Exhibit 99.1
PMC-Sierra Reports Third Quarter 2006 Results
SANTA CLARA, Calif.--(BUSINESS WIRE)--Oct. 19, 2006--PMC-Sierra,
Inc. (Nasdaq:PMCS):
- -- Q3 Net Revenues: $ 116.5 million
- -- Q3 Non-GAAP Net Income: $ 17.4 million or $0.08 per share
(fully diluted)
- -- Q3 GAAP Net Loss: $ (11.5) million or $(0.05) per share
PMC-Sierra, Inc. (Nasdaq:PMCS), a leading provider of high-speed
broadband communications and storage semiconductors, today reported
results for the third quarter ending October 1, 2006.
Net revenues in the third quarter of 2006 were $116.5 million, a
decrease of 2% compared with $118.8 million in the second quarter of
2006 and 53% higher than in the same period the prior year. As
compared to the third quarter of 2005, net revenues in the third
quarter of 2006 included a full three months of revenue from the
previously announced acquisition of Passave Inc., which closed on May
4, 2006, and the storage semiconductor business of Avago Technologies,
which closed in March 2006.
Net income in the third quarter of 2006 on a non-GAAP basis was
$17.4 million (non-GAAP diluted earnings per share of $0.08) compared
with non-GAAP net income of $19.4 million (non-GAAP diluted earnings
per share of $0.09) in the second quarter of 2006. GAAP net loss in
the third quarter of 2006 was $11.5 million (GAAP loss per share of
$0.05) compared with GAAP net loss in the second quarter of 2006 of
$31.8 million (GAAP loss per share of $0.16). Non-GAAP net income for
the third quarter excludes: (i) $11.2 million amortization of
purchased intangible assets associated with the purchases of Passave's
Fibre To The Home business and Avago's storage semiconductor business;
(ii) $10.6 million in stock-based compensation expenses; and (iii)
$6.4 million in restructuring costs.
For a full reconciliation of GAAP net loss to non-GAAP net income,
please refer to the schedule on page 6 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 third quarter, our Enterprise Storage business showed
strength as the Fibre Channel transition from 2G to 4G accelerated.
The growth in storage during the quarter, however, was offset by
reduced shipments of communications products," said Bob Bailey,
chairman and chief executive officer of PMC-Sierra.
Company announcements in Q3 2006 and subsequent include:
-- PMC-Sierra introduces AFE devices for EPON and GPON: PMC
announced the availability of four new Analog Front End
Devices (AFEs) for GPON and EPON FTTH equipment. These new
Physical layer devices compliment the Company's networking
SoCs for GPON and EPON systems. Using these Physical layer
devices, system and sub-system OEMs may be able to lower the
cost of GPON and EPON access network equipment that deliver
carrier-grade triple-play services to consumers worldwide.
-- PALADIN 20: PMC announced the PALADIN 20, the Company's third
generation Digital Predistortion (DPD) solution enabling
wireless infrastructure OEMs and carriers to deploy
cost-effective Remote Radio Head solutions with significant
capital and operational savings. The PALADIN 20 provides 40
percent efficiency for Doherty Power Amplifier-based solutions
and solves key technical challenges in amplifier linearity.
-- Metro Transport solutions for NEC's SpectralWave series: PMC
announced that NEC selected PMC-Sierra's metro transport
semiconductor solutions for their world-class SpectralWave
series. PMC-Sierra's CHESS III and CHESS Wideband solutions
enable NEC to deliver a scalable metro transport solution with
reduced power, cost and complexity. PMC's solutions allow
carriers to manage new Ethernet services and existing T1/E1
services over SONET/SDH infrastructure.
Third Quarter 2006 Conference Call
Management will review the third quarter 2006 results and provide
guidance for the fourth quarter of 2006 during a conference call at
1:30 pm Pacific Time/4:30 pm Eastern Time on October 19, 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 719-457-2681 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 4189777). A replay of the webcast will be available for five
business days.
Fourth Quarter 2006 Conference Call
PMC-Sierra is planning on releasing its results for the fourth
quarter of 2006 on January 25th, 2007. A conference call will be held
on the day of the release to review the quarter and provide an outlook
for the first quarter of 2007.
