[ Back ]   [ More News ]   [ Home ]
PMC Reports Third Quarter 2014 Results

Q3 2014 earnings announcement call live on http://investor.pmcs.com at 1:30 p.m. PT

Conference call: 1 (888) 430-8705 or 1 (719) 325-2362 outside North America; passcode 8686778

Replay available shortly after end of conference call through November 30, 2014

SUNNYVALE, Calif. — (BUSINESS WIRE) — October 27, 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 third quarter ended September 27, 2014.

Net revenues in the third quarter of 2014 totaled $135.5 million, an increase of 7 percent from $126.8 million in the second quarter of 2014 and an increase of 6 percent, compared to $128.4 million in the third quarter of 2013.

GAAP net income in the third quarter of 2014 totaled $5.5 million or $0.03 per diluted share, compared to a GAAP net loss in the second quarter of 2014 of $3.5 million or a $0.02 loss per share.

Non-GAAP net income in the third quarter of 2014 totaled $22.5 million or $0.11 per diluted share, compared to non-GAAP net income of $18.3 million or $0.09 per diluted share in the second quarter of 2014.

“Our Storage business performed exceedingly well this past quarter with double-digit growth across all of its product lines,” said PMC president and chief executive officer, Greg Lang. “PMC remains well-positioned for continued growth into FY2015, as we expect to see increasing demand for our 12Gb/s SAS I/O controllers and expanders, advanced DIGI OTN processors, Flashtec™ NVMe controllers and our new RF Remote Radio Head products.”

Net income on a non-GAAP basis in the third quarter of 2014 excludes the following items: (i) $9.9 million amortization of purchased intangible assets; (ii) $5.2 million stock-based compensation expense, (iii) $1.0 million of acquisition-related costs and other adjustments 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.

THIRD QUARTER 2014 HIGHLIGHTS

The Company made the following third quarter announcements:

Third Quarter 2014 Conference Call

Management will review the third quarter 2014 results and share its outlook for the fourth quarter of 2014 during a conference call at 1:30 p.m. Pacific Time/4:30 p.m. Eastern Time on October 27, 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 by telephone, dial 1 (888) 430-8705 or 1 (719) 325-2362 outside North America with passcode 8686778 approximately ten minutes before the start time. A telephone playback will be available for 30 business days after the completion of the call and can be accessed at 1 (888) 203-1112 or 1 (719) 457-0820 outside North America using passcode 8686778. A replay of the webcast will be available through November 30, 2014.

PMC will be attending Morgan Stanley’s Semiconductor Corporate Access Day conference next week in Boston, MA at The Boston Harbor Hotel. Steve Geiser, the company’s vice president and chief financial officer, will be available for one-on-one meetings with investors all day on the 4th of November during the event.

Safe Harbor Statement

This release contains forward-looking statements that involve risks and uncertainties. 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 tax rates, 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, PMCS is a trademark of PMC-Sierra, Inc. PMC disclaims any ownership rights in other product and company names mentioned herein. 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 27,     June 28,     September 28, September 27,     September 28,
2014 2014 2013 2014 2013
 
Net revenues $ 135,462 $ 126,822 $ 128,411 $ 388,752 $ 381,156
Cost of revenues   40,306     36,824     36,840     114,694     111,864  
Gross profit 95,156 89,998 91,571 274,058 269,292
 
Research and development 48,441 49,388 50,733 147,977 157,038
Selling, general and administrative 29,265 28,991 26,383 87,596 85,002
Amortization of purchased intangible assets   9,948     9,948     13,138     32,225     34,698  
Income (loss) from operations 7,502 1,671 1,317 6,260 (7,446 )
 
Other income (expense):
Gain on investment securities and other investments 12 46 1,762 87 1,776
Amortization of debt issue costs (51 ) (51 ) (30 ) (153 ) (30 )
Foreign exchange gain (loss) 899 (789 ) (1,898 ) 642 1,680
Interest income, net   198     114     230     321     824  
Income (loss) before provision for income taxes 8,560 991 1,381 7,157 (3,196 )
Provision for income taxes   (3,087 )   (4,471 )   (4,613 )   (9,405 )   (13,379 )
Net income (loss) $ 5,473   $ (3,480 ) $ (3,232 ) $ (2,248 ) $ (16,575 )
 
Net income (loss) per common share - basic $ 0.03 $ (0.02 ) $ (0.02 ) $ (0.01 ) $ (0.08 )
Net income (loss) per common share - diluted $ 0.03 $ (0.02 ) $ (0.02 ) $ (0.01 ) $ (0.08 )
 
