EXHIBIT 99.1
PMC-Sierra Reports Fourth Quarter and Fiscal 2006 Results
-- Q4 2006 Net Revenues: $ 101.9 million
-- Q4 2006 Non-GAAP Net income: $ 4.7 million; $0.02 per share
(diluted)
-- Q4 2006 GAAP Net loss: $ (42.2) million; $(0.20) per share
(diluted)
SANTA CLARA, Calif.--(BUSINESS WIRE)--Jan. 25, 2007--PMC-Sierra,
Inc. (NASDAQ:PMCS), a leading provider of broadband communications and
storage semiconductors, today reported results for the fourth quarter
ending December 31, 2006.
Net revenues in the fourth quarter of 2006 were $101.9 million, a
decrease of 13% compared to $116.5 million for the third quarter of
2006 and 31% higher than the fourth quarter of 2005.
Net income in the fourth quarter of 2006 on a non-GAAP basis was
$4.7 million (non-GAAP diluted earnings per share of $0.02) compared
to non-GAAP net income of $17.4 million (non-GAAP diluted earnings per
share of $0.08) in the third quarter of 2006. GAAP net loss in the
fourth quarter of 2006 was $42.2 million (GAAP loss per share of
$0.20) compared to GAAP net loss of $11.5 million in the third quarter
of 2006 (GAAP loss per share of $0.05). The increase in our GAAP net
loss in the fourth quarter was primarily due to an increase in our tax
provision arising from a change in our estimate of tax liability for
prior years as a result of a written communication we received in 2007
from a tax authority.
Non-GAAP net income in the fourth quarter of 2006 excludes: (i)
$29.9 million additional tax expense related to prior years; (ii)
$11.4 million stock-based compensation expense; (iii) $10.1 million
amortization of purchased intangible assets; (iv) $3.5 million foreign
exchange gain on Canadian taxes; (v) $0.5 million restructuring cost;
and (vi) $1.4 million income tax effect relating to these non-GAAP
adjustments.
For the year ended December 31, 2006, net revenues were $425.0
million compared with $291.4 million for the year ended December 31
2005, an increase of 46% year-over-year. Non-GAAP net income in 2006
was $57.9 million (non-GAAP diluted net income per share of $0.28)
compared with non-GAAP net income of $37.5 million (non-GAAP diluted
net income per share of $0.20) for the prior year. GAAP net loss in
2006 was $99.9 million (GAAP net loss per share of $0.49) compared
with the prior year's GAAP net income of $28.0 million (GAAP diluted
net income per share of $0.15).
For a full reconciliation of GAAP net income to non-GAAP net
income, please refer to the supplemental schedule on page 7 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 2006, PMC-Sierra's revenues and market position improved
following the acquisitions of the Avago storage semiconductor business
and the Passave Fiber To The Home business," said Bob Bailey, chairman
and chief executive officer of PMC-Sierra. "PMC-Sierra now has a more
diversified product line and broader customer base, and we're
well-positioned in both the service provider and enterprise storage
markets as we enter 2007."
In the fourth quarter of 2006, PMC-Sierra made the following
announcements:
-- Korea Telecom FTTH: PMC-Sierra and DASAN Networks, Korea's
leading supplier of broadband access equipment, announced that
Korea Telecom selected DASAN Networks for deployment of Fiber
To The Home (FTTH) equipment in the greater Seoul area.
DASAN's EPON FTTH solution is based on PMC-Sierra's FTTH chip
set for central office and customer premises equipment. DASAN
Networks expects the number of subscribers under this
deployment to reach 800,000 in the 2007 calendar year.
-- TEMUX 336: we announced the TEMUX 336, the industry's most
integrated and scalable framer solution for next-gen voice,
wireless and router platforms. The TEMUX 336 meets density and
feature requirements of both proprietary and
AdvancedTCA/Advanced Mezzanine based equipment, enabling
carriers to cost-effectively upgrade their equipment. Feature
integration and scalability make TEMUX 336 the ideal solution
for high-density SONET/SDH, T1/E1 and DS3/E3 line cards used
in voice/media gateways, wireless infrastructure and routers.
