Exhibit 99.1
PMC-Sierra Reports Third Quarter 2007 Results
-- Q3 2007 Net revenues $117.5 million
-- Q3 2007 GAAP Net loss $(5.9) million or $(0.03) per share
-- Q3 2007 Non-GAAP Net income $19.1 million or $0.09 per share
SANTA CLARA, Calif.--(BUSINESS WIRE)--Oct. 18, 2007--PMC-Sierra,
Inc. (Nasdaq:PMCS), a leading provider of high-speed broadband
communications and storage semiconductors, today reported results for
the third quarter ending September 30th, 2007.
Net revenues in the third quarter of 2007 were $117.5 million
compared with $104.7 million in the second quarter of 2007, and $116.5
million in the third quarter of the prior year.
Net loss in the third quarter of 2007 on a GAAP basis was $5.9
million (GAAP diluted loss per share of $0.03) compared with GAAP net
loss of $22.3 million (GAAP diluted loss per share of $0.10) in the
second quarter of 2007. Non-GAAP net income in the third quarter of
2007 was $19.1 million (non-GAAP diluted earnings per share of $0.09)
compared with a non-GAAP net income in the second quarter of 2007 of
$7.4 million (non-GAAP diluted earnings per share of $0.03).
"In the third quarter, we experienced strong growth in our telecom
business, particularly in Asia, as well as positive trends in our
enterprise storage business," said Bob Bailey, chairman and chief
executive officer of PMC-Sierra. "Our summer bookings were strong, and
our operating performance increased in the quarter as a result of the
combination of top-line growth and expense reductions."
Non-GAAP net income in the third quarter of 2007 excludes the
following items: (i) $8.1 million in stock-based compensation expense;
(ii) $9.8 million in amortization of purchased intangible assets;
(iii) $1.6 million in costs and charges related to the Company's
corporate restructuring announced March 29, 2007; (iv) $6.8 million
foreign exchange loss on foreign denominated FIN 48 tax liabilities;
and (v) $1.2 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 6 of this release. The
Company believes the additional non-GAAP measures provided are useful
to investors for the purpose of financial analysis. Management uses
the non-GAAP measures internally to evaluate its operating performance
before gains, losses and other charges that are considered by
management to be outside of the Company's core operating results, as
well as used to plan for the Company's future periods. Non-GAAP
measures are however neither stated in accordance with, nor are they a
substitute for, GAAP measures.
The Company made the following product announcements in Q3 2007:
-- Highly integrated WiMAX RF IC: We announced our first
WiMAX RF IC solutions for Femtocell base stations,
Customer Premises Equipment, Mobile Base Stations, and
laptop air cards. The PM8800 WiZIRD(TM) 2Tx/2Rx is the
industry's most integrated WiMAX RF IC solution that
supports full 2Tx/2Rx Multiple In/Multiple Out with
Multi-Band functionality (2.3-2.7 GHz and 3.3-3.8 GHz)
that allows a single design to cover all popular licensed
radio spectra in the world. These advanced features enable
next-generation consumer services such as gaming, video
conferencing, and streaming media applications. The PM8801
WiZIRD 1Tx/2Rx integrates a single transmit and two
receive radio paths, as well as Multi-Band support, and is
ideal for WiMAX Wave2 subscriber equipment, such as CPE
and laptop devices.
-- High-Performance Multi-Service Processors: We announced
two highly integrated Multi-Service Processors targeted at
high-performance, cost-sensitive embedded applications.
These processors meet the performance and cost targets
required to support networked appliances, storage systems
and security solutions. The MSP8110 and MSP8120 SoC
solutions, powered by the MIPS32 34K core, provide large
64KB caches with integrated I/O interfaces and consume
less than 1.5Watts. These devices are targeted for use in
IP surveillance, SMB NAS and network-connected appliances.
Third Quarter 2007 Conference Call
Management will review the third quarter 2007 results and provide
guidance for the fourth quarter of 2007 during a conference call at
1:30 p.m. Pacific Time/4:30 p.m. Eastern Time on October 18, 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 (416) 915-8321
approximately ten minutes before the start time. A telephone playback
will be available after the completion of the call and can be accessed
at (647) 436-0148 using the access code 4061228. A replay of the
webcast will be available for five business days.
Fourth Quarter 2007 Conference Call
PMC-Sierra is planning on releasing its results for the fourth
quarter of 2007 on January 24, 2008. 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 2008.
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. For more information, visit
www.pmc-sierra.com.
