PMC Reports First Quarter 2013 Results

  PMC Reports First Quarter 2013 Results

           PMC Investor Relations Website: http://investor.pmcs.com

      Q1 2013 earnings announcement call live on Website at 1:30 p.m. PT

     Conference call replay number 1 (888) 843-7419; passcode 34533385#.

  Replay available shortly after end of conference call through May 9, 2013

Business Wire

SUNNYVALE, Calif. -- April 25, 2013

PMC® (Nasdaq: PMCS), the semiconductor innovator transforming networks that
connect, move and store big data,  today reported results for the first
quarter ended March 30, 2013.

Net revenues in the first quarter of 2013 totaled $125.2 million, a decrease
of three percent compared to $129.4 million in the fourth quarter of 2012, and
a decrease of five percent compared to $132.1 million in the first quarter of
2012.

GAAP net loss in the first quarter of 2013 totaled $6.8 million, or $0.03 per
share, compared to GAAP net income in the fourth quarter of 2012  of $10.8
million, or $0.05 per diluted share. Note this GAAP comparative is restated
for an immaterial correction described in the financial statements later in
this release. Non-GAAP net income totaled $13.4 million, or $0.07 per diluted
share, down 47 percent in the first quarter of 2013 compared to non-GAAP net
income of $25.1 million, or $0.12 per diluted share in the fourth quarter of
2012.

“Our first quarter results were in line with our outlook and within the
expected range,” said Greg Lang, PMC President and Chief Executive Officer.
“We are encouraged by stronger bookings in the quarter and expect to grow
revenues in the second quarter of 2013. Our book-to-bill ratio within the
period was greater than one for the second consecutive quarter.”

Net income on a non-GAAP basis in the first quarter of 2013 excludes the
following items: (i) $7.4 million stock-based compensation expense; (ii) $10.8
million amortization of purchased intangible assets; and (iii) $2 million of
other adjustments including income tax related as described in the
accompanying GAAP to non-GAAP reconciliation table.

For a full reconciliation of each non-GAAP item used herein to the most
directly comparable GAAP financial measure, please refer to the schedule
included with 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.

FIRST QUARTER 2013 HIGHLIGHTS

The Company announced the following in the first quarter of 2013:

  *To meet the elastic traffic demands of big data, PMC announced the
    introduction of DIGI 120G, the industry’s only single-chip OTN processor
    supporting 10G, 40G and 100G speeds for OTN transport, aggregation and
    switched deployments. DIGI 120G allows for the efficient sharing and
    dynamic assignment of network resources, enabling OTN networks to
    effectively virtualize optical network bandwidth. This unprecedented level
    of silicon integration facilitates the most cost effective designs,
    engineering efficiency, and lowest power approach to OTN system solutions.
  *As a leader in secure data center storage solutions, PMC announced further
    expansion of its Adaptec storage product line with the industry’s first
    high performance, high density, low profile encrypted PCIe Gen3 host bus
    adapter (HBA) family. This product line is capable of executing over one
    million input/output operations per second (IOPS) with 6.6 GB/sec
    sustained throughput, provides 256 bit AES encryption, and offers up to 16
    ports. The Adaptec Series 7H and 6H families of SAS/SATA HBAs provide
    customers with high-performance connectivity for hard disk drives (HDDs),
    solid-state drives (SSDs), removable media and tape drives. The product
    family is ideally suited for high performance data center applications.

First Quarter 2013 Conference Call

Management will review the first quarter of 2013 results and share its outlook
for the second quarter of 2013 during a conference call at 1:30 pm Pacific
Time/4:30 pm Eastern Time on April 25, 2013. The conference call webcast will
be accessible under the Financial News and Events section at;
http://investor.pmcs.com. To listen to the conference call live by telephone,
dial 1 (888) 771-4371 (US Toll Free) or 1 (847) 585-4405 (International) with
passcode 34533385#, approximately ten minutes before the start time. A
telephone playback will be available after the completion of the call and can
be accessed at 1 (888) 843-7419 using the access code 34533385#. A replay of
the webcast will be available for 10 business days.

Safe Harbor Statement

This release contains forward-looking statements that involve risks and
uncertainties. The Company’s SEC filings describe the risks associated with
the Company’s business, including PMC’s limited revenue visibility due to
variable customer demands, market segment growth or decline, orders with short
delivery lead times, customer concentration, changes in inventory, and other
items such as foreign exchange rates and volatility in global financial
markets.

