Exhibit 99.1
PMC-Sierra Reports Profit in Third Quarter 2003
SANTA CLARA, Calif.--(BUSINESS WIRE)--Oct. 16,
2003--PMC-Sierra(TM) Inc. (Nasdaq:PMCS)
-- Q3 Net Revenues: $63.1 million
-- Q3 Net Income: $0.8m Non-GAAP or $0.00/sh.; $3.2m GAAP or
$0.02/sh.
-- Company repurchased $100 million of subordinated convertible
notes in Q3
PMC-Sierra(TM) Inc., a leading provider of high-speed broadband
communications and storage semiconductors and MIPS-based(TM)
microprocessors, today reported its third quarter results for the
period ended September 28, 2003.
Net revenues in the third quarter of 2003 were $63.1 million
compared with $60.4 million for the second quarter of 2003 and $59.6
million for the same period a year ago. This represented an increase
in revenues of 4.5 percent sequentially and 5.9 percent on a
year-over-year basis.
Net income in the third quarter of 2003 on a non-GAAP basis was
$0.8 million (non-GAAP diluted earnings per share of $0.00) compared
with a non-GAAP net loss of $3.9 million (non-GAAP net loss per share
of $0.02) in the prior quarter.
GAAP net income in the third quarter of 2003 was $3.2 million
(GAAP diluted earnings per share of $0.02). This compares to GAAP net
loss of $9.2 million in the second quarter of 2003 (GAAP net loss per
share of $0.05).
Non-GAAP net income in the third quarter of 2003 excludes the
following items: (i) a gain of $1.7 million on repurchase of
convertible subordinated notes; (ii) a net reversal of $1.1 million of
restructuring provision; (iii) $0.3 million in amortization of
deferred stock compensation; and (iv) a loss on sale of other
investments of $0.2 million. (For a full reconciliation of GAAP versus
non-GAAP for the second and third quarters of 2003 as well as the
third quarter of 2002, please see the schedule on page 6 of this
release). The Company believes that the additional non-GAAP measures
provided are useful to investors for the performance of financial
analysis. Management uses the non-GAAP measures internally to evaluate
its operating performance and planning for the Company's future
periods. However, non-GAAP measures are not in accordance with, nor
are they a substitute for, GAAP measures.
"After two-and-a-half years of hard work, PMC-Sierra has reached
its intermediate goal of achieving profitability while enhancing our
competitive position in the service provider, MIPS-based
microprocessor, and enterprise and storage semiconductor markets. The
next milestone for the Company is to achieve model profitability,"
said Bob Bailey, president and chief executive officer of PMC-Sierra.
The Company repurchased $100 million in face value of convertible
subordinated notes during the third quarter at a cost of $96.7
million. The face value of the remaining notes is $175 million and
they mature on August 15, 2006. The notes are convertible into common
shares of PMC-Sierra at a conversion price of $42.43 per share and
have an annual interest rate of 3.75 percent.
As previously announced, during the quarter, PMC-Sierra eliminated
its lease obligation at the Mission Towers Two building located at
Freedom Circle in Santa Clara, CA. The Company purchased and resold
the facility at a net cost of approximately $102 million. The
transaction eliminated the Company's remaining rental commitment for
the building of about $215 million that was due through December 2011.
"From a financial perspective, this past quarter was very
productive," said Alan Krock, vice president of finance and chief
financial officer of PMC-Sierra. "Significant future period
obligations were settled in the third quarter. In addition, we
exceeded our previous operating expense reduction targets established
in January 2003. We remain focused on maintaining operating leverage
as our markets begin to improve."
New products announced in the third quarter of 2003 include the
following:
-- 4G Fibre Channel for Next-Gen Storage Systems - announced
sampling of the industry's first 4.25 Gbit/s Fibre Channel intelligent
Port Bypass Controllers and Quad CMOS SERDES devices for
next-generation enterprise storage arrays and storage network
applications. The PBC 4x4G and PBC 18x4G intelligent Port Bypass
Controllers support 4.25 Gbit/s enterprise-class disk enclosure
applications. The QuadPHY(R) 4GFC four channel CMOS SERDES are
deployed in Fibre Channel Fabric Switch and Host-Bus Adapter
applications.