(C) Copyright PMC-Sierra, Inc. 2007. All rights reserved. PMC is a
registered trademarks of PMC-Sierra, Inc. in the United States and
other countries. PMC-SIERRA, PMCS, WiZIRD 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 Nine Months Ended
----------------------------- -------------------
September July 1, October September October
30, 2007 2007 1, 2006 30, 2007 1, 2006
Net revenues $117,455 $104,692 $116,514 $325,812 $323,075
Cost of revenues 39,871 37,650 39,146 115,092 109,331
--------- --------- --------- --------- ---------
Gross profit 77,584 67,042 77,368 210,720 213,744
Other costs and
expenses:
Research and
development 35,557 41,635 41,611 121,716 116,947
Selling, general
and administrative 24,124 25,171 29,235 75,993 76,002
Amortization of
purchased
intangible assets 9,836 9,836 11,202 29,507 23,246
In-process research
and development - - - - 35,300
Restructuring costs
and other charges 1,564 3,786 6,404 12,244 5,666
--------- --------- --------- --------- ---------
Income (loss) from
operations 6,503 (13,386) (11,084) (28,740) (43,417)
Other income
(expense):
Interest income,
net 2,728 2,472 1,849 7,037 6,682
Foreign exchange
loss (7,052) (7,926) (252) (15,975) (3,617)
Amortization of
debt issue costs (242) (242) (242) (726) (726)
Loss on
investments, net - - - - (1,269)
--------- --------- --------- --------- ---------
Income (loss) before
provision for
income taxes 1,937 (19,082) (9,729) (38,404) (42,347)
Provision for income
taxes (7,877) (3,177) (1,796) (5,619) (15,345)
--------- --------- --------- --------- ---------
Net loss $ (5,940) $(22,259) $(11,525) $(44,023) $(57,692)
========= ========= ========= ========= =========
Net loss per common
share - basic and
diluted $ (0.03) $ (0.10) $ (0.05) $ (0.20) $ (0.29)
Shares used in per
share calculation -
basic and diluted 216,837 215,688 211,298 215,469 200,528
As a supplement to the Company's condensed consolidated statement of
operations presented on a generally accepted accounting principles
(GAAP) basis, the Company provides additional non-GAAP measures for
net income (loss) and net income (loss) 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
September 30, 2007
------------------------------
Non-
GAAP
Reported Items Non-GAAP
--------- -------- ---------
Net revenues $117,455 $117,455
Cost of revenues 39,871 (298)(1) 39,573
--------- -------- ---------
Gross profit 77,584 (298) 77,882
Operating expenses:
Research and development 35,557 (3,805)(1) 31,752
Selling, general and administrative 24,124 (4,007)(1) 20,117
Amortization of purchased intangible
assets 9,836 (9,836) -
In-process research and development - -
Restructuring costs and other charges 1,564 (1,564)(2) -
--------- -------- ---------
-
Income (loss) from operations 6,503 19,510 26,013
Other income (expense):
Interest income, net 2,728 2,728
Foreign exchange gain (loss) (7,052) 6,789 (3) (263)
Amortization of debt issue costs (242) (242)
Loss on investments, net - -
--------- -------- ---------
Income (loss) before provision for
income taxes 1,937 26,299 28,236
(Provision for) recovery of income
taxes (7,877) (1,231)(4) (9,108)
--------- -------- ---------
Net (loss) income $ (5,940) $25,068 $ 19,128
========= ======== =========
Net (loss) income per common share -
basic $ (0.03) $ 0.09
Net (loss) income per common share -
diluted $ (0.03) $ 0.09
Shares used in per share calculation -
basic 216,837 216,837
Shares used in per share calculation -
diluted 216,837 219,345
Three Months Ended
October 1, 2006
-------------------------------
Non-GAAP
Reported Items Non-GAAP
--------- --------- ---------
Net revenues $116,514 $116,514
Cost of revenues 39,146 (379)(1) 38,767
--------- --------- ---------
Gross profit 77,368 (379) 77,747
Operating expenses:
Research and development 41,611 (4,186)(1) 37,425
Selling, general and administrative 29,235 (8,391)(5) 20,844
Amortization of purchased intangible
assets 11,202 (11,202) -
In-process research and development - - -
Restructuring costs and other charges 6,404 (6,404)(6) -
--------- --------- ---------
Income (loss) from operations (11,084) 30,562 19,478
Other income (expense):
Interest income, net 1,849 1,849
Foreign exchange gain (loss) (252) (108)(3) (360)
Amortization of debt issue costs (242) (242)
Loss on investments, net -
--------- --------- ---------
Income (loss) before provision for
income taxes (9,729) 30,454 20,725
(Provision for) recovery of income
taxes (1,796) (1,520)(4) (3,316)
--------- --------- ---------
Net (loss) income $(11,525) $ 28,934 $ 17,409
========= ========= =========
Net (loss) income per common share -
basic $ (0.05) $ 0.08
Net (loss) income per common share -
diluted $ (0.05) $ 0.08
Shares used in per share calculation -
basic 211,298 211,298
Shares used in per share calculation -
diluted 211,298 212,561
Non-GAAP adjustments consist of:
(1) Stock based compensation
(2) $1.6 million restructuring costs including $1.2 million for
severance and $0.3 million for excess facilities.
