EXAR CORPORATION (EXAR) Files An 8-K Completion of Acquisition or Disposition of Assets
Item 2.01 Completion of Acquisition or Disposition of Assets
On November 9, 2016, Exar Corporation (Exar) completed the
previously announced sale of 100% of the issued and outstanding
shares of Integrated Memory Logic Limited (iML), a Cayman Islands
exempt company and a wholly owned subsidiary of Exar, to the
terms of that certain Share Purchase Agreement (the Purchase
Agreement) with Beijing E-town Chipone Technology Co., Ltd. (the
Buyer), a limited liability company of the Peoples Republic of
China, and solely for the purposes of Article 13 and Article 14
of the Purchase Agreement, Beijing E-Town International
Investment Development Co., Ltd., and Chipone Technology Co.,
Ltd. iML is a leading provider of power management and color
calibration solutions for the flat-panel display and LED lighting
markets. to the Purchase Agreement, Exar sold to Buyer 100% of
the issued and outstanding shares of iML for $136,000,000,
payable in cash, and adjusted for iMLs cash and debt at closing
and other adjustments for fluctuations in working capital. The
cash paid at closing and received by Exar was $144.5 million.
This amount included $15.0 million for iMLs cash transferred at
closing, was net of $1.5 million for fluctuations in working
capital, and excluded $5.0 million which is being held in escrow
subject to customary adjustments after closing. On November 9,
2016, Exar announced information regarding the foregoing matters
in a press release, a copy of which is attached as Exhibit 99.1
to this Current Report on Form 8-K.
In accordance with the guidance in Accounting Standards
Codification (ASC) 205-20 Presentation of Financial
Statements Discontinued Operations and ASC 360 Property,
Plant Equipment, Exar classified the assets, liabilities,
operations and cash flows from iML as discontinued operations for
all periods presented in its unaudited condensed consolidated
financial statements in its Quarterly Report on Form 10-Q for the
quarterly period ended October 2, 2016, as filed on November 4,
2016.
In addition, Exar has filed with this Current Report on Form 8-K
a pro forma condensed consolidated statement of operations for
the fiscal years ended March 27, 2016 and March 29, 2015, as
though the sale of iML had occurred as of the beginning of the
earliest period presented or on the date when Exar acquired IML
if later than the beginning of earliest period presented which
June 3, 2015 when Exar acquired iML. The unaudited pro forma
condensed consolidated financial information for the fiscal year
ended March 30, 2014 is excluded from the pro forma financial
information as iML was acquired subsequent to the end of fiscal
2014, therefore the operating results for iML were not included
in Exars consolidated financial results for that period.
Additionally, Exar has filed a pro forma condensed consolidated
balance sheet as of October 2, 2016, which reflect its results as
though the sale had occurred on October 2, 2016. Pro forma
adjustments are described in the accompanying notes to the
unaudited pro forma financial information and are based upon
information available at the time of preparation and reflect
certain assumptions that Exar believes are reasonable under the
circumstances. Accordingly, the pro forma adjustments reflected
in the unaudited pro forma financial information are preliminary
and subject to revision and the actual amounts ultimately
reported could differ from these estimates. The unaudited pro
forma financial information is for informational purposes only
and is not necessarily indicative of the operating results or
financial position that would be achieved had Exars sale of iML
been consummated on the dates indicated and should not be
construed as being representative of Exars future results of
operations or financial position.
Item9.01 Financial Statements and Exhibits.
