PMC Reports Third Quarter 2012 Results

PMC Reports Third Quarter 2012 Results

PMC's investor relations website:http://investor.pmcs.com

Q3 2012 earnings announcement call live on website at 1:30 p.m. PT

Conference call replay number 1 (888) 843-7419; passcode 33368644#

Replay available shortly after end of conference call through November 8, 2012

SUNNYVALE, Calif.--(BUSINESS WIRE)-- PMC® (NAS: PMCS) , the semiconductor innovator transforming networks that connect, move and store big data, today reported results for the third quarter ended September 30, 2012.

Net revenues in the third quarter of 2012 were $131.7 million, a decrease of 4% compared to net revenues of $137.8 million in the second quarter of 2012 and a decrease of 24% compared to $173.3 million in the third quarter of 2011.

GAAP net loss in the third quarterof 2012 was $274.4 million, or a loss of $1.31 per share. Third quarter GAAP results included impairment write-downs of goodwill and intangible assets of $276.1 million related to the Passave and Wintegra acquisitions, completed in 2006 and 2010, respectively. This compares to a GAAP net income of $26.5 million, or $0.12 per diluted share, including a $28.5 million benefit from the recognition of certain U.S. tax credits, mainly arising from foreign withholding taxes paid in the second quarter of 2012.

Non-GAAP net income in the third quarter of 2012 was $21.4 million, or $0.10 per diluted share, compared to non-GAAP net income of $21.3 million, or $0.09 per diluted share, in the second quarter of 2012.

Non-GAAP net income in the third quarter of 2012 excludes the following items: (i) $6.1 million in stock-based compensation expense; (ii) $1.1 million in acquisition-related costs; (iii) $1.4 million in termination costs; (iv) $0.9 million in asset impairments; (v) $1.8 million in lease exit costs; (vi) $11.6 million in amortization of purchased intangible assets; (vii) a $2.1 million foreign exchange loss on foreign tax liabilities; (viii) $1 million of non-cash interest expense for the accretion of the debt discount related to the senior convertible notes; (ix) a $6.3 million recovery of income taxes; and (x) a $276.1 million impairment of goodwill and purchased intangible assets.

"Our third quarter results were in line with expectations despite a tough macro environment," said Greg Lang, president and chief executive officer of PMC. "With business uncertainty weighing on infrastructure purchases in every geography and market segment, we remain focused on best-in-class product execution, design wins and controlling operating expenses."

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 these non-GAAP measures internally to evaluate its in-period operating performance before gains, losses and other charges that are considered by management to be outside of the Company's core operating results. In addition, the measures are used to plan for the Company's future periods. However, non-GAAP measures are neither stated in accordance with, nor are they a substitute for, GAAP measures.

THIRD QUARTER AND RECENT HIGHLIGHTS

Highlights of events during the third quarter of 2012 and recently include:

• On October 2, 2012, Goldman Sachs completed the repurchase of PMC's common stock under the Accelerated Stock Buyback Agreement previously announced on May 2, 2012. Total shares repurchased under the Accelerated Stock Buyback Agreement are 26.8 million. In addition, PMC repurchased an additional 6.9 million shares under the Employee Equity Stock Buyback Plan which was approved for $40 million. The total amount of shares repurchased under both programs is approximately 33.7 million, representing approximately 14.5 percent of PMC's total shares outstanding as of May 2, 2012.

• PMC announced the redemption of the Company's 2.25% senior convertible notes. The redemption took place on October 20, 2012, at one hundred per cent (100%) of the outstanding principal amount of the notes plus accrued and unpaid interest. On October 20, 2012, PMC redeemed the remaining outstanding Senior Convertible Notes for approximately $51.8 million.

• As a leader in the innovation of storage networks for next generation cloud, data center, and broader market applications, Adaptec by PMC recently announced the introduction of the Series 7 family of RAID adapters, representing the industry's first and highest port count PCIe Gen 3 6Gb/s SAS/SATA RAID adapters. The Adaptec Series 7 family represents the first RAID adapters to take full advantage of PCIe Gen3 bandwidth, providing unmatched performance for a broad range of enterprise and cloud computing applications. With 16 direct-connected solid state drives (SSDs), Series 7 adapters can deliver up to 450,000 input/output operations per second (IOPS) on a 4K random read block size, equivalent to nearly 10x the performance of previous-generation RAID adapters.

• Building on its optical leadership, PMC delivered the industry's first tri-speed converged carrier Ethernet/OTN framer. PMC's PM5442 META 120G enables OEMs to substantially reduce total development costs by addressing high-speed line-card needs with a single silicon platform. As interconnect speeds increase, OTN is emerging as the de-facto protocol enabling seamless and scalable convergence of IP infrastructure and the optical transport domain. OTN provides the operations, administration and maintenance (OAM) functionality necessary for a DWDM transport infrastructure, and service providers see value in extending the OTN OAM out to the router interface. Additionally, OTN supports forward error correction (FEC) for reach extension, significantly increasing the number of links over which 100G can be deployed.

Third Quarter 2012 Conference Call

Management will review the third quarter 2012 results and share its outlook for the fourth quarter of 2012 during a conference call at 1:30 pm Pacific Time/4:30 pm Eastern Time on October 29, 2012. 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 (888) 771-4371 (US Toll Free) or 1 (847) 585-4405 (International) with passcode 33368644, 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 (888) 843-7419 using the access code 33368644#. A replay of the webcast will be available for 10 business days.

Safe Harbor Statement

This release contains forward-looking statements that involve risks and uncertainties. The Company's SEC filings 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 (NAS: PMCS) is the semiconductor 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 Twitter, LinkedIn and RSS.

© Copyright PMC-Sierra, Inc. 2012. All rights reserved. PMC and PMC-SIERRA are registered trademarks of PMC-Sierra, Inc. in the United States and other countries. PMCS and Adaptec by PMC are trademarks 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.

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.