(3) Foreign exchange loss (gain) on Canadian taxes
(4) Income tax effect relating to these non-GAAP adjustments
(5) Stock based compensation expense of $6.0 million and $2.4 million
payroll tax accrual in a foreign jurisdiction
(6) $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
PMC-Sierra, Inc.
Reconciliation of GAAP net loss to Non-GAAP net income
(in thousands, except for per share amounts)
(unaudited)
Nine Months Ended
September 30, 2007
-------------------------------
Non-GAAP
Reported Items Non-GAAP
--------- --------- ---------
Net revenues $325,812 $325,812
Cost of revenues 115,092 (1,347)(1) 113,745
--------- --------- ---------
Gross profit 210,720 (1,347) 212,067
Operating expenses:
Research and development 121,716 (12,472)(1) 109,244
Selling, general and administrative 75,993 (11,140)(2) 64,853
Amortization of purchased intangible
assets 29,507 (29,507) -
In-process research and development - - -
Restructuring costs and other charges 12,244 (12,244)(3) -
--------- --------- ---------
(Loss) income from operations (28,740) 66,710 37,970
Other income (expense):
Interest income, net 7,037 - 7,037
Foreign exchange gain (loss) (15,975) 16,074 (4) 99
Amortization of debt issue costs (726) - (726)
(Loss) Gain on investments - -
--------- --------- ---------
(Loss) Income before (provision for)
recovery of income taxes (38,404) 82,784 44,380
(Provision for) recovery of income
taxes (5,619) (7,872)(5) (13,491)
--------- --------- ---------
Net (loss) income $(44,023) $ 74,912 $ 30,889
========= ========= =========
Net (loss) income per common share -
basic $ (0.20) $ 0.14
Net (loss) income per common share -
diluted $ (0.20) $ 0.14
Shares used in per share calculation -
basic 215,469 215,469
Shares used in per share calculation -
diluted 215,469 217,602
Nine Months Ended
October 1, 2006
--------------------------------
Non-GAAP
Reported Items Non-GAAP
---------- --------- ---------
Net revenues $323,075 $323,075
Cost of revenues 109,331 (10,241) (6) 99,090
--------- --------- ---------
Gross profit 213,744 (10,241) 223,985
Operating expenses:
Research and development 116,947 (10,738) (1) 106,209
Selling, general and administrative 76,002 (17,072) (7) 58,930
Amortization of purchased intangible
assets 23,246 (23,246) -
In-process research and development 35,300 (35,300) (8) -
Restructuring costs and other
charges 5,666 (5,666) (9) -
--------- --------- ---------
(Loss) income from operations (43,417) 102,263 58,846
Other income (expense):
Interest income, net 6,682 6,682
Foreign exchange gain (loss) (3,617) 3,074 (4) (543)
Amortization of debt issue costs (726) (726)
(Loss) Gain on investments (1,269) 1,269 (10) -
--------- --------- ---------
(Loss) Income before (provision for)
recovery of income taxes (42,347) 106,606 64,259
(Provision for) recovery of income
taxes (15,345) 4,247 (11) (11,098)
--------- --------- ---------
Net (loss) income $(57,692) $110,853 $ 53,161
========= ========= =========
Net (loss) income per common share -
basic $ (0.29) $ 0.27
Net (loss) income per common share -
diluted $ (0.29) $ 0.26
Shares used in per share calculation
- basic 200,528 200,528
Shares used in per share calculation
- diluted 200,528 207,945
Non-GAAP adjustments consist of:
(1) Stock based compensation expense
(2) Stock based compensation expense of $13.4 million and $2.2 million
reversal of a payroll tax accrual in a foreign jurisdiction
(3) $12.2 million restructuring costs including $9.3 million for
severance, and $2.4 million for excess facilities, and $0.5 million
for contract termination and asset impairment
(4) Foreign exchange loss on Canadian taxes
(5) Provision for income taxes includes $4.0 million additional
recovery of prior years' income taxes and $3.8 million income tax
effect of non-GAAP adjustments
(6) Stock based compensation expense of $1.3 million and purchase
accounting adjustments of $8.9 million
(7) Stock based compensation expense of $14.5 million; acquisition
costs of $0.2 million and $2.4 million payroll tax in a foreign
jurisdiction
(8) $35.3 million in charges for in-process research and development
