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PMC SIERRA INC (PMCS)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 02/28/2012
Filed Period 12/31/2011

Table of contents

  • Page 1
    PMC SIERRA INC (PMCS) 10-K Annual report pursuant to section 13 and 15(d) Filed on 02/28/2012 Filed Period 12/31/2011

  • Page 2
    ... The aggregate market value of the voting stock held by nonaffiliates of the registrant, based upon the closing sale price of the Common Stock on June 26, 2011 as reported by the NASDAQ Global Select Market, was approximately $1.3 billion. Shares of Common Stock held by each executive officer and...

  • Page 3
    ... Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PART III Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 4
    ...; our expectations regarding our acquisitions of the Channel Storage business from Adaptec, Inc. ("Adaptec"), and of Wintegra, Inc. ("Wintegra") and expectations regarding distribution from certain investments. This Annual Report should be read in conjunction with our periodic filings made with the...

  • Page 5
    ... and storage management capabilities. Enterprises, governments, corporations, small offices and home offices are expanding their networks to better capture, store and access large quantities of data and video, efficiently and securely. We operate in one reportable segment-semiconductor solutions for...

  • Page 6
    ...: Storage, Mobile and Optical networks. Annual net revenues (in millions) by the three market segments we serve are presented below: Storage Our Storage products are supplied directly to Original Equipment Manufacturers ("OEMs") and channel customers. Our products and solutions for the Storage...

  • Page 7
    .... Storage products and/or applications incorporating PMC's semiconductor solutions PMC Products Examples of OEMs (1) Storage Area Networks Server Attached Storage SSD Cache Performance Enterprise Networking Data Center High Speed Laser and Multi-Function Printers (1) RAID-on-Chip (RoC) Controllers...

  • Page 8
    ..., and the balance were sent directly to our OEM customers. In 2011, our largest distributor was Avnet Inc. ("Avnet"), which sold our products worldwide (excluding Japan, Israel, and Taiwan). In 2011, sales shipped through Avnet worldwide represented 12% of our total net revenues. Our second largest...

  • Page 9
    ... offer the best technology and service at a competitive price. Our lead-time, or the time required to manufacture our devices, is typically 12 to 18 weeks. Based on this lead-time, our team of production planners initiates purchase orders with our wafer suppliers and with our chip assemblers for the...

  • Page 10
    ... are targeted for use in enterprise, storage and service provider markets. Increasingly, our OEM customers that serve these end markets are demanding complete solutions with software support and complex feature sets, and we are developing products to fill this need. From time to time we announce new...

  • Page 11
    ...licensing arrangements to protect our intellectual property. PMC, PMC-Sierra and our logo are registered trademarks and service marks. Any other trademarks used in this Annual Report are owned by other entities. We own other trademarks and service marks not appearing in this Annual Report. EMPLOYEES...

  • Page 12
    ... opportunities and maintain our desired level of revenue growth in the future. We are subject to rapid changes in demand for our products due to variations in our turns business; short order lead time; customer inventory levels; production schedules; and fluctuations in demand. As a result, there...

  • Page 13
    ...our lower margin parts in a particular period, it would adversely impact our results of operations. Further, our distributors provide us with periodic reports of their backlog to end customers, sales to end customers and quantities of our products that they have on hand. If the data that is provided...

  • Page 14
    ...alternative distributor to manage this portion of our business, or we are unable to service the related end customers directly. Further, if we terminate a distributor agreement, we may be required to repurchase unsold inventory held by the distributor. We maintain a reserve for estimated returns. If...

  • Page 15
    ... wafer manufacturing techniques, process tools and alternate networking technologies. We may not be able to develop new products at competitive pricing and performance levels. Even if we are able to do so, we may not complete a new product and introduce it to market in a timely manner. Our customers...

  • Page 16
    ... product life spans and new manufacturing and design technologies. Our products often must be redesigned because manufacturing yields on prototypes are unacceptable or customers redefine their products to meet changing industry standards or customer specifications. As a result, we develop products...

  • Page 17
    ... in connection with an acquisition, we may dilute our common stock with securities that have an equal or a senior interest in our company. From time to time, we license, or acquire, technology from third parties to incorporate into our products. Incorporating technology into our products may be more...

