-----------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 8 - K/A1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
May 20, 1998
PMC-Sierra, Inc.
(Exact name of registrant as specified in its charter)
- ---------------------- ---------------------- -------------------------------
Delaware 0-19084 94-2925073
- ---------------------- ---------------------- -------------------------------
State of incorporation Commission File Number IRS Employer Identification No.
- ---------------------- ---------------------- -------------------------------
105-8555 BAXTER PLACE
BURNABY, BRITISH COLUMBIA, V5A 4V7, CANADA
(address of principal executive offices)
Company's telephone number, including area code: (604) 415-6000
-----------------------------------------------
<PAGE>
This current report on Form 8-K/A1 amends the current report on Form 8-K filed
by PMC-Sierra, Inc. ("PMC") on June 3, 1998 solely to add the financial
statements of the business acquired required by Item 7(a) for the period ended
March 31, 1998 and the pro forma financial information required by Item 7(b).
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired
Pursuant to paragraph (a)(4) of Item 7 of Form 8-K, the following
financial statements were omitted from disclosure in the Registrant's
Current Report on Form 8-K filed on June 3, 1998 but are filed
herewith:
Unaudited balance sheet of Integrated Telecom Technology, Inc. ("IGT")
as of March 31, 1998 and the unaudited statements of operations, and
cash flows for the three months ended March 31, 1998 and 1997.
(b) Pro Forma Financial Information
Pursuant to paragraph (b)(2) of Item 7, the unaudited pro forma
combined balance sheet of the Registrant and IGT as of March 31, 1998
and the unaudited pro forma combined statements of operations for the
three months ended March 31, 1998 and for the year ended December 31,
1997 are attached. The unaudited pro forma combined financial
statements give effect to the merger of the Registrant's subsidiary and
IGT on a purchase accounting basis. The pro forma combined balance
sheet assumes the merger took place on March 31, 1998 and combines the
March 31, 1998 balance sheet of the Registrant with the March 31, 1998
balance sheet of IGT. The pro forma combined statement of operations
for the fiscal year ended December 31, 1997 assumes the merger took
place as of the beginning of the fiscal year and combines the
historical operating results of the Registrant and IGT for the fiscal
year ended December 31, 1997 with pro forma adjustments. The pro forma
combined statement of operations for the three months ended March 31,
1998 assumes the merger took place as of the beginning of the most
recently completed fiscal year and combines the Registrant's historical
operating results for the three months ended March 31, 1998 and IGT for
the three months ended March 31, 1998 with pro forma adjustments.
The pro forma information is presented for illustrative purposes only
and is not necessarily indicative of the operating results or financial
position that would have occurred had the acquisition of IGT by the
Registrant been consummated at the beginning of the periods presented,
nor is it necessarily indicative of future operating results or
financial position. These pro forma financial statements are based on
and should be read with the historical combined financial statements
and the related notes thereto of the Registrant and IGT.
<PAGE>
INTEGRATED TELECOM TECHNOLOGY, INC.
BALANCE SHEET - UNAUDITED
(in thousands)
Mar 31,
1998
ASSETS:
Current assets:
Cash and cash equivalents $ 1,095
Accounts receivable, net 1,814
Inventories, finished goods 579
Prepaid expenses and other current assets 175
-------------
Total current assets 3,663
Property and equipment, net 2,003
Other assets 610
-------------
$ 6,276
=============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Short-term debt $ 7,650
Accounts payable 850
Accrued liabilities 1,042
Current portion of obligations under capital leases 726
-------------
Total current liabilities 10,268
Noncurrent obligations under capital leases 722
-------------
10,990
-------------
Stockholders' equity:
Common stock 4
Preferred stock 9,974
Additional paid in capital 1,363
Accumulated deficit (16,055)
-------------
Total stockholders' equity (4,714)
-------------
$ 6,276
=============
See note to condensed financial statements.
<PAGE>
INTEGRATED TELECOM TECHNOLOGY, INC.