|
(b) |
Pro Forma Financial Information |
The following pro forma financial statements are filed with this
Current Report on Form 8-K:
Pro forma condensed consolidated balance sheets as of October 2,
2016,
Pro forma condensed consolidated statements of operations for the
years ended March 27, 2016 and March 29, 2015
Notes to pro forma financial statements
|
(d) |
Exhibits |
|
ExhibitNo. |
|
Description |
|
|
99.1 |
|
Press Release of Exar Corporation, dated November 9, 2016 |
|
EXAR CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except share amounts)
|
As Reported |
Pro forma |
||||||||||||
|
October 2, |
Proforma |
October 2, |
|||||||||||
|
2016 (a) |
Adjustments |
|
|||||||||||
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ASSETS |
|||||||||||||
|
Current assets: |
|||||||||||||
|
Cash and cash equivalents |
$ | 96,382 | $ | 125,187 |
Note 2(a) |
$ | 221,696 | ||||||
|
Accounts receivable (net of allowances of $977) |
15,693 | – | 15,693 | ||||||||||
|
Accounts receivable, related party (net of allowances of |
3,184 | – | 3,184 | ||||||||||
|
Inventories |
23,245 | – | 23,245 | ||||||||||
|
Other current assets |
2,000 | – | 2,000 | ||||||||||
|
Assets held for sale |
89,745 | (89,745 | ) |
Note 2(a) |
– | ||||||||
|
Total current assets |
230,249 | 35,569 | 265,818 | ||||||||||
|
Property, plant and equipment, net |
4,984 | – | 4,984 | ||||||||||
|
Goodwill |
31,613 | – | 31,613 | ||||||||||
|
Intangible assets, net |
10,307 | – | 10,307 | ||||||||||
|
Other non-current assets |
972 | 5,000 |
Note 2(a) |
5,972 | |||||||||
|
Total assets |
$ | 278,125 | $ | 40,442 | $ | 318,694 | |||||||
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|||||||||||||
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Current liabilities: |
|||||||||||||
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Accounts payable |
$ | 7,200 | $ | – | $ | 7,200 | |||||||
|
Accrued compensation and related benefits |
2,839 | – | 2,839 | ||||||||||
|
Deferred income and allowances on sales to distributors |
3,017 | – | 3,017 | ||||||||||
|
Deferred income and allowances on sales to distributor, |
3,357 | – | 3,357 | ||||||||||
|
Other current liabilities |
11,800 | – | 11,800 | ||||||||||
|
Liabilities held for sale |
7,376 | (7,376 | ) |
Note 2(a) |
– | ||||||||
|
Total current liabilities |
35,589 | (7,376 | ) | 28,213 | |||||||||
|
Long-term lease financing obligations |
428 | – | 428 | ||||||||||
|
Other non-current obligations |
4,094 | – | 4,094 | ||||||||||
|
Total liabilities |
40,111 | (7,376 | ) | 32,735 | |||||||||
|
Commitments and contingencies |
|||||||||||||
|
Stockholders equity: |
|||||||||||||
|
Common stock, $.0001 par value; 100,000,000 shares |
5 | – | 5 | ||||||||||
|
Additional paid-in capital |
542,724 | – | 542,724 | ||||||||||
|
Accumulated deficit |
(304,715 | ) | 47,818 |
Note 2(b) |
(256,770 | ) | |||||||
|
Total stockholders equity |
238,014 | 47,818 | 285,959 | ||||||||||
|
Total liabilities and stockholders equity |
$ | 278,125 | $ | 40,442 | $ | 318,694 | |||||||
(a) As reported in the Company’s Form 10-Q for the quarterly
period ended October 2, 2016, as filed November 4, 2016.