Safe Harbor Statement
This press release contains forward-looking statements, including
statements regarding the strength of PMC's markets and potential
benefits of PMC's new products and solutions, 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, inventory levels in the supply chain, customer
concentration, and changing environments in the different segments and
regions of the business. 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 Nine Months Ended
-------------------------------------------------
Oct 1, Jul 2, Oct 2, Oct 1, Oct 2,
2006 2006 2005 2006 2005
Net revenues $116,514 $118,780 $ 76,203 $323,075 $213,855
Cost of revenues 39,146 43,560 20,131 109,331 61,124
--------- --------- --------- --------- ---------
Gross profit 77,368 75,220 56,072 213,744 152,731
Other costs and
expenses:
Research and
development 41,611 41,587 27,205 116,947 88,077
Selling, general and
administrative 29,235 27,174 14,839 76,002 41,309
Amortization of
purchased intangible
assets 11,202 9,934 - 23,246 -
In-process research
and development - 20,500 - 35,300 -
Restructuring costs
and other charges 6,404 - 5,359 5,666 13,833
--------- --------- --------- --------- ---------
(Loss) income from
operations (11,084) (23,975) 8,669 (43,417) 9,512
Other income
(expense):
Interest income, net 1,849 1,267 2,874 6,682 8,061
Foreign exchange loss (252) (3,378) (3,378) (3,617) (3,456)
Loss on
extinguishment of
debt and
amortization of debt
issue costs (242) (242) - (726) (1,634)
(Loss) gain on
investments - (3,118) - (1,269) 1,439
--------- --------- --------- --------- ---------
(Loss) income before
provision for income
taxes (9,729) (29,446) 8,165 (42,347) 13,922
Provision for income
taxes (1,796) (2,388) (2,230) (15,345) (4,181)
--------- --------- --------- --------- ---------
Net (loss) income $(11,525) $(31,834) $ 5,935 $(57,692) $ 9,741
========= ========= ========= ========= =========
Net (loss) income per
common share -
basic $ (0.05) $ (0.16) $ 0.03 $ (0.29) $ 0.05
Net (loss) income per
common share -
diluted $ (0.05) $ (0.16) $ 0.03 $ (0.29) $ 0.05
Shares used in per
share calculation -
basic 211,298 203,067 185,110 200,528 183,563
Shares used in per
share calculation -
diluted 211,298 203,067 190,739 200,528 189,241
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 Nine Months Ended
----------------------------- -------------------
Oct 1, Jul 2, Oct 2, Oct 1, Oct 2,
2006 (1) 2006 (2) 2005 (3) 2006 (4) 2005 (5)
GAAP net (loss)
income $(11,525) $(31,834) $ 5,935 $(57,692) $ 9,741
Included in Cost of
revenues:
Stock-based
compensation 379 489 - 1,292 -
Acquisition-related
costs - 5,676 - 8,949 -
Included in Other
costs and expenses:
Stock-based
compensation 10,222 9,534 - 25,233 215
Acquisition-related
costs - - - 222 -
Amortization of
intangible assets 11,202 9,934 - 23,246 -
Employee-related
taxes 2,355 - - 2,355 -
In-process research
and development - 20,500 - 35,300 -
Restructuring costs
and other charges 6,404 - 5,359 5,666 13,833
Elimination of
provision - - - - (900)
Included in Other
income (expense):
Loss on
extinguishment of
debt - - - - 1,618
Loss (Gain) on
investments - 3,118 - 1,269 (1,439)
Foreign exchange
(gain) loss on
Canadian taxes (108) 3,295 3,388 3,074 3,576
Included in Provision
for income taxes :
Recovery of prior
year income taxes - - - - (998)
Withholding and
other taxes on
repatriation of
funds - - - 7,036 -
Income tax effect
of above items (1,520) (1,307) (1,152) (2,789) (987)
--------- --------- --------- --------- ---------
Non-GAAP net income $ 17,409 $ 19,405 $ 13,530 $ 53,161 $ 24,659
========= ========= ========= ========= =========
Non-GAAP net income
per share - diluted $ 0.08 $ 0.09 $ 0.07 $ 0.26 $ 0.13
Shares used to
calculate non-GAAP
net income per share
- diluted 212,561 214,600 190,739 207,945 189,241
Non-GAAP adjustments
(1) $10.6 million stock-based compensation expense; $11.2 million
amortization of purchased intangible assets; $2.4 million accrual for
employee-related taxes; $6.4 million restructuring costs including
$2.6 million for severance, and $3.5 million for excess facilities,
and $0.3 million for contract termination and asset impairment
primarily related to the workforce reduction in Portland and the
closure of the Ottawa facility; $0.1 million foreign exchange gain on
Canadian taxes; and $1.5 million income tax effect relating to these
non-GAAP adjustments.
