EXHIBIT 99.1
PMC-Sierra Reports First Quarter 2007 Results
-- Q1 Net Revenues: $ 103.7 million
-- Q1 GAAP Net Loss: $ (15.8) million or $(0.07) per share (fully
diluted)
-- Q1 Non-GAAP Net Income: $ 4.4 million or $0.02 per share
(fully diluted)
SANTA CLARA, Calif.--(BUSINESS WIRE)--April 25, 2007--PMC-Sierra,
Inc. (Nasdaq:PMCS), a leading provider of high-speed broadband
communications and storage semiconductors, today reported results for
the first quarter ending April 1, 2007.
Net revenues in the first quarter of 2007 were $103.7 million, an
increase of 2% compared with $101.9 million in the fourth quarter of
2006 and 18% higher than in the first quarter of 2006. The revenues in
the first quarter of 2007 included revenues related to the
acquisitions of both the Avago storage semiconductor business and the
Passave Fiber To The Home business, compared with the first quarter of
2006 which included only one month of revenues from the Avago business
and no revenue from Passave.
Net loss in the first quarter of 2007 on a GAAP basis was $15.8
million (GAAP diluted loss per share of $0.07) compared with a GAAP
net loss in the fourth quarter of 2006 of $42.2 million (GAAP loss per
share of $0.20). Non-GAAP net income was $4.4 million (non-GAAP
diluted earnings per share of $0.02) compared with non-GAAP net income
of $4.7 million (non-GAAP diluted earnings per share of $0.02) in the
fourth quarter of 2006.
Non-GAAP net income in the first quarter of 2007 excludes the
following items: (i) $6.9 million in costs and other charges related
to the Company's corporate restructuring announced March 29, 2007;
(ii) $9.4 million in stock-based compensation expense; (iii) $9.8
million in amortization of purchased intangible assets; (iv) $1.0
million foreign exchange gain on Canadian taxes; and (v) $4.0 million
income tax recovery relating to prior years, and (vi) $2.9 million
income tax effect relating to these non-GAAP adjustments.
For a full reconciliation of GAAP net income to non-GAAP net
income, please refer to the schedule on page 7 of this release. The
Company believes the additional 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 first quarter, we experienced improved visibility in our
telecom, fiber to the home, and microprocessor businesses on a
sequential basis," said Bob Bailey, chairman and chief executive
officer of PMC-Sierra. "We believe that the overall business
environment is improving in each of the markets that we serve, and our
recently announced cost reduction initiative will enable us to improve
our operating performance going forward."
The Company announced on March 29, 2007, that it was undertaking a
corporate restructuring expected to reduce on-going annualized
operating expenses by an estimated $20 to $24 million per year. The
Company's decision to initiate cost reduction activities is part of
its on-going effort to improve its corporate operating performance and
boost productivity across the organization. The restructuring included
the announced closure of two of the Company's R&D centers in Winnipeg,
Manitoba and Saskatoon, Saskatchewan. The total work force reduction
under the restructuring plan is expected to be approximately 175
positions across the organization. Restructuring activities related to
this plan are expected to be substantially complete by the end of the
third quarter of this year.
During the first quarter of 2007, the Company also announced the
appointment of Michael W. Zellner as vice president and chief
financial officer of PMC-Sierra. Mr. Zellner has 25 years of high tech
business experience and was previously senior vice president and chief
financial officer at Wind River Systems, Inc., a device software
solutions provider. In this role, Mr. Zellner was responsible for all
finance and administration functions. Prior to Wind River, Mr. Zellner
was senior director of finance at Applied Materials.
The Company made the following product announcements in Q1 2007:
-- 6Gbit/s SAS/SATA controller: we announced the PM8000
Tachyon(R) SPC 8x6G, which enables the first generation of SAS
2.0 enterprise-class tiered storage architectures. This
6Gbit/s SAS/SATA controller is the industry's first SAS 2.0
compliant device enabling storage OEMs to provide true
enterprise-class SAS/SATA disk-array systems. The device
leverages PMC-Sierra's market-leading Tachyon protocol
controller technology, preserving storage OEMs' software and
hardware investments. The Tachyon SPC 8x6G, together with
PMC-Sierra's maxSAS(TM) expander switches and active-active
multiplexers, provides a comprehensive end-to-end
enterprise-class chip set solution.