EXAR CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
For the Fiscal Year Ended March 27, 2016
(in thousands, except per share data)
|
Proforma |
||||||||||||
|
Adjustments |
||||||||||||
|
As Reported (b) |
(Note 3) |
Pro forma |
||||||||||
|
Sales: |
||||||||||||
|
Net sales |
$ | 113,587 | $ | (47,788 | ) | $ | 65,799 | |||||
|
Net sales, related party |
35,791 | – | 35,791 | |||||||||
|
Total net sales |
149,378 | (47,788 | ) | 101,590 | ||||||||
|
Cost of sales: |
||||||||||||
|
Cost of sales |
64,662 | (25,047 | ) | 39,615 | ||||||||
|
Cost of sales, related party |
15,929 | – | 15,929 | |||||||||
|
Amortization of purchased intangible assets and inventory |
9,884 | (7,457 | ) | 2,427 | ||||||||
|
Restructuring charges and exit costs |
845 | (106 | ) | 739 | ||||||||
|
Proceeds from legal settlement |
(1,500 | ) | – | (1,500 | ) | |||||||
|
Total cost of sales |
89,820 | (32,610 | ) | 57,210 | ||||||||
|
Gross profit |
59,558 | (15,178 | ) | 44,380 | ||||||||
|
Operating expenses: |
||||||||||||
|
Research and development |
31,403 | (9,534 | ) | 21,869 | ||||||||
|
Selling, general and administrative |
39,235 | (7,785 | ) | 31,450 | ||||||||
|
Restructuring charges and exit costs, net |
3,646 | (412 | ) | 3,234 | ||||||||
|
Impairment of intangibles |
1,807 | (1,807 | ) | – | ||||||||
|
Total operating expenses, net |
76,091 | (19,538 | ) | 56,553 | ||||||||
|
Loss from operations |
(16,533 | ) | 4,360 | (12,173 | ) | |||||||
|
Other income and (expense), net: |
||||||||||||
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Interest income and other, net |
34 | (20 | ) | 14 | ||||||||
|
Interest expense |
(212 | ) | 10 | (202 | ) | |||||||
|
Total other income and (expense), net |
(178 | ) | (10 | ) | (188 | ) | ||||||
|
Loss before income taxes |
(16,711 | ) | 4,350 | (12,361 | ) | |||||||
|
Provision for (benefit from) income taxes |
(685 | ) | (4,926 | ) | (5,611 | ) | ||||||
|
Net loss |
$ | (16,026 | ) | $ | 9,276 | $ | (6,750 | ) | ||||
|
Net loss per share to common stockholders: |
||||||||||||
|
Basic |
$ | (0.33 | ) | $ | (0.14 | ) | ||||||
|
Diluted |
$ | (0.33 | ) | $ | (0.14 | ) | ||||||
|
Shares used in the computation of net loss per share: |
||||||||||||
|
Basic |
48,240 | 48,240 | ||||||||||
|
Diluted |
48,240 | 48,240 | ||||||||||
(b) As reported in the Company’s Form 10-K for the fiscal year
ended March 27, 2016, as filed May 27, 2016.
EXAR CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
For the Fiscal Year Ended March 29, 2015
(in thousands, except per share data)
|
Proforma |
||||||||||||
|
Adjustments |
||||||||||||
|
As Reported (b) |
(Note 3) |
Pro forma |
||||||||||
|
Sales: |
||||||||||||
|
Net sales |
$ | 125,791 | $ | (48,822 | ) | $ | 76,969 | |||||
|
Net sales, related party |
36,259 | – | 36,259 | |||||||||
|
Total net sales |
162,050 | (48,822 | ) | 113,228 | ||||||||
|
Cost of sales: |
||||||||||||
|
Cost of sales |
71,139 | (24,184 | ) | 46,955 | ||||||||
|
Cost of sales, related party |
14,359 | – | 14,359 | |||||||||
|
Amortization of purchased intangible assets and inventory |
11,740 | (6,102 | ) | 5,638 | ||||||||
|
Impairment of intangible assets |
8,367 | – | 8,367 | |||||||||
|
Restructuring charges and exit costs |
7,597 | – | 7,597 | |||||||||
|
Warranty reserve |
(1,078 | ) | – | (1,078 | ) | |||||||
|
Total cost of sales |
112,124 | (30,286 | ) | 81,838 | ||||||||
|
Gross profit |
49,926 | (18,536 | ) | 31,390 | ||||||||
|
Operating expenses: |
||||||||||||
|
Research and development |
37,181 | (7,631 | ) | 29,550 | ||||||||
|
Selling, general and administrative |
43,758 | (6,862 | ) | 36,896 | ||||||||
|
Merger and acquisition costs |
7,348 | – | 7,348 | |||||||||
|
Restructuring charges and exit costs, net |
4,589 | (534 | ) | 4,055 | ||||||||
|
Impairment of intangibles |
4,456 | – | 4,456 | |||||||||
