PMC Sierra Inc. (PMCS) filed Quarterly Report for the period ended 2009-03-29.
PMC-Sierra designs develops markets and supports high-performance semiconductor networking solutions. The company's products are used in the high speed transmission and networking systems which are being used to restructure the global telecommunications and data communications infrastructure. The company provides components for equipment based on Asynchronous Transfer Mode Synchronized Optical Network Synchronized Digital Hierarchy T1/E1/J1 and T3/E3/J2 access transmission High speed Data Link Control and Ethernet. PMC Sierra Inc. has a market cap of $1.66 billion; its shares were traded at around $7.48 with a P/E ratio of 24.2 and P/S ratio of 3.2.
Highlight of Business Operations:
Our research and development, or R&D, expenses increased $1.3 million or 3% in the first quarter 2009 compared to the first quarter of 2008. Payroll costs increased by $0.3 million due to the increase in termination related costs which were partially offset by headcount reduction. Total material costs, including outside consultant services, wafer and photomask costs increased by $0.6 million related to completing more tapeouts on smaller geometries in the first quarter of 2009 than in the same period of 2008. These tapeouts on smaller geometries carry larger costs. In addition, the IBM RAID R&D programs which began in the first quarter of 2008, added additional costs in the first quarter of 2009. Our infrastructure related expenses also increased by $0.4 million due to increased equipment maintenance costs and design related software tools.
Our selling, general and administrative, or SG&A, expenses decreased by $2.3 million, or 10%, in the first quarter of 2009 compared to the first quarter of 2008. Payroll costs decreased by $1.4 million due to headcount reductions which were partially offset by the increase in termination related costs. The remainder of the decrease of $0.9 million is due to other operating expense cost reduction activities relating to marketing, training, travel, and infrastructure related expenses for equipment maintenance costs and software tools.
In the first and second quarters of 2006, we completed the acquisitions of the Storage Semiconductor Business from Avago, and of Passave, Inc., respectively. Amortization of intangible assets acquired from the Storage Semiconductor Business and Passave in the first quarter of 2009 was $4.7 million and $5.1 million, respectively. Amortization from the Storage Semiconductor Business and Passave in the first quarter of 2008 was $4.7 million and $5.1 million, respectively.
We recorded a provision for income taxes of $1.7 million and $38.7 million for the first quarter of 2009 and 2008, respectively. Part of the reason for the decrease is due to the product and income mix across our subsidiaries. Also, during the first quarter of 2008, one of our foreign subsidiaries received a written communication from a tax authority, resulting in an accrual of $26.5 million, including interest, as part of the liability for unrecognized tax benefits. This and certain other tax matters related to the 2000-2006 tax years were settled for less than had been accrued as part of our liability for unrecognized tax benefits during the latter part of fiscal 2008.
During 2008, we assessed the fair value of our money market funds by giving consideration to Level 2 and Level 3 inputs (see Note 3. Fair Value Measurements) in accordance with the fair value hierarchy of SFAS 157 for the Reserve Funds and their underlying securities. Based on this assessment, we recorded an impairment of the Reserve Funds of $11.8 million during the third quarter of 2008, incorporating the Reserve Funds valuation at zero for debt securities of Lehman Brothers held, and a net asset value of $0.97 per share communicated by the Reserve Funds Primary Fund. We reassessed the fair value of our investments in money market funds for the first quarter 2009, and there were no further impairments.
We expect our second quarter 2009 research and development, and selling, general and administrative expenses, to be approximately between $57.8 million to $58.8 million, including stock-based compensation expense of approximately between $4.8 million to $5.8 million. Therefore, we expect our second quarter operating research and development, and selling, general and administrative expenses, to be approximately $53.0 million.