EX-99.1 2 a4745773ex991.txt NEWS RELEASE Exhibit 99.1 PMC-Sierra Reports Third Quarter 2004 Results SANTA CLARA, Calif.--(BUSINESS WIRE)--Oct. 20, 2004--PMC-Sierra, Inc. (Nasdaq:PMCS): -- Q3 Net Revenues: $71.2 million -- Q3 Non-GAAP Net Income: $6.9 million or $0.04 per share (diluted) -- Q3 GAAP Net Income: $6.3 million or $0.03 per share (diluted) PMC-Sierra, Inc. (Nasdaq:PMCS), a leading provider of high-speed broadband communications and storage semiconductors and MIPS-Powered microprocessors, today reported its third quarter results for the period ended September 26, 2004. Net revenues in the third quarter of 2004 were $71.2 million compared with $85.7 million for the second quarter of 2004 and $63.1 million for the same period a year ago. This represented a decrease in revenues of 17 percent sequentially and an increase of 13 percent on a year-over-year basis. Net income in the third quarter of 2004 on a non-GAAP basis was $6.9 million (non-GAAP diluted earnings per share of $0.04) compared with non-GAAP net income of $14.9 million (non-GAAP diluted earnings per share of $0.08) in the second quarter of 2004. GAAP net income in the third quarter of 2004 was $6.3 million (GAAP diluted earnings per share of $0.03). This compares to GAAP net income of $15.4 million in the second quarter of 2004 (GAAP diluted earnings per share of $0.08). Non-GAAP net income in the third quarter of 2004 excludes $1.2 million in acquisition costs relating to a purchase of assets and $0.7 million in gain resulting from sales of investments. For a reconciliation of GAAP net income (loss) per share versus non-GAAP net income (loss) per share, see the supplemental schedule on page 7 of this release. The Company believes the additional non-GAAP measures provided are useful to investors for the performance of financial analysis. Management uses the non-GAAP measures internally to evaluate its in-period operating performance and planning for the Company's future periods. However, non-GAAP measures are neither in accordance with, nor are they a substitute for, GAAP measures. "Despite the recent softness in bookings due to inventory adjustments, PMC-Sierra is well positioned to participate in the current capital upgrade cycle in broadband infrastructure including fiber-to-the-curb, 3G wireless, Ethernet-over-SONET, and enterprise storage solutions," said Bob Bailey, president and chief executive officer of PMC-Sierra. New products and company announcements in Q3 2004 include the following: -- RM11200 1.8 GHz Dual CPU 64-Bit MIPS-Powered Multiprocessor -- we introduced the RM11200(TM), the company's third-generation highly integrated multiprocessor, which integrates two newly designed 1.8 GHz E11K(TM) CPU cores with multiple high-speed memory and I/O interfaces, including dual DDR2, dual PCI Express(TM), quad Gigabit Ethernet ports, and HyperTransport(TM). The RM11200 provides customers with high processing performance, low power and leading edge integration for networking, storage and communications applications such as routers, storage systems and DSLAMs. -- SAS Expander Products -- we introduced the maxSAS(TM) product line for end-to-end Serial Attached SCSI (SAS) solutions to be used in both the network and server attached storage applications. The product line includes 24 and 36 port SAS expanders, namely the SXP 24x3G and SXP 36x3G, as well as an innovative storage enclosure management processor, called the SMC-L. The PMC-Sierra maxSAS product family, combined with either the Adaptec AIC-9410 SAS controller or ASC-48300 SAS host bus adapter, provides storage equipment manufacturers with a complete end-to-end storage systems solution using either SAS or SATA hard disk drives. -- Open Source Network Computing (NC) initiative -- we announced the Open Source NC initiative at the Fall Processor Forum in San Jose to enable the rapid commercialization of low power thin client solutions for education, enterprise, self-service kiosks, and retail displays. PMC-Sierra's open source NC solution, the PMC Xiao Hu(TM) (pronounced `Sha hu', meaning "Little Tiger") is a commercially available single board solution co-developed with China's Tsinghua University, MIPS Technologies, Inc., and ATI Technologies, Inc. The combination of the PMC Xiao Hu board with Linux software and a MIPS-Powered microprocessor from PMC-Sierra achieves significant reduction in power and costs compared to the traditional desktop PC approach. -- Executive announcements: we announced the appointment of Thomas Brigiotta as Vice President of Worldwide Sales. Mr. Brigiotta comes to the position with more than 20 years of international sales experience and was formerly with Cadence Design Systems. The Company also announced the appointment of Steve Cadigan as Vice President of Human Resources. Mr. Cadigan has more than 15 years of international human resources experience and was formerly with Cisco Systems and Advanced Micro Devices. Third