About PMC

PMC (Nasdaq:PMCS) is the semiconductor innovator transforming networks that
connect, move and store big data. Building on a track record of technology
leadership, the Company is driving innovation across storage, optical and
mobile networks.PMC’s highly integrated solutions increase performance and
enable next-generation services to accelerate the network transformation. For
more information, visit www.pmcs.com. Follow PMC on Twitter, LinkedIn and RSS.

© Copyright PMC-Sierra, Inc. 2013. All rights reserved. PMC and PMC-SIERRA are
registered trademarks of PMC-Sierra, Inc. in the United States and other
countries, and PMCS is a trademark of PMC-Sierra, Inc. Other product and
company names mentioned herein may be trademarks of their respective owners.
PMC is the corporate brand of PMC-Sierra.

                                                            
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts)
(unaudited)
                                                                
                                 Three Months Ended
                                 March 30,     December 29,     April 1,
                                   2013            2012            2012
                                              (As Restated -   (As Restated -
                                               See Note A)      See Note A)
Net revenues                     $ 125,161     $   129,418      $  132,094
Cost of revenues                  37,260        36,663        41,012   
Gross profit                       87,901          92,755          91,082
                                                                
Research and development           54,624          49,553          59,071
Selling, general and               28,342          26,432          28,971
administrative
Amortization of purchased         10,784        10,784        11,287   
intangible assets
(Loss) income from operations      (5,849  )       5,986           (8,247   )
                                                                
Other income (expense):
(Loss) gain on investment          (16     )       777             39
securities and other
Amortization of debt issue         -               (17      )      (50      )
costs
Foreign exchange gain (loss)       1,365           439             (1,105   )
Interest income (expense), net    264           (47      )     (179     )
(Loss) income before
(provision for) recovery of        (4,236  )       7,138           (9,542   )
income taxes
(Provision for) recovery of       (2,589  )      3,701         (57,811  )
income taxes
Net (loss) income                $ (6,825  )   $   10,839      $  (67,353  )
                                                                
Net (loss) income per common     $ (0.03   )   $   0.05         $  (0.29    )
share - basic
Net (loss) income per common     $ (0.03   )   $   0.05         $  (0.29    )
share - diluted
                                                                
Shares used in per share           203,307         202,400         232,142
calculation - basic
Shares used in per share           203,307         202,900         232,142
calculation - diluted
                                                                            

 As a supplement to the Company's condensed consolidated financial statements
    presented in accordance with generally accepted accounting principles
   ("GAAP"), the Company provides additional non-GAAP measures for cost of
  revenues, gross profit, gross profit percentage, research and development
    expense, selling, general and administrative expense, amortization of
purchased intangible assets, other income (expense), (provision for) recovery
of income taxes, operating expenses, operating income (loss), operating margin
  percentage, net income (loss), and basic and diluted net income (loss) per
                                    share.

      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.
Adjustments to GAAP Cost of Revenues, Gross Profit, Gross Profit Percentage,
Research and Development Expense,
Selling, General and Administrative Expense, Amortization of Purchased
Intangible Assets
Other Income (Expense), (Provision for) Recovery of Income Taxes, Operating
Expenses, Operating Income (Loss),
Operating Margin Percentage, Net Income (Loss), and Basic and Diluted Net
Income (Loss) Per Share
(in thousands, except for per share amounts)
(unaudited)
                                                
                                  Three Months Ended
                                  March 30,       December 29,   April 1,
                                   2013 ^(1)     2012 ^(2)    2012 ^(3) 
GAAP cost of revenues             $ 37,260        $ 36,663       $ 41,012
Stock-based compensation            (245      )     (218      )    (224      )
Acquisition-related costs           -               -              (2        )
Asset impairment                    -               10             -
Termination costs                  -             (92       )   -         
Non-GAAP cost of revenues         $ 37,015       $ 36,363      $ 40,786    
                                                                 
GAAP gross profit                 $ 87,901        $ 92,755       $ 91,082
Stock-based compensation            245             218            224
Acquisition-related costs           -               -              2
Asset impairment                    -               (10       )    -
Termination costs                  -             92           -         
Non-GAAP gross profit             $ 88,146       $ 93,055      $ 91,308    
                                                                 
