10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of 1934

for the quarterly period ended September 26, 2015

or  

☐ Transition Report Pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of 1934.

For the transition period fromto

Commission File Number 0-19084

PMC-Sierra, Inc.

(Exact name of registrant as specified in its charter)

A Delaware Corporation - I.R.S. NO. 94-2925073

1380 Bordeaux Drive

Sunnyvale, CA 94089

(408) 239-8000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  ☒   No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  ☒   No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reportingcompany	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐   No  ☒

As of November 2, 2015, the registrant had 198,759,058 shares of Common Stock, $0.001 par value, outstanding.

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements
	- Condensed Consolidated Statements of Operations	3
	- Condensed Consolidated Statements of Comprehensive Income (Loss)	4
	- Condensed Consolidated Balance Sheets	5
	- Condensed Consolidated Statements of Cash Flows	6
	- Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	25
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	37
Signatures		38

2

Part I—FINANCIAL INFORMATION

Item 1—Financial Statements (Unaudited)

PMC-Sierra, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except for per share amounts)

	Three Months Ended				Nine Months Ended
	September 26,		September 27,		September 26,		September 27,
	2015		2014		2015		2014
Net revenues	$	133,574	$	135,462	$	391,412	$	388,752
Cost of revenues (excluding amortization of purchased intangible assets below)		37,999		40,306		116,413		114,694
Gross profit		95,575		95,156		274,999		274,058
Research and development, net		47,277		48,441		151,976		147,977
Selling, general and administrative		28,050		29,265		88,589		87,596
Amortization of purchased intangible assets		9,172		9,948		27,758		32,225
Income from operations		11,076		7,502		6,676		6,260
Other income (expense):
Foreign exchange gain		2,412		899		4,058		642
Interest and other financial income, net		108		198		589		321
Gain on investment securities and other investments		70		12		127		87
Amortization of debt issuance costs		(51)		(51)		(153)		(153)
Accretion of discount on short-term and long-term obligation		(170)		—		(560)		—
Income before income taxes		13,445		8,560		10,737		7,157
Provision for income taxes		(6,727)		(3,087)		(7,943)		(9,405)
Net income (loss)	$	6,718	$	5,473	$	2,794	$	(2,248)
Net income (loss) per common share - basic and diluted	$	0.03	$	0.03	$	0.01	$	(0.01)
Shares used in per share calculation - basic		194,562		197,613		196,848		196,305
Shares used in per share calculation - diluted		196,865		200,744		201,018		196,305
See notes to the interim condensed consolidated financial statements.

3

PMC-Sierra, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

	Three Months Ended				Nine Months Ended
	September 26,		September 27,		September 26,		September 27,
	2015		2014		2015		2014
Net income (loss)	$	6,718	$	5,473	$	2,794	$	(2,248)
Other comprehensive income (loss):
Change in fair value of derivatives, net of tax of nil, $227, nil, and $41		(2,707)		(745)		(687)		(217)
Change in fair value of investment securities, net of tax of nil, $47, nil, and $13		(13)		(134)		229		(37)
Other comprehensive loss		(2,720)		(879)		(458)		(254)
Comprehensive income (loss)	$	3,998	$	4,594	$	2,336	$	(2,502)
See notes to the interim condensed consolidated financial statements.

4

PMC-Sierra, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

	September 26,		December 27,
	2015		2014
ASSETS:
Current assets:
Cash and cash equivalents	$	73,130	$	112,570
Short-term investments		42,347		45,885
Accounts receivable, net of allowance for doubtful accounts    of$735 (2014 - $795)		62,269		55,414
Inventories, net		32,846		37,949
Prepaid expenses and other current assets		12,020		16,473
Income taxes receivable		1,147		1,968
Prepaid income taxes		—		51
Deferred income tax assets		5,211		5,442
Total current assets		228,970		275,752
Investment securities		134,400		107,509
Investments and other assets		6,328		7,683
Prepaid income taxes		93		42
Property and equipment, net		37,871		37,311
Goodwill		283,239		283,239
Intangible assets, net		116,945		143,680
Deferred income tax assets		13,218		13,412
Income taxes receivable		440		457
	$	821,504	$	869,085
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable	$	18,261	$	23,360
Accrued liabilities		55,172		74,135
Credit facility		30,000		—
Income taxes payable		626		1,062
Liability for unrecognized tax benefit		14,001		16,076
Deferred income tax liabilities		7,677		7,644
Deferred income		4,515		4,530
Total current liabilities		130,252		126,807
Long-term obligations		28,396		36,305
Deferred income tax liabilities		56,182		53,493
Liability for unrecognized tax benefit		27,107		25,244
PMC special shares convertible into 203 (2014 - 278) shares    of common stock		475		745
Stockholders’ equity:
Common stock, par value $0.001:900,000 shares authorized; 195,642 shares issued and outstanding (2014 - 199,518)		196		200
Additional paid in capital		1,599,345		1,595,609
Accumulated other comprehensive loss		(2,813)		(2,355)
Accumulated deficit		(1,017,636)		(966,963)
Total stockholders' equity		579,092		626,491
	$	821,504	$	869,085
See notes to the interim condensed consolidated financial statements.

5

PMC-Sierra, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine Months Ended
	September 26,		September 27,
	2015		2014
Cash flows from operating activities:
Net income (loss)	$	2,794	$	(2,248)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		45,166		48,739
Stock-based compensation		17,994		16,334
Unrealized foreign exchange gain, net		(8,179)		(2,372)
Net amortization of premiums and accrued interest on investments		587		628
Asset impairments		252		770
Gain on disposal of property and equipment		(63)		—
Gain on investment securities and other investments		(64)		(86)
Accretion of discount on short-term and long-term obligations		560		—
Amortization of debt issuance costs		153		153
Gain on exit of lease agreement		(696)		—
Changes in operating assets and liabilities:
Accounts receivable, net		(6,855)		(934)
Inventories, net		5,103		(3,514)
Prepaid expenses and other current assets		2,306		4,072
Accounts payable and accrued liabilities		(9,732)		(6,699)
Deferred taxes and income taxes payable		7,480		8,608
Deferred income		(15)		(1,980)
Net cash provided by operating activities		56,791		61,471
Cash flows from investing activities:
Cash paid in connection with business acquisition		—		(10,000)
Purchases of property and equipment		(13,724)		(11,175)
Purchase of intangible assets		(4,072)		(1,167)
Redemption of short-term investments		28,131		4,920
Disposals of investment securities and other investments		40,446		37,936
Purchases of investment securities and other investments		(92,577)		(67,727)
Net cash used in investing activities		(41,796)		(47,213)
Cash flows from financing activities:
Installment payment in connection with previous business acquisition		(18,000)		—
Proceeds from credit facility		102,000		30,000
Repayment of credit facility		(72,000)		(60,000)
Proceeds from issuance of common stock		36,982		17,924
Repurchases of common stock		(102,108)		(11,496)
Net cash used in financing activities		(53,126)		(23,572)
Effect of exchange rate changes on cash and cash equivalents		(1,309)		(784)
Net decrease in cash and cash equivalents		(39,440)		(10,098)
Cash and cash equivalents, beginning of the period		112,570		100,038
Cash and cash equivalents, end of the period	$	73,130	$	89,940
Supplemental disclosures of cash flow information:
Cash paid for interest	$	(483)	$	(276)
Cash payments made for income taxes, net of refunds received	$	(827)	$	(747)
See notes to the interim condensed consolidated financial statements.

6

PMC-Sierra, Inc.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1.  Summary of Significant Accounting Policies  

Description of business.  PMC-Sierra, Inc. (the “Company” or “PMC”) is a fabless semiconductor and software solution innovator transforming networks that connect, move, and store Big Data. The Company designs, develops, markets and supports semiconductor, embedded software, and board level solutions by integrating its mixed-signal, software and systems expertise through a network of offices in North America, Europe and Asia. 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.

Basis of presentation. The accompanying interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) and United States Generally Accepted Accounting Principles (“GAAP”).  Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules or regulations.  These interim condensed consolidated financial statements are unaudited, but reflect all adjustments which are normal and recurring in nature and are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented.  These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in the Company’s Annual Report on Form 10-K for the year ended December 27, 2014 filed with the SEC on February 24, 2015.  The results of operations for the interim periods are not necessarily indicative of results to be expected in future periods.  Fiscal 2015 will consist of 52 weeks and will end on Saturday, December 26, 2015.  Fiscal 2014 consisted of 52 weeks and ended on Saturday, December 27, 2014.  The third quarter of each of 2015 and 2014 consisted of 13 weeks.  The Company’s reporting currency is the United States (“U.S.”) dollar and presented in thousands unless otherwise stated.

Estimates. The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Estimates are used for, but not limited to, stock-based compensation, purchase accounting assumptions including those used to calculate the fair value of intangible assets and goodwill, the valuation of investments, accounting for doubtful accounts, inventory reserves, depreciation and amortization, asset impairments, revenue recognition, sales returns, warranty costs, restructuring costs, income taxes including uncertain tax positions, accounting for employee benefit plans, and contingencies.  Actual results could differ materially from these estimates.

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.  This ASU requires retrospective adoption and will be effective for us beginning in our first quarter of 2017.  Early adoption is permitted. ASU 2015-13 is not expected to have a material impact on the Company’s condensed consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, or ASU 2014-09, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The standard will replace most existing revenue recognition guidance in GAAP when it becomes effective. The standard allows for either full retrospective or modified retrospective adoption method. In July 2015, the FASB deferred the effective date to January 1, 2018 with early adoption beginning January 1, 2017.  The Company is currently evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method, adoption date, or determined the effect of the standard on its ongoing financial reporting.

In July 2015, the FASB issued ASU 2015-11, Inventory - Simplifying the Measurement of Inventory (Topic 330). ASU 2015-11 requires inventory to be subsequentlymeasured using the lower of cost and net realizable value, thereby eliminating the market value approach. Net realizable value is defined as the “estimated selling prices inthe ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.” ASU 2015-11 is effective for reporting periods beginningafter December 15, 2016 and is applied prospectively. Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our financialstatements and disclosure.

7

NOTE 2. Business Combinations  

Acquisition of RAID Software License

On September 4, 2014 (“Effective Date”), PMC completed a transaction agreement with Hewlett-Packard Company (“HP”) to license core HP Smart Array (“RAID”) software, firmware and management technology (the “Transaction”) for total acquisition consideration of $52 million, accounted for using the acquisition method. With this technology, as well as with certain key employees who worked for HP as lead RAID software development engineers and who were transferred to PMC, PMC can provide more system value to new and existing enterprise, Hyperscale data center and channel customers.

The $52 million total acquisition consideration is payable in installments.  An initial payment of $10 million was made on the Effective Date and $18 million was paid on January 10, 2015.  The remaining $24 million is payable in two installments of $12 million each on January 10, 2016 and January 10, 2017.  Such installment payments are classified as financing activities in our condensed consolidated statement of cash flows.

Other Agreement with HP

Upon the closing of the Transaction, the Company also entered into an agreement with HP related to services and non-recurring engineering (“NRE”) which provides the framework for the development of future generations of RAID software for HP for a period of approximately two years from the Effective Date. During this period, HP will make cost reimbursement payments to the Company totaling $25 million, which are receivable in installments through April 2016. The Company received $3.3 million of the $25 million total cost reimbursement payments from HP in the third quarter of 2015 ($9.8 million in the first nine months of 2015 and $13.8 million since the Effective Date). Payments to the Company in accordance with this agreement are recorded as a reduction of research and development expense.

NOTE 3.  Derivative Instruments  

The Company generates revenues in U.S. dollars but incurs a portion of its operating expenses in foreign currencies, primarily the Canadian dollar.  To minimize the short-term impact of foreign currency fluctuations on the Company’s operating expenses, the Company purchases forward currency contracts.  The Company’s accounting policies for these instruments are based on whether the instruments are classified as designated or non-designated hedging instruments. The Company records all derivatives in the Condensed Consolidated Balance Sheets at fair value. The changes in the fair values of the effective portions of designated cash flow hedges are recorded in Accumulated other comprehensive income (loss) until the hedged item is recognized in earnings. Derivatives that are not designated as hedging instruments and the ineffective portion of cash flow hedges are adjusted to fair value through earnings. The Company de-designates its cash flow hedges when the forecasted hedged transactions are realized or it is probable the forecasted hedged transactions will not occur in the initially identified time period. At such time, the associated gains and losses deferred in Accumulated other comprehensive income (loss) are reclassified immediately into earnings and any subsequent changes in the fair value of such derivative instruments are immediately recorded in earnings. The fair value of our derivative instruments are included in prepaid expenses and other assets or accrued liabilities.

The Company did not recognize any net gains or losses related to the de-designation of discontinued cash flow hedges during the nine months ended September 26, 2015.  As at September 26, 2015 the Company had 79 forward currency contracts outstanding (September 27, 2014 - 84), all with maturities of less than 15 months, which qualified and were designated as cash flow hedges.  As of September 26, 2015, the U.S. dollar notional amount of these contracts was$48.3 million (September 27, 2014 - $35.5million), and the contracts had an aggregate fair value loss of $2.7 million and $0.7 million for the three months ended September 26, 2015 and September 27, 2014, respectively (aggregate fair value loss of 0.7 million and $0.2 million for the nine months ended September 26, 2015 and September 27, 2014, respectively).  These were recorded in Accumulated other comprehensive loss, net of taxes.

8

NOTE 4.  Fair Value Measurements   

ASC Topic 820 specifies a hierarchy of valuation techniques which requires an entity to maximize the use of observable inputs that may be used to measure fair value.  The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows:

Level 1: Inputs are based on quoted market prices for identical assets and liabilities in active markets at the measurement date.

Level 2: Inputs include similar quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Pricing inputs include significant inputs that are generally not observable in the marketplace. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

The Company’s valuation techniques used to measure the fair value of money market funds and other financial instruments were derived from quoted prices in active markets for identical assets. The valuation techniques used to measure the fair value of all other financial instruments, all of which have counterparties with high credit ratings, were valued based on quoted market prices or model driven valuations using significant inputs derived from or corroborated by observable market data.

In the third quarter of 2015, the Company reviewed and evaluated the observable market pricing data and volume of trading activity used in determining Level 1 and Level 2 assets and classified $9.5 million of investments as Level 2 that were reported as Level 1 at December 27, 2014.  The Company also classified $10.1 million of investments as Level 1 that were reported as Level 2 at December 27, 2014.  The Company’s derivative instruments are classified as Level 2 as of September 26, 2015 and December 27, 2014, as they are not actively traded and are valued using pricing models that use observable market inputs.  There were no Level 3 assets or liabilities at September 26, 2015 or December 27, 2014.

Assets/Liabilities Measured and Recorded at Fair Value on a Recurring Basis

Financial assets measured on a recurring basis as at September 26, 2015 and December 27, 2014, are summarized below:  

	Fair value,
	September 26, 2015
(in thousands)	Level 1		Level 2
Assets:
Money market funds	$	4,040	$	—
Corporate bonds and notes		97,434		21,224
U.S. treasury and government agency notes		46,835		—
Foreign government and agency notes		1,509		9,514
U.S. state and municipal securities		151		80
Total assets	$	149,969	$	30,818
	Fair value,
	December 27, 2014
(in thousands)	Level 1		Level 2
Assets:
Money market funds	$	8,729	$	—
Corporate bonds and notes		88,401		17,030
U.S. treasury and government agency notes		38,283		1,387
Foreign government and agency notes		537		7,525
U.S. state and municipal securities		—		231
Total assets	$	135,950	$	26,173
These assets are included in Cash and cash equivalents, Short-term investments, and Long-term investment securities.  See Note 7. Investment Securities.

9

Financial liabilities measured on a recurring basis are summarized below:  

	Fair value,
	September 26, 2015
(in thousands)	Level 2
Current liabilities:
Forward currency contracts	$	2,744
	Fair value,
	December 27, 2014
(in thousands)	Level 2
Current liabilities:
Forward currency contracts	$	1,907
These are included in Accrued liabilities.

There were no assets or liabilities measured and recorded at fair value on a non-recurring basis as of September 26, 2015.

NOTE 5.  Stock-Based Compensation  

The Company has two stock-based compensation plans.  Neither of the Company’s stock-based awards under these plans are classified as liabilities.  The Company recorded stock-based compensation expense for the three and nine months ended September 26, 2015 and September 27, 2014 as follows:

	Three Months Ended				Nine Months Ended
	September 26,		September 27,		September 26,		September 27,
(in thousands)	2015		2014		2015		2014
Cost of revenues	$	266	$	226	$	803	$	681
Research and development, net		2,266		1,990		7,510		6,540
Selling, general and administrative		2,658		3,012		9,681		9,113
Total	$	5,190	$	5,228	$	17,994	$	16,334

 The Company received cash of $37.0 million related to the issuance of common stock during the nine months ended September 26, 2015 (September 27, 2014 - $17.9 million).

Equity Award Plans

The Company issues its equity awards under the provisions of its equity plans. Stock options are granted with an exercise price equal to the closing market price of the Company’s common stock at the grant date. The options generally expire within 10 years and vest over four years.

Activity under the option plans during the nine months ended September 26, 2015 was as follows:

	Number of options	Weighted average exercise price per share		Weighted average remaining contractual term (years)		Aggregate intrinsic value
Outstanding, December 27, 2014	18,316,720	$	7.53	4.41	$	32,598,999
Granted	847,892	$	6.73
Exercised	(4,017,595)	$	6.66
Forfeited	(136,344)	$	6.55
Expired	(1,025,118)	$	9.48
Outstanding, September 26, 2015	13,985,555	$	7.60	4.27	$	2,734,065
Vested and expected to vest, September 26, 2015	13,731,955	$	7.62	4.18	$	2,722,645
Exercisable, September 26, 2015	12,046,856	$	7.75	3.53	$	2,509,015

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the quoted price of the Company’s common stock for the options that were in-the-money at September 26, 2015.  Total forfeitures recorded amounted to $0.7 million and $1.8 million during the nine months ended September 26, 2015, and September 27, 2014, respectively.

10

The fair value of the Company’s stock option awards granted to employees is estimated using a lattice-binomial valuation model.  This model considers the contractual term of the option, the probability that the option will be exercised prior to the end of its contractual life, and the probability of termination or retirement of the option holder in computing the value of the option.   The model requires the input of highly subjective assumptions including the expected stock price volatility and expected life.

The Company’s estimates of expected volatilities are based on a weighted historical and market-based implied volatility.  The Company uses historical data to estimate option exercises and employee terminations within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes.  The expected term of options granted is based on historical activity and represents the period of time that granted options are expected to be outstanding.  The risk-free rate for periods within the expected life of the stock option is based on the U.S. Treasury yield curve in effect at the time of the grant.  

The fair values of the Company’s stock option awards were calculated for expense recognition using an estimated forfeiture rate, assuming no expected dividends and using the following weighted average assumptions:

	Nine Months Ended
	September 26,	September 27,
	2015	2014
Expected life (years)	5.9	5.8
Expected volatility	30%	33%
Risk-free interest rate	1.8%	1.8%

The weighted average grant-date fair value per stock options granted during the nine months ended September 26, 2015 was $2.11 (September 27, 2014 - $2.29). The total intrinsic value of stock options exercised during the nine months ended September 26, 2015 was $9.6 million (September 27, 2014 - $2.3 million).

As of September 26, 2015, there was $3.5 million of total unrecognized compensation costs related to unvested stock options granted under the plans, which is expected to be recognized over an average period of 2.9 years.   

Restricted Stock Units  

The Company has various stock award plans that allow for the issuance of Restricted Stock Units (“RSUs”) to employees and directors. 

On February 25, 2015, the Company made its annual grant of RSU awards to Executives based on the second performance-based program tied to Non-GAAP operating income targets for 2015-2017. The total fair value of these 2015 grants was estimated at $3.8 million and will be recognized as compensation expense over the award’s vesting terms, with 34% vesting on February 25, 2016, 33% on February 25, 2017 and 33% vesting on February 25, 2018. On August 25, 2015, the Company made its annual grant of RSU awards to Executives. The performance metric applicable to the RSUs granted under the first program remain based on the degree of achievement of Total Shareholder Return (“TSR”) relative to Global Industry Classification Standards (“GICS’) Semiconductor Companies (8-Digit) for the Performance Period (July 1,  2015 - June 30, 2017). The total estimated $1.5 million fair value of these 2015 awards will be recognized as compensation expense over the award’s vesting terms, with 50% vesting on August 25, 2017 and 50% vesting on August 25, 2018.

A summary of RSU activity during the nine months ended September 26, 2015 is as follows:

	Restricted Stock Units	Weighted Average Remaining Contractual Term (years)			Aggregate intrinsic value
Unvested units at December 27, 2014	7,368,529		1.73	$	67,200,984
Awarded	3,492,249		-		—
Released	(2,242,344)		-		—
Forfeited	(712,317)		-		—
Unvested units at September 26, 2015	7,906,117		1.83	$	50,361,965
Restricted Stock Units expected to vest at September 26, 2015	6,784,932		1.73	$	43,220,018

11

The intrinsic value of RSUs vested during the nine months ended September 26, 2015 was $14.9 million. As of September 26, 2015, total unrecognized compensation expense, adjusted for estimated forfeitures, related to unvested RSUs was $41.0 million, which is expected to be recognized over the next 2.8 years.  

Employee Stock Purchase Plan (“ESPP”)

The Company’s 2011 Employee Stock Purchase Plan (the “2011 Plan”) was approved by stockholders at the 2010 Annual Meeting.  The 2011 Plan became effective on February 11, 2011.  Up to 12,000,000 shares of our Common Stock have been initially reserved for issuance under the 2011 Plan.   At the Company’s 2015 annual stockholders meeting, the stockholders approved an increase of 7,000,000 shares of Common Stock to the 2011 Plan.

