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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended March 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
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Commission File No. 0-14225
EXAR CORPORATION
(Exact Name of registrant as specified in its charter)
Delaware 94-1741481
(State or other jurisdiction of ( I.R.S. Employer
incorporation or organization) (Identification No.)
2222 Qume Drive, San Jose, California 95131
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 434-6400
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in any definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of May 31, 1995 was $251,154,227 based on the last sales price
reported for such date.
The number of shares outstanding of the Registrant's Common Stock was 9,477,518
as of May 31, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Definitive Proxy Statement filed not later than 120
days after the close of the fiscal year are incorporated in Part III of this
report.
PART I
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ITEM 1 BUSINESS
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GENERAL
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Exar Corporation ("Exar" or the "Company") designs, develops and markets analog
and mixed-signal integrated circuits for use in telecommunications, data
communications, document imaging, consumer electronics, mass storage
and automotive products and in other selected product areas. The Company's
target markets are ones in which the Company believes its design and process
expertise, combined with its knowledge of particular system application
requirements, enable the Company to deliver products that provide effective
solutions to customer needs. Exar is emphasizing the development and sale of
analog and mixed-signal application-specific standard products ("ASSPs"). The
Company also produces digital integrated circuits used in telecommunications and
data communications products, as well as general purpose analog integrated
circuits.
In May 1994, the Company acquired Origin Technology, Inc. ("Origin") and in June
1994 the Company acquired Micro Power Systems, Inc. ("Micro Power"). In March
1995 the Company acquired Startech Semiconductor, Inc. ("Startech") and in June
1995 the Company acquired Silicon Microstructures, Inc. ("SMI"). (See "Recent
Acquisitions".) In May 1995, the Company announced the discontinuance of its
mass storage product line. (See "Mass Storage".)
Rohm Co., Ltd., a manufacturer of semiconductor devices and other electronic
components in Japan, was the majority stockholder of Exar from 1971 until 1990.
Working in cooperation with the Company, Rohm has been reducing its ownership
interest in Exar since 1984 and in May 1990, Rohm engaged in a share exchange
that reduced its ownership of Exar's common stock to less than 50%. As of
January 1994, Rohm was no longer an affiliate of the Company. Exar has in the
past and continues to have various significant business relationships with Rohm
Co., Ltd. and its subsidiaries ("Rohm"), including the sale of epitaxial and
bipolar wafers to Rohm. The arrangement for the sale of epitaxial and bipolar
wafers to Rohm was terminated as of April 1, 1994. Rohm continues to be a major
foundry supplier of the Company.
INDUSTRY BACKGROUND
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Integrated circuits may be divided into three general categories -- analog (or
linear), digital and mixed-signal. Analog circuits typically are used to
condition, process, measure or control physical properties such as temperature,
pressure, sound or speed. They include devices such as amplifiers, filters,
switches and power circuits. Digital circuits perform logic and memory
functions, and include devices such as memories and microprocessors. Mixed-
signal circuits combine analog circuitry with digital logic or memory in a
single integrated circuit or chip set to provide an interface between the analog
and digital worlds.
The Company believes that the market for analog and mixed-signal integrated
circuits, in contrast to the market for digital integrated circuits, is
characterized by longer product life cycles, smaller unit volumes and generally
lower capital requirements. The analog market is a highly fragmented group of
niche markets, serving numerous and widely differing applications. For each
application, different users may have unique requirements for circuits with
specific characteristics.
Integrated circuits are either standard products or custom products (including
both full custom and semi-custom). Standard products are available to customers
"off-the-shelf." Standard application-specific products that are tailored to
address specific applications and to meet the needs of multiple customers are
often referred to as ASSPs. Custom products are designed to an individual
customer's specifications. Custom products typically involve greater design
costs for the customer, compared to standard products, but enable the customer
to save space, improve performance, reduce manufacturing costs, or maintain
greater confidentiality with respect to the customer's ultimate product design.
PRODUCTS AND MARKETS
- --------------------
The Company divides its integrated circuit sales into six major market groups:
communications, document imaging, consumer electronics, personal computers, mass
storage and other products. These market groups account for most of the
Company's sales of integrated circuits, with a small portion being accounted for
by the sale of general purpose integrated circuits to distributors.
In recent years, the Company entered the Japanese market for integrated circuits
used in consumer electronics products. These integrated circuits are sold to
several of the major Japanese electronics companies through Exar Japan
Corporation, a wholly-owned subsidiary of Exar ("Exar Japan"). The Company
sells both proprietary products and standard Rohm products in Japan. Effective
April 1, 1995, the Company will no longer recognize revenue from its sale of
standard Rohm products in Japan, but will record its net margin from such sales
as commission revenue. (See Management's Discussion and Analysis of Financial
Condition and Results of Operations".)
The following chart shows selected applications and representative products in
each of the Company's major market areas:
MARKET APPLICATION PRODUCT
------ ----------- -------
Communications Long-distance high T-Carrier circuits:
speed transmission, -repeaters
central office -line interface
equipment and private circuits
branch exchanges -framers
-buffers
-transcoders
Telephone sets, Speakerphone and
headsets telephone circuits
Speech Recognition
Caller ID Systems, Phase-Locked loops,
pagers, cellular function generators
telephones, two-way and tone decoders
radios
Computer-to-computer Modem chips and
links through chip sets
telephones
Computer bus UARTS/DUARTS/
interfaces QUARTS
Wireline Analog-to-digital
communication test converter/dual
systems digital-to-analog
converter
Document Imaging Scanners Analog-to-digital
Digital Camera converters (ADCs)
Digital Copiers Digital-to-analog
converters (DACs)
Mass Storage1 Disk Drives Read/write
integrated channels
Data separators
Servo demodulators
Read/write pre-amps
Consumer Electronics2 Graphic Equalizers Switched capacitor
filters
Audio Systems Audio enhancement
circuits
Video Systems Automatic track
finding (ATF)
circuits
Personal Computers3 Clocks Frequency timing
generators
Input/Output Super I/O
Automotive Air bags4 Silicon sensors
Engine controls Timing circuits
RF
Automotive remote transmitters/
lock controls receivers
Other Hearing aids Amplifiers
Multi media Audio mixer
circuits
Proximity sensors Sensor interface
circuits
Home automation Command and control
functions
1 This market and applications will be discontinued in July 1995. (See "Mass
Storage".)
2 Only Exar designed products are described here. Exar also sells in Japan
integrated circuits designed by Rohm for use in consumer electronic products.
(See "Consumer Electronics".)
3 This market and applications are a result of the Startech Semiconductor, Inc.
acquisition. (See "Recent Acquisitions".)
4 This application is a result of the Silicon Microstructures, Inc. acquisition.
(See "Recent Acquisitions".)
COMMUNICATIONS
- --------------
Exar markets integrated circuits for a variety of applications in both the
telecommunications as well as data communication markets.
Exar's transmission telecommunications circuits are used in private branch
exchanges (PBX), central office switches and digital cross connects. Exar's
principal products in this market are its T-carrier and E-carrier integrated
circuits. These circuits include line interface circuits, repeater circuits,
framers, buffers, transcoders for pulse code modulation (PCM) systems and T1/E1
and T3/E3/Sonet interfaces. The majority of these circuits require bipolar,
mixed-signal and CMOS process technology optimized for telecommunications
applications and have specialized test and performance criteria. Certain of
these products are based upon ANSI, Bellcore and CCITT standards and are jointly
marketed with AT&T Microelectronics, Inc. The Company also provides integrated
circuits for station telecommunications products, including speakerphones,
telephone circuitry and caller identification systems. As a result of the
acquisition of Origin Technology, Inc., the Company plans to integrate automatic
speech recognition into certain of its communication products.
The Company's data communications products include Universal Asynchronous
Receiver and Transmitter ("UART") circuits and related products known as DUART
(Dual UART) and QUART (Quad UART) circuits for use in computer bus interfaces.
Exar supplies a V.35 transmitter and transceiver interface circuits for high
speed data transmission. In addition, the Company manufactures high performance
fax/data/voice ("modem") chip sets. These chip sets incorporate proprietary
firmware that facilitates integration of the Company's fax/data/voice products
into OEM customers' systems. The Company has no additional versions of its
modem chip sets currently in development.
The Company offers proprietary automatic speech recognition ("ASR") products
through its wholly-owned subsidiary Origin. Origin integrates its proprietary
ASR technology into a family of voice dialing telephone products which are
distributed worldwide.
Users of the Company's integrated circuits in the communications market include
Alcatel S.A., British Telecom, Digital Switch Corporation, Nokia, Northern
Telecom, Inc. and Siemens A.G.
DOCUMENT IMAGING
- ----------------
The Company supplies high-performance data converters, data acquisition
subsystems and other sophisticated electronic components to the document
imaging, communications, industrial and other markets through its wholly-owned
subsidiary, Micro Power. The Company offers analog to digital converters (ADCs)
as well as digital to analog converters (DACs), to the document imaging industry
for products such as scanners, digital cameras and digital copiers. Using CMOS
and BiCMOS process technologies, the Company creates standard and custom
products that integrate data conversion and other functions. The Company was
first to market a monolithic triple 10-bit ADC, a digitally-controlled gain and
offset adjustment device for color scanners. Advanced design techniques and
process technologies are used to integrate low-power converter architectures
with surrounding analog functions to minimize total system cost. The Company
offers both standard and custom solutions.
The family of ADCs includes full flash, half flash, pipeline and successive
approximation register converter architectures. Current products offer from 6
to 12 bits of resolution and operating ranges from <1 kHz to 30 mHz. Several
devices are currently specified for 3.3V operation for battery-operated and
hand-held equipment.
Innovative circuit topologies and efficient design techniques have allowed the
creation of multichannel ADC, DAC and combination architectures. Application-
specific products that integrate data conversion and other functions include a
family of multiple output DACs for use in high frequency signal conditioning and
gain control in CCD and video applications and a family of 16 to 32 channel data
acquisition subsystem products with over voltage protection circuitry for
control systems.
Users of the Company's integrated circuits in the document imaging market
include Canon, Epson and Logitech.
MASS STORAGE
- ------------
Exar offers a family of devices for use in the mass storage industry with a
particular emphasis on products for use in high performance, small form factor,
hard disk drives. These devices address the mixed-signal system requirements of
this market and include the following functions: fully integrated read/write
-
combo devices, data separators, servo demodulators and read/write pre-
amplifiers. Exar also produces highly integrated custom solutions which include
two or more of the functions listed above. In addition, Exar addresses the low
power and reduced size requirements of battery powered portable computers with a
family of low-power read/write preamplifiers for the small form factor drive.
Hard disk drive manufacturers which use Exar integrated circuits or have
designed such circuits into new products include Seagate Technology, Inc. and
Syquest Technology.
In May 1995, the Company announced the discontinuance of its mass storage
devices effective July 1995. The termination of this product line was the
result of supply disruptions and accompanying low margins. ("See Management's
Discussion and Analysis of Financial Condition and Results of Operation".)
CONSUMER ELECTRONICS
- --------------------
With the establishment of Exar Japan in 1989 and related sales assistance from
Rohm, Exar began to market integrated circuits to Japanese manufacturers of
consumer electronics products. Exar-designed products being sold to or
developed for the consumer products market include integrated circuits for use
in graphic equalizer systems, telephone answering devices, base band circuits
for cellular telephones, filter circuits for use in audio and video systems,
Barcus Berry Effect (BBE) audio chips for sound enhancement, automatic track
finding circuits for video systems and timer circuits for various products.