Quarter 2004 Conference Call Management will review the third quarter 2004 results and provide guidance for the fourth quarter of 2004 during a conference call at 1:30 pm Pacific Time/4:30 pm Eastern Time on October 20, 2004. To listen to the call, investors can access an audio webcast of the conference call on the Financial Events and Calendar section at http://investor.pmc-sierra.com/. A replay of this webcast will be posted and available two hours after the conference call has been completed. To listen to the conference call live by telephone, please dial 719-457-2625 approximately ten minutes before the start time. A telephone replay will be available 15 minutes after the completion of the call and can be accessed by dialing 719-457-0820 (replay access code is 945252). A replay of the webcast will be available for five business days. Fourth Quarter 2004 Conference Call PMC-Sierra is planning to release its results for the fourth quarter of 2004 in late January 2005. A conference call will be held on the day of the release to review the quarter and provide an outlook for the first quarter of 2005. Safe Harbor Statement PMC-Sierra's forward-looking statements regarding the broadband infrastructure capital upgrade cycle are subject to risks and uncertainties. Actual results may differ from these projections. Investments in broadband infrastructure vary over time and by type of end-user. Even if they invest in broadband infrastructure, service providers and enterprises may not maintain or increase their purchases of equipment containing PMC-Sierra's products, particularly equipment incorporating PMC-Sierra's newer products. The Company's SEC filings describe more fully the risks associated with market trends and sales of newer products, including rapid changes in demand due to customer inventory levels and production schedules, fluctuations in demand for networking equipment, and customer concentration. The Company does not undertake any obligation to update the forward-looking statements. About PMC-Sierra PMC-Sierra(TM) is a leading provider of high speed broadband communications semiconductors and MIPS-Powered(TM) processors for enterprise, access, metro, storage, wireless infrastructure and advanced consumer electronics equipment. The company offers worldwide technical and sales support, including a network of offices throughout North America, Europe and Asia. The company is publicly traded on the NASDAQ Stock Market under the PMCS symbol and is included in the S&P 500 Index. For more information, visit www.pmc-sierra.com. (C) Copyright PMC-Sierra, Inc. 2004. All rights reserved. E11K, maxSAS, PMC, PMC Xiao Hu, PMCS, PMC-Sierra, RM11200 and "Thinking You can Build On" are trademarks of PMC-Sierra, Inc. All other trademarks are the property of the respective owners. PMC-Sierra, Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except for per share amounts) (unaudited) Three Months Ended -------------------------------- Sep 26, Jun 27, Sep 28, 2004 2004 2003 Net revenues Networking $ 71,173 $ 85,703 $ 63,100 Non-networking - - - ---------- ---------- ---------- Total 71,173 85,703 63,100 Cost of revenues 21,024 23,843 21,868 ---------- ---------- ---------- Gross profit 50,149 61,860 41,232 Other costs and expenses: Research and development 30,168 30,689 27,759 Marketing, general and administrative 12,148 12,203 12,031 Amortization of deferred stock compensation: Research and development - - - Marketing, general and administrative - - 313 Acquisition costs 1,212 - - Restructuring costs - - (1,093) ---------- ---------- ---------- Income (loss) from operations 6,621 18,968 2,222 Interest and other income (expense), net 1,320 978 (267) Gain (loss) on extinguishment of debt - - 1,700 Gain (loss) on investments 655 - (162) ---------- ---------- ---------- Income (loss) before provision for income taxes 8,596 19,946 3,493 Provision for (recovery of) income taxes 2,288 4,537 329 ---------- ---------- ---------- Net income (loss) $ 6,308 $ 15,409 $ 3,164 ========== ========== ========== Net income (loss) per common share - basic $ 0.03 $ 0.09 $ 0.02 Net income (loss) per common share - diluted $ 0.03 $ 0.08 $ 0.02 Shares used in per share calculation - basic 180,280 179,570 174,118 Shares used in per share calculation - diluted 187,968 190,136 186,137 PMC-Sierra, Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except for per share amounts) (unaudited) Nine Months Ended ----------------------- Sep 26, Sep 28, 2004 2003 Net revenues Networking $ 235,536 $ 178,096 Non-networking - 768 ----------- ----------- Total 235,536 178,864 Cost of revenues 68,624 65,054 ----------- ----------- Gross profit 166,912 113,810 Other costs and expenses: Research and development 89,659 90,880 Marketing, general and administrative 36,276 36,798 Amortization of deferred stock compensation: Research and development - 317 Marketing, general and administrative 697 421 Acquisition costs 1,212 - Restructuring