PMC Reports Fourth Quarter and Full Year 2013 Results

  PMC Reports Fourth Quarter and Full Year 2013 Results

           PMC Investor Relations Website: http://investor.pmcs.com
      Q4 2013 earnings announcement call live on Website at 1:30 p.m. PT
      Conference call replay number 1 (800) 406-7325; passcode 4660981#.
Replay available shortly after end of conference call through February 6, 2014

Business Wire

SUNNYVALE, Calif. -- January 30, 2014

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 fourth quarter and full year ended
December 28, 2013.

Net revenues in the fourth quarter of 2013 totaled $126.1 million, a decrease
of 2.2 percent compared to $128.9 million in the third quarter of 2013, and a
decrease of 2.6 percent compared to $129.4 million in the fourth quarter of
2012.

GAAP net loss in the fourth quarter of 2013 totaled $16.7 million, or $0.08
per share, compared to a GAAP net loss in the third quarter of 2013  of $2.7
million, or $0.01 per share. The fourth quarter GAAP net loss included
provision for income taxes of $12.8 million, driven primarily by net deferred
tax expense associated with changes in assessment for certain income tax
credits. Non-GAAP net income totaled $18.5 million, or $0.09 per diluted
share, down seven percent in the fourth quarter of 2013 compared to non-GAAP
net income of $20.0 million, or $0.10 per diluted share in the third quarter
of 2013.

“Fourth quarter results were above the midpoint of our expectations and
reflected solid growth in our storage business,” said Greg Lang, PMC president
and chief executive officer. “It is encouraging to see our storage and server
businesses finish the year strong.”

Net income on a non-GAAP basis in the fourth quarter of 2013 excludes the
following items: (i) $6.8 million stock-based compensation expense; (ii) $13.6
million amortization of purchased intangible assets; (iii) $4.1 million
severance costs; and (iv) $10.7 million of other adjustments, including income
tax related as described in the accompanying GAAP to non-GAAP reconciliation
table.

For the full year ended December 28, 2013, net revenues were $508.0 million
compared to $531.0 million for the year ended December 29, 2012, a decrease of
4.3 percent year over year. GAAP operating loss for the full year 2013 was
$6.7 million compared to GAAP operating loss of $282 million reported in the
year ended December 29, 2012. GAAP operating loss for the full year 2012
included impairment write-downs of goodwill and intangible assets of $274.6
million. Non-GAAP operating income for the full year 2013 was $68.1 million
compared to non-GAAP operating income of $77.5 million in the prior year. GAAP
net loss for the full year 2013 was $32.5 million, or $0.16 per share,
compared to GAAP net loss of $319.3 million, or $1.47 per share, for the prior
year. Non-GAAP net income in the year ended December 28, 2013, was $68.2
million or $0.33 per diluted share, compared to non-GAAP net income of $81.8
million or $0.38 per diluted share, in the year ended December 29, 2012.

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.

FOURTH QUARTER AND 2013 HIGHLIGHTS

The Company announced the following in the fourth quarter and full year of
2013:

  *On Nov. 18, TweakTown recognized the Adaptec by PMC Series 8 12Gb/s RAID
    controller with an Editor’s Choice Award, commenting that they “are built
    to address the changing landscape of the data center.”
  *On Nov. 14, Fierce Telecom recognized PMC’s WinPath4 mobile backhaul
    processor with two Fierce Innovation Awards: a “Best in Show” award for
    “Best Technological Problem Solver” as well as the best backhaul solution
    for wireless networks.
  *On Oct. 28, Dell DCS announced a demonstration of their ARM 64-bit server,
    which utilizes PMC’s 16-port 12Gb/s SAS storage solution, at ARM TechCon
    2013.
  *On Sept. 4, PMC became the only supplier of an end-to-end 12G architecture
    from controller to SSD with the introduction of Adaptec Series 8 12Gb/s
    SAS RAID Adapters. 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.
  *On July 15, PMC announced the completion of its previously announced
    intention to acquire IDT’s Enterprise Flash Controller business,
    strengthening the Company’s position as a leader in the rapidly growing
    enterprise SSD market segment.
  *On June 5, PMC introduced WinPath4, the industry’s first backhaul
    processor that enables mobile operators to scale capacity in their
    backhaul networks while transitioning to Layer 3 Packet Transport
    Networks. WinPath4 eliminates network bottlenecks caused by the growing
    deployment of 4G LTE.
  *On June 3, PMC announced further expansion of its Adaptec storage product
    line with the industry’s first low-profile, 24-port, PCI Express® (PCIe®)
    Gen3 6Gb/s SAS/SATA RAID adapter, enabling new dense architectures for
    scale-out or space-limited data centers. With 24-port native connectivity,
    the Adaptec 78165 triples storage connectivity by replacing up to three
    eight-port RAID adapters, and more than doubles the performance of
    competing solutions, significantly reducing cost and power.
  *On Mar. 18, PMC introduced DIGI 120G, the industry’s only single-chip OTN
    processor supporting 10G, 40G and 100G speeds for OTN transport,
    aggregation and switched deployments. To meet the elastic traffic demands
    of big data, DIGI 120G allows for efficient sharing and the 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.
  *On Feb. 20, PMC expanded 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/s 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,
    solid-state drives, removable media and tape drives. The product family is
    ideally suited for high-performance data center applications and positions
    PMC as a leader in secure data center storage solutions.

