PMC - Sierra, Inc. (NASDAQ:PMCS)
May 01, 2013 12:00 pm ET
Gregory S. Lang - Chief Executive Officer, President and Director
Alinka Flaminia - Vice President, General Counsel and Corporate Secretary
Gregory S. Lang
Good morning, ladies and gentleman. I'm Greg Lang, President and Director -- President, CEO and Director of PMC. On behalf of the board and PMC management team, welcome and thank you for joining us here in Sunnyvale or listening to the webcast of PMC's 2013 Annual Shareholders Meeting. As a reminder to our audience, please turn off your cellphones if you haven't done so already. First of all, I'd like to start with introductions of our Board of Directors who are present today. Jon Judge, Chairman of the Board and Chair of the Compensation Committee; Ric Belluzzo, who's a Member of the Audit Committee and Nominating and Corporate Governance Committee; Mike Farese, Chairman of the Nominating and Corporate Governance Committee and Member of the Comp Committee; Mike Klayko, Member of the Compensation Committee; Bill Kurtz, Chairman of the Audit Committee; Richard Nottenburg, Member of the Audit Committee; and Jim Diller, Vice Chairman of the Board who is attending by telephone.
Before our Corporate Secretary conducts the formal part of the meeting, I have a few comments about 2012 and 2013 to date. I'll begin with our financial performance for 2012. 2012, we reported annual revenues of $531 million compared to $654 million in 2011. We generated $77 million -- $77.5 million in non-GAAP operating income 2012, which yielded an operating margin of 15%. 2012 was a challenging year. PMC's business was impacted by macroeconomic headwinds, weaker spending and slower-than-expected ramp of OTN and Metro Networks. Despite these challenges, we maintained the solid level of profitability of 15% operating income and was an excellent year from an execution standpoint.
We delivered best-in-class products when major designs tightly controlled our operating expenses, all of which provided excellent leverage as our markets recover. With the side of confidence in our company's long-term financial outlook and growth opportunities, the board authorized the company's first ever accelerated stock buyback program. The total number of shares repurchased in 2012 is approximately 33.7 million and represented 15% of PMC's total shares outstanding as of May 2, 2012. Even with this $200 million invested in buybacks, our balance sheet remains strong with net cash of $273 million at the end of 2012.
As we entered 2013, I'd like to share some thoughts on significant industry trends that are driving large opportunities, particularly in Big Data and describe how PMC is positioned well to capitalize on this major growth opportunities. Big Data represents an enormous opportunity for PMC. The world is creating massive volumes of datas that are difficult to move, store and process efficiently. In a recent 2013 study, Cisco Systems -- by Cisco Systems, they concluded that mobile network speeds will increase by 7x and average mobile network connections will exceed 4 megabits per second in 2017. In 2012, video traffic exceeded data traffic for the first time on the mobile network and the use of video on these mobile devices is still in its infancy. The influx of data represented a massive shift that was creating a strain on storage, optical and mobile networks. Given the rapidly increasing network demand, PMC is playing a major role in enabling our customers to expand their networks to better access, move and store large quantities of data and video, trends that we expect to continue well into the future.
Last week, we announced our first quarter 2013 earnings, reporting $13.4 million of non-GAAP operating income on revenues of $125.2 million and provided an outlook for revenue growth in the range of 1% to 7% in the second quarter of the year.
We're encouraged by 2 quarters of positive book-to-bill and the revenue growth is anticipated in Q2. Today, our business is focused on transforming networks that connect, move and store Big Data. We believe the fundamental drivers for our main growth areas and storage networks, Flash controllers, OTN networks, mobile backhaul and radio head solutions remain firmly intact. Firmly, we believe our design-win position in each of these segments will allow us to grow shares in the next few years. In summary, while the pace of the market is hard to predict, market recovery is hard to predict, we remain focused on our mission at multiple significant growth opportunities to pursue in the coming years. And now I'll turn the meeting over to Alinka Flaminia, Vice President and General Counsel and Corporate Secretary to make introductions to our executive officers in attendance and to conduct the formal part of the meeting.