A majority of the integrated circuits sold by Exar Japan for use in consumer
electronics products are designed by Rohm and, until April 1995, purchased by
Exar Japan from Rohm. Sales of integrated circuits for consumer electronics
product applications are intensely price competitive, and margins on Exar's
sales of these products have been lower than margins on the Company's other
products. Beginning April 1, 1995, the Company will no longer purchase and
resell the products designed by Rohm, but, as a representative, will receive a
commission on the sales of these products.
Customers of the Company in the consumer products area include Sony Corporation,
AIWA Co., Ltd. and Matsushita.
PERSONAL COMPUTERS
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Through the acquisition of Startech, the Company will supply frequency timing
generators and super I/O (Input/Output) chips to the personal computer and
workstation markets.
In a computer system, in order to perform an operation accurately, the computer
requires a precise timing of signals that coordinate transfer, storage and
execution activities. There are many different timing signals (sometimes called
"clocks") needed to make a computer run. Previous generations of computer
designs used individual oscillator circuits and their additional crystal
components in every system. By using modern phased-locked-loop and voltage
controlled oscillator design methods, Startech engineers have developed a single
chip which can synthesize all the required timing signals into a single
oscillator source, or "frequency timing generator".
The output timing signal from Startech's frequency timing generators has low
"noise" levels and is within the industry requirements for low frequency
"jitter" that computer systems demand. The timing signals generated by
Startech's frequency generators are virtually identical to those of individual
oscillator circuits and the reduction in the number of required circuits is
significant. Most Startech frequency generator applications result in a ten-
fold reduction in circuit count, which translates into significant reduction in
cost for the customer.
Super I/O chips integrate certain selected features of standard integrated
circuits. By blending functions, a super I/O chip can hold all or most of the
common input/output, control and interface functions of more than one dedicated
circuit. Startech is developing a line of super I/O chips that integrate
selected features found in various standard integrated circuits.
Personal computer manufacturers among Startech's customers include Compaq
Computer Corp., Dell Computers, IBM and Matsushita Electric Corporation of
America.
OTHER PRODUCTS AND MARKETS
- --------------------------
The Company also serves a variety of other markets, such as hearing aids,
industrial controls and automotive controls. At present, most of the Company's
integrated circuits sold to these markets are custom and semi-custom products.
However, the Company continues to develop ASSP products in certain niche areas
where there are opportunities.
HEARING AIDS The Company's BiCMOS processes and advanced filtering
------------
technology allow the Company to provide a low-noise, low-power single chip
solution for hearing aid manufacturers. The Company's design experience
with EEPROM memory also enables the Company to add programmability features
so that in the future the electronic characteristics of hearing aids may be
tailored to fit both an individual user and ambient noise conditions.
INDUSTRIAL CONTROL The Company's products in this area include integrated
------------------
circuits for use in security systems, magnetic card readers and process
control. One of the Company's products in this area is an integrated
circuit for industrial robotics applications incorporating EEPROM
technology.
AUTOMOTIVE Exar sells custom and semi-custom integrated circuits for use
----------
in automotive applications, including air bags and body control systems,
such as keyless entry systems.
MULTI MEDIA Multi media combines voice, data, and video on the same
-----------
medium. The Company's mixed-signal and audio expertise are integrated for
custom products in this market.
SENSORS The Company's analog to digital techniques and amplifier expertise
-------
are incorporated in Exar's offering of sensor interface circuits. The
acquisition of SMI expands Exar's product offerings to the motion, pressure
and accelerometer markets. (See "Recent Acquisitions".)
HOME AUTOMATION The acquisition of Origin provided the Company with
---------------
capabilities needed to enter the home automation market through command and
control functions with such applications as remote control.
GENERAL PURPOSE ANALOG STANDARD PRODUCTS The Company also markets a line
----------------------------------------
of general purpose analog standard products such as timers, switching
regulators, operational amplifiers and filters. The Company offers current
and voltage output DACs which include products ranging from 8 to 16 bits of
resolution. Recent product introductions offer unique digital control
capabilities and wide bandwidth for the direct control of video and CCD
imaging signals.
WAFER SERVICES Through March 31, 1994, the Company sold epitaxial and bipolar
- --------------
wafers to Rohm. The Company entered into a sale and leaseback of these
manufacturing facilities with Rohm in April 1992 in order to shift to Rohm (as
the largest customer of the facilities) the benefits and risks associated with
capacity utilization. Effective April 1, 1994, Exar no longer operates the
manufacturing facilities for Rohm. Accordingly, the revenues associated with
the operation of such facilities are no longer included in the financial results
of the Company. During the period April 1, 1994 through March 31, 1995, the
Company provided management services to Rohm in connection with the operation of
the Rohm manufacturing facilities. In exchange for these services, the Company
received a management fee. Fees for such services were not significant.
RECENT ACQUISITIONS
- -------------------
STARTECH On March 31, 1995, the Company acquired Startech Semiconductors, Inc.
- --------
(Startech). Startech, a privately held fabless semiconductor company
headquartered in Sunnyvale, California, designs, develops and markets ASSPs for
a variety of markets including the data communications, telecommunications,
personal computer, workstation and peripherals markets. ASSPs meet the
requirement for fast, error-free, inexpensive data communications essential to
today's computer system and software products. Startech designs its ASSPs to
meet evolving industry standards and protocols, enabling its customers to react
rapidly to the technological changes they face.
Startech's principal product offerings include a broad line of UARTs. Startech
created a highly integrated Quad UART with FIFO (first in, first out) circuitry
which has been established as the de facto industry standard for Quad FIFO UARTs
used in multi-channel networking applications designed to work with Intel
Corporation's microprocessors. Startech is using its megacell design library,
created in connection with its UART operations, to develop a line of super I/O
(input/output) chips that integrate selected features found in various standard
integrated circuits. In addition to its UART-related activities, Startech
offers a range of programmable frequency generators used in computer system
graphics applications, hard disk drives and telecommunications.
Startech's has over 200 customers worldwide including Boca Research, Rockwell
International and U.S. Robotics, as well as Exar, in the communications and
connectivity industry together with the personal computer manufacturers
previously discussed. (See "Personal Computers".)
SMI In February 1993, Exar acquired a minority interest in Silicon
- ---
Microstructures, Inc. (SMI) a privately held fabless semiconductor company
headquartered in Fremont, California. In May 1995, the Company acquired all of
the remaining outstanding stock of SMI. SMI designs, develops and markets
silicon sensors for a variety of markets including medical, automotive and
consumer. SMI's current products include precision piezoresistive pressure
sensors and accelerometers.
The pressure devices are fabricated in silicon using processing similar to that
needed for bipolar or MOS transistors coupled with additional silicon etching
technologies to allow the formation of thin membranes and force concentrators.
SMI produces both moderate and very-low pressure sensors.
SMI has achieved a precision capacitive accelerometer structure using "bulk"
micromachining of the silicon merged with fusion bonding of several silicon
wafers to provide a self-contained sensor. Coupled with an application specific
integrated circuit, the accelerometer provides high performance, wide-dynamic
range, good stability, good over-shock protection and low cost. Micron sized
mechanical parts etched in silicon can incorporate sophisticated intelligence
on-board the sensor itself.
Other structures possible with the technology include, for instance, precision
flow channels, ultra small valve structures, as well as co-integrated devices
where mechanical structures and circuitry are fabricated on a common wafer
silicon.
MARKETING AND CUSTOMERS
- -----------------------
Exar sells its products principally to OEMs for use in a broad range of
electronic systems and equipment. The following table provides a geographic
breakdown of the Company's sales with sales of wafer services to Rohm set forth
separately. For additional geographic financial information, see Note 8 in
Notes to Consolidated Financial Statements.
YEARS ENDED MARCH 31
--------------------
(IN THOUSANDS)
1995 1994 1993
---- ---- ----
U.S. Sales $ 62,344 $ 42,040 $43,512
International Sales:
Sales by Exar Japan 55,851 64,833 54,216
Other Sales 41,277 32,732 31,549
Rohm Wafer Services -- 22,054 16,819
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TOTAL $159,472 $161,659 $146,096
======== ======== ========
Exar markets its products in the United States principally through nineteen
independent sales representatives and ten independent non-exclusive
distributors, as well as through the Company's direct sales force. Exar
currently has sales support offices in or near Boston, Chicago, Dallas, Los
Angeles, Philadelphia and San Jose.
Exar is represented internationally by approximately thirty-one sales
representatives and distributors. In addition, Exar is represented in Europe by
its wholly-owned subsidiary, Exar Ltd. and in Japan by its wholly-owned
subsidiary, Exar Japan. The products marketed by Exar Japan are generally not
in competition with those marketed in Japan by Exar's independent distributors.
Exar's international operations are subject to certain risks common to foreign
operations in general, such as governmental regulations and import restrictions.
While Exar has acted to minimize its exposure to exchange rate fluctuations,
there can be no assurance that the Company will not from time to time experience
exchange rate losses on products sold overseas by Exar Ltd. and Exar Japan.
During the fiscal year ended March 31, 1995, no single customer accounted for
more than 10% of Exar's sales.
Exar typically provides a limited warranty against defects in materials and
workmanship for a period of ninety days from the date its products are
delivered.
PROCESS TECHNOLOGIES
- --------------------
Exar uses a variety of process technologies in the fabrication of its products,
including bipolar, silicon gate and moly gate CMOS, and BiCMOS, which utilizes
both bipolar and CMOS technologies. These processes allow Exar to take
advantage of different types and characteristics of integrated circuit
components with different performance and cost characteristics. The Company
believes that its ability to design and deliver integrated circuits using a wide
variety of processes enables it to be responsive to customer requirements and
optimize the performance of its products for particular applications.
Historically, bipolar processes have been used for analog circuits where speed,
high voltage, low noise or effective component matching is necessary. CMOS
circuitry was originally used for digital applications where lower voltage and
greater chip density are necessary. CMOS manufacturing processes have
subsequently been adopted and are used for an increasing portion of analog and
mixed-signal devices in order to take advantage of that technology's lower power
consumption. BiCMOS processes permit the combination of bipolar and CMOS on a
single device, resulting in the ability to combine selectively the performance
characteristics of bipolar circuitry with the lower power consumption of CMOS.
In addition, the Company can provide accurately matched thin-film resistors
and/or laser trim when needed to meet performance requirements.
MANUFACTURING
- -------------
The Company uses outside sources for the supply of its integrated circuits.
Rohm is the Company's largest supplier of wafer services. During fiscal 1995,
approximately 67% of the Company's sales of integrated circuits were of products
made from wafers manufactured for the Company by Rohm. Rohm supplies the
Company with 2 micron bipolar products, and CMOS products. In addition, Rohm
Corporation is the Company's primary source of 6 micron bipolar and BiCMOS
products. These services are provided to the Company pursuant to two separate
foundry service agreements which expire in April 1997 and April 2006. The
agreement expiring in April 1997 is automatically extended for successive two
year terms unless and until it is terminated by either party upon at least six
months notice prior to the end of the extension term. The Company is not under
any obligation to continue obtaining manufacturing services from Rohm.
The Company also obtains CMOS and BiCMOS products from independent
manufacturers. Although the Company has qualified second sources for certain of
its foundry requirements, there would be significant lead times and initially
lower yields associated with the use of such sources. Accordingly, a disruption
in supply from one or more of the Company's outside suppliers could have a
material adverse effect on operations.
