18,646 13,998
Dilutive effect of stock options 2,686 616
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Shares used in computation of diluted net income per share 21,332 14,614
============ =============
BASIC NET INCOME PER SHARE $ 0.35 $ 0.28
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DILUTED NET INCOME PER SHARE $ 0.30 $ 0.27
============ =============
</TABLE>
Options to purchase 51,000 and 1,041,334 shares of common stock at prices
ranging above $73.63 to $95.31 and from $13.25 to $24.83 were outstanding as of
June 30, 2000 and 1999, respectively, but not included in the computation of
diluted net income per share because the options' exercise prices were greater
than the average market price of the common shares as of such dates and,
therefore, would be antidilutive under the treasury stock method.
7
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NOTE 5. COMPREHENSIVE INCOME
SFAS No. 130, "Reporting Comprehensive Income," requires an enterprise to
report, by major components and as a single total, the change in net assets
during the period from nonowner sources. For the three months ended June 30,
2000 and 1999, comprehensive income, which was comprised of the Company's net
income for the periods and changes in cumulative translation adjustments was as
follows (in thousands):
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THREE MONTHS ENDED
JUNE 30,
2000 1999
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NET INCOME $6,455 $3,895
OTHER COMPREHENSIVE INCOME-
Cumulative translation adjustments (18) (7)
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COMPREHENSIVE INCOME $6,437 $3,888
=========== ==========
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NOTE 6. INDUSTRY AND SEGMENT INFORMATION
In fiscal 1999, the Company adopted SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
reporting information about operating segments in annual financial statements
and requires that certain selected information about operating segments be
reported in interim financial reports. It also establishes standards for related
disclosures about products and services and geographic areas. Operating segments
are defined as components of an enterprise about which separate financial
information is evaluated regularly by the chief operating decision maker, or
decision making group in deciding how to allocate resources and in assessing
performance. Under SFAS No. 131, the Company operates in one reportable segment
and is engaged in the design, development and marketing of a variety of analog
and mixed-signal application-specific integrated circuits for use in
communications and in video and imaging products. The nature of the Company's
products and production processes as well as type of customers and distribution
methods are consistent among all of the Company's devices. The Company's foreign
operations consist primarily of its wholly owned subsidiaries in Japan, the
United Kingdom, France and Taiwan. The Company's principal markets include North
America, Asia, Europe and other countries.
The following table sets forth product line revenue:
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THREE MONTHS ENDED
JUNE 30,
-----------------------
2000 1999
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Communications 20,021 12,180
Video and Imaging 5,879 2,740
Other 1,439 1,331
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27,339 16,251
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8
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Identifiable assets represent assets used in the Company's operations in each
geographic area.
Geographic financial information is as follows:
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THREE MONTHS ENDED
JUNE 30,
2000 1999
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Net sales:
United States $ 18,645 $ 10,644
Export sales to Japan and Asia 4,484 2,682
Export sales to Western Europe 3,991 2,438
Export sales to rest of world 219 276
Japan - 211
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$ 27,339 $ 16,251
=============== ================
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<CAPTION>
THREE MONTHS ENDED
JUNE 30,
2000 1999
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Income (Loss) from operations:
United States $ 4,496 $ (1,928)
Japan (147) (133)
Western Europe (254) (281)
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$ 4,095 $ (2,342)
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AT JUNE 30, AT MARCH 31,
2000 2000
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Long-lived assets:
United States $ 448,112 $ 437,505
Japan 421 526
Western Europe 451 402
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$ 448,984 $ 438,433
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NOTE 7. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which defines
derivatives, requires that all derivatives be carried at fair value, and
provides for hedging accounting when certain conditions are met. This statement
is effective for all fiscal quarters of fiscal years beginning after June 15,
2000. On a forward looking basis, although the Company has not fully assessed
the implications of this new statement, the Company does not believe adoption of
this statement will have a material impact on the Company's financial position
or results of operations.
In December 1999, the Securities and Exchange Commission (SEC) released Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." This bulletin summarizes certain interpretations and practices
followed by the Division of Corporation Finance and the Office of the Chief
Accountant of the SEC in administering the disclosure requirements of the
Federal securities laws in applying generally accepted accounting principles to
revenue recognition in financial statements. As
9
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amended by SAB 101B, applications of the accounting and disclosures desired
in the bulletin is required by the fourth quarter of fiscal 2001. Although
the Company has not fully assessed the implications of SAB No. 101,
management does not believe adoption of this bulletin will have a significant
impact on the Company's consolidated financial position, results of
operations or cash flows.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Except for the historical information contained herein, the following discussion
contains forward looking statements that involve risks and uncertainties. Our
actual results could differ materially from those discussed here. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed in this section, as well as in the section entitled "Risk
Factors."
OVERVIEW
We design, develop and market analog and mixed-signal ICs for use in the
communications market and video and imaging market. Our primary customers are
large communications equipment OEMs.
