----------------------------------------------
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)
September 28, 2000
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.
900 East Hamilton Avenue
Suite 250
Campbell, CA 95008
(address of principal executive offices)
Company's telephone number, including area code: (408) 626-2000
-----------------------------------------------
<PAGE>
Item 2. Acquisition or Disposition of Assets
On July 21, 2000, PMC-Sierra, Inc. completed the acquisition of Datum
Telegraphic, Inc. in accordance with the Acquisition Agreement (the "Merger
Agreement") dated June 26, 2000 between PMC and Datum.
Datum is a privately held wireless semiconductor company located in Vancouver,
Canada. Datum makes digital signal processors that allow traffic for all major
digital wireless standards to be transmitted using a single digitally controlled
power amplifier architecture.
PMC purchased the 92% interest of Datum that PMC did not already own for
approximately 591,000 shares of PMC common stock and options to purchase PMC
common stock and $17,000,000 cash in lieu of PMC common stock.
PMC will account for the merger as a purchase. PMC expects to record a one-time
charge to earnings during the third quarter of fiscal 2000 due to the
acquisition of technology that has not reached technological feasibility and
that has no alternative future use. The amount of the charge has not yet been
determined.
Item 7. Financial Statements and Exhibits.
On August 28, 2000, PMC-Sierra, Inc. filed a Current Report on Form 8-K to
report the completion of its acquisition of Datum Telegraphic, Inc. This
Amendment is filed to add the financial statements of the business acquired and
pro-forma information as required by Item 7.
(a) Financial Statements of Businesses Acquired
Financial statements of Datum included in this Amendment are as
follows:
- Audited financial statements of Datum as of and for the year ended
August 31, 1999;
- Unaudited financial statements of Datum as of and for the nine months
ended May 31, 2000.
(b) Pro Forma Financial Information
The following unaudited pro forma condensed consolidated financial
information is being filed herewith: Unaudited Pro Forma Combined
Condensed Balance Sheet at June 25, 2000, Unaudited Pro Forma Combined
Condensed Statement of Operations for the year ended December 26, 1999
and six months ended June 25, 2000 and Notes to Unaudited Pro Forma
Combined Condensed Financial Statements.
The unaudited pro forma combined financial statements give effect to the merger
of PMC, Datum and Malleable Technologies, Inc. on a purchase accounting basis.
The pro forma condensed combined balance sheet assumes the merger took place on
June 25, 2000 and combines the June 25, 2000 balance sheet of PMC with the June
30, 2000 balance sheet of Malleable and the May 31, 2000 balance sheet of Datum.
The pro forma condensed combined statement of operations for the year ended
December 31, 1999 assumes the merger took place on January 1, 1999. It combines
the historical results with pro forma adjustments of PMC for the fiscal year
ended December 26, 1999 with the fiscal year ended December 31, 1999 for
Malleable and the twelve months ended November 30, 1999 for Datum. The pro forma
combined statement of operations for the six months ended June 25, 2000 assumes
the merger took place as of January 1, 1999. It combines the historical results
of PMC and Malleable for the six months ended June 25, 2000 and Datum for the
six months ended May 31, 2000.
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 acquisitions of Datum and Malleable by PMC 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 PMC, Datum and
Malleable.
<PAGE>
Auditors' Report and Financial Statements of
DATUM TELEGRAPHIC INC.
Nine Months Ended May 31, 2000, Nine Months Ended May 31, 1999
and Year Ended August 31, 1999
<PAGE>
Auditors' Report
To the Board of Directors and Stockholders of
Datum Telegraphic Inc.
We have audited the balance sheet of Datum Telegraphic Inc. as at August 31,
1999 and the statements of operations, stockholders' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's' management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, these combined statements present fairly, in all material
respects, the financial position of the Company as at August 31, 1999 and the
results of its operations and its cash flows for the year then ended in
accordance with generally accepted accounting principles in the United States.
/s/Deloitte & Touche LLP
Chartered Accountants
Vancouver, British Columbia
July 19, 2000
<PAGE>
DATUM TELEGRAPHIC INC.