costs - 12,811 ----------- ----------- Income (loss) from operations 39,068 (27,417) Interest and other income (expense), net 3,124 175 Gain (loss) on extinguishment of debt (1,845) 1,700 Gain (loss) on investments 9,242 2,331 ----------- ----------- Income (loss) before provision for income taxes 49,589 (23,211) Provision for (recovery of) income taxes 11,025 (5,695) ----------- ----------- Net income (loss) $ 38,564 $ (17,516) =========== =========== Net income (loss) per common share - basic $ 0.21 $ (0.10) Net income (loss) per common share - diluted $ 0.20 $ (0.10) Shares used in per share calculation - basic 179,420 172,603 Shares used in per share calculation - diluted 190,135 172,603 As a supplement to the Company's consolidated financial statements presented on a generally accepted accounting principles (GAAP) basis, the Company provides additional non-GAAP measures for net income (loss) and net income (loss) per share in its press release. A non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. The Company believes that the additional non-GAAP measures are useful to investors for the performance of financial analysis. Management uses these measures internally to evaluate its in-period operating performance and the measures are used for planning and forecasting of the Company's future periods. However, non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. Other companies may use different non-GAAP measures and presentation of results. PMC-Sierra, Inc. Reconciliation of GAAP net income (loss) to Non-GAAP net income (loss) (in thousands) (unaudited) Three Months Ended ------------------------------ Sep 26, Jun 27, Sep 28, 2004 (1) 2004 (2) 2003 (3) GAAP net income (loss) $ 6,308 $ 15,409 $ 3,164 Amortization of deferred stock compensation - - 313 Reversal of provision for excess inventory resulting from the sale of inventory that was previously provided for - (651) - Acquisition costs 1,212 - - Restructuring costs - - (1,093) Impairment of other investments - - - (Gain) loss on extinguishment of debt - - (1,700) (Gain) loss on sale of investments (655) - 162 Income tax effect of above items - 163 - --------- ---------- --------- Non-GAAP net income (loss) $ 6,865 $ 14,921 $ 846 ========= ========== ========= Non-GAAP net income (loss) per share - diluted $ 0.04 $ 0.08 $ 0.00 Shares used to calculate non-GAAP net income (loss) per share - diluted 187,968 190,136 186,137 Non-GAAP adjustments The above amounts have been adjusted to eliminate the following: (1) $0.7 million gain on sales of investments and $1.2 million acquisition costs relating to a purchase of assets. (2) $0.7 million reversal of a provision for excess inventory resulting from the sale of inventory that was previously provided for and $0.2 million income tax effect related to this non-GAAP adjustment. (3) $0.3 million amortization of deferred stock compensation, a $1.1 million net reversal of restructuring costs, $1.7 million gain on extinguishment of debt and $0.2 million loss on sale of investments. The $1.1 million net reversal of restructuring costs is comprised of a $4.5 million reversal of excess facilities costs related to our October 2001 restructuring, $3.1 million additional excess facilities costs related to sites abandoned in our March 2001 restructuring and $0.3 million of restructuring costs related to our January 2003 restructuring. PMC-Sierra, Inc. Reconciliation of GAAP net income (loss) to Non-GAAP net income (loss) (in thousands) (unaudited) Nine Months Ended ---------------------- Sep 26, Sep 28, 2004 (4) 2003 (5) GAAP net income (loss) $ 38,564 $ (17,516) Amortization of deferred stock compensation 697 738 Reversal of provision for excess inventory resulting from the sale of inventory that was previously provided for (651) - Acquisition costs 1,212 - Restructuring costs - 12,811 Impairment of other investments - 3,500 (Gain) loss on extinguishment of debt 1,845 (1,700) (Gain) loss on sale of investments (9,242) (5,831) Income tax effect of above items 163 (1,860) ---------- ----------- Non-GAAP net income (loss) $ 32,588 $ (9,858) ========== =========== Non-GAAP net income (loss) per share - diluted $ 0.17 $ (0.06) Shares used to calculate non-GAAP net income (loss) per share - diluted 190,135 172,603 Non-GAAP adjustments The above amounts have been adjusted to eliminate the following: (4) $0.7 million amortization of deferred stock compensation, $0.7 million reversal of a provision for excess inventory resulting from the sale of inventory that was previously provided for, $1.2 million acquisition costs relating to purchase of assets, $1.8 million loss on extinguishment of debt, $9.2 million gain on sale of investments, and $0.2 million income tax effect related to these non-GAAP adjustments. (5) $0.7 million amortization of deferred stock compensation, a $12.8 million net charge for restructuring costs, a $3.5 million charge for impairment of other investments, a $1.7 million