PMC Reports Third Quarter 2013 Results

  PMC Reports Third Quarter 2013 Results

           PMC Investor Relations Website: http://investor.pmcs.com
      Q3 2013 earnings announcement call live on Website at 1:30 p.m. PT
      Conference call replay number 1 (800) 406-7325; passcode 4641853#.
  Replay available shortly after end of conference call through November 28,
                                     2013

Business Wire

SUNNYVALE, Calif. -- October 28, 2013

PMC-Sierra, Inc. (PMC®) (Nasdaq: PMCS), the semiconductor and software
solutions innovator transforming networks that connect, move and store big
data,  today reported results for the third quarter ended September 28, 2013.

Net revenues in the third quarter of 2013 totaled $128.9 million, an increase
of one percent compared to $127.9 million in the second quarter of 2013, and a
decrease of two percent compared to $131.7 million in the third quarter of
2012.

GAAP net loss in the third quarter of 2013 totaled $2.7 million, or $0.01 per
share, compared to a GAAP net loss in the second quarter of 2013  of $4.7
million, or $0.02 per share. Non-GAAP net income totaled $20.0 million, or
$0.10 per diluted share, up 23 percent in the third quarter of 2013 compared
to non-GAAP net income of $16.3 million, or $0.08 per diluted share in the
second quarter of 2013.

“The third quarter played out largely as expected and we continued to execute
well in a challenging environment,” said Greg Lang, PMC president and chief
executive officer. “We enter the fourth quarter well positioned with multiple
growth opportunities and we remain committed to tightly managing our
expenses.”

Net income on a non-GAAP basis in the third quarter of 2013 excludes the
following items: (i) $5.9 million stock-based compensation expense; (ii) $13.1
million amortization of purchased intangible assets; and (iii) $3.7 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 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.

THIRD QUARTER AND RECENT 2013 HIGHLIGHTS

The Company announced the following third quarter and recent announcements:

  *PMC established the Company as the only supplier of end-to-end 12G
    architecture from controller to SSD by introducing the Adaptec Series 8
    12Gb/s SAS RAID Adapters. Systems designed with PMC's solutions can
    provide double the overall storage connectivity as competing solutions,
    with less components, space and power. PMC's 12Gb/s SAS architecture is
    optimized to deliver the performance, flexibility and density needed for
    dynamic data in cloud computing, content delivery networks, and
    mission-critical database applications.
  *As a leader in enterprise flash, PMC showcased performance demonstrations
    of its SAS flash manager and the industry’s first PCIe® Gen 3 NVM Express
    flash controller at the 2013 Flash Memory Summit.

Third Quarter 2013 Conference Call

Management will review the third quarter of 2013 results and share its outlook
for the fourth quarter of 2013 during a conference call at 1:30 p.m. Pacific
Time/4:30 p.m. Eastern Time on October 28, 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 (877) 941-9205 with passcode 4641853#, approximately 10 minutes before
the start time. A telephone playback will be available after the completion of
the call and can be accessed at 1(800) 406-7325 using the access code
4641853#. A replay of the webcast will be available for 30 business days.

Safe Harbor Statement

This release contains forward-looking statements that involve risks and
uncertainties, including in respect of our ongoing review of tax accounting
errors. The Company’s SEC filings, including the Company’s most recent reports
on Form 10-K and Form 10-Q, 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 and software solutions 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 Facebook, 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, Inc.

PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts)
(unaudited)
                                                            
                     Three Months Ended               Nine Months Ended
                     September       September        September       September
                     28,             30,              28,             30,
                     2013            2012             2013            2012
                                     (As Restated                     (As Restated
                                     -                                -
                                    See Note A)                    See Note A)
Net revenues         $ 128,855       $ 131,723        $ 381,923       $ 401,579
Cost of               37,194        38,990         112,281       121,255  
revenues
Gross profit           91,661          92,733           269,642         280,324
                                                                      