Fourth Quarter and Full Year 2013 Conference Call

Management will review the fourth quarter and full year 2013 results and share
its outlook for the first quarter of 2014 during a conference call at 1:30 pm
Pacific Time/4:30 pm Eastern Time on January 30, 2014. 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 4660981#, 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
4660981#. 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. 2014. 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                    Twelve Months Ended
                       December          December              December          December 29,
                       28,               29,                   28,
                         2013              2012                  2013              2012
                                         (As                                     (As restated
                                         restated -                              -
                                        See Note A)                            See Note A)
Net revenues           $ 126,105         $ 129,418             $ 508,028         $ 530,997
Cost of                 37,176          36,663              149,457         157,918  
revenues
Gross profit $           88,929            92,755                358,571           373,079
                                                                                 
Gross profit %           71      %         72      %             71      %         70       %
                                                                                 
Research and             54,009            49,553                211,047           220,927
development
Selling,
general and              27,768            26,432                112,770           112,479
administrative
Amortization
of purchased             13,547            10,784                48,245            45,321
intangible
assets
Impairment of
goodwill and
purchased               -               -                   -               274,637  
intangible
assets
(Loss) income
from                     (6,395  )         5,986                 (13,491 )         (280,285 )
operations
                                                                                 
Foreign
exchange gain            2,363             439                   4,043             (1,512   )
(loss)
Amortization
of debt issue            -                 (17     )             -                 (167     )
costs
Interest
income                   33                (47     )             827               (1,586   )
(expense), net
Gain on
investment
securities and          103             777                 1,879           1,523    
other
investments
(Loss) income
before
(provision               (3,896  )         7,138                 (6,742  )         (282,027 )
for) recovery
of income
taxes
(Provision
for) recovery           (12,795 )        6,967               (25,756 )        (37,301  )
of income
taxes
Net (loss)             $ (16,691 )       $ 14,105             $ (32,498 )       $ (319,328 )
income
                                                                                 
Net (loss)
income per             $ (0.08   )       $ 0.07                $ (0.16   )       $ (1.47    )
common share -
basic
Net (loss)
income per             $ (0.08   )       $ 0.07                $ (0.16   )       $ (1.47    )
common share -
diluted
                                                                                 
Shares used in
per share                201,615           202,400               203,882           216,593
calculation -
basic
Shares used in
per share                201,615           202,900               203,882           216,593
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, impairment of goodwill and 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,
Impairment of goodwill and 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                          Twelve Months Ended
                      December      September     December        December      December 29,
                      28,           28,           29,             28,
                       2013        2013        2012          2013        2012     
                        ^(1)          ^(2)          ^(3)            ^(4)          ^(5)
                                                                     
                                                                                
GAAP cost of          $ 37,176      $ 37,194      $ 36,663        $ 149,457     $ 157,918
revenues
Stock-based             (256    )     (190    )     (218    )       (899    )     (875     )
compensation
Acquisition-related     (5      )     (777    )     -               (800    )     (37      )
costs
Asset impairment        -             -             10              -             (98      )
Termination costs       (171    )     -             (92     )       (171    )     (92      )
Reversal of            -           2,300       -             2,300       -        
accruals
Non-GAAP cost of      $ 36,744     $ 38,527     $ 36,363       $ 149,887    $ 156,816  
revenues
                                                                                