-- Framing/Mapping Devices for SONET/SDH Transport - introduced
the ARROW 12xETEC, a 12 channel DS3/E3/STS-1E framing and mapping
device for existing and next-generation ADMs, MSPPs, Digital
Cross-Connects and terminal multiplexers. The new device offers a
power savings of over 50 percent and transport designers can leverage
the ARROW 12xETEC's power efficiency to scale DS3/E3/STS-1E tributary
line cards while lowering overall costs.
-- Next-Gen Metro Transport Framers - introduced the ARROW 622 and
ARROW 155 Metro access and transport framers for use in a wide array
of SONET/SDH applications including ADMs, Customer Premise Equipment,
DSLAMs, Media Gateways, MSPPs, and MS Switches. Both devices support a
broad range of optical and electrical interfaces (OC-12/STM-4,
OC-3/STM-1, EC-1, DS3, and E3) to enable OEMs to significantly lower
design and manufacturing costs.
-- SERDES Product Line Extended - the 6-channel HexPHY 1GR and the
4-channel QuadPHY 1GR serializer/deserializer devices were introduced
for high-speed serial backplanes and Gigabit Ethernet transceivers.
Both devices use PMC-Sierra's proven mixed-signal technology and are
used in enterprise Ethernet switches, blade servers, and access/metro
transport network equipment.
Third Quarter 2003 Conference Call
Management will review the third quarter 2003 results and provide
guidance for the fourth quarter of 2003 during a conference call at
1:30 PM Pacific Time/4:30 PM Eastern Time today. To listen to the
call, investors can access an audio webcast of the conference from the
Investor Relations page of PMC-Sierra's corporate website at
www.pmc-sierra.com. A replay of this webcast will be posted and
available two hours after the conference call has been completed. To
listen to the conference call live by telephone, please dial
719-457-2621 approximately ten minutes before the 1:30 PM Pacific
start time. A phone replay will be available 15 minutes after the
completion of the call and can be accessed by dialing 719-457-0820
(replay access code is 701006).
Fourth Quarter 2003 Conference Call
PMC-Sierra will be releasing its results for the fourth quarter on
January 22, 2004. A conference call will be held that day to review
the quarter and provide an outlook for the first quarter of 2004.
About PMC-Sierra
PMC-Sierra is a leading provider of high-speed broadband
communications and storage semiconductors and MIPS-based(TM)
processors for Enterprise, Access, Metro Optical Transport, Storage
Area Networking and Wireless network equipment. The company offers
worldwide technical and sales support, including a network of offices
throughout North America, Europe and Asia. The company is publicly
traded on the NASDAQ Stock Market under the PMCS symbol and is
included in the S&P 500 Index. For more information, visit
www.pmc-sierra.com.
(C)Copyright PMC-Sierra, Inc. 2003. PMC, PMCS, PMC-Sierra and
"Thinking you can build on" are trademarks of PMC-Sierra, Inc.
PMC-Sierra, Inc.
NON-GAAP STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts)
(unaudited)
Three Months Ended
-----------------------------
Sep 28, Jun 29, Sep 29,
2003 (1) 2003 (2) 2002 (3)
Net revenues
Networking $63,100 $59,610 $59,358
Non-networking - 768 226
--------- --------- ---------
Total 63,100 60,378 59,584
Gross profit $
Networking 41,232 38,748 36,259
Non-networking - 329 96
--------- --------- ---------
Total 41,232 39,077 36,355
--------- --------- ---------
Gross profit %
Networking 65.3% 65.0% 61.1%
Non-networking - 42.8% 42.5%
Total 65.3% 64.7% 61.0%
Other costs and expenses:
Research and development 27,759 32,173 33,977
Marketing, general and
administrative 12,031 12,151 16,030
--------- --------- ---------
Non-GAAP income (loss)
from operations 1,442 (5,247) (13,652)
Interest and other income
(expense), net (267) (106) 1,374
--------- --------- ---------
Non-GAAP income (loss) before
provision for income taxes 1,175 (5,353) (12,278)
Provision for (recovery of)
income taxes 329 (1,499) (3,438)
--------- --------- ---------
Non-GAAP net income (loss) $ 846 $(3,854) $(8,840)
========= ========= =========
Non-GAAP net income (loss)
per share - diluted $ 0.00 $ (0.02) $ (0.05)
Shares used to calculate non-GAAP net
income (loss) per share - diluted: 186,137 172,289 170,525
Non-GAAP adjustments
The above amounts have been adjusted to eliminate the following:
(1) $0.3 million amortization of deferred stock compensation, a $1.1
million net reversal of restructuring costs, $1.7 million gain on
extinguishment of debt and $0.2 million loss on sale of investments.