                                                                      
Research and           50,733          55,604           157,038         171,374
development
Selling,
general and            26,383          27,786           85,002          86,047
administrative
Amortization
of purchased           13,138          11,624           34,698          34,537
intangible
assets
Impairment of
goodwill and
purchased             -             274,637        -             274,637  
intangible
assets
Income (loss)
from                   1,407           (276,918 )       (7,096  )       (286,271 )
operations
                                                                      
Other income
(expense):
Gain on
investment             1,762           180              1,776           746
securities and
other
Amortization
of debt issue          -               (50      )       -               (150     )
costs
Foreign
exchange gain          (1,898  )       (2,454   )       1,680           (1,951   )
(loss)
Interest
income                200           (797     )      794           (1,539   )
(expense), net
Income (loss)
before                 1,471           (280,039 )       (2,846  )       (289,165 )
provision for
income taxes
(Provision
for) recovery         (4,195  )      5,924          (12,961 )      (59,325  )
of income
taxes
Net loss             $ (2,724  )     $ (274,115 )     $ (15,807 )     $ (348,490 )
                                                                      
Net loss per
common share -       $ (0.01   )     $ (1.31    )     $ (0.08   )     $ (1.57    )
basic
Net loss per
common share -       $ (0.01   )     $ (1.31    )     $ (0.08   )     $ (1.57    )
diluted
                                                                      
Shares used in
per share              205,377         209,512          204,638         221,323
calculation -
basic
Shares used in
per share              205,377         209,512          204,638         221,323
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                               Nine Months Ended
                          September       June 29,        September        September       September
                          28,                             30,              28,             30,
                          2013 ^(1)       2013 ^(2)       2012 ^(3)        2013 ^(4)       2012 ^(5)
GAAP cost of              $ 37,194        $ 37,827        $ 38,990         $ 112,281       $ 121,255
revenues
Stock-based                 (190    )       (208    )       (181     )       (643    )       (657     )
compensation
Acquisition-related         (777    )       (18     )       -                (795    )       (37      )
costs
Asset impairment            -               -               (108     )       -               (108     )
Reversal of                2,300         -             -              2,300         -        
accruals
Non-GAAP cost of          $ 38,527       $ 37,601       $ 38,701        $ 113,143      $ 120,453  
revenues
                                                                                           
GAAP gross profit         $ 91,661        $ 90,080        $ 92,733         $ 269,642       $ 280,324
Stock-based                 190             208             181              643             657
compensation
Acquisition-related         777             18              -                795             37
costs
Asset impairment            -               -               108              -               108
Reversal of                (2,300  )      -             -              (2,300  )      -        
accruals
Non-GAAP gross            $ 90,328       $ 90,306       $ 93,022        $ 268,780      $ 281,126  
profit
                                                                                           
Non-GAAP gross              70      %       71      %       71       %       70      %       70       %
profit %
                                                                                           
GAAP research and         $ 50,733        $ 51,681        $ 55,604         $ 157,038       $ 171,374
development expense
Stock-based                 (2,541  )       (2,396  )       (2,933   )       (8,241  )       (8,674   )
compensation
Acquisition-related         (1,200  )       (268    )       (751     )       (1,741  )       (1,893   )
costs
Termination costs           (178    )       (878    )       (690     )       (1,448  )       (2,401   )
Reversal of                 -               2,890           -                2,890           -
accruals
Asset impairment           -             -             (479     )      -             (479     )
Non-GAAP research
and development           $ 46,814       $ 51,029       $ 50,751        $ 148,498      $ 157,927  
expense
                                                                                           
GAAP selling,
general and               $ 26,383        $ 30,277        $ 27,786         $ 85,002        $ 86,047
administrative
expense
Stock-based                 (3,143  )       (3,601  )       (2,974   )       (10,577 )       (10,647  )
compensation
Acquisition-related         (5      )       (1,072  )       (335     )       (1,083  )       (1,631   )
costs
Termination costs           (41     )       (254    )       (717     )       (502    )       (918     )
Asset impairment            -               (1,575  )       (312     )       (1,575  )       (312     )
Lease exit costs           -             -             (1,755   )      -             (2,509   )
Non-GAAP selling,
general and               $ 23,194       $ 23,775       $ 21,693        $ 71,265       $ 70,030   
administrative
expense
                                                                                           