  • Page 18
    ... We also have less control over delivery schedules, manufacturing yields and costs than competitors with their own fabrication facilities. If the wafer foundries we use are unable or unwilling to manufacture our products in required volumes, or at specified times, we may have to identify and qualify...

  • Page 19
    ... of our critical business or information technology systems in Israel or India could harm our ability to conduct normal business operations and therefore negatively impact our operating results. On an on-going basis, some of our Israeli employees are periodically called into active military duty. In...

  • Page 20
    ... be sold. In addition, our competitors may be able to design around our patents. To protect our product technology, documentation and other proprietary information, we enter into confidentiality agreements with our employees, customers, consultants and strategic partners. We require our employees to...

  • Page 21
    ... of our customers are required to obtain licenses from and pay royalties to third parties for the sale of systems incorporating our semiconductor devices. Customers may also make claims against us in connection with infringement claims made against them that relate to our products or components...

  • Page 22
    ... approximately 149,000 square feet of office space. This location supports a significant portion of our product development, manufacturing, marketing, sales and testing activities. In addition to the two major sites in Sunnyvale and Burnaby, during 2011 we also operated fourteen additional research...

  • Page 23
    ...SECURITIES. Stock Price Information Our Common Stock trades on the NASDAQ Global Select Market under the symbol PMCS. The following table sets forth, for the periods indicated, the high and low closing sale prices for our Common Stock as reported by the NASDAQ Global Select Market: Fiscal 2011 High...

  • Page 24
    Table of Contents Stock Performance Graph The following graph shows a comparison of cumulative total stockholder returns for PMC, the line-of-business index for semiconductors and related devices (SIC code 3674) furnished by Research Data Group, Inc., and the S&P 500 Index. In addition, we have ...

  • Page 25
    .... Year Ended (in thousands, except for per share data) December 31, (1) 2011 December 26, (2) 2010 December 27, (3) 2009 December 28, (4) 2008 December 30, (5) 2007 STATEMENT OF OPERATIONS DATA: Net revenues Cost of revenues Gross profit Research and development Selling, general and administrative...

  • Page 26
    ... for the year ended December 31, 2011 include $0.9 million stock-based compensation expense and $9.1 million acquisition-related costs included in Cost of revenues; $11.6 million stock-based compensation, $3 million asset impairment, and $0.2 million acquisition-related costs included in Research...

  • Page 27
    ...termination of a supplier contract, $2.0 million deferred tax recovery related to non-deductible intangible asset amortization, and $1.3 million deferred tax recovery related to the impairment of investment securities. (5) Results for the year ended December 30, 2007 include $1.7 million stock-based...

  • Page 28
    ... of revenues; $3 million stock-based compensation and $0.2 million acquisition-related costs included in Research and development expense; $3.5 million stock-based compensation expense, $0.8 million acquisitionrelated costs, and $0.6 million recovery of lease exit costs included in Selling, general...

  • Page 29
    ...million income tax recovery related to stock-based compensation. Results include $0.2 million stock-based compensation expense and $9.0 million acquisition-related costs included in Cost of revenues; $2.7 million stock-based compensation expense and $0.2 million acquisition-related costs included in...

  • Page 30
    ... to unrecognized tax benefits, and $0.2 million tax recovery related to stock-based compensation. Results include $0.2 million stock-based compensation and $0.1 million acquisition related costs included in Cost of revenues; $0.2 million stock-based compensation expense included in Research and...

  • Page 31
    ...: Storage, Mobile and Optical networks. 1. 2. 3. Our Storage products enable high-speed communication servers, switches and storage devices to store, manage and move large quantities of data securely; Our Mobile products are used in wireless base stations, mobile backhaul, and aggregation equipment...

  • Page 32
    ... due to higher volumes of our SAS devices shipped with the continued production ramp of our 6G SAS products and as customers continue to migrate from 3G to 6G platforms. Also, in 2011, we had a full year of revenues from our Channel Storage business that we purchased from Adaptec mid-year in...

  • Page 33
    ... product mix, applying fixed costs over higher sales volumes and having customer funded ASIC mask sets at zero margin during 2009, which we did not have in 2010. OTHER COSTS AND EXPENSES (in millions) 2011 Change 2010 Change 2009 Research and development Percentage of net revenues Selling, general...