During the nine months ended September 26, 2015, 1,727,159 shares were issued under the 2011 Plan at a weighted average price of $5.91 per share.  As of September 26, 2015, 2,653,049 shares were available for future issuance under the 2011 Plan compared to 4,380,208 as at December 27, 2014. The valuation inputs utilized to determine the grant date fair value per ESPP award granted were as follows:

	Nine Months Ended
	September 26,	September 27,
	2015	2014
Expected life (years)	0.5	0.5
Expected volatility	34%	35%
Risk-free interest rate	0.2%	0.1%

The weighted average grant date fair value per ESPP award granted during the first nine months of 2015 was $1.93.  The total intrinsic value of ESPP shares issued during the first nine months of 2015 was $3.7 million.   As of September 26, 2015, total unrecognized compensation costs, adjusted for estimated forfeitures, related to non-vested ESPP awards was $1.1 million which is expected to be recognized over the next four months.

NOTE 6.  Balance Sheet Items

a. Inventories.

Inventories (net of reserves of $7.2 million and $7.8 million at September 26, 2015 and December 27, 2014, respectively) were as follows:

	September 26,		December 27,
(in thousands)	2015		2014
Work-in-progress	$	15,655	$	17,438
Finished goods		17,191		20,511
	$	32,846	$	37,949

b. Product warranties.

The Company provides a limited warranty on most of its standard products and accrues for the estimated cost at the time of shipment.  The Company estimates its warranty costs based on historical failure rates and related repair or replacement costs and periodically reassess these estimates as actual warranty activities occur.  The changes in the Company’s accrued warranty obligations from December 27, 2014 to September 26, 2015, and from December 28, 2013 to September 27, 2014 were as follows:  

	Nine Months Ended
	September 26,		September 27,
(in thousands)	2015		2014
Balance, beginning of the period	$	1,756	$	2,163
Accrual for new warranties issued		512		371
Reduction for payments and product replacements		(372)		(533)
Adjustments related to revisions and changes in estimate of warranty accrual		(700)		(113)
Balance, end of the period	$	1,196	$	1,888

During the three months ended September 26, 2015, the Company revised its estimate of the warranty provision necessary for certain product failure obligations resulting in a reduction in warranty accrual of approximately $0.7 million as the risk of product

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failures associated with this provision was determined to be no longer probable.The Company’s accrual for warranty obligations is included in Accrued liabilities in the interim Condensed Consolidated Balance Sheet. 

c. 2015 Restructuring costs

During the second quarter of 2015, the Company began implementing a restructuring plan to reduce spending across the organization.  This has involved a reduction in force of approximately 200 employees worldwide and other targeted spending reductions.  In connection with this plan, the Company expects to incur charges of approximately $15 million to $16 million, including approximately $13 million to $14 million in charges related to employee severance and related compensation benefits and approximately $2 million in charges related to site closures, asset impairments, and completion costs.   The Company expects to complete activities under its cost reduction plan by end of the fourth quarter 2016.

Restructuring costs at the end of each period were as follows:

	Three Months Ended		Nine Months Ended
	September 26,		September 26,
(in thousands)	2015		2015
Employee severance and related compensation benefits (recoveries) expense:
Cost of revenues	$	(6)	$	1,158
Research and development, net		(80)		7,864
Selling, general and administrative		16		3,993
		(70)		13,015
Site closures and asset impairments		1,165		1,165
Total restructuring costs	$	1,095	$	14,180

The following summarizes the restructuring activity for the 2015 restructuring plan:

(in thousands)	Employee severance & related  benefits compensation		Site closures & assets impairment		Total
Accrued restructuring balance as of December 27, 2014	$	—	$	—	$	—
Additional accruals		13,488		1,165		14,653
Cash payments		(6,127)		(154)		(6,281)
Adjustments and non-cash charges		(921)		(792)		(1,713)
Accrued restructuring balance as of September 26, 2015	$	6,440	$	219	$	6,659

The accrued restructuring costs are expected to be settled and paid by end of the second quarter 2016 and were recorded in Accrued liabilities in the Company’s Condensed and Consolidated Balance Sheet.

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NOTE 7.  Investment Securities  

The Company’s available for sale investments, by investment type, consists of the following at September 26, 2015 and December 27, 2014:

	September 26, 2015
(in thousands)	Amortized Cost		Gross Unrealized Gains*		Gross Unrealized Losses		Fair Value
Cash equivalents:
Money market funds	$	4,040	$	—	$	—	$	4,040
Total cash equivalents		4,040		—		—		4,040
Short-term investments:
Corporate bonds and notes		32,879		958		(5)		33,832
US treasury and government agency notes		5,131		92		—		5,223
Foreign government and agency notes		3,012		51		(2)		3,061
US states and municipal securities		230		1		—		231
Total short-term investments		41,252		1,102		(7)		42,347
Long-term investment securities:
Corporate bonds and notes		84,866		75		(115)		84,826
US treasury and government agency notes		41,508		105		(1)		41,612
Foreign government and agency notes		7,962		4		(4)		7,962
Total long-term investment securities		134,336		184		(120)		134,400
Total	$	179,628	$	1,286	$	(127)	$	180,787
*Gross unrealized gains include accrued interest on investments of $0.6 million which are included in the Consolidated Statement of Operations.  The remainder of the gross unrealized gains and losses are included in the Consolidated Balance Sheet as Accumulated other comprehensive income (loss).
	December 27, 2014
(in thousands)	Amortized Cost		Gross Unrealized Gains*		Gross Unrealized Losses		Fair Value
Cash equivalents:
Money market funds	$	8,729	$	—	$	—	$	8,729
Total cash equivalents		8,729		—		—		8,729
Short-term investments:
Corporate bonds and notes		43,777		498		(16)		44,259
US treasury and government agency notes		1,010		79		—		1,089
Foreign government and agency notes		501		36		—		537
Total short-term investments		45,288		613		(16)		45,885
Long-term investment securities:
Corporate bonds and notes		61,357		28		(213)		61,172
US treasury and government agency notes		38,650		7		(76)		38,581
Foreign government and agency notes		7,563		1		(39)		7,525
US states and municipal securities		230		1		—		231
Total long-term investment securities		107,800		37		(328)		107,509
Total	$	161,817	$	650	$	(344)	$	162,123
*Gross unrealized gains include accrued interest on investments of $0.6 million which are included in the Consolidated Statement of Operations.  The remainder of the gross unrealized gains and losses are included in the Consolidated Balance Sheet as Accumulated other comprehensive income (loss).

As of September 26, 2015 and December 27, 2014, the fair value of certain of the Company’s available-for-sale securities was less than their cost basis.  Management reviews various factors in determining whether to recognize an impairment charge related to these unrealized losses, including the current financial and credit market environment, the financial condition, near-term prospects of the issuer of the investment security, the magnitude of the unrealized loss compared to the cost of the investment, length of time the

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investment has been in a loss position and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery of market value.  As of September 26, 2015, the Company determined that all the unrealized losses are temporary in nature and recorded them as a component of Accumulated other comprehensive income (loss).

Contractual maturities as of September 26, 2015 of the Company’s investment securities do not exceed three years.  The majority of the contractual maturities are two to three years, and the balance has maturities of one year or less.

NOTE 8. Credit Facility

As of September 26, 2015, the Company had an available revolving line of credit with a group of banks under which the Company may borrow up to $100 million, of which $30 million was drawn (December 27, 2014 - nil). The Company may request, from time to time, and subject to customary conditions, including receipt of commitments, that the revolving credit facility be increased by an aggregate amount not to exceed $150 million.  Interest payments are based on LIBOR plus margins, where margins range from 1.75% to 2.25% per annum based on the Company’s leverage ratio.  The revolving credit facility is available for general corporate purposes. The credit facility is collateralized by substantially all of the Company’s personal property. The Company’s obligations under the credit facility are jointly and severally guaranteed by material wholly-owned domestic subsidiaries of the Company.

On October 14, 2015, subsequent to the third quarter of 2015 balance sheet date, the Company repaid $5 million of the outstanding balance as of September 26, 2015.

NOTE 9.  Income Taxes  

The Company recorded a provision for income taxes of $6.7 million and $7.9 million for the three and nine months ended September 26, 2015, respectively.  The Company recorded a provision for income taxes of $3.1 million and $9.4 million for the three and nine months ended September 27, 2014, respectively.

The Company’s effective tax rate was 50% and 36% for the three months ended September 26, 2015 and September 27, 2014, respectively.  For the third quarter of 2015, the difference between the Company’s effective tax rate and the 35% federal statutory rate results primarily from changes in accruals related to unrecognized tax benefits and non-deductible amortization of intangible assets, partially offset by foreign earnings eligible for tax rates lower than the federal statutory rate.  For the third quarter of 2014, the difference between the Company’s effective tax rate and the 35% federal statutory rate results primarily from changes in accruals related to unrecognized tax benefits, non-deductible amortization of intangible assets, and amortization of prepaid taxes, partially offset by foreign earnings eligible for tax rates lower than the federal statutory rate and book losses that are not benefited for tax purposes. 

The Company’s effective tax rate was 74% and 131% for the nine months ended September 26, 2015 and September 27, 2014, respectively.  For the first nine months of 2015, the difference between the Company’s tax rate and the 35% federal statutory rate results primarily from changes in accruals related to unrecognized tax benefits and non-deductible amortization of intangible assets, partially offset by foreign earnings eligible for tax rates lower than the federal statutory rate.  For the first nine months of 2014, the difference between the Company’s tax rate and the 35% federal statutory rate results primarily from changes in accruals related to unrecognized tax benefits, non-deductible amortization of intangible assets, and amortization of prepaid taxes, partially offset by foreign earnings eligible for tax rates lower than the federal statutory rate and book losses that are not benefited for tax purposes.

 As of September 26, 2015 and December 27, 2014, the Company’s liability for unrecognized tax benefits on a world-wide consolidated basis was $41.1 million and $41.3 million, respectively. The ultimate recognition of an amount different from this estimate would affect the Company’s effective tax rate.

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NOTE 10.  Net Income (Loss) Per Share  

The following table sets forth the computation of basic and diluted net income (loss) per share:  

	Three Months Ended				Nine Months Ended
	September 26,		September 27,		September 26,		September 27,
(in thousands, except per share amounts)	2015		2014		2015		2014
Numerator:
Net income (loss)	$	6,718	$	5,473	$	2,794	$	(2,248)
Denominator:
Basic and diluted weighted average common shares outstanding (1)		194,562		197,613		196,848		196,305
Dilutive effect of employee stock options and awards		2,303		3,131		4,170		—
Diluted weighted average common shares outstanding (1)		196,865		200,744		201,018		196,305
Basic and diluted net income (loss) per share	$	0.03	$	0.03	$	0.01	$	(0.01)

(1) PMC-Sierra Ltd. special shares are included in the calculation of basic and diluted weighted average common shares outstanding.

In the nine months ended September 27, 2014, the Company had approximately 3.3 million of stock options and Restricted Stock Units that were not included in the diluted net loss per share because they would have been anti-dilutive.

NOTE 11.  Stock Repurchase

 On February 9, 2015, the Board of Directors of the Company authorized a share repurchase for up to $75 million of its common stock.  This program increased the total remaining repurchase authorization to $102.1 million, including the $27.1 million that remained available for repurchases under the $275 million 2012 share repurchase authorization as of December 27, 2014. 

On May 21, 2015, the Board of Directors of the Company authorized up to $75 million of its common stock for share repurchases, which is the authorization amount that remained available for repurchases as of September 26, 2015.

For the nine months ended September 26, 2015 and September 27, 2014, the Company repurchased 11.6 million and 1.4 million shares for a total cash cost of $102.1 million and $8.9 million, respectively. The repurchased shares were retired immediately.  Accordingly, the repurchased shares were recorded as a reduction of common stock, additional paid-in capital and accumulated deficit.  As of September 26, 2015, the Company had completed $430.0 million of the total announced $505.0 million stock repurchases since 2011.

NOTE 12.  Subsequent Events

On October 5, 2015, the Company entered into an Agreement and Plan of Merger  with Skyworks Solutions, Inc., a Delaware corporation (“Parent” or “Skyworks”), and Amherst Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), which agreement was later amended and restated by the parties’ entry into the Amended and Restated Agreement and Plan of Merger on October 29, 2015 (as so amended and restated, the “Merger Agreement’) in response to an unsolicited bid from Microsemi Corporation. Under the Merger Agreement, Skyworks has agreed to acquire the Company for $11.60 in cash per share of the Company’s common stock.

Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly-owned subsidiary of Parent. In the Merger, each outstanding share of the Company’s common stock (the “ Company Common Stock ”), other than shares of Company Common Stock held in the treasury of the Company, shares of Company Common Stock owned by Parent or any subsidiary of Parent (including Merger Sub) or shares of Common Stock owned by stockholders who have validly exercised their appraisal rights under Delaware law, will be converted into the right to receive $11.60 per share in cash (the “Merger Consideration”) without interest and subject to any required withholding for taxes. Skyworks intends to fund the Merger Consideration with a combination of cash on hand and committed debt financing.

As a result of the Merger, (i) each vested in-the-money stock option and vested restricted stock unit will be cancelled in exchange for the right to receive the Merger Consideration (less any amounts required to be withheld and, in the case of options, the exercise price of such options), and (ii) each unvested stock option, out-of-the money stock option (whether vested or unvested) and unvested restricted stock unit (including unvested performance stock units, with target-level performance deemed achieved) will be assumed by Parent and converted, as applicable, into stock options and restricted stock units of Parent, on the basis of the Merger Consideration, adjusted pursuant to an exchange ratio based on Company and Parent’s relative stock prices prior to the Merger, which converted stock options and restricted stock units shall retain the same vesting terms (except that performance stock units will be subject only to time-based vesting conditions following the Merger).

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Closing Conditions

The obligation of each party to consummate the Merger is subject to the satisfaction or waiver of customary closing conditions set forth in the Merger Agreement, including (i) the approval of the Merger Agreement and the Merger by stockholders of the Company owning at least a majority of the issued and outstanding shares of Company Common Stock, (ii) the expiration or termination of any applicable regulatory waiting periods and/or receipt of regulatory clearance, (iii) the absence of any order or ruling prohibiting the consummation of the Merger and (iv) subject to certain exceptions, the accuracy of the other party’s representations and warranties and compliance with covenants. In addition, the obligation of Parent and Merger Sub to consummate the Merger is also subject to the satisfaction or waiver of the condition that no material adverse effect on the Company shall have occurred since the date of the Merger Agreement. Skyworks’ and the Company’s obligations are not subject to any financing condition.

Representations and Warranties; Covenants

Each of the Company, Parent and Merger Sub has made customary representations and warranties and covenants in the Merger Agreement, including covenants to use their respective reasonable best efforts to secure required regulatory approvals, other than antitrust filings, which are governed by more detailed requirements. In addition, the Company has agreed to other customary covenants, including, among others, covenants to conduct its business in the ordinary course during the interim period between the execution of the Merger Agreement and the closing of the Merger, and not to solicit alternative transactions or, subject to certain exceptions, not to enter into discussions concerning, or provide confidential information in connection with, an alternative transaction, and Parent has agreed to other customary covenants, including, among others, covenants to use its reasonable best efforts to consummate the committed debt financing.

Termination and Termination Fees

The Merger Agreement contains certain termination rights for each of the Company and Parent, including, among others, if the Merger is not consummated at or prior to 11:59 p.m. (New York City time) on July 6, 2016, which may be extended by either the Company or Parent until October 5, 2016 if the mutual closing conditions set forth in the Merger Agreement relating to regulatory clearances have not yet been satisfied or waived. Upon termination of the Merger Agreement under specified circumstances, including a termination by the Company to enter into an agreement for an alternative transaction pursuant to a “superior proposal,” the Company has agreed to pay Parent a termination fee of $88.5 million.

The Company recorded acquisition-related costs of approximately $1.6 million, primarily for outside legal and financial advisory fees associated with the pending Skyworks acquisition of the Company in the three and nine months ended September 26, 2015.  Those costs were recorded in selling, general and administrative expenses in our unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 26, 2015.

The foregoing description of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Amended and Restated Merger Agreement, which is attached as Exhibit 2.1 to the Form 8-K filed by the Company on October 30, 2015 and listed in the Exhibit Table of this filing.  The Company plans to file with the SEC and mail to our stockholders a proxy statement in connection with the Merger.  Additionally, the Company intends to file other relevant materials with the SEC in connection with the Merger. The proxy statement and other relevant materials will contain important information about the Company, Skyworks, the Merger and related matters.  Investors and stockholders are urged to read the proxy statement and the other relevant materials carefully when they become available before making any voting or investment decision with respect to the Merger.

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Item 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report contains forward-looking statements that involve risks and uncertainties. We use words such as “anticipates,” “believes,” “plans,” “expects,” “future,” “intends,” “may,” “could,” “should,” “estimates,” “predicts,” “potential,” “continue,” “becoming,” “transitioning” and similar expressions to identify such forward-looking statements.  Our forward-looking statements include statements as to our business outlook, revenues, margins, expenses, tax provision, capital resources and liquidity sufficiency, sources of liquidity, capital expenditures, interest and other financial income and expenses, restructuring activities, cash commitments, purchase commitments, use of cash, our expectation regarding our amortization of purchased intangible assets, our expectations regarding our business acquisitions, and our expectation regarding distribution from certain investments. Such statements, particularly in the “Business Outlook” section, are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this filing. (See also “Risk Factors” Part II, Item 1A. and our other filings with the Securities and Exchange Commission (“SEC”)). Our actual results may differ materially, and these forward-looking statements do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that had not been completed as of the filing date of this Quarterly Report.  

Investors are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date of this Quarterly Report.   We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

OVERVIEW

PMC is a fabless semiconductor and software solution innovator transforming networks that connect, move and store Big Data. The Company designs, develops, markets and supports semiconductor, embedded software, and board level solutions by integrating its mixed-signal, software and systems expertise through a network of offices in North America, Europe and Asia.  Building on a track record of technology leadership, we are driving innovation across storage, optical and mobile networks. Our highly integrated solutions increase performance and enable next generation services to accelerate the network transformation.   

Our current revenues are generated by a portfolio of approximately 700 products which we have designed and developed or acquired.  PMC’s diverse product portfolio enables many different types of communications network infrastructure equipment in three market segments:  Storage, Mobile and Optical networks.    

1. Our Storage network products enable high-speed servers, switches and storage equipment to store, manage and move large quantities of data securely;  

2. Our Optical network products are used in optical transport platforms, multi-service provisioning platforms, and edge routers where they gather, process and transmit disparate traffic to their next destination in the network; and  

3. Our Mobile networkproducts are used in wireless base stations, base station radios, mobile backhaul, and aggregation equipment.  

Results of Operations

Third quarters of 2015 and 2014

Net revenues

	Third Quarter
($ millions)	2015		2014		Change
Net revenues	$	133.6	$	135.5	(1)%

Overall net revenues for the third quarter of 2015 were $133.6 million, a decrease of $1.9 million, or 1% compared to the third quarter of 2014, mainly due to lower sales volumes of our Mobileproducts, partially offset by higher sales volumes of our Optical network products.

 Storage represented 73% of our net revenues in the third quarter of 2015 compared to 72% in the same period of 2014. Storage net revenues decreased by $0.6 million compared to the same quarter in 2014 mainly due to a decrease in sales volume of ourFiber Channel, Printer Application Specific Integrated Circuit (“ASIC”) and Flash Controller products, largely offset by a record level of  demand from our Datacenter and Server customers.  On a sequential basis, Storage net revenues were higher by $10.6 million mainly due to increased demand from our Datacenter and Server customers and an increase in sales volume of our Serial Attached SCSI (“SAS”) products, related to market share gain in the transition from 6G to 12G SAS interconnect products.

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Optical represented 18% of our net revenues in the third quarter of 2015 compared to 16% in the same period of 2014. Optical net revenues increased by $1.9 million compared to the same quarter in 2014 mainly due to an increase in the volume of sales from our Optical Transport Network (“OTN”) products due to Long-Term Evolution (“LTE”) deployments in the China and U.S. markets, partially offset by a decline in sales volumes of our fiber-to-the-home (“FTTH”) products.  On a sequential basis, Optical net revenues decreased by $1.7 million mainly due to a lower volume of sales from our FTTH products, partially offset by record OTN sales volume on product ramps.  

Mobile represented 9% of our net revenues for the third quarter of 2015 compared to 12% in the same period of 2014. Mobile net revenues decreased by $3.2 million compared to the third quarter of 2014 mainly due to lower sales volumes of our WinPath family of processors due to weak infrastructure spending in North America, partially offset by an increase in sales volumes of our legacy SONET products.  On a sequential basis, Mobile revenues decreased slightly by $0.1 million mainly due to lower sales volumes of our WinPath family of processors due to weak infrastructure spending in North America, partially offset by an increase in sales volumes of our legacy SONET products.

Gross profit

	Third Quarter
($ millions)	2015		2014		Change
Gross profit	$	95.6	$	95.2	0%
Percentage of net revenues		72%		70%

Our gross profit increased by $0.4 million in the third quarter of 2015 compared to the same period in 2014.  Gross profit as a percentage of net revenues increased by 2% mainly due to a decrease in payroll-related costs on lower headcount and favorable impact of warranty provision release of approximately $0.7 million during the third quarter of 2015.