Non-GAAP gross profit %             70        %     72        %    69        %
                                                                 
GAAP research and development     $ 54,624        $ 49,553       $ 59,071
expense
Stock-based compensation            (3,304    )     (2,909    )    (2,841    )
Acquisition-related costs           (273      )     (269      )    (598      )
Termination costs                   (392      )     (347      )    (1,484    )
Asset impairment                   -             (533      )   -         
Non-GAAP research and             $ 50,655       $ 45,495      $ 54,148    
development expense
                                                                 
GAAP selling, general and         $ 28,342        $ 26,432       $ 28,971
administrative expense
Stock-based compensation            (3,833    )     (3,210    )    (3,516    )
Acquisition-related costs           (6        )     40             (761      )
Termination costs                   (207      )     (219      )    (133      )
Asset impairment                    -               39             -
Lease exit costs                   -             125          (442      )
Non-GAAP selling, general and     $ 24,296       $ 23,207      $ 24,119    
administrative expense
                                                                 
GAAP amortization of purchased    $ 10,784        $ 10,784       $ 11,287
intangible assets
Amortization of purchased          (10,784   )    (10,784   )   (11,287   )
intangible assets
Non-GAAP amortization of          $ -            $ -           $ -         
purchased intangible assets
                                                                 
GAAP other income (expense)       $ 1,613         $ 1,152        $ (1,295    )
Foreign exchange (gain) loss on     (1,313    )     (872      )    1,342
foreign tax liabilities
Accretion of debt discount
related to senior convertible      -             389          925       
notes
Non-GAAP other income             $ 300          $ 669         $ 972       
                                                                 
GAAP provision for (recovery      $ 2,589         $ (3,701    )  $ 57,811
of) income taxes
(Provision for) recovery of        (2,481    )    3,577        (57,800   )
income taxes
Non-GAAP provision for            $ 108          $ (124      )  $ 11        
(recovery of) income taxes
                                                                 
                                                                 
                                  Three Months Ended
                                  March 30,       December 29,   April 1,
                                   2013 ^(1)     2012 ^(2)    2012 ^(3) 
GAAP operating expenses           $ 93,750        $ 86,769       $ 99,329
Stock-based compensation            (7,137    )     (6,119    )    (6,357    )
Acquisition-related costs           (279      )     (229      )    (1,359    )
Termination costs                   (599      )     (566      )    (1,617    )
Asset impairment                    -               (494      )    -
Lease exit costs                    -               125            (442      )
Amortization of purchased          (10,784   )    (10,784   )   (11,287   )
intangible assets
Non-GAAP operating expenses       $ 74,951       $ 68,702      $ 78,267    
                                                                 
GAAP operating (loss) income      $ (5,849    )   $ 5,986        $ (8,247    )
Stock-based compensation            7,382           6,337          6,581
Acquisition-related costs           279             229            1,361
Termination costs                   599             658            1,617
Asset impairment                    -               484            -
Lease exit costs                    -               (125      )    442
Amortization of purchased          10,784        10,784       11,287    
intangible assets
Non-GAAP operating income         $ 13,195       $ 24,353      $ 13,041    
                                                                 
Non-GAAP operating margin %         11        %     19        %    10        %
                                                                 
GAAP net (loss) income            $ (6,825    )   $ 10,839       $ (67,353   )
Stock-based compensation            7,382           6,337          6,581
Acquisition-related costs           279             229            1,361
Termination costs                   599             658            1,617
Asset impairment                    -               484            -
Lease exit costs                    -               (125      )    442
Amortization of purchased           10,784          10,784         11,287
intangible assets
Foreign exchange (gain) loss on     (1,313    )     (872      )    1,342
foreign tax liabilities
Accretion of debt discount
related to senior convertible       -               389            925
notes
Provision for (recovery of)        2,481         (3,577    )   57,800    
income taxes
Non-GAAP net income               $ 13,387       $ 25,146      $ 14,002    
                                                                 
Non-GAAP net income per share -   $ 0.07          $ 0.12         $ 0.06
basic
Non-GAAP net income per share -   $ 0.07          $ 0.12         $ 0.06
diluted
                                                                 
Shares used to calculate non-GAAP   203,307         202,400        232,142
net income per share - basic
Shares used to calculate non-GAAP   205,475         202,900        234,198
net income per share - diluted
                                                                             

(1) $7.4 million stock-based compensation expense; $0.3 million
acquisition-related costs; $0.6 million termination costs; $10.8 million
amortization of purchased intangible assets; $1.3 million foreign exchange
gain on foreign tax liabilities; and $2.5 million provision for income taxes
which includes $1.8 million tax provision relating to intercompany
transactions, $1 million arrears interest relating to unrecognized tax
benefits, $0.5 million deferred tax recovery related to non-deductible
intangible asset amortization, $0.1 million tax provision for adjustments
relating to prior periods, and $0.1 million income tax provision related to
tax deductible items above.

