Exhibit 99.1
PMC-Sierra Reports Second Quarter 2006 Results
SANTA CLARA, Calif.--(BUSINESS WIRE)--July 20, 2006--PMC-Sierra, Inc.
(Nasdaq:PMCS):
-- Q2 Net Revenues: $ 118.8 million
-- Q2 Non-GAAP Net Income: $ 19.4 million or $0.09 per share (fully
diluted)
-- Q2 GAAP Net Loss: $ (31.3) million or $(0.15) per share
PMC-Sierra, Inc. (Nasdaq:PMCS), a leading provider of high-speed broadband
communications and storage semiconductors, today reported results for the second
quarter ending July 2, 2006.
Net revenues in the second quarter of 2006 were $118.8 million, an increase
of 35% compared with $87.8 million in the first quarter of 2006 and 66% higher
than in the second quarter of 2005. Net revenues in the second quarter of 2006
included: (i) $8.8 million in revenue from the previously announced acquisition
of Passave Inc., which closed on May 4, 2006; and (ii) a full three months of
revenue from the acquisition of the Avago storage semiconductor business
compared with only one month of revenue from this acquisition in the first
quarter of 2006.
Net income in the second quarter of 2006 on a non-GAAP basis was $19.4
million (non-GAAP diluted earnings per share of $0.09) compared with non-GAAP
net income of $16.3 million (non-GAAP diluted earnings per share of $0.08) in
the first quarter of 2006. GAAP net loss in the second quarter of 2006 was $31.3
million (GAAP loss per share of $0.15) compared with GAAP net loss in the first
quarter of 2006 of $14.3 million (GAAP loss per share of $0.08). Non-GAAP net
income for the second quarter excludes: (i) $20.5 million charge for in-process
R&D and a $9.9 million amortization of purchased intangible assets associated
with the purchases of Passave and the Avago storage semiconductor business; (ii)
$5.7 million in adjustments and acquisition costs included in the Cost of
Revenue related to the Passave and Avago acquisitions; (iii) $9.4 million in
stock-based compensation expenses; and (iv) $3.2 million to write down an
investment in a private company.
For a full reconciliation of GAAP net loss to non-GAAP net income, please
refer to the schedule on page 7 of this release. The Company believes the
addition of non-GAAP measures are useful to investors for the purpose of
financial analysis. Management uses the non-GAAP measures internally to evaluate
its in-period operating performance before gains, losses and other charges that
are considered by management to be outside of the Company's core operating
results. In addition, the measures are used 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 the second quarter, we successfully integrated the Avago storage
semiconductor business into PMC's operations and we also closed the acquisition
of Passave Inc., the leader in Fiber To The Home semiconductor solutions," said
Bob Bailey, chairman and chief executive officer of PMC-Sierra. "And our
Enterprise Storage business showed strength in the second quarter as the Fibre
Channel transition from 2Gb/s to 4Gb/s has accelerated."
Company announcements in Q2 2006 and subsequent include:
-- PMC-Sierra wins Gold Medal supplier award from Huawei: PMC announced
it received a prestigious Gold Medal Supplier Award from Huawei
Technologies, China's leading telecommunications equipment company,
for the superior service and support that PMC provides to its
customer. PMC-Sierra is a key supplier to Huawei and has provided
semiconductor devices and solutions to Huawei's datacom,
next-generation networks, wireless, and optical transport business
segments.
-- Carrier Class Multi-Service Residential Gateway Solution: PMC
announced an enhanced residential gateway platform to enable
carrier-grade services into the digital home. The solution is based on
PMC-Sierra's new VoIP-enabled Multi-Service Processor family, the
MSP7120 for ADSL2+ and the MSP7130 for Passive Optical Networks and
VDSL. These System-on-Chip products provide the basis for delivery of
IPTV, VoIP and multimedia services. The MSP7100 gateway platform
delivers 180,000 packets-per-second IP forwarding to support
high-bandwidth broadband access such as VDSL2 and Fiber To The Home.
-- Stand-alone VDSL2 Analog Front End: PMC announced an Analog Front End
(AFE) for VDSL2 and ADSL2+ customer premises equipment. The highly
integrated CMOS device is a stand-alone VDSL2 AFE that allows
equipment manufacturers to quickly bring to market VDSL2 modem or
residential gateway products. VDSL2 technology allows Service
Providers to offer significantly faster and more robust broadband
connections to support the deployment of IPTV and other advanced IP
services.