Balance Sheet
(Expressed in United States Dollars)
--------------------------------------------------------------------------------
May 31, August 31,
2000 1999
------------ -------------
(Unaudited)
ASSETS
CURRENT
Cash and cash equivalents $ 385,247 $ 221,313
Short-term investments 2,542,873 890,003
Accounts receivable 377,697 195,774
Income tax receivable 477,113 529,983
------------ ------------
3,782,930 1,837,073
PROPERTY AND EQUIPMENT, NET 638,566 723,622
------------ ------------
$ 4,421,496 $ 2,560,695
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 145,293 $ 539,534
Due to stockholders (Note 2) 220,763 221,355
------------ ------------
366,056 760,889
DEFERRED INCOME TAXES 225,365 427,082
------------ ------------
$ 591,421 $ 1,187,971
------------ ------------
STOCKHOLDER'S EQUITY
Common stock - Class A
2,200,000 shares authorized
(10,000,000 shares in 1999)
2,200,000 shares issued and outstanding 147 147
Common stock - Class B
10,000,000 shares authorized
2,295,250 shares issued and 3,018,972 1,633,794
outstanding (2,225,750 in 1999)
Common stock - Class C
5,000,000 shares authorized
(10,000,000 shares in 1999)
1,900,000 shares issued and outstanding 355,108 355,108
Common stock - Class D
5,000,000 shares authorized (0 shares in 1999)
370,017 shares issued and outstanding (0 in 1999) 2,500,000 -
Deferred stock compensation (1,158,867) (345,087)
Accumulated deficit (885,285) (271,238)
------------ ------------
3,830,075 1,372,724
------------ ------------
$ 4,421,496 $ 2,560,695
------------ ------------
See Accompanying Notes to these Financial Statements
<PAGE>
DATUM TELEGRAPHIC INC.
Statement of Operations
(Expressed in United States Dollars)
--------------------------------------------------------------------------------
Nine Nine
months ended months ended Year ended
May 31, May 31, August 31,
2000 1999 1999
------------- ------------- ------------
(Unaudited) (Unaudited)
Net revenues $ 1,110,136 $ 1,459,779 $ 1,805,646
------------ ------------ ------------
Costs and expenses
Salaries and benefits
(including $559,344 - May 31,
2000; $382,776 - May 31, 1999
and $1,085,452 - August 31, 2000
of stock-based compensation) 1,658,095 1,057,749 1,563,662
Depreciation 273,632 120,598 168,814
General and administration 500,353 261,622 404,874
------------- ------------ -----------
Total costs and expenses 2,432,080 1,439,969 2,137,350
------------- ------------ -----------
(Loss) income from operations (1,321,944) 19,810 (331,704)
Interest and other income, net 48,694 19,545 (20,078)
------------- ------------ -----------
(Loss) income before recovery
of income taxes (1,273,250) 39,355 (351,782)
Recovery of income taxes (664,645) (37,828) (251,761)
------------- ------------- -----------
NET (LOSS) INCOME $ (608,605) $ 77,183 $ (100,021)
------------- ------------- -----------
See Accompanying Notes to these Financial Statements
<PAGE>
<TABLE>
<CAPTION>
DATUM TELEGRAPHIC INC.
Statements of Stockholders' Equity
(Expressed in United States Dollars)
------------------------------------------------------------------------------------------------------------------------------------
Class A Class B Class C Class D
------------------ -------------------------- -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares Amount Shares Amount Shares Amount Shares Amount
---------- -------- ----------- ------------- ------------ ------------- ------------ --------------
Balance at August 31, 1998 2,200,000 $ 147 2,200,000 $ 1,561,889 1,800,000 $ 289,961 - $ -
Issuance of common stock
from treasury - - 25,750 4,297 100,000 65,147 - -
Deferred stock compensation - - - 67,608 - - - -
Amortization of deferred
stock compensation - - - - - - - -
Net income - - - - - - - -
-----------------------------------------------------------------------------------------------------------------------------------
Balance at May 31, 1999 2,200,000 147 2,225,750 1,633,794 1,900,000 355,108 - -
Amortization of deferred
stock compensation - - - - - - - -
Net loss - - - - - - - -
-----------------------------------------------------------------------------------------------------------------------------------
Balance at August 31, 1999 2,200,000 147 2,225,750 1,633,794 1,900,000 355,108 - -
Issuance of common stock
from treasury - - 69,500 12,054 - - 370,017 2,500,000
Deferred stock compensation - - - 1,373,124 - - - -
Amortization of deferred
stock compensation - - - - - - - -
Dividends paid - - - - - - - -
Net loss - - - - - - - -
-----------------------------------------------------------------------------------------------------------------------------------
Balance at May 31, 2000 2,200,000 $ 147 2,295,250 $ 3,018,972 1,900,000 $ 355,108 370,017 $ 2,500,000
-----------------------------------------------------------------------------------------------------------------------------------
<FN>
See Accompanying Notes to these Financial Statements
</FN>
</TABLE>
DATUM TELEGRAPHIC INC.
