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., April 25 /CNW/ - 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
                                                       --------- ---------
    




For further information:

For further information: 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

Organization Profile

PMC-SIERRA, INC.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890