Shares used in per share calculation - basic 197,613 196,114 205,377 196,305 204,638
Shares used in per share calculation - diluted 200,744 196,114 205,377 196,305 204,638
 
 

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 (Expense) Income, (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 27,     June 28,     September 28, September 27,     September 28,

2014 (1)

2014 (2)

2013 (3)

2014 (4)

2013 (5)

 
 
GAAP cost of revenues $ 40,306 $ 36,824 $ 36,840 $ 114,694 $ 111,864
Stock-based compensation (226 ) (214 ) (190 ) (681 ) (643 )
Acquisition-related costs - - (777 ) - (795 )
Termination recoveries - - - 9 -
Reversal of accruals   -     -     2,300     -     2,300  
Non-GAAP cost of revenues $ 40,080   $ 36,610   $ 38,173   $ 114,022   $ 112,726  
 
GAAP gross profit $ 95,156 $ 89,998 $ 91,571 $ 274,058 $ 269,292
Stock-based compensation 226 214 190 681 643
Acquisition-related costs - - 777 - 795
Termination recoveries - - - (9 ) -
Reversal of accruals   -     -     (2,300 )   -     (2,300 )
Non-GAAP gross profit $ 95,382   $ 90,212   $ 90,238   $ 274,730   $ 268,430  
 
Non-GAAP gross profit % 70 % 71 % 70 % 71 % 70 %
 
GAAP research and development expense $ 48,441 $ 49,388 $ 50,733 $ 147,977 $ 157,038
Stock-based compensation (1,990 ) (1,903 ) (2,541 ) (6,540 ) (8,241 )
Acquisition-related costs (356 ) (794 ) (1,200 ) (1,950 ) (1,741 )
Termination recoveries (costs) 28 (342 ) (178 ) (256 ) (1,448 )
Reversal of accruals   -     -     -     -     2,890  
Non-GAAP research and development expense $ 46,123   $ 46,349   $ 46,814   $ 139,231   $ 148,498  
 
GAAP selling, general and administrative expense $ 29,265 $ 28,991 $ 26,383 $ 87,596 $ 85,002
Stock-based compensation (3,012 ) (2,798 ) (3,143 ) (9,113 ) (10,577 )
Acquisition-related costs (669 ) (3 ) (5 ) (733 ) (1,083 )
Lease exit costs (31 ) (4 ) - (177 ) -
Termination recoveries (costs) 254 (1,295 ) (41 ) (1,044 ) (502 )
Asset impairment - - - (477 ) (1,575 )
Other expenses   -     -     -     (58 )   -  
Non-GAAP selling, general and administrative expense $ 25,807   $ 24,891   $ 23,194   $ 75,994   $ 71,265  
 
GAAP amortization of purchased intangible assets $ 9,948 $ 9,948 $ 13,138 $ 32,225 $ 34,698
Amortization of purchased intangible assets   (9,948 )   (9,948 )   (13,138 )   (32,225 )   (34,698 )
Non-GAAP amortization of purchased intangible assets $ -   $ -   $ -   $ -   $ -  
 
GAAP other (expense) income $ 1,058 $ (680 ) $ 64 $ 897 $ 4,250
Foreign exchange (gain) loss on foreign tax liabilities (1,081 ) 976 1,390 (984 ) (2,133 )
Gain on disposal of investment   -     -     -     -     (1,762 )
Non-GAAP other income (expense) $ (23 ) $ 296   $ 1,454   $ (87 ) $ 355  
 
GAAP provision for income taxes $ 3,087 $ 4,471 $ 4,613 $ 9,405 $ 13,379
Provision for income tax matters   (2,178 )   (3,550 )   (4,578 )   (6,839 )   (13,636 )
Non-GAAP provision for (recovery of) income taxes $ 909   $ 921   $ 35   $ 2,566   $ (257 )
 
GAAP operating expenses $ 87,654 $ 88,327 $ 90,254 $ 267,798 $ 276,738
Stock-based compensation (5,002 ) (4,701 ) (5,684 ) (15,653 ) (18,818 )
Acquisition-related costs (1,025 ) (797 ) (1,205 ) (2,683 ) (2,824 )
Assets impairment - - - (477 ) (1,575 )
Lease exit costs (31 ) (4 ) - (177 ) -
Termination recoveries (costs) 282 (1,637 ) (219 ) (1,300 ) (1,950 )
Amortization of purchased intangible assets (9,948 ) (9,948 ) (13,138 ) (32,225 ) (34,698 )
Reversal of accruals - - - - 2,890
Other expenses   -     -     -     (58 )   -  
Non-GAAP operating expenses $ 71,930   $ 71,240   $ 70,008   $ 215,225   $ 219,763  
 