Statements of Stockholders' Equity
(Expressed in United States Dollars)
--------------------------------------------------------------------------------
Deferred Retained Total
Stock Earnings Stockholders'
Compensation (Deficit) Equity
-------------- ------------ --------------
Balance at August 31, 1998 $ (755,689) $ (171,217) $ 925,091
Issuance of common stock
from treasury - - 69,444
Deferred stock compensation (67,608) - -
Amortization of deferred -
stock compensation 382,776 - 382,776
Net income - 77,183 77,183
------------- ----------- -----------
Balance at May 31, 1999 (440,521) (94,034) 1,454,494
Amortization of deferred
stock compensation 95,434 - 95,434
Net loss - (177,204) (177,204)
------------- ----------- -----------
Balance at August 31, 1999 (345,087) (271,238) 1,372,724
Issuance of common stock
from treasury - - 2,512,054
Deferred stock compensation (1,373,124) - -
Amortization of deferred
stock compensation 559,344 - 559,344
Dividends paid - (5,442) (5,442)
Net loss - (608,605) (608,605)
------------- ----------- ------------
Balance at May 31, 2000 $ (1,158,867) $ (885,285) $ 3,830,075
------------- ----------- ------------
See Accompanying Notes to these Financial Statements
<PAGE>
<TABLE>
<CAPTION>
DATUM TELEGRAPHIC INC.
Statement of Cash Flows
(Expressed in United States Dollars)
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Nine Nine
months ended months ended Year ended
May 31, May 31, August 31,
2000 1999 1999
------------- ------------- -----------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (608,605) $ 77,183 $ (100,021)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation 273,632 120,598 168,814
Amortization of deferred stock compensation 559,344 382,776 478,210
Deferred income taxes (201,717) 95,990 216,120
Changes in operating assets and liabilities:
Accounts receivable (181,923) 18,841 32,110
Accounts payable and accrued liabilities (394,241) (432,042) 81,120
Income taxes receivable 52,870 120,999 (226,508)
----------- ---------- -----------
Net cash (used in) provided by operating activities (500,640) 384,345 649,845
----------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of capital assets (188,576) (180,549) (663,949)
Purchase of investments (1,652,870) (610,644) (343,847)
----------- ---------- -----------
Net cash used in investing activities (1,841,446) (791,193) (1,007,796)
----------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings (592) 175,147 172,371
Proceeds from issuance of common stock 2,512,054 69,444 69,444
Dividends paid (5,442) - -
----------- ---------- -----------
Net cash provided by financing activities 2,506,020 244,591 241,815
----------- ---------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 163,934 (162,257) (116,136)
CASH AND CASH EQUIVALENTS,
BEGINNING OF THE PERIOD 221,313 337,450 337,450
----------- ---------- -----------
CASH AND CASH EQUIVALENTS,
END OF THE PERIOD $ 385,247 $ 175,193 $ 221,314
----------- ---------- -----------
Supplemental disclosures of cash flow information:
Cash received for interest $ 77,484 $ 20,120 $ 32,470
----------- ---------- ----------
Cash recovered from income taxes $ 773,901 $ 487,620 $ 487,620
----------- ---------- ----------
<FN>
See Accompanying Notes to these Financial Statements
</FN>
</TABLE>
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of business
Datum Telegraphic Inc. (the "Company" or "Datum") designs wireless
semiconductor systems.
Basis of presentation
The financial statements have been prepared due to the acquisition of
Datum by PMC-Sierra, Inc. The Company's fiscal year end is August 31.
The Company's functional and reporting currencies are the United States
dollar.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets, liabilities,
revenues and expenses, and disclosure of contingent assets and
liabilities as of the dates and for the periods presented. Estimates
are used for, but not limited to, the accounting for doubtful accounts,
depreciation and amortization, sales returns, taxes and contingencies.
Actual results may differ from those estimates.
Cash, cash equivalents and short-term investments
Cash equivalents are defined as highly liquid debt instruments with
original maturities at the date of acquisition of 90 days or less that
have insignificant interest rate risk. Short-term investments are
defined as money market instruments with original maturities greater
than 90 days, but less than one year.
Under Financial Accounting Standards No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS 115"), management
classifies investments as available-for-sale or held-to-maturity at the
time of purchase and re-evaluates such designation as of each balance
sheet date. Investments classified as held-to-maturity securities are
stated at amortized cost with corresponding premiums or discounts
amortized against interest income over the life of the investment.
Marketable equity and debt securities not classified as
held-to-maturity are classified as available-for-sale and reported at
fair value. Unrealized gains and losses on these investments are
included in accumulated other comprehensive income. The cost of
securities sold is based on the specific identification method.
As at August 31, 1999, the Company's short-term investments consisted
solely of held-to-maturity investments and their carrying value was
substantially the same as their market value. Proceeds from sales and
realized gains or losses on sales of available-for-sale securities for
all years presented were immaterial.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and equipment, net
Property and equipment are stated at cost and depreciated using the
straight-line method over the estimated useful lives of the assets,
ranging from two to five years, or the applicable lease term, whichever
is shorter. The carrying value of property and equipment is reviewed
periodically for any permanent impairment in value.