GAAP amortization
of purchased              $ 13,138        $ 10,776        $ 11,624         $ 34,698        $ 34,537
intangible assets
Amortization of
purchased                  (13,138 )      (10,776 )      (11,624  )      (34,698 )      (34,537  )
intangible assets
Non-GAAP
amortization of           $ -            $ -            $ -             $ -            $ -        
purchased
intangible assets
                                                                                           
GAAP impairment of
goodwill and              $ -             $ -             $ 274,637        $ -             $ 274,637
purchased
intangible assets
Impairment of
goodwill and               -             -            $ (274,637 )      -             (274,637 )
purchased
intangible assets
Non-GAAP impairment
of goodwill and           $ -            $ -            $ -             $ -            $ -        
purchased
intangible assets
                                                                                           
GAAP other income         $ 64            $ 2,573         $ (3,121   )     $ 4,250         $ (2,894   )
(expense)
Foreign exchange
(gain) loss on              1,486           (2,210  )       2,145            (2,037  )       2,403
foreign tax
liabilities
Accretion of debt
discount related to         -               -               962              -               2,829
senior convertible
notes
Gain on disposal of         (1,762  )       -               -                (1,762  )       -
investments
Amortization of            (48     )      -             -              (48     )      -        
debt issue costs
Non-GAAP other            $ (260    )     $ 363          $ (14      )     $ 403          $ 2,338    
income (expense)
                                                                                           
GAAP provision for
(recovery of)             $ 4,195         $ 4,602         $ (5,924   )     $ 12,961        $ 59,325
income taxes
(Provision for)
recovery of income         (4,160  )      (5,002  )      5,131          (13,219 )      (60,498  )
taxes
Non-GAAP (recovery
of) provision for         $ 35           $ (400    )     $ (793     )     $ (258    )     $ (1,173   )
income taxes
                                                                                           
                                                                                           
                          Three Months Ended                               Nine Months Ended
                          September       June 29,        September        September       September
                          28,                             30,              28,             30,
                          2013 ^(1)       2013 ^(2)       2012 ^(3)        2013 ^(4)       2012 ^(5)
GAAP operating            $ 90,254        $ 92,734        $ 369,651        $ 276,738       $ 566,595
expenses
Stock-based                 (5,684  )       (5,997  )       (5,907   )       (18,818 )       (19,321  )
compensation
Acquisition-related         (1,205  )       (1,340  )       (1,086   )       (2,824  )       (3,524   )
costs
Termination costs           (219    )       (1,132  )       (1,407   )       (1,950  )       (3,319   )
Asset impairment            -               (1,575  )       (791     )       (1,575  )       (791     )
Reversal of                 -               2,890           -                2,890           -
accruals
Lease exit costs            -               -               (1,755   )       -               (2,509   )
Amortization of
purchased                   (13,138 )       (10,776 )       (11,624  )       (34,698 )       (34,537  )
intangible assets
Impairment of
goodwill and               -             -             (274,637 )      -             (274,637 )
purchased
intangible assets
Non-GAAP operating        $ 70,008       $ 74,804       $ 72,444        $ 219,763      $ 227,957  
expenses
                                                                                           
GAAP operating            $ 1,407         $ (2,654  )     $ (276,918 )     $ (7,096  )     $ (286,271 )
income (loss)
Stock-based                 5,874           6,205           6,088            19,461          19,978
compensation
Acquisition-related         1,982           1,358           1,086            3,619           3,561
costs
Termination costs           219             1,132           1,407            1,950           3,319
Asset impairment            -               1,575           899              1,575           899
Reversal of                 (2,300  )       (2,890  )       -                (5,190  )       -
accruals
Lease exit costs            -               -               1,755            -               2,509
Amortization of
purchased                   13,138          10,776          11,624           34,698          34,537
intangible assets
Impairment of
goodwill and               -             -             274,637        -             274,637  
purchased
intangible assets
Non-GAAP operating        $ 20,320       $ 15,502       $ 20,578        $ 49,017       $ 53,169   
income
                                                                                           