The Company is currently experiencing long lead times and delays from outside
sources of certain products. These delays have negatively affected the
Company's ability to respond to customers of such products. Due to supply
disruptions, the Company decided to terminate its product line of semiconductors
used in hard disk drive products. (See "Mass Storage".) The Company is
currently reviewing alternatives including the expansion of its available
manufacturing capacity for other products.
Exar conducts electrical testing of integrated circuits in both wafer and
packaged form. The combination of various functionalities makes the test
process for analog and mixed-signal devices particularly difficult. The Company
has purchased and intends to continue to acquire advanced equipment to test its
products. Test operations require the programming, maintenance and use of
sophisticated computer-based test systems and complex automatic handling
systems. Exar has special screening and qualification programs when high
reliability quality grades are required by customer specifications.
After testing, wafers are usually shipped to the Far East for assembly, where
they are cut into individual circuits and packaged. Following assembly, a
significant portion of the Company's products are returned to Exar for final
testing and quality assurance. Most of Exar's assembly work is performed by
independent contractors in Taiwan, Indonesia, the Philippines and Korea. A
portion of such work is also performed by subsidiaries of Rohm in Japan.
The raw materials and equipment used in the production of the Company's
integrated circuits are available from several suppliers. Although shortages
have occurred and on occasion lead times have been extended, the Company has not
recently experienced significant difficulty in obtaining raw materials or
equipment.
ENGINEERING, RESEARCH AND DEVELOPMENT
- -------------------------------------
Exar's ability to compete successfully depends in part on its ability to
introduce technologically advanced products on a cost-effective and timely
basis. Exar is committed to improving its manufacturing and design capabilities
and developing new process technologies and products. During the fiscal years
ended March 31, 1995, 1994 and 1993, Exar's research and development expenses
were $14.4 million, $11.5 million, and $11.4 million, respectively.
Exar was one of the first companies to offer its customers the ability to create
semi-custom analog integrated circuits, and the Company remains a leading vendor
in this area. Exar's analog arrays utilize silicon wafers containing a series
of uncommitted components. The wafers are completely fabricated except for the
final metalization layer, allowing an engineer to customize the circuit by
connecting the uncommitted components to conform to the customer's requirements.
Semi-custom design techniques reduce the total time required for new custom
designs to reach production, with development costs substantially lower than
those associated with full custom design. Exar makes available to its customers
its FLEXARTM family of flexible linear arrays, together with its proprietary
Flexible Integrated Design System (FIDSTM) software tools to assist customers
with the design and layout of array products.
Exar utilizes an "N"-well CMOS library of analog, digital and EEPROM standard
cells which incorporate analog, digital and memory functions. Standard cells
are pre-designed and characterized mini-circuits that adhere to certain design
constraints, and that have been prepared for efficient insertion into custom
integrated circuits. These mini-circuits include widely used functional blocks,
plus primitive circuit elements from which more specialized functions can be
built. The technique of designing with standard cells enables the designer to
focus on functional aspects of the circuit design, rather than physical aspects.
Exar anticipates that market demand for higher performance and more complex
circuits will require increasing levels of precision, simulation and testing
made available with design automation tools, such as computer-aided engineering
("CAE") and computer-aided design ("CAD") systems. In addition, such design
automation systems significantly accelerate the product development cycle,
particularly when used with semi-custom products, such as analog and mixed-
signal arrays and standard cells. The vast majority of the CAE systems
available have been developed for digital design and, consequently, must be
adapted for analog design implementation. Exar considers its CAE/CAD
capabilities to be important to its future success in all areas of new product
development and intends to continue to enhance its CAE/CAD systems.
COMPETITION
- -----------
The semiconductor industry is intensely competitive and is characterized by
rapid technological change and a history of price reduction as production
efficiencies are achieved in successive generations of products. Although the
market for analog and mixed-signal integrated circuits is generally
characterized by longer product life cycles and less dramatic price reductions
than the market for digital integrated circuits, Exar faces substantial
competition in each market in which it participates. Competition in Exar's
markets is based principally on technical innovation, product features, timely
introduction of new products, reliability, price, technical support and service.
Exar believes that it competes favorably in all of these areas.
Because the analog and mixed-signal integrated circuit markets are highly
fragmented, the Company generally encounters different competitors in its
various market areas. Competitors with respect to some of the Company's
products include, among others, Crystal Semiconductor, Dallas Semiconductor,
Hitachi, Level One Communications, Rockwell Communications, and Silicon Systems,
Inc. While Japanese and other foreign manufacturers have not played a major
role in markets for the Company's products to date, they possess the necessary
technical and financial capabilities to compete effectively in these markets,
and there can be no assurance that significant foreign competition will not
develop in the future. As the Company markets its products more aggressively in
Japan, it will encounter greater competition from Japanese manufacturers. Many
of the Company's competitors have substantially greater financial, manufacturing
and marketing, and some of them have greater technical resources. There can be
no assurance that competitive factors will not adversely affect the Company's
future business.
BACKLOG
- ------
Exar defines backlog to include OEM orders and distributor orders for which a
delivery schedule has been specified for product shipment over the succeeding
twelve months. Backlog includes oral orders which are generally subsequently
confirmed by written purchase orders. Exar's backlog does not include Rohm
designed products sold by Exar Japan which has been a material source of revenue
for Exar.
At March 31, 1995, Exar's backlog was approximately $38.9 million, compared with
$39.4 million at March 31, 1994. In addition, Startech's backlog at March 31,
1995 was approximately $3 million.
Sales are made pursuant to purchase orders for current delivery of standard
items or agreements covering purchases over a period of time, which are
frequently subject to revision and cancellation. Lead times for the release of
purchase orders depend upon the scheduling practices of the individual customer,
and the rate of bookings varies from month to month. In addition, Exar's
distributor agreements generally permit the return of up to 10% of the purchases
annually for purposes of stock rotation and also provide for credits to
distributors in the event Exar reduces the price of any product. Because of the
possibility of changes in delivery schedules, cancellations of orders,
distributor returns or price reductions, Exar's backlog as of any particular
date may not be representative of actual sales for any succeeding period.
Customer orders for standard products can be canceled prior to shipment without
substantial penalty.
EMPLOYEES
- ---------
As of April 1, 1995, Exar had 468 employees, including 109 in marketing and
sales, 167 in research, development and engineering-related functions, 134 in
manufacturing and production and 58 in administration. Many of Exar's employees
are highly skilled, and competition in recruiting and retaining such personnel
is particularly intense in the labor market in which Exar operates. Exar
believes that its continued success depends in part on its ability to continue
to attract highly qualified management, marketing and technical personnel. None
of Exar's employees are covered by collective bargaining agreements, and Exar
has not experienced any work stoppages. Exar believes that its employee
relations are good.
EXECUTIVE OFFICERS OF THE COMPANY The name of the Company's executive officers
- ---------------------------------
and certain information about them is set forth below.
NAME AGE POSITION
---- --- --------
George D. Wells 59 Chief Executive Officer, President and
Director
Ronald W. Guire 46 Senior Vice President, Chief Financial
Officer, Secretary and Director
H. Ilhan Refioglu 46 Vice President, Strategic Product Groups
Robert M. Skinner 64 Vice President, Worldwide Sales
Stephen W. Michael 48 Vice President, New Market Development Group
Thomas R.Melendrez 41 Corporate Vice President, Legal Affairs
Paul Kageyama 51 Director of Manufacturing
Thomas W. Jones 47 Director of Reliability and Quality Assurance
Suhas "Sid" Bagwe 55 Director of Strategic Planning and Long Range
Development
Mr. Wells joined Exar as CEO and President of the Company in June 1992 and has
served as a director since September 1992. Mr. Wells has more than 35 years of
semiconductor experience, most recently with LSI Logic Corporation, a
manufacturer of HCMOS and BiCMOS application-specific integrated circuits (LSI)
where he was President and Chief Operating Officer from 1984 to 1992. From 1983
to 1985, Mr. Wells was President of Intersil and General Manager of
Semiconductor, divisions of General Electric. Mr. Wells is also a director of
Micronics Computers, Inc., a manufacturer of high-performance
system boards and Q Logic a supplier of adapter cards and disk controller
chips. Mr. Wells holds a BS in Physics (cum laude) and completed
two years of post-graduate work in Nuclear
Physics at the University of Glasgow, Scotland.
Mr. Guire joined the Company in July 1984 and has been a director of the Company
since June 1985. He has served in a variety of officer positions, and has been
Chief Financial Officer of the Company since May 1985 and Senior Vice President
since November 1989. Mr. Guire was a partner in the certified public accounting
firm of Graubart & Co. from 1979 until he joined the Company in July 1984.
Dr. Refioglu worked continually with Exar from August 1984, serving in a variety
of management positions until April 1994 when he assumed the position as Vice
President, Strategic Product Groups. In addition, he worked for Exar in various
engineering capacities from 1978 until 1983. Dr. Refioglu holds a Ph.D. in
electrical engineering from Arizona State University. In June 1995 Dr. Refioglu
resigned his position with the Company.
Mr. Skinner joined Exar in September of 1992 as Vice President, Worldwide Sales.
He has over 30 years of semiconductor sales experience. From 1985 to 1992 Mr.
Skinner served as Vice President of Sales for LSI. Prior to LSI, he headed his
own import and distribution company of electronic components. He has also held
senior sales management positions with Zilog, Kierulff Electronics, Intersil and
Fairchild.
Mr. Michael joined the Company as Vice President of New Market Development in
September 1992. Mr. Michael has 22 years of semiconductor industry experience,
most recently as Vice President, and General Manager, Analog & Custom Products
with Catalyst Semiconductor ("Catalyst"). He joined Catalyst in 1987 and served
in various senior positions.
Mr. Melendrez joined Exar in April of 1986 as Corporate Attorney. He was
promoted to Director, Legal Affairs in July 1991, and again to Corporate Vice
President, Legal Affairs in March 1993. Mr. Melendrez has over 15 years legal
experience in the semiconductor and related industries. He received a B.A. from
the University of Notre Dame, and a J.D. from the University of San Francisco.
Mr. Kageyama joined Exar in June 1987 and worked in various engineering
positions. He was promoted in May 1989 to Director of Manufacturing. Mr.
Kageyama holds an MSEE from Stanford University and BSEE from the University of
California at Berkeley.
Mr. Jones joined the Company as Director of Total Quality Management in October
1992 and was promoted to Director of Reliability and Quality Assurance in
November 1992. Mr. Jones has over thirty years of industry experience, most
recently with LSI as Director of Quality Assurance. Mr. Jones joined LSI in
September 1990. In December 1989 Mr. Jones joined Elcon Products International,
Fremont California as Director of Manufacturing. From 1970 to December 1989, he
was with Siliconix, where he held various management positions including
Director of Operations, and Director of Quality and Reliability.
Mr. Bagwe joined Exar as Director of Data Communications Product Group in March
1993, a position he held until April 1994 when he assumed his current position
as Director of Strategic Planning and Long Range Business Development. From
January 1990 until March 1993, Mr. Bagwe was Vice President of Marketing and
Sales at Phylon Communications. From 1987 to December 1990 he served as
Director of Business Development for Headland Technology. Mr. Bagwe has also
served in a variety of executive management positions with various companies in
the electronics industry. Mr. Bagwe holds an MBA with honors from Loyola
University in Chicago, a BSEE from the University of Illinois and a BS in
physics from the University of Poone, India.