-- GPON ONT Solution: we announced the availability of the
PAS65311 GPON ONT reference design featuring PMC's
GigaPASS(TM) architecture. It includes a fully featured ITU-T
G.984 GPON MAC, an advanced classification engine, robust QoS
queuing, advanced VLAN bridging and manipulation, and IPTV
filtering, all performed at line-rate speeds for all packet
sizes. The solution has already proven interoperability with
most existing GPON OLT designs.
First Quarter 2007 Conference Call
Management will review the first quarter 2007 results and provide
guidance for the second quarter of 2007 during a conference call at
1:30 pm Pacific Time/4:30 pm Eastern Time on April 25, 2007. The
conference call webcast will be accessible under the Financial Events
and Calendar section at http://investor.pmc-sierra.com/. To listen to
the conference call live by telephone, dial (913) 312-1295
approximately ten minutes before the start time. A telephone playback
will be available after the completion of the call and can be accessed
at (719) 457-0820 using the access code 3449714. A replay of the
webcast will be available for five business days.
Second Quarter 2007 Conference Call
PMC-Sierra is planning on releasing its results for the second
quarter of 2007 on July 19th. A conference call will be held on the
day of the release to review the quarter and provide an outlook for
the third quarter of 2007.
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, market segment growth or
decline, orders with short delivery lead times, customer
concentration, and the uncertain timing of expense reductions
associated with corporate restructurings and their related impact on
PMC's 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 fiber access
gateway 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 and
Tachyon are registered trademarks of PMC-Sierra, Inc. in the United
States and other countries. PMC-SIERRA, PMCS, maxSAS, GigaPASS 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
-----------------------------
Apr 1, Dec 31, Apr 2,
2007 2006 2006
Net revenues $103,665 $101,917 $ 87,781
Cost of revenues 37,571 37,125 26,625
--------- --------- ---------
Gross profit 66,094 64,792 61,156
Other costs and expenses:
Research and development 44,524 41,713 33,749
Selling, general and administrative 26,698 26,362 19,593
Amortization of purchased intangible
assets 9,835 10,136 2,110
In-process research and development - - 14,800
Restructuring costs and other charges 6,894 453 (738)
--------- --------- ---------
Loss from operations (21,857) (13,872) (8,358)
Other income (expense):
Interest income, net 1,837 2,297 3,566
Foreign exchange (loss) gain (996) 3,508 13
Amortization of debt issue costs (242) (242) (242)
Gain on investments - - 1,849
--------- --------- ---------
Loss before (provision for) recovery of
income taxes (21,258) (8,309) (3,172)
(Provision for) recovery of income taxes 5,435 (33,891) (11,161)
--------- --------- ---------
Net loss $(15,823) $(42,200) $(14,333)
========= ========= =========
Net loss per common share - basic and
diluted $ (0.07) $ (0.20) $ (0.08)
Shares used in per share calculation -
basic and diluted 213,881 212,295 187,218
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 to Non-GAAP net income
(in thousands, except for per share amounts)
(unaudited)
Three Months Ended
-----------------------------
Apr 1, Dec 31, Apr 2,
2007(1) 2006(2) 2006 (3)
GAAP net loss $(15,823) $(42,200) $(14,333)
Included in Cost of revenues:
Stock-based compensation 517 517 423
Acquisition-related costs - - 3,273
Included in Other costs and expenses:
Stock-based compensation 8,900 10,867 5,478
Acquisition-related costs - - 222
Amortization of intangible assets 9,835 10,136 2,110
In-process research and development - - 14,800
Restructuring costs and other charges 6,894 453 (738)
Included in Other income (expense):
(Gain) loss on investments - - (1,849)
Foreign exchange (gain) loss on
Canadian taxes 979 (3,521) (113)
Included in Provision for income taxes :
Additional provision for (recovery of)
prior years' income taxes (4,000) 29,888 -
Withholding and other taxes on
repatriation of funds - - 7,036
Income tax effect of non-GAAP items (2,902) (1,442) 38
--------- --------- ---------
Non-GAAP net income $ 4,400 $ 4,698 $ 16,347
========= ========= =========
Non-GAAP net income per share - diluted $ 0.02 $ 0.02 $ 0.08
Shares used to calculate non-GAAP
net income per share - diluted 215,385 214,332 196,674
Non-GAAP adjustments
(1) $9.4 million stock-based compensation expense; $9.8 million
amortization of purchased intangible assets; $6.9 million
restructuring costs comprised of $4.5 million additional severance,
$0.4 million writedown of assets and $2.0 million provision for
excess facilities; $1.0 million foreign exchange loss on Canadian
taxes; a $4.0 million tax recovery relating to prior years; and $2.9
million income tax effect relating to these non-GAAP adjustments.
