- Company Anticipates Shareholder Approval of a Merger Agreement with Exar Corporation at its shareholders meeting scheduled for August 23, 2007.
Second quarter 2007 non-GAAP net loss was $7.2 million, or $0.38 per share, compared to $5.3 million, or $0.29 per share, in the previous quarter and compared to $6.1 million, or $0.34 per share in the second quarter of 2006. Non-GAAP results exclude the impact of stock-based compensation, restructuring, and additional depreciation expense. A reconciliation of the adjustments made to GAAP net loss to compute non-GAAP net loss is contained in the financial tables of this press release.
"I am encouraged by our top-line results as we further penetrate top tier accounts, and the analog market continues to improve. Our core power business was up 28% in the quarter and interface was up 7.3%. The optics business, which we have put into harvest mode, declined 41% to under $1 million," said Ralph Schmitt, CEO of Sipex. "We did not perform as well in the gross margin area. The improvement in the market drove more commodity business at lower margins. We also had a significant impact due to foundry startup yield issues which now have been resolved."
"There has been an intense focus on reducing our higher cost inventories, and we made a significant impact in the quarter. Our inventory levels are now at $11.4 million. On a unit basis, we have reduced our inventory over 53 million units in the first half of this year. This is an important activity in order for us to get to the lower cost material at the foundries that will drive our gross margin improvement."
"Sipex's improved delivery of new products continues with the introduction of 8 new products in the second quarter. Most notable were the completion of the 4.5V to 30V family of highly integrated DC-to-DC Buck Controllers that continue to move Sipex up the value added proprietary product curve," described Mr. Schmitt. "Sipex lighting solutions have continued to expand significantly. We now have a simple 2 channel device for low end mobile platforms all the way to a system level, 7-channel product for feature rich handsets."
"We hit a significant milestone in July by being listed on the NASDAQ Global Market. This is a major step in our continuing improvement of Sipex," explained Ray Wallin, CFO of Sipex. "Operating expenses increased in the quarter due primarily to $1.4 million of one-time merger related costs. Cost reductions have continued on an operating basis to bring our operating expenses slightly below $9 million per quarter excluding stock compensation expense and one-time merger related costs."
Mr. Wallin continued, "We expect our revenues and margins to improve in the third fiscal quarter. We have decided to forego a conference call due to the pending merger with Exar."
About Sipex Corporation
Sipex Corporation is an analog semiconductor company that addresses standard linear and application specific standard products (ASSP) for customer systems that are primarily targeted at the consumer, networking and industrial markets. Our products are categorized into three synergistic areas of power management, interface and optical storage. Sipex is a global company with operations in Asia, Europe and North America. It is the mission of the Company to create innovative analog products that enable customers to produce differentiated products.
For further information, contact Ray Wallin at: Sipex Corporation, 233 South Hillview Drive, Milpitas, California 95035, (408) 934-7500; or visit our website at http://www.sipex.com.
Safe Harbor Statement
This press release contains forward-looking statements concerning Sipex's future events and results of operations including, but not limited to statements about improvements in the analog market, the decline of the optics business, improvements in gross margin and revenues and the pending merger with Exar Corporation. Statements regarding the Company's beliefs, plans, expectations or intentions regarding the future are forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are predictions and involve risks and uncertainties, such that actual results may differ significantly. These risks include, but are not limited to, the risk that Sipex may be unable to execute operational improvements, that revenue from our optical business may decline more than expected, that Sipex may not be able to appropriately manage inventory levels, that the demand for analog products may not be as expected, that general market conditions in the semiconductor industry may decline, and that proposed merger Exar does not close as expected. The Company disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. For further discussion of these risks and uncertainties, we refer you to the documents the Company files with the SEC from time to time, including the Company's Annual Report on Form 10-K for the year ended December 30, 2006 and its Quarterly Report of Form 10-Q for the quarters ended March 31, 2007 and June 30, 2007. All forward-looking statements are made as of today, and the Company disclaims any duty to update such statements.
Non-GAAP Reporting -- The Company's management uses non-GAAP measures to evaluate the performance of our business and to estimate future performance. Since management finds this measure to be useful, we believe that our investors benefit from seeing our results "through the eyes" of management in addition to seeing our GAAP results. For comparison purposes, the Company makes reference to certain gross margin, operating margin, net loss and net loss per share. These non-GAAP results were reached by excluding stock-based compensation expense, restructuring, and additional depreciation expense. We reference those results to allow a better comparison of results in the current period to those in prior periods and to provide meaningful insight to the Company's on-going operating performance. We have reconciled such non-GAAP results to the most directly comparable GAAP financial measures. Our reference to these non-GAAP results should be considered in addition to results that are prepared under current accounting standards but should not be considered a substitute for results that are presented as consistent with GAAP. It should also be noted that our non-GAAP information may be different from the non-GAAP information provided by other companies.
Additional Information and Where You Can Find It
Exar filed a Registration Statement on Form S-4 containing a proxy statement / prospectus and other documents concerning the proposed merger transaction with the Securities and Exchange Commission (the "SEC"). Security holders are urged to read the proxy statement/prospectus and other relevant documents filed with the SEC because they will contain important information. Security holders may obtain a free copy of the proxy statement/prospectus (when it is available) and other documents filed by Exar and Sipex with the SEC at the SEC's web site at http://www.sec.gov. The proxy statement/prospectus and other documents may also be obtained for free by contacting Exar Investor Relations by e-mail at Email Contact or by telephone at 1-510-668-7201 or by contacting Sipex Investor Relations by e-mail at Email Contact or by telephone at 1-408-934-7586.
Exar and its executive officers and directors may be deemed to be participants in the solicitation of proxies from Exar's stockholders with respect to the transactions contemplated by the merger agreement. Information regarding such executive officers and directors is included in Exar's Proxy Statement for its 2006 Annual Meeting of Stockholders filed with the SEC on August 9, 2006, which is available free of charge at the SEC's web site at
http://www.sec.gov and from Exar Investor Relations which can be contacted by e-mail at
Email Contact or by telephone at 1-510-668-7201. Certain executive officers and directors of Exar have interests in the transaction that may differ from the interests of Exar stockholders generally. These interests will be described in the proxy statement/prospectus when it becomes available.