TRADEMARKS, PATENTS AND LICENSES
- --------------------------------
The Company seeks to protect its proprietary products through a combination of
patent rights, copyrights, mask work registrations and trade secrets. Exar
believes that these intellectual property rights are substantially less
significant to its business than such factors as technical expertise, marketing
ability and customer support.
Because of rapid technological developments in the semiconductor industry and
the broad and rapidly developing patent, mask-work rights and copyright
coverage, certain of Exar's products or processes may, from time to time, give
rise to alleged infringement of existing patents, mask-work rights or
copyrights. Exar has, on occasion, received notifications of alleged
infringements and some allegations remain unresolved. There can be no assurance
regarding the outcome of any particular alleged infringements. The Company
attempts to protect its trade secrets, mask-work rights and other proprietary
information through agreements with customers and suppliers, proprietary
information agreements with employees and other security measures. Although the
Company intends to protect its rights vigorously, there can be no assurance that
these measures will be successful.
ENVIRONMENTAL LAWS
- ------------------
Governmental regulations impose various controls on the discharge to the
environment of hazardous materials used in semiconductor processing. Failure to
comply with present or future regulations could result in the suspension or
cessation of the Company's operations. In addition, such regulations could
restrict Exar's ability to expand at its present location and incur other
substantial expense. Moreover, there can be no assurance that changes in
governmental regulations will not result in the imposition of other requirements
which could impede operating performance. Any failure by Exar to adequately
control hazardous substances could also subject it to future liabilities.
The California Regional Water Quality Control Board for the San Francisco Bay
Region is conducting an investigation of contaminants detected in subsurface
groundwater at approximately 50 different sites in Santa Clara County,
California, including a location formerly leased by Exar in Sunnyvale,
California. Ongoing studies indicate that contaminants in groundwater beneath
such leased facility result from the migration of contaminants released by other
neighboring manufacturers. Although this matter is subject to an unusual degree
of uncertainty, on the basis of the facts presently known, the ultimate outcome
of this matter is not expected to have a material adverse effect on the
financial position or results of operations of the Company.
During 1987, Micro Power became aware of low-level groundwater contamination on
its principal manufacturing property. Although the area of contamination
appears to have been defined, the source has not been determined. Micro Power
has reached an informal agreement with another company to participate in the
cost of the remedial investigations and the final clean up, which is expected to
continue for approximately 10-15 years. Micro Power has recorded its share of
the estimated liability, approximately $1.1 million.
ITEM 2 PROPERTIES
----------
The Company's corporate headquarters are located in San Jose, California. The
leased facility consists of approximately 81,000 square feet of office space
occupied by Exar's principal administrative, test, engineering, marketing,
customer service and sales departments. The lease on this facility expires in
November 1995. In addition, the Company leases approximately 60,000 square feet
of office space in Santa Clara, California. This space is occupied by certain
of the Company's administrative, sales and manufacturing departments. The lease
on this facility expires in 1996.
Exar owns 13.1 acres of land in Fremont, California which it acquired in 1985.
In October 1994, the Company began construction on facilities at this site
consisting of approximately 151,000 square feet. The facilities are expected to
be completed in November 1995 and will be occupied by Exar's principal
administrative, test, engineering, marketing, customer service and sales
departments. (See "Managements Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources".)
ITEM 3 LEGAL PROCEEDINGS
-----------------
None.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matters were submitted to a vote of security holders during the quarter ended
March 31, 1995.
PART II
-------
ITEM 5 MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
------------------------------------------------- -------------------
The Common Stock of Exar is traded on the NASDAQ National Market System under
the symbol "EXAR." The following table sets forth the range of high and low
sales prices for the Company's common stock for the periods indicated, as
reported by NASDAQ. Such prices have been adjusted for the stock dividend
effected in the form of a stock split in October 1994. The listed quotations
represent inter-dealer prices without retail markup, markdown or commissions.
COMMON STOCK PRICES
-------------------
HIGH LOW
---- ---
FISCAL 1995
- -----------
Quarter ended March 31, 1995 $24 3/4 $19 1/2
Quarter ended December 31, 1994 $24 1/2 $19 1/2
Quarter ended September 30, 1994 $35 $25 1/2
Quarter ended June 30, 1994 $28 1/4 $21 1/2
FISCAL 1994
- -----------
Quarter ended March 31, 1994 $18 1/8 $14 3/8
Quarter ended December 31, 1993 $22 3/8 $14 1/8
Quarter ended September 30, 1993 $23 $18
Quarter ended June 30, 1993 $19 1/8 $13 7/8
The Company has never paid dividends on its Common Stock and presently intends
to continue this policy in order to retain earnings for use in its business.
The Company had approximately 360 stockholders of record as of May 31, 1995.
The Company believes it has in excess of 2,500 beneficial stockholders. The
last sales price for Exar's Common Stock, as reported by NASDAQ on May 31, 1995,
was $26.50 per share.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
------------------------------------
YEARS ENDED MARCH 31,
---------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
Consolidated Statements
of Operations Data:
Net Sales $112,730 $139,775 $146,096 $161,659 $159,472
Income (Loss)From
Operations 8,234 13,250 18,858 20,999 (4,989)
Net Income (Loss) 7,150 10,819 13,687 15,665 (11,084)
Net Income (Loss) Per
Share (a) .97 1.16 1.33 1.52 (1.25)
Weighted Average Shares
Outstanding(a) 7,404 9,354 10,260 10,287 8,835
MARCH 31,
---------
(IN THOUSANDS)
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
Consolidated Balance
Sheet Data:
Working Capital $41,337 $73,426 $90,827 $ 85,842 $ 81,286
Total Assets 105,674 138,235 138,898 132,219 150,080
Redeemable Preferred 21,075 13,135 -- -- --
Stock
Retained Earnings 10,770 21,529 35,216 50,881 39,797
Stockholders' Equity 53,798 91,623 108,773 105,378 107,696
(a) All share and per share amounts for 1991 through 1994 have been restated to
give effect to the 3 for 2 stock dividend effected in the form of a stock split
in October 1994.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
GENERAL
- -------
The Company derives revenue principally from the sale of integrated circuits for
use in communications, consumer electronics, document imaging, automotive,
personal computers and mass storage products and other selected areas. The
Company's gross margins from sales of integrated circuits vary depending on
competition from other manufacturers, the volume of products manufactured and
sold, and the Company's ability to achieve certain manufacturing efficiencies.
The Company's newer analog and mixed-signal products tend to have higher gross
margins than many of the Company's more mature products and margins of any
particular product may erode over time.
The Company has wholly-owned subsidiaries in Japan and the United Kingdom to
support its sales operations in each of those areas. The Company's business in
Japan includes the sale of integrated circuits which are primarily for use in
consumer electronics products and such sales are made with sales assistance from
Rohm. The sale of integrated circuits for use in consumer electronics products
is a high volume business, but generally such products have lower gross margins
than the Company's other products.
The Company has made a number of changes in its underlying business in an effort
to reduce its low-margin businesses. At the same time, to increase its share of
revenues from the sale of proprietary products and to acquire additional
technology, the Company made significant investments through direct acquisition
of companies with related product lines. These actions, which have continued
into the first quarter of fiscal 1996, are summarized below:
Reduction of Low Margin Businesses
- ----------------------------------
Effective April 1, 1994, the Company transferred its wafer manufacturing
operations to Rohm and thereby eliminated sales derived from wafer processing
services. In fiscal 1995, the Company continued to provide certain services to
Rohm in exchange for an administrative fee, which was not significant, but this
activity and the related fees have ceased. However, Rohm continues to be a
major supplier of wafers to the Company.
Effective April 1, 1995, the Company no longer recognizes revenue from the sale
of Rohm-designed integrated circuits for the consumer products industry in
Japan. However, the Company will recognize commission revenue from this
business in the future and will continue to recognize revenue from the sale of
its proprietary products in Japan. In fiscal 1995 sales of Rohm designed
products were approximately $36 million. The Company believes that the impact
of the elimination of these revenues will not have a material impact on results
from operations.
In May 1995, the Company was notified by its foundry supplier
of wafers used in its mass storage products that no wafers
would be delivered in the second quarter of fiscal 1996. Accordingly, the
Company will discontinue its mass storage product line, which has historically
been a low margin business, in the second quarter of fiscal 1996. In the year
ended March 31, 1995, sales of mass storage products were approximately $20
million and the product line generated a small operating loss. The Company is
currently evaluating the assets associated with this product line and other
costs associated with the cancellation of these products. The Company has made
a claim against its foundry supplier for recovery of write-offs it may incur
related to the termination of this product line.
Recent Acquisitions
- -------------------
In May 1994, the Company acquired Orgin Technology, Inc. (Origin) for $1.4
million in cash (see Note 9 to consolidated financial statements). Origin
designs, develops and markets proprietary automatic speech recognition (ASR)
products for the consumer market.
In June 1994, the Company acquired Micro Power Systems, Inc. (Micro Power) for
$21.7 million in cash (see Note 9 to consolidated financial statements). Micro
Power designs, develops, manufactures and markets high-performance data
converters, data acquisition subsystems and other sophisticated electronic
components for the document imaging, communications, microperipherals,
industrial and other markets.
On March 31, 1995, the Company acquired Startech Semiconductor, Inc. (Startech)
in exchange for a combination of cash and common stock valued at $13.2 million.
Startech designs, develops and markets application-specific standard products
for a variety of markets, including the data communications, telecommunications
and personal computer workstation and peripheral markets. Startech reported
total revenues of $9.7 million for its most recent fiscal year ended September
30, 1994.
In the first quarter of fiscal 1996, the Company acquired Silicon
Microstructures, Inc. (SMI). SMI designs, develops and markets silicon sensors
for a variety of markets, including medical, automotive and consumer.
All of the acquisitions have been accounted for as purchases and the results of
operations for fiscal 1995 include the operations of the acquired companies
subsequent to the dates of acquisition. Accordingly, the operations of these
companies, prior to acquisition, are not reflected in the Company's historical
operating results. As a result of the acquisitions completed in fiscal 1995,
the Company recorded approximately $6.9 million of goodwill which is being
amortized over a period of five years. The remaining portion of the excess
purchase price (approximately $27.8 million) was allocated to acquired research
and development and was expensed in fiscal 1995.
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.
YEARS ENDED MARCH 31,
---------------------
1995 1994 1993
---- ---- ----
Net sales 100.0% 100.0% 100.0%
Cost of sales 61.1 67.6 66.2
Research and development 9.0 7.1 7.8
Write-off of in-process R&D 17.4 - -
Selling, general and
administrative 15.6 12.4 13.1
----- ----- -----
Operating income (loss) (3.1) 12.9 12.9
Other income, net 1.8 1.9 1.5
----- ----- -----
Income (loss) before income
taxes (1.3) 14.8 14.4
Income taxes 5.7 5.1 5.0
----- ----- -----
Net income (loss) (7.0)% 9.7% 9.4%
====== ===== =====
FISCAL 1995 VS FISCAL 1994
- --------------------------
Net sales during fiscal 1995 were approximately $159.5 million compared to
$161.7 million in fiscal 1994 as the addition of the revenues of Origin and
Micro Power, offset in part, the revenues previously provided under the wafer
processing arrangement with Rohm and a decrease in sales of second source
consumer products in Japan.
The Company experienced increases in sales of integrated circuits for use in new
markets, communications and microperipheral products which were partially offset
by decreases in sales of integrated circuits for use in the communications
product line. These decreases were due, in part, to increased competition and
no new product introductions within the modem market.