(2) $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.
(3) $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.
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
Apr 1, Dec 31,
2007 2006
ASSETS:
Current assets:
Cash, cash equivalents, and short-term
investments $ 280,701 $ 258,914
Accounts receivable, net 38,930 37,303
Inventories, net 30,601 34,505
Prepaid expenses and other current assets 15,888 17,164
----------- -----------
Total current assets 366,120 347,886
Investments and other assets 13,382 14,653
Property and equipment, net 18,430 18,904
Deferred tax assets 37,164 397
Goodwill 396,143 395,943
Intangible assets, net 213,647 223,629
Deposits for wafer fabrication capacity 5,145 5,145
----------- -----------
$1,050,031 $1,006,557
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 18,011 $ 19,074
Accrued liabilities 51,624 51,199
Income taxes payable 132 722
Deferred income taxes 2,042 2,042
Liability for unrecognized tax benefit 57,240 58,706
Accrued restructuring costs 17,014 12,657
Deferred income 13,022 11,340
----------- -----------
Total current liabilities 159,085 155,740
2.25% Senior convertible notes due October 15,
2025 225,000 225,000
Deferred income taxes 11,067 10,126
Liability for unrecognized tax benefit 76,396 42,531
PMC special shares convertible into 2,099
(2006 - 2,099) shares of common stock 2,732 2,732
Stockholders' equity
Capital stock and additional paid in capital 1,344,822 1,327,808
Accumulated other comprehensive loss (605) (1,127)
Accumulated deficit (768,466) (756,253)
----------- -----------
Total stockholders' equity 575,751 570,428
----------- -----------
$1,050,031 $1,006,557
=========== ===========
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
-------------------
Apr 1, Apr 2,
2007 2006
Cash flows from operating activities:
Net loss $(15,823) $(14,333)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Stock-based compensation 9,418 5,901
Depreciation and amortization 15,478 5,412
In-process research and development - 14,800
Gain on investments - (1,849)
Loss on disposal of property and equipment 484 -
Changes in operating assets and liabilities:
Accounts receivable (1,627) (13,239)
Inventories 3,904 (837)
Prepaid expenses and other current assets 1,006 (19,310)
Accounts payable and accrued liabilities (47) 7,045
Income taxes payable (996) 7,569
Accrued restructuring costs 4,357 (3,133)
Deferred income 1,682 1,208
--------- ---------
Net cash (used in) provided by operating
activities 17,836 (10,766)
--------- ---------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired - (431,231)
Proceeds from sales and maturities of short-term
available-for-sale investments - 173,010
Proceeds from sale of investments and other
assets - 5,118
Purchases of property and equipment (2,257) (2,483)
Purchase of intangible assets (1,388) (587)
--------- ---------
Net cash used in investing activities (3,645) (256,173)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock 7,596 14,780
--------- ---------
Net cash provided by financing activities 7,596 14,780
--------- ---------
Net (decrease) increase in cash and cash
equivalents 21,787 (252,159)
Cash and cash equivalents, beginning of the period 258,914 405,566
--------- ---------
Cash and cash equivalents, end of the period $280,701 $153,407
========= =========
CONTACT: PMC-Sierra, Inc.
Vice President & CFO
Mike Zellner, 408-988-1204
or
VP Marketing Communications
David Climie, 408-988-8276
or
Manager, Communications
Susan Shaw, 408-988-8515