GAAP gross profit     $ 88,929      $ 91,661      $ 92,755        $ 358,571     $ 373,079
Stock-based             256           190           218             899           875
compensation
Acquisition-related     5             777           -               800           37
costs
Asset impairment        -             -             (10     )       -             98
Termination costs       171           -             92              171           92
Reversal of            -           (2,300  )    -             (2,300  )    -        
accruals
Non-GAAP gross        $ 89,361     $ 90,328     $ 93,055       $ 358,141    $ 374,181  
profit
                                                                                
Non-GAAP gross          70.9    %     70.1    %     71.9    %       70.5    %     70.5     %
profit %
                                                                                
GAAP research and     $ 54,009      $ 50,733      $ 49,553        $ 211,047     $ 220,927
development expense
Stock-based             (2,854  )     (2,541  )     (2,909  )       (11,095 )     (11,583  )
compensation
Acquisition-related     (1,071  )     (1,200  )     (269    )       (2,812  )     (2,162   )
costs
Termination costs       (2,690  )     (178    )     (347    )       (4,138  )     (2,748   )
Reversal of             -             -             -               2,890         -
accruals
Asset impairment       (508    )    -           (533    )      (508    )    (1,012   )
Non-GAAP research
and development       $ 46,886     $ 46,814     $ 45,495       $ 195,384    $ 203,422  
expense
                                                                                
GAAP selling,
general and           $ 27,768      $ 26,383      $ 26,432        $ 112,770     $ 112,479
administrative
expense
Stock-based             (3,694  )     (3,143  )     (3,210  )       (14,271 )     (13,857  )
compensation
Acquisition-related     (39     )     (5      )     40              (1,122  )     (1,591   )
costs
Lease exit (costs)      (48     )     -             125             (48     )     (2,384   )
recoveries
Termination costs       (1,282  )     (41     )     (219    )       (1,784  )     (1,137   )
Reversal of             1,300         -             -               1,300         -
accruals
Asset impairment       (639    )    -           39            (2,214  )    (273     )
Non-GAAP selling,
general and           $ 23,366     $ 23,194     $ 23,207       $ 94,631     $ 93,237   
administrative
expense
                                                                                
GAAP amortization
of purchased          $ 13,547      $ 13,138      $ 10,784        $ 48,245      $ 45,321
intangible assets
Amortization of
purchased              (13,547 )    (13,138 )    (10,784 )      (48,245 )    (45,321  )
intangible assets
Non-GAAP
amortization of       $ -          $ -          $ -            $ -          $ -        
purchased
intangible assets
                                                                                
GAAP impairment of
goodwill and          $ -           $ -           $ -             $ -           $ 274,637
purchased
intangible assets
Impairment of
goodwill and           -           -           -             -           (274,637 )
purchased
intangible assets
Non-GAAP impairment
of goodwill and       $ -          $ -          $ -            $ -          $ -        
purchased
intangible assets
                                                                                
GAAP other income     $ 2,499       $ 64          $ 1,152         $ 6,749       $ (1,742   )
(expense)
Foreign exchange
(gain) loss on          (2,564  )     1,390         (872    )       (4,697  )     1,531
foreign tax
liabilities
Accretion of the
debt discount
related to the          -             -             389             -             3,218
senior convertible
notes
Gain on disposal of     -             (1,762  )     -               (1,762  )     -
investments
Interest expense
related to             114         48          -             162         -        
short-term loan
Non-GAAP other        $ 49         $ (260    )   $ 669          $ 452        $ 3,007    
income (expense)
                                                                                
GAAP provision for
(recovery of)         $ 12,795      $ 4,195       $ (6,967  )     $ 25,756      $ 37,301
income taxes
(Provision for)
recovery of income     (12,179 )    (4,160  )    6,843         (25,397 )    (38,598  )
tax matters
Non-GAAP provision
for (recovery of)     $ 616        $ 35         $ (124    )     $ 359        $ (1,297   )
income taxes
                                                                                