Operating expenses

	Third Quarter
($ millions)	2015		2014		Change
Research and development, net	$	47.3	$	48.4	(2)%
Percentage of net revenues		35%		36%
Selling, general and administrative	$	28.1	$	29.3	(4)%
Percentage of net revenues		21%		22%
Amortization of purchased intangible assets	$	9.2	$	9.9	(7)%
Percentage of net revenues		7%		7%

Research and Development, net

Our research and development, net (“R&D”) expenses decreased in the third quarter of 2015 by $1.1 million, or 2% compared to the same period last year.  This was primarily due to a decrease in payroll-related costs on lower headcount, partially offset by higher tape-out related costs incurred in the third quarter of 2015 compared to the same quarter of 2014. On a sequential basis, R&D expenses were $8.5 million lower in the third quarter of 2015 compared to the second quarter of 2015.  This was mainly due to the accrual of a $7.9 million restructuring charge related to employee severance and related compensation benefits during the second quarter of 2015 and reduced payroll-related costs incurred during the third quarter of 2015, partially offset by higher tape-out related costs incurred in the third quarter of 2015.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses were $1.2 million, or 4%  lower in the third quarter of 2015 compared to the same period last year, mainly due to a decrease in salaries and employee benefits related costs due to lower headcount, partially offset by an increase in outside services and acquisition related professional fees incurred during the third quarter of 2015.  On a sequential basis, SG&A expenses were $2.4 million lower in the third quarter of 2015 compared to the second quarter of 2015.  This was mainly due to the accrual of a $4.0 million restructuring charge related to employee severance and related compensation benefits during the second quarter of 2015, partially offset by anincrease in commission expense due to higher sales and acquisition-related professional fees incurred during the third quarter of 2015.

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Amortization of purchased intangible assets

Amortization of acquired intangible assets related to license of existing technologies, developed technology, in-process research and development, customer relationships, and trademarks decreased by $0.7 million in the third quarter of 2015 compared to the same period in 2014 mainly due to certain intangible assets that reached the end of their amortization period during 2014, partially offset by amortization of intangible assets acquired from HP during the third quarter of 2014.

Other income (expense) and Benefit from (provision for) income taxes

	Third Quarter
($ millions)	2015		2014		Change
Foreign exchange gain	$	2.4	$	0.9	167%
Interest and other financial income, net	$	0.1	$	0.2	(50)%
Gain on investment securities and other investments	$	0.1	$	0.1	-%
Amortization of debt issuance costs	$	(0.1)	$	(0.1)	-%
Accretion of discount on short-term and long-term obligation	$	(0.2)	$	—	(100)%
Provision for income taxes	$	(6.7)	$	(3.1)	116%

Foreign exchange gain

We recorded a net foreign exchange gain of $2.4 million in the third quarter of 2015 compared to $0.9 million in the third quarter of 2014.  This was primarily due to a foreign exchange revaluation of our foreign denominated assets and liabilities which are primarily denominated in the Canadian dollar and Israeli Shekel driven in part by the U.S. dollar appreciating by approximately 7.8% during the third quarter of 2015 compared to approximately 5% during the third quarter of 2014, against currencies applicable to our foreign operations.

Interest and other financial income, net

Interest and other financial income, net was $0.1 million in the third quarter of 2015 compared to $0.2 in the third quarter of 2014. 

Gain on investment securities and other investments

In the third quarters of 2015 and 2014, we recorded a gain on sale of investment securities and other investments of $0.1 million related to the disposition of investment securities and other investments.

Amortization of debt issuance costs

In the third quarters of 2015 and 2014, we amortized $0.1 million of debt issuance costs relating to our credit facility obtained during the third quarter of 2013.

Accretion of discount on short-term and long-term obligations

In the third quarter of 2015, we recorded accretion of discount on short-term and long-term obligations of $0.2 million relating to our commitment from the acquisition of HP RAID software license during the third quarter of 2014.

Provision for income taxes

The provision for income taxes was $6.7 million in the third quarter of 2015 compared to $3.1 million in the third quarter of 2014.  This was mainly due to changes in accruals related to unrecognized tax benefits, non-deductible amortization of intangible assets and a decrease in the amortization of prepaid taxes.

In July 2015, the U.S. Tax Court (the “Court”) issued an opinion favorable to Altera Corporation (“Altera”) with respect to Altera’s litigation with the Internal Revenue Services (“IRS”).  The litigation relates to the treatment of stock-based compensation expense in an inter-company qualified cost-sharing arrangement with Altera’s foreign subsidiary.  In its opinion, the Court accepted Altera’s position of excluding stock-based compensation from its inter-company qualified cost-sharing arrangement.  The Company has evaluated the impact of the court case on its probable income tax liabilities and recorded a deferred tax asset of $8.1 million offset fully by a valuation allowance in its consolidated financial statements as of and for the three and nine months ended September 26, 2015.  However, the U.S. Department of Treasury has not withdrawn the requirement to include stock-based compensation from its regulations.  The Company will continue to monitor ongoing developments and potential impact to its financial statements.

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First nine months of 2015 and 2014

Net revenues

	First Nine Months
($ millions)	2015		2014		Change
Net revenues	$	391.4	$	388.8	1%

Net revenues for the first nine months of 2015 were $391.4 million compared to $388.8 million for the same period of 2014.  This slight increase was mainly attributable to higher sales volumes of our Storage network products driven by our Datacenter and SAS products partially offset by lower sales volumes in our Mobile network products driven by our WinPath family of processors. 

Storage represented 72% of our net revenues in the first nine months of 2015 compared to 69% in the same period of 2014.  Storage net revenues increased by $13.1 million compared to the first nine months of 2014 mainly due to increased sales volumes related to market share gain in the transition from 6G to12G SAS interconnect products and an increase in sales demand from our Datacenter and Server customers, partially offset by a slight decrease in sales volumes of our flash controller products.  

Optical represented 18% of our net revenues in the first nine months of 2015 and 2014.  Optical net revenues increased by $1 million compared to the first nine months of 2014 mainly due to higher volume of sales from our OTN products,largely offset by lower sales volumes from our FTTH and legacy SONET and metro aggregation transport products.

Mobile represented 10% of our net revenues in the first nine months of 2015 compared to 13% in the same period of 2014.  Mobile net revenues decreased by $11.4 million compared to the first nine months of 2014 mainly due to lower sales volumesof our WinPath family of processors attributable to weak infrastructure spending in North America.

Gross profit

	First Nine Months
($ millions)	2015		2014		Change
Gross profit	$	275.0	$	274.1	0%
Percentage of net revenues		70%		70%

Total gross profit increased by $0.9 million in the first nine months of 2015 compared to the same period in 2014 mainly due to slightly higher revenues.  Gross profit as a percentage of net revenues remained consistent at 70% in the third quarter of 2015 and 2014.

Operating expenses

	First Nine Months
($ millions)	2015		2014		Change
Research and development, net	$	152.0	$	148.0	3%
Percentage of net revenues		39%		38%
Selling, general and administrative	$	88.6	$	87.6	1%
Percentage of net revenues		23%		23%
Amortization of purchased intangible assets	$	27.8	$	32.2	(14)%
Percentage of net revenues		7%		8%

Research and Development, net

Our R&D expense increased by $4.0 million, or 3%, in the first nine months of 2015 compared to the same period in 2014.  This was primarily due to a restructuring charge of approximately $7.9 million related to employee severance and related compensation benefits and higher tape-out related costs, partially offset by lower acquisition-related costs.

Selling, General and Administrative Expenses

SG&A expenses increased by $1.0 million, or 1%, in the first nine months of 2015 compared to the same period in 2014, mainly due to higher restructuring charge of $4.4 million related to employee severance and related compensation benefits, compared

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to approximately $1.0 million termination costs incurred in the same period in 2014.  This was partially offset by a lower outside services costs, a decrease in asset impairments of $0.5 million and a $0.7 million net gain from lease exit activity recognized in 2015.

Amortization of purchased intangible assets

Amortization of acquired intangible assets related to developed technology, in-process research and development, customer relationships, and trademarks decreased by $4.4 million in the first nine months of 2015 compared to the same period in 2014.  This was mainly due to certain intangible assets that reached the end of their amortization period during 2014, partially offset by amortization of intangible assets acquired from HP during the third quarter of 2014.

Other income (expense) and provision for income taxes

	First Nine Months
($ millions)	2015		2014		Change
Foreign exchange gain	$	4.1	$	0.6	583%
Interest and other financial income, net	$	0.6	$	0.3	100%
Gain on investment securities and other investments	$	0.1	$	0.1	-%
Amortization of debt issuance costs	$	(0.2)	$	(0.2)	-%
Accretion of discount on short-term and long-term obligation	$	(0.6)	$	—	(100)%
Provision for income taxes	$	(7.9)	$	(9.4)	16%

Foreign exchange gain

We recognized a net foreign exchange gain of $4.1 million in the first nine months of 2015 compared to $0.6 million in the first nine months of 2014.  This was primarily due to a foreign exchange revaluation of our foreign denominated assets and liabilities, which are primarily denominated in the Canadian dollar and Israeli Shekel, driven in part by the U.S. dollar appreciating by approximately 14.6% during the first nine months of 2015, compared to approximately 4.4%  appreciation during the first nine months of 2014, against currencies applicable to our foreign operations.

Interest and other financial income, net

Net interest and other financial income was $0.6 million in the first nine months of 2015 compared to $0.3 million in the first nine months of 2014.

Gain on investment securities and other investments

We recorded a gain on sale of investment securities and other investments of $0.1 million related to the disposition of investment securities and other investments in each of the first nine months of 2015 and 2014.

Amortization of debt issue costs

In each of the first nine months of 2015 and 2014, we amortized $0.2 million of debt issue costs relating to our credit facility obtained during the third quarter of 2013.   

Accretion of discount on short-term and long-term obligations

In the first nine months of 2015, we recorded accretion of discount on short-term and long-term obligations of $0.6 million relating to our commitment from the acquisition of HP RAID software license during the third quarter of 2014.

Provision for income taxes

In the first nine months of 2015, provision for income taxes was $7.9 million, compared to $9.4 million in the first nine months of 2014.  This was mainly due to changes in accruals related to unrecognized tax benefits, non-deductible amortization of intangible assets, and decrease in the amortization of prepaid taxes.

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Critical Accounting Estimates

General

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our interim condensed consolidated financial statements, which have been prepared in accordance with GAAP.  The preparation of these financial statements requires us to make estimates and assumptions that affect our reported assets, liabilities, revenue and expenses, and related disclosure of our contingent assets and liabilities.  For a full discussion of our accounting estimates and assumptions that we have identified as critical in the preparation of our interim condensed consolidated financial statements, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Critical Accounting Policies and Estimates section and Item 8. Financial Statements and Supplementary Data, the Notes to the Consolidated Financial Statements, Note 1. Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the year ended December 27, 2014, which also provides commentary on our most critical accounting estimates.  Since our fiscal year ended December 27, 2014, there have been no material changes in our critical accounting policies and estimates.

Liquidity and Capital Resources

Our principal sources of liquidity are cash from operations, short-term investments, long-term investment securities, and our credit facility. We employ these sources of liquidity to support ongoing business activities, acquire or invest in critical or complementary technologies, purchase capital equipment, repay any short-term indebtedness, and finance working capital. Currently, our primary objective for use of discretionary cash has been to repurchase and retire a portion of our common stock.  The combination of cash, cash equivalents, short-term investments and long-term investment securities at September 26, 2015 and December 27, 2014totaled $219.9 million and $266.0 million, respectively, net of $30.0 million and nil outstanding on our credit facility as of September 26, 2015 and December 27, 2014, respectively.On October 14, 2015, subsequent to the balance sheet date, we repaid $5 million of the outstanding balance on our credit facility as of September 26, 2015.

Our credit facility is a revolving line of credit with a group of banks under which we may borrow up to $100 million.  The credit agreement contains customary representations and warranties, affirmative covenants and negative covenants with which the Company must be in compliance in order to borrow funds and to avoid an event of default, including, without limitation, restrictions and limitations on dividends, asset sales, the ability to incur additional debt and additional liens and certain financial covenants.  As of September 26, 2015, the Company was in compliance with these covenants.

As of September 26, 2015, the amount of cash and short-term and long-term investments held by our foreign subsidiaries was $245.9 million.  Our intent is and we have the ability to indefinitely reinvest these funds outside the U.S.  If the funds held by our foreign subsidiaries are needed for our operations in the U.S., or are otherwise repatriated into the U.S., we could be required to accrue and pay taxes to repatriate these funds, which could reduce the net funds available to the Company.

In the future, we expect our cash on hand and cash generated from operations, together with our short-term investments, long-term investment securities and revolving line of credit, to be our primary sources of liquidity (see Item 1. Financial Statements, the Notes to the Condensed Consolidated Financial Statements, Note 4. Fair Value Measurements).

Operating Activities

We generated cash from operations of $56.8 million in the first nine months of 2015 compared to $61.5 million in the first nine months of 2014.  Our positive operating cash flows in the first nine months of 2015 were mainly driven by our operating income, bythe favorable impact of non-cash adjustments of $63.2 million, which are comprised of $45.2 million of amortization and depreciation expense (first nine months of 2014 - $48.7 million) and $18 million of stock-based compensation (first nine  months of 2014 - $16.3 million), andby a  net decrease in working capital.  The net decrease in working capital was due primarily to the timing of payment of prior period accruals, including payment of restructuring costs, and to a decrease in inventory and prepaid expenses and other current assets, partially offset by an increase in accounts receivable.

Investing Activities

We had a net outflow of cash of $41.8 million from investing activities in the first nine months of 2015 compared to a net cash outflow of $47.2 million in the same period in 2014. During the first nine months of 2015, we used $92.6 million to purchase investment securities (first nine months of 2014 - $67.7 million), and generated $68.5 million from redemptions and sales of such investments securities compared to $42.8 million in the first nine months of 2014.  We also invested $17.8 million through the purchase of property and equipment and intangible assets in the first nine months of 2015 compared to $12.4 million in the same period in 2014.  In addition, we made a $10 million first installment payment related to our acquisition of HP’s RAID software license (see Note 2. Business Combinations).

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Financing Activities

We had a net outflow of cash of $53.1 million from financing activities in the first nine months of 2015 compared to a net cash outflow of $23.6 million in the first nine months of 2014.  During the first nine months of 2015, we borrowed $102 million from our credit facility and repaid $72 million compared to $30 million and $60 million borrowed and repaid during the first nine months of 2014.  We also repurchased common stock for $102.1 million in the first nine months of 2015 compared to $11.5 million in the first nine months of 2014.  This was partially offset by $37.0 million in proceeds from employee related stock issuances in the first nine months of 2015compared to $17.9 million during the first nine months of 2014.  In addition, on January 10, 2015, we made an $18 million second installment payment related to our acquisition of HP’s RAID software license (see Note 2. Business Combinations).

Contractual Obligations

As of September 26, 2015 we had cash commitments comprised of the following:  

	Payments due in:
			Less than						More than
(in thousands)	Total		1 year		1-3 years		3-5 years		5 years
Operating Lease Obligations:
Minimum Rental Payments	$	59,298	$	10,090	$	25,928	$	11,377	$	11,903
Estimated Operating Cost Payments		14,579		2,169		5,699		1,692		5,019
Purchase and Other Obligations		3,138		2,371		767		—		—
Acquisition Consideration Installment Payments		24,000		12,000		12,000		—		—
Total	$	101,015	$	26,630	$	44,394	$	13,069	$	16,922

In addition to the amounts shown in the table above, as of September 26, 2015 we have $41.1 million recorded as a liability for unrecognized tax benefits and $9.0 million recorded long-term obligations for employee severance, health, and pension benefits that are payable only upon termination, retirement or death of the respective employee, and we are uncertain as to the ultimate amount and timing of settlement of these potential liabilities.

Purchase obligations, as noted in the above table, are comprised of commitments to purchase design tools and software for use in product development and other long term purchase obligations.  Excluded from these purchase obligations are commitments for inventory or other expenses entered into in the normal course of business.  We estimate these other commitments to be approximately $47.5 million at September 26, 2015 for inventory and other expenses that will be received within 90 days and that will require settlement 30 days thereafter.

Also, in addition to the amounts shown in the table above, we expect to use approximately $3.1million of cash in the remainder of 2015 for purchases of property and equipment and intellectual property.

We continue to expect that our cash from operations, short-term investments, long-term investment securities and credit facility will continue to be our primary sources of liquidity.  Based on our current operating prospects, we believe that existing sources of liquidity will satisfy our projected operating, working capital, investing, and capital expenditures through the next twelve months.    

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion regarding our risk management activities contains “forward-looking statements” that involve risks and uncertainties.  Actual results may differ materially from those included in the forward-looking statements.

Cash Equivalents, Short-Term Investments and Long-Term Investment Securities:

We regularly maintain a portfolio of short and long-term investments comprised of various types of money market funds, United States treasury and government agency notes including 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.  Our investment policy sets guidelines for diversification and maturities that intend to preserve principal, while meeting liquidity needs.  Maturities of these instruments are 36 months or less.  To minimize credit risk, we diversify our investments and select minimum ratings of P-1 or A3 by Moody’s, or A-1 or A- by Standard and Poor’s, or equivalent.  We classify these securities as available-for-sale and they are carried at fair market value.  Our corporate policies prevent us from holding material amounts of asset-backed commercial paper.  

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Investments in instruments with both fixed and floating rates carry a degree of interest rate risk.  Fixed rate securities may have their fair market value adversely impacted because of a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall.  Due in part to these factors, our future investment income may fall short of expectations because of changes in interest rates, or we may suffer losses in principal if we were to sell securities that have declined in market value because of changes in interest rates.    

We do not attempt to reduce or eliminate our exposure to interest rate risk through the use of derivative financial instruments.

Based on a sensitivity analysis performed on the financial instruments held at September 26, 2015, the impact to the fair value of our investment portfolio by a shift in the yield curve of plus or minus 100 basis points would result in a decline of approximately $2.7 million or an increase of approximately $2.4 million, respectively.  The selected hypothetical change in interest rates does not reflect what could be considered the best or worst case scenarios.

Foreign Currency:

Our sales and corresponding receivables are denominated primarily in United States dollars.  We generate a significant portion of our revenues from sales to customers located outside the United States including Asia, Europe and Canada.  We are subject to risks typical of an international business including, but not limited to, differing economic conditions, changes in political climate, differing tax structures, other regulations and restrictions and foreign exchange rate volatility.  Accordingly, our future results could be materially and adversely affected by changes in these or other factors.

Through our operations in Canada and elsewhere outside of the United States, we incur research and development, sales, customer support and administrative expenses in various foreign currencies.  We are exposed, in the normal course of business, to foreign currency risks on these expenditures, primarily in Canada.  In our effort to manage such risks, we have adopted a foreign currency risk management policy intended to reduce the effects of potential short-term fluctuations on our operating results stemming from our exposure to these risks.  As part of this risk management, we enter into foreign exchange forward contracts. These forward contracts offset the impact of exchange rate fluctuations on forecasted cash flows or firm commitments.  We limit the forward contracts operational period to 24 months or less and we do not enter into foreign exchange forward contracts for trading purposes. Because we do not engage in foreign exchange risk management techniques beyond these periods, our cost structure is subject to long-term changes in foreign exchange rates.  In the event that one of the counterparties to our forward currency contracts failed to complete the terms of their contracts, we would purchase foreign currencies at the spot rate as of the date the funds were required.  If the counterparties to our foreign forward currency contracts that matured in the third quarter endedSeptember 26, 2015 had not fulfilled their contractual obligations and we were required to purchase the foreign currencies at the spot market rate on respective settlement dates, our operating income for the third quarter of 2015 would have increased by $1.4 million.  See Note 3. Derivative Instruments for further details.

We attempt to limit our exposure to foreign exchange rate fluctuations from our foreign currency net asset or liability positions.  In the first nine months of 2015, we recorded a $4.1 million foreign exchange gain on the revaluation of our net tax liabilities in a foreign jurisdiction.  The revaluation of our foreign income tax liabilities was required because of fluctuations in the value of the U.S. dollar against other currencies.  Our operating income would be materially impacted by a shift in the foreign exchange rates between U.S. and foreign currencies that are material to our business.  For example, a five percent shift in the foreign exchange rates between United States dollar and Canadian dollar would impact our second quarter 2015 pre-tax income by approximately $1.3 million.

Item 4.  CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified by the SEC and that such information is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.  Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of September 26, 2015 our disclosure controls and procedures are designed at a reasonable assurance level and are effective at that reasonable assurance level.

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Changes in internal control over financial reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the third quarter ended September 26, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II – OTHER INFORMATION

Item 1. Legal Proceedings

On October 8, 2015, October 14, 2015 and October 21, 2015, respectively, three purported class action complaints were filed in the Superior Court of California for Santa Clara County and the Delaware Court of Chancery, challenging the proposed transaction between PMC and Skyworks Solutions, Inc. (“Skyworks”).  The actions are captioned Bhakta v. PMC-Sierra, Inc., et al., Case No. 1-15-CV-286967 (Superior Court of California, Santa Clara County), Pietrus Industries Limited v. PMC-Sierra, Inc., Case No. 11610-VCG (Delaware Court of Chancery) and Azzalini v. Lang et al., Case No. 1-15-CV-287124 (Superior Court of California, Santa Clara County).  Plaintiffs, purported shareholders of PMC, allege that the members of the PMC board of directors breached their fiduciary duties to PMC’s stockholders by agreeing to a transaction with Skyworks that is the result of conflicts of interest on the part of PMC’s directors and which offers PMC stockholders an unfair and inadequate price, and by agreeing to unreasonable deal protection devices that preclude competing offers from emerging. Plaintiffs also allege that PMC, Skyworks and Skyworks' merger subsidiary aided and abetted the PMC directors’ alleged breaches of fiduciary duty.  The actions seek, among other things, injunctive relief preventing the parties from completing the proposed transaction or, in the event the transaction is completed, rescission thereof, an order directing defendants to account to PMC’s stockholders for damages suffered as a result of the alleged wrongdoing, and awards of attorneys’ fees and expenses for plaintiffs.  The actions are in their initial stages.