The $1.1 million net reversal of restructuring costs is comprised of
a $4.5 million reversal of excess facilities costs related to our
October 2001 restructuring, $3.1 million additional excess
facilities costs related to sites abandoned in our March 2001
restructuring and $0.3 million of restructuring costs related to our
January 2003 restructuring.
(2) $0.01 million amortization of deferred stock compensation, a
$7.3 million charge for restructuring costs and $2.0 million net
gain on other investments. The $7.3 million restructuring charge is
comprised of $4.0 million for consolidation of excess facilities,
$1.3 million of asset impairments, $1.1 million for obligations
incurred in connection with the closure of development sites and
$0.8 million for workforce reduction. The $2.0 million net gain on
other investments is comprised of a $5.5 million gain on sale of
other investments and a $3.5 million charge for impairment of other
investments.
(3) $0.5 million amortization of deferred stock compensation and
$0.1 million gain on sale of other investments.
PMC-Sierra, Inc.
NON-GAAP STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts)
(unaudited)
Nine Months Ended
-----------------------
Sep 28, Sep 29,
2003 (4) 2002 (5)
Net revenues
Networking $ 178,096 $ 160,095
Non-networking 768 5,442
----------- -----------
Total 178,864 165,537
Gross profit $
Networking 113,481 98,662
Non-networking 329 2,329
----------- -----------
Total 113,810 100,991
----------- -----------
Gross profit %
Networking 63.7% 61.6%
Non-networking 42.8% 42.8%
Total 63.6% 61.0%
Other costs and expenses:
Research and development 90,880 104,649
Marketing, general and administrative 36,798 49,592
----------- -----------
Non-GAAP income (loss)
from operations (13,868) (53,250)
Interest and other income
(expense), net 175 4,134
----------- -----------
Non-GAAP income (loss) before
provision for income taxes (13,693) (49,116)
Provision for (recovery of)
income taxes (3,835) (13,753)
----------- -----------
Non-GAAP net income (loss) $ (9,858) $ (35,363)
=========== ===========
Non-GAAP net income (loss)
per share - diluted $ (0.06) $ (0.21)
Shares used to calculate non-GAAP net
income (loss) per share - diluted: 172,603 169,945
Non-GAAP adjustments
The above amounts have been adjusted to eliminate the following:
(4) $0.7 million amortization of deferred stock compensation, $12.8
million net charge for restructuring costs, a $1.7 million gain on
extinguishment of debt, $2.3 million gain on investments and $1.9
million recovery of taxes related to these transactions. The $12.8
million restructuring charge is comprised of $7.2 million for
workforce reduction, $7.5 million for excess facilities, $1.5
million for asset impairments, $1.1 million for obligations incurred
in connection with the closure of development sites and $4.5 million
reversal of excess facilities costs related to our October 2001
restructuring. The $2.3 million net gain on investments is comprised
of a $5.8 million net gain on sale of investments and a $3.5 million
charge for impairment of other investments.
(5) $2.3 million amortization of deferred stock compensation and
$3.1 million gain on sale of other investments.
As a supplement to the Company's consolidated financial statements
presented on a generally accepted accounting principles (GAAP)
basis, the Company provides additional non-GAAP measures for gross
profit, income (loss) from operations, net income (loss) and net
income (loss) per share in its press release.
A non-GAAP financial measure is a numerical measure of a company's
performance, financial position, or cash flows that either excludes
or includes amounts that are not normally excluded or included in
the most directly comparable measure calculated and presented in
accordance with GAAP. The Company believes that the additional
non-GAAP measures are useful to investors for the performance of
financial analysis. Management uses these measures internally to
evaluate its operating performance and the measures are used for
planning and forecasting of the Company's future periods. However,
non-GAAP measures are not in accordance with, nor are they a
substitute for, GAAP measures. Other companies may use different
non-GAAP measures and presentation of results.
PMC-Sierra, Inc.