Over the past several years, we have actively refocused our business on products
for the communications markets. In the 1970's, we designed, manufactured, and
marketed custom and general purpose analog circuits supporting many different
applications. In the 1980's, we transitioned our products to analog and
mixed-signal application specific standard products focusing on
telecommunications, data communications, computer peripherals and consumer
electronics. Through the mid 1990's, we continued this product transition
through internal development and strategic acquisitions and moved to a fabless
semiconductor business model. In 1997, we chose to focus our product strategy
and development efforts on the communications market. At that time, our
communications products represented 43.2% of our net sales. For the three months
ended June 30, 2000, our communications product sales increased to 73.2% of our
net sales.
International sales represented 31.8% of our net sales for the three months
ended June 30, 2000. Our international sales consist of sales from the United
States to overseas customers and are denominated in United States Dollars. Our
international operations give rise to exposures from changes in currency
exchange rates. We have adopted a set of practices to minimize our foreign
currency risk which include the occasional use of foreign currency exchange
contracts to hedge operating results from our foreign subsidiaries. Although
foreign sales may be subject to tariffs in certain countries or with regard to
certain products; our profit margin on international sales of ICs, adjusted for
differences in product mix, is not significantly different from that realized on
our sales to domestic customers.
We recognize revenue from the sale of products when shipped. Our distributor
agreements generally permit the return of up to 10% of their purchases annually
for purposes of stock rotation and also provide for credits to distributors in
the event we reduce the price of any product. We record an allowance based on
authorized and historical patterns of returns, price protection, and other
concessions at the time revenue is recognized.
Our gross margins vary depending on product mix, price competition, the volume
of products manufactured and sold, our suppliers' ability to achieve
manufacturing efficiencies and the cost of materials procured from our
suppliers. Our newer analog and mixed-signal products, especially our
communications products, generally have higher gross margins than our more
mature products. In addition, margins of any particular product may erode over
time.
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RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage
relationship to net sales of certain cost, expense and income items. The table
and subsequent discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto.
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THREE MONTHS ENDED
JUNE 30,
----------------------------------
2000 1999
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Net sales 100.0% 100.0%
Cost of sales 41.8 44.9
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Gross profit 58.2 55.1
Research and development 21.2 32.3
Selling, general and administrative 22.0 36.4
Goodwill amortization - 0.8
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Operating income 15.0 (14.4)
Other income, net 22.2 49.5
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Income before income taxes 37.2 35.1
Income taxes 13.6 11.1
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Net income 23.6% 24.0%
============ =========
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PRODUCT LINE SALES AS A PERCENTAGE OF NET SALES
The following table sets forth product line revenue information as a percentage
of net sales. The table and subsequent discussion should be read in conjunction
with the Consolidated Financial Statements and Notes thereto.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
------------------------------
2000 1999
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Communications 73.2% 74.9%
Video and Imaging 21.5 16.9
Other 5.3 8.2
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100.0% 100.0%
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THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
NET SALES. Net sales for the three months ended June 30, 2000 were
$27.3 million compared to $16.3 million for the three months ended June 30,
1999, an increase of 68.2%. This increase was primarily due to increases in
sales of the Company's communications products, which increased 64.4% or $7.8
million when compared to the corresponding period in fiscal 2000. This
increase in communications product sales was fueled by increased sales of our
serial communications products and increased sales of our network and
transmission products as both of these product lines gained market acceptance
and design wins.
In the three months ended June 30, 2000, sales to domestic customers
increased by 75.2% to $18.6 million. International sales increased by 55.1%
to $8.7 million.
COST OF SALES. Cost of sales as a percentage of net sales for the three
months ended June 30, 2000 decreased to 41.8%, compared to 44.9% for the
three ended June 30, 1999. The resulting increase in gross margins is due
primarily to the increased volume resulting in greater product mix and
manufacturing efficiencies. Gross margins from sales of ICs vary depending on
product mix, price competition, the volume of products manufactured and sold,
the ability of our suppliers to achieve manufacturing efficiencies and the
cost of materials procured from our suppliers. Margins on any particular
product generally erode over time.
RESEARCH AND DEVELOPMENT. Research and development expenses for the three
months ended June 30, 2000 represented 21.2% of net sales, compared to 32.3%
of net sales for the three months ended June 30, 1999. Research and
development spending for the three months ended June 30, 2000 increased 10.2%
as we continued to invest in the development of our communications products.
These spending increases resulted from additional staffing in the
communications product line areas and increases in expenditures for supplies
and equipment for the development of communications products. A decrease in
benefits expenses related to a pre-tax gain recognized in Other Income in the
first quarter of fiscal 2000 (see Other Income below) partially offset these
increases in the first quarter of fiscal 2001. In the future, we expect to
increase spending on research and development activities, particularly for
communications products. We expect research and development expenses to
continue to fluctuate as a percentage of net sales as result of the timing of
expenditures and changes in the level of net sales. However, we intend to
continue spending approximately 20% of net sales on research and development
activities to support our growth.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the three months ended June 30, 2000 represented 22.0% of net
sales, compared to 36.4% in the three months ended June 30, 1999. Selling,
general and administrative spending for the three months ended June 30, 2000
increased by 1.9% compared to the corresponding period in fiscal 2000. The
increase was due to growth in communications product sales and an increase in
employee compensation. A decrease in benefits expenses related to a pre-tax
gain recognized in Other Income in the first quarter of fiscal 2000 (see
Other Income below) partially offset these increases in the first quarter of
fiscal 2001. In the short term, many of the selling, general, and
administrative expenses are fixed, causing a decline as a percentage of net
sales in periods of rapidly rising sales and an increase as a percentage of
net sales when sales growth is slower or declining.