gain on extinguishment of debt, a $5.8 million gain on sale of investments and $1.9 million recovery of taxes related to these transactions. The $12.8 million restructuring charge is comprised of $7.2 million for workforce reduction, $7.5 million for excess facilities, $1.5 million for asset impairments, $1.1 million for obligations incurred in connection with the closure of development sites and $4.5 million reversal of excess facilities costs related to our October 2001 restructuring. PMC-Sierra, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) Sep 26, Dec 28, 2004 2003 ASSETS: Current assets: Cash and short-term investments (1) $ 251,966 $ 411,928 Accounts receivable, net 20,516 21,645 Inventories, net 17,747 18,275 Prepaid expenses and other current assets 14,547 12,547 ----------- ----------- Total current assets 304,776 464,395 Investment in bonds and notes (1) 140,083 41,569 Other investments and assets 4,640 11,336 Property and equipment, net 16,661 20,750 Goodwill and other intangible assets, net 13,244 8,127 Deposits for wafer fabrication capacity 6,779 6,779 Deferred tax assets 274 - ----------- ----------- $ 486,457 $ 552,956 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable $ 16,941 $ 27,356 Accrued liabilities 43,281 50,240 Income taxes payable 48,427 36,171 Accrued restructuring costs 11,097 16,413 Deferred income 9,577 15,720 Current deferred income taxes 609 1,051 ----------- ----------- Total current liabilities 129,932 146,951 3.75% Convertible subordinated notes due August 15, 2006 68,071 175,000 Deferred tax liabilities 74 189 PMC special shares convertible into 2,897 (2003 - 2,921) shares of common stock 4,434 4,519 Stockholders' equity Capital stock and additional paid in capital 891,065 870,857 Accumulated other comprehensive income 715 1,838 Accumulated deficit (607,834) (646,398) ----------- ----------- Total stockholders' equity 283,946 226,297 ----------- ----------- $ 486,457 $ 552,956 =========== =========== (1) Total cash and marketable investments, current and non-current, comprised of Cash and short-term investments plus Investments in bonds and notes, totaled $392.0 million and $453.5 million at September 26, 2004 and December 28, 2003, respectively. PMC-Sierra, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Nine Months Ended --------------------- Sep 26, Sep 28, 2004 2003 Cash flows from operating activities: Net income (loss) $ 38,564 $ (17,516) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 12,442 23,628 Impairment of other investments - 3,500 Noncash restructuring costs - 1,490 Loss (gain) on extinguishment of debt 1,845 (1,700) Gain on sale of investments and other assets (9,242) (5,818) Reversal of write-down of excess inventory (651) - Changes in operating assets and liabilities: Accounts receivable 1,129 (1,828) Inventories 1,179 6,730 Prepaid expenses and other current assets (2,139) 3,216 Accounts payable and accrued liabilities (10,223) (9,524) Income taxes payable 12,256 17,025 Accrued restructuring costs (5,169) (114,200) Deferred income (6,143) (2,278) ---------- ---------- Net cash provided by (used in) operating activities 33,848 (97,275) ---------- ---------- Cash flows from investing activities: Purchases of short-term held-to-maturity investments (8,237) (16,538) Purchases of short-term available-for-sale investments (288) (54,701) Proceeds from sales and maturities of short-term held-to-maturity investments - 120,459 Proceeds from sales and maturities of short-term available-for-sale investments 13,521 149,098 Purchases of long-term held-to-maturity investments in bonds and notes - (95,874) Purchases of long-term available-for-sale investments in bonds and notes (191,980) - Proceeds from sales and maturities of long-term held-to-maturity investments in bonds and notes - 189,973 Proceeds from sales and maturities of long-term available-for-sale investments in bonds and notes 113,378 - Purchases of investments and other assets (5,991) (1,304) Proceeds from sale of investments and other assets 20,067 8,421 Proceeds from refund of wafer fabrication deposits - 15,213 Purchases of property and equipment (6,907) (10,562) Purchase of intangible assets (5,675) - ---------- ---------- Net cash provided by (used in) investing activities (72,112) 304,185 ---------- ---------- Cash flows from financing activities: Repurchase of convertible subordinated notes (106,929) (96,680) Proceeds from issuance of common stock 12,001 20,529 ---------- ---------- Net cash used in financing activities (94,928) (76,151) ---------- ---------- Net increase (decrease) in cash and cash equivalents (133,192) 130,759 Cash and cash equivalents, beginning of the period 292,811 75,833 ---------- ---------- Cash and cash equivalents, end of the period $ 159,619 $ 206,592 ========== ========== CONTACT: PMC-Sierra Alan Krock, 408-988-1204 Or David Climie, 408-988-8276 (Investor Relations) Or Susan Kirk, 408-988-8515 (Corp. Communications)