STATEMENTS OF OPERATIONS - UNAUDITED
(in thousands)
Three Months Ended
-----------------------------
Mar 31, Mar 31,
1998 1997
Net revenues $ 3,104 $ 3,136
Cost of revenues 1,006 978
------------- -------------
Gross profit 2,098 2,158
Other costs and expenses:
Research and development 1,593 1,770
Marketing, general and administrative 963 710
------------- -------------
Loss from operations (458) (322)
Interest expense (190) (59)
------------- -------------
Net loss $ (648) $ (381)
============= =============
See note to condensed financial statements.
<PAGE>
<TABLE>
INTEGRATED TELECOM TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS - UNAUDITED
(in thousands)
<CAPTION>
Three Months Ended
----------------------------
Mar 31, Mar 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (648) $ (381)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 364 284
Gain on sale of equipment (11) -
Changes in assets and liabilities
Accounts receivable 921 397
Inventories (275) 179
Prepaid expenses and other 56 (71)
Accounts payable and accrued expenses (38) 430
Contracts in progress - (595)
------------- -------------
Net cash provided by operating activities 369 243
------------- -------------
Cash flows from investing activities:
Purchases of plant and equipment (31) (207)
------------- -------------
Net cash used in investing activities (31) (207)
------------- -------------
Cash flows from financing activities:
Proceeds from issuance of note payable 2,000 -
Repayment of short-term debt (2,000) -
Financing Fees - (24)
Principal payments under capital lease obligations (188) (92)
Proceeds from issuance of options 28 -
------------- -------------
Net cash used in investing activities (160) (116)
------------- -------------
Net increase (decrease) in cash and cash equivalents 178 (80)
Cash and cash equivalents, beginning of the period 917 804
------------- -------------
Cash and cash equivalents, end of the period $ 1,095 $ 724
============= =============
See note to condensed financial statements.
</TABLE>
<PAGE>
INTEGRATED TELECOM TECHNOLOGY, INC.
NOTE TO CONDENSED FINANCIAL STATEMENTS
1. The accompanying financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC").
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to those
rules or regulations. The interim financial statements are unaudited, but
reflect all adjustments which are, in the opinion of management, necessary
to present a fair statement of results for the interim periods presented.
These financial statements should be read in conjunction with the financial
statements and the notes thereto in IGT's financial statements for the year
ended December 31, 1997.
<PAGE>
<TABLE>
PMC-Sierra, Inc.
PRO FORMA COMBINED BALANCE SHEET - UNAUDITED
March 31, 1998
(in thousands)
<CAPTION>
Pro Forma
PMC IGT Pro Forma Adjustments Combined
----------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 77,149 $ 1,095 $ (26,777) (a) $ 51,467
Short-term investments 2,982 - - 2,982
Accounts receivable, net 17,602 1,814 - 19,416
Inventories 4,258 579 - 4,837
Prepaid expenses and other current assets 1,717 175 - 1,892
------------- ------------- -------------- -------------
Total current assets 103,708 3,663 (26,777) 80,594
Property and equipment, net 20,377 2,003 (220) (d) 22,160
Goodwill and other intangible assets, net 8,174 - 5,341 (b), (c), (d) 13,515
Investments and other assets 4,424 610 - 5,034
Deposits for wafer fabrication capacity 23,120 - - 23,120
------------- ------------- -------------- -------------
$ 159,803 $ 6,276 $ (21,656) $ 144,423
============= ============= ============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Short-term debt $ - $ 7,650 (7,650) (a) $ -
Accounts payable 6,251 850 - 7,101
Accrued liabilities 16,702 1,042 2,295 (b), (d) 20,039
Accrued income taxes 6,935 - - 6,935
Current portion of obligations under
capital leases and long-term debt 4,515 726 (32) (d) 5,209
Net liabilities of discontinued operations 249 - - 249
------------- ------------- -------------- -------------
Total current liabilities 34,652 10,268 (5,387) 39,533
Deferred income taxes 3,992 - - 3,992
Noncurrent obligations under capital leases
and long-term debt 8,104 722 221 (d) 9,047
Special shares convertible into PMC common stock 9,503 - - 9,503
Shareholders' equity:
Common stock, par value $0.001 30 4 (4) (e) 30
Preferred stock - 9,974 (9,974) (e) -
Additional paid in capital 146,491 1,363 26,860 (a), (e) 174,714
Accumulated deficit (42,969) (16,055) (33,372) (e), (f) (92,396)
------------- ------------- -------------- -------------
Total shareholders' equity 103,552 (4,714) (16,490) 82,348
------------- ------------- -------------- -------------
$ 159,803 $ 6,276 $ (21,656) $ 144,423
============= ============= ============== =============
See notes to unaudited pro forma combined financial statements.
