PMC-SIERRA, INC.
NASDAQ : PMCS

PMC-SIERRA, INC.

October 19, 2005 16:05 ET

PMC-Sierra Reports Third Quarter 2005 Results

SANTA CLARA, Calif.--(CCNMatthews - Oct 19, 2005) -

PMC-Sierra, Inc. (Nasdaq:PMCS):

-- Q3 Net Revenues: $76.2 million

-- Q3 Non-GAAP Net Income: $13.5 million or $0.07 per share (diluted)

-- Q3 GAAP Net Income: $5.9 million or $0.03 per share (diluted)

PMC-Sierra, Inc. (Nasdaq:PMCS), a leading provider of high-speed broadband communications, storage semiconductors and microprocessors, today reported results for the third quarter ending October 2, 2005.

Net revenues in the third quarter of 2005 were $76.2 million, an increase of 6.5% compared to $71.5 million for the second quarter of 2005 and 7.1% higher than the third quarter of 2004.

Net income in the third quarter of 2005 on a non-GAAP basis was $13.5 million (non-GAAP diluted earnings per share of $0.07) compared to non-GAAP net income of $7.2 million (non-GAAP diluted earnings per share of $0.04) in the second quarter of 2005. GAAP net income in the third quarter of 2005 was $5.9 million (GAAP diluted earnings per share of $0.03) compared to GAAP net income of $0.5 million in the second quarter of 2005 (GAAP diluted earnings per share of $0.00).

Non-GAAP net income in the third quarter of 2005 excludes (i) a cash charge of $5.4 million for consolidation of facilities associated with a workforce reduction plan announced in the second quarter of 2005; (ii) a $3.4 million foreign exchange loss on Canadian taxes; and (iii) $1.2 million of income tax effects related to these non-GAAP adjustments.

For a full reconciliation of GAAP net income to non-GAAP net income, please refer to the supplemental schedule on page 6 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 the third quarter of 2005, we had solid growth in both our metro telecom transport business as well as enterprise storage semiconductors," said Bob Bailey, chairman and chief executive officer of PMC-Sierra. "PMC-Sierra also experienced meaningful engagements in Voice-over-IP opportunities in Asia this quarter."

PMC-Sierra Executive appointments in Q3 2005

During the third quarter, the Company announced the appointment of Dr. Robert Yung to the position of Chief Technology Officer. Dr. Yung was most recently a Founder and Partner at GSR Ventures, an early-stage private equity technology fund. Prior to that, Dr. Yung held various CTO positions within Intel Corporation (the most recent being CTO for Enterprise Processors) and before that he was CTO for Sun Microsystems in Asia.

PMC-Sierra also announced the appointment of Ben Naskar to the position of Vice President and General Manager for the Communications Products Division. Most recently, Mr. Naskar was the president and CEO of Magfusion, Inc., a start-up company developing RF MEMS-based products used in wireless and RF applications. Prior to that, Mr. Naskar was managing director and vice president, Asia Pacific, for Analog Devices and before that was a group director for National Semiconductor.

Third Quarter 2005 Conference Call

Management will review the third quarter 2005 results and provide guidance for the fourth quarter of 2005 during a conference call at 1:30 pm Pacific Time/4:30 pm Eastern Time on October 19, 2005. 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 3494436). A replay of the webcast will be available for five business days.

Fourth Quarter 2005 Conference Call

PMC-Sierra is planning on releasing its results for the fourth quarter of 2005 on January 26th. 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 2006.

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, orders with short delivery lead times and customer concentration. The Company does not undertake any obligation to update the forward-looking statements.

About PMC-Sierra

PMC-Sierra™ is a leading provider of high-speed broadband communications semiconductors, storage semiconductors and microprocessors for enterprise, access, metro, storage, wireless infrastructure and customer premises equipment. The company offers worldwide technical and sales support, including a network of offices throughout North America, Europe 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. 2005. All rights reserved. PMC, PMCS, PMC-Sierra, and "Thinking You can Build On" are trademarks of PMC-Sierra, Inc. All other trademarks are the property of the respective owners



PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts)

Three Months Ended
-----------------------------
(unaudited)
Oct 2, Jul 3, Sep 26,
2005 2005 2004

Net revenues $ 76,203 $ 71,541 $ 71,173

Cost of revenues 20,131 21,372 21,024
--------- --------- ---------
Gross profit 56,072 50,169 50,149


Other costs and expenses:
Research and development 27,205 29,456 30,168
Marketing, general and
administrative 14,839 13,251 12,148
Amortization of deferred
stock compensation:
Marketing, general and
administrative - 215 -
Acquisition costs - - 1,212
Restructuring costs and other charges 5,359 7,606 -
--------- --------- ---------
Income (loss) from operations 8,669 (359) 6,621