-- Security-enabled 1Ghz System-on-Chip: PMC announced its first
System-on-Chip solution featuring standards-based integrated hardware
security. The SoC incorporates a high-performance scalable 600 MHz to
one GHz E9000 MIPS-based processor with integrated security in
hardware and is targeted at Small Medium Business network attached
storage, mid-range VPN routers and security appliances, and
printer/imaging systems.
-- Fiber To The Home Access Acquisition: On May 4th 2006, PMC-Sierra
announced that it had completed the acquisition of Passave, Inc., a
leading developer of system-on-chip semiconductor solutions for the
Fiber To The Home (FTTH) semiconductor market. Passave's semiconductor
solutions enable Service Providers to offer voice, video and data at
up to 1Gbps over Passive Optical Networking (PON) equipment. The
Passave product line includes system-on-chip solutions for Optical
Line Terminals for the Central Office as well as Optical Network
Terminals and Optical Network Units solutions for residential
termination equipment.
Second Quarter 2006 Conference Call
Management will review the second quarter 2006 results and provide guidance
for the third quarter of 2006 during a conference call at 1:30 p.m. Pacific
Time/4:30 p.m. Eastern Time on July 20, 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
719-457-2693 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 9967412). A replay of
the webcast will be available for five business days.
Third Quarter 2006 Conference Call
PMC-Sierra is planning on releasing its results for the third quarter of
2006 on October 19th. A conference call will be held on the day of the release
to review the quarter and provide an outlook for the fourth quarter of 2006.
Safe Harbor Statement
This press release may contain forward-looking statements, which are
subject to risks and uncertainties. Actual results may differ from 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 and customer
concentration, and uncertainties relating to the impact on PMC-Sierra's business
from the purchase of Avago's storage semiconductor business and the acquisition
of Passave. The Company does not undertake any obligation to update the
forward-looking statements.
About PMC-Sierra
PMC-Sierra(TM) is a leading provider of broadband communications and
storage semiconductors for metro, access, fiber to the home, wireless
infrastructure, storage, laser printers and customer premises equipment.
PMC-Sierra offers worldwide technical and sales support, including a network of
offices throughout North America, Europe, Israel 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 is a
registered trademark of PMC-Sierra, Inc. in the United States and other
countries. PMC-SIERRA, PMCS and "Thinking You can Build On" are trademarks of
PMC-Sierra, Inc. Other product and company names mentioned herein may be
trademarks of their respective owners.
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts)
(unaudited)
Three Months Ended Six Months Ended
-------------------------------------------------
Jul 2, Apr 2, Jul 3, Jul 2, Jul 3,
2006 2006 2005 2006 2005
Net revenues $118,780 $ 87,781 $ 71,541 $206,561 $137,652
Cost of revenues 43,519 26,625 21,372 70,144 40,993
-------- -------- -------- -------- --------
Gross profit 75,261 61,156 50,169 136,417 96,659
Other costs and
expenses:
Research and
development 41,344 33,749 29,456 75,093 60,872
Selling, general
and administrative 26,883 19,593 13,466 46,476 26,470
Amortization of
purchased
intangible assets 9,934 2,110 - 12,044 -
In-process research
and development 20,500 14,800 - 35,300 -
Restructuring costs
and other charges - (738) 7,606 (738) 8,474
-------- -------- -------- -------- --------
(Loss) income from
operations (23,400) (8,358) (359) (31,758) 843
Other income
(expense):
Interest income, net 1,267 3,566 2,502 4,833 5,187
Foreign exchange
(loss) gain (3,378) 13 512 (3,365) (78)
Loss on
extinguishment of
debt and
amortization of
debt issue costs (242) (242) - (484) (1,634)
(Loss) gain on
investments (3,118) 1,849 - (1,269) 1,439
-------- -------- -------- -------- --------
(Loss) income before
provision for
income taxes (28,871) (3,172) 2,655 (32,043) 5,757
Provision for income
taxes (2,388) (11,161) (2,126) (13,549) (1,951)
-------- -------- -------- -------- --------
Net (loss) income $(31,259) $(14,333) $ 529 $(45,592) $ 3,806
======== ======== ======== ======== ========
Net (loss) income
per common share -
basic $ (0.15) $ (0.08) $ 0.00 $ (0.23) $ 0.02
Net (loss) income
per common share -
diluted $ (0.15) $ (0.08) $ 0.00 $ (0.23) $ 0.02
Shares used in per
share calculation -
basic 203,067 187,218 183,386 195,143 182,789
Shares used in per
share calculation -
diluted 203,067 187,218 188,305 195,143 188,492