|
Net change in fair value of contingent consideration |
(4,343 | ) | – | (4,343 | ) | |||||||
|
Total operating expenses, net |
92,989 | (15,027 | ) | 77,962 | ||||||||
|
Income (loss) from operations |
(43,063 | ) | (3,509 | ) | (46,572 | ) | ||||||
|
Other income and (expense), net: |
||||||||||||
|
Interest income and other, net |
571 | (491 | ) | 80 | ||||||||
|
Interest expense |
(1,082 | ) | (70 | ) | (1,152 | ) | ||||||
|
Impairment of long-term investment |
(544 | ) | – | (544 | ) | |||||||
|
Total other income and (expense), net |
(1,055 | ) | (561 | ) | (1,616 | ) | ||||||
|
Income (loss) before income taxes |
(44,118 | ) | (4,070 | ) | (48,188 | ) | ||||||
|
Provision for income taxes |
889 | (246 | ) | 643 | ||||||||
|
Net income (loss) |
(45,007 | ) | (3,824 | ) | (48,831 | ) | ||||||
|
Less: Net loss attributable to non-controlling interests |
37 | (37 | ) | – | ||||||||
|
Net income (loss) attributable to Exar |
$ | (44,970 | ) | $ | (3,861 | ) | $ | (48,831 | ) | |||
|
Net income (loss) per share to common stockholders: |
||||||||||||
|
Basic |
$ | (0.95 | ) | $ | (1.03 | ) | ||||||
|
Diluted |
$ | (0.95 | ) | $ | (1.03 | ) | ||||||
|
Shares used in the computation of net income (loss) per |
||||||||||||
|
Basic |
47,253 | 47,253 | ||||||||||
|
Diluted |
47,253 | 47,253 | ||||||||||
(b) As reported in the Company’s Form 10-K for the fiscal year
ended March 27, 2015, as filed May 27, 2016.
Notes to Unaudited Pro Forma Financial
Information
1. Basis of Presentation
The unaudited pro forma condensed consolidated financial
information presented here is based on the historical
consolidated financial information of the Company, as previously
provided in or derived from filings with the SEC. The unaudited
pro forma condensed consolidated balance sheet assume the
Transaction was consummated as of October 2, 2016. The unaudited
pro forma condensed consolidated statements of operations for the
fiscal years ended March 27, 2016 and March 30, 2015 assumes the
Transaction was consummated on June 3, 2015, the date when Exar
acquired iML.
2. Unaudited Pro Forma Condensed Consolidated Balance
Sheet Information
The following adjustments to the condensed consolidated balance
sheet as of October 2, 2016, reflect the sale of the iML to the
final Sale and Purchase Agreement dated June 1, 2016, net of
transaction costs, as though the sale occurred on October 2,
2016.
|
(a) |
The below table reflects the receipt of proceeds, net of |
|
Amount |
||||
|
Total consideration |
$ | 136,000 | ||
|
Amount withheld in escrow account |
(5,000 | ) | ||
|
Adjustment for the shortfall of working capital |
(4,000 | ) | ||
|
Payments of transaction costs |
(1,813 | ) | ||
|
Net cash received upon completion of transaction |
$ | 125,187 | ||
|
(b) |
The pro forma effect of the sale of iML on the October 2, |
|
Amount |
||||
|
Total consideration, net of cash acquired |
$ | 136,000 | ||
|
Adjustment for the shortfall of working capital |
(4,000 | ) | ||
|
Transaction costs |
(1,813 | ) | ||
|
Net assets of iML |
(82,369 | ) | ||
|
Net gain |
$ | 47,818 | ||
3. Unaudited Pro Forma Condensed Consolidated Statements
of Operations
The unaudited pro forma condensed consolidated statements of
operations for the fiscal year ended March 27, 2016 include
adjustments made to historical financial information which
assumes the Transaction was consummated on March 30, 2015 and the
fiscal year ended March 29, 2015 assumes the Transaction was
consummated on June 3, 2015, the date when Exar acquired iML.
These adjustments reflect the elimination of the results of
operations of iML as a result of the Transaction. The unaudited
pro forma condensed consolidated financial information does not
include the impact of the gain on the Transaction in any of the
periods presented.
About EXAR CORPORATION (EXAR)