GAAP operating        $ 95,324      $ 90,254      $ 86,769        $ 372,062     $ 654,809
expenses
Stock-based             (6,548  )     (5,684  )     (6,119  )       (25,366 )     (25,440  )
compensation
Acquisition-related     (1,110  )     (1,205  )     (229    )       (3,934  )     (3,753   )
costs
Asset impairment        (1,147  )     -             (494    )       (2,722  )     (1,285   )
Lease exit (costs)      (48     )     -             125             (48     )     (2,384   )
recoveries
Termination costs       (3,972  )     (219    )     (566    )       (5,922  )     (3,885   )
Amortization of
purchased               (13,547 )     (13,138 )     (10,784 )       (48,245 )     (45,321  )
intangible assets
Reversal of             1,300         -             -               4,190         -
accruals
Impairment of
goodwill and           -           -           -             -           (274,637 )
purchased
intangible assets
Non-GAAP operating    $ 70,252     $ 70,008     $ 68,702       $ 290,015    $ 296,659  
expenses
                                                                                
GAAP operating        $ (6,395  )   $ 1,407       $ 5,986         $ (13,491 )   $ (280,285 )
(loss) income
Stock-based             6,804         5,874         6,337           26,265        26,315
compensation
Acquisition-related     1,115         1,982         229             4,734         3,790
costs
Asset impairment        1,147         -             484             2,722         1,383
Reversal of             (1,300  )     (2,300  )     -               (6,490  )     -
accruals
Lease exit costs        48            -             (125    )       48            2,384
(recoveries)
Termination costs       4,143         219           658             6,093         3,977
Amortization of
purchased               13,547        13,138        10,784          48,245        45,321
intangible assets
Impairment of
goodwill and           -           -           -             -           274,637  
purchased
intangible assets
Non-GAAP operating    $ 19,109     $ 20,320     $ 24,353       $ 68,126     $ 77,522   
income
                                                                                
Non-GAAP operating      15.2    %     15.8    %     18.8    %       13.4    %     14.6     %
margin
                                                                                
                                                                                
                      Three Months Ended                          Twelve Months Ended
                      December      September     December        December      December 29,
                      28,           28,           29,             28,
                     2013        2013        2012          2013        2012     
                        ^(1)          ^(2)          ^(3)            ^(4)          ^(5)
                                                                                
GAAP net (loss)       $ (16,691 )   $ (2,724  )   $ 14,105        $ (32,498 )   $ (319,328 )
income
Stock-based             6,804         5,874         6,337           26,265        26,315
compensation
Acquisition-related     1,115         1,982         229             4,734         3,790
costs
Termination costs       4,143         219           658             6,093         3,977
Asset impairment        1,147         -             484             2,722         1,383
Reversal of             (1,300  )     (2,300  )     -               (6,490  )     -
accruals
Lease exit costs        48            -             (125    )       48            2,384
(recoveries)
Amortization of
purchased               13,547        13,138        10,784          48,245        45,321
intangible assets
Impairment of
goodwill and            -             -             -               -             274,637
purchased
intangible assets
Foreign exchange
(gain) loss on          (2,564  )     1,390         (872    )       (4,697  )     1,531
foreign tax
liabilities
Accretion of the
debt discount
related to the          -             -             389             -             3,218
senior convertible
notes
Gain on disposal of     -             (1,762  )     -               (1,762  )     -
investments
Interest expense
related to              114           48            -               162           -
short-term loan
Provision for
(recovery of)          12,179      4,160       (6,843  )      25,397      38,598   
income tax matters
Non-GAAP net income   $ 18,542     $ 20,025     $ 25,146       $ 68,219     $ 81,826   
                                                                                
Non-GAAP net income   $ 0.09        $ 0.10        $ 0.12          $ 0.33        $ 0.38
per share - basic
Non-GAAP net income   $ 0.09        $ 0.10        $ 0.12          $ 0.33        $ 0.38
per share - diluted
                                                                                
                                                                                
Shares used to
calculate non-GAAP      201,615       205,377       202,400         203,882       216,593
net income per
share - basic
Shares used to
calculate non-GAAP      203,047       207,475       202,900         205,841       218,046
net income per
share - diluted
                                                                                

(1) $6.8 million stock-based compensation expense; $1.1 million
acquisition-related costs and deferred tax effects; $4.1 million termination
costs; $1.1 million asset impairment; $1.3 million reversal of accrual; $0.1
million lease exit costs; $13.5 million amortization of purchased intangible
assets; $2.6 million foreign exchange loss on foreign tax liabilities; $0.1
million interest expense related to short-term loan; and $12.2 million
provision for income taxes which includes $1.9 million income tax recovery
relating to intercompany transactions, $2.5 million income tax recovery for
adjustments relating to prior periods and changes in estimates, $0.9 million
arrears interest relating to unrecognized tax benefits, $3.3 million provision
related to non-deductible intangible asset amortization, $0.7 million income
tax provision relating to foreign exchange translation of a foreign
subsidiary, $10.4 million deferred tax effect related to changes in
assessments for certain income tax credits, and $1.3 million income tax
provision related to tax deductible goodwill and other items above.

