PMC Sierra Inc. Reports Operating Results (10-Q)
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 $1.96 billion; its shares were traded at around $8.73 with a P/E ratio of 24.2 and P/S ratio of 3.7. Highlight of Business Operations: We expect our fourth quarter 2009 research and development, and selling, general and administrative expenses, to be approximately between $57.5 million and $59.5 million, including stock-based compensation expense of approximately between $4.5 million and $5.5 million.
As of September 27, 2009 and December 28, 2008, we had $57.6 million and $55.4 million of senior convertible notes outstanding, respectively, recorded on our Condensed Consolidated Balance Sheets. The face value of the senior convertible notes as at September 27, 2009 and December 28, 2008 was $68.3 million. In the future, we expect our cash from operations, short-term investments and long-term investment securities, including distributions from the Reserve Funds, to be our sources of liquidity.
Operating Activities During the first nine months of 2009, we generated net positive operating cash flows of $92.2 million. The main drivers for this were primarily our $31.8 million net income and the add backs of $59.1 million non-cash operating expenses.
Investing Activities We used $33.3 million for investing activities in the first nine months of fiscal 2009, including $209.3 million for the purchase of investment securities, and $6.0 for the purchase of property, plant and equipment and intellectual property, net of $11.1 million received for the disposal of investments securities and $170.8 million in distributions from the Reserve Funds.
Based on a sensitivity analysis performed on the financial instruments held at September 27, 2009, the impact to the fair value of our investment portfolio by a shift in the yield curve of plus, or minus, 50, 100 or 150 basis points would result in a decline, or increase, in portfolio value of approximately $1.4 million, $2.8 million and $4.2 million, respectively.
Holders may convert the notes into the right to receive the conversion value (i) when our stock price exceeds 120% of the approximately $8.80 per share initial conversion price for a specified period, (ii) in certain change in control transactions, and (iii) when the trading price of the notes does not exceed a minimum price level. For each $1,000 principal amount of notes, the conversion value represents the amount equal to 113.6687 shares multiplied by the per share price of our common stock at the time of conversion. If the conversion value exceeds $1,000 per $1,000 in principal of notes, we will pay $1,000 in cash and may pay the amount exceeding $1,000 in cash, stock or a combination of cash and stock, at our election.
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