Non-GAAP operating          16      %       12      %       16       %       13      %       13       %
margin %
                                                                                           
GAAP net loss             $ (2,724  )     $ (4,683  )     $ (274,115 )     $ (15,807 )     $ (348,490 )
Stock-based                 5,874           6,205           6,088            19,461          19,978
compensation
Acquisition-related         1,982           1,358           1,086            3,619           3,561
costs
Termination costs           219             1,132           1,407            1,950           3,319
Asset impairment            -               1,575           899              1,575           899
Reversal of                 (2,300  )       (2,890  )       -                (5,190  )       -
accruals
Lease exit costs            -               -               1,755            -               2,509
Amortization of
purchased                   13,138          10,776          11,624           34,698          34,537
intangible assets
Impairment of
goodwill and                -               -               274,637          -               274,637
purchased
intangible assets
Foreign exchange
(gain) loss on              1,486           (2,210  )       2,145            (2,037  )       2,403
foreign tax
liabilities
Accretion of debt
discount related to         -               -               962              -               2,829
senior convertible
notes
Gain on disposal of         (1,762  )       -               -                (1,762  )       -
investments
Amortization of             (48     )       -               -                (48     )       -
debt issue costs
Provision for
(recovery of)              4,160         5,002         (5,131   )      13,219        60,498   
income taxes
Non-GAAP net income       $ 20,025       $ 16,265       $ 21,357        $ 49,678       $ 56,680   
                                                                                           
Non-GAAP net income       $ 0.10          $ 0.08          $ 0.10           $ 0.24          $ 0.26
per share - basic
Non-GAAP net income       $ 0.10          $ 0.08          $ 0.10           $ 0.24          $ 0.25
per share - diluted
                                                                                           
Shares used to
calculate non-GAAP          205,377         205,230         209,512          204,638         221,323
net income per
share - basic
Shares used to
calculate non-GAAP          207,475         207,366         210,525          206,772         223,094
net income per
share - diluted
                                                                                           

(1) $5.9 million stock-based compensation expense; $2 million
acquisition-related costs; $0.2 million termination costs; $13.1 million
amortization of purchased intangible assets; $1.5 million foreign exchange
loss on foreign tax liabilities; $1.8 million gain from disposal of
investments; $2.3 million reversal of accruals; and $4.2 million provision for
income taxes which includes $2.9 million deferred tax provision related to
non-deductible intangible asset amortization, $0.7 million arrears interest
relating to unrecognized tax benefits, $0.4 million tax recovery relating to
foreign exchange translation of a foreign subsidiary, and $1 million income
tax provision related to tax deductible items above.

(2) $6.2 million stock-based compensation expense; $1.4 million
acquisition-related costs; $1.1 million termination costs; $1.6 million asset
impairment; $10.8 million amortization of purchased intangible assets; $2.2
million foreign exchange gain on foreign tax liabilities; and $5 million
provision for income taxes which includes $2.8 million deferred tax provision
related to non-deductible intangible asset amortization, $1.3 million tax
provision for adjustments relating to prior periods, and $0.9 million tax
provision relating to foreign exchange translation of a foreign subsidiary.

(3) $6.1 million stock-based compensation expense; $1.1 million
acquisition-related costs; $1.4 million termination costs; $0.9 million asset
impairment; $1.8 million lease exit costs; $11.6 million amortization of
purchased intangible assets; $274.6 million impairment of goodwill and
purchased intangible assets; $2.1 million foreign exchange loss on foreign tax
liabilities; $1 million non-cash interest expense for the accretion of the
debt discount related to the senior convertible notes; and $5.1 million
recovery of income taxes which includes $5.2 million income tax recovery for
adjustments relating to prior periods, $0.1 million tax provision relating to
intercompany transactions, $0.1 million deferred tax recovery related to
non-deductible intangible asset amortization and impairment, $0.8 million
arrears interest relating to unrecognized tax benefits, $0.2 million recovery
of income tax related to other tax deductible items above, and $0.5 million
income tax recovery relating to foreign exchange translation of a foreign
subsidiary.