September 27, June 28, September 28, September 27, September 28,
  2014 2014 2013 2014   2013
 
GAAP operating income (loss) $ 7,502 $ 1,671 $ 1,317 $ 6,260 $ (7,446 )
Stock-based compensation 5,228 4,915 5,874 16,334 19,461
Acquisition-related costs 1,025 797 1,982 2,683 3,619
Assets impairment - - - 477 1,575
Lease exit costs 31 4 - 177 -
Termination (recoveries) costs (282 ) 1,637 219 1,291 1,950
Amortization of purchased intangible assets 9,948 9,948 13,138 32,225 34,698
Reversal of accruals - - (2,300 ) - (5,190 )
Other expenses   -     -     -     58     -  
Non-GAAP operating income $ 23,452   $ 18,972   $ 20,230   $ 59,505   $ 48,667  
 
Non-GAAP operating margin 17 % 15 % 16 % 15 % 13 %
 
GAAP net income (loss) $ 5,473 $ (3,480 ) $ (3,232 ) $ (2,248 ) $ (16,575 )
Stock-based compensation 5,228 4,915 5,874 16,334 19,461
Acquisition-related costs 1,025 797 1,982 2,683 3,619
Termination costs (recoveries) (282 ) 1,637 219 1,291 1,950
Reversal of accruals - - (2,300 ) - (5,190 )
Assets impairment - - - 477 1,575
Lease exit costs 31 4 - 177 -
Amortization of purchased intangible assets 9,948 9,948 13,138 32,225 34,698
Other expenses - - - 58 -
Foreign exchange (gain) loss on foreign tax liabilities (1,081 ) 976 1,390 (984 ) (2,133 )
Gain on disposal of investments - - (1,762 ) - (1,762 )
Provision for income tax matters   2,178     3,550     4,578     6,839     13,636  
Non-GAAP net income $ 22,520   $ 18,347   $ 19,887   $ 56,852   $ 49,279  
 
Non-GAAP net income per share - basic $ 0.11 $ 0.09 $ 0.10 $ 0.29 $ 0.24
Non-GAAP net income per share - diluted $ 0.11 $ 0.09 $ 0.10 $ 0.28 $ 0.24
 
 
Shares used to calculate non-GAAP net income per share - basic 197,613 196,114 205,377 196,305 204,638
Shares used to calculate non-GAAP net income per share - diluted 200,744 199,594 207,475 199,548 206,772
 

(1) $5.2 million stock-based compensation expense; $1 million acquisition-related costs; $0.3 million recovery of termination costs; $9.9 million amortization of purchased intangible assets; $1.1 million foreign exchange gain on foreign tax liabilities; $0.1 million lease exit costs; $0.1 million other expenses; and $2.2 million provision for income taxes which includes $0.9 million income tax provision related to unrecognized tax benefits, $1.1 million income tax provision related to prepaid tax amortization, and $0.2 million income tax provision from adjustments related to prior periods.

 

(2) $4.9 million stock-based compensation expense; $0.8 million acquisition-related costs; $1.6 million of net termination costs; $9.9 million amortization of purchased intangible assets; $1 million foreign exchange loss on foreign tax liabilities; $0.1 million lease exit costs; and $3.6 million provision for income taxes which includes $0.8 million income tax provision related to unrecognized tax benefits, $1.5 million income tax provision related to prepaid tax amortization, $1.5 million income tax provision related to tax deductible goodwill and other items, $0.4 million deferred income tax benefit from adjustments related to prior periods, and $0.2 million income tax provision related to tax deductible items above.

 

(3) $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; $1.4 million foreign exchange loss on foreign tax liabilities; $1.8 million gain from disposal of investments; $2.3 million reversal of accruals; and $4.6 million provision for income taxes which includes $2.9 million deferred tax provision related to non-deductible intangible asset amortization, $1.1 million income tax provision related to unrecognized tax benefits, $0.4 million tax recovery related to foreign exchange translation of a foreign subsidiary, and $1 million income tax provision related to tax deductible items above.

 

(4) $16.3 million stock-based compensation expense; $2.7 million acquisition-related costs; $1.3 million net termination costs; $32.2 million amortization of purchased intangible assets; $1 million foreign exchange gain on foreign tax liabilities; $0.5 million asset impairment; $0.2 million lease exit costs; $0.1 million other expenses; and $6.8 million provision for income taxes which includes $2.4 million income tax provision related to unrecognized tax benefits, $3 million income tax provision related to prepaid tax amortization, and $1.4 million income tax provision related to tax deductible goodwill and other items.

 

(5) $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; $2.1 million foreign exchange gain on foreign tax liabilities; $1.8 million gain on disposal; and $13.6 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, $2.7 million tax provision for adjustments relating to prior period, and $0.1 million deferred tax provision related to tax deductible items above.