OTHER INCOME. Other income in the three months ended June 30, 2000 includes
interest income of $6.1 million compared to $1.0 million in the corresponding
period in fiscal 2000. The increase in interest income was mainly due to
increased cash and equivalents and short-term investment balances due to
$260.8 million in net proceeds received from a follow-on offering in March,
2000. Other income in the three months ended June 30, 1999 includes a pre-tax
$7.0 million gain on the sale of an investment related to a minority equity
investment in IC Works, Inc. In April 1999, we received approximately 1.1
million shares of common stock in Cypress Semiconductor, Inc. in exchange for
our investment in IC Works due to the merger of Cypress Semiconductor and IC
Works. We sold the majority of this stock during the first
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quarter of fiscal 2000, resulting in a pre-tax gain of $7.0 million in other
income and related employee compensation and benefits expense of $3.0 million
in costs and expenses.
PROVISION FOR INCOME TAXES. The provision for income taxes is based on income
from operations. The effective tax rate for the first three months of fiscal
2001 was approximately 36.5% compared with the federal statutory rate of 35%.
The difference is due to non-deductible expenses, state income taxes and
foreign income, which is taxed at rates different from U.S. income tax,
partially offset by utilization of capital loss carryforwards and tax savings
generated from our foreign sales corporation.
NET INCOME PER BASIC AND DILUTED SHARE. The increase in basic and diluted net
income per share in the first quarter of fiscal 2001 compared to the first
quarter of fiscal 2000 is due to the increase in net income partially offset
by the increase in the weighted average common shares outstanding primarily
resulting from the sale of 3,450,000 common shares in March, 2000.
To date, inflation has not had a significant impact on our operating results.
LIQUIDITY AND CAPITAL RESOURCES
During the first three months of fiscal 2001, we financed our operations
primarily with cash flows from operations and existing cash and short-term
investments. At June 30, 2000, we had $390.0 million of cash and short-term
investments. We have a short-term, unsecured line of credit available under
which we may borrow up to $10.0 million, none of which was being utilized at
June 30, 2000. In addition, we have a credit facility with certain domestic
and foreign banks under which we may execute up to $25.0 million, in foreign
currency transactions. At June 30, 2000, we had no foreign currency contracts.
For the three months ended June 30, 2000, we generated $9.2 million of cash
from our operating activities; resulting from net income of $6.5 million, a
net increase in working capital of $1.8 million and non-cash items of $.9
million.
Net capital and other asset expenditures during the three months ended June
30, 2000 totaled $.9 million, including purchases of computer equipment and
software used for product development. Other investing activities during the
three months ended June 30, 2000 included the net purchases of $9.4 million
of short-term investments.
During the three months ended June 30, 2000, we received $1.6 million from the
issuance of 127,184 common stock shares upon the exercise of stock options under
our stock option plans.
We have no material firm capital commitments.
We anticipate that we will continue to finance our operations with cash flows
from operations, existing cash and short-term investment balances, borrowings
under existing bank credit lines, and some combination of long-term debt
and/or lease financing and additional sales of equity securities. The
combination and sources of capital will be determined by management based on
our needs and prevailing market conditions. We believe that cash, cash
equivalents, short-term investments, borrowings from the line of credit and
cash flows from operations will be sufficient to satisfy working capital
requirements and capital equipment needs for at least the next twelve months.
From time to time, we also evaluate potential acquisitions and equity
investments complementary to our design expertise and market strategy,
including investments in wafer fabrication foundries. To the extent we pursue
these transactions, we could be required to seek additional equity or debt
financing. There can be no assurance that additional financing
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could be obtained on terms acceptable to us, if at all. The sale of
additional equity or convertible debt could result in dilution to our
stockholders.
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE INVESTING IN
OUR COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS
COULD BE HARMED. THIS COULD CAUSE THE PRICE OF OUR STOCK TO DECLINE, AND YOU
MAY LOSE PART OR ALL OF YOUR INVESTMENT. THIS 10-Q CONTAINS FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES, INCLUDING STATEMENTS ABOUT
FUTURE PLANS, OBJECTIVES, INTENTIONS AND EXPECTATIONS. MANY FACTORS,
INCLUDING THOSE DESCRIBED BELOW, COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE DISCUSSED IN ANY FORWARD-LOOKING STATEMENT.