-- Multi-Service Residential Gateway Platforms: we announced a
suite of multi-service residential gateway reference platforms
for the industry's broadest range of advanced broadband access
protocols. The MSP7100-based platforms are available in a
broad range of configurations including ADLS2+, VDSL2,
Ethernet and EPON to enable delivery of carrier-grade services
into the digital home. These platforms, based on PMC's
VoIP-enabled Multi-Service Processor family, allow OEMs and
ODMs to rapidly develop high-performance residential gateways
for enhanced Triple Play service delivery.
-- Next-Gen EPON Solutions: we announced the industry's first
EPON optical network unit (ONU) and optical line terminal
(OLT) silicon devices that support China Telecom defined
algorithms for the Chinese telecom market. The new ONU for
customer premises equipment and OLT for central office
equipment provide an end-to-end EPON solution ideal for high
volume deployments in China. The two system-on-chip devices
are the first to meet China Telecom standards that define data
encryption and decryption algorithms, quality of service
procedures and classification protocols.
-- Next-Gen SONET/SDH Framer: we introduced the ARROW 2488, a
feature-rich, high capacity single-chip solution that combines
multi-rate SONET/SDH framers, non-blocking STS/AU and VT/TU
cross-connect, and best-in-class backplane SERDES for next-gen
compact and scalable chassis-based SONET/SDH platforms.
Carriers are driving the adoption of converged networks to
more effectively manage both new Ethernet services and
existing T1/E1 services over their SONET/SDH infrastructures.
Fourth Quarter Conference Call
Management will review the fourth quarter 2006 results and provide
guidance for the first quarter of 2007 during a conference call at
1:30 pm Pacific Time/4:30 pm Eastern Time on January 25, 2007. 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) 457-2727 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 9329344). A replay of the webcast will be available for five
business days.
First Quarter 2007 Conference Call
PMC-Sierra is planning on releasing its results for the first
quarter of 2007 during the last week of April. 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 2007.
Safe Harbor Statement
This press release contains forward-looking statements, including
statements regarding PMC-Sierra's position in the service provider and
enterprise storage markets, 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-SierraTM 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. 2007. All rights reserved. PMC,
TEMUX and Multi-Service Processor are registered trademarks of
PMC-Sierra, Inc. in the United States and other countries. PMC-SIERRA,
PMCS and "Enabling connectivity. Empowering people." 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 Twelve Months Ended
----------------------------- -------------------
Dec 31, Oct 1, Dec 31, Dec 31, Dec 31,
2006 2006 2005 2006 2005
Net revenues $101,917 $116,514 $77,556 $424,992 $291,411
Cost of revenues 37,125 39,146 19,839 146,456 80,963
--------- --------- -------- --------- ---------
Gross profit 64,792 77,368 57,717 278,536 210,448
Other costs and
expenses:
Research and
development 41,713 41,611 30,643 158,661 118,720
Selling, general and
administrative 26,362 29,235 14,968 102,363 56,278
Amortization of
purchased intangible
assets 10,136 11,202 - 33,381 -
In-process research
and development - - - 35,300 -
Restructuring costs
and other charges 453 6,404 - 6,119 13,833
--------- --------- -------- --------- ---------
(Loss) income from
operations (13,872) (11,084) 12,106 (57,288) 21,617
Other income
(expense):
Interest income, net 2,297 1,849 4,044 8,979 12,106
Foreign exchange gain
(loss) 3,508 (252) 197 (109) (3,259)
Amortization of debt
issue costs and loss
on extinguishment of
debt (242) (242) (175) (968) (1,809)
(Loss) gain on
investments - - - (1,269) 1,439
--------- --------- -------- --------- ---------
(Loss) income before
provision for income
taxes (8,309) (9,729) 16,172 (50,655) 30,094
(Provision for)
recovery of income
taxes (33,891) (1,796) 2,073 (49,237) (2,108)
--------- --------- -------- --------- ---------
Net (loss) income $(42,200) $(11,525) $18,245 $(99,892) $27,986