  • Page 34
    ... by $14.3 million, or 48% in 2011 compared to 2010. This increase was the result of increased amortization related to the intangible assets identified in the purchase price allocation for our acquisitions of the Channel Storage business from Adaptec, and Wintegra, in the amount of $1.1 million...

  • Page 35
    ... expense exposures to changes in the value of the Canadian dollar relative to the United States dollar have been hedged in accordance with our general practice of hedging approximately three quarters in advance. Our net foreign exchange gain was $0.3 million in 2011, and we recorded a net foreign...

  • Page 36
    ...from operations, our short-term investments and long-term investment securities. We employ these sources of liquidity to support ongoing business activities, acquire or invest in critical or complementary technologies, purchase capital equipment, repurchase and repay our loans and notes, and finance...

  • Page 37
    ...* Gross Unrealized Losses* (in thousands) Fair Value Cash and cash equivalents: Cash Corporate bonds and notes US treasury and government agency notes Money market funds Foreign government and agency notes US states and municipal securities Total cash and cash equivalents Short-term investments...

  • Page 38
    ... decline in fourth quarter net revenues on a year-over-year basis. Partially offset by: INVESTING ACTIVITIES Cash used for investing activities was significantly higher in 2010 compared to 2011, with our acquisitions of Wintegra and the Channel Storage business of Adaptec. In 2010, we used $200...

  • Page 39
    ... above is $15.1 million in design software tools, which will be paid between 2012 and 2014. This amount includes $1.3 million classified as long-term obligations in our Consolidated Balance Sheet for the year ended December 31, 2011. We have not included open purchase orders for inventory or other...

  • Page 40
    ... we report as assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are reasonable in the circumstances. These estimates could change under different...

  • Page 41
    ..., such as directors or executives, are considered separately for valuation purposes. The expected forfeiture rate applied in calculating stock-based compensation cost is estimated using historical data and is updated annually. The assumptions used in calculating the fair value of stock-based awards...

  • Page 42
    ...Government Agency notes, FDIC-insured corporate notes, United States State and Municipal Securities, foreign government and agency notes and corporate bonds and notes. Our investments are made in accordance with an investment policy approved by our Board of Directors. All investments have maturities...

  • Page 43
    ... portion of our revenues from sales to customers located outside the United States including Canada, Europe, the Middle East and Asia. We are subject to risks typical of an international business including, but not limited to, differing economic conditions, changes in political climate, differing...

  • Page 44
    ...cost, net of write-downs for other than temporary declines in market value. These investments are inherently risky, as they typically are comprised of investments in companies and partnerships that are still in the start-up or development stages. The market for the technologies or products that they...

  • Page 45
    ... on Internal Control Over Financial Reporting included in Item 9A: Management's Annual Report on Internal Control over Financial Reporting Report of Independent Registered Public Accounting Firm Schedules for each of the years in the three year period ended December 31, 2011 included in Item 15...

  • Page 46
    Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of PMC-Sierra, Inc. We have audited the accompanying consolidated balance sheets of PMC-Sierra, Inc. and subsidiaries (the "Company") as of December 31, 2011 and December 26, 2010 ...

  • Page 47
    Table of Contents PMC-Sierra, Inc. CONSOLIDATED BALANCE SHEETS (in thousands, except par value) December 31, 2011 December 26, 2010 ASSETS: Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net of allowance for doubtful accounts of $1,952 (2010-$1,888) ...

  • Page 48
    Table of Contents PMC-Sierra, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Year Ended December 31, 2011 December 26, 2010 December 27, 2009 Net revenues Cost of revenues Gross profit Other costs and expenses: Research and development Selling, general and ...

  • Page 49
    ... of Contents PMC-Sierra, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2011 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Stock-based compensation...

  • Page 50
    ...of $211 Comprehensive income Conversion of special shares into common shares Issuance of common stock under stock benefit plans Stock-based compensation expense Benefit of stock option related loss carry-forwards Repurchases of common stock Balances at December 31, 2011 341 3,968 - - (6,084) 230,233...

  • Page 51
    ..., move and store digital content. Building on a track record of technology leadership, the Company is driving innovation across storage, optical and mobile networks. PMC's highly integrated solutions increase performance and enable next generation services to accelerate the network transformation...

  • Page 52
    ... lives or the lease term. Goodwill. Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. The Company performs a two-step process on an annual basis, or more frequently if necessary, to...