(4) $19.5 million stock-based compensation expense; $3.6 million
acquisition-related costs; $2 million termination costs; $1.6 million asset
impairment; $5.2 million reversal of accruals $34.7 million amortization of
purchased intangible assets; $2 million foreign exchange gain on foreign tax
liabilities; $1.8 million gain on disposal; and $13.2 million provision for
income taxes which includes$1.7 million arrears interest relating to
unrecognized tax benefits, $8.6 million deferred tax provision related to
non-deductible intangible asset amortization, $0.5 million income tax
provision relating to foreign exchange translation of a foreign subsidiary,
$2.3 million tax provision for adjustments relating to prior period, and $0.1
million deferred tax provision related to tax deductible items above.

(5) $20 million stock-based compensation expense; $3.6 million
acquisition-related costs; $3.3 million termination costs; $0.9 million asset
impairment; $2.5 million lease exit costs; $34.5 million amortization of
purchased intangible assets; $274.6 million impairment of goodwill and
purchased intangible assets; $2.4 million foreign exchange loss on foreign tax
liabilities; $2.8 million non-cash interest expense for the accretion of the
debt discount related to the senior convertible notes; and $60.5 million
provision for income taxes which includes $0.2 million income tax provision
relating to intercompany transactions, $4.1 million arrears interest relating
to unrecognized tax benefits, $12.5 million tax provision related to
non-deductible intangible asset amortization, $0.5 million income tax recovery
relating to foreign exchange translation of a foreign subsidiary, $45.7
million income tax provision for adjustments relating to prior periods, and
$1.6 million deferred tax recovery related to other tax deductible items
above.

PMC-Sierra, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
                                              
                                  September 28,     December 29,
                                  2013              2012
                                                   (As Restated - See Note A)
ASSETS:
Current assets:
Cash and cash equivalents         $ 87,019          $      169,970
Short-term investments              13,670                 11,431
Accounts receivable, net            60,948                 62,143
Inventories, net                    32,024                 23,548
Prepaid expenses and other          20,030                 22,125
current assets
Income tax receivable               2,417                  6,630
Prepaid tax expense                 7,594                  -
Deferred tax assets                52,671               43,630        
Total current assets                276,373                339,477
                                                    
Investment securities               109,359                91,778
Investments and other               13,379                 20,133
assets
Prepaid tax expenses                1,538                  19,152
Property and equipment, net         40,240                 43,146
Goodwill                            279,055                252,419
Intangible assets, net              160,346                128,668
Deferred tax assets                145                  -             
                                  $ 880,435        $      894,773       
                                                    
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable                  $ 20,950          $      27,410
Accrued liabilities                 61,893                 72,282
Liability for unrecognized          54,607                 51,810
tax benefit
Income taxes payable                704                    1,450
Deferred income taxes               2,514                  2,466
Deferred income                    7,198                8,113         
Total current liabilities           147,866                163,531
                                                    
Long-term obligations               10,886                 17,233
Deferred income taxes               44,752                 41,936
Liability for unrecognized          34,886                 34,957
tax benefit
PMC special shares
convertible into 1,019              1,188                  1,188
(2012 - 1,019) shares of
common stock
                                                    
Stockholders' equity:
Common stock and additional         1,582,004              1,553,137
paid in capital
Accumulated other                   59                     616
comprehensive income
Accumulated deficit                (941,206  )           (917,825      )
Total stockholders' equity         640,857              635,928       
                                  $ 880,435        $      894,773       
                                                                         

PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                                                 
                                     Nine Months Ended
                                     September 28,     September 30,
                                     2013              2012
                                                      (As Restated - See Note
                                                       A)
Cash flows from operating
activities:
Net loss                             $  (15,807  )     $     (348,490     )
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and amortization           51,731               48,724
Stock-based compensation                19,461               19,978
Unrealized foreign exchange             (6,106   )           2,299
(gain) loss, net
Net amortization of
premiums/discounts and accrued          1,353                3,844
interest of investments
Asset impairment                        -                    1,158
Gain on sale of investment
securities and other                    (1,767   )           (731         )
investments
Impairment of goodwill and              -                    274,637
purchased intangible assets
Taxes related to intercompany           -                    60,940
dividend
                                                       