========= ========= ======== ========= =========
Net (loss) income per
common share - basic $(0.20) $(0.05) $0.10 $(0.49) $0.15
Net (loss) income per
common share -
diluted $(0.20) $(0.05) $0.10 $(0.49) $0.15
Shares used in per
share calculation -
basic 212,295 211,298 185,703 203,470 184,098
Shares used in per
share calculation -
diluted 212,295 211,298 188,805 203,470 189,132
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 Twelve Months Ended
-----------------------------------------------
Dec 31, Oct 1, Dec 31, Dec 31, Dec 31,
2006 (1) 2006 (2) 2005 (3) 2006 (4) 2005 (5)
GAAP net (loss) income $(42,200) $(11,525) $18,245 $(99,892) $27,986
Included in Cost of
revenues:
Stock-based
compensation 517 379 - 1,809 -
Acquisition-related
costs - - - 8,949 -
Included in Other costs
and expenses:
Stock-based
compensation 10,867 10,222 - 36,099 215
In-process research
and development - - - 35,300 -
Amortization of
intangible assets 10,136 11,202 - 33,381 -
Restructuring costs
and other charges 453 6,404 - 6,119 13,833
Employee-related
taxes - 2,355 - 2,355 -
Acquisition-related
costs - - - 222 -
Elimination of
provision - - - - (900)
Included in Other
income (expense):
Loss on
extinguishment of
debt - - - - 1,618
Loss (Gain) on
investments - - - 1,269 (1,439)
Foreign exchange
(gain) loss on
Canadian taxes (3,521) (108) (167) (447) 3,409
Included in Provision
for income taxes:
Additional provision
for (recovery of)
prior years' income
taxes 29,888 - (5,274) 29,888 (6,272)
Withholding and other
taxes on
repatriation of
funds - - - 7,036 -
Income tax effect of
non-GAAP items (1,442) (1,520) - (4,231) (987)
-----------------------------------------------
Non-GAAP net income $4,698 $17,409 $12,804 $57,857 $37,463
===============================================
Non-GAAP net income per
share - diluted $0.02 $0.08 $0.07 $0.28 $0.20
Shares used to
calculate non-GAAP
net income per share -
diluted 214,332 212,561 188,805 209,542 189,132
Non-GAAP adjustments
(1) $11.4 million stock-based compensation expense; $10.1 million
amortization of purchased intangible assets; $0.5 million
restructuring costs related to vacating the Ottawa facility in the
fourth quarter of 2006; $3.5 million foreign exchange gain on
Canadian taxes; $29.9 million increase in our estimated tax provision
for previous years as a result of a written communication received in
2007 from tax authorities; and $1.4 million income tax effect
relating to these non-GAAP adjustments.
(2) $10.6 million stock-based compensation expense; $11.2 million
amortization of purchased intangible assets; $6.4 million
restructuring costs including $2.6 million for severance, $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; $2.4
million accrual for employee-related taxes; $0.1 million foreign
exchange gain on Canadian taxes; and $1.5 million income tax effect
relating to these non-GAAP adjustments.
(3) $0.2 million foreign exchange gain on Canadian taxes and $5.3
million excess R&D tax credits.
(4) $37.9 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; $35.3 million in charges for in-process research and
development and $33.4 million amortization of purchased intangible
assets from the purchases of Passave and the Avago Storage
Semiconductor Business; $6.1 million in restructuring comprised of
$1.6 million net provision for excess facilities, $4.2 million
additional severance, and $0.3 million in contract termination and
asset impairment; $2.4 million for employee-related taxes; $1.3
million net loss on investments including a $3.2 million write-down,
offset by $1.9 million gains on sales of investments; $0.5 million
foreign exchange gain on Canadian taxes; $29.9 million increase in
our estimated tax provision for previous years as a result of a
written communication received in 2007 from tax authorities; $7.0
million withholding and other taxes on repatriation of funds; and
$4.2 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 $5.3 million for
excess facilities; $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; $3.4 million foreign
exchange loss on Canadian taxes; $6.3 million tax benefits comprised
of $5.3 million excess R&D tax credits and $1.0 recovery of prior
year sales tax; and $1.0 million income tax effect relating to these
non-GAAP adjustments.