  • Page 53
    ... has occurred, the sales price is fixed or determinable, and collectibility is reasonably assured. PMC generates revenues from sales made both directly to customers and through distributors. The Company recognizes revenues on goods shipped directly to customers at the time of shipping, as that...

  • Page 54
    ... when the product is sold to their customers. The Company does not believe that there is any significant exposure related to deferred income based on historical experience and business terms in place. In cases where agreements with distributors grant only limited rights of return or price credits...

  • Page 55
    ... consist of stock options, shares issuable under our Employee Stock Purchase Plan and common shares issuable on conversion of the Company's senior convertible notes. Segment reporting. The Company has one reportable segment-semiconductor solutions for communications network infrastructure (see Note...

  • Page 56
    ...on as the surviving corporation and as a direct wholly-owned subsidiary of PMC (the "Merger"). PMC purchased Wintegra to accelerate the Company's product offering in IP/Ethernet packet-based mobile backhaul equipment and because the acquisition fit strategically with the Company's overall efforts to...

  • Page 57
    ... vesting period. On acquisition, the Company recorded a fair value adjustment related to the inventory acquired in the amount of $9.8 million, which was fully expensed through Cost of revenues by the end of the first quarter of 2011. The Company incurred $3.7 million in acquisition-related costs...

  • Page 58
    ... sale of products to existing customers of the acquired company. The Company used the same method to determine the fair value of this intangible asset as core technology assets and utilized a discount rate of 24%. Trademarks represent the value of the revenues associated with the WinPath registered...

  • Page 59
    ... cash. The Channel Storage business includes Adaptec's redundant array of independent disks ("RAID") storage product line, a well-established global value added reseller customer base, board logistics capabilities, and leading SSD cache performance solutions. The total purchase price has been...

  • Page 60
    ... may be used to measure fair value: Level 1-Quoted prices in active markets are available for identical assets and liabilities. The Company's Level 1 assets include cash equivalents, shortterm investments, and long-term investment securities, which are generally acquired or sold at par value and are...

  • Page 61
    ...Corporate bonds and notes (1) Money market funds (1) United States ("US") treasury and government agency notes (1) Foreign government and agency notes (1) US state... 2011. Fair Value Measured and Recorded Using Significant Unobservable Inputs (Level 3) Liability for Money Market (In thousands) Funds ...

  • Page 62
    ... a non-recurring basis during 2010 and 2011, and the losses recorded during 2010 and 2011 on those assets: Total Losses for Year Ended December 31, 2011 Net Carrying Value Fair Value Measured and Recorded Using (In thousands) As of December 31, 2011 Level 1 Level 2 Level 3 Intangible assets Total...

  • Page 63
    ... as equity. The Company did not capitalize any stock-based compensation cost and recorded compensation expense as follows: Stock-based compensation expense: Year Ended (in thousands) December 31, 2011 December 26, 2010 December 27, 2009 Cost of revenues Research and development Selling, general and...

  • Page 64
    ... In 2010, the Company assumed the stock option plans and all outstanding stock options of Wintegra subject to a conversion formula, and were part of the merger consideration in that business combination. Activity under the option plans during the year ended December 31, 2011 was as follows: Weighted...

  • Page 65
    ...amended its stock award plans to allow for the issuance of RSUs to employees and directors. The first grant of RSUs occurred on May 25, 2007. The grants vest over varying terms, to a maximum of four years from the date of grant. A summary of RSU activity during the year ended December 31, 2011 is as...

  • Page 66
    ...Board of Directors. The 2011 Employee Stock Purchase Plan ("2011 Plan") was approved by stockholders at the 2010 Annual Meeting. The 2011 Plan became effective on February 11, 2011 and replaced the 1991 Plan. 12,000,000 shares of our common stock...) Gross Net Software Machinery and equipment...

  • Page 67
    ... assets The components of acquired intangible assets are as follows: Accumulated Amortization Estimated Life December 31, 2011 (in thousands) Gross Net Core technology Customer relationships Existing technology Trademarks Trademarks Developed technology assets Backlog In-process research...

  • Page 68
    ... The following table summarizes the activity related to the product warranty liability during fiscal 2011, 2010 and 2009: Year Ended (in thousands) December 31, 2011 December 26, 2010 December 27, 2009 Balance, beginning of the year Accrual for new warranties issued Reduction for payments and...