(2) $6.3 million stock-based compensation expense; $0.2 million
acquisition-related costs; $0.7 million termination costs; $0.5 million asset
impairment; $0.1 million recovery of lease exit costs; $10.8 million
amortization of purchased intangible assets; $0.9 million foreign exchange
gain on foreign tax liabilities; $0.4 million non-cash interest expense for
the accretion of the debt discount related to the senior convertible notes;
and $3.6 million recovery of income taxes which includes $3.2 million tax
recovery relating to intercompany transactions, $1.3 million income tax
provision for adjustments relating to prior periods, $0.6 million recovery of
arrears interest relating to unrecognized tax benefits, $0.5 million deferred
tax recovery related to non-deductible intangible asset amortization and
impairment, $0.4 million income tax recovery relating to foreign exchange
translation of a foreign subsidiary, and $0.2 million income tax recovery
related to tax deductible items above.

(3) $6.6 million stock-based compensation expense; $1.4 million
acquisition-related costs; $1.6 million termination costs; $0.4 million lease
exit costs; $11.3 million amortization of purchased intangible assets; $1.3
million foreign exchange loss on foreign tax liabilities; $0.9 million
non-cash interest expense for the accretion of the debt discount related to
the senior convertible notes; and $57.8 million provision for income taxes
which includes $58.1 million tax provision relating to intercompany
transactions, $0.6 million arrears interest relating to unrecognized tax
benefits, $0.5 million deferred tax recovery related to non-deductible
intangible asset amortization, $0.2 million net tax recovery relating to
foreign exchange translation of a foreign subsidiary, and $0.2 million income
tax recovery for adjustments relating to prior periods.

PMC-Sierra, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
                                                 
                                    March 30,       December 29,
                                      2013                 2012
                                                   (As Restated - See Note A)
ASSETS:
Current assets:
Cash and cash equivalents           $ 84,897        $      169,970
Short-term investments                21,958               11,431
Accounts receivable, net              57,343               62,143
Inventories, net                      25,699               23,548
Prepaid expenses and other            19,822               22,125
current assets
Income tax receivable                 5,235                6,630
Deferred tax assets                  46,642             43,630        
Total current assets                  261,596              339,477
                                                    
Investment securities                 190,043              91,778
Investments and other assets          17,796               20,133
Prepaid expenses                      10,437               11,847
Property and equipment, net           42,208               43,146
Goodwill                              252,419              252,419
Intangible assets, net                118,079              128,668
Deferred tax assets                  44                 -             
                                    $ 892,622      $      887,468       
                                                    
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Current liabilities:
Accounts payable                    $ 24,702        $      27,410
Accrued liabilities                   65,385               72,282
Liability for unrecognized tax        52,247               51,810
benefit
Income taxes payable                  1,817                1,450
Deferred income taxes                 2,450                2,466
Deferred income                      7,841              8,113         
Total current liabilities             154,442              163,531
                                                    
Long-term obligations                 14,983               17,233
Deferred income taxes                 45,909               44,849
Liability for unrecognized tax        29,612               29,234
benefit
                                                    
PMC special shares convertible
into 1,019 (2012 - 1,019)
shares of common stock                1,188                1,188
                                                    
Stockholders' equity:
Common stock and additional paid      1,550,031            1,527,707
in capital
Accumulated other comprehensive       172                  616
income
Accumulated deficit                  (903,715  )         (896,890      )
Total stockholders' equity           646,488            631,433       
                                    $ 892,622      $      887,468       
                                                                         

PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                                                              
                                                  Three Months Ended
                                                  March 30,      April 1,
                                                    2013            2012
                                                                (As Restated-
                                                                 See Note A)
Cash flows from operating activities:
Net loss                                          $ (6,825   )   $  (67,353  )
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization                       15,732          15,919
Stock-based compensation                            7,382           6,581
Unrealized foreign exchange (gain) loss, net        (1,406   )      1,312
Net amortization of premiums/discounts and          58              1,462
accrued interest of investments
Gain on investment securities and other             26              (35      )
Taxes related to intercompany dividend              -               85,462
                                                                 