 
 

PMC-Sierra, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
 
        September 27,     December 28,
2014 2013
ASSETS:
Current assets:
Cash and cash equivalents $ 89,940 $ 100,038
Short-term investments   35,419     10,894  
Cash, cash equivalents and short-term investments 125,359 110,932
Accounts receivable, net 57,013 56,112
Inventories, net 34,588 31,074
Prepaid expenses and other current assets 16,304 19,855
Income tax receivable 3,673 2,640
Prepaid tax expense 2,749 5,695

Deferred tax assets (1)

  3,328     43,131  
Total current assets 243,014 269,439
 
Investment securities 103,101 103,391
Investments and other assets 8,190 10,750
Prepaid tax expense 93 93
Property and equipment, net 38,730 39,149
Goodwill and other intangible assets, net 439,120 425,823

Deferred tax assets (1)

  1,557     1,306  
$ 833,805   $ 849,951  
 
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 19,092 $ 23,173
Accrued liabilities 72,360 64,257
Credit facility - 30,000
Income taxes payable 2,983 632
Liability for unrecognized tax benefit (1) 21,394 54,127
Deferred income taxes 9 71
Deferred income   5,501     7,481  
Total current liabilities 121,339 179,741
 
Long-term obligations 35,982 11,108
Deferred income taxes 49,183 43,143

Liability for unrecognized tax benefit (1)

18,621 27,947

PMC special shares convertible into 1,016 (2013 - 1,019) shares of common stock

1,180 1,188
Stockholders' equity:
Common stock and additional paid in capital 1,577,573 1,550,385
Accumulated other comprehensive loss (780 ) (526 )
Accumulated deficit   (969,293 )   (963,035 )
Total stockholders' equity   607,500     586,824  
$ 833,805   $ 849,951  
 
(1) Effective from the beginning of the first quarter of 2014, the Company adopted Financial Accounting Standards Board's Accounting Standards Update (“ASU”) No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or Tax Credit Carryforward Exists.” Approximately $44 million of deferred tax assets of a foreign subsidiary were derecognized along with the related liability for unrecognized tax benefits as a result of this presentation adoption, with no impact to the Condensed Consolidated Statements of Operations.
 
 

PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
        Nine Months Ended
September 27,     September 28,
2014 2013
 
Cash flows from operating activities:
Net loss $ (2,248 ) $ (16,575 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 48,739 51,731
Stock-based compensation 16,334 19,461
Unrealized foreign exchange gain, net (2,372 ) (6,106 )
Net amortization of premiums and accrued interest of investments 628 1,353
Asset impairments 770 -
Gain on investment securities and other (86 ) (1,767 )
Excess tax benefits from stock option transactions - (2,274 )
 
Changes in operating assets and liabilities:
Accounts receivable, net (934 ) 1,923
Inventories, net (3,514 ) (7,110 )
Prepaid expenses and other current assets 4,225 927
Accounts payable and accrued liabilities (6,699 ) (8,614 )
Deferred taxes and income taxes payable 8,608 11,120
Deferred income   (1,980 )   (915 )
Net cash provided by operating activities   61,471     43,154  
 
Cash flows from investing activities:
Business acquisition (10,000 ) (96,098 )
Investment in long term deposits - (1,127 )
Purchases of property and equipment (11,175 ) (11,297 )
Purchase of intangible assets (1,167 ) (2,048 )
Redemption of short-term investments 4,920 8,466
Disposals of investment securities and other investments 37,936 146,340
Purchases of investment securities and other investments   (67,727 )   (172,114 )
Net cash used in investing activities   (47,213 )   (127,878 )
 
Cash flows from financing activities:
Payment of debt issuance costs - (928 )
Proceeds from short-term loan and credit facility 30,000 -
Repayment of credit facility (60,000 ) -
Proceeds from issuance of common stock 17,924 23,476
Repurchases of common stock (11,496 ) (22,544 )
Excess tax benefits from stock option transactions   -     2,274  
Net cash (used in) provided by financing activities   (23,572 )   2,278  
 
Effect of exchange rate changes on cash and cash equivalents   (784 )   (505 )
Net decrease in cash and cash equivalents (10,098 ) (82,951 )
Cash and cash equivalents, beginning of the period   100,038     169,970  
Cash and cash equivalents, end of the period $ 89,940   $ 87,019  



Contact:

PMC-Sierra, Inc.
Joel Achramowicz, 1-408-239-8630
Director, Investor Relations
Email Contact
or
Kim Mason, 1-604-415-6239
Manager, Corporate Communications
Email Contact