  • Page 69
    ...activities. The Company initially recorded restructuring charges totaling $195.2 million, $16.2 million related to asset write-downs. The majority of the restructuring charge related to lease commitments on its office space in Santa Clara, CA, which was the Company's headquarters until January, 2011...

  • Page 70
    ...of the following as at December 31, 2011 and December 26, 2010: December 31, 2011 Amortized Cost Gross Unrealized Gains* Gross Unrealized Losses* (in thousands) Fair Value Cash equivalents: Money market funds Total cash equivalents Short-term investments: Corporate bonds and notes US treasury and...

  • Page 71
    ... and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery of market value. As of December 31, 2011, the Company determined that the unrealized losses are temporary in nature and recorded them as a component of Accumulated other comprehensive income...

  • Page 72
    ... the Company changed the valuation method from a market approach to an income approach. In addition, in 2008, due to the status of the Reserve Funds, the Company reclassified a portion of these shares from cash and cash equivalents to short-term investments and long-term investment securities, based...

  • Page 73
    ...into the right to receive the conversion value (i) when the Company's 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...

  • Page 74
    ... were recorded to the year end. NOTE 12. SPECIAL SHARES At December 31, 2011 and December 26, 2010, the Company maintained a reserve of 1,029,000 and 1,370,000 shares, respectively, of PMC common stock to be issued to holders of PMC-Sierra, Ltd. ("LTD") special shares. The special shares of...

  • Page 75
    ...25, 2011. Stock Repurchase Program On May 5, 2011, the Board of Directors of the Company authorized a share repurchase plan for fiscal year 2011. Under this authorization, the Company may repurchase common stock to offset dilution from employee equity grants and stock purchases, at an aggregate cost...

  • Page 76
    ...number of years of employment. The severance pay liability of the Company to these employees reflects the undiscounted amount of the liability. The liability is partly covered by insurance policies and by regular deposits to severance pay funds. The Company records changes in the severance liability...

  • Page 77
    ... allowance, changes in accruals related to the unrecognized tax benefit liabilities, permanent differences arising from stock-based compensation, non-deductible, intangible asset amortization and utilization of stock option related loss carryforwards recorded in equity. The 2011 recovery of income...

  • Page 78
    ... the sale of certain assets between our whollyowned subsidiaries. GAAP requires the tax expense associated with gains on such inter-company transactions to be recognized over the estimated life of the related assets. Accordingly prepaid tax expenses were recorded in the years ended December 31, 2011...

  • Page 79
    ..., Channel Storage Products, and Wireless Infrastructure and Networking Products. All operating segments noted above have been aggregated into one reportable segment because they have similar long-term economic characteristics, products, production processes, types or classes of customers and methods...

  • Page 80
    ..., 2009 Long-lived assets Canada United States Israel Other Total $ $ 12,685 7,450 3,885 3,775 27,795 $ $ 12,608 7,014 5,422 2,656 27,700 $ $ 10,147 3,931 3,796 3,628 21,502 During 2011, the Company had two end customers whose purchases represented 10% or more of net revenues. In 2010 and...

  • Page 81
    ... NOTE 18. COMPREHENSIVE INCOME The components of comprehensive income, net of tax, are as follows: Year Ended (in thousands) December 31, 2011 December 26, 2010 December 27, 2009 Net income Other comprehensive (loss) income: Change in net unrealized gains on investments, net of tax of $211 in...

  • Page 82
    ... officer, as appropriate to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. Management's Annual Report on Internal Control...

  • Page 83
    Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of PMC-Sierra, Inc. We have audited the internal control over financial reporting of PMC-Sierra, Inc. and subsidiaries (the "Company") as of December 31, 2011, based on criteria ...

  • Page 84
    Table of Contents ITEM 9B. None. OTHER INFORMATION. 83

  • Page 85
    ... in the sections entitled "Election of Directors", "Code of Business Conduct and Ethics", "Executive Officers", and "Section 16(a) Beneficial Ownership Reporting Compliance" in our Proxy Statement for the 2012 Annual Stockholder Meeting. ITEM 11. EXECUTIVE COMPENSATION. The information required by...

  • Page 86
    ... Change of Control and Severance Agreements" in our Proxy Statement for the 2012 Annual Stockholder Meeting. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. The information required by this Item is incorporated by reference from our Proxy Statement for the 2012 Annual Stockholder Meeting. PART...