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 purpose of financial
analysis. Management uses these measures internally to evaluate the
Company's in-period operating performance before gains, losses and
other charges that are considered by management to be outside of the
Company's core operating results. In addition, 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 (loss) income to Non-GAAP net income
(in thousands, except for per share amounts)
(unaudited)
Three Months Ended Six Months Ended
----------------------------- -------------------
Jul 2, Apr 2, Jul 3, Jul 2, Jul 3,
2006 (1) 2006 (2) 2005 (3) 2006 (4) 2005 (5)
GAAP net (loss)
income $(31,259) $(14,333) $ 529 $(45,592) $ 3,806
Included in Cost of
revenues:
Stock-based
compensation 448 423 - 871 -
Acquisition-
related costs 5,676 3,273 - 8,949 -
Included in Other
costs and
expenses:
Stock-based
compensation 9,000 5,478 215 14,478 215
Acquisition-
related costs - 222 - 222 -
Amortization of
intangible
assets 9,934 2,110 - 12,044 -
In-process
research and
development 20,500 14,800 - 35,300 -
Restructuring
costs and other
charges - (738) 7,606 (738) 8,474
Elimination of
provision - - (900) - (900)
Included in Other
income (expense):
Loss on
extinguishment
of debt - - - - 1,618
Loss (Gain) on
investments 3,118 (1,849) - 1,269 (1,439)
Foreign exchange
(gain) loss on
Canadian taxes 3,295 (113) (522) 3,182 188
Included in
Provision for
income taxes :
Recovery of prior
year income
taxes - - - - (998)
Withholding and
other taxes on
repatriation of
funds - 7,036 - 7,036 -
Income tax effect
of above items (1,307) 38 315 (1,269) 165
-------- -------- -------- -------- --------
Non-GAAP net
income $ 19,405 $ 16,347 $ 7,243 $ 35,752 $ 11,129
======== ======== ======== ======== ========
Non-GAAP net income
per share -
diluted $ 0.09 $ 0.08 $ 0.04 $ 0.17 $ 0.06
Shares used to
calculate non-GAAP
net income per
share - diluted 214,600 196,674 188,305 205,637 188,492
Non-GAAP adjustments
(1) $9.4 million stock-based compensation expense; $5.4 million
purchase accounting adjustment to inventory and $0.3 million in
additional acquisition-related contractor costs included in Cost of
revenues; $9.9 million amortization of purchased intangible assets and
a $20.5 million charge for in-process research and development from
the purchase of Passave, Inc.; $3.2 million write-down of an
investment net of a $0.1 million gain on sale of an investment; $3.3
million foreign exchange loss on Canadian taxes; and $1.3 million
income tax effect of these non-GAAP adjustments.
(2) $5.9 million stock-based compensation expense; $3.5 million
acquisition-related costs comprised of a $2.8 million purchase
accounting adjustment to inventory and $0.5 million in additional
contractor costs included in Cost of revenues, and $0.2 million
relocation expenses included in Selling, general and administrative
expenses; $2.1 million amortization of purchased intangible assets and
a $14.8 million charge for in-process research and development from
the purchase of the Avago Storage Semiconductor Business; $0.7 million
net reduction in restructuring comprised of $2.3 million reversal of
provision for excess facilities and $1.6 million additional severance;
$1.8 million net gain on sale of investments; $0.1 million foreign
exchange gain on Canadian taxes; $7.0 million withholding and other
taxes on repatriation of funds; and the income tax effect of these
non-GAAP adjustments.
(3) $0.2 million amortization of deferred stock compensation; $7.6
million restructuring costs including $6.6 million for workforce
reduction and $1.0 million for asset write-downs; $0.9 million
reversal of provision for doubtful accounts receivable; $0.5 million
foreign exchange gain on Canadian taxes and $0.3 million income tax
effect related to these non-GAAP adjustments.
(4) $15.3 million stock-based compensation expense; $9.2 million
acquisition-related costs comprised of a $8.2 million purchase
accounting adjustments to inventory and $0.8 million in additional
contractor costs included in Cost of revenues, and $0.2 million
relocation expenses included in Selling, general and administrative
expenses; $12.0 million amortization of purchased intangible assets
and $35.3 million in charges for in-process research and development
from the purchases of Passave and the Avago Storage Semiconductor
Business; $0.7 million net reduction in restructuring comprised of
$2.3 million reversal of provision for excess facilities and $1.6
million additional severance; $1.3 million net loss on investments
including a $3.2 million write-down, offset by $1.9 million gains on
sales of investments; $3.2 million foreign exchange loss on Canadian
taxes; $7.0 million withholding and other taxes on repatriation of
funds; and the income tax effect of these non-GAAP adjustments.