Overall, sales of proprietary products increased by approximately 29%, while
sales of second source consumer products decreased by approximately 21%. In
fiscal 1995, Sales to domestic customers increased by 48% to $62.3 million.
International sales, excluding wafer sales to Rohm, remained relatively constant
at approximately $97 million. The Company's international sales consist of
sales from the United States to overseas customers and sales by the Company's
wholly-owned subsidiaries in Japan and the United Kingdom. Sales by the
Company's foreign subsidiaries are denominated in the currency of the local
country, while all other international sales are denominated in U.S. dollars.
The fact that the Company operates internationally gives rise to exposures from
changes in currency exchange rates. The Company has adopted a set of practices
to strictly minimize its foreign currency risk which includes the use of foreign
currency exchange contracts to hedge amounts receivable from its foreign
subsidiaries. In addition, foreign sales may be subject to tariffs in certain
countries or with regard to certain products; however, the Company's profit
margin on international sales of integrated circuits, adjusted for differences
in product mix, is not significantly different from that realized on its sales
to domestic customers.
Cost of sales as a percentage of net sales decreased from 68% in fiscal 1994 to
61% in fiscal 1995. The corresponding increase in gross margins is due
primarily to changes in product mix, including i) the termination of the
arrangement under which the Company provided wafer processing services to Rohm,
ii) the decrease in sales of second source consumer products in Japan , and iii)
the addition of higher margin product lines as a result of the acquisitions
discussed above.
Expenditures for research and development during fiscal 1995 increased by $2.9
million or 25% compared to fiscal 1994. As a percentage of net sales,
expenditures for research and development increased from approximately 7% in
fiscal 1994 to 9% in fiscal 1995. The increase in research and development
expenses is primarily attributable to additional headcount and additional
research and development expenditures of acquired companies, as well as changes
in product mix as the products of acquired companies displaced the wafer foundry
services previously provided to Rohm.
Selling, general and administrative expenses were $24 million in fiscal 1995
compared to $20 million in fiscal 1994. As a percentage of net sales, selling
general and administrative expenses increased from approximately 12% of net
sales in fiscal 1994 to 16% of net sales in fiscal 1995. The increases are due
primarily due to the additional selling, general and administrative expenses of
acquired companies and changes in product mix.
Net interest income during fiscal 1995 was consistent with the amounts reported
in fiscal 1994 as higher average investment rates in fiscal 1995 were partially
offset by lower levels of cash and short-term investments.
The Company's provision for income taxes is based on income from operations,
excluding the write-off of in-process research and development, as there was no
tax benefit associated with such write-off. The effective income tax rate for
fiscal 1995, before the write-off of in-process research and development, was
consistent with the federal statutory rate of 35% as state income taxes and
foreign income which is taxed at rates different from U.S. income tax rates was
offset by tax advantaged investment income and tax savings generated from
utilization of net operating losses and the Company's foreign sales corporation.
Although the Company reported a net loss for fiscal 1995, excluding the effects
of the write-off of in-process research and development, the Company reported
net income of $16.7 million ($1.81 per share) compared to $15.7 million ($1.52
per share) in fiscal 1994.
To date inflation has not had a significant impact of the Company's operating
results.
FISCAL 1994 VS FISCAL 1993
- --------------------------
Net sales during fiscal 1994 increased approximately 11% from 1993. Sales of
integrated circuits increased approximately 7% while net sales of wafer services
to Rohm increased approximately 31%. Substantial increases in sales of
integrated circuits for use in new markets, telecommunications and advanced
consumer electronics products were partially offset by a significant decrease in
sales of integrated circuits for use in data communications and microperipheral
products . The decrease in sales of data communication products was due, in
part, to price erosion in that market and delay of new product introductions
while the decrease in sales of microperipheral products was due primarily to
supply shortages of certain products being manufactured by foundries new to the
Company for the hard disk drive market. Sales of Rohm-designed integrated
circuits (which are primarily for use in consumer electronics products)
increased by approximately 7% while sales of all other integrated circuits
increased by approximately 8%.
International sales, other than wafer services provided to Rohm, increased by
14% to $97.6 million in fiscal 1994 from $85.8 million in fiscal 1993, while
domestic sales decreased 3% to $42.0 million from $43.5 million
Cost of sales as a percentage of net sales increased to 68% in fiscal 1994 from
66% in fiscal 1993. Such increase was due primarily to changes in the product
mix, including the increase in sales of wafer services provided to Rohm and
Rohm-designed consumer electronic products.
Expenditures for research and development during fiscal 1994 remained relatively
constant as compared to fiscal 1993, but as a percentage of net sales decreased
to approximately 7% from approximately 8% reported in fiscal 1993.
Selling, general and administrative expenses, as a percentage of net sales,
decreased slightly during fiscal 1994.
Net interest income during fiscal 1994 increased from fiscal 1993 due,
primarily, to an increase in cash which was partially offset by a decrease in
investment rates.
Other income during fiscal 1994 includes primarily the gain on disposal of idle
equipment and foreign currency gains offset in part by a write down of
investments to estimated net realizable value..
The Company's effective income tax rate during fiscal 1994 was 36% as compared
to the federal statutory rate of 35%, due primarily to state taxes offset in
part by tax savings generated from utilization of the Company's foreign sales
corporation and tax advantaged investment income.
QUARTERLY RESULTS
-----------------
The following table contains selected unaudited quarterly financial data for the
fiscal years ended March 31, 1994 and 1995. In the opinion of management, this
unaudited information has been prepared on the same basis as the audited
information and includes all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the information set forth therein.
QUARTERLY RESULTS
(Three Months Ended)
(In thousands, except per share amounts)
JUNE 30, SEPT. DEC. 31, MARCH 31,
30,
1993 1993 1993 1994
STATEMENT OF INCOME
DATA
Net sales $42,635 $43,316 $38,407 $37,301
Cost of sales 29,197 29,343 25,667 25,006
------- ------- ------ -------
Gross profit 13,438 13,973 12,740 12,295
Research and
development 3,007 2,990 2,630 2,846
Selling, general,
and
administrative 4,988 5,219 4,923 4,844
Write-off of in-
process research
and development -- -- -- --
------ ------ ------- ------
Operating
income (loss) 5,443 5,764 5,187 4,605
Other income, net 672 830 1,053 449
------ ------ ------- ------
Income (loss)
before income
taxes and
cumulative effect
of change in
accounting
principle 6,115 6,594 6,240 5,054
Income taxes 2,243 2,518 2,274 1,503
------ ------ ------- ------
Income (loss)
before cumulative
effect of change in
accounting
principle 3,872 4,076 3,966 3,551
Cumulative
effect of change
in accounting
principle 200 -- -- --
------ ------ ------- ------
Net income (loss) $4,072 $4,076 $ 3,966 $3,551
====== ====== ======= ======
Net income (loss)
per share (a) $ .39 $ .38 $ .37 $ .38
----- ----- ------ -----
Shares used in
computation (a) 10,532 10,797 10,700 9,408
======= ====== ======= =======
QUARTERLY RESULTS (Continued)
(Three Months Ended)
(In thousands, except per share amounts)
JUNE 30, SEPT.30 DEC.31 MARCH 31,
1994 1994 1994 1995
STATEMENT OF INCOME
DATA
Net sales $38,061 $40,752 $40,029 $40,630
Cost of sales 24,203 25,110 24,316 23,871
------- ------ ------ ------
Gross profit 13,858 15,642 15,713 16,759
Research and
development 3,212 3,385 3,600 4,179
Selling, general,
and
administrative 5,965 6,154 5,944 5,917
Write-off of in-
process research
and development 16,875 -- -- 10,951
------- ------ ------ ------
Operating
income (loss) (12,194) 6,103 6,169 (4,288)
Other income, net 733 398 559 509
------- ------ ------ ------
Income (loss)
before income
taxes and
cumulative effect
of change in
accounting
principle (11,461) 6,501 6,728 (3,779)
Income taxes 1,870 2,320 2,372 2,511
------- ------ ------ ------
Income (loss)
before cumulative
effect of change in
accounting
principle (13,331) 4,181 4,356 (6,290)
Cumulative
effect of change
in accounting
principle -- -- -- --
------- ------ ------ ------
Net income (loss) $(13,331) $4,181 $4,356 $(6,290)
========= ====== ====== ========
Net income (loss)
per share (a) $(1.49) $ .45 $ .47 $(.70)
------ ----- ----- -----
Shares used in
computation (a) 5,949 6,165 9,334 8,938
======= ======= ====== =======
(a) All share and per share amounts have been restated to give effect to the 3
for 2 stock dividend effected in the form of a stock split in October 1994.
The Company's operations have reflected, and may in the future reflect,
substantial fluctuations from period to period as a result of the impact of
general economic conditions, the timing of orders from major customers,
variations in manufacturing efficiencies, exchange rate fluctuations, management
decisions to commence or discontinue certain product lines, and the Company's
ability to design, introduce and manufacture new products on a cost-effective
and timely basis
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the fiscal years ended March 31, 1993, 1994 and 1995, the Company
financed its operations primarily from existing cash and short-term investments
and cash flows from operations.
At March 31, 1995, the Company had $62.2 million in cash and short-term
investments. The Company also has short-term, unsecured, informal lines of
credit under which it may borrow up to $35.5 million, none of which was being
utilized at March 31, 1995. In addition, the Company has a credit facility with
certain domestic and foreign banks under which it may borrow up to $37 million
in support of its foreign currency transactions. At March 31, 1995, the Company
had outstanding Japanese yen forward contracts totaling $2.1 million which
mature through June 1995.
During the first quarter of fiscal 1995, the Company acquired Origin and Micro
Power for approximately $23.1 in cash. On March 31, 1995, the Company completed
the acquisition of Startech in exchange for a combination of cash and common
stock valued at $13.2 million. Certain of the purchase agreements include
provisions for adjustments to the final purchase price and/or include deferred
compensation arrangements which may result in additional cash payments of up to
$16.5 million over the next three years.
The building lease for the Company's principal manufacturing, engineering and
administration facility expires in November 1995. The Company is in the process
of constructing new facilities on its property in Fremont, California. The new
facilities are expected to be completed in November 1995 at an estimated cost of
approximately $14 million. The Company believes that such construction will
require the use of approximately $12 million in cash in fiscal 1996.
The Company anticipates that it will finance its 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 the needs of the
Company and prevailing market conditions.
ITEM 8. FINANCIAL STATEMENTS
--------------------
Independent Auditors' Report
----------------------------
Board of Directors and Stockholders
Exar Corporation:
We have audited the accompanying consolidated balance sheets of Exar Corporation
and subsidiaries as of March 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three year period ended March 31, 1995. In connection with our
audits of the consolidated financial statements, we have also audited the
financial statement schedule for each of the years in the three-year period
ended March 31, 1995. These consolidated financial statements and the financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Exar Corporation and
subsidiaries as of March 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the years in the three-year period ended March
31, 1995 in conformity with generally accepted accounting principles. Also in
our opinion, the related consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
KPMG PEAT MARWICK LLP
Palo Alto, California
May 3, 1995, Except
as to Note 13 which
is as of June 14, 1995
EXAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND 1994 (IN THOUSANDS, EXCEPT SHARE
AMOUNTS)
1995 1994
ASSETS
CURRENT ASSETS:
Cash and equivalents $57,029 $62,400
Short-term investments 5,133 5,254
Accounts receivable, net of allowances of $2,985 and 29,719 25,128
$2,359
Inventories 18,411 11,927
Prepaid expenses and other 1,687 1,576
Deferred income taxes 7,277 4,376
Total current assets 119,256 110,661
LAND, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, Net 22,192 19,103
GOODWILL, net of accumulated amortization of $780 4,866 -
OTHER ASSETS 3,766 2,455
TOTAL ASSETS $150,080 $132,219
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $27,326 $16,174
Accrued compensation and related benefits 4,925 4,496
Other accrued expenses 1,912 2,068
Income taxes payable 3,807 2,081
Total current liabilities 37,970 24,819
DEFERRED INCOME TAXES 1,857 2,022
LONG-TERM OBLIGATIONS 2,557 -
STOCKHOLDERS' EQUITY:
Preferred stock; $.0001 par value; 2,250,000 shares
authorized;
no shares outstanding - -
Common stock; $.0001 par value; 25,000,000 shares
authorized;
9,309,066 and 10,376,142 shares outstanding 67,217 77,792
Cumulative translation adjustments 682 350
Retained earnings 39,797 50,881
Treasury stock; 1,727,052 shares at cost - (23,645)
Total stockholders' equity 107,696 105,378
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$150,080 $132,219
See notes to consolidated financial statements.
EXAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 1995, 1994 AND 1993
(In thousands, except per share amounts)
1995 1994 1993
NET SALES $ 159,472 $ 161,659 $ 146,096
COST AND EXPENSES:
Cost of sales 97,500 109,213 96,799
Research and development 14,375 11,473 11,351
Selling, general and administrative 23,980 19,974 19,088
Write-off of in-process research
and development 27,826 - -
Goodwill amortization 780 - -
------- --------- -------
Total costs and expenses 164,461 140,660 127,238
------- --------- --------
INCOME (LOSS) FROM OPERATIONS (4,989) 20,999 18,858
OTHER INCOME (EXPENSE)
Interest income 2,471 2,414 2,899
Interest expense (99) (85) (198)
Other, net 606 675 (454)
-------- --------- ---------
Total other income, net 2,978 3,004 2,247
-------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES AND
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE (2,011) 24,003 21,105
INCOME TAXES 9,073 8,538 7,418
-------- --------- ---------
INCOME (L0SS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE (11,084) 15,465 13,687
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE - 200 -
--------- --------- --------
NET INCOME (LOSS) ($11,084) $15,665 $13,687
--------- --------- --------
--------- --------- --------
PER SHARE:
Income (loss) before cumulative
effect of change in accounting
principle ($1.25) $1.50 $1.33
Cumulative effect of change in
accounting principle - 0.02 -
--------- --------- ----------
Net income (loss) ($1.25) $ 1.52 $1.33
WEIGHTED AVERAGE SHARES OUTSTANDING 8,835 10,287 10,260
--------- --------- ---------
--------- --------- ---------
See notes to consolidated financial statements
EXAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY
YEARS ENDED MARCH 31, 1995, 1994 AND 1993 (IN THOUSANDS, EXCEPT SHARE AMOUNTS
Common Stock Treasury Stock
Shares Amount Shares Amount
BALANCES, April 1,
1992 9,690,396 $ 70,110 - $ -
Exercise of stock
options 233,034 1,551
Income tax benefit
from stock options
exercised and sold - 628
Stock issued under
Employee Stock
Participation Plan 67,536 699
Translation adjustment
Net income
BALANCES, March 31,
1993 9,990,966 72,988 - -
Exercise of stock
options 324,503 2,855
Income tax benefit
from stock options
exercised and sold - 1,100
Stock issued under
Employee Stock
Participation Plan 60,673 849
Acquisition of
treasury stock,
including transaction
costs of $100 (1,727,052) (23,645)
Translation adjustment
Net income
BALANCES, March 31,
1994 10,376,142 77,792 (1,727,052) (23,645)
Stock issued in
connection with
acquisitions 349,587 8,750
Exercise of stock
options 246,661 2,566
Income tax benefit
from stock options
exercised and sold 739
Stock issued under
Employee Stock
Participation Plan 63,728 1,015
Retirement of treasury
stock (1,727,052) (23,645) 1,727,052 23,645
Translation adjustment
Net loss
BALANCES, March 31,
1995 9,309,066 $ 67,217 - $ -
See notes to
consolidated financial
statements
EXAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)
YEARS ENDED MARCH 31, 1995, 1994 AND 1993 (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Cumulative Total
Translation Retained Stockholders'
Adjustments Earnings Equity
BALANCES, April 1, 1992 $(16) $ 21,529 $91,623
Exercise of stock options 1,551
Income tax benefit from
stock options exercised
and sold 628
Stock issued under
Employee Stock
Participation Plan 699
Translation adjustment 585 585
Net income 13,687 13,687
BALANCES, March 31, 1993 569 35,216 108,773
Exercise of stock options 2,855
Income tax benefit from
stock options exercised
and sold 1,100
Stock issued under
Employee Stock
Participation Plan 849
Acquisition of treasury
stock, including
transaction costs of $100 (23,645)
Translation adjustment (219) (219)
Net income 15,665 15,665
BALANCES, March 31, 1994 350 50,881 105,378
Stock issued in connection
with acquisitions 8,750
Exercise of stock options 2,566
Income tax benefit from
stock options exercised
and sold 739
Stock issued under
Employee Stock
Participation Plan 1,015
Retirement of treasury
stock -
Translation adjustment 332 332
Net loss (11,084) (11,084)
BALANCES, March 31, 1995 $682 $ 39,797 $107,696
See notes to consolidated
financial statements
EXAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1995, 1994 AND
1993 (IN THOUSANDS)
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($11,084) $ 15,665 $ 13,687
Reconciliation to net cash provided
by operating activities:
Depreciation and amortization 5,725 3,795 3,278
Provision for doubtful accounts
and sales returns 626 471 (383)
Write-down of investments to
estimated net realizable value - 1,256 1,568
Write-off of in process research
and development 27,826 - -
Deferred income taxes (531) (925) (3,058)
Changes in operating assets and
liabilities:
Accounts receivable (849) (1,650) 35
Inventories (267) (248) 2,999
Prepaid expenses and other 364 (752) (298)
Accounts payable 5,009 (274) (4,133)
Accrued compensation and
related benefits (1,165) (716) (19)
Other accrued expenses (4,438) (422) (465)
Income taxes payable 1,671 (1,775) 3,904
Net cash provided by
operating activities 22,887 14,425 17,115
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and leasehold
improvements (6,798) (7,546) (3,577)
Proceeds from disposition of
equipment and leasehold improvements - - 1,574
Purchases of short-term investments (6,450) (23,000) (22,002)
Proceeds from sales of short-term
investments 8,316 28,687 22,053
Other assets (1,228) (98) (581)
Acquisitions, net of cash acquired (26,357) - -
Net cash used in investing
activities (32,517) (1,957) (2,533)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common
stock 3,581 3,704 2,250
Long-term obligations 346 - -
Acquisition of treasury stock - (23,645) -
Net cash provided by (used
in) financing activities 3,927 (19,941) 2,250
EFFECT OF EXCHANGE RATE
CHANGES ON CASH 332 (219) 585
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS (5,371) (7,692) 17,417
CASH AND EQUIVALENTS AT BEGINNING OF
YEAR 62,400 70,092 52,675
CASH AND EQUIVALENTS AT END OF YEAR $ 57,029 $ 62,400 $ 70,092
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for income taxes $ 7,857 $ 10,853 $ 6,572
Cash paid for interest - $ 5 $ 173
See notes to consolidated financial
statements.
EXAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1995, 1994 AND 1993
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS - Exar Corporation (Exar or the Company) designs,
develops, and markets analog and mixed-signal application-specific
integrated circuits for use in communications, document imaging, mass
storage, consumer electronics and other selected products.
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial
statements include the accounts of Exar and its wholly-owned subsidiaries.
All significant intercompany accounts and transactions have been
eliminated.
CASH AND EQUIVALENTS - The Company considers all highly liquid investments
with original maturities of three months or less, when purchased, to be
cash equivalents.
SHORT-TERM INVESTMENTS - The Company's policy is to invest in various
short-term instruments with investment grade credit ratings. Generally such
investments have contractual maturities of less than one year. At March
31, 1995, short-term investments consist of certificates of deposits of
$2,000,000, auction-rate securities of $1,260,000, commercial paper of
$950,000 and money market and/or mutual fund investments of $923,000.
Effective April 1, 1994 the Company adopted Statement of Financial
Accounting Standards No. 115 (SFAS 115), "Accounting for Certain
Investments in Debt and Equity Securities." The Company classifies its
short-term investments as "available-for-sale securities" and the cost of
securities sold is based on the specific identification method. During the
year ended March 31, 1995 there was no significant difference between the
fair market value and the underlying cost of such investments.
INVENTORIES - Inventories are stated at the lower of standard cost (first-
in, first-out method) or market.
LAND, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS - Land, equipment, and
leasehold improvements are stated at cost. Depreciation and amortization
are computed using the straight-line method over the shorter of the
estimated useful lives of the assets or the lease term.
GOODWILL - Goodwill is amortized on a straight-line basis over a period of
five years.
INCOME TAXES - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting
for Income Taxes," which requires the asset and liability approach for
financial accounting and reporting of income taxes. Deferred income taxes
reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes.
REVENUE RECOGNITION - Revenue is recognized at the time of shipment,
including sales made to distributors under agreements allowing limited
right of return and price protection on merchandise unsold by the
distributors. For sales made to distributors, reserves are provided for
returns and price allowances at the time of shipment.
NET INCOME PER SHARE - Net income per share is calculated based on the
weighted average number of common and dilutive common share equivalents
outstanding. Common share equivalents reflect the dilutive effect of
outstanding stock options. In September 1994, the Company declared a 3 for
2 stock dividend which was effected in the form of a stock split. All
share and per share amounts have been retroactively restated to give effect
to the stock split.
.
FOREIGN CURRENCY - The functional currency of each of the Company's foreign
subsidiaries is the local currency of that country. Material translation
adjustments are included in stockholders' equity. Gains and losses
resulting from foreign currency transactions are included in other income.
The Company enters into foreign currency exchange contracts from time-to-
time to hedge certain currency exposures. At March 31, 1995, the Company
had Japanese yen forward contracts for the conversion of 197,000,000 yen to
U.S. dollars ($2,139,000 at March 31, 1995) which mature through June 1995.
The Company is exposed to credit-related losses in the event of non
performance by the parties to its foreign currency exchange contracts, but
the credit exposure on such contracts was not significant at March 31,
1995. Net foreign currency transaction gains were $511,000, $1,400,000 and
$372,000 in 1995, 1994, and 1993, respectively.
FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK - Financial
instruments which potentially subject the Company to concentrations of
credit risk consist primarily of accounts receivable and cash and short-
term investments. The majority of the Company's sales are derived from
manufacturers in the computer, communications and consumer electronics
industries. The Company performs on-going credit evaluations of its
customers and generally does not require collateral for sales on credit.
The Company maintains reserves for potential credit losses and such losses
have been within management's expectations. Approximately 51% of net
accounts receivable relates to sales to customers in Japan. By policy, the
Company places its cash and short-term investments with high credit quality
financial institutions and limits the amounts invested with any one
financial institution or in any type of financial instrument. The Company
does not hold or issue financial instruments for trading purposes.