from the purchases of Passave and the Avago Storage Semiconductor
Business
(9) $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
(10) $1.3 million net loss on investments including a $3.2 million
write-down, offset by $1.9 million gains on sales of investment
(11) $7.0 million withholding and other taxes on repatriation of funds
offset by $2.8 million income tax effect of these non-GAAP
adjustments
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
September 30, December 31,
2007 2006
ASSETS:
Current assets:
Cash and cash equivalents $ 328,001 $ 258,914
Accounts receivable, net 41,440 37,303
Inventories, net 30,499 34,505
Prepaid expenses and other current assets 18,271 16,186
Deferred tax assets 4,321 978
------------- ------------
Total current assets 422,532 347,886
Goodwill 398,418 395,943
Intangible assets, net 198,493 223,629
Property and equipment, net 16,978 18,904
Investments and other assets 12,519 14,653
Deposits for wafer fabrication capacity 5,145 5,145
Deferred tax assets 50,482 397
------------- ------------
$ 1,104,567 $ 1,006,557
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 23,462 $ 19,074
Accrued liabilities 52,943 51,199
Income taxes payable 5,086 722
Deferred income taxes 3,481 2,042
Liability for unrecognized tax benefit 69,212 58,706
Accrued restructuring costs 12,728 12,657
Deferred income 13,494 11,340
------------- ------------
Total current liabilities 180,406 155,740
Long-term obligations 1,012 -
2.25% Senior convertible notes due October
15, 2025 225,000 225,000
Deferred taxes and other tax liabilities 13,505 10,612
Liability for unrecognized tax benefit 99,547 42,045
PMC special shares convertible into 2,099
(2006 - 2,099) shares of common stock 2,732 2,732
Stockholders' equity
Common stock and additional paid in
capital 1,375,130 1,327,808
Accumulated other comprehensive income
(loss) 2,778 (1,127)
Accumulated deficit (795,543) (756,253)
------------- ------------
Total stockholders' equity 582,365 570,428
------------- ------------
$ 1,104,567 $ 1,006,557
============= ============
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
------------------------
September 30, October 1,
2007 2006
Cash flows from operating activities:
Net loss $ (44,023) $ (57,692)
Adjustments to reconcile net loss to net
cash (used in) provided by operating
activities:
Stock-based compensation 27,172 26,525
Depreciation and amortization 42,606 34,520
In-process research and development - 35,300
Loss on investments - 1,243
Loss on disposal of property and equipment 496 -
Changes in operating assets and
liabilities:
Accounts receivable (4,137) (6,070)
Inventories 3,655 (5,463)
Prepaid expenses and other current
assets 462 (13,202)
Accounts payable and accrued liabilities 5,700 (7,359)
Deferred taxes and income taxes payable 27,522 14,518
Accrued restructuring costs 223 (713)
Deferred income 2,154 1,742
------------- ----------
Net cash provided by operating
activities 61,830 23,349
------------- ----------
Cash flows from investing activities:
Acquisition of businesses, net of cash
acquired - (417,738)
Proceeds from sales and maturities of short-
term available-for-sale investments - 222,357
Proceeds from sale of investments and other
assets - 5,444
Purchases of property and equipment (5,781) (6,422)
Purchase of intangible assets (7,112) (3,944)
------------- ----------
Net cash used in investing activities (12,893) (200,303)
------------- ----------
Cash flows from financing activity:
Proceeds from issuance of common stock 20,150 21,857
------------- ----------
Net cash provided by financing activity 20,150 21,857
------------- ----------
Net (decrease) increase in cash and cash
equivalents 69,087 (155,097)
Cash and cash equivalents, beginning of the
period 258,914 405,566
------------- ----------
Cash and cash equivalents, end of the period $ 328,001 $ 250,469
============= ==========
CONTACT: PMC-Sierra, Inc.
Vice President & CFO
Mike Zellner, 1-408-988-1204
or
VP Marketing Communications
David Climie, 1-408-988-8276
or
Senior Manager, Communications
Susan Shaw, 1-408-988-8515