PMC Reports Second Quarter 2015 Results

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, net, selling, general and administrative expense, amortization of purchased intangible assets, other income (expense), benefit from (provision for) income taxes, operating expenses, operating (loss) income, operating margin, net (loss) income, and net income per share - basic and diluted.

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, net,
Selling, General and Administrative Expense, Amortization of Purchased Intangible Assets
Other Income (Expense), Benefit from (Provision for) Income Taxes, Operating Expenses, Operating (Loss) Income,
Net (Loss) Income, and Net (Loss) Income Per Share - Basic and Diluted
(in thousands, except for per share amounts)
(unaudited)
 
Three Months Ended Six Months Ended
June 27, March 28, June 28, June 27, June 28,
  2015     2015     2014     2015     2014  
 
 
GAAP cost of revenues $ 38,434 $ 39,980 $ 36,824 $ 78,414 $ 74,388
Stock-based compensation (266 ) (271 ) $ (214 ) (537 ) (455 )
Termination (costs) recoveries   (1,215 )   -   $ -     (1,215 )   9  
Non-GAAP cost of revenues $ 36,953   $ 39,709   $ 36,610   $ 76,662   $ 73,942  
 
GAAP gross profit $ 86,333 $ 93,091 $ 89,998 $ 179,424 $ 178,902
Stock-based compensation 266 271 214 537 455
Termination costs (recoveries)   1,215     -     -     1,215     (9 )
Non-GAAP gross profit $ 87,814   $ 93,362   $ 90,212   $ 181,176   $ 179,348  
 
Non-GAAP gross profit % 70.4 % 70.2 % 71.1 % 70.3 % 70.8 %
 
GAAP research and development expense, net $ 55,833 $ 48,866 $ 49,388 $ 104,699 $ 99,536
Stock-based compensation (2,400 ) (2,844 ) (1,903 ) (5,244 ) (4,550 )
Acquisition-related costs (162 ) (106 ) (794 ) (268 ) (1,594 )
Termination (costs) recoveries (7,944 ) 38 (342 ) (7,906 ) (284 )
Asset impairments   (252 )   -     -     (252 )   -  
Non-GAAP research and development expense, net $ 45,075   $ 45,954   $ 46,349   $ 91,029   $ 93,108  
 
GAAP selling, general and administrative expense $ 30,488 $ 30,051 $ 28,991 $ 60,539 $ 58,331
Stock-based compensation (3,445 ) (3,578 ) (2,798 ) (7,023 ) (6,101 )
Acquisition-related costs (34 ) (171 ) (3 ) (205 ) (64 )
Lease exit recoveries (costs) 488 11 (4 ) 499 (146 )
Termination costs (3,867 ) (507 ) (1,295 ) (4,374 ) (1,298 )
Asset impairments - - - - (477 )
Other expenses   -     -     -     -     (58 )
Non-GAAP selling, general and administrative expense $ 23,630   $ 25,806   $ 24,891   $ 49,436   $ 50,187  
 
GAAP amortization of purchased intangible assets $ 9,269 $ 9,317 $ 9,948 $ 18,586 $ 22,277
Amortization of purchased intangible assets   (9,269 )   (9,317 )   (9,948 )   (18,586 )   (22,277 )
Non-GAAP amortization of purchased intangible assets $ -   $ -   $ -   $ -   $ -  
 
GAAP other income $ (837 ) $ 2,529 $ (680 ) $ 1,692 $ (161 )
Foreign exchange loss (gain) on foreign tax liabilities 487 (2,179 ) 976 (1,692 ) 97
Accretion of discount on short-term and long-term obligations   180     210     -     390     -  
Non-GAAP other income (expense) $ (170 ) $ 560   $ 296   $ 390   $ (64 )
 
GAAP benefit from (provision for) income taxes $ 1,515 $ (2,731 ) $ (4,471 ) $ (1,216 ) $ (6,318 )
Benefit from (provision for) income taxes   (2,467 )   1,516     3,550     (951 )   4,661  
Non-GAAP provision for income taxes $ (952 ) $ (1,215 ) $ (921 ) $ (2,167 ) $ (1,657 )
 
GAAP operating expenses $ 95,590 $ 88,234 $ 88,327 $ 183,824 $ 180,144
Stock-based compensation (5,845 ) (6,422 ) (4,701 ) (12,267 ) (10,651 )
Acquisition-related costs (196 ) (277 ) (797 ) (473 ) (1,658 )
Asset impairments (252 ) - - (252 ) (477 )
Lease exit recoveries (costs) 488 11 (4 ) 499 (146 )
Termination costs (11,811 ) (469 ) (1,637 ) (12,280 ) (1,582 )
Amortization of purchased intangible assets (9,269 ) (9,317 ) (9,948 ) (18,586 ) (22,277 )
Other expenses   -     -     -     -     (58 )
Non-GAAP operating expenses $ 68,705   $ 71,760   $ 71,240   $ 140,465   $ 143,295  
 
June 27, March 28, June 28, June 27, June 28,
    2015     2015     2014     2015     2014  
 
GAAP operating (loss) income $ (9,257 ) $ 4,857 $ 1,671 $ (4,400 ) $ (1,242 )
Stock-based compensation 6,111 6,693 4,915 12,804 11,106
Acquisition-related costs 196 277 797 473 1,658
Asset impairments 252 - - 252 477
Lease exit (recoveries) costs (488 ) (11 ) 4 (499 ) 146
Termination costs 13,026 469 1,637 13,495 1,573
Amortization of purchased intangible assets 9,269 9,317 9,948 18,586 22,277
Other expenses   -     -     -     -     58  
Non-GAAP operating income $ 19,109   $ 21,602   $ 18,972   $ 40,711   $ 36,053  
 
Non-GAAP operating margin 15.3 % 16.2 % 15.0 % 15.8 % 14.2 %
 
GAAP net (loss) income $ (8,579 ) $ 4,655 $ (3,480 ) $ (3,924 ) $ (7,721 )
Stock-based compensation 6,111 6,693 4,915 12,804 11,106
Acquisition-related costs 196 277 797 473 1,658
Termination costs 13,026 469 1,637 13,495 1,573
Asset impairments 252 - - 252 477
Lease exit (recoveries) costs (488 ) (11 ) 4 (499 ) 146
Amortization of purchased intangible assets 9,269 9,317 9,948 18,586 22,277
Other expenses - - - - 58
Foreign exchange loss (gain) on foreign tax liabilities 487 (2,179 ) 976 (1,692 ) 97
Accretion of discount on short-term and long-term obligations 180 210 - 390 -
(Provision for) benefit from income taxes   (2,467 )   1,516     3,550     (951 )   4,661  
Non-GAAP net income $ 17,987   $ 20,947   $ 18,347   $ 38,934   $ 34,332  
 
Non-GAAP net income per share - basic $ 0.09 $ 0.10 $ 0.09 $ 0.20 $ 0.18
Non-GAAP net income per share - diluted $ 0.09 $ 0.10 $ 0.09 $ 0.19 $ 0.17
 
Shares used to calculate non-GAAP net income per share - basic 195,732 200,249 196,114 197,991 195,651
Shares used to calculate non-GAAP net income per share - diluted 200,501 205,688 199,594 203,095 198,950
 

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