Changes in operating assets and liabilities:
Accounts receivable                                 4,765           (3,613   )
Inventories                                         (2,151   )      8,719
Prepaid expenses and other current assets           174             1,106
Accounts payable and accrued liabilities            (6,787   )      (11,790  )
Deferred income taxes and income taxes payable      3,683           (26,192  )
Deferred income                                    (272     )     362      
Net cash provided by operating activities          14,379        11,940   
                                                                 
Cash flows from investing activities:
Business acquisition                                -               (15,900  )
Purchases of property and equipment                 (4,552   )      (9,070   )
Purchases of intangible assets                      (465     )      -
Redemption of short-term investments                5,946           -
Disposals of investment securities                  20,518          37,144
Purchases of investment securities and other       (135,318 )     (31,891  )
investments
Net cash used in investing activities              (113,871 )     (19,717  )
                                                                 
Cash flows from financing activities:
Proceeds from issuance of common stock             14,836        7,220    
Net cash provided by financing activities          14,836        7,220    
                                                                 
Effect of exchange rate changes on cash and         (417     )      (10      )
cash equivalents
Net decrease in cash and cash equivalents           (85,073  )      (567     )
Cash and cash equivalents, beginning of period     169,970       182,571  
Cash and cash equivalents, end of period          $ 84,897      $  182,004  
                                                                             

Note A. Error Corrections - Income Taxes

The condensed consolidated financial statements as of December 29, 2012 and
for the quarters ended December 29, 2012 and April 1, 2012 have been revised
to reflect a restatement related to income tax errors. Subsequent to the
issuance of the Company’s December 29, 2012 consolidated financial statements,
errors were identified that related to the determination of tax expense
associated with the Company’s 2009 intercompany sale of intellectual property.
Under the accounting principles that apply to the intercompany sale of
intellectual property, the tax expense attributable to the gain is recognized
over the economic life of the asset sold. The Company had previously
identified any tax expense that would not have been recognized absent the
transaction as tax expense subject to deferral, including tax expense in years
subsequent to the year of sale. This correction limits the tax expense subject
to deferral to the incremental tax expense incurred in the year of sale.

Additionally, the Company corrected tax benefits recognized that related to
excess stock option deductions to appropriately consider foreign tax credit
carry-forwards previously not recognized, that should have reduced tax expense
in 2012. Furthermore, the Company has corrected the accounting for foreign tax
credits that arose in the first quarter of 2012. Management believes the
effects of the current period corrections to its financial statements restated
in its 2012 annual report filed on Form 10-K on February 28, 2013, including
the quarterly information restated in Part II, Item 6 therein, are not
material.

The tables below illustrate the effects on the condensed consolidated balance
sheet and statements of operations:

                        As at                                  
                          December 29, 2012
                                       As
                                        Previously
(in thousands)            As Restated   Reported
CONDENSED
CONSOLIDATED BALANCE
SHEETS
Non-current assets:
        Prepaid           $ 11,847      $  25,077
        expenses
Liabilities
        Liability for
        unrecognized      $ 29,234      $  38,915
        tax benefits
        - non-current
Equity:
        Common stock
        and
        additional        $ 1,527,707   $  1,527,084
        paid in
        capital
        Accumulated       $ (896,890)   $  (892,718)
        deficit
                                                                      
                                                                      
                          Three Months Ended
                          December 29, 2012            April 1, 2012
                                                                    As
                                                                    Previously
                                        As                          Reported
                                        Previously                  in
(in thousands, except                                  As           Q1 2012
for per share             As Restated   Reported       Restated     10-Q
amounts)
CONDENSED
CONSOLIDATED
STATEMENTS OF
OPERATIONS
Recovery of
(provision for)           $ 3,701       $  3,939       $ (57,811)   $ (86,729)
income taxes
Net income (loss)         $ 10,839      $  11,077      $ (67,353)   $ (96,271)
Net income (loss) per     $ 0.05        $  0.05        $ (0.29)     $ (0.41)
common share - basic
Net income (loss) per
common share -            $ 0.05        $  0.05        $ (0.29)     $ (0.41)
diluted

Contact:

PMC
Director, Investor Relations
Jennifer Gianola, 1-408-239-8630
jennifer.gianola@pmcs.com
or
Communications Specialist
Hillary Choularton, 1-604-415-6671
hillary.choularton@pmcs.com
 
Press spacebar to pause and continue. Press esc to stop.