The components of property and equipment are as follows:
May 31, August 31,
2000 1999
---------- ----------
(unaudited)
Computer equipment $ 657,997 $ 562,372
Computer software 503,050 410,099
Furniture and fixtures 630 630
----------- -----------
Total cost 1,161,677 973,101
Accumulated depreciation (523,111) (249,479)
----------- -----------
$ 638,566 $ 723,622
----------- -----------
Accounts payable and accrued liabilities
The components of accrued liabilities are as follows:
May 31, August 31,
2000 1999
---------- ------------
(unaudited)
Accounts payable $ 45,577 $ 113,037
Accrued compensation and benefits - 123,576
Other accrued liabilities 99,716 302,921
---------- -----------
$ 145,293 $ 539,534
---------- -----------
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Foreign currency translation
The United States dollar is the Company's functional currency. Assets
and liabilities in Canadian dollars are translated using the exchange
rate at the balance sheet date. Revenues and expenses are translated at
average rates of exchange during the year. Gains and losses from
foreign currency transactions are included in interest and other
income.
Fair value of financial instruments
The estimated fair value amounts have been determined by the Company
using available market information and appropriate valuation
methodologies. However, considerable judgment is required in
interpreting market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a current
market exchange.
The Company's carrying value of cash and cash equivalents, short-term
investments, accounts receivable, accounts payable and accrued
liabilities and amounts due to shareholders approximates fair value
because the instruments have a short-term maturity.
The fair value of the Company's stockholder loans at August 31, 1999
approximates their carrying value.
Concentrations
The Company maintains its cash, cash equivalents and short-term
investments in investment grade financial instruments with high-quality
financial institutions, thereby reducing credit risk concentrations.
Revenue recognition
Revenues from service contracts are recognized as the work is performed
by the Company's employees. Amounts received from customers as
prepayments for services to be provided in the future are recorded on
the balance sheet as deferred revenue and are recognized as revenue as
the work is performed.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock-based compensation
The Company accounts for stock-based awards to employees using the
intrinsic value method in accordance with APB No. 25, "Accounting for
Stock Issued to Employees". Deferred stock compensation charges arise
from those situations where either shares or options are issued or
granted at an exercise price lower than the fair value of the
underlying common shares. These amounts are amortized as charges to
operations over the vesting periods of the individual stock options.
Interest and other income, net
The components of interest and other income, net are as follows:
Nine months Nine months
ended ended Year ended
May 31, May 31, August 31,
2000 1999 1999
------------- ----------- -----------
(unaudited) (unaudited)
Interest income $ 93,922 $ 29,934 37,911
Foreign exchange loss (40,032) (10,753) (59,575)
Other (5,196) 364 1,586
--------- --------- ----------
$ 48,694 $ 19,545 $ (20,078)
--------- --------- ----------
Income taxes
Income taxes are reported under Statement of Financial Accounting
Standards No. 109 and, accordingly, deferred income taxes are
recognized using the asset and liability method, whereby deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
basis, and operating loss and tax credit carryforwards.
Comprehensive income
Under Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income ("SFAS 130"), the Company is required to report
total comprehensive. Comprehensive income is defined as changes in
stockholders' equity exclusive of transactions with owners such as
capital contributions and dividends. The Company has no comprehensive
income items, other than the net income or loss in any of the periods
presented.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recently issued accounting standards
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", which establishes accounting and reporting standards for
derivative instruments and hedging activities. The Statement will
require the recognition of all derivatives on the Company's
consolidated balance sheet at fair value. The FASB has subsequently
delayed implementation of the standard to the financial years beginning
after June 15, 2000. The Company expects to adopt the new Statement
effective January 1, 2001. The impact on the Company's financial
statements is not expected to be material.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" (SAB No. 101). SAB No. 101, which is effective in the
fourth quarter of 2000, provides guidance on the recognition,
presentation, and disclosure of revenue in financial statements of all
public companies. Management does not expect that the adoption of SAB
101 will have a significant effect on the Company's results of
operations or financial position.
In March 2000, the FASB issued FASB Interpretation No. 44 ("FIN 44"),
"Accounting for Certain Transactions Involving Stock Compensation." The
Company will be required to adopt FIN 44 effective July 1, 2000 with
respect to certain provisions applicable to new awards, exchanges of
awards in a business combination, modifications to outstanding awards,
and changes in grantee status that occur on or after that date. FIN 44
addresses practice issues related to the application of Accounting
Practice Bulletin Opinion No. 25, "Accounting for Stock issued to
Employees." The Company does not expect the application of FIN 44 to
have a material impact on its financial position or results of
operations.
2. DUE TO STOCKHOLDER
During the year ended August 31, 1999 Datum borrowed a total of
$330,373 Canadian dollars from three stockholders. These loans are
non-interest bearing, unsecured and repayable at the earlier of five
years or at the demand of the stockholder.
3. STOCKHOLDERS' EQUITY
Class A Shares
Class A shares are voting, non-participating, non-convertible, and can
be transferred only in connection with the transfer of Class B shares
held by such holders or their "affiliates" or "associates". Upon such
transfer, the holders of the Class A shares will be entitled to receive
for each Class A share no more than an amount equal to the paid-up
capital of the Class A shares. In the event of a Liquidation Event, the
holders of the Class A shares shall be entitled to receive no more than
an amount equal to the paid-up capital thereof on a pro-rata basis with
the holders of the outstanding Class B shares, Class C shares and the
Class D shares.