ITEM 1A. RISK FACTORS

Our company is subject to a number of risks.  Some of these risks are common in the fabless semiconductor industry, some are the same or similar to those disclosed in previous SEC filings, and some may be present in the future. You should carefully consider all of these risks and the other information in this report before investing in PMC. The fact that certain risks are endemic to the industry does not lessen the significance of the risk.

As a result of the following risks, our business, financial condition, operating results and/or liquidity could be materially adversely affected. This could cause the trading price of our securities to decline, and you may lose part or all of your investment.

The announcement and pendency of our agreement to be acquired by Skyworks may have an adverse effect on our business and our share price.

Our pending acquisition by Skyworks could have an adverse effect on our revenue in the near term if our customers delay, defer or cancel purchases pending completion of the Merger (as defined in the Merger Agreement). While we are attempting to address this risk through communications with our customers, current and prospective customers may be reluctant to purchase our products due to potential uncertainty about the direction of our product offerings and the support and service of our products after the merger is consummated. Additionally, we are subject to additional risks in connection with the announcement and pendency of the Merger, including:

· the pendency and outcome of any legal proceedings that have been or may be instituted against us, our directors and others relating to the transactions contemplated by the Merger Agreement;

· potential adverse effects on our relationships with our current suppliers and other business partners, or those with which we are seeking to establish business relationships;

· the restrictions imposed on our business and operations pursuant to certain covenants set forth in the Merger Agreement, which may prevent us from pursuing certain opportunities without Skyworks’ approval;

· that we may forego opportunities we might otherwise pursue absent the Merger Agreement;

· potential adverse effects on our ability to attract, recruit, retain and motivate current and prospective employees who may be uncertain about their future roles and relationships with us following the completion of the Merger; and

· the diversion of our employees’ and management’s attention due to activities related to the transactions contemplated by the Merger Agreement.

We plan to file with the SEC and mail to our stockholders a proxy statement in connection with the Merger.  Additionally, we intend to file other relevant materials with the SEC in connection with the Merger. The proxy statement and other relevant materials will contain important information about the Company, Skyworks, the Merger and related matters.  Investors and stockholders are

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urged to read the proxy statement and the other relevant materials carefully when they become available before making any voting or investment decision with respect to the Merger.

Litigation challenging the Merger Agreement may prevent the Merger from being consummated at all or within the expected timeframe.

Multiple class action lawsuits have been filed against us, our Board of Directors and other parties to the Merger Agreement, challenging our acquisition by Skyworks. Those lawsuits brought by purported shareholders of the Company seek, among other things, to enjoin consummation of the Merger. One of the conditions to the consummation of the Merger is that no governmental entity having jurisdiction over the Company, Skyworks, or any of the other parties to the agreement shall have issued an order, decree or ruling or taken any other material action enjoining or otherwise prohibiting consummation of the Merger substantially on the terms contemplated by the Merger Agreement. As such, if any of the plaintiffs are successful in their efforts, then our acquisition by Skyworks may not be consummated at all or within the expected timeframe.

The failure of our pending acquisition by Skyworks to be completed may adversely affect our business and our share price.

Our and Skyworks’ obligations to consummate our acquisition by Skyworks are subject to the satisfaction or waiver of certain customary conditions, including (i) approval of the Merger by both our and Skyworks’ shareholders, (ii) the expiration or termination of the waiting period under the HSR Act, (iii) receipt of regulatory clearance under certain foreign antitrust laws in China, (iv) the absence of any law or order prohibiting or restraining the Merger or any law making the consummation of the Merger illegal, (v) there being no event that has or would reasonably be expected to have a material adverse effect on us, (vi) subject to certain exceptions, the accuracy of the representations and warranties of the parties in the Merger Agreement, and (vii) performance by us and Skyworks of our respective obligations under the Merger Agreement. There can be no assurance that these conditions to the completion of the Merger will be satisfied in a timely manner or at all. In addition, other factors, such as Skyworks’ ability to obtain the debt financing it needs to consummate the Merger, may affect when and whether the Merger will occur. If the Merger is not completed, our share price could fall to the extent that our current price reflects an assumption that the acquisition will be completed. Furthermore, if the acquisition is not completed, we may suffer other consequences that could adversely affect our business, results of operations and share price, including the following:

· we could be required to pay a termination fee of $88.5 million to Skyworks under certain circumstances as described in the Merger Agreement;

· we would have incurred significant costs in connection with the acquisition that we would be unable to recover;

· we may be subject to legal proceedings related to the acquisition;

· the failure of the acquisition to be consummated may result in negative publicity and a negative impression of us in the investment community;

· any disruptions to our business resulting from the announcement and pendency of the acquisition, including any adverse changes in our relationships with our customers, vendors and employees, may continue or intensify in the event the Merger is not consummated;

· we may not be able to take advantage of alternative business opportunities or effectively respond to competitive pressures; and

· we may experience a departure of employees.

Our share price has been, and may continue to be, materially affected by the anticipation of the Merger and expectations of further competing bids and could be materially affected by the termination of the Merger Agreement or the non-occurrence any further competing bid.

The current market price of our common stock may reflect, among other things, the  anticipated completion of the Merger or the anticipation of further competing  bids.  However, there can be no assurance that the Merger will be completed or that a competing bid for the Company will be made or accepted.  In the event that the Merger or an alternative transaction concerning the Company does not occur, our stock price may be materially and adversely affected.

Our global business is subject to a number of economic risks.

We conduct business throughout the world, including in Asia, North America, Europe and the Middle East.  Instability in the global credit markets, including the recent European economic and financial turmoil related to sovereign debt issues in certain countries, the instability in the geopolitical environment in many parts of the world and other disruptions, such as changes in energy costs, may continue to put pressure on global economic conditions. The world has recently experienced a global macroeconomic downturn. To the extent global economic and market conditions, or economic conditions in key markets, remain uncertain or deteriorate further, business, operating results, and financial condition may be materially adversely impacted.

Additionally, given the greater credit restrictions that are being invoked by lenders around the world, our ability to access the capital markets may be severely restricted at a time when we would like, or need, to access such capital markets, which could have an impact on our flexibility to pursue additional expansion opportunities and maintain our desired level of revenue growth in the future.

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Our operating results may be impacted by rapid changes in demand due to the following:

•variations in our turns business;

•short order lead-time;

•customer inventory levels;

•production schedules; and

•fluctuations in demand.

As a result, there could be significant variability in the demand for our products, and our past operating results may not be indicative of our future operating results.

Fluctuation in demand is dependent on, among other things, the size of the markets for our products, the rate at which such markets develop, and the level of capital spending by end customers. We cannot assure you of the rate, or extent to which, capital spending by end customers will grow, if at all.

Our revenues and profits may fluctuate because of factors that are beyond our control. As a result, we may fail to meet the expectations of securities analysts and investors, which could cause our stock price to decline.

Our ability to project revenues is limited because a significant portion of our quarterly revenues may be derived from orders placed and shipped in the same quarter, which we call our “turns business.” Our turns business varies widely from quarter to quarter. Our customers may delay product orders and reduce delivery lead-time expectations, which may reduce our ability to project revenues beyond the current quarter. While we regularly evaluate end users’ and contract manufacturers’ inventory levels of our products to assess the impact of their inventories on our projected turns business, we do not have complete information on their inventories. This could cause our projections of a quarter’s turns business to be inaccurate, leading to lower or higher revenues than projected.

We may fail to meet our forecasts if our customers cancel or delay the purchase of our products or if we are unable to meet their demand.

We rely on customer forecasts in order to estimate the appropriate levels of inventory to build and to project our future revenues. Many of our customers have numerous product lines, numerous component requirements for each product, sizeable and complex supplier structures, and typically engage contract manufacturers for additional manufacturing capacity. This complex supply chain creates several variables that make it difficult to accurately forecast our customers’ demand and accurately monitor their inventory levels of our products. If customer forecasts are not accurate, we may build too much inventory, potentially leaving us with excess and obsolete inventory, which would reduce our profit margins and adversely affect our operating results. Conversely, we may build too little inventory to meet customer demand causing us to miss revenue-generating opportunities. The cancellation or deferral of product orders, the return of previously sold products or overproduction due to the failure of anticipated orders to materialize, could result in our holding excess or obsolete inventory, which could in turn result in write-downs of inventory. This difficulty may be compounded when we sell to OEMs indirectly through distributors and other resellers or contract manufacturers, or both, as our forecasts of demand are then based on estimates provided by multiple parties.

Our customers often shift buying patterns as they manage inventory levels, market different products, or change production schedules. This makes forecasting their production requirements difficult and can lead to an inventory surplus or shortage of certain components. In addition, our products vary in terms of the profit margins they generate. If our customers purchase a greater proportion of 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 to us is inaccurate, it could lead to inaccurate forecasting of our revenues or errors in our reported revenues, gross profit and net income.

While backlog is our best estimate of our next quarter’s expectations of revenues, it is industry practice to allow customers to cancel, change or defer orders with limited advance notice prior to shipment. As such, backlog may be an unreliable indicator of future revenue levels. Because a significant portion of our operating expenses is fixed, even a small revenue shortfall can have a disproportionately negative effect on our operating results.

We rely on a few customers for a major portion of our sales, any one of which could materially impact our revenues should they change their ordering pattern. The loss of a key customer could materially impact our results of operations.

We depend on a limited number of customers for large portions of our net revenues.During the first nine months of 2015 and in fiscal years 2014, 2013, and 2012, we had two end customers that accounted for more than 10% of our net revenues, namely HP Enterprise and EMC.

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During the first nine months of 2015 and in fiscal years 2014, 2013, and 2012, our top ten customers accounted for more than 60% of our net revenues. We do not have long-term volume purchase commitments from any of our major customers. We sell our products solely on the basis of purchase orders. Those customers could decide to cease purchasing products with little or no notice and without significant penalties. A number of factors could cause our customers to cancel or defer orders, including interruptions to their operations due to a downturn in their industries, delays in manufacturing their own product offerings into which our products are incorporated, and natural disasters. Accordingly, our future operating results will continue to depend on the success of our largest customers and on our ability to sell existing and new products to these customers in significant quantities.

The loss of a key customer, or a reduction in our sales to any major customer or our inability to attract new significant customers could materially and adversely affect our business, financial condition or results of operations. In addition, if we fail to win new product designs from our major customers, our business and results of operations may be harmed.

We use indirect channels of product distribution in many locations across the world and over which we have limited control.

We generate a portion of our sales through third-party distribution and reseller agreements. Termination of a distributor agreement, either by us or a distributor, could result in a temporary or permanent loss of revenue, if we cannot establish an alternative distributor to manage this portion of our business or if 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 actual returns exceed estimated returns, there may be an adverse effect on our operating results. Our distributors are located all over the world and are of various sizes and financial profiles. Lower sales or earnings, debt downgrades, an inability to access capital markets or higher interest rates could potentially affect our distributors’ operations. 

If the demand for our customers’ products declines, demand for our products will be similarly affected and our revenues, gross margins and operating performance will be adversely affected.

Our customers are subject to their own business cycles, most of which are unpredictable in commencement, depth and duration. We cannot accurately predict the continued demand of our customers’ products and the demands of our customers for our products. In the past, networking customers have reduced capital spending without notice, which adversely affected our revenues. As a result of this uncertainty, our past operating results may not be indicative of our future operating results and our results may be below the expectations of public market analysts and investors, which could cause the market price of our common stock to decline.

Changes in the political and economic climate in the countries in which we do business may adversely affect our operating results.

We earn a substantial proportion of our revenues in Asia. We conduct an increasing portion of our research and development and manufacturing activities outside North America. We procure substantially all of our wafers from Taiwan and use assemblers and testers throughout Asia.

Given the depth of our sales and operations in Asia, we face risks that could negatively impact our results of operations, including economic sanctions imposed by the U.S. government, imposition of tariffs and other potential trade barriers or regulations, uncertain protection for intellectual property rights and generally longer receivable collection periods. In addition, fluctuations in foreign currency exchange rates could adversely affect the revenues, net income, earnings per share and cash flow of our operations in affected markets. Similarly, fluctuations in exchange rates may affect demand for our products in foreign markets or our cost competitiveness and may adversely affect our profitability.

Our results of operations continue to be influenced by our sales to customers in Asia.  Government agencies in this region have broad discretion and authority over many aspects of the telecommunications and information technology industry.  Accordingly, their decisions may impact our ability to do business in this region, and significant changes in this region’s political and economic conditions and governmental policies could have a substantial negative impact on our business.

Laws and regulations to which we are subject, as well as customer requirements in the area of environmental protection and social responsibility, could impose substantial costs on us and may adversely affect our business.

Our business is subject to or may be impacted by various environmental protection and social responsibility legal and customer requirements. For example, we are subject to the European Union Directive on the Restriction of the use of certain Hazardous Substances in Electrical & Electronic Equipment (RoHS) and the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) Regulation in the European Union. Such regulations could require us to redesign our products in order to ensure compliance and require the development and/or maintenance of compliance administration systems. Redesigned products could be more costly to manufacture or require more costly or less efficient raw materials. If we cannot develop compliant products on a timely basis or properly administer our compliance programs, our revenues could decline due to lower sales. In addition, under certain environmental laws, we could be held responsible, without regard to fault, for costs relating to any contamination at our current or past

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facilities and at third-party waste-disposal sites. We could also be held liable for consequences arising out of human exposure to such substances or other environmental damage.

Recently there has been increased focus on environmental protection and social responsibility initiatives. We may choose or be required to implement various standards due to the adoption of rules or regulations that result from these initiatives. Our customers may also require us to implement environmental or social responsibility procedures or standards before they will continue to do business with us or order new products from us. Our adoption of these procedures or standards could be costly, and our failure to adopt these standards or procedures could result in the loss of business or fines or other costs.

The conflict minerals provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act could result in additional costs and liabilities.

In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC established disclosure and reporting requirements for those companies who use “conflict minerals” mined from the Democratic Republic of the Congo and adjoining countries in their products, whether or not these products are manufactured by third parties.  These requirements could affect the sourcing and availability of minerals used in the manufacture of our semiconductor products.  We also have incurred and will continue to incur costs associated with complying with the disclosure requirements, including identifying the sources of any conflict minerals used in our products, in addition to the cost of remediation and other changes to products, processes, or sources of supply as a consequence of such verification activities.

The loss of key personnel could delay us from designing new products.

To succeed, we must retain and hire technical personnel highly skilled at design and test functions needed to develop high-speed networking products. The competition for such employees is intense.

We do not have employment agreements in place with many of our key personnel. As employee incentives, we issue common stock options, restricted stock, and performance-based restricted stock which are subject to vesting.  In addition, stock options are granted with an exercise price equal to the closing market price of the Company’s common stock at the grant date. The equity awards to employees are effective as retention incentives only if they have economic value, which at times could be difficult to maintain given the substantial variability in our stock price.

Our revenues may decline if we do not maintain a competitive portfolio of products or if we fail to secure design wins.

We are experiencing significantly greater competition in the markets in which we participate. We are expanding into market segments, such as the Storage, Optical, and Mobile market segments, which have established incumbents with substantial financial and technological resources. We expect more intense competition than we have traditionally faced as some of these incumbents derive a majority of their earnings from these markets.

We typically face competition at the design stage, where customers evaluate alternative design approaches requiring integrated circuits. We often compete in bid selection processes to achieve design wins. These selection processes can be lengthy and require us to invest significant effort and incur significant design and development costs. We may not be successful in competing in bid selection processes or, if successful, we may not generate the expected level of revenue despite incurring significant design and development costs. Because the life cycles of our customers’ products can last several years and changing suppliers involves significant cost, time, effort and risk, our failure to win a competitive bid can result in our foregoing revenue from a given customer’s product line for the life of that product.

The markets for our products are intensely competitive and subject to rapid technological advancement in design tools, 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 may substitute use of our products in their next generation equipment with those of current or future competitors, reducing our future revenues. With the shortening product life and design-in cycles in many of our customers’ products, our competitors may have more opportunities to supplant our products in next generation systems.

Our customers are increasingly price conscious, as semiconductors sourced from third party suppliers comprise a greater portion of the total materials cost in networking equipment. We continue to experience aggressive price competition from other companies that wish to enter into the market segments in which we participate. These circumstances may make some of our products less competitive, and we may be forced to decrease our prices significantly to win a design. We may lose design opportunities or may experience overall declines in gross margins as a result of increased price competition.

Over the next few years, we expect additional competitors, some of which may also have greater financial and other resources, to enter these markets with new products. These companies, individually or collectively, could represent future competition for many design wins and subsequent product sales.

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Design wins do not translate into near-term revenues and the timing of revenues from newly designed products is often uncertain.

From time to time, we announce new products and design wins for existing and new products. While some industry analysts may use design wins as a metric for future revenues, many design wins have not, and will not, generate any revenues for us, as a result of customer projects being cancelled or unsuccessful in their end market. In the event a design win generates revenues, the amount of revenue it produces can vary greatly from other design wins. In addition, most revenue-generating design wins do not translate into near-term revenues often taking more than two years to generate meaningful revenues.

Product quality problems could result in reduced revenues and claims against us.

We produce highly complex products that incorporate leading-edge technology. Despite our testing efforts and those of our subcontractors, defects may be found in existing or new products. Because our product warranties against materials and workmanship defects and non-conformance to our specifications cover varying lengths of time, we may incur significant warranty, support and repair or replacement costs. The resolution of any defects could also divert the attention of our engineering personnel from other product development efforts. If the costs for customer or warranty claims increase significantly compared with our historical experience, our revenue, gross margins and net income may be adversely affected.

Increasingly our customers require warranty protection for periods beyond our standard warranty and for expansive remedies that include direct and indirect damages.  We negotiate these “epidemic failure warranty” provisions rigorously and seek liability caps but, nonetheless, this extraordinary warranty exposure may adversely affect our financial results.

Since many of the products we develop do not reach full production sales volumes for a number of years, we may incorrectly anticipate market demand and develop products that achieve little or no market acceptance.

Our products generally take between 12 and 24 months from initial conceptualization to development of a viable prototype, and another three to 18 months to be designed into our customers’ equipment and sold in production quantities. We sell products whose characteristics include evolving industry standards, short product life spans and new manufacturing and design technologies. As a result, we develop products many years before volume production and may inaccurately anticipate our customers’ needs. From initial product design-in to volume production, many factors, such as unacceptable manufacturing yields on prototypes or our customers’ redefinition of their products, can affect the timing and/or delivery of our products. Our products may become obsolete during these delays, resulting in our inability to recoup our initial investments in product development.

We may be unsuccessful in transitioning the design of our new products to new manufacturing processes.

Many of our new products are designed to take advantage of new manufacturing processes offering smaller device geometries as they become available, since smaller geometries can provide a product with improved features such as lower power requirements, increased performance, more functionality and lower cost. We believe that the transition of our products to, and introduction of new products using, smaller device geometries is critical for us to remain competitive. We could experience difficulties in migrating to future smaller device geometries or manufacturing processes, which would result in the delay of the production of our products. Our products may become obsolete during these delays, or allow competitors’ parts to be chosen by customers during the design process.

The final determination of our income tax liability may be materially different from our initial income tax provision.

We are subject to income taxes in both the United States and international jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions where the ultimate tax determination is uncertain. Additionally, our calculations of income taxes are based on our interpretations of applicable tax laws in the jurisdictions in which we file income tax returns. Although we believe our tax estimates are reasonable, there is no assurance that the final determination of our income tax liability will not be materially different than what is reflected in our income tax provisions and accruals. Should additional taxes be assessed as a result of new legislation, an audit or litigation, if our effective tax rate should change as a result of changes in federal, international or state and local tax laws, or if we were to change the locations where we operate, there could be a material effect on our income tax provision and results of operations in the period or periods in which that determination is made, and potentially in future periods as well.

The ultimate resolution of outstanding tax matters could be for amounts in excess of our reserves established. Such events could have a material adverse effect on our liquidity or cash flows in the quarter in which an adjustment is recorded or the tax payment is due.

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If foreign exchange rates fluctuate significantly, our profitability may decline.

We are exposed to foreign currency rate fluctuations because a significant part of our development, test, and selling and administrative costs are incurred in foreign currencies. The U.S. dollar has fluctuated significantly compared to other foreign currencies and this trend may continue. To protect against reductions in value and the volatility of future cash flows caused by changes in foreign exchange rates, we enter into foreign currency forward contracts. The contracts reduce, but do not eliminate, the impact of foreign currency exchange rate movements. In addition, this foreign currency risk management policy may not be effective in addressing long-term fluctuations since our contracts do not extend beyond a 24-month maturity.

We regularly limit our exposure to foreign exchange rate fluctuations from our foreign net asset or liability positions. We recorded a net $4.1 million foreign exchange gain on the revaluation of our income tax liability in the first nine months of 2015 because of the fluctuations in the U.S. dollar against certain foreign currencies. A five percent shift in the foreign exchange rates between the U.S. and Canadian dollar would cause an approximately $1.3 million impact to our third quarter 2015 pre-tax net income.

We are exposed to the credit risk of some of our customers.

Many of our customers employ contract manufacturers to produce their products and manage their inventories. Many of these contract manufacturers represent greater credit risk than our OEM customers, who do not guarantee our credit receivables related to their contract manufacturers.

In addition, a significant portion of our sales flow through our distribution channel.  This generally represents a higher credit risk. Should these companies encounter financial difficulties, our revenues could decrease, and collection of our significant accounts receivables with these companies or other customers could be jeopardized.

Our business strategy contemplates acquisition of other products, technologies or businesses, which could adversely affect our operating performance.