(5) $0.2 million amortization of deferred stock compensation; $8.5
million restructuring costs including $7.5 million for workforce
reduction and $1.0 million for asset write-downs; $0.9 million
reversal of provision for doubtful accounts receivable; $1.6 million
loss on extinguishment of debt, $1.4 million gain on sales of property
and investments, $1.0 million reversal of state income tax; $0.2
million foreign exchange loss on Canadian taxes, and $0.2 million
income tax effect relating to these non-GAAP adjustments.
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
Jul 2, Dec 31,
2006 2005
ASSETS:
Current assets:
Cash and short-term investments $ 232,326 $ 627,476
Accounts receivable, net 52,657 31,799
Inventories, net 33,312 14,046
Prepaid expenses and other current assets 29,376 13,630
---------- ---------
Total current assets 347,671 686,951
Other investments and assets 8,464 16,390
Property and equipment, net 21,042 10,981
Goodwill 390,897 7,907
Intangible assets, net 243,623 5,575
Deposits for wafer fabrication capacity 5,145 5,145
---------- ---------
$1,016,842 $ 732,949
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 30,712 $ 21,507
Accrued liabilities 52,043 40,619
Income taxes payable 38,321 32,050
Deferred income taxes 2,408 1,037
Accrued restructuring costs 10,805 15,233
Deferred income 12,487 11,004
---------- ---------
Total current liabilities 146,776 121,450
2.25% Senior convertible notes due
October 15, 2025 225,000 225,000
Deferred taxes and other tax liabilities 43,162 29,090
PMC special shares convertible into 2,099
(2005 - 2,459) shares of common stock 2,732 3,362
Stockholders' equity
Capital stock and additional paid in capital 1,210,329 919,055
Accumulated other comprehensive income 1,166 1,723
Accumulated deficit (612,323) (566,731)
---------- ---------
Total stockholders' equity 599,172 354,047
---------- ---------
$1,016,842 $ 732,949
========== =========
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
---------------------
Jul 2, Jul 3,
2006 2005
Cash flows from operating activities:
Net (loss) income $ (45,592) $ 3,806
Adjustments to reconcile net (loss) income
to net cash (used in) provided by operating
activities:
Stock-based compensation 15,349 -
Depreciation and amortization 18,246 5,805
In-process research and development 35,300 -
Impairment of purchased intangible assets - 538
Loss on extinguishment of debt - 1,618
Loss (gain) on investments 1,243 (1,255)
Gain on disposal of property and equipment - (184)
Changes in operating assets and liabilities:
Accounts receivable (13,151) (5,155)
Inventories (4,988) 1,111
Prepaid expenses and other current assets (16,588) (1,070)
Accounts payable and accrued liabilities (2,158) (2,452)
Income taxes payable 13,019 1,780
Accrued restructuring costs (4,428) 2,193
Deferred income 1,483 432
--------- ---------
Net cash (used in) provided by operating
activities (2,265) 7,167
--------- ---------
Cash flows from investing activities:
Acquisition of businesses, net of cash
acquired (413,781) -
Purchases of short-term available-for-sale
investments - (82,389)
Proceeds from sales and maturities of short-
term available-for-sale investments 181,450 141,084
Purchases of long-term available-for-sale
investments in bonds and notes - (10,231)
Proceeds from sales and maturities of long-term
available-for-sale investments in bonds and
notes - 44,760
Purchases of investments and other assets - (2,000)
Proceeds from sale of investments and other
assets 5,440 734
Proceeds from refund of wafer fabrication
deposits - 1,634
Purchases of property and equipment (3,977) (2,666)
Proceeds from sale of property - 2,604
Purchase of intangible assets (1,747) (1,530)
--------- ---------
Net cash (used in) provided by investing
activities (232,615) 92,000
--------- ---------
Cash flows from financing activities:
Repurchase of convertible subordinated notes - (70,177)
Proceeds from issuance of common stock 20,793 12,715
--------- ---------
Net cash provided by (used in) financing
activities 20,793 (57,462)
--------- ---------
Net (decrease) increase in cash and cash
equivalents (214,087) 41,705
Cash and cash equivalents, beginning of the
period 405,566 121,276
--------- ---------
Cash and cash equivalents, end of the period $ 191,479 $ 162,981
========= =========
CONTACT: PMC-Sierra, Inc.
Alan Krock, 408-988-1204
or
David Climie, 408-988-8276
or
Susan Shaw, 408-988-8515