<PAGE>
3. STOCKHOLDERS' EQUITY (Continued)
Class B Shares
Class B shares are non-voting. In the event of liquidation, holders of
Class B shares are also entitled to the paid-up capital on a pro-rata
basis, and if any of the property or assets of the Company thereafter
remain available for distribution, the holders of the Class B shares
shall be entitled to receive, on a pro rata basis with the holders of
the Class C shares and the Class D shares then outstanding, such
assets.
Class C Shares
Class C shares are voting shares. In the event of the liquidation, the
holders of the Class C shares shall be entitled to receive an amount
equal to the paid-up capital thereof and any dividends declared and
unpaid on the pro-rata basis with the holders of the outstanding Class
A shares, Class B shares and the Class D shares, and if any of the
property or assets of the Company thereafter remain available for
distribution, the holders of the Class C shares shall be entitled to
receive, on a pro-rata basis with the holders of the Class B shares and
the Class D shares then outstanding, such assets.
Class D shares
Class D shares have voting rights and each shall confer the right to a
.96353 vote in person or by proxy at all meetings of members of the
Company. In the event of the liquidation, the holders of the Class D
shares shall be entitled to receive an amount equal to the paid-up
capital thereof and any dividends declared and unpaid on a pro-rata
basis with the holders of the outstanding Class A shares, Class B
shares and the Class C shares, and if any of the property or assets of
the Company thereafter remain available for distribution, the holders
of the Class D shares shall be entitled to receive, on a pro-rata
basis, with the holders of the Class B shares and the Class C shares
then outstanding, such assets.
Stock options
The Company has issued stock options to certain employees. Deferred
stock compensation has been recorded in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and its related interpretations based on the deemed fair
value of the underlying common stock.
<PAGE>
3. STOCKHOLDERS' EQUITY (Continued)
Stock options (continued)
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123), requires the disclosure of pro
forma net loss as if the Company had adopted the fair value method. The
Company's calculations were made using the minimum value method with
the following weighted average assumptions: expected life, four years;
risk-free interest rate, 5%; and no dividends during the expected term.
The Company's calculations are based on a multiple option valuation
approach, and forfeitures are recognized as they occur. If the computed
fair values of the awards had been amortized to expense over the
vesting periods of the awards, the pro forma net loss would not have
been materially different from the amounts reported for the year ended
August 31, 1999.
A summary of option activity is as follows:
Balance, August 31, 1998 $ 120,500
Granted 34,700
Exercised (25,750)
-----------
Balance, August 31, 1999 $ 129,450
-----------
All the options have an exercise price of Canadian $0.25 per share,
have a remaining life of 3.33 years and are not exercisable at August
31, 1999.
4. INCOME TAXES
The income tax recovery, calculated under Statement of Financial
Accounting Standard No. 109 ("SFAS 109") consist of the following:
9 months ended 9 months ended Year ended
May 31, May 31, August 31,
2000 1999 1999
----------- ------------- -------------
(unaudited) (unaudited)
Current $ 462,928 $ 133,818 $ 467,881
Deferred 201,717 (95,990) (216,120)
----------- ----------- -----------
Recovery of income taxes $ 664,645 $ 37,828 $ 251,761
----------- ----------- -----------
<PAGE>
4. INCOME TAXES (Continued)
A reconciliation between the Company's effective tax rate and the
Canadian statutory rate is as follows:
9 months ended 9 months ended Year ended
May 31, May 31, August 31,
2000 1999 1999
-------------- -------------- ----------
(unaudited) (unaudited)
Loss (income) before provision
for tax purposes $ 1,273,250 $ (39,355) $ 351,782
Statutory corporate tax rate 46% 46% 46%
Recovery of (provision for) income
taxes at statutory rates 585,695 (18,103) 161,820
Deferred stock compensation (257,928) (176,077) (219,977)
Research and development tax credits 358,854 235,421 313,895
Other (21,976) (3,413) (3,977)
------------ ----------- ----------
Recovery of income taxes $ 664,645 $ 37,828 $ 251,761
------------ ----------- ----------
Significant components of the Company's deferred tax liabilities are as
follows:
May 31, August 31,
2000 1999
------------ ------------
(unaudited)
Depreciation $ 271,450 $ 319,508
Other (46,085) 107,574
------------ ------------
$ 225,365 $ 427,082
------------ ------------
5. SUBSEQUENT EVENT
On July 21, 2000, the Company entered into a definitive agreement with
PMC-Sierra, Inc. ("PMC") for the purchase of the Company's outstanding
common shares not already owned by PMC on that date, for approximately
550,000 shares of PMC common stock, 44,000 options to purchase PMC
common stock, and approximately $17 million cash.