OUR OPERATING RESULTS MAY FLUCTUATE BECAUSE OF A NUMBER OF FACTORS, MANY OF
WHICH ARE BEYOND OUR CONTROL.
Our operating results fluctuate significantly. Some of the factors that affect
our quarterly and annual results, many of which are difficult to control or
predict, are:
- the reduction, rescheduling or cancellation of orders by customers;
- fluctuations in the timing and amount of customer requests for
product shipments;
- fluctuations in the manufacturing output, yields and inventory
levels of our suppliers;
- changes in the mix of products that are customers purchase;
- our ability to introduce new products on a timely basis;
- the announcement or introduction of products by our competitors;
- the availability of external foundry capacity and raw materials;
- competitive pressures on selling prices;
- the amounts and timing of costs associated with warranties and
product returns;
- the amounts and timing of investments in research and development;
- market acceptance of our products;
- costs associated with acquisitions and the integration of acquired
operations;
- the ability of our customers to obtain components from their other
suppliers;
- general conditions in the communications and semiconductor
industries;
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<PAGE>
- fluctuations in interest rates; and
- general economic conditions.
OUR MARKETS ARE SUBJECT TO RAPID TECHNOLOGICAL CHANGE, AND OUR SUCCESS
THEREFORE DEPENDS ON OUR ABILITY TO DEVELOP AND INTRODUCE NEW PRODUCTS.
The markets for our products are characterized by:
- rapidly changing technologies;
- evolving and competing industry standards;
- changing customer needs;
- frequent new product introductions and enhancements;
- increased integration with other functions; and
- rapid product obsolescence.
To develop new products for our target markets, we must develop, gain access
to and use leading technologies in a cost-effective and timely manner and
continue to expand our technical and design expertise. In addition, we must
have our products designed into our customers' future products and maintain a
close working relationships with key customers in order to develop new
products that meet their changing needs.
In addition, products for communications applications are based on industry
standards that are continually evolving. Our ability to compete in the future
will depend on our ability to identify and ensure compliance with these
evolving industry standards. As a result, we could be required to invest
significant time and effort and to incur significant expense to redesign our
products to ensure compliance with relevant standards.
We cannot assure you that we will be able to identify new product
opportunities successfully, develop and bring to market new products, achieve
design wins or respond effectively to new technological changes or product
announcements by our competitors. In addition, we may not be successful in
developing or using new technologies or in developing new products or product
enhancements that achieve market acceptance. Our pursuit of necessary
technological advances may require substantial time and expense. Failure in
any of these areas could harm our operating results.
OUR FUTURE SUCCESS DEPENDS IN PART ON THE CONTINUED SERVICE OF OUR KEY DESIGN
ENGINEERING, SALES, MARKETING AND EXECUTIVE PERSONNEL AND OUR ABILITY TO
IDENTIFY, HIRE AND RETAIN ADDITIONAL PERSONNEL.
There is intense competition for qualified personnel in the semiconductor
industry, in particular the highly skilled design, process and test engineers
involved in the development of new communications ICs. Competition is
especially intense in the Silicon Valley, where our corporate headquarters are
located. We may not be able to continue to attract and retain engineers or
other qualified personnel necessary for the development of our business or to
replace engineers or other qualified personnel who may leave our employ in
the future. Our anticipated growth is expected to place increased demands on
our resources and
15
<PAGE>
will likely require the addition of new management personnel and the
development of additional expertise by existing management personnel. Loss of
the services of, or failure to recruit, key design engineers or other
technical and management personnel could harm our business.
WE DEPEND ON THIRD-PARTY FOUNDRIES TO MANUFACTURE OUR ICs.
We do not own or operate a semiconductor fabrication facility. Most of our
products are only manufactured by a single foundry. Two foundries manufacture
our products based on CMOS processes, and one foundry manufactures all of our
BiCMOS products. Most of our products are based on CMOS processes. We do not
have long-term wafer supply agreements with our CMOS foundries that guarantee
wafer or product quantities, prices, or delivery lead times, and our CMOS
foundries manufacture our products on a purchase order basis. We cannot be
certain that we will be able to maintain strong relationships with our
foundries. In addition, we cannot be certain that we will continue to do
business with our foundries on terms as favorable as our current terms. Other
significant risks associated with our reliance on outside foundries include:
- the lack of assured semiconductor wafer supply and control over
delivery schedules;
- the unavailability of, or delays in obtaining access to, key
process technologies;
- limited control over quality assurance, manufacturing yields and
production costs; and
- potential misappropriation of our intellectual property.
We do not have a guaranteed level of production capacity at either of our
CMOS foundries. We provide these foundries with rolling forecasts of our
production requirements; however, the ability of each foundry to provide
wafers to us is limited by the foundry's available capacity. Therefore, our
CMOS foundries could choose to prioritize capacity for other customers or
reduce or eliminate deliveries to us on short notice. Accordingly, we cannot
be certain that these foundries will allocate sufficient capacity to satisfy
our requirements.
