Exhibit 99.1
PMC-Sierra Reports Fourth Quarter and Fiscal 2005 Results
SANTA CLARA, Calif.--(BUSINESS WIRE)--Jan. 25, 2006--PMC-Sierra,
Inc. (Nasdaq:PMCS):
- -- Q4 2005 Net Revenues: $ 77.6 million
- -- Q4 2005 Non-GAAP Net Income: $ 12.8 million;
$ 0.07 per share (diluted)
- -- Q4 2005 GAAP Net Income: $ 18.2 million;
$ 0.10 per share (diluted)
PMC-Sierra, Inc. (Nasdaq:PMCS), a leading provider of broadband
communications and storage semiconductors, today reported results for
the fourth quarter ending December 31, 2005.
Net revenues in the fourth quarter of 2005 were $77.6 million, an
increase of 2% compared to $76.2 million for the third quarter of 2005
and 25% higher than the fourth quarter of 2004.
Net income in the fourth quarter of 2005 on a non-GAAP basis was
$12.8 million (non-GAAP diluted earnings per share of $0.07) compared
to non-GAAP net income of $13.5 million (non-GAAP diluted earnings per
share of $0.07) in the third quarter of 2005. GAAP net income in the
fourth quarter of 2005 was $18.2 million (GAAP diluted earnings per
share of $0.10) compared to GAAP net income of $5.9 million in the
third quarter of 2005 (GAAP diluted earnings per share of $0.03).
Non-GAAP net income in the fourth quarter of 2005 excludes (i) a
$0.2 million foreign exchange gain relating to Canadian taxes and (ii)
$5.3 million relating to R&D tax credits earned in excess of
previously recorded amounts.
For the year ended December 31, 2005, net revenues were $291.4
million compared with $297.4 million for the year ended December 26,
2004. Non-GAAP net income in 2005 was $37.5 million (non-GAAP diluted
net income per share of $0.20) compared with non-GAAP net income of
$34.5 million (non-GAAP diluted net income per share of $0.18) the
prior year. GAAP net income in 2005 was $28.0 million (GAAP diluted
net income per share of $0.15) compared with the prior year's GAAP net
income of $51.7 million (GAAP diluted net income per share of $0.27).
For a full reconciliation of GAAP net income to non-GAAP net
income, please refer to the supplemental schedule on page 6 of this
release. The Company believes 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 in-period operating performance and to plan for the Company's
future periods. However, non-GAAP measures are neither stated in
accordance with, nor are they a substitute for, GAAP measures.
"In 2005, PMC's revenues improved each quarter and our storage
business experienced the fastest growth during the year as 4G Fibre
Channel devices entered into production," said Bob Bailey, chairman
and chief executive officer of PMC-Sierra. "We are well-positioned for
2006 in both wireline and wireless infrastructure as well as the
enterprise storage market with the acquisition of the storage
semiconductor division of Agilent Technologies which is expected to
close in the first quarter of 2006."
In the fourth quarter of 2005, PMC-Sierra announced it had entered
into a definitive agreement with Kohlberg Kravis Roberts & Co. and
Silver Lake Partners to acquire the storage semiconductor business of
Agilent Technologies for approximately $425 million in cash. The
storage semiconductor business is part of Agilent's Semiconductor
Products Group, which KKR and Silver Lake Partners acquired in
December 2005. The acquisition, which at this time is expected to
close in the first quarter of 2006, will significantly strengthen
PMC-Sierra's position as a leading provider of silicon solutions to
the enterprise storage market.
In the fourth quarter, PMC-Sierra issued $225 million aggregate
principal amount of senior convertible notes due 2025. The notes bear
interest at a rate of 2.25% per year and under certain circumstances
may be convertible into cash (up to the principal amount of the notes)
and, with respect to any excess conversion value, into cash, shares of
common stock of PMC-Sierra or a combination of cash and shares of
common stock, at the company's option.
Fourth Quarter 2005 Conference Call
Management will review the fourth quarter 2005 results and provide
guidance for the first quarter of 2006 during a conference call at
1:30 pm Pacific Time/4:30 pm Eastern Time on January 25, 2006. To
listen to the call, investors can access an audio webcast of the
conference call on the Financial Events and Calendar section at
http://investor.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 719-457-2650 approximately ten minutes before the start time. A
telephone 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 1421212). A replay of the webcast will be available for five
business days.
First Quarter 2006 Conference Call
PMC-Sierra is planning on releasing its results for the first
quarter of 2006 on April 20th. A conference call will be held on the
day of the release to review the quarter and provide an outlook for
the second quarter of 2006.
Safe Harbor Statement
PMC-Sierra's forward-looking statements are subject to risks and
uncertainties. Actual results may differ from these projections. The
Company's SEC filings describe more fully the risks associated with
the Company's business including PMC-Sierra's limited revenue
visibility due to variable customer demands, orders with short
delivery lead times, customer concentration, and the uncertain timing
of the storage semiconductor acquisition and its impact on PMC's
business. The Company does not undertake any obligation to update the
forward-looking statements.