Acquiring products, intellectual property, technologies and businesses from third parties is a core part of our business strategy. That strategy depends on the availability of suitable acquisition candidates at reasonable prices and our ability to resolve challenges associated with integrating acquired businesses into our existing business. These challenges include integration of product lines, sales forces, customer lists and manufacturing facilities, development of expertise outside our existing business, diversion of management time and resources, possible divestitures, inventory write-offs and other charges. We also may be forced to replace key personnel who may leave us as a result of an acquisition. We cannot be certain that we will find suitable acquisition candidates or that we will be able to meet these challenges successfully. Acquisitions could also result in customer dissatisfaction, performance problems with the acquired company, investment, or technology, the assumption of contingent liabilities, or other unanticipated events or circumstances, any of which could harm our business. Consequently, we might not be successful in integrating any acquired businesses, products or technologies and may not achieve anticipated revenues and cost benefits.

An acquisition could absorb substantial cash resources, require us to incur or assume debt obligations, or issue additional equity. If we are not able to obtain financing, then we may not be in a position to consummate acquisitions. If we issue equity securities 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 costly or more difficult than expected, or require additional management attention to achieve the desired functionality. The complexity of our products could result in unforeseen or undetected defects or bugs, which could adversely affect the market acceptance of new products and damage our reputation with current or prospective customers.

Our current product roadmap is dependent, in part, on successful acquisition and integration of intellectual property cores developed by third parties. If we experience difficulties in obtaining or integrating intellectual property from these third parties, it could delay or prevent the development of our products in the future.

Although our customers, our suppliers and we rigorously test our products, our highly complex products may contain defects or bugs. We have in the past experienced, and may in the future experience, defects and bugs in our products. If any of our products contain defects or bugs, or have reliability, quality or compatibility problems that are significant to our customers, our reputation may be damaged and customers may be reluctant to buy our products. This could materially and adversely affect our ability to retain existing customers or attract new customers. In addition, these defects or bugs could interrupt or delay sales to our customers.

We may have to invest significant capital and other resources to alleviate problems with our products. If any of these problems are not found until after we have commenced commercial production of a new product, we may be required to incur additional development costs and product recall, repair or replacement costs. These problems may also result in claims against us by our

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customers or others. In addition, these problems may divert our technical and other resources from other development efforts. Moreover, we would likely lose or experience a delay in market acceptance of the affected product or products, and we could lose credibility with our current and prospective customers.

Industry consolidation may lead to increased competition and may harm our operating results.

There has been a trend toward industry consolidation in our markets for several years. We expect this trend to continue as companies attempt to improve the leverage of growing research and development costs, strengthen or hold their market positions in an evolving industry or are unable to continue operations. Companies that are strategic alliance partners in some areas of our business may acquire or form alliances with our competitors, thereby reducing their business with us. We believe that industry consolidation may result in stronger competitors that are better able to compete as sole-source vendors for customers. This could lead to more variability in our operating results and could have a material adverse effect on our business, operating results and financial condition.

Our business may be adversely affected if our customers or suppliers cannot obtain sufficient supplies of other components necessary to meet their projected production levels.

Some of our products are used by customers in conjunction with a number of other components, such as transceivers, microcontrollers and digital signal processors. If, for any reason, our customers experience a shortage of any component, their ability to produce the forecasted quantity of their product offerings may be affected adversely and our product sales would decline until the shortage is remedied.

Moreover, if any of our suppliers experience capacity constraints or component shortages, encounters financial difficulties, or experiences any other major disruption of its operations, we may need to qualify an alternate supplier, which may take an extended period of time and could result in delays in product shipments. These delays could cause our customers to seek alternate semiconductor companies to provide them with products previously purchased from us, which could harm our operating results, cash flow and financial condition.

We rely on limited sources of wafer fabrication, the loss of which could delay and limit our product shipments.

We do not own or operate a wafer fabrication facility. In the first nine months of 2015, three outside wafer foundries supplied approximately 98% of our semiconductor wafer requirements. Our wafer foundry suppliers also make products for other companies and some make products for themselves.  As a result, we may not have access to adequate capacity or certain process technologies. 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 acceptable additional or alternative foundries. This qualification process could take six months or longer. We may not find sufficient capacity quickly enough or at an acceptable cost to satisfy our production requirements.

Some companies that supply products to our customers are similarly dependent on a limited number of suppliers. These other companies’ products may represent important components of networking equipment into which our products are designed. If these companies are unable to produce the volumes demanded by our customers, our customers may be forced to slow down or halt production on the equipment for which our products are designed, which could materially reduce our order levels.

We depend on third parties for the assembly and testing of our semiconductor products, which could delay and limit our product shipments.

We depend on third parties in Asia for the assembly and testing of our semiconductor products. In addition, subcontractors in Asia assemble all of our semiconductor products into a variety of packages. Raw material shortages, political, economic and social instability, assembly and testing house service disruptions, currency fluctuations, or other circumstances in the region could force us to seek additional or alternative sources of supply, assembly or testing. This could lead to supply constraints or product delivery delays that, in turn, may result in the loss of revenues. At times, capacity in the assembly industry has become scarce and lead times have lengthened. This capacity shortage may become more severe, which could in turn adversely affect our revenues. We have less control over delivery schedules, assembly processes, testing processes, quality assurances, raw material supplies and costs than competitors that do not outsource these tasks.

Due to the amount of time that it usually takes us to qualify assemblers and testers, we could experience significant delays in product shipments if we are required to find alternative assemblers or testers for our components. Any problems that we may encounter with the delivery, quality or cost of our products could damage our customer relationships and materially and adversely affect our results of operations. We are continuing to develop relationships with additional third-party subcontractors to assemble and test our products. However, even if we use these new subcontractors, we will continue to be subject to all of the risks described above.

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If we fail to maintain effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired, which could adversely affect investor perceptions of us and the value of our common stock.

We are subject to Section 404 of the Sarbanes-Oxley Act of 2002 and, as such, are required to maintain internal control over financial reporting adequate to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements in accordance with generally accepted accounting principles. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. As a result, we cannot assure you that a material weakness in our internal control over financial reporting will not be identified in the future. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The existence of a material weakness can cause us to fail to timely meet our periodic reporting obligations or result in material misstatements in our consolidated financial statements. Any such failure could adversely affect the results of periodic management control evaluations and annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting, cause us to incur unforeseen costs, negatively impact our results of operations, or cause the market price of our common stock to decline.

Our estimated restructuring accruals may not be adequate.

During the second quarter of 2015, we began implementing a restructuring plan to reduce spending across the organization.  This has involved a reduction in force of approximately 200 employees worldwide and other reductions, including site closures and asset impairments. 

While management uses all available information to estimate these restructuring costs, particularly employee severance and related compensation benefits, our estimated accruals may prove to be inadequate.  If our actual payout differs from our estimates, we may have to record additional charges, which could materially affect our results of operations, financial position and cash flow.

Our business is vulnerable to interruption by earthquake, flooding, fire, power loss, telecommunications failure, terrorist activity and other events beyond our control.

We do not have sufficient business interruption insurance to compensate us for actual losses from interruption of our business that may occur, and any losses or damages incurred by us could have a material adverse effect on our business. We are vulnerable to a major earthquake and other calamities. We have operations in seismically active regions in California, Japan and British Columbia, Canada, and we rely on third-party suppliers, including wafer fabrication and testing facilities, in seismically active regions in Asia, which have recently experienced natural disasters.  To the extent that manufacturing issues and any related component shortages result in delayed shipments in the future, and particularly in periods in which we and our contract manufacturers are operating at higher levels of capacity, it is possible that our revenue could be adversely affected if such matters occur and are not remediated. 

We are unable to predict the effects of any such events, but the effects could be seriously harmful to our business.

Hostilities in the Middle East and India may have a significant impact on our Israeli and Indian subsidiaries’ ability to conduct their business.

As at September 26, 2015, we have operations, concentrated primarily on research and development, located in Israel and India that employ approximately 80 and 147 people, respectively. A catastrophic event, such as a terrorist attack or the outbreak of hostilities that results in the destruction or disruption of any 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 the event of severe hostilities breaking out, a significant number of our Israeli employees may be called into active military duty, resulting in delays in various aspects of production, including product development schedules.

From time to time, we become defendants in legal proceedings about which we are unable to assess our exposure and which could become significant liabilities upon judgment.

We become defendants in legal proceedings from time to time. Companies in our industry have been subject to claims related to patent infringement and product liability, as well as contract and personal claims. We may not be able to accurately assess the risk related to these suits and we may be unable to accurately assess our level of exposure. An infringement or product liability claim brought against us, even if unsuccessful, would likely be time-consuming and costly to defend and could divert the efforts of our technical and management personnel. These proceedings may result in material charges to our operating results in the future if our exposure is material and if our ability to assess our exposure becomes clearer.

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If we cannot protect our proprietary technology, we may not be able to prevent competitors from copying or misappropriating our technology and selling similar products, which would harm our business.

To compete effectively, we must protect our intellectual property. We rely on a combination of patents, trademarks, copyrights, trade secret laws, confidentiality procedures and licensing arrangements to protect our intellectual property rights. We hold numerous patents and have a number of pending patent applications. However, our portfolio of patents evolves as new patents are issued and older patents expire and the expiration of patents could have a negative effect on our ability to prevent competitors from duplicating certain of our products.

We might not succeed in obtaining patents from any of our pending applications. Even if we are awarded patents, they may not provide any meaningful protection or commercial advantage to us, as they may not be of sufficient scope or strength, or may not be issued in all countries where our products can 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 acknowledge their obligation to maintain confidentiality with respect to PMC’s products. Despite these efforts, we cannot guarantee that these parties will maintain the confidentiality of our proprietary information in the course of future employment or working with other business partners. We develop, manufacture and sell our products in Asia and other countries that may not protect our intellectual property rights to the same extent as the laws of the United States. This makes piracy of our technology and products more likely. Steps we take to protect our proprietary information may not be adequate to prevent theft of our technology. We may not be able to prevent our competitors from independently developing technologies that are similar to or better than ours.

Our products employ technology that may infringe on the intellectual property and the proprietary rights of third parties, which may expose us to litigation and prevent us from selling our products.

Vigorous protection and pursuit of intellectual property rights or positions characterize the semiconductor industry. This often results in expensive and lengthy litigation. We, and our customers or suppliers, may be accused of infringing patents or other intellectual property rights owned by third parties in the future. An adverse result in any litigation against us or a customer or supplier could force us to pay substantial damages, stop manufacturing, using and selling the infringing products, spend significant resources to develop non-infringing technology, discontinue using certain processes or obtain licenses to use the infringing technology. In addition, we may not be able to develop non-infringing technology or find appropriate licenses on reasonable terms or at all. Although some of our suppliers have agreed to indemnify us against certain intellectual property infringement claims or other losses relating to their products, these contractual indemnification rights may not cover the full extent of losses we incur as a result of these suppliers’ products. 

Patent disputes in the semiconductor industry  between industry participants are often settled through cross-licensing arrangements. Our portfolio of patents may not have the breadth to enable us to settle an alleged patent infringement claim through a cross-licensing arrangement. Patent disputes brought by non-practicing entities (patent holders who do not manufacture products but only seek to monetize patent rights) cannot be settled through cross-licensing and cannot be avoided through cross-licensing with industry practitioners. We may therefore be more exposed to third party claims than some of our larger competitors and customers.

Customers may make claims against us in connection with infringement claims made against them that are alleged to relate to our products or components included in our products, even where we obtain the components from a supplier. In such cases, we may incur monetary losses due to cost of defense, settlement or damage award and non-monetary losses as a result of diverting valuable internal resources to litigation support.  To the extent that claims against us or our customers relate to third party intellectual property integrated into our products, there is no assurance that we will be fully indemnified by our suppliers against any losses.

Furthermore, we may initiate claims or litigation against third parties for infringing our proprietary rights or to establish the validity of our proprietary rights. This could consume significant resources and divert the efforts of our technical and management personnel, regardless of the litigation’s outcome.

We may be subject to intellectual property theft or misuse, which could result in third-party claims and harm our business and results of operations.

We regularly face attempts by others to gain unauthorized access through the Internet to our information technology systems, such as when such parties masquerade as authorized users or surreptitiously introduce software. We might become a target of computer hackers who create viruses to sabotage or otherwise attack our products and services. Hackers might attempt to penetrate our network security and gain access to our network and our data centers, misappropriate our or our customers’ proprietary information, including personally identifiable information, or cause interruptions of our internal systems and services. We seek to detect and investigate these security incidents and to prevent their recurrence, but in some cases we might be unaware of an incident or its magnitude and effects. The theft or unauthorized use or publication of our trade secrets and other confidential business information as a result of such an incident could adversely affect our competitive position and reduce marketplace acceptance of our products; reduce

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the value of our investment in R&D, product development, and marketing; and could motivate third parties to assert against us or our customers claims related to loss of confidential or proprietary information, end-user data, or system reliability. Our business could be subject to significant disruption, and we could suffer monetary and other losses, including the cost of product recalls and returns and reputational harm, in the event of such incidents and claims.

Securities we issue to fund our operations could dilute your ownership.

We may decide to raise additional funds through public or private debt or equity financing. If we raise funds by issuing equity securities, the percentage ownership of current stockholders will be reduced and the new equity securities may have rights that take priority over your investment. We may not obtain sufficient financing on terms that are favorable to you or us. We may delay, limit or eliminate some or all of our proposed operations if adequate funds are not available.

Our stock price has been and may continue to be volatile.

We expect that the price of our common stock may continue to fluctuate significantly, as it has in the past. In particular, fluctuations in our stock price and our price-to-earnings multiple may have made our stock attractive to momentum, hedge or day-trading investors who often shift funds into and out of stocks rapidly, exacerbating price fluctuations in either direction particularly when viewed on a quarterly basis.

Securities class action litigation has often been instituted against a company following periods of volatility and decline in the market price of their securities. If instituted against us, regardless of the outcome, such litigation could result in substantial costs and diversion of our management’s attention and resources and have a material adverse effect on our business, financial condition and operating results. In addition, we could incur substantial punitive and other damages relating to such litigation.

Provisions in Delaware law and our charter documents may delay or prevent another entity from acquiring us without the consent of our Board of Directors.

Our Board of Directors has the right to issue preferred stock without stockholder approval, which could be used to dilute the stock ownership of a potential hostile acquirer. Delaware law imposes some restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock.

Although we believe these provisions of our charter documents and Delaware law will provide for an opportunity to receive a higher bid by requiring potential acquirers to negotiate with our Board of Directors, these provisions apply even if the offer may be considered beneficial by some stockholders.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.  Defaults Upon Senior Securities

None.  

Item 4.  Mine Safety Disclosures

Not applicable.  

Item 5.  Other Information

None.

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Item 6.  Exhibits

						Filed
Exhibit				Filing	Exhibit No.	with
No.	Description	Form	File No.	Date	as Filed	this 10-Q
2.1	Amended and Restated Agreement and Plan of Merger, dated as of October 29, 2015, by and among PMC-Sierra, Inc., Skyworks Solutions, Inc., and Amherst Acquisition, Inc.	8-K	0-19084	10/30/2015	2.1
31.1	Certification of Chief Executive Officer pursuant to Section 302 (a) of the Sarbanes-Oxley Act of 2002					X
31.2	Certification of Chief Financial Officer pursuant to Section 302 (a) of the Sarbanes-Oxley Act of 2002					X
32.1	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer)					X
32.2	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer)					X
101.INS	XBRL Instance Document					X
101.SCH	XBRL Taxonomy Extension Schema Document					X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document					X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document					X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document					X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document					X

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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:	November 3, 2015	/s/ Steven J. Geiser
		Steven J. Geiser
		Vice President,
		Chief Financial Officer and
		Principal Accounting Officer

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EX-31.1

Exhibit 31.1  

CERTIFICATION  

I, Gregory S. Lang, certify that:  

1. I have reviewed this quarterly report on Form 10-Q of PMC-Sierra, Inc.;  

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;  

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;   

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:  

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;  

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;  

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and   

d) 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 annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):  

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and  

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.  

Date:	November3, 2015	By:	/s/ Gregory S. Lang
			Gregory S. Lang
			President and
			Chief Executive Officer

EX-31.2

Exhibit 31.2  

CERTIFICATION  

I, Steven J. Geiser, certify that:  

1. I have reviewed this quarterly report on Form 10-Q of PMC-Sierra, Inc.;  

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;  

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;   

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:  

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;  

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;  

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and   

d) 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 annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and  

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):  

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and  

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.  

Date:	November 3, 2015	By:		/s/ Steven J. Geiser
			Steven J. Geiser
			Vice President,
			Chief Financial Officer and
			Principal Accounting Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER  

PURSUANT TO 18 U.S.C. SECTION 1350  

AS ADOPTED PURSUANT TO SECTION 906  

OF THE SARBANES-OXLEY ACT OF 2002  

I, Gregory S. Lang,  hereby certify, in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in my capacity as an officer of PMC-Sierra, Inc. (“PMC”), that, to my knowledge, this Quarterly Report of PMC on Form 10-Q for the period ended September 26, 2015, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of PMC.  

Date:	November 3, 2015	By:	/s/ Gregory S. Lang
			Gregory S. Lang
			President and
			Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER  

PURSUANT TO 18 U.S.C. SECTION 1350  

AS ADOPTED PURSUANT TO SECTION 906  

OF THE SARBANES-OXLEY ACT OF 2002  

I, Steve J. Geiser hereby certify, in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in my capacity as an officer of PMC-Sierra, Inc. (“PMC”), that, to my knowledge, this Quarterly Report of PMC on Form 10-Q for the period ended September 26, 2015, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of PMC.  

Date:	November 3, 2015	By:	/s/ Steven J. Geiser
			Steven J. Geiser
			Vice President,
			Chief Financial Officer and
			Principal Accounting Officer

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Balance Sheet Items (Schedule Of Restructuring Activity) (Details) $ in Thousands	9 Months Ended
	Sep. 26, 2015 USD ($)
Restructuring Cost and Reserve [Line Items]
Accrued restructuring beginning balance
Additional accruals	$ 14,653
Cash payments	(6,281)
Adjustments and non-cash charges	(1,713)
Accrued restructuring ending balance	$ 6,659
Employee Severance & Related Benefits Compensation [Member]
Restructuring Cost and Reserve [Line Items]
Accrued restructuring beginning balance
Additional accruals	$ 13,488
Cash payments	(6,127)
Adjustments and non-cash charges	(921)
Accrued restructuring ending balance	$ 6,440
Site Closures & Assets Impairment [Member]
Restructuring Cost and Reserve [Line Items]
Accrued restructuring beginning balance
Additional accruals	$ 1,165
Cash payments	(154)
Adjustments and non-cash charges	(792)
Accrued restructuring ending balance	$ 219

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Stock-Based Compensation (Schedule Of Activity Under Option Plans) (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 26, 2015	Dec. 27, 2014
Stock-Based Compensation [Abstract]
Outstanding beginning balance, Number of options	18,316,720
Granted, Number of options	847,892
Exercised, Number of options	(4,017,595)
Forfeited, Number of options	(136,344)
Expired, Number of options	(1,025,118)
Outstanding ending balance, Number of options	13,985,555	18,316,720
Vested and expected to vest, Number of options	13,731,955
Exercisable, Number of options	12,046,856
Outstanding beginning balance, Weighted average exercise price per share	$ 7.53
Granted, Weighted average exercise price per share	6.73
Exercised, Weighted average exercise price per share	6.66
Forfeited, Weighted average exercise price per share	6.55
Expired, Weighted average exercise price per shre	9.48
Outstanding ending balance, Weighted average exercise price per share	7.60	$ 7.53
Vested and expected to vest, Weighted average exercise price per share	7.62
Exercisable, Weighted average exercise price per share	$ 7.75
Outstanding, Weighted average remaining contractual term (years)	4 years 3 months 7 days	4 years 4 months 28 days
Vested and expected to vest, Weighted average remaining contractual term (years)	4 years 2 months 5 days
Exercisable, Weighted average remaining contractual term (years)	3 years 6 months 11 days
Outstanding beginning balance, Aggregate intrinsic value	$ 32,598,999
Outstanding ending balance, Aggregate intrinsic value	2,734,065	$ 32,598,999
Vested and expected to vest, Aggregate intrinsic value	2,722,645
Exercisable, Aggregate intrinsic value	$ 2,509,015

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Net Loss Per Share (Tables)

9 Months Ended

Sep. 26, 2015

Net Loss Per Share [Abstract]

Computation Of Basic And Diluted Net Loss Per Share

	Three Months Ended				Nine Months Ended
	September 26,		September 27,		September 26,		September 27,
(in thousands, except per share amounts)	2015		2014		2015		2014
Numerator:
Net income (loss)	$	6,718	$	5,473	$	2,794	$	(2,248)
Denominator:
Basic and diluted weighted average common shares outstanding (1)		194,562		197,613		196,848		196,305
Dilutive effect of employee stock options and awards		2,303		3,131		4,170		—
Diluted weighted average common shares outstanding (1)		196,865		200,744		201,018		196,305
Basic and diluted net income (loss) per share	$	0.03	$	0.03	$	0.01	$	(0.01)

(1) PMC-Sierra Ltd. special shares are included in the calculation of basic and diluted weighted average common shares outstanding.