  • Page 87
    ... Plan of Merger by and among PMCSierra, Inc., Rosewood Acquisition Corp., Wintegra, Inc. and Concord (k.t.) Venture Management Ltd., as Stockholders' Agent, dated as of October 21, 2010. Amended and Restated Certificate of Incorporation of PMC-Sierra, Inc., as amended on May 5, 2011 Certificate of...

  • Page 88
    ... Taiwan 10-K Semiconductor Manufacturing Corporation. 10.13 Sixth Amendment to Building Lease Agreement between PMC-Sierra, Ltd. and Production Court 10-Q Property Holdings Inc. 10.14 Amendment for Purchase and Sale of Real Property between WHTS Freedom Circle Partners II, L.L.C. 10-Q and PMC-Sierra...

  • Page 89
    ...filed separately with the Commission. Indicates management compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(c) of Form 10K. Refer to Note 17 of the consolidated financial statements included in Item 8 of Part II of this Annual Report. Refer to Signature page of...

  • Page 90
    ... requirements of Section 13 or 15(d) 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) /s/ Michael W. Zellner Michael W. Zellner Vice President, (duly authorized...

  • Page 91
    ... N. Nottenburg President, Chief Executive Officer (Principal Executive Officer) and Director Vice President, Chief Financial Officer (and Principal Accounting Officer) Chairman of the Board of Directors Director Director Director Director Director Director Director February 28, 2012 February...

  • Page 92
    Table of Contents SCHEDULE II-Valuation and Qualifying Accounts Charged to expenses or other accounts Balance at Beginning of year Write-offs Balance at end of year Allowance for doubtful accounts December 31, 2011 December 26, 2010 December 27, 2009 $ $ $ 1,888 1,259 1,148 91 $ $ $ 64 629 ...

  • Page 93
    ...Incorporation of PMC-Sierra, Inc. Amended and Restated Executive Employment Agreement Statement of Computation of Ratio of Earnings to Fixed Charges Subsidiaries of the Registrant Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm Certification of Chief Executive Officer...

  • Page 94
    ... amends and restates the Certificate of Incorporation of PMC-Sierra, Inc to read in its entirety as follows: ARTICLE I The name of this corporation is PMC-Sierra, Inc. (the "Corporation"). ARTICLE II The address of the Corporation's registered office in the State of Delaware is 1209 Orange...

  • Page 95
    ... other class or series of Preferred Stock; and (i) such other preferences, powers, qualifications, special or relative rights and privileges thereof as the Board of Directors of the Corporation, acting in accordance with this Certificate of Incorporation, may deem advisable and are not inconsistent...

  • Page 96
    ...other enterprise as a director, officer or employee at the request of the Corporation or any predecessor to the Corporation. 3. Amendments. Neither any amendment nor repeal of this Article VII, nor the adoption of any provision of the Corporation's Certificate of Incorporation inconsistent with this...

  • Page 97
    ... holders of a majority of the outstanding shares, containing the information described below, sent by registered mail to the president or chief executive officer, the board of directors shall determine a place and time for such meeting and a record date for the determination of stockholders entitled...

  • Page 98
    IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been signed by a duly authorized officer of the th Corporation this 5 day of May, 2011. PMC-SIERRA, INC. /s/ Alinka Flaminia By: Name: Alinka Flaminia Vice President, General Counsel and Title: Corporate Secretary 5

  • Page 99
    ...and Chief Executive Officer ("CEO") of the Company based at the Company's headquarters in Sunnyvale, CA and will report directly to the Company's Board of Directors (the "Board"). 3. Compensation. (a) Base Salary. During the Employment Period, Executive shall receive an annual gross base salary paid...

  • Page 100
    ... schedule and other terms for this grant will be in accordance with the Company's standard RSU grant agreements. (b) Stock Ownership Requirement. As part of its corporate governance initiatives, the Company has instituted stock ownership requirements for its executive officers and directors. Based...

  • Page 101
    ...benefit. (e) Employee Stock Purchase Plan (ESPP): Executive may participate in the Company's ESPP according to its terms and conditions. The Company reserves the right to alter or terminate ESPP benefits at any time in the future. 6. Indemnification. Effective as of the Start Date, the Company shall...