We could experience a substantial delay or interruption in the shipment of
our products or an increase in our costs due to the following:
- a sudden demand for an increased amount of semiconductor devices;
- a manufacturing disruption experienced by one or more of our
outside foundries or sudden reduction or elimination of an
existing source or sources of semiconductor devices;
- time required to find or qualify alternative manufacturing sources
for existing or new product; or
- failure of our suppliers to obtain the raw materials and equipment
used in the production of our ICs.
16
<PAGE>
TO SECURE FOUNDRY CAPACITY, WE MAY BE REQUIRED TO ENTER INTO FINANCIAL AND
OTHER ARRANGEMENTS WITH FOUNDRIES, AND SUCH AGREEMENTS MAY RESULT IN THE
DILUTION OF OUR EARNINGS OR OF THE OWNERSHIP OF OUR STOCKHOLDERS.
Allocation of a foundry's manufacturing capacity may be influenced by a
customer's size or the existence of a long-term agreement with the foundry.
To address foundry capacity constraints, we and other semiconductor companies
that rely on third-party foundries have utilized various arrangements,
including equity investments in or loans to foundries, in exchange for
guaranteed production capacity, joint ventures to own and operate foundries,
or "take or pay" contracts that commit a company to purchase specified
quantities of components over extended periods. While we are not currently a
party to any of these arrangements, we may decide to enter into such
arrangements in the future. We cannot be sure, however, that these
arrangements will be available to us on acceptable terms or at all. Any of
these arrangements could require us to commit substantial capital. The need
to commit substantial capital could require us to obtain additional debt or
equity financing, which could result in the dilution of our earnings or the
ownership of our stockholders, or otherwise harm our operating results.
IF OUR FOUNDRIES DISCONTINUE THE MANUFACTURING PROCESSES NEEDED TO MEET OUR
DEMANDS, OR FAIL TO UPGRADE THE TECHNOLOGIES NEEDED TO MANUFACTURE OUR
PRODUCTS, WE MAY FACE PRODUCTION DELAYS.
Our wafer and product requirements typically represent a small portion of the
total production of the foundries that manufacture our products. As a result,
we are subject to the risk that a foundry will cease production on an older
or lower-volume process that it uses to produce our parts. Additionally, we
cannot be certain our foundries will continue to devote resources to the
production of our products or continue to advance the process design
technologies on which the manufacturing of our products is based. Each of
these events could increase our costs and harm our ability to deliver our
products on time.
THE MARKETS IN WHICH WE PARTICIPATE ARE INTENSELY COMPETITIVE.
Our target markets are intensely competitive. Our ability to compete
successfully in our target markets depends on the following factors:
- designing new products that implement new technologies;
- subcontracting the manufacture of new products and delivering them
in a timely manner;
- product quality and reliability;
- customer support;
- time-to-market;
- product performance;
- price;
- end-user acceptance of our customers' products; and
- market acceptance of competitors' products.
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<PAGE>
In addition, our competitors or customers may offer new products based on new
technologies, industry standards or end-user or customer requirements,
including products that have the potential to replace or provide lower-cost
or higher-performance alternatives to our products. The introduction of new
products by our competitors or customers could render our existing and future
products obsolete or unmarketable. In addition, our competitors and customers
may introduce products that integrate the functions performed by our ICs on a
single IC, thus eliminating the need for our products.
Because the IC markets are highly fragmented, we generally encounter
different competitors in our various market areas. Competitors with respect
to our communications products include Conexant Systems, PMC-Sierra, Inc. and
TranSwitch Corporation. In addition, the expansion of our communications
product portfolio may in the future bring us into competition with other
established communications IC companies, such as Applied Micro Circuits
Corporation and Vitesse Semiconductor Corporation. Competitors in our other
markets include Analog Devices, Philips Semiconductor and Texas Instruments.
Many of our competitors have greater, financial, technical and management
resources than we do. Some of these competitors may be able to sell their
products at prices that are below those at which it would be financially
feasible for us to sell our products.
IF WE ARE UNABLE TO FURTHER PENETRATE THE MARKETS FOR COMMUNICATIONS ICs OR
IF THESE MARKETS FAIL TO GROW AS EXPECTED, OUR REVENUES COULD STOP GROWING
AND MAY DECLINE.
A significant portion of our revenues in recent periods have been, and is
expected to continue to be, derived from sales of communications ICs,
particularly products based on the T1/E1, T3/E3 and ATM transmission
standards. In order for us to be successful, we must continue to penetrate
these markets. Furthermore, if these markets fail to grow as expected, our
business might be harmed.
WE EXPECT THAT REVENUES CURRENTLY DERIVED FROM NON-COMMUNICATIONS PRODUCTS
WILL DECLINE IN FUTURE PERIODS, AND OUR BUSINESS WILL BE HARMED IF OUR
COMMUNICATIONS PRODUCTS FAIL TO MAKE UP FOR THIS DECLINE.