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Credit Facility (Details) - USD ($) $ in Thousands		9 Months Ended
	Oct. 14, 2015	Sep. 26, 2015	Sep. 27, 2014	Dec. 27, 2014
Line of Credit Facility [Line Items]
Line of credit, repayment of outstanding balance		$ 72,000	$ 60,000
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Line of credit, maximum borrowing capacity		100,000
Line of credit, amount drawn		$ 30,000		$ 0
Subsequent Event [Member] | Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Line of credit, repayment of outstanding balance	$ 5,000
Minimum [Member] | Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Line of credit, margin rate		1.75%
Maximum [Member] | Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Line of credit, maximum borrowing capacity		$ 150,000
Line of credit, margin rate		2.25%

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Balance Sheet Items (Schedule Of Product Warranties) (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 26, 2015	Sep. 27, 2014
Balance Sheet Items [Abstract]
Balance, beginning of the period	$ 1,756	$ 2,163
Accrual for new warranties issued	512	371
Reduction for payments and product replacements	(372)	(533)
Adjustments related to revisions and changes in estimate of warranty accrual	(700)	(113)
Balance, end of the period	$ 1,196	$ 1,888

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Business Combinations

9 Months Ended

Sep. 26, 2015

Business Combinations [Abstract]

Business Combinations

NOTE 2. Business Combinations  

Acquisition of RAID Software License

On September 4, 2014 (“Effective Date”), PMC completed a transaction agreement with Hewlett-Packard Company (“HP”) to license core HP Smart Array (“RAID”) software, firmware and management technology (the “Transaction”) for total acquisition consideration of $52 million, accounted for using the acquisition method. With this technology, as well as with certain key employees who worked for HP as lead RAID software development engineers and who were transferred to PMC, PMC can provide more system value to new and existing enterprise, Hyperscale data center and channel customers.

The $52 million total acquisition consideration is payable in installments.  An initial payment of $10 million was made on the Effective Date and $18 million was paid on January 10, 2015.  The remaining $24 million is payable in two installments of $12 million each on January 10, 2016 and January 10, 2017.  Such installment payments are classified as financing activities in our condensed consolidated statement of cash flows.

Other Agreement with HP

Upon the closing of the Transaction, the Company also entered into an agreement with HP related to services and non-recurring engineering (“NRE”) which provides the framework for the development of future generations of RAID software for HP for a period of approximately two years from the Effective Date. During this period, HP will make cost reimbursement payments to the Company totaling $25 million, which are receivable in installments through April 2016. The Company received $3.3 million of the $25 million total cost reimbursement payments from HP in the third quarter of 2015 ($9.8 million in the first nine months of 2015 and $13.8 million since the Effective Date). Payments to the Company in accordance with this agreement are recorded as a reduction of research and development expense.

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 26, 2015	Sep. 27, 2014	Sep. 26, 2015	Sep. 27, 2014	Dec. 27, 2014
Income Taxes [Abstract]
Provision for income taxes	$ 6,727	$ 3,087	$ 7,943	$ 9,405
Effective tax rate	50.00%	36.00%	74.00%	131.00%
Federal statutory rate	35.00%	35.00%	35.00%	35.00%
Unrecognized tax benefits	$ 41,100		$ 41,100		$ 41,300

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Fair Value Measurements (Financial Assets Measured At Fair Value On Recurring Basis) (Details) - USD ($) $ in Thousands	Sep. 26, 2015	Dec. 27, 2014
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	$ 149,969	$ 135,950
Level 1 [Member] | Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	4,040	8,729
Level 1 [Member] | Corporate Bonds And Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	97,434	88,401
Level 1 [Member] | U.S. Treasury And Government Agency Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	46,835	38,283
Level 1 [Member] | Foreign Government And Agency Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	1,509	537
Level 1 [Member] | U.S. State And Municipal Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	151
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	30,818	26,173
Level 2 [Member] | Corporate Bonds And Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	21,224	17,030
Level 2 [Member] | U.S. Treasury And Government Agency Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets		1,387
Level 2 [Member] | Foreign Government And Agency Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	9,514	7,525
Level 2 [Member] | U.S. State And Municipal Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	$ 80	$ 231

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Fair Value Measurements (Narrative) (Details) - USD ($)	Sep. 26, 2015	Dec. 27, 2014
Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured and recorded at fair value	$ 0
Liabilities measured and recorded at fair value	0
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments previously listed as Level 2	(10,100,000)
Assets measured and recorded at fair value	149,969,000	$ 135,950,000
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments previously listed as Level 1	(9,500,000)
Assets measured and recorded at fair value	30,818,000	26,173,000
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured and recorded at fair value	0	0
Liabilities measured and recorded at fair value	$ 0	$ 0

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Net Loss Per Share (Computation Of Basic And Diluted Net Loss Per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 26, 2015	Sep. 27, 2014	Sep. 26, 2015	Sep. 27, 2014
Net Loss Per Share [Abstract]
Net income (loss)		$ 6,718	$ 5,473	$ 2,794	$ (2,248)
Basic and diluted weighted average common shares outstanding	[1]	194,562	197,613	196,848	196,305
Dilutive effect of employee stock options and awards		2,303	3,131	4,170
Diluted weighted average common shares outstanding	[1]	196,865	200,744	201,018	196,305
Basic and diluted net income (loss) per share		$ 0.03	$ 0.03	$ 0.01	$ (0.01)
Antidilutive securities excluded from computation of loss per share					3,300,000

[1] PMC-Sierra Ltd. special shares are included in the calculation of basic and diluted weighted average common shares outstanding.

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Fair Value Measurements (Financial Liabilities Measured At Fair Value On Recurring Basis) (Details) - USD ($) $ in Thousands	Sep. 26, 2015	Dec. 27, 2014
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Forward currency contracts	$ 2,744	$ 1,907

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Stock-Based Compensation (Narrative) (Details) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 26, 2015 USD ($) $ / shares ShareBasedCompensationPlan shares	Sep. 27, 2014 USD ($) $ / shares	Dec. 27, 2014 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock-based compensation plans | ShareBasedCompensationPlan	2
Proceeds from issuance of common stock	$ 36,982	$ 17,924
2011 Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized compensation costs	$ 1,100
Average period of unrecognized compensation costs expected to be recognized	4 months
Common shares initially reserved for issuance | shares	2,653,049		4,380,208
Common shares increase | shares	7,000,000
Shares issued during period under ESPP | shares	1,727,159
Weighted average price per share under ESPP | $ / shares	$ 5.91
Weighted average grant-date fair value per ESPP award | $ / shares	$ 1.93
Total intrinsic value of ESPP shares issued	$ 3,700
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options expiration period	10 years
Options vesting period	4 years
Total forfeitures recorded	$ 700	$ 1,800
Weighted average grant-date fair value per stock options granted | $ / shares	$ 2.11	$ 2.29
Total intrinsic value of awards	$ 9,600	$ 2,300
Total unrecognized compensation costs	$ 3,500
Average period of unrecognized compensation costs expected to be recognized	2 years 10 months 24 days
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total intrinsic value of awards	$ 14,900
Total unrecognized compensation costs	$ 41,000
Average period of unrecognized compensation costs expected to be recognized	2 years 9 months 18 days
Restricted Stock Units (RSUs) [Member] | February 25, 2015 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of grants	$ 3,800
Restricted Stock Units (RSUs) [Member] | August 25, 2015 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of grants	$ 1,500
Restricted Stock Units (RSUs) [Member] | First Vesting Date [Member] | February 25, 2015 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	34.00%
Restricted Stock Units (RSUs) [Member] | First Vesting Date [Member] | August 25, 2015 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	50.00%
Restricted Stock Units (RSUs) [Member] | Second Vesting Date [Member] | February 25, 2015 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	33.00%
Restricted Stock Units (RSUs) [Member] | Second Vesting Date [Member] | August 25, 2015 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	50.00%
Restricted Stock Units (RSUs) [Member] | Third Vesting Date [Member] | February 25, 2015 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	33.00%
Maximum [Member] | 2011 Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common shares initially reserved for issuance | shares	12,000,000

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Summary Of Significant Accounting Policies

9 Months Ended

Sep. 26, 2015

Summary Of Significant Accounting Policies [Abstract]

Summary Of Significant Accounting Policies

NOTE 1.  Summary of Significant Accounting Policies  

Description of business.  PMC-Sierra, Inc. (the “Company” or “PMC”) is a fabless semiconductor and software solution innovator transforming networks that connect, move, and store Big Data. The Company designs, develops, markets and supports semiconductor, embedded software, and board level solutions by integrating its mixed-signal, software and systems expertise through a network of offices in North America, Europe and Asia. 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.

Basis of presentation. The accompanying interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) and United States Generally Accepted Accounting Principles (“GAAP”).  Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules or regulations.  These interim condensed consolidated financial statements are unaudited, but reflect all adjustments which are normal and recurring in nature and are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented.  These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in the Company’s Annual Report on Form 10-K for the year ended December 27, 2014 filed with the SEC on February 24, 2015.  The results of operations for the interim periods are not necessarily indicative of results to be expected in future periods.  Fiscal 2015 will consist of 52 weeks and will end on Saturday, December 26, 2015.  Fiscal 2014 consisted of 52 weeks and ended on Saturday, December 27, 2014.  The third quarter of each of 2015 and 2014 consisted of 13 weeks.  The Company’s reporting currency is the United States (“U.S.”) dollar and presented in thousands unless otherwise stated.

Estimates. The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Estimates are used for, but not limited to, stock-based compensation, purchase accounting assumptions including those used to calculate the fair value of intangible assets and goodwill, the valuation of investments, accounting for doubtful accounts, inventory reserves, depreciation and amortization, asset impairments, revenue recognition, sales returns, warranty costs, restructuring costs, income taxes including uncertain tax positions, accounting for employee benefit plans, and contingencies.  Actual results could differ materially from these estimates.

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.  This ASU requires retrospective adoption and will be effective for us beginning in our first quarter of 2017.  Early adoption is permitted. ASU 2015-13 is not expected to have a material impact on the Company’s condensed consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, or ASU 2014-09, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The standard will replace most existing revenue recognition guidance in GAAP when it becomes effective. The standard allows for either full retrospective or modified retrospective adoption method. In July 2015, the FASB deferred the effective date to January 1, 2018 with early adoption beginning January 1, 2017.  The Company is currently evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method, adoption date, or determined the effect of the standard on its ongoing financial reporting.

In July 2015, the FASB issued ASU 2015-11, Inventory - Simplifying the Measurement of Inventory (Topic 330). ASU 2015-11 requires inventory to be subsequently measured using the lower of cost and net realizable value, thereby eliminating the market value approach. Net realizable value is defined as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.” ASU 2015-11 is effective for reporting periods beginning after December 15, 2016 and is applied prospectively. Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our financial statements and disclosure.

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Stock-Based Compensation (Schedule Of Stock-Based Compensation Expense) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 26, 2015	Sep. 27, 2014	Sep. 26, 2015	Sep. 27, 2014
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 5,190	$ 5,228	$ 17,994	$ 16,334
Cost Of Revenues [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	266	226	803	681
Research And Development, Net [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	2,266	1,990	7,510	6,540
Selling, General And Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 2,658	$ 3,012	$ 9,681	$ 9,113

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Investment Securities (Narrative) (Details)	9 Months Ended
	Sep. 26, 2015
Contractual maturities of investment securities	3 years
Minimum [Member]
Contractual maturities of investment securities	2 years
Maximum [Member]
Contractual maturities of investment securities	3 years
Contractual maturities of investment securities, balance	1 year

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Condensed Consolidated Statements Of Operations - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 26, 2015	Sep. 27, 2014	Sep. 26, 2015	Sep. 27, 2014
Condensed Consolidated Statements Of Operations [Abstract]
Net revenues		$ 133,574	$ 135,462	$ 391,412	$ 388,752
Cost of revenues (excluding amortization of purchased intangible assets below)		37,999	40,306	116,413	114,694
Gross profit		95,575	95,156	274,999	274,058
Research and development, net		47,277	48,441	151,976	147,977
Selling, general and administrative		28,050	29,265	88,589	87,596
Amortization of purchased intangible assets		9,172	9,948	27,758	32,225
Income from operations		11,076	7,502	6,676	6,260
Other income (expense):
Foreign exchange gain		2,412	899	4,058	642
Interest and other financial income, net		108	198	589	321
Gain on investment securities and other investments		70	12	127	87
Amortization of debt issuance costs		(51)	(51)	(153)	(153)
Accretion of discount on short-term and long-term obligation		(170)		(560)
Income before income taxes		13,445	8,560	10,737	7,157
Provision for income taxes		(6,727)	(3,087)	(7,943)	(9,405)
Net income (loss)		$ 6,718	$ 5,473	$ 2,794	$ (2,248)
Net income (loss) per common share - basic and diluted		$ 0.03	$ 0.03	$ 0.01	$ (0.01)
Shares used in per share calculation - basic		194,562	197,613	196,848	196,305
Shares used in per share calculation - diluted	[1]	196,865	200,744	201,018	196,305

[1] PMC-Sierra Ltd. special shares are included in the calculation of basic and diluted weighted average common shares outstanding.

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Stock Repurchase (Details) - USD ($) shares in Millions, $ in Millions	9 Months Ended
	Sep. 26, 2015	Sep. 27, 2014	May. 21, 2015	Feb. 09, 2015	Dec. 27, 2014
Equity, Class of Treasury Stock [Line Items]
Share repurchase plan, authorized amount	$ 505.0		$ 75.0	$ 75.0
Share repurchase plan, remaining authorized amount				102.1
Share repurchase plan, authorized amount available	$ 430.0
Share repurchase plan, common stock repurchased, shares	11.6	1.4
Share repurchase plan, common stock repurchased, value	$ 102.1	$ 8.9
2012 Stock Repurchase Program [Member]
Equity, Class of Treasury Stock [Line Items]
Share repurchase plan, authorized amount					$ 275.0
Share repurchase plan, remaining authorized amount				$ 27.1

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 26, 2015	Dec. 27, 2014
Condensed Consolidated Balance Sheets [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 735	$ 795
PMC special shares convertible into common stock, shares	203,000	278,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	900,000,000	900,000,000
Common stock, shares issued	195,642,000	199,518,000
Common stock, shares outstanding	195,642,000	199,518,000

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Stock-Based Compensation (Summary Of RSU Activity) (Details) - Restricted Stock Units (RSUs) [Member] - USD ($)	9 Months Ended	12 Months Ended
	Sep. 26, 2015	Dec. 27, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested units, Beginning balance, Restricted Stock Units	7,368,529
Awarded, Restricted Stock Units	3,492,249
Released, Restricted Stock Units	(2,242,344)
Forfeited, Restricted Stock Units	(712,317)
Unvested units, Ending balance, Restricted Stock Units	7,906,117	7,368,529
Restricted Stock Units expected to vest, Restricted Stock Units	6,784,932
Unvested units, Weighted Average Remaining Contractual Term (years)	1 year 9 months 29 days	1 year 8 months 23 days
Restricted Stock Units expected to vest, Weighted Average Remaining Contractual Term (years)	1 year 8 months 23 days
Unvested units, Beginning balance, Aggregate intrinsic value	$ 67,200,984
Unvested units, Ending balance, Aggregate intrinsic value	50,361,965	$ 67,200,984
Restricted Stock Units expected to vest, Aggregate intrinsic value	$ 43,220,018

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 26, 2015

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule Of Stock-Based Compensation Expense

	Three Months Ended				Nine Months Ended
	September 26,		September 27,		September 26,		September 27,
(in thousands)	2015		2014		2015		2014
Cost of revenues	$	266	$	226	$	803	$	681
Research and development, net		2,266		1,990		7,510		6,540
Selling, general and administrative		2,658		3,012		9,681		9,113
Total	$	5,190	$	5,228	$	17,994	$	16,334

Schedule Of Activity Under Option Plans

	Number of options	Weighted average exercise price per share		Weighted average remaining contractual term (years)		Aggregate intrinsic value
Outstanding, December 27, 2014	18,316,720	$	7.53	4.41	$	32,598,999
Granted	847,892	$	6.73
Exercised	(4,017,595)	$	6.66
Forfeited	(136,344)	$	6.55
Expired	(1,025,118)	$	9.48
Outstanding, September 26, 2015	13,985,555	$	7.60	4.27	$	2,734,065
Vested and expected to vest, September 26, 2015	13,731,955	$	7.62	4.18	$	2,722,645
Exercisable, September 26, 2015	12,046,856	$	7.75	3.53	$	2,509,015

Schedule Of Fair Value Weighted Average Assumptions

	Nine Months Ended
	September 26,	September 27,
	2015	2014
Expected life (years)	5.9	5.8
Expected volatility	30%	33%
Risk-free interest rate	1.8%	1.8%

Summary Of RSU Activity

	Restricted Stock Units	Weighted Average Remaining Contractual Term (years)			Aggregate intrinsic value
Unvested units at December 27, 2014	7,368,529		1.73	$	67,200,984
Awarded	3,492,249		-		—
Released	(2,242,344)		-		—
Forfeited	(712,317)		-		—
Unvested units at September 26, 2015	7,906,117		1.83	$	50,361,965
Restricted Stock Units expected to vest at September 26, 2015	6,784,932		1.73	$	43,220,018

2011 Employee Stock Purchase Plan [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule Of Fair Value Weighted Average Assumptions

	Nine Months Ended
	September 26,	September 27,
	2015	2014
Expected life (years)	0.5	0.5
Expected volatility	34%	35%
Risk-free interest rate	0.2%	0.1%

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Balance Sheet Items (Schedule Of Inventories) (Details) - USD ($) $ in Thousands	Sep. 26, 2015	Dec. 27, 2014
Balance Sheet Items [Abstract]
Work-in-progress	$ 15,655	$ 17,438
Finished goods	17,191	20,511
Inventory, net	32,846	37,949
Inventory reserves	$ 7,200	$ 7,800

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Investment Securities (Tables)

9 Months Ended

Sep. 26, 2015

Investment Securities [Abstract]

Available For Sale Investments

	September 26, 2015
(in thousands)	Amortized Cost		Gross Unrealized Gains*		Gross Unrealized Losses		Fair Value
Cash equivalents:
Money market funds	$	4,040	$	—	$	—	$	4,040
Total cash equivalents		4,040		—		—		4,040
Short-term investments:
Corporate bonds and notes		32,879		958		(5)		33,832
US treasury and government agency notes		5,131		92		—		5,223
Foreign government and agency notes		3,012		51		(2)		3,061
US states and municipal securities		230		1		—		231
Total short-term investments		41,252		1,102		(7)		42,347
Long-term investment securities:
Corporate bonds and notes		84,866		75		(115)		84,826
US treasury and government agency notes		41,508		105		(1)		41,612
Foreign government and agency notes		7,962		4		(4)		7,962
Total long-term investment securities		134,336		184		(120)		134,400
Total	$	179,628	$	1,286	$	(127)	$	180,787
*Gross unrealized gains include accrued interest on investments of $0.6 million which are included in the Consolidated Statement of Operations.  The remainder of the gross unrealized gains and losses are included in the Consolidated Balance Sheet as Accumulated other comprehensive income (loss).
	December 27, 2014
(in thousands)	Amortized Cost		Gross Unrealized Gains*		Gross Unrealized Losses		Fair Value
Cash equivalents:
Money market funds	$	8,729	$	—	$	—	$	8,729
Total cash equivalents		8,729		—		—		8,729
Short-term investments:
Corporate bonds and notes		43,777		498		(16)		44,259
US treasury and government agency notes		1,010		79		—		1,089
Foreign government and agency notes		501		36		—		537
Total short-term investments		45,288		613		(16)		45,885
Long-term investment securities:
Corporate bonds and notes		61,357		28		(213)		61,172
US treasury and government agency notes		38,650		7		(76)		38,581
Foreign government and agency notes		7,563		1		(39)		7,525
US states and municipal securities		230		1		—		231
Total long-term investment securities		107,800		37		(328)		107,509
Total	$	161,817	$	650	$	(344)	$	162,123
*Gross unrealized gains include accrued interest on investments of $0.6 million which are included in the Consolidated Statement of Operations.  The remainder of the gross unrealized gains and losses are included in the Consolidated Balance Sheet as Accumulated other comprehensive income (loss).

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Condensed Consolidated Statements Of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 26, 2015	Sep. 27, 2014
Cash flows from operating activities:
Net income (loss)	$ 2,794	$ (2,248)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	45,166	48,739
Stock-based compensation	17,994	16,334
Unrealized foreign exchange gain, net	(8,179)	(2,372)
Net amortization of premiums and accrued interest on investments	587	628
Asset impairments	252	770
Gain on disposal of property and equipment	(63)
Gain on investment securities and other investments	(64)	(86)
Accretion of discount on short-term and long-term obligations	560
Amortization of debt issuance costs	153	153
Gain on exit of lease agreement	(696)
Changes in operating assets and liabilities:
Accounts receivable, net	(6,855)	(934)
Inventories, net	5,103	(3,514)
Prepaid expenses and other current assets	2,306	4,072
Accounts payable and accrued liabilities	(9,732)	(6,699)
Deferred taxes and income taxes payable	7,480	8,608
Deferred income	(15)	(1,980)
Net cash provided by operating activities	56,791	61,471
Cash flows from investing activities:
Cash paid in connection with business acquisition		(10,000)
Purchases of property and equipment	(13,724)	(11,175)
Purchase of intangible assets	(4,072)	(1,167)
Redemption of short-term investments	28,131	4,920
Disposals of investment securities and other investments	40,446	37,936
Purchases of investment securities and other investments	(92,577)	(67,727)
Net cash used in investing activities	(41,796)	(47,213)
Cash flows from financing activities:
Installment payment in connection with previous business acquisition	(18,000)
Proceeds from credit facility	102,000	30,000
Repayment of credit facility	(72,000)	(60,000)
Proceeds from issuance of common stock	36,982	17,924
Repurchases of common stock	(102,108)	(11,496)
Net cash used in financing activities	(53,126)	(23,572)
Effect of exchange rate changes on cash and cash equivalents	(1,309)	(784)
Net decrease in cash and cash equivalents	(39,440)	(10,098)
Cash and cash equivalents, beginning of the period	112,570	100,038
Cash and cash equivalents, end of the period	73,130	89,940
Supplemental disclosures of cash flow information:
Cash paid for interest	(483)	(276)
Cash payments made for income taxes, net of refunds received	$ (827)	$ (747)

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Condensed Consolidated Statements Of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 26, 2015	Sep. 27, 2014	Sep. 26, 2015	Sep. 27, 2014
Condensed Consolidated Statements Of Comprehensive Loss [Abstract]
Net income (loss)	$ 6,718	$ 5,473	$ 2,794	$ (2,248)
Other comprehensive income (loss):
Change in fair value of derivatives, net of tax of nil, $227, nil and $41	(2,707)	(745)	(687)	(217)
Change in fair value of investment securities, net of tax of nil, $47, nil and $13	(13)	(134)	229	(37)
Other comprehensive loss	(2,720)	(879)	(458)	(254)
Comprehensive income (loss)	$ 3,998	$ 4,594	$ 2,336	$ (2,502)

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Net Loss Per Share

9 Months Ended

Sep. 26, 2015

Net Loss Per Share [Abstract]

Net Loss Per Share

NOTE 10.  Net Income (Loss) Per Share  

The following table sets forth the computation of basic and diluted net income (loss) per share:  

	Three Months Ended				Nine Months Ended
	September 26,		September 27,		September 26,		September 27,
(in thousands, except per share amounts)	2015		2014		2015		2014
Numerator:
Net income (loss)	$	6,718	$	5,473	$	2,794	$	(2,248)
Denominator:
Basic and diluted weighted average common shares outstanding (1)		194,562		197,613		196,848		196,305
Dilutive effect of employee stock options and awards		2,303		3,131		4,170		—
Diluted weighted average common shares outstanding (1)		196,865		200,744		201,018		196,305
Basic and diluted net income (loss) per share	$	0.03	$	0.03	$	0.01	$	(0.01)

(1) PMC-Sierra Ltd. special shares are included in the calculation of basic and diluted weighted average common shares outstanding.