  • Page 102
    ...to the aggregate of: (i) one year of Executive's then current Base Salary; (ii) the amount of bonuses received by Executive under STIP (or any successor cash incentive program) for the last STIP periods totaling 12 months preceding the termination date; (iii) the cost of medical insurance and dental...

  • Page 103
    ... of the 6 month period measured from the date of his Separation from Service or (ii) the date of Executive's death, if the Executive is deemed at the time of such Separation from Service a "key employee" within the meaning of that term under Section 416(i) of the Internal Revenue Code of 1986, as...

  • Page 104
    ... with any change in control or ownership of the Company or the subsequent termination of his employment. Unless the Company and Executive otherwise agree in writing, any determination required under this Section 11 shall be made in writing in good faith by an independent registered public accounting...

  • Page 105
    ...one year after the date Executive's employment terminates, Executive will not, as an employee, agent, consultant, advisor, independent contractor, general partner, officer, director, stockholder, investor or in any other capacity directly engage in work for, provide services or assistance to, or own...

  • Page 106
    ... Federal Express or a similar commercial overnight service, or (iii) three days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to Company at its principal office, attention: General Counsel, or to Executive at his last principal residence known to...

  • Page 107
    ... (including the Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from my employment with the Company or the termination or Separation from Service with the Company, including any...

  • Page 108
    ...revocation of the Certificate of Incorporation and Bylaws or any change in the composition of the Company's Board of Directors or acquisition transaction relating to the Company), and (iii) an inducement to provide effective services to the Company as a director and/or officer, the Company wishes to...

  • Page 109
    ... execution of this Agreement, related to the fact that Indemnitee is or was a director or officer of the Company, or while a director or officer is or was serving at the request of the Company as a director, officer, employee, trustee, agent, or fiduciary of another foreign or domestic corporation...

  • Page 110
    ... approved by a majority of the directors on the Board who were directors immediately prior to such Change in Control) and Independent Counsel has approved its initiation. (c) Expense Advances. If so requested by Indemnitee, the Company shall advance (within ten business days of such request) any and...

  • Page 111
    ... of the directors on the Board who were directors immediately prior to such Change in Control) concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement or under applicable law or the Company's Certificate of Incorporation or Bylaws...

  • Page 112
    ... by commencing litigation in any court in the State of California or the State of Delaware having subject matter jurisdiction thereof seeking an initial determination by the court or challenging any determination by the Reviewing Party or any aspect thereof. The Company hereby consents to service of...

  • Page 113
    ... directors on the Board who were directors immediately prior to such Change in Control), the employment of counsel by Indemnitee has been approved by the Independent Counsel, or (iv) the Company shall not in fact have employed counsel to assume the defense of such Proceeding, in each of which cases...

  • Page 114
    ... a Change in Control (other than a Change in Control approved by a majority of the directors on the Board who were directors immediately prior to such Change in Control) the Company shall, upon written request by Indemnitee, create a Trust for the benefit of the Indemnitee and from time to time upon...

  • Page 115
    ...successor (whether direct or indirect by purchase, merger, consolidation, or otherwise) to all, substantially all, or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this...

  • Page 116
    ..., certified or registered mail, return receipt requested, and addressed to the Company at: PMC-Sierra, Inc. 3975 Freedom Circle, Suite 100 Santa Clara, CA 95054 Attention: General Counsel and to Indemnitee at: home address on file with Human Resources. Notice of change of address shall be effective...

  • Page 117
    ... in the course of employment; (b) receive the Separation Benefits or Change of Control Benefits described in the Agreement; (b) unemployment; (c) state disability and/or workers' compensation insurance benefits; (d) my vested rights upon termination in certain of the Company's group benefit plans...

  • Page 118
    ... provisions of Section 1542 of the Civil Code of the State of California or any other similar state statute, which states as follows: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by...

  • Page 119
    EXECUTIVE HAS READ THIS GENERAL RELEASE AND IS AUTHORIZED TO SIGN IT. NO RIGHTS HEREIN ARE ASSIGNED TO ANY OTHER PERSON. EXECUTIVE HAS HAD THE OPPORTUNITY TO CONSULT WITH AN ATTORNEY OF HIS OWN CHOOSING BEFORE SIGNING IT AND SIGNS IT VOLUNTARILY: Signed: , 20 Executive's Signature: B-3

  • Page 120
    ...to, customers of the Company on whom I called or with whom I became acquainted during the term of my employment), software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances or other business information...

