PMC-Sierra Reports First Quarter 2009 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, selling, general and administrative expense, amortization of purchased intangible assets, restructuring costs and other charges, other income, provision for income taxes, operating expenses, operating income (loss), 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, Restructuring Costs and Other Charges, Other Income, Provision for Income Taxes, Operating Expenses, Operating Income (Loss), Net Income (Loss), and Basic and Diluted Net Income (Loss) Per Share
(in thousands, except for per share amounts)
(unaudited)
Three Months Ended
March 29, March 30,

2009 (1)

 

2008 (2)

 

  Restated
 
GAAP cost of revenues $ 36,803 $ 43,306
Stock-based compensation   (205 )   (315 )
Non-GAAP cost of revenues $ 36,598   $ 42,991  
 
GAAP gross profit $ 65,769 $ 81,734
Stock-based compensation   205     315  
Non-GAAP gross profit $ 65,974   $ 82,049  
 
Non-GAAP gross profit % 64.3 % 65.6 %
 
GAAP research and development expense $ 38,628 $ 37,310
Stock-based compensation (2,331 ) (3,162 )
Exclusion of termination costs   (1,168 )   -  
Non-GAAP research and development expense $ 35,129   $ 34,148  
 
GAAP selling, general and administrative expense $ 21,889 $ 24,209
Stock-based compensation (2,925 ) (3,529 )
Exclusion of termination costs   (771 )   -  
Non-GAAP selling, general and administrative expense $ 18,193   $ 20,680  
 
GAAP amortization of purchased intangible assets $ 9,836 $ 9,836
Exclusion of amortization of purchased intangible assets   (9,836 )   (9,836 )
Non-GAAP amortization of purchased intangible assets $ -   $ -  
 
GAAP restructuring costs and other charges $ 335 $ 887
Exclusion of restructuring costs and other charges   (335 )   (887 )
Non-GAAP restructuring costs and other charges $ -   $ -  
 
GAAP other income $ 2,671 $ 8,271
Loss on subleased facilities 538 -
Accretion of the debt discount related to the senior convertible notes 728 1,907
Gain on repurchase of senior convertible notes, net - (4,931 )
Foreign exchange gain on foreign tax liabilities   (3,576 )   (3,605 )
Non-GAAP other income $ 361   $ 1,642  
 
GAAP provision for income taxes $ 1,669 $ 38,686
Provision for income tax matters   (1,030 )   (33,408 )
Non-GAAP provision for income taxes $ 639   $ 5,278  
 
 
Three Months Ended
March 29, March 30,

2009 (1)

 

2008 (2)

 

  Restated
 
GAAP operating expenses $ 70,688 $ 72,242
Stock-based compensation (5,256 ) (6,691 )
Exclusion of termination costs (1,939 ) -
Exclusion of amortization of purchased intangible assets (9,836 ) (9,836 )
Exclusion of restructuring costs and other charges   (335 )   (887 )
Non-GAAP operating expenses $ 53,322   $ 54,828  
 
GAAP operating income (loss) $ (4,919 ) $ 9,492
Stock-based compensation 5,461 7,006
Exclusion of termination costs 1,939 -
Exclusion of amortization of purchased intangible assets 9,836 9,836
Exclusion of restructuring costs and other charges   335     887  
Non-GAAP operating income $ 12,652   $ 27,221  
 
GAAP net loss $ (3,917 ) $ (20,923 )
Stock-based compensation 5,461 7,006
Exclusion of termination costs 1,939 -
Exclusion of amortization of purchased intangible assets 9,836 9,836
Exclusion of restructuring costs and other charges 335 887
Loss on subleased facilities 538 -
Accretion of the debt discount related to the senior convertible notes 728 1,907
Gain on repurchase of senior convertible notes, net - (4,931 )
Foreign exchange gain on foreign tax liabilities (3,576 ) (3,605 )
Provision for income tax matters   1,030     33,408  
Non-GAAP net income $ 12,374   $ 23,585  
 
Non-GAAP net income per share - basic $ 0.06 $ 0.11
Non-GAAP net income per share - diluted $ 0.06 $ 0.11
 
Shares used to calculate non-GAAP net income per share - basic 223,844 219,931
Shares used to calculate non-GAAP net income per share - diluted 224,771 220,948
 

Non-GAAP adjustments

 

 

(1) $5.5 million stock-based compensation expense; $1.9 million termination costs; $9.8 million amortization of purchased intangible assets; $0.3 million restructuring costs; $0.5 million loss on subleased facilities; $0.7 million of non-cash interest expense for the accretion of the debt discount related to the senior convertible notes; $3.6 million foreign exchange gain on a foreign tax liability; and $1.0 million income tax provision which includes $0.9 million net deferred tax recovery relating to foreign exchange translation of a foreign subsidiary, $0.4 million arrears interest relating to unrecognized tax benefits, $0.7 million tax adjustments relating to prior periods, $0.3 million income tax related to foreign exchange gain on a foreign tax liability, $1.0 million tax effect on inter-company transactions, and $0.5 million income tax recovery related to adjustments above.

 

(2) $7.0 million stock-based compensation expense; $9.8 million amortization of purchased intangible assets; $0.9 million restructuring costs, including $0.3 million for severance and $0.6 million for excess facilities; $1.9 million of non-cash interest expense for the accretion of the debt discount related to the senior convertible notes; $4.9 million net gain on the repurchase of senior convertible notes; $3.6 million foreign exchange gain on a foreign tax liability; and $33.4 million income tax provision, including $32.6 million foreign tax matters provision and $0.8 million income tax effect of these non-GAAP adjustments.


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