Reconciliation of Non-GAAP Adjustments
(in thousands)
(unaudited)
Three Months Ended
----------------------------
Sep 28, Jun 29, Sep 29,
2003 2003 2002
Non-GAAP net income (loss) $ 846 $ (3,854) $ (8,840)
Amortization of deferred stock
compensation (313) (13) (476)
Restructuring costs:
Workforce reduction - (812) -
Excess facility and contract
settlement costs 1,272 (4,038) -
Write-down of capitalized
software licenses - (357) -
Write-down of property and
equipment, net (179) (954) -
Obligations incurred in connection
with closure of development sites - (1,099) -
Impairment of other investments - (3,500) -
Gain on extinguishment of debt 1,700 - -
Gain (loss) on sale of other investments (162) 5,462 71
Income tax effect of above items - - -
-------- --------- ---------
GAAP net income (loss) $ 3,164 $ (9,165) $ (9,245)
======== ========= =========
PMC-Sierra, Inc.
Reconciliation of Non-GAAP Adjustments
(in thousands)
(unaudited)
Nine Months Ended
------------------------
Sep 28, Sep 29,
2003 2002
Non-GAAP net income (loss) $ (9,858) $ (35,363)
Amortization of deferred stock compensation (738) (2,288)
Restructuring costs:
Workforce reduction (7,196) -
Excess facility and contract
settlement costs (3,026) -
Write-down of capitalized
software licenses (357) -
Write-down of property and equipment, net (1,133) -
Obligations incurred in connection
with closure of development sites (1,099) -
Impairment of other investments (3,500) -
Gain on extinguishment of debt 1,700 -
Gain (loss) on sale of other investments 5,831 3,135
Income tax effect of above items 1,860 -
----------- -----------
GAAP net income (loss) $ (17,516) $ (34,516)
=========== ===========
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts)
(unaudited)
Three Months Ended
--------------------------------
Sep 28, Jun 29, Sep 29,
2003 2003 2002
Net revenues
Networking $ 63,100 $ 59,610 $ 59,358
Non-networking - 768 226
---------- ---------- ----------
Total 63,100 60,378 59,584
Cost of revenues 21,868 21,301 23,229
---------- ---------- ----------
Gross profit 41,232 39,077 36,355
Other costs and expenses:
Research and development 27,759 32,173 33,977
Marketing, general and
administrative 12,031 12,151 16,030
Amortization of deferred
stock compensation:
Research and development - (82) 453
Marketing, general and
administrative 313 95 23
Restructuring costs (1,093) 7,260 -
---------- ---------- ----------
Income (loss) from operations 2,222 (12,520) (14,128)
Interest and other income
(expense), net (267) (106) 1,374
Gain on extinguishment of debt 1,700 - -
Gain (loss) on investments (162) 1,962 71
---------- ---------- ----------
Income (loss) before provision
for income taxes 3,493 (10,664) (12,683)
Provision for (recovery of)
income taxes 329 (1,499) (3,438)
---------- ---------- ----------
Net income (loss) $ 3,164 $ (9,165) $ (9,245)
========== ========== ==========
Net income (loss) per common
share - basic $ 0.02 $ (0.05) $ (0.05)
Net income (loss) per common
share - diluted $ 0.02 $ (0.05) $ (0.05)
Shares used in per share
calculation - basic 174,118 172,289 170,525
Shares used in per share
calculation - diluted 186,137 172,289 170,525
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts)
(unaudited)
Nine Months Ended
-----------------------
Sep 28, Sep 29,
2003 2002
Net revenues
Networking $ 178,096 $ 160,095
Non-networking 768 5,442
----------- -----------
Total 178,864 165,537
Cost of revenues 65,054 64,546
----------- -----------
Gross profit 113,810 100,991
Other costs and expenses:
Research and development 90,880 104,649
Marketing, general and administrative 36,798 49,592
Amortization of deferred
stock compensation:
Research and development 317 2,138
Marketing, general and administrative 421 150
Restructuring costs 12,811 -
----------- -----------
Income (loss) from operations (27,417) (55,538)
Interest and other income (expense), net 175 4,134
Gain on extinguishment of debt 1,700 -
Gain (loss) on investments 2,331 3,135
----------- -----------
Income (loss) before provision
for income taxes (23,211) (48,269)
Provision for (recovery of)
income taxes (5,695) (13,753)
----------- -----------
Net income (loss) $ (17,516) $ (34,516)
=========== ===========