Thank you. First, please note that Mr. Lang’s remarks on the state of the business contain forward-looking statements, which are subject to known and unknown risk and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements including, but not limited to, risks described in PMC-Sierra’s SEC filing. PMC-Sierra undertakes no obligation to update any forward-looking statements. Mr. Lang’s remarks also included certain non-GAAP financial measures, which are reconciled to the most directly comparable GAAP financial measures in our financial news releases posted on the Investor Page of our website at pmcs.com.
Executives here today include Steve Geiser, Vice President, Finance and Chief Financial Officer, who joined us in November of last year; Colin Harris, Vice President, Chief Operating Officer and the General Manager of the Carrier Business Unit; Rob Liszt, Vice President of World Wide Sales; Ra'ed O. Elmurib, Vice President, Corporate Development and General Manager of the Microprocessor Products Division; Daryn Lau, Vice President, New Business Initiative; and Travis Karr, Vice President, General Manager of the Enterprise Storage Division. Also with us today is Beverly Powell, a representative of Deloitte LLP, the company's independent auditors.
And now we will begin the formal part of today’s meeting. The proxy solicitor has informed me that the time for submitting proxies has ended. We will cover the meeting agenda items first and then vote. Any stockholders of record who wish to vote in person may do so.
The formal matters on the agenda are: number one, the election of directors to serve until the 2014 Annual Meeting of Stockholders and until any successor has been elected and qualified; number two, ratification of Deloitte LLP as PMC-Sierra's independent auditors for fiscal 2013; and number three, to approve in a nonbinding vote the compensation of our named executive officers as described in our proxy.
The Board of Directors fixed the close of business on March 6, 2013, as the record date for the determination of stockholders entitled to vote at this meeting. On the record date, the company had approximately 203,209,819 shares of common stock outstanding. I have proof by affidavit that notice of the Annual Meeting of Stockholders was properly given and that notice of annual meeting along with the proxy statement and proxy were furnished on or about March 15 to all stockholders of record. The affidavit, together with the copies of the notice, proxy statements and proxy will be filed with the minutes of this meeting.
PMC-Sierra has appointed John Depinto of Alliance Advisors LLC as our Inspector of Election. The Inspector of Elections has signed an oath of office, which will be filed with the minutes of this meeting. The Inspector of Elections has informed me that a majority of the votes entitled to be cast constituting a quorum are represented at this meeting by proxy or in person. Therefore, the meeting is duly constituted and we may proceed.
Let me review voting procedures. Votes would be cast by ballot. Ballots have already been provided to the proxy holders named in the proxy statement for this meeting. If you have already delivered a proxy and do not wish to change your vote, it is not necessary to complete another ballot. Your vote will be counted. Is there anyone here today who has not given proxies or has not revoked their proxies? Or anyone who has been appointed by a stockholder of record who has not yet voted?
Okay. Everyone has voted. We don't have anyone at the meeting who intends to vote. We will now move to the election of directors. The company has nominated 8 directors to the elected at this meeting. The following 8 directors are nominated by PMC's Board of Directors: Richard Belluzzo, James Diller Sr., Michael Fareze, Jonathan Judge, Michael Clayco, William Kurtz, Gregory Lang and Richard Nottenburg.
Is there a motion to elect the company's nominees for directors? Is there a second? Thank you.
The next matter is a stockholder ratification of the appointment of Deloitte LLP as PMC-Sierra's independent auditors for the 2013 fiscal year. Are there any questions? Is there a motion to ratify the appointment of Deloitte LLP as the company's independent auditors? Is there a second? Thank you.
The last matter is the stockholder -- for a stockholder approval of a nonbinding vote of the compensation of our named executive officers as described in our proxy statement. This vote is commonly referred to as say-on-pay vote. Are there any questions? Is there a motion to approve in a nonbinding vote the compensation of our named executive officers as described in the proxy statement? Is there a second? Thank you.
The proxies and ballots for each of the 3 matters presented today will be tabulated by the Inspector of Election. The company will also report these results in the filing with the SEC. Mr. Inspector of Elections, do you have results to report? Please give your report.
Thank you. The final report of the Inspector of Elections shall be filed with the minutes of this meeting. If there is no further business to come for this meeting, do I have a motion to adjourn? Is there a second? Thank you. The 2013 Annual Meeting of Stockholders is now concluded.
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