(2) $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.

(3) $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 $6.8 million recovery of income taxes which includes $3.5 million income
tax recovery related to an intercompany dividend, $0.5 million income tax
provision relating to intercompany transactions, $1.8 million income tax
recovery for adjustments relating to prior periods, $0.6 million recovery of
arrears interest relating to unrecognized tax benefits, $0.8 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.

(4) $26.3 million stock-based compensation expense; $4.8 million
acquisition-related costs and deferred tax effects; $6.1 million termination
costs; $2.8 million asset impairment; $6.5 million reversal of accruals; $0.1
million lease exit costs; $48.2 million amortization of purchased intangible
assets; tangible assets; $4.7 million foreign exchange loss on foreign tax
liabilities; $0.1 million interest related to short-term loan; and $25.4
million provision for income taxes which includes $0.2 million income tax
provision relating to intercompany transactions, $2.6 million arrears interest
relating to unrecognized tax benefits, $11.7 million provision related to
non-deductible intangible asset amortization and impairment, $2 million income
tax recovery for adjustments relating to prior periods and changes in
estimates, $1.2 million income tax provision relating to foreign exchange
translation of a foreign subsidiary, $10.4 million deferred tax effect related
to change in assessment for certain income tax credit, and $1.3 million income
tax provision related to tax deductible goodwill and other items above.

(5) $26.3 million stock-based compensation expense; $3.8 million
acquisition-related costs; $4 million termination costs; $1.4 million asset
impairment; $2.4 million lease exit costs; $45.3 million amortization of
purchased intangible assets; $274.6 million impairment of goodwill and
purchased intangible assets; $1.5 million foreign exchange loss on foreign tax
liabilities; $3.2 million non-cash interest expense for the accretion of the
debt discount related to the senior convertible notes; and $38.6 million
provision for income taxes which includes $42 million income tax provision
related to an intercompany dividend net of $11.1 million related to the U.S.
Federal and State tax credits required to be recognized in advance of their
utilization, $10 million income tax provision relating to intercompany
transactions, $2.2 million arrears interest relating to unrecognized tax
benefits, $4 million deferred tax recovery related to non-deductible
intangible asset amortization and impairment, $10.2 million income tax
recovery for adjustments relating to prior periods, $0.9 million net tax
recovery relating to foreign exchange translation of a foreign subsidiary, and
$0.5 million income tax recovery related to tax deductible items above.

                                                     
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
                                                                
                                                                
                                          December 28,          December 29,
                                            2013                   2012
                                                                (As restated -
                                                    See Note A)
                                                                
ASSETS:
Current assets:
Cash and cash equivalents                 $ 100,038             $  169,970
Short-term investments                     10,894               11,431    
Cash, cash equivalents and                  110,932                181,401
short-term investments
Accounts receivable, net                    56,112                 62,143
Inventories, net                            28,712                 23,548
Prepaid expenses and other                  19,855                 22,125
current assets
Income tax receivable                       2,640                  6,630
Prepaid tax expense                         5,695                  -
Deferred tax assets                        42,561               43,630    
Total current assets                        266,507                339,477
                                                                
Investment securities                       103,391                91,778
Investments and assets                      10,750                 20,133
Prepaid tax expense                         93                     19,152
Property and equipment, net                 39,149                 43,146
Goodwill and other intangible               425,823                381,087
assets, net
Deferred tax assets                        7,492                1,137     
                                          $ 853,205            $  895,910   
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Current liabilities:
Accounts payable                            23,173              $  27,410
Accrued liabilities                         64,257                 66,722
Short-term loan                             30,000                 -
Liability for unrecognized                  54,127                 51,810
tax benefit
Income taxes payable                        632                    1,450
Current deferred income taxes               2,450                  2,466
Deferred income                            7,481                8,113     
Total current liabilities                   182,120                157,971
                                                                
Long-term obligations                       11,108                 22,793
Deferred tax and other                      46,380                 39,186
long-term tax liabilities
Liability for unrecognized                  27,947                 28,204
tax benefit
                                                                