PMC-Sierra(TM) is a leading provider of high-speed broadband
communications semiconductors, storage semiconductors and
microprocessors for enterprise, access, metro, storage, wireless
infrastructure, laser printers and customer premises 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. 2006. All rights reserved. PMC,
PMCS, PMC-Sierra, and "Thinking You can Build On" are trademarks of
PMC-Sierra, Inc. All other trademarks are the property of the
respective owners.
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts)
(unaudited)
Three Months Ended Twelve Months Ended
----------------------------- -------------------
Dec 31, Oct 2, Dec 26, Dec 31, Dec 26,
2005 2005 2004 2005 2004
Net revenues $ 77,556 $ 76,203 $ 61,847 $291,411 $297,383
Cost of revenues 19,839 20,131 18,918 80,963 87,542
-------- -------- -------- -------- --------
Gross profit 57,717 56,072 42,929 210,448 209,841
Other costs and
expenses:
Research and
development 30,643 27,205 30,833 118,720 120,492
Marketing, general
and administrative 14,968 14,839 9,859 56,063 46,135
Amortization of
deferred stock
compensation:
Marketing, general
and administrative - - - 215 697
Acquisition costs - - - - 1,212
Restructuring costs
and other charges - 5,359 3,520 13,833 3,520
-------- -------- -------- -------- --------
Income (loss) from
operations 12,106 8,669 (1,283) 21,617 37,785
Other income
(expense):
Interest income,
net 4,044 2,874 1,529 12,106 4,859
Foreign exchange
gain (loss) 197 (3,378) (1,380) (3,259) (1,295)
Amortization of
debt issue costs
and loss on
extinguishment of
debt (175) - (97) (1,809) (2,233)
Gain on sale of
investments - - - 1,439 9,242
-------- -------- -------- -------- --------
Income (loss)
before provision
for income taxes 16,172 8,165 (1,231) 30,094 48,358
Recovery of
(provision for)
income taxes 2,073 (2,230) 14,348 (2,108) 3,323
-------- -------- -------- -------- --------
Net income $ 18,245 $ 5,935 $ 13,117 $ 27,986 $ 51,681
======== ======== ======== ======== ========
Net income per
common share -
basic $ 0.10 $ 0.03 $ 0.07 $ 0.15 $ 0.29
Net income per
common share -
diluted $ 0.10 $ 0.03 $ 0.07 $ 0.15 $ 0.27
Shares used in per
share calculation
- basic 185,703 185,110 181,209 184,098 180,353
Shares used in per
share calculation
- diluted 188,805 190,739 188,607 189,132 188,903
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 net income and
net income 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 in-period 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 GAAP net income to Non-GAAP net income
(in thousands, except for per share amounts)
(unaudited)
Three Months Ended Twelve Months Ended
----------------------------- -------------------
Dec 31, Oct 2, Dec 26, Dec 31, Dec 26,
2005 (a) 2005 (b) 2004 (c) 2005 (d) 2004 (e)
GAAP net income $ 18,245 $ 5,935 $ 13,117 $ 27,986 $ 51,681
Amortization of
deferred stock
compensation - - - 215 697
Acquisition costs - - - - 1,212
Restructuring
costs and other
charges - 5,359 3,520 13,833 3,520
Elimination of
provision - - (1,300) (900) (1,951)
Loss on
extinguishment of
debt - - - 1,618 1,845
Gain on sale of
investments - - - (1,439) (9,242)
Excess tax credits
and recovery of
prior years'
income taxes (5,274) - (5,095) (6,272) (5,095)
Canada Revenue
Agency
assessments of
prior years'
taxes - - (9,355) - (9,355)
Foreign exchange
(gain) loss on
Canadian taxes (167) 3,388 1,545 3,409 1,545
Income tax effect
of above items - (1,152) (531) (987) (368)
-------- -------- -------- -------- --------
Non-GAAP net
income $ 12,804 $ 13,530 $ 1,901 $ 37,463 $ 34,489
======== ======== ======== ======== ========
Non-GAAP net
income per share
- diluted $ 0.07 $ 0.07 $ 0.01 $ 0.20 $ 0.18
Shares used to
calculate non-GAAP
net income per
share - diluted 188,805 190,739 188,607 189,132 188,903
Non-GAAP adjustments
The above amounts have been adjusted to eliminate the following:
(a) $0.2 million foreign exchange gain on Canadian taxes and $5.3
million excess R&D tax credits.
(b) $5.4 million restructuring costs for excess facilities vacated in
the third quarter of 2005; $3.4 million foreign exchange loss on
Canadian taxes and $1.2 million income tax effects related to
these non-GAAP adjustments.
(c) $3.5 million net charge for additional excess facilities costs
related to our 2001 and 2003 restructurings, $1.3 million
elimination of a provision for potential employee-related taxes,
$5.1 million recovery of prior year taxes, $9.4 million tax
recovery based on agreements and assessments with Canada Revenue
Agency, $1.5 million foreign exchange loss on Canadian taxes and
$0.5 million income tax effect related to these non-GAAP
adjustments.
