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Form 8-K PMC SIERRA INC For: Oct 27

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October 27, 2014 4:06 PM EDT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported)
October 27, 2014

PMC-SIERRA, INC.
(Exact name of Registrant as specified in its charter)

Delaware

0-19084

94-2925073

(State or other jurisdiction of

incorporation)

(Commission File

Number)

(IRS Employer Identification
Number)

1380 Bordeaux Drive
Sunnyvale, CA 94089
(Address of Principal Executive Offices)(Zip Code)

(408) 239-8000
(Registrants telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

� Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

� Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

� Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

� Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02.

Results of Operations and Financial Condition

On October 27, 2014, PMC-Sierra, Inc. (the Registrant) issued a press release reporting the financial results for its fiscal third quarter ended September 27, 2014.��The press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.

The information in this Form 8-K and the Exhibit, attached hereto, shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

As a supplement to the Registrant's condensed consolidated financial statements presented on a generally accepted accounting principles (GAAP) basis, the Registrant 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 in its press release, along with reconciliations to each of the most comparable GAAP measures.

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 Registrant 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 Registrant'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.

ITEM 9.01.

Financial Statements and Exhibits

�

(d)

Exhibits.

�

99.1

Press release dated October 27, 2014 reporting financial results of the Registrant for its fiscal third quarter ended September 27, 2014.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

� �

PMC-SIERRA, INC.

(Registrant)

�
�

�

Date:

October 27, 2014

By:

/s/ Steven J. Geiser

Vice President

Chief Financial Officer and

Principal Accounting Officer

EXHIBIT�INDEX

�

Exhibit
Number

Description
99.1

Press release dated October 27, 2014, reporting financial results of the Registrant for its fiscal third quarter ended September 27, 2014.

Exhibit 99.1

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 Companys core operating results. In addition, the measures are used to plan for the Companys 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:

  • On Sept. 17, PMC announced it was first to ship 16-port 12Gb/s SAS and 16-port 6Gb/s SATA I/O controller solutions. PMCs data center I/O products enable OEMs and ODMs to design cost-effective customized server hardware for hyperscale deployments, such as Open Compute, Windows Cloud Servers, OpenStack and Project Scorpio. The devices have the industrys highest port density, lowest power and are capable of more than 1,000,000 I/Os per second (IOPS) to support the most demanding cloud software applications.
  • On Sept. 16, Heng Liao, fellow in PMCs Chief Strategy and Technology Office, presented Storage Optimization for the Hyperscale Data Center at the Huawei Cloud Congress.
  • On Sept. 10, PMC announced it received Huaweis Supplier Quality Award, which recognizes PMCs product quality, technical support and product delivery through a score card system to evaluate supplier performance on all quality assurance-related procedures. PMC consistently earned an A rating on all items delivered in 2013.
  • On Sept. 4, PMC announced that the Company executed an agreement with HP to license core HP Smart Array software, firmware and management technology. PMC will leverage this technology to provide more system value to new and existing server storage and data center customers. This transaction also positions PMC as the supplier of key storage solution components across HP ProLiant Gen9 and beyond.
  • On Aug. 26, PMC introduced the industrys first 12Gb/s SAS expander card to enable density-optimized servers, the fastest growing segment of the worldwide server market according to IDC. The Adaptec� 12Gb/s SAS expander card enables flexible, high-density server architectures that can expand as data center storage needs grow. It provides 36 ports in a PCI Express� (PCIe�) low-profile form factor.
  • On Aug. 12, PMC announced it received the prestigious Excellent Partner Award from Hitachi, Ltd. The award recognizes the superior product technology, service and support that PMC provides to Hitachi.
  • On Aug. 5, PMC established a new ultra-fast storage class memory tier to accelerate critical applications in scale-out storage and all-flash arrays. The PMC Flashtec" NVRAM Drives combine the speed and endurance of DRAM with the persistency of NAND flash to deliver ten times higher performance than the fastest Solid State Drive (SSD), at more than 10 million IOPS, with sub-microsecond latency. Leveraging PCIe� 3.0, the Flashtec NVRAM Drives connect directly to the host to optimize CPU utilization and maximize overall system performance.
  • On Aug. 5, Derek Dicker, vice president of PMCs NVM Solutions Group, presented a keynote, Software Defined Flash Solutions Herald an Era of Choice at Flash Memory Summit. PMC storage experts also presented on the latest trends in PCIe�, NVM Express (NVMe) and error correction that are shaping next-generation SSDs in forum sessions during the conference.
  • On July 29, PMC announced the Company was recognized as an honoree in the 2013 Total Cost of Ownership (TCOO") Supplier Award program from Celestica. Celesticas awards program recognizes suppliers that support its TCOO strategy and demonstrate excellence in quality, delivery, technology, service, pricing and flexibility.
  • On July 15, PMC joined AT&T, Ciena and Verizon on a panel at the Lightwave Optical Summit in Austin, Texas, to discuss the state of 100G OTN networking and deployment readiness, and what is beyond 100G. The discussion topics included the latest developments in equipment, optics and OTN processing semiconductors, and software-defined networking.

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 Stanleys Semiconductor Corporate Access Day conference next week in Boston, MA at The Boston Harbor Hotel. Steve Geiser, the companys 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 Companys SEC filings, including the Companys most recent reports on Form 10-K and Form 10-Q, describe the risks associated with the Companys business, including PMCs 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.�PMCs 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 protected]
or
Kim Mason, 1-604-415-6239
Manager, Corporate Communications
[email protected]


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