  • Page 121
    ... interest, I hereby grant to the Company a nonexclusive, royalty-free, fully paid-up, irrevocable, perpetual, worldwide license to make, have made, modify, use and sell such Prior Invention as part of or in connection with such product, process or service, and to practice any method related thereto...

  • Page 122
    ... the criteria in California Labor Code Section 2870 and not otherwise disclosed on Schedule A. 3. Conflicting Employment. I agree that, during the term of my employment with the Company, I will not engage in any other employment, occupation or consulting directly related to the business in which the...

  • Page 123
    ... (INCLUDING THE COMPANY AND ANY EMPLOYEE, OFFICER, DIRECTOR, SHAREHOLDER OR BENEFIT PLAN OF THE COMPANY IN THEIR CAPACITY AS SUCH OR OTHERWISE) ARISING OUT OF, RELATING TO, OR RESULTING FROM MY EMPLOYMENT WITH THE COMPANY OR THE TERMINATION OF MY EMPLOYMENT WITH THE COMPANY, INCLUDING ANY BREACH...

  • Page 124
    ... FAMILY RIGHTS ACT, THE CALIFORNIA LABOR CODE, CLAIMS OF HARASSMENT, DISCRIMINATION OR WRONGFUL TERMINATION AND ANY STATUTORY CLAIMS. I FURTHER UNDERSTAND THAT THIS AGREEMENT TO ARBITRATE ALSO APPLIES TO ANY DISPUTES THAT THE COMPANY MAY HAVE WITH ME. B. Procedure. I AGREE THAT ANY ARBITRATION...

  • Page 125
    ...State of California. I hereby expressly consent to the personal jurisdiction of the state and federal courts located in California for any lawsuit filed there against me by the Company arising from or relating...in writing signed by the President of the Company and me. Any subsequent change or changes ...

  • Page 126
    Schedule A to Confidential Information, Invention Assignment and Arbitration Agreement LIST OF PRIOR INVENTIONS AND ORIGINAL WORKS OF AUTHORSHIP Title Date Identifying Number or Brief Description X No inventions or improvements Additional Sheets Attached Signature of Employee: Print Name of ...

  • Page 127
    ...inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or (2) Result from any work performed by the employee for the employer. (b) To the extent...

  • Page 128
    ... Information, Invention Assignment and Arbitration Agreement PMC-SIERRA, INC. TERMINATION CERTIFICATION This is to certify that I do not have in my possession, nor have I failed to return, any devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings...

  • Page 129
    Exhibit 12.1 PMC-SIERRA, INC. STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Year Ended December 31, 2011 December 26, 2010 December 27, 2009 December 28, 2008 December 30, 2007 Earnings: Income (loss) before income taxes and before income from equity investees Fixed charges: ...

  • Page 130
    ... (All 100% Owned) Subsidiaries of the Registrant State or Other Jurisdiction of Incorporation PMC-Sierra Ltd. PMC-Sierra Israel, Ltd. PMC-Sierra US, Inc. PMC-Sierra International Sdn. Bhd. Wintegra, Inc. British Columbia, Canada Herzliya, Israel Delaware, USA Penang, Malaysia Texas, USA

  • Page 131
    ... statements and financial statement schedules of PMC-Sierra Inc., and the effectiveness of internal control over financial reporting appearing in this Annual Report on Form 10-K of PMC-Sierra Inc. for the year ended December 31, 2011. /s/ Deloitte & Touche LLP Vancouver, Canada February 28, 2012

  • Page 132
    ... of the end of the period covered by this report based on such evaluation; and Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an...

  • Page 133
    ... of the end of the period covered by this report based on such evaluation; and Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an...

  • Page 134
    Exhibit 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED ... my capacity as an officer of PMC-Sierra, Inc. ("PMC"), that, to my knowledge, this Annual Report of PMC on Form 10-K for the annual period ended December 31, 2011 fully complies with the requirements...

  • Page 135
    Exhibit 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT...in my capacity as an officer of PMC-Sierra, Inc. ("PMC"), that, to my knowledge, this Annual Report of PMC on Form 10-K for the annual period ended December 31, 2011, fully complies with the ...