(2) $10.0 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.
(3) $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.
(4) $26.5 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; $23.2 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; $2.4 million for employee-related taxes; $5.7 million in
restructuring comprised of $1.2 million net provision for excess
facilities, $4.2 million additional severance, and $0.3 million in
contract termination and asset impairment; $1.3 million net loss on
investments including a $3.2 million write-down, offset by $1.9
million gains on sales of investments; $3.1 million foreign exchange
loss on Canadian taxes; $7.0 million withholding and other taxes on
repatriation of funds; and $2.8 million income tax effect of these
non-GAAP adjustments.
(5) $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 sales of
investments, $1.0 million reversal of state income tax; $3.6 million
foreign exchange loss on Canadian taxes, and $1.0 million income tax
effect relating to these non-GAAP adjustments.
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
Oct 1, Dec 31,
2006 2005
(As
Restated)
ASSETS:
Current assets:
Cash and short-term investments $ 250,469 $ 627,476
Accounts receivable, net 45,576 31,799
Inventories, net 33,787 14,046
Prepaid expenses and other current assets 25,857 13,630
----------- -----------
Total current assets 355,689 686,951
Other investments and assets 8,422 16,390
Property and equipment, net 19,712 10,981
Goodwill 394,855 7,907
Intangible assets, net 233,562 5,575
Deposits for wafer fabrication capacity 5,145 5,145
----------- -----------
$1,017,385 $ 732,949
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 27,343 $ 21,507
Accrued liabilities 50,211 40,619
Income taxes payable 40,392 32,050
Deferred income taxes 2,356 1,037
Accrued restructuring costs 14,520 15,233
Deferred income 12,746 11,004
----------- -----------
Total current liabilities 147,568 121,450
2.25% Senior convertible notes due October
15, 2025 225,000 225,000
Deferred taxes and other tax liabilities 42,794 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 1,312,199 1,008,685
Accumulated other comprehensive income 1,145 1,723
Accumulated deficit (714,053) (656,361)
----------- -----------
Total stockholders' equity 599,291 354,047
----------- -----------
$1,017,385 $ 732,949
=========== ===========
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
----------------------
Oct 1, Oct 2,
2006 2005
Cash flows from operating activities:
Net (loss) income $ (57,692) $ 9,741
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Stock-based compensation 26,525 215
Depreciation and amortization 34,520 8,976
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 (6,070) (17,858)
Inventories (5,463) 2,813
Prepaid expenses and other current assets (13,202) 1,570
Accounts payable and accrued liabilities (7,359) 1,349
Income taxes payable 14,518 7,313
Accrued restructuring costs (713) 3,395
Deferred income 1,742 3,804
---------- ----------
Net cash provided by operating activities 23,349 22,035
---------- ----------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (417,738) -
Purchases of short-term available-for-sale
investments - (138,759)
Proceeds from sales and maturities of short-
term available-for-sale investments 222,357 153,084
Purchases of long-term available-for-sale
investments in bonds and notes - (35,231)
Proceeds from sales and maturities of long-term
available-for-sale investments in bonds and
notes - 70,678
Purchases of investments and other assets - (2,000)
Proceeds from sale of investments and other
assets 5,444 772
Proceeds from refund of wafer fabrication
deposits - 1,634
Purchases of property and equipment (6,422) (3,492)
Proceeds from sale of property - 2,604
Purchase of intangible assets (3,944) (2,130)
---------- ----------
Net cash (used in) provided by investing
activities (200,303) 47,160
---------- ----------
Cash flows from financing activities:
Repurchase of convertible subordinated notes - (70,177)
Proceeds from issuance of common stock 21,857 23,178
---------- ----------
Net cash provided by (used in) financing
activities 21,857 (46,999)
---------- ----------
Net (decrease) increase in cash and cash
equivalents (155,097) 22,196
Cash and cash equivalents, beginning of the
period 405,566 121,276
---------- ----------
Cash and cash equivalents, end of the period $ 250,469 $ 143,472
========== ==========
CONTACT: PMC-Sierra, Inc.
Alan Krock, Vice President & CFO, 408-988-1204
or
David Climie, VP Marketing Communications, 408-988-8276
or
Susan Shaw, Manager, Communications, 408-988-8515