2. INVENTORIES
Inventories at March 31 consist of the following:
1995 1994
---- ----
(In thousands)
Raw materials $ 301 $ 227
Work in process 11,746 6,597
Finished goods 6,364 5,103
------- -------
Total $18,411 $11,927
======= =======
3. LAND, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Land, equipment, and leasehold improvements at March 31 consist of the
following:
1995 1994
---- ----
(In thousands)
Land $6,561 $ 6,561
Machinery and equipment 40,976 34,641
Leasehold improvements 1,287 1,133
Construction in progress 2,747 -
------ ------
51,571 42,335
Accumulated depreciation and
amortization (29,379) (23,232)
-------- ------
Total $22,192 $19,103
======= ======
4. BORROWING ARRANGEMENTS
The Company has two short-term, unsecured, informal bank lines of credit
under which it may borrow up to $35,500,000 through January 31, 1996. In
addition, the Company has a credit facility with certain domestic and
foreign banks under which it may borrow up to $37 million in support of its
foreign currency transactions. Interest rates are based on the term
federal funds rate (5.75% at March 31, 1995) plus .25% to .55%. At March
31, 1995 there were no outstanding borrowings under these credit
facilities.
5. INCOME TAXES
The provision for income taxes for the years ended March 31 consists of the
following:
1995 1994 1993
---- ---- ----
(In thousands)
Current:
Federal $7,210 $7,076 $8,115
State 1,826 2,079 2,113
Foreign 568 108 248
------ ------ ------
9,604 9,263 10,476
----- ----- ------
Deferred:
Federal (172) (598) (3,122)
State (359) (207) -
Foreign - 80 64
------ ------ ------
(531) ( 725) (3,058)
------ ------ -------
Total $9,073 $8,538 $7,418
====== ====== ======
Consolidated pretax income includes foreign income of approximately
$1,066,000, $399,000, and $616,000 in 1995, 1994, and 1993, respectively.
The Company adopted SFAS 109 effective April 1, 1993. The principal impact
to the Company was a change in the recognition criteria for deferred tax
assets. The cumulative effect of adopting SFAS 109 was to increase 1994
net income by $200,000 ($0.02 per share). Significant components of the
Company's net deferred tax asset at March 31, 1995 and 1994 are as follows:
1995 1994
---- ----
Deferred tax assets: (In thousands)
Reserves and accruals not currently deductible $ 4,571 $ 3,452
Net operating loss and tax credit carryforwards 2,291 -
State income taxes 371 821
Other 44 103
------ -------
Total deferred tax assets 7,277 4,376
----- -------
Deferred tax liabilities:
Depreciation (1,460) (1,784)
Other (397) (238)
------- --------
Total deferred tax liabilities (1,857) (2,022)
------- --------
Net deferred tax assets $5,420 $ 2,354
====== =======
The Company's net deferred tax assets at March 31, 1995 include $2,535,000
of deferred tax assets arising from the acquisitions of Micro Power
Systems, Inc., Origin Technology, Inc. and Startech Semiconductor, Inc.
(see Note 9). Approximately $1,266,000 of the acquired deferred tax assets
relate to net operating loss carryforwards which previously had not been
recognized. In accordance with the provisions of SFAS 109, the portion of
the deferred tax assets relating to net operating loss carryforwards have
been recognized as a reduction of the recorded value of goodwill. No
valuation allowance for deferred tax assets was required for the years
ended March 31, 1995 and 1994 as management believes it is more likely than
not that the Company will generate sufficient taxable income to realize its
deferred tax assets.
Certain of the Company's subsidiaries have net operating loss and tax
credit carryforwards of approximately $2,700,000 for state income tax
purposes and $5,000,000 for federal income tax purposes, which are
available to offset future taxable income through 1997 and 2008,
respectively. Current federal and California tax law includes provisions
limiting the use of net operating loss and tax credit carryforwards in the
event of certain changes in ownership, as defined. The Company's ability
to utilize its net operating loss and tax credit carryforwards could be
limited according to these provisions.
The following summarizes differences between the amount computed by
applying the statutory federal income tax rate to income (loss) before
income taxes and the provision for income taxes for each of the years
ended March 31:
1995 1994 1993
---- ---- ----
(In thousands)
Income taxes at statutory rate $(704) $8,401 $7,176
State income taxes, net of federal
income tax benefit 954 1,217 1,395
Write-off of in-process research
and development 9,739 - -
Goodwill amortization 273 - -
Benefit of acquired net operating
losses not previously recognized (574) - -
Benefit from utilization of
net operating losses (70) - -
Tax-exempt interest income (168) (531) (621)
Benefit of foreign sales corporation (541) (648) (379)
Foreign income taxed at rates
higher than U.S. tax rates 175 48 102
Other, net (11) 51 (255)
------ ----- ------
Total $9,073 $8,538 $7,418
====== ====== ======
The California income tax authorities may propose to assess income taxes
using the unitary taxation method for some or all of the fiscal years 1986
to 1990, which remain open to examination under the statute of limitations.
This taxation method has the effect of apportioning taxable income of Rohm
to Exar and could possibly result in additional state income tax liability
if successfully asserted. The California income tax authorities have
assessed Exar for income taxes under the unitary taxation method for the
years 1980 through 1985. Such assessments have been paid or accrued as of
March 31, 1995. However, management believes the unitary taxation method is
inappropriate for the Company and has filed refund claims or protests with
respect to such amounts.
6. EMPLOYEE BENEFIT PLANS
EXAR SAVINGS PLAN - The Exar Savings Plan covers substantially all
employees of the Company. The Savings Plan provides for voluntary salary
reduction contributions in accordance with Section 401(k) of the Internal
Revenue Code as well as contributions from the Company based on the
achievement of specified operating results. Exar made contributions of
$385,000, $311,000, and $311,000 during 1995, 1994 and 1993, respectively.
BONUS PLANS - The Company's bonus plans provide for incentive bonuses for
substantially all employees of the Company based upon the achievement of
specified operating and performance results. Incentive bonuses totaled
$400,000, $1,100,000 and $1,200,000 for 1995, 1994 and 1993, respectively.
The Company's bonus plans may be amended or discontinued at the discretion
of the Board of Directors.
7. STOCKHOLDERS' EQUITY
STOCK DIVIDEND AND RETIREMENT OF TREASURY STOCK - In September 1994, the
Board of Directors declared a 3 for 2 stock dividend which was effected in
the form of a stock split. All share and per share amounts have been
retroactively restated to give effect to the stock split. In addition, the
Company formally retired 1,727,052 shares of its common stock which had
previously been held as treasury shares.
EMPLOYEE STOCK PARTICIPATION PLAN - Exar is authorized to issue 1,000,000
shares of common stock under its Employee Stock Participation Plan. The plan
permits employees to purchase common stock through payroll deductions. The
purchase price is the lower of 85% of the fair market value of the common
stock at the beginning or end of each offering period. Shares purchased by
and distributed to employees were 63,728 in 1995, 60,673 in 1994, and 67,536
in 1993.
The Company has reserved 772,264 shares of common stock for future issuance
under its Employee Stock Participation plan.
STOCK OPTION PLANS - Exar has a Stock Option Plan and a Non-Employee
Directors' Stock Option Plan. Under these plans, the Company may grant
options to purchase up to 2,405,000 and 245,000 shares of common stock,
respectively. Options are granted at fair market value on the date of grant.
Options are exercisable in four equal annual installments commencing one year
after the date of grant and expire seven years from the grant date. The
stock option plans were retroactively amended in 1993 to make canceled stock
options available for future grant. The amount of shares presented as
available for future grant has been restated to reflect this amendment.
Option activity for both plans is summarized as follows:
Outstanding Options
-------------------
Shares Number of Price per
Available Shares Share
--------- ------ -----
Balances, April 1, 1992 1,751,900 846,272 $3.67 -$13.59
Options granted (681,750) 681,750 9.42- 18.83
Options exercised - (233,034) 3.67- 13.59
Options canceled 82,695 (82,695) 3.75- 17.17
------ -------- -------------
Balances, March 31, 1993 1,152,845 1,212,293 $3.67 -$18.83
Options granted (664,650) 664,650 14.09- 17.00
Options exercised - (324,503) 3.67- 17.17
Options canceled 104,730 (104,730) 4.83- 17.66
------- -------- -------------
Balances March 31, 1994 592,925 1,447,710 $3.67 -$18.83
Additional shares reserved 285,000 - -
Options granted (519,500) 519,500 16.09- 22.50
Options exercised - (246,661) 3.67- 20.25
Options canceled 123,511 (121,644) 4.84- 18.17
-------- --------- -------------
Balances March 31, 1995 481,936 1,598,905 $3.79 -$22.50
======= ========= =============
Options to purchase 338,983 shares were exercisable at March 31, 1995.
OTHER OPTIONS - In connection with the acquisition of Startech
Semiconductor Inc. (see Note 9), the Company assumed options to purchase up
to 150,373 shares of the Company's common stock for $21.50 per share. The
options are exercisable at prices ranging form $0.22 to $21.65 and expire
in December 1996.
8. GEOGRAPHIC AREA INFORMATION
The Company and its subsidiaries market products in the United States and
in foreign countries. The Company's foreign operations consist primarily
of its wholly-owned subsidiaries in Japan and the United Kingdom.
Identifiable assets represent assets used in the Company's operations in
each geographic area.
Geographic financial information for each year is as follows:
1995 1994 1993
---- ---- ----
(In thousands)
Net sales:
United States $62,344 $42,040 $43,512
Export sales to Japan and Asia 22,674 43,537 37,282
Export sales to western Europe 11,653 10,258 8,626
Export sales to rest of world 1,347 991 2,460
Japan 60,862 64,833 54,216
Western Europe 592 - -
------- ------- --------
$159,472 $161,659 $146,096
======== ======== ========
Net income (loss):
United States $(11,581) $15,454 $13,383
Japan 299 211 304
Western Europe 198 - -
-------- ------- -------
$(11,084) $15,665 $13,687
========= ======= =======
Identifiable assets:
United States $121,358 $113,566 $124,117
Japan 27,437 18,653 14,781
Western Europe 1,285 - -
-------- -------- --------
$150,080 $132,219 $138,898
======== ======== ========
9. ACQUIRED COMPANIES
In May 1994, the Company acquired all of the outstanding common stock of
Origin Technology, Inc., (Origin) for $1.4 million in cash and invested an
additional $1.0 million in newly issued common stock of Origin. The
purchase agreement includes provisions for additional payments to the
selling shareholders of up to $1.5 million in 1999. Such contingent
payments have been accrued and are included in long-term obligations at
March 31, 1995.
In June 1994, the Company acquired all of the outstanding common stock of
MPS Holdings, Inc. (Micro Power) for $21.7 million in cash.
On March 31, 1995, the Company acquired all of the outstanding common stock
of Startech Semiconductor, Inc. (Startech), in exchange for 349,587 shares
of common stock and the assumption of Startech's outstanding stock options
with an aggregate value of $8,750,000 and cash of $4,450,000 . The
purchase agreement includes provisions for adjustments to the final
purchase price, which may result in additional payments of up to $6 million
in April 1996 and an additional $6 million in October 1996 based on
Startech's future operating performance. In addition, the Company may be
required to pay up to $3,000,000 in deferred compensation to certain key
employees of Startech through April 1998.
For accounting purposes, the acquisitions have been accounted for as
purchases. Accordingly, the results of operations for the year ended March
31, 1995 include the operations of the acquired companies subsequent to the
dates of acquisition. As a result of these transactions, the Company
recorded approximately $6.9 million of goodwill which is being amortized
over a period of five years. The remaining portion of the excess purchase
price (approximately $27.8 million) represented in-process research and
development which was charged to operations in 1995.