Net income (loss) per common share - basic $ (0.10) $ (0.20)
Net income (loss) per common share - diluted $ (0.10) $ (0.20)
Shares used in per share
calculation - basic 172,603 169,945
Shares used in per share
calculation - diluted 172,603 169,945
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
Sep 28, Dec 29,
2003 2002
(unaudited)
ASSETS:
Current assets:
Cash and short-term investments (1) $ 351,142 $ 416,659
Accounts receivable, net 18,449 16,621
Inventories, net 19,690 26,420
Deferred tax assets 1,131 1,083
Prepaid expenses and other current assets 12,691 15,499
----------- -----------
Total current assets 403,103 476,282
Investment in bonds and notes (1) 54,073 148,894
Other investments and assets 8,010 21,978
Property and equipment, net 25,124 51,189
Property held for sale 14,203 -
Goodwill and other intangible assets, net 7,907 8,381
Deposits for wafer fabrication capacity 6,779 21,992
----------- -----------
$ 519,199 $ 728,716
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 22,188 $ 24,697
Accrued liabilities 44,255 53,530
Income taxes payable 38,578 21,553
Accrued restructuring costs 15,274 129,499
Deferred income 15,704 17,982
----------- -----------
Total current liabilities 135,999 247,261
3.75% Convertible subordinated notes
due August 15, 2006 175,000 275,000
Deferred tax liabilities 74 2,764
PMC special shares convertible into 2,961
(2002 - 3,196) shares of common stock 4,636 5,052
Stockholders' equity
Capital stock and additional
paid in capital 857,263 834,265
Deferred stock compensation (212) (1,158)
Accumulated other comprehensive income 2,362 3,939
Accumulated deficit (655,923) (638,407)
----------- -----------
Total stockholders' equity 203,490 198,639
----------- -----------
$ 519,199 $ 728,716
=========== ===========
(1) Total cash and marketable investments, current and non-current,
comprised of Cash and short-term investments plus Investments in
bonds and notes, totaled $405.2 million and $565.6 million at
September 28, 2003 and December 29, 2002, respectively.
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
---------------------
Sep 28, Sep 29,
2003 2002
Cash flows from operating activities:
Net loss $(17,516) $(34,516)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 23,628 35,256
Impairment of other investments 3,500 -
Noncash restructuring costs 1,490 -
Gain on extinguishment of debt (1,700) -
Gain on sale of investments and other assets (5,818) (3,126)
Changes in operating assets and liabilities:
Accounts receivable (1,828) (952)
Inventories 6,730 6,116
Prepaid expenses and other current assets 3,216 671
Accounts payable and accrued liabilities (11,784) (2,033)
Income taxes payable 17,025 12,454
Accrued restructuring costs (114,200) (24,386)
Deferred income (2,278) (5,361)
---------- ----------
Net cash used in operating activities (99,535) (15,877)
---------- ----------
Cash flows from investing activities:
Change in restricted cash 2,785 -
Purchases of short-term investments (71,239) (118,887)
Proceeds from sales and maturities
of short-term investments 269,557 107,601
Purchases of long-term bonds and notes (95,874) (141,863)
Proceeds from sales and maturities
of long-term bonds and notes 189,973 93,249
Other investments 7,102 (3,609)
Proceeds from refund of wafer
fabrication deposits 15,213 -
Purchases of property and equipment (10,547) (2,946)
---------- ----------
Net cash provided by (used in)
investing activities 306,970 (66,455)
---------- ----------
Cash flows from financing activities:
Repayment of capital leases and long-term debt - (377)
Repurchase of convertible notes (96,680) -
Proceeds from issuance of common stock 22,789 9,867
---------- ----------
Net cash provided by (used in)
financing activities (73,891) 9,490
---------- ----------
Net increase (decrease) in cash
and cash equivalents 133,544 (72,842)
Cash and cash equivalents,
beginning of the period 70,504 152,120
---------- ----------
Cash and cash equivalents, end of the period $204,048 $ 79,278
========== ==========
CONTACT: PMC-Sierra
Alan Krock
VP Finance & CFO
408/988-1204
alan_krock@pmc-sierra.com
OR
David Climie
Director, Investor Relations
408/988-8276
david_climie@pmc-sierra.com
OR
Susan Kirk
Public Relations
408/988-8515
susan_kirk@pmc-sierra.com