</TABLE>
<PAGE>
<TABLE>
PMC-Sierra, Inc.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS - UNAUDITED
Year Ended December 31, 1997
(in thousands, except for per share amounts)
<CAPTION>
Pro Forma
PMC IGT Pro Forma Adjustments Combined
---------------------------
<S> <C> <C> <C> <C>
Net revenues $ 127,166 $ 12,603 $ - $ 139,769
Cost of revenues 33,065 4,634 688 (a) 38,387
------------ ------------ -------------- --------------
Gross profit 94,101 7,969 (688) 101,382
Other costs and expenses:
Research and development 22,880 7,378 351 (a) 30,609
Marketing, general and administrative 23,663 3,567 121 (a) 27,351
Restructure and other costs (1,383) - - (1,383)
------------ ------------ -------------- --------------
Income (loss) from operations 48,941 (2,976) (1,160) 44,805
Interest income (expense), net 1,044 (408) (1,162) (b) (526)
------------ ------------ -------------- --------------
Income (loss) before provision for income taxes 49,985 (3,384) (2,322) 44,279
Provision for income taxes 15,727 - (366) (c) 15,361
------------ ------------ -------------- --------------
Net income (loss) $ 34,258 $ (3,384) $ (1,956) $ 28,918
============ ============ ============== ==============
Basic net income per share: $ 1.10 $ 0.92
Diluted net income per share: $ 1.05 $ 0.87
Shares used to calculate:
Basic net income per share 31,043 31,458
Diluted net income per share 32,642 33,244
See notes to unaudited pro forma combined financial statements.
</TABLE>
<PAGE>
<TABLE>
PMC-Sierra, Inc.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS - UNAUDITED
Three Months Ended March 31, 1998
(in thousands, except for per share amounts)
<CAPTION>
Pro Forma
PMC IGT Pro Forma Adjustments Combined
------------------------
<S> <C> <C> <C> <C>
Net revenues $ 34,295 $ 3,104 $ - $ 37,399
Cost of revenues 8,135 1,006 172 (a) 9,313
------------ ------------ ------------ -------------
Gross profit 26,160 2,098 (172) 28,086
Other costs and expenses:
Research and development 6,016 1,593 88 (a) 7,697
Marketing, general and administrative 6,122 963 30 (a) 7,115
------------ ------------ ------------ -------------
Income (loss) from operations 14,022 (458) (290) 13,274
Interest income (expense), net 824 (190) (227) (b) 407
------------ ------------ ------------ -------------
Income (loss) before provision for income taxes 14,846 (648) (517) 13,681
Provision for income taxes 5,197 - (79) (c) 5,118
------------ ------------ ------------ -------------
Net income (loss) $ 9,649 $ (648) $ (438) $ 8,563
============ ============ ============ =============
Basic net income per share: $ 0.31 $ 0.27
Diluted net income per share: $ 0.29 $ 0.25
Shares used to calculate:
Basic net income per share 31,524 31,939
Diluted net income per share 33,701 34,312
See notes to unaudited pro forma combined financial statements.
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. Basis of Presentation
On May 20, 1998, the Registrant acquired IGT in exchange for total consideration
of $55.0 million consisting of cash paid to IGT stockholders of $17.8 million,
cash paid to IGT creditors of $9.0 million and the issuance of 415,000 shares of
common stock and options to purchase 214,000 shares of common stock. IGT is a
fabless semiconductor company headquartered in Gaithersburg, MD with a
development site in San Jose, CA. IGT makes Asynchronous Transfer Mode (ATM)
switching chipsets for wide area network applications as well as ATM
Segmentation-and-Reassembly and other telecommunication chips.