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
Dec 31, Dec 31,
2006 2005
(As
Restated)
ASSETS:
Current assets:
Cash, cash equivalents, and short-term
investments $258,914 $627,476
Accounts receivable, net 37,303 31,799
Inventories, net 34,505 14,046
Prepaid expenses and other current assets 17,164 13,630
----------- ----------
Total current assets 347,886 686,951
Investments and other assets 15,050 16,390
Property and equipment, net 18,904 10,981
Goodwill 395,943 7,907
Intangible assets, net 223,629 5,575
Deposits for wafer fabrication capacity 5,145 5,145
----------- ----------
$1,006,557 $732,949
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $19,074 $21,507
Accrued liabilities 51,199 40,619
Income taxes payable 59,428 32,050
Deferred income taxes 2,042 1,037
Accrued restructuring costs 12,657 15,233
Deferred income 11,340 11,004
----------- ----------
Total current liabilities 155,740 121,450
2.25% Senior convertible notes due October
15, 2025 225,000 225,000
Deferred taxes and other tax liabilities 52,657 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 1,327,808 1,008,685
Accumulated other comprehensive (loss)
income (1,127) 1,723
Accumulated deficit (756,253) (656,361)
----------- ----------
Total stockholders' equity 570,428 354,047
----------- ----------
$1,006,557 $732,949
=========== ==========
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Twelve Months Ended
==============================
Dec 31, Dec 31,
2006 2005
Cash flows from operating activities:
Net (loss) income $(99,892) $27,986
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Stock-based compensation 37,908 215
In-process research and development 35,300 -
Depreciation and amortization 48,778 12,098
Loss on disposal of property and
equipment - (184)
Impairment of goodwill and purchased
intangible assets - 538
Loss on extinguishment of debt - 1,618
Loss (gain) on investments 1,269 (1,255)
Reversal of write-down of excess
inventory - (1,904)
Changes in operating assets and
liabilities:
Accounts receivable 2,203 (11,868)
Inventories (6,181) 3,681
Prepaid expenses and other current
assets (15,416) 3,489
Accounts payable and accrued liabilities (14,296) 6,416
Income taxes payable 44,664 4,749
Accrued restructuring costs (2,576) 2,095
Deferred income 336 3,357
-------------------- ---------
Net cash provided by operating
activities 32,097 51,031
-------------------- ---------
Cash flows from investing activities:
Acquisition of businesses, net of cash
acquired (419,436) -
Purchases of short-term available-for-
sale investments - (138,759)
Proceeds from sales and maturities of
short-term available-for-sale
investments 222,357 173,422
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 - 71,021
Purchases of investments and other
assets - (5,693)
Proceeds from sale of investments and
other assets 5,445 772
Proceeds from refund of wafer
fabrication deposits - 1,634
Purchases of property and equipment (8,011) (5,156)
Proceeds from sale of property and
equipment - 2,604
Purchase of intangible assets (5,144) (3,454)
-------------------- ---------
Net cash (used in) provided by investing
activities (204,789) 61,160
-------------------- ---------
Cash flows from financing activities:
Proceeds from issuance of senior
convertible notes - 225,000
Repurchase of convertible subordinated
notes - (70,177)
Payment of debt issuance costs - (6,788)
Proceeds from issuance of common stock 26,040 24,064
-------------------- ---------
Net cash provided by financing
activities 26,040 172,099
-------------------- ---------
Net (decrease) increase in cash and cash
equivalents (146,652) 284,290
Cash and cash equivalents, beginning of
the period 405,566 121,276
-------------------- ---------
Cash and cash equivalents, end of the
period $258,914 $405,566
==================== =========
CONTACT: PMC-Sierra, Inc.
Alan Krock, Vice President & CFO
408-988-1204
or
David Climie, V.P., Corporate Marketing
408-988-8276
or
Susan Shaw, Manager, Communications
408-988-8515