We do not intend to increase our funding of development efforts relating to
our serial communications and video and imaging products, and as a result we
expect that revenues from these products will decline in future periods. In
addition, the markets for these products are subject to extreme price
competition, and we may not be able to reduce our costs in response to
declining average selling prices. Even if we reduce our costs, our customers
in these markets may not purchase these products. Moreover, these markets may
decrease in size in the future. If our communications products fail to make
up for any revenue shortfall, our business may be harmed.
OUR DEPENDENCE ON THIRD-PARTY SUBCONTRACTORS TO ASSEMBLE AND TEST OUR
PRODUCTS INCREASES THE RISK THAT WE WILL NOT HAVE AN ADEQUATE SUPPLY OF
PRODUCTS TO MEET DEMAND OR THAT OUR COST OF MATERIALS WILL BE HIGHER THAN
EXPECTED.
We depend on independent subcontractors for the assembly and testing of our
products. Our reliance on these subcontractors involves the following
significant risks:
- reduced control over delivery schedules and quality;
- the potential lack of adequate capacity during periods of excess
demand;
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<PAGE>
- difficulties selecting and integrating new subcontractors;
- limited warranties on products supplied to us;
- potential increases in prices due to capacity shortages and other
factors; and
- potential misappropriation of our intellectual property.
These risks may lead to increased costs or delayed product delivery, which
would harm our profitability and customer relationships.
OUR RELIANCE UPON FOREIGN SUPPLIERS EXPOSES US TO RISKS ASSOCIATED WITH
INTERNATIONAL OPERATIONS.
We use semiconductor assembly and test subcontractors throughout Asia for
most of our products, and we intend to continue transferring our testing and
shipping operations to offshore subcontractors. Our dependence on these
subcontractors involves the following substantial risks:
- political and economic instability;
- disruption to air transportation from Asia;
- changes in tax laws, tariffs and freight rates; and
- compliance with local or foreign regulatory requirements.
These risks may lead to increased costs or delayed product delivery, which
would harm our profitability and customer relationships.
OUR RELIANCE ON FOREIGN CUSTOMERS COULD CAUSE FLUCTUATIONS IN OUR OPERATING
RESULTS.
International sales accounted for 31.7% and 34.3% of our net sales for the
three months ending June 30, 2000 and 1999, respectively. International sales
may account for an increasing portion of our revenues, which would subject it
to the following risks:
- changes in regulatory requirements;
- tariffs and other barriers;
- timing and availability of export licenses;
- political and economic instability;
- difficulties in accounts receivable collections;
- difficulties in staffing and managing foreign subsidiary and
branch operations;
- difficulties in managing distributors;
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<PAGE>
- difficulties in obtaining governmental approvals for
communications and other products;
- limited intellectual property protection;
- foreign currency exchange fluctuations;
- the burden of complying with and the risk of violating a wide
variety of complex foreign laws and treaties; and
- potentially adverse tax consequences.
In addition, because sales of our products have been denominated to date
primarily in United States Dollars (except in Japan, where we transact a
portion of our business in Japanese Yen), increases in the value of the
United States Dollar could increase the relative price of our products so
that they become more expensive to customers in the local currency of a
particular country. Future international activity may result in increased
foreign currency denominated sales. Furthermore, because some of our customer
purchase orders and agreements are governed by foreign laws, we may be
limited in our ability to enforce our rights under these agreements and to
collect damages, if awarded.
WE RELY ON OUR DISTRIBUTORS AND SALES REPRESENTATIVES TO SELL MANY OF OUR
PRODUCTS.
We sell many of our products through distributors and sales representatives.
Our distributors and sales representatives could reduce or discontinue sales
of our products. They may not devote the resources necessary to sell our
products in the volumes and within the time frames that we expect. In
addition, we depend upon the continued viability and financial resources of
these distributors and sales representatives, some of which are small
organizations with limited working capital. These distributors and sales
representatives, in turn, depend substantially on general economic conditions
and conditions within the semiconductor industry. We believe that our success
will continue to depend upon these distributors and sales representatives. If
some or all of our distributors and sales representatives experience
financial difficulties, or otherwise become unable or unwilling to promote
and sell our products, our business could be harmed.
BECAUSE OUR COMMUNICATIONS ICs TYPICALLY HAVE LENGTHY SALES CYCLES, WE MAY
EXPERIENCE SUBSTANTIAL DELAYS BETWEEN INCURRING EXPENSES RELATED TO RESEARCH
AND DEVELOPMENT AND THE GENERATION OF SALES REVENUE.
Due to the communications IC product cycle, it usually takes more than 12
months for us to realize volume shipments of our communications ICs after we
first contact a customer. We first work with customers to achieve a design
win, which may take nine months or longer. Our customers then complete the
design, testing and evaluation process and begin to ramp up production, a
period which typically lasts an additional three months or longer. As a
result, a significant period of time may elapse between our sales efforts and
our realization of revenue, if any, from volume purchasing of our
communications products by our customers.
OUR BACKLOG MAY NOT RESULT IN FUTURE REVENUE.