Other income (expense):
Interest income, net 2,874 2,502 1,319
Foreign exchange gain (loss) (3,378) 512 98
Loss on extinguishment of debt and
amortization of debt issue costs - - (97)
Gain on sale of property
and investments - - 655
--------- --------- ---------
Income before provision
for income taxes 8,165 2,655 8,596

(Provision for) recovery
of income taxes (2,230) (2,126) 2,288
--------- --------- ---------
Net income $ 5,935 $ 529 $ 6,308
========= ========= =========

Net income per common share - basic $ 0.03 $ 0.00 $ 0.03

Net income per common share - diluted $ 0.03 $ 0.00 $ 0.03

Shares used in per share
calculation - basic 185,110 183,386 180,280
Shares used in per share
calculation - diluted 190,739 188,305 187,968



PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts)

Nine Months Ended
-----------------------
(unaudited)
Oct 2, Sep 26,
2005 2004

Net revenues $ 213,855 $ 235,536

Cost of revenues 61,124 68,624
----------- -----------
Gross profit 152,731 166,912


Other costs and expenses:
Research and development 88,077 89,659
Marketing, general and
administrative 41,094 36,276
Amortization of deferred stock compensation:
Marketing, general and administrative 215 697
Acquisition costs - 1,212
Restructuring costs and other charges 13,833 -
----------- -----------
Income (loss) from operations 9,512 39,068

Other income (expense):
Interest income, net 8,061 3,330
Foreign exchange gain (loss) (3,456) 85
Loss on extinguishment of debt and
amortization of debt issue costs (1,634) (2,136)
Gain on sale of property and investments 1,439 9,242
----------- -----------
Income before provision for income taxes 13,922 49,589

(Provision for) recovery of income taxes (4,181) (11,025)
----------- -----------
Net income $ 9,741 $ 38,564
=========== ===========

Net income per common share - basic $ 0.05 $ 0.21

Net income per common share - diluted $ 0.05 $ 0.20

Shares used in per share
calculation - basic 183,563 179,420
Shares used in per share
calculation - diluted 189,241 190,135



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 performance of financial analysis. Management uses these measures internally to evaluate its in-period operating performance and 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 income to Non-GAAP net income
(in thousands, except for per share amounts)
(unaudited)

Three Months Ended
---------------------------
Oct 2, Jul 3, Sep 26,
2005(1) 2005(2) 2004(3)

GAAP net income $ 5,935 $ 529 $ 6,308

Amortization of deferred
stock compensation - 215 -
Reversal of provision for excess
inventory resulting from the
sale of inventory that was
previously provided for - - -
Acquisition costs - - 1,212
Restructuring costs and other charges 5,359 7,606 -
Elimination of provision - (900) -
Loss on extinguishment of debt - - -
Gain on sales of property and investments - - (655)
Recovery of prior year income taxes - - -
Foreign exchange (gain) loss
on Canadian taxes 3,388 (522) -
Income tax effect of above items (1,152) 315 -
--------- -------- --------
Non-GAAP net income $ 13,530 $ 7,243 $ 6,865
========= ======== ========

Non-GAAP net income per share - diluted $ 0.07 $ 0.04 $ 0.04

Shares used to calculate non-GAAP
net income per share - diluted 190,739 188,305 187,968


Non-GAAP adjustments

The above amounts have been adjusted to eliminate the following:

(1) $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.

(2) $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.

(3) $1.2 million acquisition costs relating to a purchase of assets
and $0.7 million gain on sales of investments.


PMC-Sierra, Inc.
Reconciliation of GAAP net income to Non-GAAP net income
(in thousands, except for per share amounts)
(unaudited)

Nine Months Ended
----------------------
Oct 2, Sep 26,
2005(4) 2004(5)

GAAP net income $ 9,741 $ 38,564

Amortization of deferred
stock compensation 215 697
Reversal of provision for excess
inventory resulting from the
sale of inventory that was
previously provided for - (651)
Acquisition costs - 1,212
Restructuring costs and other charges 13,833 -
Elimination of provision (900) -
Loss on extinguishment of debt 1,618 1,845
Gain on sales of property and investments (1,439) (9,242)
Recovery of prior year income taxes (998) -
Foreign exchange (gain) loss
on Canadian taxes 3,576 -
Income tax effect of above items (987) 163
---------- ----------
Non-GAAP net income $ 24,659 $ 32,588
========== ==========

Non-GAAP net income per share - diluted $ 0.13 $ 0.17

Shares used to calculate non-GAAP
net income per share - diluted 189,241 190,135


Non-GAAP adjustments

The above amounts have been adjusted to eliminate the following:

(4) $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 property and 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.