(d) $0.2 million amortization of deferred stock compensation; $13.8
million restructuring costs including $7.5 million for workforce
reduction, $1.0 million for asset write-downs and $5.4 million for
excess facilities vacated in the third quarter of 2005; $0.9
million reversal of provision for doubtful accounts receivable;
$1.6 million loss on extinguishment of debt, $1.4 million gain on
sale of investments, $6.3 million tax benefits comprised of $5.3
million excess R&D tax credits and $1.0 recovery of prior year
sales tax; $3.4 million foreign exchange loss on Canadian taxes,
and $1.0 million income tax effect relating to these non-GAAP
adjustments.
(e) $0.7 million amortization of deferred stock compensation, $1.2
million acquisition costs related to a purchase of assets, $3.5
million net charge for additional excess facilities costs related
to our 2001 and 2003 restructurings, $2.0 million eliminiation of
provisions including $1.3 million elimination of a provision for
employee-related taxes and $0.7 million reversal of a provision
for excess inventory resulting from the sale of inventory that was
previously provided for, $1.8 million loss on extinguishment of
debt, $9.2 million gain on sale of investments, $5.1 million
recovery of prior year taxes, $9.4 million tax recovery based on
agreements and assessments with Canada Revenue Agency, $1.5
million foreign exchange loss on Canadian taxes and $0.4 million
income tax effect related to these non-GAAP adjustments.
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
Dec 31, Dec 26,
2005 2004
ASSETS:
Current assets:
Cash and short-term investments $ 627,476 $ 274,686
Accounts receivable, net 31,799 19,931
Inventories, net 14,046 15,823
Prepaid expenses and other current assets 13,630 17,042
--------- ---------
Total current assets 686,951 327,482
Investment in bonds and notes - 139,111
Other investments and assets 16,390 4,565
Property and equipment, net 10,981 16,177
Goodwill and other intangible assets, net 13,482 12,910
Deposits for wafer fabrication capacity 5,145 6,779
--------- ---------
$ 732,949 $ 507,024
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 21,507 $ 16,598
Accrued liabilities 40,619 40,195
Income taxes payable 33,087 28,931
Accrued restructuring costs 15,233 13,735
Deferred income 11,004 7,646
Current portion of long-term debt - 68,071
--------- ---------
Total current liabilities 121,450 175,176
2.25% Senior convertible notes due October 15,
2025 225,000 -
Deferred taxes and other tax liabilities 29,090 28,077
PMC special shares convertible into 2,459 (2004
- 2,897) shares of common stock 3,362 4,434
Stockholders' equity
Capital stock and additional paid in capital 919,055 893,704
Accumulated other comprehensive income 1,723 350
Accumulated deficit (566,731) (594,717)
--------- ---------
Total stockholders' equity 354,047 299,337
--------- ---------
$ 732,949 $ 507,024
========= =========
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Twelve Months Ended
---------------------
Dec 31, Dec 26,
2005 2004
Cash flows from operating activities:
Net income $ 27,986 $ 51,681
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 12,313 16,518
Gain on disposal of property and equipment (184) -
Impairment of goodwill and purchased
intangible assets 538 175
Loss on extinguishment of debt 1,618 1,845
Gain on sale of investments (1,255) (9,242)
Reversal of write-down of excess
inventory (1,904) (219)
Changes in operating assets and
liabilities:
Accounts receivable (11,868) 1,714
Inventories 3,681 2,671
Prepaid expenses and other
current assets 3,489 (3,831)
Accounts payable and accrued
liabilities 6,416 (21,076)
Income taxes payable 4,749 20,147
Accrued restructuring costs 2,095 (2,531)
Deferred income 3,357 (8,074)
--------- ---------
Net cash provided by operating
activities 51,031 49,778
--------- ---------
Cash flows from investing activities:
Purchases of short-term available-for-sale
investments (138,759) (8,525)
Proceeds from sales and maturities of
short-term available-for-sale investments 173,422 14,067
Purchases of long-term available-for-sale
investments in bonds and notes (35,231) (199,376)
Proceeds from sales and maturities of
long-term available-for-sale investments
in bonds and notes 71,021 126,087
Purchases of investments and other assets (5,693) (6,074)
Proceeds from sale of investments and other
assets 772 20,067
Proceeds from refund of wafer fabrication
deposits 1,634 -
Purchases of property and equipment (5,156) (9,922)
Proceeds from sale of property 2,604 -
Purchase of intangible assets (3,454) (5,921)
--------- ---------
Net cash provided by (used in)
investing activities 61,160 (69,597)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of senior convertible
notes 225,000 -
Repurchase of convertible subordinated notes (70,177) (106,929)
Payment of debt issuance costs (6,788) -
Proceeds from issuance of common stock 24,064 22,065
--------- ---------
Net cash provided by (used in)
financing activities 172,099 (84,864)
--------- ---------
Net increase (decrease) in cash and cash
equivalents 284,290 (104,683)
Cash and cash equivalents, beginning of the
period 121,276 225,959
--------- ---------
Cash and cash equivalents, end of the period $ 405,566 $ 121,276
========= =========
CONTACT: PMC-Sierra, Inc.
Alan Krock, 408-988-1204
David Climie, 408-988-8276
Susan Shaw, 408-988-8515