<PAGE>
<TABLE>
<CAPTION>
PMC-Sierra, Inc.
PRO FORMA CONDENSED COMBINED BALANCE SHEET - UNAUDITED
June 25, 2000
(in thousands)
<S> <C> <C> <C> <C>
Historical Historical Historical Pro Forma Pro Forma
PMC Malleable Datum Adjustments Combined
ASSETS:
Current assets:
Cash and cash equivalents $ 126,073 $ 256 $ 385 $ (17,025) (d) $ 109,689
Short-term investments 123,844 - 2,543 - 126,387
Accounts receivable, net 64,614 37 378 - 65,029
Income taxes receivable - - 477 - 477
Inventories 13,164 - - - 13,164
Deferred income taxes 9,270 - - - 9,270
Prepaid expenses and other current assets 11,475 273 - - 11,748
---------- -------- -------- ---------- ----------
Total current assets 348,440 566 3,783 (17,025) 335,764
Property and equipment, net 72,804 1,465 639 74,908
Goodwill and other intangible assets, net 13,433 - - 347,187 (a),(c) 360,620
Investments and other assets 13,993 - - (6,500) (c) 7,493
Deposits for wafer fabrication capacity 23,001 - - - 23,001
---------- -------- -------- ---------- ----------
$ 471,671 $ 2,031 $ 4,422 $ 323,662 $ 801,786
========== ======== ======== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 24,926 $ 541 $ 45 $ - $ 25,512
Accrued liabilities 21,239 344 100 1,700 (b) 23,383
Deferred income 47,413 - - - 47,413
Income taxes payable 22,265 - - - 22,265
Due to stockholders - - 221 - 221
Current portion of obligations under -
capital leases and long-term debt 4,168 1,000 - - 5,168
---------- -------- -------- ---------- ----------
Total current liabilities 120,011 1,885 366 1,700 123,962
Deferred income taxes 9,091 - 225 - 9,316
Noncurrent obligations under capital - 1,648
leases and long-term debt 1,603 45 -
- 6,653
PMC special shares convertible into common stock 6,653 - -
---------- -------- -------- ---------- ----------
137,358 1,930 591 1,700 141,579
---------- -------- -------- ---------- ----------
Stockholders' equity:
Common stock and additional paid in capital 258,624 8,618 5,875 385,934 (d),(e) 659,051
Deferred stock compensation (14,096) (505) (1,159) (34,669) (a),(e) (50,429)
Retained earnings 89,785 (8,012) (885) (29,303) (e),(f) 51,585
---------- --------- -------- ---------- ----------
Total stockholders' equity 334,313 101 3,831 321,962 660,207
---------- --------- -------- ---------- ----------
$ 471,671 $ 2,031 $ 4,422 $ 323,662 $ 801,786
========== ========= ======== ========== ==========
<FN>
See notes to unaudited pro forma condensed combined financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PMC-Sierra, Inc.
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS - UNAUDITED
Six Months Ended June 25, 2000
(in thousands, except for per share amounts)
<S> <C> <C> <C> <C>
Historical Historical Historical Pro Forma Pro Forma
PMC Malleable Datum Adjustments Combined
Net revenues $ 236,915 $ 54 $ 937 $ - $ 237,906
Cost of revenues 48,292 76 - - 48,368
---------- -------- ------- ----------- ---------
Gross profit 188,623 (22) 937 - 189,538
Other costs and expenses:
Research and development 59,450 2,566 1,350 - 63,366
Marketing, general and administrative 35,126 1,041 - - 36,167
Amortization of deferred stock compensation:
Research and development 6,353 76 480 - 6,909
Marketing, general and administrative 818 - - - 818
Amortization of goodwill 918 - - 34,719 (a) 35,637
Costs of merger 13,678 - - 13,678
---------- --------- ------- ----------- -----------
Income (loss) from operations 72,280 (3,705) (893) (34,719) 32,963
Interest and other income (expense), net 7,266 (391) 47 - 6,922
Gain on sale of investments 27,109 - - 27,109
---------- --------- ------- ----------- -----------
Income (loss) before provision 106,655 (4,096) (846) (34,719) 66,994
for income taxes
Provision for income taxes 36,571 1 (440) - 36,132
---------- --------- ------- ----------- ----------
Net income (loss) $ 70,084 $ (4,097) $(406) $ (34,719) $ 30,862
========== ========= ======= =========== ==========
$ 0.20
Basic net income per share: $ 0.47
$ 0.18
Diluted net income per share: $ 0.42
Shares used to calculate: 151,425
Basic net income per share 149,141 170,496
Diluted net income per share 168,212
<FN>
See notes to unaudited pro forma condensed combined financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PMC-Sierra, Inc.