Due to possible customer changes in delivery schedules and cancellations of
orders, our backlog at any particular date is not necessarily indicative of
actual sales for any succeeding period. A reduction of
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<PAGE>
backlog during any particular period, or the failure of our backlog to result
in future revenue, could harm our business.
OUR OPERATING EXPENSES ARE RELATIVELY FIXED, AND WE MAY ORDER MATERIALS IN
ADVANCE OF ANTICIPATED CUSTOMER DEMAND. THEREFORE, WE MAY HAVE LIMITED
ABILITY TO REDUCE EXPENSES QUICKLY IN RESPONSE TO ANY REVENUE SHORTFALLS.
We may experience revenue shortfalls for the following reasons:
- significant pricing pressures that occur because of declines in
average selling prices over the life of a product;
- sudden shortages of raw materials or fabrication, test or
assembly capacity constraints that lead our suppliers to allocate
available supplies or capacity to other customers and, in turn,
harm our ability to meet our sales obligations; and
- the reduction, rescheduling or cancellation of customer orders.
In addition, we typically plan our production and inventory levels based on
internal forecasts of customer demand, which is highly unpredictable and can
fluctuate substantially. From time to time, in response to anticipated long
lead times to obtain inventory and materials from our outside suppliers and
foundries, we may order materials in advance of anticipated customer demand.
This advance ordering may result in excess inventory levels or unanticipated
inventory write-downs if expected orders fail to materialize.
PERIODS OF RAPID GROWTH AND EXPANSION COULD CONTINUE TO PLACE A SIGNIFICANT
STRAIN ON OUR LIMITED PERSONAL AND OTHER RESOURCES.
To manage our possible future growth effectively, we will be required to
continue to improve our operational, financial, and management systems and to
successfully hire, train, motivate, and manage our employees. In addition,
the integration of past and future potential acquisitions and the evolution
of our business plan will require significant additional management,
technical and administrative resources. We cannot be certain that we will be
able to manage the growth and evolution of our current business effectively.
WE HAVE IN THE PAST AND MAY IN THE FUTURE MAKE ACQUISITIONS, WHICH WILL
INVOLVE NUMEROUS RISKS. WE CANNOT ASSURE YOU THAT WE WILL BE ABLE TO ADDRESS
THESE RISKS SUCCESSFULLY WITHOUT SUBSTANTIAL EXPENSE, DELAY OR OTHER
OPERATIONAL OR FINANCIAL PROBLEMS.
The risks involved with acquisitions include:
- diversion of management's attention;
- failure to retain key personnel;
- amortization of acquired intangible assets;
- customer dissatisfaction or performance problems with an acquired
company;
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- the cost associated with acquisitions and the integration of
acquired operations; and
- assumption of unknown liabilities, or other unanticipated events
or circumstances.
We cannot assure you that we will be able to address these risks successfully
without substantial expense, delay, or other operational or financial
problems.
WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY ADEQUATELY.
Our ability to compete is affected by our ability to protect our proprietary
information. We rely on a combination of patents, trademarks, copyrights,
mask work registrations, trade secret laws, confidentiality procedures, and
non-disclosure and licensing arrangements to protect our intellectual
property. Despite these efforts, we cannot be certain that the steps we take
to protect our proprietary information will be adequate to prevent
misappropriation of our technology, or that our competitors will not
independently develop technology that is substantially similar or superior to
our technology.
More specifically, we cannot assure you that our pending patent applications
or any future applications will be approved, or that any issued patents will
provide us with competitive advantages or will not be challenged by third
parties, or that if challenged, will be found to be valid or enforceable, or
that the patents of others will not have an adverse effect on our ability to
do business. Furthermore, others may independently develop similar products
or processes, duplicate our products or processes or design around any
patents that may be issued to us.
WE COULD BE HARMED BY LITIGATION INVOLVING PATENTS AND PROPRIETARY RIGHTS.
As a general matter, the semiconductor industry is characterized by
substantial litigation regarding patent and other intellectual property
rights. We may be accused of infringing the intellectual property rights of
third parties. Furthermore, we have certain indemnification obligations to
customers with respect to the infringement of third-party intellectual
property rights by our products. We cannot be certain that infringement
claims by third parties or claims for indemnification by customers or end
users of our products resulting from infringement claims will not be asserted
in the future or that such assertions, if proven to be true, will not harm
our business.
Any litigation relating to the intellectual property rights of third parties,
whether or not determined in our favor or settled by us, would at a minimum
be costly and could divert the efforts and attention of our management and
technical personnel. In the event of any adverse ruling in any such
litigation, we could be required to pay substantial damages, cease the
manufacturing, use and sale of infringing products, discontinue the use of
certain processes or obtain a license under the intellectual property rights
of the third party claiming infringement. A license might not be available on
reasonable terms, or at all.
EARTHQUAKES AND OTHER NATURAL DISASTERS MAY DAMAGE OUR FACILITIES OR THOSE OF
OUR SUPPLIERS.