In connection with the acquisition, intangible assets of $54.8 million were
acquired by the Registrant of which $49.4 million was allocated to in-process
research and development. The related technology has not reached technological
feasibility and the technology has no alternative future use. In accordance with
generally accepted accounting principles, the acquired in-process research and
development will be charged to expense by the Registrant in its second quarter
ended June 30, 1998. The remaining $5.3 million of intangible assets will be
amortized over their estimated useful lives, ranging from three to seven years.
The pro forma combined statements of operations for the fiscal year ended
December 31, 1997 and for the three months ended March 31, 1998 exclude the
impact of the nonrecurring charge associated with expensing in-process research
and development.
The unaudited pro forma combined financial statements give effect to the merger
of the Registrant and IGT on a purchase accounting basis. The pro forma combined
balance sheet assumes the merger took place on March 31, 1998 and combines the
March 31, 1998 balance sheets of the Registrant and IGT. The pro forma combined
statement of operations for the fiscal year ended December 31, 1997 assumes the
merger took place as of the beginning of the fiscal year and combines the
historical results of the Registrant and IGT for the fiscal year ended December
31, 1997 with pro forma adjustments. The pro forma combined statement of
operations for the three months ended March 31, 1998 assumes the merger took
place as of the beginning of the most recently completed fiscal year and
combines the historical results of the Registrant and IGT for the three months
ended March 31, 1998 with pro forma adjustments.
The pro forma combined financial statements included herein have been prepared
by the Registrant, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. However,
the Registrant believes that the disclosures are adequate to make the
information not misleading. These pro forma combined financial statements should
be read in conjunction with the financial statements and the notes thereto
included in the Registrant's annual report on Form 10-K for the fiscal year
ended December 31, 1997 and the financial statements of IGT included in the
Registrant's Current Report on Form 8-K filed on June 3, 1998.
<PAGE>
2. Pro Forma Adjustments
The pro forma combined balance sheet reflects the following adjustments:
a) Entry to record the acquisition of IGT by the payment of cash to
IGT stockholders and cash to IGT creditors and the issuance of
415,000 shares of common stock and options to purchase 214,000
shares of common stock;
b) Entry to record acquisition related expenses of $850,000;
c) Entry to record intangibles including goodwill, existing product
technologies and assembled work force;
d) Entry to record other purchase price adjustments to reflect
certain IGT balances at fair values;
e) Entry to eliminate the preferred stock, common stock, additional
paid-in capital and accumulated deficit of IGT and
f) Entry to expense in-process research and development of IGT.
The pro forma combined statements of operations reflect the following adjustment
with respect to the acquisition:
a) Entry to record amortization of purchased intangibles other than
in-process research and development over estimated useful lives,
ranging from three to seven years;
b) Entry to record elimination of interest expense paid on IGT's
lines of credit as if they were repaid at the beginning of the
year and reduction of interest income of the Registrant as a
result of utilizing cash and cash equivalents for the IGT
acquisition and
c) Entry to record related tax effect of adjustment b).
3. Earnings Per Share
Basic net income per share for each period is calculated by dividing pro forma
net income by the shares used to calculate basic net income per share in the
historical period plus the effect of the 415,000 shares of the Registrant's
Common Stock which, together with cash payments, were exchanged for all issued
and outstanding shares of IGT common and preferred stock. Diluted net income per
share also includes the effect of the options to purchase 214,000 shares of the
Registrant's Common Stock which were exchanged for options to purchase IGT
common stock.
4. Merger Related Expenses
The Registrant estimates that it will incur merger-related expenses, consisting
primarily of transaction costs for lawyers, accountants, financial advisory
services, and other related charges, of approximately $850,000 before income
taxes. This estimate is preliminary and subject to change.
These non-recurring expenses are reflected in the purchase price in the pro
forma financial statements.
<PAGE>
SIGNATURES
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 thereunto duly authorized.
PMC-SIERRA, INC.
(Registrant)
Date: June 19, 1998 /S/ JOHN W. SULLIVAN
------------- -------------------
John W. Sullivan
Vice President, Finance
Chief Financial Officer
(Principal Accounting Officer)