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS - UNAUDITED
Year Ended December 31, 1999
(in thousands, except for per share amounts)
<S> <C> <C> <C> <C>
Historical Historical Historical Pro Forma Pro Forma
PMC Malleable Datum Adjustments Combined
Net revenues $ 263,281 $ 176 $ 1,700 $ - $ 265,157
Cost of revenues 55,147 52 - - 55,199
---------- -------- --------- ----------- ----------
Gross profit 208,134 124 1,700 - 209,958
Other costs and expenses:
Research and development 69,820 2,885 1,962 - 74,667
Marketing, general and administrative 43,600 1,053 - 44,653
Amortization of deferred stock compensation:
Research and development 2,810 - 408 - 3,218
Marketing, general and administrative 778 - - - 778
Amortization of goodwill 1,912 - - 69,437 (a) 71,349
Costs of merger 866 - - - 866
--------- --------- --------- ----------- ----------
Income (loss) from operations 88,348 (3,814) (670) (69,437) 14,427
Interest and other income (expense), net 7,791 (52) (39) - 7,700
Gain on sale of investments 26,800 - - - 26,800
---------- --------- --------- ----------- ----------
Income (loss) before provision 122,939 (3,866) (709) (69,437) 48,927
for income taxes
Provision for income taxes 41,337 1 (351) - 40,987
--------- --------- --------- ----------- ----------
Net income (loss) $ 81,602 $ (3,867) $ (358) $ (69,437) $ 7,940
========= ========== ========= =========== ==========
Basic net income per share: $ 0.57 $ 0.05
Diluted net income per share: $ 0.52 $ 0.05
Shares used to calculate:
Basic net income per share 142,759 145,043
Diluted net income per share 156,465 158,749
<FN>
See notes to unaudited pro forma condensed combined financial statements.
</FN>
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(all dollars in thousands)
NOTE 1: Basis of Presentation
The following unaudited pro forma condensed combined financial statements give
the effect to the acquisitions of Malleable Technologies Inc. ("Malleable") and
Datum Telegraphic Inc. ("Datum") by PMC-Sierra, Inc. (the "Company" or "PMC").
On June 13, 2000, the Company entered into a definitive agreement to purchase
the 85% interest of Malleable that PMC did not already own. The purchase was
completed on June 27, 2000. The purchase price of $293,837 consisted of the
issuance of common shares, options and warrants of the Company pursuant to the
exercise of a call option held by PMC with a fair value of $293,012 and
acquisition related costs of $825. Malleable is a fabless semiconductor company
located in San Jose, CA. Malleable makes digital signal processors for
voice-over-packet processing applications which bridge voice and high speed data
networks by compressing voice traffic into ATM or IP packets.
On June 26, 2000, the Company entered into a definitive agreement to purchase
the 92% interest of Datum that PMC did not already own. The purchase was
completed on July 21, 2000. The purchase price of $125,314 consisted of the
issuance of common shares and options to purchase shares of the Company with a
fair value of $107,414, cash of $17,025 and acquisition related expenditures of
$875. Datum is a wireless semiconductor company located in Vancouver, Canada.
Datum makes digital signal processors that allow traffic for all major digital
wireless standards to be transmitted using a single digitally controlled power
amplifier architecture.
The pro forma condensed combined balance sheet assumes the merger took place on
June 25, 2000 and combines the June 25, 2000 balance sheet of PMC with the June
30, 2000 balance sheet of Malleable and the May 31, 2000 balance sheet of Datum.
The pro forma condensed combined statement of operations for the year ended
December 31, 1999 assumes the merger took place on January 1, 1999. It combines
the historical results with pro forma adjustments of PMC for the fiscal year
ended December 26, 1999 with the fiscal year ended December 31, 1999 for
Malleable and the twelve months ended November 30, 1999 for Datum. The pro forma
combined statement of operations for the six months ended June 25, 2000 assumes
the merger took place as of January 1, 1999. It combines the historical results
of PMC and Malleable for the six months ended June 25, 2000 and Datum for the
six months ended May 31, 2000.
The unaudited pro forma condensed combined balance sheet reflects the
appropriate pro forma adjustments to record the acquisition of Datum and
Malleable using the purchase method of accounting as described in Note 2.
Acquisition costs and the preliminary determination of the unallocated excess of
acquisition costs over net assets acquired are set forth below:
<PAGE>
Malleable Datum Total
----------- ---------- -----------
Fair value of shares of PMC common
stock issued and value of options $ 293,012 $ 107,414 $ 400,426
and warrants exchanged
Cash consideration paid - 17,025 17,025
Estimated transaction costs 825 875 1,700
---------- ---------- ----------
Estimated total acquisition costs 293,837 125,314 419,151
Less: net tangible assets acquired 101 3,830 3,931
---------- ---------- ----------
Unallocated excess of acquisition 293,736 121,484 415,220
costs over net
tangible assets acquired
Preliminary allocation to:
In process research and development 31,500 6,700 38,200
Unearned compensation 29,033 7,300 36,333
---------- ---------- ----------
Preliminary allocation to goodwill $ 233,203 $ 107,484 $ 340,687
and other intangibles ========== ========== ==========
The fair value of shares of PMC common stock was determined by taking an average
of the opening and closing price of PMC common stock for a short period just
before and just after the terms of the transactions were agreed to by PMC, Datum
and Malleable and announced to the public. The purchase price was increased by
the estimated fair value of the PMC options and warrants exchanged for the
Malleable and Datum options and warrants outstanding.
