EXAR CORPORATION (NASDAQ:EXAR) Files An 8-K Completion of Acquisition or Disposition of Assets

ME Staff
-
0

EXAR CORPORATION (NASDAQ: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


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
$377)


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


Current liabilities:


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,
related party


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
authorized; 50,088,632 shares outstanding


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
step-up


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:


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
step-up


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
Corporation


$
(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
share:


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
transaction costs, for the sale of iML as of October 2,
2016.


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,
2016 balance sheet, as reported in our Form 10-Q for that
period, results in a gain of $47.8 million, net of
immaterial tax impact.


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 (NASDAQ:EXAR)