PMC special shares                          1,188                  1,188
                                                                
Stockholders' equity:
Capital stock and additional                1,550,385              1,555,087
paid in capital
Accumulated other                           (526      )            616
comprehensive (loss) income
Accumulated deficit                        (965,397  )           (909,135  )
Total stockholders' equity                 584,462              646,568   
                                          $ 853,205            $  895,910   
                                                                

                                                      
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                                                                  
                                                                  
                                          Twelve Months Ended
                                           December 28,           December 29,
                                            2013                 2012     
Cash flows from operating
activities:
Net loss                                   $ (32,498  )           $ (319,328 )
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and amortization                71,432                 64,535
Stock-based compensation                     26,264                 26,315
Unrealized foreign exchange                  (2,251   )             1,747
(gain) loss , net
Net amortization of
premiums/discounts and accrued               1,580                  5,101
interest of investments
Asset Impairment                             167                    1,759
Gain on investment securities                (1,796   )             (1,508   )
and other investments
Impairment of goodwill and                   -                      274,637
purchased intangible assets
Taxes related to intercompany                -                      60,940
dividend
Loss on disposal of property                 6                      -
and equipment
Excess tax benefits from stock               (842     )             (14,232  )
option transactions
                                                                  
Changes in operating assets
and liabilities:
Accounts receivable                          6,007                  (2,929   )
Inventories                                  (3,381   )             16,363
Prepaid expenses and other                   1,900                  2,635
current assets
Accounts payable and accrued                 (5,551   )             (28,267  )
liabilities
Deferred taxes and income                    16,223                 (21,085  )
taxes payable
Deferred income                             (632     )            (7,911   )
Net cash provided by operating              76,628               58,772   
activities
                                                                  
Cash flows from investing
activities:
Business acquisition                         (96,098  )             (15,900  )
Investment in long term                      (1,127   )             -
deposits
Purchases of property and                    (14,637  )             (31,229  )
equipment
Purchase of intangible assets                (3,979   )             (7,438   )
Redemption of short-term                     8,466                  26,473
investments
Disposals of investment
securities and other                         162,773                315,310
investments
Purchases of investment
securities and other                        (179,837 )            (120,917 )
investments
Net cash (used in) provided by              (124,439 )            166,299  
investing activities
                                                                  
Cash flows from financing
activities:
Payment of debt issuance costs               (928     )             -
Repurchase of convertible                    -                      (68,340  )
subordinated notes
Proceeds from short-term loan                30,000                 -
Proceeds from issuance of                    25,247                 16,000
common stock
Excess tax benefits from stock               842                    14,232
option transactions
Repurchases of common stock                 (76,335  )            (199,999 )
Net cash used in financing                  (21,174  )            (238,107 )
activities
                                                                  
Effect of exchange rate
changes on cash and cash                     (947     )             435
equivalents
Net decrease in cash and cash                (69,932  )             (12,601  )
equivalents
Cash and cash equivalents,                  169,970              182,571  
beginning of the period
Cash and cash equivalents, end             $ 100,038             $ 169,970  
of the period
                                                                  

Note A. Prior Period Error Corrections - Income Taxes

The comparative condensed consolidated financial statements as of and for the
year ended December 29, 2012 have been revised to correct the misapplication
of accounting principles related to our accounting for deferred income taxes
and uncertain tax positions. Most significantly, the Company did not
appropriately re-measure its reserves for uncertain tax positions associated
with a decrease in exposure that occurred in 2012 related to the historical
utilization of certain tax credits. The Company also corrected two additional
items: the Company did not adjust its deferred tax liabilities to reflect the
effect of a certain change in tax law enacted 2012; and the Company did not
record the deferred tax effect related to a change in the value of a certain
liability that occurred in 2012. The net impact of revising our comparative
condensed consolidated financial statements for these items was an $8.7
million reduction in our previously recorded 2012 provision for income tax, a
$1.1 million increase, $6.8 million decrease and $2.8 million decrease in
long-term deferred tax assets, liability for unrecognized tax benefits and
deferred tax liabilities, respectively, and a $2.0 million increase in
additional paid in capital as of December 28, 2012. 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 taxing authorities as a result of these matters in any period.

Management believes the effects of these corrections on its 2012 consolidated
financial statements as presented in Form 10-K/A filed November 12, 2013,
including the effects on the 2012 quarterly financial information summarized
below, are not material. The Company and its auditors continue to review the
accounting adjustments. As a result, the selected financial information
reported herein, including the adjusted 2012 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 2013 Annual Report on Form 10-K when
it is available.