The unaudited pro forma condensed consolidated statements of operations reflect
additional amortization expense resulting from the increase in goodwill and
other intangible assets due to these acquisitions. The charge for in process
research and development and the allocation to unearned compensation have been
reflected in the unaudited pro forma condensed combined balance sheet. The
charge for in process research and development and amortization of unearned
compensation have not been included in the Unaudited Pro Forma Condensed
Combined Statements of Operations as these statements do not give effect to
nonrecurring merger costs related to the transaction. The unallocated excess of
acquisition costs over net assets acquired has been preliminarily allocated to
goodwill, which will be amortized over five years. In accordance with generally
accepted accounting principles, the acquired in process research and development
will be charged to expense by PMC in its third quarter ended September 24, 2000.
In connection with finalizing the purchase price allocation of these
transactions, PMC is currently evaluating the fair value of the consideration
given and the fair value of the assets acquired and liabilities assumed. Using
this information, PMC will make a final allocation of the purchase price,
including the allocation to in process research and development, unearned
compensation and goodwill and other intangibles. Accordingly, the purchase
accounting information is preliminary.
The pro forma combined financial statements included herein have been prepared
by PMC, 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, PMC
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 consolidated financial statements and the notes thereto
included in PMC's annual report on Form 10-K/A for the fiscal year ended
December 26, 1999, the restated consolidated financial statements and related
notes of PMC included in PMC's registration statement on Form S-4/A dated July
26, 2000, the financial statements of Malleable included in PMC's Form 8-K filed
August 4, 2000 and the financial statements of Datum included in this filing.
<PAGE>
NOTE 2: Pro Forma Adjustments
The pro forma condensed combined balance sheet reflects the following
adjustments:
a) To record intangibles including goodwill, assembled work force and
unearned compensation.
b) To record acquisition related expenses of $ 1,700 which include
costs for legal, accounting and other costs related to the acquisitions
of Malleable and Datum.
c) To reclass the existing 15% investment in Malleable and 8%
investment in Datum to goodwill.
d) To record the acquisition of Malleable by the issuance of
approximately 1,693,000 shares of common stock, options and warrants to
purchase the 85% interest of Malleable that PMC did not already own. To
record the acquisition of Datum by the payment of $ 17,025 in cash and
issuance of approximately 591,000 shares of common stock and options to
purchase common stock for the 92% interest of Datum that PMC did not
already own.
e) To eliminate the common stock and additional paid-in capital,
deferred stock compensation and accumulated deficit of Malleable and
Datum.
f) To record the charge for in process research and development.
The pro forma combined statements of operations reflect the following adjustment
with respect to the acquisition:
a) To record amortization of purchased intangibles other than in
process research and development over estimated useful lives of five
years.
NOTE 3: Earnings Per Share
Basic and diluted net income per share for each period is calculated by dividing
pro forma net income by the shares used to calculate net income per share in the
historical period plus the effect of the shares of the PMC's common stock,
options and warrants which were exchanged for all issued and outstanding shares
of Datum not already owned by PMC.
<PAGE>
Exhibit Index
Exhibit Number Description
23.1 Consent of Deloitte & Touche, LLP, Independent Auditors
<PAGE>
CONSENT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-3 Nos. 333-42308, 333-44204, 333-35024, 333-34648, 333-31450, 333-86951,
33-86930, 33-90392, 33-96620, 33-97490, 333-15519 and 333-55989), and in the
Registration Statements (Form S-8 Nos. 333-45118, 333-40508, 333-44212,
333-35276, 333-34622, 333-94999, 333-92885, 333-87039, 33-41027, 33-80988,
333-13387, 33-80992, 33-94790, 333-13359, 333-34671, 333-13357, 333-55983 and
333-55991) of our report of PMC-Sierra, Inc. of our report, dated July 19, 2000
on the financial statements of Datum Telegraphic Inc. for the year ended August
31, 1999, which report is included in this current report on Form 8-K for
PMC-Sierra, Inc.
/s/DELOITTE & TOUCHE LLP
Vancouver, British Columbia, Canada
September 28, 2000
<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: September 28, 2000 S/ JOHN W. SULLIVAN
-------------------
John W. Sullivan
Vice President, Finance
Chief Financial Officer (Principal
Accounting Officer)