Had the acquisitions been effective at the beginning of 1995, the impact
would have been to increase revenues by $14.6 million to increase operating
loss by $503,000, and to decrease net loss by $125,000 ($.01 per share).
Had the acquisitions been effective at the beginning of 1994, the impact
would have been to increase revenues by $27 million, and to increase
operating income and net income by $1.6 million and $1.4 million ($.14 per
share), respectively.
10. TRANSACTIONS WITH RELATED PARTIES
The Company purchases and sells products and provides certain
administrative services to Rohm. In addition, Rohm has from time to time
had an equity interest in the Company and such transactions have been
treated as related party transactions. The Company and Rohm have been
working to reduce Rohm's equity interest in Exar and at March 31, 1995,
Rohm had no equity interest in the Company.
The following summarizes related party transactions with Rohm and/or its
affiliates for each of the years ended March 31:
1994 1993
---- ----
(In thousands)
Sales and services provided to Rohm $26,142 $20,266
Purchases of inventory and other
services from Rohm $64,900 $58,300
Rents paid to Rohm $ 760 $ 740
In addition, in 1993 Exar exchanged manufacturing assets and leasehold
improvements with a net book value of $14.7 million for the outstanding
Series B Redeemable Preferred Stock held by Rohm (approximately $13.1
million) and $1.6 million in cash. In connection with this transaction,
the Company agreed to lease back the manufacturing assets on a per-wafer-
processed basis.
Effective March 31, 1994, the Company and Rohm mutually agreed to terminate
the lease agreement and the supply agreement under which Exar sold
epitaxial and semi-processed wafers to Rohm.
11. COMMITMENTS AND CONTINGENCIES
The Company's operating facilities are leased under noncancelable lease
agreements which expire through August 1997. The agreements generally
require the Company to pay property taxes, insurance, and common area
charges. Rent expense was $1,200,000, $650,000, and $821,000 for 1995,
1994, and 1993, respectively. Future minimum lease payments for 1996, 1997
and 1998 are $1,000,000, $185,000, and $56,000 respectively.
In September 1994, the Company entered into an agreement for the
construction of its principal manufacturing and administration facilities.
The new facilities are expected to be completed in November 1995 at an
estimated cost of approximately $14 million.
In 1987, one of the Company's subsidiaries identified low-level groundwater
contamination at its principal manufacturing site. Although the area of
contamination appears to have been defined, the source of the contamination
has not been identified. The Company has reached an informal agreement
with another entity to participate in the cost of ongoing site
investigations and the operation of remedial systems to remove subsurface
chemicals which is expected to continue for 10 to 15 years. The
accompanying financial statements include the Company's share of estimated
remediation costs of approximately $1.1 million.
In addition, the California Regional Water Quality Control Board for the
San Francisco Bay Region is conducting an investigation of contaminants
detected in subsurface groundwater at approximately 50 different sites in
Santa Clara County, California, including a location formerly leased by
Exar. Ongoing studies indicate that contaminants in the groundwater
beneath such leased facility result from the migration of contaminants
released by other neighboring manufacturers. Although this matter is
subject to an unusual degree of uncertainty, on the basis of the facts
presently known, the ultimate outcome of this matter is not expected to
have a material adverse effect on the Company's financial position or
results of operations.
The Company is involved in various claims, legal actions and complaints
arising in the normal course of business. Although the ultimate outcome of
these matters is not presently determinable, management believes that the
resolution of all such pending matters will not have a material adverse
effect on the Company's financial position or results of operations.
12. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Summarized quarterly financial information for 1995 and 1994 are as
follows:
Quarters Ended
-----------------------------------
June 30 September 30 December 31 March 31
--------------------------------------
(In thousands, except per share amounts)
1995
----
Net sales $38,061 $40,752 $40,029 $40,630
Gross profit 13,858 15,642 15,713 16,759
Write-off of in-process
research and development (16,875) - - (10,951)
Net income (loss) (13,331) 4,181 4,356 (6,290)
Per share:
Net income (loss) (1.49) .45 .47 (.70)
1994
----
Net sales $42,635 $43,316 $38,407 $37,301
Gross profit 13,438 13,973 12,740 12,295
Net income 4,072 4,076 3,966 3,551
Per share:
Income before cumulative
effectof change in
accounting principle .37 - - -
Net income .39 .38 .37 .38
13. SUBSEQUENT EVENT
On June 14, 1995, the Company acquired all of the outstanding common stock
of Silicon Microstructures Inc. (SMI), in exchange for 43,334 shares of
common stock and the conversion to equity of $1,250,000 of loans previously
granted to SMI. In addition, the Company may be required to issue up to
$1,500,000 in additional shares based on SMI's future operating
performance.
PART III
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
-----------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
---------------------------------------------------
For a listing of executive officers and certain key employees of the Company and
certain information about them, see Part I "Executive Officers of the Company."
The information required by this item concerning the Company's directors is
incorporated by reference from the section captioned "Proposal 1: Election of
Directors" contained in the Company's Definitive Proxy Statement filed not later
than 120 days following the close of the fiscal year ("Definitive Proxy
Statement").
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
- -------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the NASD. Officers, directors and greater than ten-percent shareholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the fiscal year
ended March 31, 1995, all filing requirements applicable to its officers,
directors, and greater than ten-percent beneficial owners were complied with.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The information required under this item is hereby incorporated by reference
from the Company's Definitive Proxy Statement under the caption "Executive
Compensation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The information required under this item is hereby incorporated by reference
from the Company's Definitive Proxy Statement under the captions "Security
Ownership of Certain Beneficial Owners and Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The information required under this item is hereby incorporated by reference
from the Company's Definitive Proxy Statement under the captions "Certain
Transactions" and "Executive Compensation."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
(a) The following documents are filed as part of this Form 10-K:
(1) Index to Consolidated Financial Statements. The following Consolidated
Financial Statements of Exar Corporation and its subsidiaries are filed as part
of this Form 10-K:
Form 10K
Page No.
Independent Auditors' Report 25
Consolidated Balance Sheets
March 31, 1995 and 1994 26
Consolidated Statements of Operations
for the years ended
March 31, 1995, 1994 and 1993 27
Consolidated Statements of Stockholders'
Equity for the years ended
March 31, 1995, 1994, and 1993 28
Consolidated Statements of Cash Flows
for the years ended
March 31, 1995, 1994 and 1993 29
Notes to Consolidated Financial
Statements 30-39
(2) Index to Financial Statement Schedules. The following Consolidated
Financial Statement Schedules of Exar Corporation and its subsidiaries for each
of the years ended March 31, 1995, 1994 and 1993 are filed as part of this Form
10-K:
Form 10K
Page No.
II Valuation and Qualifying Accounts
and Reserves 45
Schedules not listed above have been omitted because they are not applicable or
required, or the information required to be set forth therein is included in the
Consolidated Financial Statements or notes thereto.
Exhibit Exhibit
Footnote Number Description
(g) 2.1 Agreement and Plan of Reorganization
Dated June 3, 1994
(g) 2.2 First Amendment to Agreement and Plan of
Reorganization Dated March 31, 1995
(f) 3.1 Restated Certificate of Incorporation of the
Company.
(f) 3.2 Bylaws of the Company, as amended.
4.1 Reference is made to Exhibits 3.1 and 3.2.
(b)* 10.1 1984 Incentive Stock Option Plan of the Company,
as amended, and related forms of stock option
grant and exercise.
(a) 10.2 Cross License and Second Source Agreement between
the Company and Rohm Co., Ltd. dated as of July 1,
1985.
(b)* 10.3 1986 Directors' Stock Option Plan of the Company,
as amended, and related forms of stock option
grant and exercise.
(e)* 10.4 1989 Employee Stock Participation Plan of the
Company and related Offering.
(c) 10.5 Building lease for 2222 Qume Drive, San Jose,
California, dated as of December 23, 1986, between
the Company and IBP #9.
(d) 10.6 Foundry Services and Facility Access Agreement,
dated April 20, 1988, by and among the Company and
Exel.
(g) 10.7 First amendment to building lease for 2222 Qume
Drive, San Jose, California dated April 2, 1993.
(g) 10.8 Second amendment to building lease for 2222 Qume
Drive, San Jose, California dated March 17, 1994.
(b) 10.9 Addendum to Cross License and Second Source
Agreement between the Company and Rohm Co., Ltd.
dated as of March 1, 1991.
(f)* 10.10 1991 Stock Option Plan of the Company and related
forms of stock option grant and exercise.
(f)* 10.11 1991 Non-Employee Directors' Stock Option Plan of
the Company and related forms of stock option
grant and exercise.
(*) 10.12 Key Employee Incentive Compensation Program.
(*) 10.13 Description of Fiscal Year 1995 Executive
Incentive Program.
11.1 Statement Re Computation of Per Share Earnings.
21.1 Subsidiaries of the Company.
23.1 Consent of Independent Auditors'
24.1 Power of Attorney. Reference is made to the
signature page.
(a) Filed as an exhibit to Amendment No. 1 to the Registration
Statement, filed with the Commission on July 24, 1985 and
incorporated herein by reference.
(b) Filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1991 and incorporated herein
by reference.
(c) Filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1987 and incorporated herein
by reference.
(d) Filed as an exhibit to the Company's Amendment No. 1 on Form 8 to
the Current Report on Form 8-K, filed with the Commission on June
2, 1988 and incorporated herein by reference.
(e) Filed as an exhibit to the Company's report on Form 8-K, filed
with the Commission on January 19, 1990 and incorporated herein
by reference.
(f) Filed as an exhibit to the Company's Annual report on Form 10-K
for the fiscal year ended March 31, 1992 and incorporated herein
by reference.
(g) Filed as an exhibit to the Company's Annual report on Form 10-K
for the fiscal year ended March 31, 1994 and incorporated herein
by reference.
* Indicates management contracts or compensatory plans and
arrangements filed pursuant to Item 601(b)(10) of Regulation S-K.
(b) Reports on Form 8-K. The Company filed no Current Report on Form 8-K with
the Commission during the quarter ended March 31, 1995.
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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/ George D. Wells
-------------------
George D. Wells
Chief Executive Officer, President and Director
Date: June 28, 1995
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ronald W. Guire and George D. Wells, and each of
them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and re-substitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all amendments to this Report, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming that all said attorneys-in-fact
and agents, or any of them or their or his substitute or substituted, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/ George D. Wells Chief Executive Officer,
- -------------------------
(George D. Wells) President and Director June 28, 1995
/s/ Ronald W. Guire Senior Vice President,
- -------------------------
(Ronald W. Guire) Chief Financial Officer June 28, 1995
Secretary and Director
(Principal Financial and Accounting Officer)
/s/ Raimon L. Conlisk Director and Chairman
- ------------------------------
(Raimon L. Conlisk) of the Board June 28, 1995
/s/ James E. Dykes Director June 28, 1995
- -------------------------
(James E. Dykes)
/s/ George E. Grega Director June 28, 1995
- -------------------------
(George E. Grega)
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
Balance at Balance
Beginning Write- at end
Classification of Year Additions offs and of Year
Recoverie
s
Year ended March 31,
1995:
Allowance for
doubtful
accounts and sales
returns $2,359 $1,169 $ 543 $2,985
Year ended March 31,
1994:
Allowance for
doubtful
accounts and sales
returns $1,888 $ 834 $ 363 $2,359
Year ended March 31,
1993:
Allowance for
doubtful
accounts and sales
returns $2,271 $ 73 $ 456 $1,888