The tables below illustrate the effects on the comparative condensed
consolidated financial statements as of and for the year ended December 29,
2012, and as supplemental information, the effects on the condensed
consolidated balance sheets for each of the past six quarters and the interim
condensed consolidated statements of operations for the three and six month
periods ended July 1, 2012 and the three and twelve month period ended
December 29, 2012:

                                                                                        
               As of                            As of                          As of
               September 28, 2013              June 29, 2013                   March 30, 2013
                               As Previously                   As Previously                   As Previously
(in            As Restated     Reported        As Restated     Reported        As Restated     Reported
thousands)
CONDENSED
CONSOLIDATED
BALANCE
SHEETS
Non-current
assets:
Deferred tax   $ 1,282         $ 145           $ 1,389         $ 252           $ 1,181         $ 44
assets
Non-current
liabilities
Liability
for
unrecognized   $ 28,133        $ 34,886        $ 27,610        $ 34,363        $ 28,489        $ 35,242
tax benefits
-
non-current
Deferred tax
and other
long-term      $ 42,002        $ 44,752        $ 41,395        $ 44,145        $ 40,134        $ 42,884
tax
liabilities
Equity:
Common stock
and
additional     $ 1,584,013     $ 1,582,063     $ 1,581,116     $ 1,579,166     $ 1,577,403     $ 1,575,453
paid in
capital
Accumulated    $ (932,575  )   $ (941,265  )   $ (923,966  )   $ (932,656  )   $ (917,535  )   $ (926,225  )
deficit
                                                                                                 
                                                                                                 
               As of                            As of                          As of
               December 29, 2012               September 30, 2012              July 1, 2012
                               As Previously                   As Previously                   As Previously
(in            As Restated     Reported        As Restated     Reported        As Restated     Reported
thousands)
CONDENSED
CONSOLIDATED
BALANCE
SHEETS
Non-current
assets:
Deferred tax   $ 1,137         $ -             $ 777           $ 58            $ 1,108         $ 389
assets
Non-current
liabilities
Liability
for
unrecognized   $ 28,204        $ 34,957        $ 29,330        $ 36,083        $ 28,529        $ 35,282
tax benefits
-
non-current
Deferred tax
and other
long-term      $ 39,186        $ 41,936        $ 40,279        $ 40,279        $ 40,321        $ 40,321
tax
liabilities
Equity:
Common stock
and
additional     $ 1,555,087     $ 1,553,137     $ 1,553,971     $ 1,552,021     $ 1,560,720     $ 1,558,770
paid in
capital
Accumulated    $ (909,135  )   $ (917,825  )   $ (915,276  )   $ (920,798  )   $ (633,590  )   $ (639,112  )
deficit
                                                                                                 

                                                                                       
             Twelve months                 Three Months Ended     Six Months Ended            Three Months Ended
             December 29, 2012             December 29, 2012      July 1, 2012                July 1, 2012
                            As                       As                         As                      As
                            Previously               Previously                 Previously              Previously
(in
thousands,                                 As                                                 As
except for   As Restated    Reported       Restated  Reported     As Restated   Reported      Restated  Reported
per share
amounts)
CONDENSED
CONSOLIDATED
STATEMENTS
OF
OPERATIONS
(Provision
for)         $ (37,301  )   $ (45,991  )   $ 6,967   $  3,799     $ (49,783 )   $ (55,305 )   $  5,457  $  (65   )
recovery of
income taxes
Net loss     $ (319,328 )   $ (328,018 )   $ 14,105  $  10,937    $ (58,909 )   $ (64,431 )   $  5,873  $  351
Net loss per
common share $ (1.47    )   $ (1.51    )   $ 0.07    $  0.05      $ (0.26   )   $ (0.28   )   $  0.03   $  0.00
- basic
Net loss per
common share $ (1.47    )   $ (1.51    )   $ 0.07    $  0.05      $ (0.26   )   $ (0.28   )   $  0.03   $  0.00
- diluted

Contact:

Blueshirt Group
Suzanne Schmidt, 1-415-217-4962
suzanne@blueshirtgroup.com
or
PMC-Sierra, Inc.
Hillary Choularton, 1-604-415-6671
Communications Specialist
hillary.choularton@pmcs.com
 
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