Changes in operating assets
and liabilities:
Accounts receivable                     1,156                (3,352       )
Inventories                             (6,693   )           12,506
Prepaid expenses and other              927                  4,108
current assets
Accounts payable and accrued            (8,614   )           (27,643      )
liabilities
Deferred income taxes and               10,702               11
income taxes payable
Deferred income                        (915     )          (3,304       )
Net cash provided by operating         45,428             44,685       
activities
                                                       
Cash flows from investing
activities:
Investment in long term                 (1,127   )           -
deposits
Business acquisition                    (96,098  )           (15,900      )
Purchases of property and               (11,297  )           (25,558      )
equipment
Purchases of intangible assets          (2,048   )           (4,602       )
Redemption of short-term                8,466                11,415
investments
Disposals of investment
securities and other                    146,340              182,488
investments
Purchases of investment
securities and other                   (172,114 )          (87,267      )
investments
Net cash (used in) provided by         (127,878 )          60,576       
investing activities
                                                       
Cash flows from financing
activities:
Payment of debt issuance costs          (928     )           -
Repurchases of common stock             (22,544  )           (180,807     )
Equity forward contract
related to accelerated share            -                    (9,827       )
repurchase program
Proceeds from issuance of              23,476             15,869       
common stock
Net cash provided by (used in)         4                  (174,765     )
financing activities
                                                       
Effect of exchange rate
changes on cash and cash                (505     )           152
equivalents
Net decrease in cash and cash           (82,951  )           (69,352      )
equivalents
Cash and cash equivalents,             169,970            182,571      
beginning of period
Cash and cash equivalents, end       $  87,019        $     113,219      
of period
                                                                          

Note A. Error Corrections

The comparative condensed consolidated financial statements as of December 29,
2012 and for the three and nine months ended September 30, 2012 have been
restated to correct the misapplication of accounting principles related to
income tax benefits associated with stock option deductions in excess of the
expense recognized in the financial statements. In prior periods impacted by
this matter, the Company understated the income tax benefits of its loss
carry-forwards that are required to be included in equity, rather than in
income tax expense (benefit). These income tax benefits were generated
primarily in the 1999 and 2000 years and were utilized to reduce the
previously recorded income tax expense throughout the years from 2006 and into
the first two quarters of 2013. From 2006 and forward, the Company should have
recorded the income tax benefit of utilizing these stock option related loss
carry-forwards as an increase to Additional Paid-in Capital, rather than as a
reduction of income tax expense. There was no change to the total amount of
income tax loss carry-forwards or any other income tax assets available or
utilized for tax purposes, nor to the actual amount of income tax payable to
the taxing authorities as a result of this matter, in any period. In
connection with restating our historical financial statements, the Company
also corrected the timing of recognition of amounts related to amended tax
return filings and certain tax credits, and restated the quarter ended June
29, 2013 to reverse a liability accrual that no longer met the criteria for
recognition as a liability under Generally Accepted Accounting Principles.

The Company and its auditors continue to review the accounting adjustments. As
a result, the selected financial information reported herein, including the
adjusted prior-period financial information reported herein, should be
considered preliminary. Until the examination has been completed,the Company
cannot make assurances that it will not adjust the selected financial
information reported herein or amend prior period filings. You are encouraged
to read the Company's Quarterly Report on Form 10-Q for the third quarter when
it is available.