In the nine months ended September 27, 2014, the Company had approximately 3.3 million of stock options and Restricted Stock Units that were not included in the diluted net loss per share because they would have been anti-dilutive.

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Document And Entity Information - shares	9 Months Ended
	Sep. 26, 2015	Nov. 02, 2015
Document And Entity Information [Abstract]
Entity Registrant Name	PMC SIERRA INC
Entity Filer Category	Large Accelerated Filer
Entity Central Index Key	0000767920
Trading Symbol	pmcs
Amendment Flag	false
Document Type	10-Q
Document Fiscal Period Focus	Q3
Document Period End Date	Sep. 26, 2015
Document Fiscal Year Focus	2015
Current Fiscal Year End Date	--12-26
Entity Common Stock, Shares Outstanding		198,759,058

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Stock Repurchase

9 Months Ended

Sep. 26, 2015

Stock Repurchase [Abstract]

Stock Repurchase

NOTE 11.  Stock Repurchase

 On February 9, 2015, the Board of Directors of the Company authorized a share repurchase for up to $75 million of its common stock.  This program increased the total remaining repurchase authorization to $102.1 million, including the $27.1 million that remained available for repurchases under the $275 million 2012 share repurchase authorization as of December 27, 2014. 

On May 21, 2015, the Board of Directors of the Company authorized up to $75 million of its common stock for share repurchases, which is the authorization amount that remained available for repurchases as of September 26, 2015.

For the nine months ended September 26, 2015 and September 27, 2014, the Company repurchased 11.6 million and 1.4 million shares for a total cash cost of $102.1 million and $8.9 million, respectively. The repurchased shares were retired immediately.  Accordingly, the repurchased shares were recorded as a reduction of common stock, additional paid-in capital and accumulated deficit.  As of September 26, 2015, the Company had completed $430.0 million of the total announced $505.0 million stock repurchases since 2011.

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Condensed Consolidated Statements Of Comprehensive Loss (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 26, 2015	Sep. 27, 2014	Sep. 26, 2015	Sep. 27, 2014
Condensed Consolidated Statements Of Comprehensive Loss [Abstract]
Change in fair value of derivatives, tax		$ 227		$ 41
Change in fair value of investment securities, tax		$ 47		$ 13

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Stock-Based Compensation

9 Months Ended

Sep. 26, 2015

Stock-Based Compensation [Abstract]

Stock-Based Compensation

NOTE 5.  Stock-Based Compensation  

The Company has two stock-based compensation plans.  Neither of the Company’s stock-based awards under these plans are classified as liabilities.  The Company recorded stock-based compensation expense for the three and nine months ended September 26, 2015 and September 27, 2014 as follows:

	Three Months Ended				Nine Months Ended
	September 26,		September 27,		September 26,		September 27,
(in thousands)	2015		2014		2015		2014
Cost of revenues	$	266	$	226	$	803	$	681
Research and development, net		2,266		1,990		7,510		6,540
Selling, general and administrative		2,658		3,012		9,681		9,113
Total	$	5,190	$	5,228	$	17,994	$	16,334

 The Company received cash of $37.0 million related to the issuance of common stock during the nine months ended September 26, 2015  (September 27, 2014 - $17.9 million).

Equity Award Plans

The Company issues its equity awards under the provisions of its equity plans. Stock options are granted with an exercise price equal to the closing market price of the Company’s common stock at the grant date. The options generally expire within 10 years and vest over four years.

Activity under the option plans during the nine months ended September 26, 2015 was as follows:

	Number of options	Weighted average exercise price per share		Weighted average remaining contractual term (years)		Aggregate intrinsic value
Outstanding, December 27, 2014	18,316,720	$	7.53	4.41	$	32,598,999
Granted	847,892	$	6.73
Exercised	(4,017,595)	$	6.66
Forfeited	(136,344)	$	6.55
Expired	(1,025,118)	$	9.48
Outstanding, September 26, 2015	13,985,555	$	7.60	4.27	$	2,734,065
Vested and expected to vest, September 26, 2015	13,731,955	$	7.62	4.18	$	2,722,645
Exercisable, September 26, 2015	12,046,856	$	7.75	3.53	$	2,509,015

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the quoted price of the Company’s common stock for the options that were in-the-money at September 26, 2015.  Total forfeitures recorded amounted to $0.7 million and $1.8 million during the nine months ended September 26, 2015, and September 27, 2014, respectively.

The fair value of the Company’s stock option awards granted to employees is estimated using a lattice-binomial valuation model.  This model considers the contractual term of the option, the probability that the option will be exercised prior to the end of its contractual life, and the probability of termination or retirement of the option holder in computing the value of the option.   The model requires the input of highly subjective assumptions including the expected stock price volatility and expected life.

The Company’s estimates of expected volatilities are based on a weighted historical and market-based implied volatility.  The Company uses historical data to estimate option exercises and employee terminations within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes.  The expected term of options granted is based on historical activity and represents the period of time that granted options are expected to be outstanding.  The risk-free rate for periods within the expected life of the stock option is based on the U.S. Treasury yield curve in effect at the time of the grant.  

The fair values of the Company’s stock option awards were calculated for expense recognition using an estimated forfeiture rate, assuming no expected dividends and using the following weighted average assumptions:

	Nine Months Ended
	September 26,	September 27,
	2015	2014
Expected life (years)	5.9	5.8
Expected volatility	30%	33%
Risk-free interest rate	1.8%	1.8%

The weighted average grant-date fair value per stock options granted during the nine months ended September 26, 2015 was $2.11 (September 27, 2014 - $2.29). The total intrinsic value of stock options exercised during the nine months ended September 26, 2015 was $9.6 million (September 27, 2014 - $2.3 million).

As of September 26, 2015, there was $3.5 million of total unrecognized compensation costs related to unvested stock options granted under the plans, which is expected to be recognized over an average period of 2.9 years.   

Restricted Stock Units  

The Company has various stock award plans that allow for the issuance of Restricted Stock Units (“RSUs”) to employees and directors. 

On February 25, 2015, the Company made its annual grant of RSU awards to Executives based on the second performance-based program tied to Non-GAAP operating income targets for 2015-2017. The total fair value of these 2015 grants was estimated at $3.8 million and will be recognized as compensation expense over the award’s vesting terms, with 34% vesting on February 25, 2016, 33% on February 25, 2017 and 33% vesting on February 25, 2018. On August 25, 2015, the Company made its annual grant of RSU awards to Executives. The performance metric applicable to the RSUs granted under the first program remain based on the degree of achievement of Total Shareholder Return (“TSR”) relative to Global Industry Classification Standards (“GICS’) Semiconductor Companies (8-Digit) for the Performance Period (July 1,  2015 - June 30, 2017). The total estimated $1.5 million fair value of these 2015 awards will be recognized as compensation expense over the award’s vesting terms, with 50% vesting on August 25, 2017 and 50% vesting on August 25, 2018.

A summary of RSU activity during the nine months ended September 26, 2015 is as follows:

	Restricted Stock Units	Weighted Average Remaining Contractual Term (years)			Aggregate intrinsic value
Unvested units at December 27, 2014	7,368,529		1.73	$	67,200,984
Awarded	3,492,249		-		—
Released	(2,242,344)		-		—
Forfeited	(712,317)		-		—
Unvested units at September 26, 2015	7,906,117		1.83	$	50,361,965
Restricted Stock Units expected to vest at September 26, 2015	6,784,932		1.73	$	43,220,018

The intrinsic value of RSUs vested during the nine months ended September 26, 2015 was $14.9 million. As of September 26, 2015, total unrecognized compensation expense, adjusted for estimated forfeitures, related to unvested RSUs was $41.0 million, which is expected to be recognized over the next 2.8 years.  

Employee Stock Purchase Plan (“ESPP”)

The Company’s 2011 Employee Stock Purchase Plan (the “2011 Plan”) was approved by stockholders at the 2010 Annual Meeting.  The 2011 Plan became effective on February 11, 2011.  Up to 12,000,000 shares of our Common Stock have been initially reserved for issuance under the 2011 Plan.   At the Company’s 2015 annual stockholders meeting, the stockholders approved an increase of 7,000,000 shares of Common Stock to the 2011 Plan.

During the nine months ended September 26, 2015,  1,727,159 shares were issued under the 2011 Plan at a weighted average price of $5.91 per share.  As of September 26, 2015,  2,653,049 shares were available for future issuance under the 2011 Plan compared to 4,380,208 as at December 27, 2014. The valuation inputs utilized to determine the grant date fair value per ESPP award granted were as follows:

	Nine Months Ended
	September 26,	September 27,
	2015	2014
Expected life (years)	0.5	0.5
Expected volatility	34%	35%
Risk-free interest rate	0.2%	0.1%

The weighted average grant date fair value per ESPP award granted during the first nine months of 2015 was $1.93.  The total intrinsic value of ESPP shares issued during the first nine months of 2015 was $3.7 million.   As of September 26, 2015, total unrecognized compensation costs, adjusted for estimated forfeitures, related to non-vested ESPP awards was $1.1 million which is expected to be recognized over the next four months.

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Fair Value Measurements

9 Months Ended

Sep. 26, 2015

Fair Value Measurements [Abstract]

Fair Value Measurements

NOTE 4.  Fair Value Measurements   

ASC Topic 820 specifies a hierarchy of valuation techniques which requires an entity to maximize the use of observable inputs that may be used to measure fair value.  The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows:

Level 1: Inputs are based on quoted market prices for identical assets and liabilities in active markets at the measurement date.

Level 2: Inputs include similar quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Pricing inputs include significant inputs that are generally not observable in the marketplace. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

The Company’s valuation techniques used to measure the fair value of money market funds and other financial instruments were derived from quoted prices in active markets for identical assets. The valuation techniques used to measure the fair value of all other financial instruments, all of which have counterparties with high credit ratings, were valued based on quoted market prices or model driven valuations using significant inputs derived from or corroborated by observable market data.

In the third quarter of 2015, the Company reviewed and evaluated the observable market pricing data and volume of trading activity used in determining Level 1 and Level 2 assets and classified $9.5 million of investments as Level 2 that were reported as Level 1 at December 27, 2014.  The Company also classified $10.1 million of investments as Level 1 that were reported as Level 2 at December 27, 2014.  The Company’s derivative instruments are classified as Level 2 as of September 26, 2015 and December 27, 2014, as they are not actively traded and are valued using pricing models that use observable market inputs.  There were no Level 3 assets or liabilities at September 26, 2015 or December 27, 2014.

Assets/Liabilities Measured and Recorded at Fair Value on a Recurring Basis

Financial assets measured on a recurring basis as at September 26, 2015 and December 27, 2014, are summarized below:  

	Fair value,
	September 26, 2015
(in thousands)	Level 1		Level 2
Assets:
Money market funds	$	4,040	$	—
Corporate bonds and notes		97,434		21,224
U.S. treasury and government agency notes		46,835		—
Foreign government and agency notes		1,509		9,514
U.S. state and municipal securities		151		80
Total assets	$	149,969	$	30,818
	Fair value,
	December 27, 2014
(in thousands)	Level 1		Level 2
Assets:
Money market funds	$	8,729	$	—
Corporate bonds and notes		88,401		17,030
U.S. treasury and government agency notes		38,283		1,387
Foreign government and agency notes		537		7,525
U.S. state and municipal securities		—		231
Total assets	$	135,950	$	26,173
These assets are included in Cash and cash equivalents, Short-term investments, and Long-term investment securities.  See Note 7. Investment Securities.

Financial liabilities measured on a recurring basis are summarized below:  

	Fair value,
	September 26, 2015
(in thousands)	Level 2
Current liabilities:
Forward currency contracts	$	2,744
	Fair value,
	December 27, 2014
(in thousands)	Level 2
Current liabilities:
Forward currency contracts	$	1,907
These are included in Accrued liabilities.

There were no assets or liabilities measured and recorded at fair value on a non-recurring basis as of September 26, 2015.

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Balance Sheet Items (Tables)

9 Months Ended

Sep. 26, 2015

Balance Sheet Items [Abstract]

Schedule Of Inventories

	September 26,		December 27,
(in thousands)	2015		2014
Work-in-progress	$	15,655	$	17,438
Finished goods		17,191		20,511
	$	32,846	$	37,949

Schedule Of Product Warranties

	Nine Months Ended
	September 26,		September 27,
(in thousands)	2015		2014
Balance, beginning of the period	$	1,756	$	2,163
Accrual for new warranties issued		512		371
Reduction for payments and product replacements		(372)		(533)
Adjustments related to revisions and changes in estimate of warranty accrual		(700)		(113)
Balance, end of the period	$	1,196	$	1,888

Schedule Of Restructuring Costs

	Three Months Ended		Nine Months Ended
	September 26,		September 26,
(in thousands)	2015		2015
Employee severance and related compensation benefits (recoveries) expense:
Cost of revenues	$	(6)	$	1,158
Research and development, net		(80)		7,864
Selling, general and administrative		16		3,993
		(70)		13,015
Site closures and asset impairments		1,165		1,165
Total restructuring costs	$	1,095	$	14,180

Schedule Of Restructuring Activity

(in thousands)	Employee severance & related  benefits compensation		Site closures & assets impairment		Total
Accrued restructuring balance as of December 27, 2014	$	—	$	—	$	—
Additional accruals		13,488		1,165		14,653
Cash payments		(6,127)		(154)		(6,281)
Adjustments and non-cash charges		(921)		(792)		(1,713)
Accrued restructuring balance as of September 26, 2015	$	6,440	$	219	$	6,659

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Subsequent Events

9 Months Ended

Sep. 26, 2015

Subsequent Events [Abstract]

Subsequent Events

NOTE 12.  Subsequent Events

On October 5, 2015, the Company entered into an Agreement and Plan of Merger  with Skyworks Solutions, Inc., a Delaware corporation (“Parent” or “Skyworks”), and Amherst Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), which agreement was later amended and restated by the parties’ entry into the Amended and Restated Agreement and Plan of Merger on October 29, 2015 (as so amended and restated, the “Merger Agreement’) in response to an unsolicited bid from Microsemi Corporation. Under the Merger Agreement, Skyworks has agreed to acquire the Company for $11.60 in cash per share of the Company’s common stock.

Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly-owned subsidiary of Parent. In the Merger, each outstanding share of the Company’s common stock (the “ Company Common Stock ”), other than shares of Company Common Stock held in the treasury of the Company, shares of Company Common Stock owned by Parent or any subsidiary of Parent (including Merger Sub) or shares of Common Stock owned by stockholders who have validly exercised their appraisal rights under Delaware law, will be converted into the right to receive $11.60 per share in cash (the “Merger Consideration”) without interest and subject to any required withholding for taxes. Skyworks intends to fund the Merger Consideration with a combination of cash on hand and committed debt financing.

As a result of the Merger, (i) each vested in-the-money stock option and vested restricted stock unit will be cancelled in exchange for the right to receive the Merger Consideration (less any amounts required to be withheld and, in the case of options, the exercise price of such options), and (ii) each unvested stock option, out-of-the money stock option (whether vested or unvested) and unvested restricted stock unit (including unvested performance stock units, with target-level performance deemed achieved) will be assumed by Parent and converted, as applicable, into stock options and restricted stock units of Parent, on the basis of the Merger Consideration, adjusted pursuant to an exchange ratio based on Company and Parent’s relative stock prices prior to the Merger, which converted stock options and restricted stock units shall retain the same vesting terms (except that performance stock units will be subject only to time-based vesting conditions following the Merger).

Closing Conditions

The obligation of each party to consummate the Merger is subject to the satisfaction or waiver of customary closing conditions set forth in the Merger Agreement, including (i) the approval of the Merger Agreement and the Merger by stockholders of the Company owning at least a majority of the issued and outstanding shares of Company Common Stock, (ii) the expiration or termination of any applicable regulatory waiting periods and/or receipt of regulatory clearance, (iii) the absence of any order or ruling prohibiting the consummation of the Merger and (iv) subject to certain exceptions, the accuracy of the other party’s representations and warranties and compliance with covenants. In addition, the obligation of Parent and Merger Sub to consummate the Merger is also subject to the satisfaction or waiver of the condition that no material adverse effect on the Company shall have occurred since the date of the Merger Agreement. Skyworks’ and the Company’s obligations are not subject to any financing condition.

Representations and Warranties; Covenants

Each of the Company, Parent and Merger Sub has made customary representations and warranties and covenants in the Merger Agreement, including covenants to use their respective reasonable best efforts to secure required regulatory approvals, other than antitrust filings, which are governed by more detailed requirements. In addition, the Company has agreed to other customary covenants, including, among others, covenants to conduct its business in the ordinary course during the interim period between the execution of the Merger Agreement and the closing of the Merger, and not to solicit alternative transactions or, subject to certain exceptions, not to enter into discussions concerning, or provide confidential information in connection with, an alternative transaction, and Parent has agreed to other customary covenants, including, among others, covenants to use its reasonable best efforts to consummate the committed debt financing.

Termination and Termination Fees

The Merger Agreement contains certain termination rights for each of the Company and Parent, including, among others, if the Merger is not consummated at or prior to 11:59 p.m. (New York City time) on July 6, 2016, which may be extended by either the Company or Parent until October 5, 2016 if the mutual closing conditions set forth in the Merger Agreement relating to regulatory clearances have not yet been satisfied or waived. Upon termination of the Merger Agreement under specified circumstances, including a termination by the Company to enter into an agreement for an alternative transaction pursuant to a “superior proposal,” the Company has agreed to pay Parent a termination fee of $88.5 million.

The Company recorded acquisition-related costs of approximately $1.6 million, primarily for outside legal and financial advisory fees associated with the pending Skyworks acquisition of the Company in the three and nine months ended September 26, 2015.  Those costs were recorded in selling, general and administrative expenses in our unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 26, 2015.

The foregoing description of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Amended and Restated Merger Agreement, which is attached as Exhibit 2.1 to the Form 8-K filed by the Company on October 30, 2015 and listed in the Exhibit Table of this filing.  The Company plans to file with the SEC and mail to our stockholders a proxy statement in connection with the Merger.  Additionally, the Company intends to file other relevant materials with the SEC in connection with the Merger. The proxy statement and other relevant materials will contain important information about the Company, Skyworks, the Merger and related matters.  Investors and stockholders are urged to read the proxy statement and the other relevant materials carefully when they become available before making any voting or investment decision with respect to the Merger.

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Credit Facility

9 Months Ended

Sep. 26, 2015

Credit Facility [Abstract]

Credit Facility

NOTE 8. Credit Facility

As of September 26, 2015, the Company had an available revolving line of credit with a group of banks under which the Company may borrow up to $100 million, of which $30 million was drawn (December 27, 2014 - nil). The Company may request, from time to time, and subject to customary conditions, including receipt of commitments, that the revolving credit facility be increased by an aggregate amount not to exceed $150 million.  Interest payments are based on LIBOR plus margins, where margins range from 1.75% to 2.25% per annum based on the Company’s leverage ratio.  The revolving credit facility is available for general corporate purposes. The credit facility is collateralized by substantially all of the Company’s personal property. The Company’s obligations under the credit facility are jointly and severally guaranteed by material wholly-owned domestic subsidiaries of the Company.

On October 14, 2015, subsequent to the third quarter of 2015 balance sheet date, the Company repaid $5 million of the outstanding balance as of September 26, 2015.

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Balance Sheet Items

9 Months Ended

Sep. 26, 2015

Balance Sheet Items [Abstract]

Balance Sheet Items

NOTE 6.  Balance Sheet Items

a. Inventories.

Inventories (net of reserves of $7.2 million and $7.8 million at September 26, 2015 and December 27, 2014, respectively) were as follows:

	September 26,		December 27,
(in thousands)	2015		2014
Work-in-progress	$	15,655	$	17,438
Finished goods		17,191		20,511
	$	32,846	$	37,949

b. Product warranties.