Our corporate headquarters in Fremont, California are located near major
earthquake faults which have experienced earthquakes in the past. In addition,
some of our suppliers are located near fault lines. In the event of a major
earthquake or other natural disaster near our headquarters, our operations could
be harmed. Similarly, a major earthquake or other natural disaster near one or
more of our major suppliers, like the one that occurred in Taiwan in September
1999, could disrupt the operations of those suppliers, which could limit the
supply of our products and harm our business.
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OUR STOCK PRICE IS VOLATILE.
The market price of our common stock has fluctuated significantly to date. In
the future, the market price of our common stock could be subject to
significant fluctuations due to general market conditions and in response to
quarter-to-quarter variations in:
- our anticipated or actual operating results;
- announcements or introductions of new products;
- technological innovations or setbacks by us or our competitors;
- conditions in the communication and semiconductor markets;
- the commencement of litigation;
- changes in estimates of our performance by securities analysts;
- announcements of merger or acquisition transactions; and
- general economic and market conditions.
In addition, the stock market in recent years has experienced extreme price
and volume fluctuations that have affected the market prices of many high
technology companies, including semiconductor companies, and that have often
been unrelated or disproportionate to the operating performance of companies.
These fluctuations, as well as general economic and market conditions, may
harm the price of our common stock.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FOREIGN CURRENCY FLUCTUATIONS. We are exposed to foreign currency
fluctuations primarily through our foreign operations. This exposure is the
result of the foreign operating expenses being denominated in foreign
currency. Operational currency requirements are typically forecast for a
three-month period. If there is a need to hedge this risk, we will enter into
transactions to purchase currency in the open market; or enter into forward
currency exchange contracts which are currently available under our bank
lines of credit. While it is expected that this method of hedging foreign
currency risk will be utilized in the future, the hedging methodology and/or
usage may be changed to manage exposure to foreign currency fluctuations.
If our foreign operations forecasts are overstated or understated during periods
of currency volatility, we could experience unanticipated currency gains or
losses. At the end of the first quarter of fiscal 2001, we did not have
significant foreign currency denominated net assets or net liabilities
positions, and had no foreign currency contracts outstanding.
INTEREST RATE SENSITIVITY. We maintain investment portfolio holdings of various
issuers, types, and maturity dates with various banks and investment banking
institutions. We do not regularly hold investments with maturity dates beyond 90
days. The market value of these investments on any day during the investment
term may vary as a result of market interest rate fluctuations. This exposure is
not hedged because a hypothetical 10% movement in interest rates during the
investment term would not likely have a material impact on investment income.
The actual impact on investment income in the future
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may differ materially from this analysis, depending on actual balances and
changes in the timing and the amount of interest rate movements. The
short-term investments are classified as "available-for-sale" securities and
the cost of securities sold is based on the specific identification method.
This designation is reevaluated as of each balance sheet date. At June 30,
2000, short-term investments consisted of auction rate securities of $12.4
million. As of June 30, 2000, there were no significant differences between
the fair market value and the underlying cost of such investments.
PART II - OTHER INFORMATION
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A Special Meeting of the Stockholders of Exar Corporation was held on June 8,
2000 in Fremont, California. The matter voted upon at the meeting and the
number of affirmative and negative votes cast with respect to such matter
were as follows:
<TABLE>
<CAPTION>
Affirmative Negative Abstained
----------- -------- ---------
<S> <C> <C> <C>
Resolution to approve an amendment
to the Company's Amended and Restated
Certificate of Incorporation to increase the
Number of shares of Common Stock from
25,000,000 shares to 100,000,000 shares. 9,433,359 6,999,281 430,815
</TABLE>
ITEM 5. - OTHER INFORMATION
Pursuant to the Company's Bylaws, stockholders who wish to bring matters or
propose nominees for director at the Company's 2001 annual meeting of
stockholders must provide specified information to the Company prior to March
31, 2001 (unless such matters are included in the Company's proxy statement
pursuant to rule 14A-3 under the Securities Exchange Act of 1934, as amended).
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Exhibits:
<S> <C>
Exhibit Number Description of Document
-------------- -----------------------
27.0 Financial Data Schedule
</TABLE>
(b) The Registrant filed a report on Form 8-K dated June 22, 2000. In Item
5 of Form 8-K, Other Events, the Company reported that it had filed a
Certificate of Amendment to its Amended and Restated Certificate of
Incorporation. The amendment increased the number of Exar's authorized
shares of common stock from 25,000,000 to 100,000,000. The amendment
had been approved by Exar's stockholders at a special meeting held on
June 8, 2000.
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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 thereunto duly authorized.
EXAR CORPORATION
By /s/ Date: August 11, 2000
--------------------------------------------------------
Donald L. Ciffone, Jr.
President
Chief Executive Officer
By /s/ Date: August 11, 2000
--------------------------------------------------------
Ronald W. Guire
Executive Vice President,
Chief Financial Officer,
Secretary
25
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
------- ----
<S> <C> <C>
27.0 Financial Data Schedule ..............................................27
</TABLE>
26