The tables below illustrate the effects on the comparative condensed
consolidated financial statements, and as supplemental information, the
effects on the condensed consolidated statements of operations for the three
month period ended March 30, 2013 and the three and six month periods ended
June 29, 2013:

               As of                                                                        
                 December 29, 2012
                                 As Previously
(in              As Restated       Reported
thousands)
CONDENSED
CONSOLIDATED
BALANCE
SHEETS
Non-current
assets:
Prepaid tax      $ 19,152          $ 11,851
expenses
Non-current
liabilities
Liability
for
unrecognized     $ 34,957          $ 29,236
tax benefits
-
non-current
Deferred tax
and other
long-term        $ 41,936          $ 44,849
tax
liabilities
Equity:
Common stock
and
additional       $ 1,553,137       $ 1,527,710
paid in
capital
Accumulated      $ (917,825  )     $ (896,891  )
deficit
                                                                                                         
                                                                                                         
                 Six Months Ended                    Three Months Ended                Three Months Ended
                 June 29, 2013                       June 29, 2013                     March 30, 2013
                                   As Previously                      As                               As
                                                                      Previously                       Previously
(in
thousands,
except for       As Restated       Reported          As Restated      Reported         As Restated     Reported
per share
amounts)
CONDENSED
CONSOLIDATED
STATEMENTS
OF
OPERATIONS
Research and     $ 106,305         $ 109,195         $ 51,681         $ 54,571         $ 54,624        $ 54,624
development
Provision
for income       $ (8,766    )     $ (3,770    )     $ (4,602   )     $ (1,181   )     $ (4,164  )     $ (2,589  )
taxes
Net loss         $ (13,083   )     $ (10,977   )     $ (4,683   )     $ (4,152   )     $ (8,400  )     $ (6,825  )
Net loss per
common share     $ (0.06     )     $ (0.05     )     $ (0.02    )     $ (0.02    )     $ (0.04   )     $ (0.03   )
- basic
Net loss per
common share     $ (0.06     )     $ (0.05     )     $ (0.02    )     $ (0.02    )     $ (0.04   )     $ (0.03   )
- diluted
                                                                                                         
                                                                                                         
                 Nine Months Ended                   Three Months Ended
                 September 30, 2012                  September 30, 2012
                                   As Previously                      As
                                                                      Previously
(in
thousands,
except for       As Restated       Reported          As Restated      Reported
per share
amounts)
CONDENSED
CONSOLIDATED
STATEMENTS
OF
OPERATIONS
(Provision
for)             $ (59,325   )     $ (52,753   )     $ 5,924          $ 5,577
recovery of
income taxes
Net loss         $ (348,490  )     $ (343,363  )     $ (274,115 )     $ (275,907 )
Net loss per
common share     $ (1.57     )     $ (1.55     )     $ (1.31    )     $ (1.32    )
- basic
Net loss per
common share     $ (1.57     )     $ (1.55     )     $ (1.31    )     $ (1.32    )
- diluted
                                                                                                         
                                                                                                         
                 Six Months Ended                    Three Months Ended                Three Months Ended
                 July 1, 2012                        July 1, 2012                      April 1, 2012
                                   As Previously                      As                               As
                                                                      Previously                       Previously
(in
thousands,
except for       As Restated       Reported          As Restated      Reported         As Restated     Reported
per share
amounts)
CONDENSED
CONSOLIDATED
STATEMENTS
OF
OPERATIONS
(Provision
for)             $ (65,249   )     $ (58,330   )     $ 24             $ (519     )     $ (65,273 )     $ (57,811 )
recovery of
income taxes
Net (loss)       $ (74,375   )     $ (67,456   )     $ 440            $ (103     )     $ (74,815 )     $ (67,353 )
income
Net (loss)
income per       $ (0.33     )     $ (0.30     )     $ 0.00           $ (0.00    )     $ (0.32   )     $ (0.29   )
common share
- basic
Net (loss)
income per       $ (0.33     )     $ (0.30     )     $ 0.00           $ (0.00    )     $ (0.32   )     $ (0.29   )
common share
- diluted

Contact:

PMC-Sierra, Inc.
Jennifer Gianola, 1-408-239-8630
Director, Investor Relations
jennifer.gianola@pmcs.com
or
Hillary Choularton, 1-604-415-6671
Communications Specialist
hillary.choularton@pmcs.com
 
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