The Company provides a limited warranty on most of its standard products and accrues for the estimated cost at the time of shipment.  The Company estimates its warranty costs based on historical failure rates and related repair or replacement costs and periodically reassess these estimates as actual warranty activities occur.  The changes in the Company’s accrued warranty obligations from December 27, 2014 to September 26, 2015, and from December 28, 2013 to September 27, 2014 were as follows:  

	Nine Months Ended
	September 26,		September 27,
(in thousands)	2015		2014
Balance, beginning of the period	$	1,756	$	2,163
Accrual for new warranties issued		512		371
Reduction for payments and product replacements		(372)		(533)
Adjustments related to revisions and changes in estimate of warranty accrual		(700)		(113)
Balance, end of the period	$	1,196	$	1,888

During the three months ended September 26, 2015, the Company revised its estimate of the warranty provision necessary for certain product failure obligations resulting in a reduction in warranty accrual of approximately $0.7 million as the risk of product failures associated with this provision was determined to be no longer probable.  The Company’s accrual for warranty obligations is included in Accrued liabilities in the interim Condensed Consolidated Balance Sheet. 

c. 2015 Restructuring costs

During the second quarter of 2015, the Company began implementing a restructuring plan to reduce spending across the organization.  This has involved a reduction in force of approximately 200 employees worldwide and other targeted spending reductions.  In connection with this plan, the Company expects to incur charges of approximately $15 million to $16 million, including approximately $13 million to $14 million in charges related to employee severance and related compensation benefits and approximately $2 million in charges related to site closures, asset impairments, and completion costs.   The Company expects to complete activities under its cost reduction plan by end of the fourth quarter 2016.

Restructuring costs at the end of each period were as follows:

	Three Months Ended		Nine Months Ended
	September 26,		September 26,
(in thousands)	2015		2015
Employee severance and related compensation benefits (recoveries) expense:
Cost of revenues	$	(6)	$	1,158
Research and development, net		(80)		7,864
Selling, general and administrative		16		3,993
		(70)		13,015
Site closures and asset impairments		1,165		1,165
Total restructuring costs	$	1,095	$	14,180

The following summarizes the restructuring activity for the 2015 restructuring plan:

(in thousands)	Employee severance & related  benefits compensation		Site closures & assets impairment		Total
Accrued restructuring balance as of December 27, 2014	$	—	$	—	$	—
Additional accruals		13,488		1,165		14,653
Cash payments		(6,127)		(154)		(6,281)
Adjustments and non-cash charges		(921)		(792)		(1,713)
Accrued restructuring balance as of September 26, 2015	$	6,440	$	219	$	6,659

The accrued restructuring costs are expected to be settled and paid by end of the second quarter 2016 and were recorded in Accrued liabilities in the Company’s Condensed and Consolidated Balance Sheet.

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Investment Securities

9 Months Ended

Sep. 26, 2015

Investment Securities [Abstract]

Investment Securities

NOTE 7.  Investment Securities  

The Company’s available for sale investments, by investment type, consists of the following at September 26, 2015 and December 27, 2014:

	September 26, 2015
(in thousands)	Amortized Cost		Gross Unrealized Gains*		Gross Unrealized Losses		Fair Value
Cash equivalents:
Money market funds	$	4,040	$	—	$	—	$	4,040
Total cash equivalents		4,040		—		—		4,040
Short-term investments:
Corporate bonds and notes		32,879		958		(5)		33,832
US treasury and government agency notes		5,131		92		—		5,223
Foreign government and agency notes		3,012		51		(2)		3,061
US states and municipal securities		230		1		—		231
Total short-term investments		41,252		1,102		(7)		42,347
Long-term investment securities:
Corporate bonds and notes		84,866		75		(115)		84,826
US treasury and government agency notes		41,508		105		(1)		41,612
Foreign government and agency notes		7,962		4		(4)		7,962
Total long-term investment securities		134,336		184		(120)		134,400
Total	$	179,628	$	1,286	$	(127)	$	180,787
*Gross unrealized gains include accrued interest on investments of $0.6 million which are included in the Consolidated Statement of Operations.  The remainder of the gross unrealized gains and losses are included in the Consolidated Balance Sheet as Accumulated other comprehensive income (loss).
	December 27, 2014
(in thousands)	Amortized Cost		Gross Unrealized Gains*		Gross Unrealized Losses		Fair Value
Cash equivalents:
Money market funds	$	8,729	$	—	$	—	$	8,729
Total cash equivalents		8,729		—		—		8,729
Short-term investments:
Corporate bonds and notes		43,777		498		(16)		44,259
US treasury and government agency notes		1,010		79		—		1,089
Foreign government and agency notes		501		36		—		537
Total short-term investments		45,288		613		(16)		45,885
Long-term investment securities:
Corporate bonds and notes		61,357		28		(213)		61,172
US treasury and government agency notes		38,650		7		(76)		38,581
Foreign government and agency notes		7,563		1		(39)		7,525
US states and municipal securities		230		1		—		231
Total long-term investment securities		107,800		37		(328)		107,509
Total	$	161,817	$	650	$	(344)	$	162,123
*Gross unrealized gains include accrued interest on investments of $0.6 million which are included in the Consolidated Statement of Operations.  The remainder of the gross unrealized gains and losses are included in the Consolidated Balance Sheet as Accumulated other comprehensive income (loss).

As of September 26, 2015 and December 27, 2014, the fair value of certain of the Company’s available-for-sale securities was less than their cost basis.  Management reviews various factors in determining whether to recognize an impairment charge related to these unrealized losses, including the current financial and credit market environment, the financial condition, near-term prospects of the issuer of the investment security, the magnitude of the unrealized loss compared to the cost of the investment, length of time the investment has been in a loss position and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery of market value.  As of September 26, 2015, the Company determined that all the unrealized losses are temporary in nature and recorded them as a component of Accumulated other comprehensive income (loss).

Contractual maturities as of September 26, 2015 of the Company’s investment securities do not exceed three years.  The majority of the contractual maturities are two to three years, and the balance has maturities of one year or less.

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Income Taxes

9 Months Ended

Sep. 26, 2015

Income Taxes [Abstract]

Income Taxes

NOTE 9.  Income Taxes  

The Company recorded a provision for income taxes of $6.7 million and $7.9 million for the three and nine months ended September 26, 2015, respectively.  The Company recorded a provision for income taxes of $3.1 million and $9.4 million for the three and nine months ended September 27, 2014, respectively.

The Company’s effective tax rate was 50% and 36% for the three months ended September 26, 2015 and September 27, 2014, respectively.  For the third quarter of 2015, the difference between the Company’s effective tax rate and the 35% federal statutory rate results primarily from changes in accruals related to unrecognized tax benefits and non-deductible amortization of intangible assets, partially offset by foreign earnings eligible for tax rates lower than the federal statutory rate.  For the third quarter of 2014, the difference between the Company’s effective tax rate and the 35% federal statutory rate results primarily from changes in accruals related to unrecognized tax benefits, non-deductible amortization of intangible assets, and amortization of prepaid taxes, partially offset by foreign earnings eligible for tax rates lower than the federal statutory rate and book losses that are not benefited for tax purposes. 

The Company’s effective tax rate was 74% and 131% for the nine months ended September 26, 2015 and September 27, 2014, respectively.  For the first nine months of 2015, the difference between the Company’s tax rate and the 35% federal statutory rate results primarily from changes in accruals related to unrecognized tax benefits and non-deductible amortization of intangible assets, partially offset by foreign earnings eligible for tax rates lower than the federal statutory rate.  For the first nine months of 2014, the difference between the Company’s tax rate and the 35% federal statutory rate results primarily from changes in accruals related to unrecognized tax benefits, non-deductible amortization of intangible assets, and amortization of prepaid taxes, partially offset by foreign earnings eligible for tax rates lower than the federal statutory rate and book losses that are not benefited for tax purposes.

 As of September 26, 2015 and December 27, 2014, the Company’s liability for unrecognized tax benefits on a world-wide consolidated basis was $41.1 million and $41.3 million, respectively. The ultimate recognition of an amount different from this estimate would affect the Company’s effective tax rate.

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Stock-Based Compensation (Schedule Of Fair Value Weighted Average Assumptions) (Details)	9 Months Ended
	Sep. 26, 2015	Sep. 27, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected life (years)	5 years 10 months 24 days	5 years 9 months 18 days
Expected volatility	30.00%	33.00%
Risk-free interest rate	1.80%	1.80%
2011 Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected life (years)	6 months	6 months
Expected volatility	34.00%	35.00%
Risk-free interest rate	0.20%	0.10%

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 26, 2015

Fair Value Measurements [Abstract]

Financial Assets Measured At Fair Value On Recurring Basis

	Fair value,
	September 26, 2015
(in thousands)	Level 1		Level 2
Assets:
Money market funds	$	4,040	$	—
Corporate bonds and notes		97,434		21,224
U.S. treasury and government agency notes		46,835		—
Foreign government and agency notes		1,509		9,514
U.S. state and municipal securities		151		80
Total assets	$	149,969	$	30,818
	Fair value,
	December 27, 2014
(in thousands)	Level 1		Level 2
Assets:
Money market funds	$	8,729	$	—
Corporate bonds and notes		88,401		17,030
U.S. treasury and government agency notes		38,283		1,387
Foreign government and agency notes		537		7,525
U.S. state and municipal securities		—		231
Total assets	$	135,950	$	26,173
These assets are included in Cash and cash equivalents, Short-term investments, and Long-term investment securities.  See Note 7. Investment Securities.

Financial Liabilities Measured At Fair Value On Recurring Basis

	Fair value,
	September 26, 2015
(in thousands)	Level 2
Current liabilities:
Forward currency contracts	$	2,744
	Fair value,
	December 27, 2014
(in thousands)	Level 2
Current liabilities:
Forward currency contracts	$	1,907
These are included in Accrued liabilities.

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Business Combinations (Details) - USD ($) $ in Thousands					3 Months Ended	9 Months Ended	10 Months Ended
	Jan. 10, 2017	Jan. 10, 2016	Jan. 10, 2015	Sep. 04, 2014	Sep. 26, 2015	Sep. 26, 2015	Jun. 27, 2015
Business Acquisition [Line Items]
Installment payment						$ 18,000
RAID Software License [Member]
Business Acquisition [Line Items]
Effective Date						Sep. 04, 2014
Total acquisition consideration				$ 52,000
Initial payment				$ 10,000
Installment payment			$ 18,000
Installment payments remaining					$ 24,000	$ 24,000
Period for development of future generations of software						2 years
Cost reimbursement payments					25,000	$ 25,000
Reimbursement revenue					$ 3,300	$ 9,800	$ 13,800
Forecast [Member] | RAID Software License [Member]
Business Acquisition [Line Items]
Installment payment	$ 12,000	$ 12,000

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Investment Securities (Available For Sale Investments) (Details) - USD ($) $ in Thousands		9 Months Ended	12 Months Ended
		Sep. 26, 2015	Dec. 27, 2014
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		$ 179,628	$ 161,817
Gross Unrealized Gains	[1]	1,286	650
Gross Unrealized Losses		(127)	(344)
Fair Value		180,787	162,123
Accrued interest on investments		600	600
Cash Equivalents [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		4,040	8,729
Fair Value		4,040	8,729
Cash Equivalents [Member] | Money Market Funds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		4,040	8,729
Fair Value		4,040	8,729
Short-Term Investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		41,252	45,288
Gross Unrealized Gains	[1]	1,102	613
Gross Unrealized Losses		(7)	(16)
Fair Value		42,347	45,885
Short-Term Investments [Member] | Corporate Bonds And Notes [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		32,879	43,777
Gross Unrealized Gains	[1]	958	498
Gross Unrealized Losses		(5)	(16)
Fair Value		33,832	44,259
Short-Term Investments [Member] | U.S. Treasury And Government Agency Notes [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		5,131	1,010
Gross Unrealized Gains	[1]	92	79
Fair Value		5,223	1,089
Short-Term Investments [Member] | Foreign Government And Agency Notes [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		3,012	501
Gross Unrealized Gains	[1]	51	36
Gross Unrealized Losses		(2)
Fair Value		3,061	537
Short-Term Investments [Member] | US States And Municipal Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		230
Gross Unrealized Gains	[1]	1
Fair Value		231
Long-Term Investment Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		134,336	107,800
Gross Unrealized Gains	[1]	184	37
Gross Unrealized Losses		(120)	(328)
Fair Value		134,400	107,509
Long-Term Investment Securities [Member] | Corporate Bonds And Notes [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		84,866	61,357
Gross Unrealized Gains	[1]	75	28
Gross Unrealized Losses		(115)	(213)
Fair Value		84,826	61,172
Long-Term Investment Securities [Member] | U.S. Treasury And Government Agency Notes [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		41,508	38,650
Gross Unrealized Gains	[1]	105	7
Gross Unrealized Losses		(1)	(76)
Fair Value		41,612	38,581
Long-Term Investment Securities [Member] | Foreign Government And Agency Notes [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		7,962	7,563
Gross Unrealized Gains	[1]	4	1
Gross Unrealized Losses		(4)	(39)
Fair Value		$ 7,962	7,525
Long-Term Investment Securities [Member] | US States And Municipal Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost			230
Gross Unrealized Gains	[1]		1
Fair Value			$ 231

[1] Gross unrealized gains include accrued interest on investments of $0.6 million which are included in the Consolidated Statement of Operations. The remainder of the gross unrealized gains and losses are included in the Consolidated Balance Sheet as Accumulated other comprehensive income (loss).

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 26, 2015	Dec. 27, 2014
Current assets:
Cash and cash equivalents	$ 73,130	$ 112,570
Short-term investments	42,347	45,885
Accounts receivable, net of allowance for doubtful accounts of $735 (2014 - $795)	62,269	55,414
Inventories, net	32,846	37,949
Prepaid expenses and other current assets	12,020	16,473
Income taxes receivable	1,147	1,968
Prepaid income taxes		51
Deferred income tax assets	5,211	5,442
Total current assets	228,970	275,752
Investment securities	134,400	107,509
Investments and other assets	6,328	7,683
Prepaid income taxes	93	42
Property and equipment, net	37,871	37,311
Goodwill	283,239	283,239
Intangible assets, net	116,945	143,680
Deferred income tax assets	13,218	13,412
Income taxes receivable	440	457
Total assets	821,504	869,085
Current liabilities:
Accounts payable	18,261	23,360
Accrued liabilities	55,172	74,135
Credit facility	30,000
Income taxes payable	626	1,062
Liability for unrecognized tax benefit	14,001	16,076
Deferred income tax liabilities	7,677	7,644
Deferred income	4,515	4,530
Total current liabilities	130,252	126,807
Long-term obligations	28,396	36,305
Deferred income tax liabilities	56,182	53,493
Liability for unrecognized tax benefit	27,107	25,244
PMC special shares convertible into 203 (2014 - 278) shares of common stock	475	745
Stockholders' equity:
Common stock, par value $0.001: 900,000 shares authorized; 195,642 shares issued and outstanding (2014 - 199,518)	196	200
Additional paid in capital	1,599,345	1,595,609
Accumulated other comprehensive loss	(2,813)	(2,355)
Accumulated deficit	(1,017,636)	(966,963)
Total stockholders' equity	579,092	626,491
Total liabilities and stockholders' equity	$ 821,504	$ 869,085

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Derivative Instruments

9 Months Ended

Sep. 26, 2015

Derivative Instruments [Abstract]

Derivative Instruments

NOTE 3.  Derivative Instruments  

The Company generates revenues in U.S. dollars but incurs a portion of its operating expenses in foreign currencies, primarily the Canadian dollar.  To minimize the short-term impact of foreign currency fluctuations on the Company’s operating expenses, the Company purchases forward currency contracts.  The Company’s accounting policies for these instruments are based on whether the instruments are classified as designated or non-designated hedging instruments. The Company records all derivatives in the Condensed Consolidated Balance Sheets at fair value. The changes in the fair values of the effective portions of designated cash flow hedges are recorded in Accumulated other comprehensive income (loss) until the hedged item is recognized in earnings. Derivatives that are not designated as hedging instruments and the ineffective portion of cash flow hedges are adjusted to fair value through earnings. The Company de-designates its cash flow hedges when the forecasted hedged transactions are realized or it is probable the forecasted hedged transactions will not occur in the initially identified time period. At such time, the associated gains and losses deferred in Accumulated other comprehensive income (loss) are reclassified immediately into earnings and any subsequent changes in the fair value of such derivative instruments are immediately recorded in earnings. The fair value of our derivative instruments are included in prepaid expenses and other assets or accrued liabilities.

The Company did not recognize any net gains or losses related to the de-designation of discontinued cash flow hedges during the nine months ended September 26, 2015.  As at September 26, 2015 the Company had 79 forward currency contracts outstanding (September 27, 2014 - 84), all with maturities of less than 15 months, which qualified and were designated as cash flow hedges.  As of September 26, 2015, the U.S. dollar notional amount of these contracts was$48.3 million (September 27, 2014 - $35.5million), and the contracts had an aggregate fair value loss of $2.7 million and $0.7 million for the three months ended September 26, 2015 and September 27, 2014, respectively (aggregate fair value loss of 0.7 million and $0.2 million for the nine months ended September 26, 2015 and September 27, 2014, respectively).  These were recorded in Accumulated other comprehensive loss, net of taxes.

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Derivative Instruments (Details) - Cash Flow Hedging [Member]	3 Months Ended		9 Months Ended
	Sep. 26, 2015 USD ($) contract	Sep. 27, 2014 USD ($) contract	Sep. 26, 2015 USD ($) contract	Sep. 27, 2014 USD ($) contract
Derivative [Line Items]
Gains (losses) related to de-designation of discontinued cash flow hedges			$ 0
Forward currency contracts outstanding | contract	79	84	79	84
Forward currency contracts maturity, maximum			15 months
Notional amount of contracts	$ 48,300,000	$ 35,500,000	$ 48,300,000	$ 35,500,000
Aggregate fair value gain, net of taxes	$ 2,700,000	$ 700,000	$ 700,000	$ 200,000

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Balance Sheet Items (Schedule Of Restructuring Costs) (Details) $ in Thousands	3 Months Ended	9 Months Ended	21 Months Ended
	Sep. 26, 2015 USD ($)	Sep. 26, 2015 USD ($) employee	Dec. 25, 2016 USD ($)
Restructuring Cost and Reserve [Line Items]
Number of employees, reduction in force | employee		200
Employee severance and related compensation benefits	$ (70)	$ 13,015
Site closures and asset impairments	1,165	1,165
Total restructuring costs	1,095	14,180
Cost Of Revenues [Member]
Restructuring Cost and Reserve [Line Items]
Employee severance and related compensation benefits	(6)	1,158
Research And Development, Net [Member]
Restructuring Cost and Reserve [Line Items]
Employee severance and related compensation benefits	(80)	7,864
Selling, General And Administrative [Member]
Restructuring Cost and Reserve [Line Items]
Employee severance and related compensation benefits	$ 16	$ 3,993
Forecast [Member]
Restructuring Cost and Reserve [Line Items]
Site closures and asset impairments			$ 2,000
Minimum [Member] | Forecast [Member]
Restructuring Cost and Reserve [Line Items]
Employee severance and related compensation benefits			13,000
Total restructuring costs			15,000
Maximum [Member] | Forecast [Member]
Restructuring Cost and Reserve [Line Items]
Employee severance and related compensation benefits			14,000
Total restructuring costs			$ 16,000

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Summary Of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 26, 2015

Summary Of Significant Accounting Policies [Abstract]

Description Of Business

Description of business.  PMC-Sierra, Inc. (the “Company” or “PMC”) is a fabless semiconductor and software solution innovator transforming networks that connect, move, and store Big Data. The Company designs, develops, markets and supports semiconductor, embedded software, and board level solutions by integrating its mixed-signal, software and systems expertise through a network of offices in North America, Europe and Asia. 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.

Basis Of Presentation

Basis of presentation. The accompanying interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) and United States Generally Accepted Accounting Principles (“GAAP”).  Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules or regulations.  These interim condensed consolidated financial statements are unaudited, but reflect all adjustments which are normal and recurring in nature and are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented.  These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in the Company’s Annual Report on Form 10-K for the year ended December 27, 2014 filed with the SEC on February 24, 2015.  The results of operations for the interim periods are not necessarily indicative of results to be expected in future periods.  Fiscal 2015 will consist of 52 weeks and will end on Saturday, December 26, 2015.  Fiscal 2014 consisted of 52 weeks and ended on Saturday, December 27, 2014.  The third quarter of each of 2015 and 2014 consisted of 13 weeks.  The Company’s reporting currency is the United States (“U.S.”) dollar and presented in thousands unless otherwise stated.

Estimates

Estimates. The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Estimates are used for, but not limited to, stock-based compensation, purchase accounting assumptions including those used to calculate the fair value of intangible assets and goodwill, the valuation of investments, accounting for doubtful accounts, inventory reserves, depreciation and amortization, asset impairments, revenue recognition, sales returns, warranty costs, restructuring costs, income taxes including uncertain tax positions, accounting for employee benefit plans, and contingencies.  Actual results could differ materially from these estimates.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.  This ASU requires retrospective adoption and will be effective for us beginning in our first quarter of 2017.  Early adoption is permitted. ASU 2015-13 is not expected to have a material impact on the Company’s condensed consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, or ASU 2014-09, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The standard will replace most existing revenue recognition guidance in GAAP when it becomes effective. The standard allows for either full retrospective or modified retrospective adoption method. In July 2015, the FASB deferred the effective date to January 1, 2018 with early adoption beginning January 1, 2017.  The Company is currently evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method, adoption date, or determined the effect of the standard on its ongoing financial reporting.

In July 2015, the FASB issued ASU 2015-11, Inventory - Simplifying the Measurement of Inventory (Topic 330). ASU 2015-11 requires inventory to be subsequently measured using the lower of cost and net realizable value, thereby eliminating the market value approach. Net realizable value is defined as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.” ASU 2015-11 is effective for reporting periods beginning after December 15, 2016 and is applied prospectively. Early adoption is permitted. We are currently evaluating the impact that this guidance will have on our financial statements and disclosure.