(5) $0.7 million amortization of deferred stock compensation, $0.7
million reversal of a provision for excess inventory resulting
from the sale of inventory that was previously provided for, $1.2
million acquisition costs relating to purchase of assets, $1.8
million loss on extinguishment of debt, $9.2 million gain on sale
of investments, and $0.2 million income tax effect related to
these non-GAAP adjustments.



PMC-Sierra, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)

Oct 2, Dec 26,
2005 2004

ASSETS:
Current assets:
Cash and short-term investments (1) $ 375,862 $ 274,686
Accounts receivable, net 37,789 19,931
Inventories, net 13,010 15,823
Prepaid expenses and other current assets 16,448 17,042
----------- -----------
Total current assets 443,109 327,482

Investment in bonds and notes (1) 9,831 139,111
Other investments and assets 5,511 4,565
Property and equipment, net 11,609 16,177
Goodwill and other intangible assets, net 12,812 12,910
Deposits for wafer fabrication capacity 5,145 6,779
----------- -----------
$ 488,017 $ 507,024
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 18,580 $ 16,598
Accrued liabilities 38,480 40,195
Income taxes payable 36,646 28,931
Accrued restructuring costs 16,533 13,735
Deferred income 11,451 7,646
Current portion of long-term debt - 68,071
----------- -----------
Total current liabilities 121,690 175,176

Deferred taxes and other tax liabilities 28,077 28,077

PMC special shares convertible into 2,469
(2004 - 2,897) shares of common stock 3,370 4,434

Stockholders' equity
Capital stock and additional paid in capital 918,161 893,704
Accumulated other comprehensive income 1,695 350
Accumulated deficit (584,976) (594,717)
----------- -----------
Total stockholders' equity 334,880 299,337
----------- -----------
$ 488,017 $ 507,024
=========== ===========

(1) Total cash and marketable investments, current and non-current,
comprised of Cash and short-term investments plus Investments in
bonds and notes, totaled $385.7 million and $413.8 million at
October 2, 2005 and December 26, 2004, respectively.



PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

Nine Months Ended
---------------------
Oct 2, Sep 26,
2005 2004

Cash flows from operating activities:
Net income $ 9,741 $ 38,564
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 9,191 12,442
Gain on disposal of property and equipment (184) -
Impairment of goodwill and purchased
intangible assets 538 -
Loss on extinguishment of debt 1,618 1,845
Gain on sale of investments and other assets (1,255) (9,242)
Reversal of write-down of excess inventory - (651)
Changes in operating assets and liabilities:
Accounts receivable (17,858) 1,129
Inventories 2,813 1,179
Prepaid expenses and other current assets 1,570 (2,139)
Accounts payable and accrued liabilities 1,349 (17,648)
Income taxes payable 7,313 12,256
Accrued restructuring costs 3,395 (5,169)
Deferred income 3,804 (6,143)
---------- ----------
Net cash provided by operating activities 22,035 26,423
---------- ----------

Cash flows from investing activities:
Purchases of short-term available-for-sale
investments (138,759) (8,525)
Proceeds from sales and maturities of
short-term available-for-sale investments 153,084 13,521
Purchases of long-term available-for-sale
investments in bonds and notes (35,231) (211,980)
Proceeds from sales and maturities of
long-term available-for-sale investments
in bonds and notes 70,678 113,378
Purchases of investments and other assets (2,000) (5,991)
Proceeds from sale of investments
and other assets 772 20,067
Proceeds from refund of wafer
fabrication deposits 1,634 -
Purchases of property and equipment (3,492) (6,907)
Proceeds from sale of property 2,604 -
Purchase of intangible assets (2,130) (5,675)
---------- ----------
Net cash provided by (used in)
investing activities 47,160 (92,112)
---------- ----------

Cash flows from financing activities:
Repurchase of convertible subordinated notes (70,177) (106,929)
Proceeds from issuance of common stock 23,178 19,426
---------- ----------
Net cash used in financing activities (46,999) (87,503)
---------- ----------

Net increase (decrease) in cash
and cash equivalents 22,196 (153,192)
Cash and cash equivalents,
beginning of the period 121,276 292,811
---------- ----------
Cash and cash equivalents, end of the period $ 143,472 $ 139,619
========== ==========



Contact Information

  • PMC-Sierra
    Alan Krock, 408-988-1204
    or
    David Climie, 408-988-8276
    or
    Susan Shaw, 408-988-8515