- 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.
Sipex and its executive officers and directors may be deemed to be participants in the solicitation of proxies from Sipex's stockholders with respect to the transactions contemplated by the merger agreement. Information regarding such executive officers and directors is included in Sipex's Proxy Statement for its 2006 Annual Meeting of Stockholders filed with the SEC on October 24, 2006, which is available free of charge at the SEC's web site at http://www.sec.gov and from Sipex Investor Relations which can be contacted by e-mail at Email Contact or by telephone at 1-408-934-7586. Certain executive officers and directors of Sipex have interests in the transaction that may differ from the interests of Sipex stockholders generally. These interests will be described in the proxy statement/prospectus when it becomes available.
SIPEX CORPORATION
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
June 30, December 30,
2007 2006
ASSETS
Current assets:
Cash and cash equivalents $2,845 $13,041
Restricted cash - 350
Short-term investment
securities 597 2,388
Accounts receivable, net 5,427 6,222
Accounts receivable, related
party, net 2,069 949
Inventories, net 11,356 15,586
Prepaid expenses and other
current assets 1,914 1,641
Total current assets 24,208 40,177
Property, plant and equipment,
net 19,301 19,113
Restricted cash - noncurrent 58 57
Other assets 204 202
Total assets $43,771 $59,549
LIABILITIES AND STOCKHOLDERS'
DEFICIT
Current liabilities:
Current portion of long-term
bank borrowing $667 $667
Current portion of lease
financing obligation 220 191
Accounts payable 8,360 10,331
Accrued expenses 5,582 7,185
Accrued restructuring costs 524 1,728
Deferred income, related
party 5,248 5,543
Deferred income, other 2,014 2,555
Total current liabilities 22,615 28,200
Long-term portion of bank borrowing 1,000 1,333
Long-term lease financing obligation 12,033 12,152
Long-term accrued restructuring costs - 139
Convertible senior notes 26,224 25,826
Other long-term liabilities 22 24
Total liabilities 61,894 67,674
Stockholders' deficit:
Common stock 190 184
Additional paid-in capital 239,063 234,785
Accumulated deficit (257,357) (243,075)
Accumulated other
comprehensive loss (19) (19)
Total stockholders'
deficit (18,123) (8,125)
Total liabilities and
stockholders' deficit $43,771 $59,549
SIPEX CORPORATION
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
For the Three Months For the Six Months
Ended Ended
June 30, March 31, July 1, June 30, July 1,
2007 2007 2006 2007 2006
Net sales $9,857 $8,758 $11,558 $18,615 $20,861
Net sales, related party 8,562 8,101 9,455 16,663 18,006
Total net sales 18,419 16,859 21,013 35,278 38,867
Cost of sales 8,177 7,073 9,781 15,250 19,959
Cost of sales, related
party 6,241 5,347 7,366 11,588 15,237
Total cost of sales 14,418 12,420 17,147 26,838 35,196
Gross profit 4,001 4,439 3,866 8,440 3,671
Operating expenses:
Research and development 3,431 3,686 3,883 7,117 9,379
Marketing and selling 3,115 3,293 3,765 6,408 7,421
General and
administrative 4,650 2,968 2,743 7,617 6,764
Restructuring and other (103) 63 (22) (40) 285
Total operating
expenses 11,093 10,010 10,369 21,102 23,849
Loss from operations (7,092) (5,571) (6,503) (12,662) (20,178)
Other income (expense):
Interest income 60 131 221 191 270
Interest expense (897) (834) (582) (1,731) (765)
Other income, net - 1 59 - 101
Total other expense, net (837) (702) (302) (1,540) (394)
Loss before income tax
expense (7,929) (6,273) (6,805) (14,202) (20,572)
Income tax expense 51 17 53 68 85
Net loss $(7,980) $(6,290) $(6,858) $(14,270) $(20,657)
Net loss per common share $(0.42) $(0.34) $(0.39) $(0.76) $(1.16)
- basic and diluted
Weighted average common
shares outstanding
- basic and diluted 18,798 18,547 17,775 18,673 17,775
SIPEX CORPORATION
Reconciliation of GAAP Gross Profit (Loss) to Non-GAAP Gross Profit
(Loss)
(In thousands)
(Unaudited)
For the Three Months For the Six Months
Ended Ended
June 30, March 31, July 1, June 30, July 1,
2007 2007 2006 2007 2006
GAAP - gross profit $4,001 $4,439 $3,866 $8,440 $3,671
Increased depreciation due
to shorter economic
life of Hillview facility
included in:
Total cost of sales - - - - 4,519
Stock-based compensation
included in:
Total cost of sales 124 111 (59) 235 68
Non-GAAP - gross profit $4,125 $4,550 $3,807 $8,675 $8,258
GAAP gross profit as a
percent of net sales 22% 26% 18% 24% 9%
Non-GAAP gross profit as a
percent of net sales 22% 27% 18% 25% 21%
SIPEX CORPORATION
Reconciliation of GAAP Loss from Operations to Non-GAAP Loss from Operations
(In thousands)
(Unaudited)
For the Three Months For the Six Months
Ended Ended
June 30, March 31, July 1, June 30, July 1,
2007 2007 2006 2007 2006
GAAP - loss from
operations $(7,092) $(5,571) $(6,503) $(12,662) $(20,178)
Increased depreciation
due to shorter
economic
life of Hillview
facility included in:
Total cost of
sales - - - - 4,519
Research and
development - - - - 1,118
Marketing and
selling - - - - 322
General and
administrative - - - - 744
Stock-based compensation
included in:
Total cost of
sales 124 111 (59) 235 68
Research and
development 142 231 311 373 649
Marketing and
selling 242 258 235 499 425
General and
administrative 424 304 309 729 587
Restructuring and
other (103) 63 (22) (40) 285
Non-GAAP - loss from
operations $(6,263) $(4,604) $(5,729) $(10,866) $(11,461)
SIPEX CORPORATION
Reconciliation of GAAP Net Loss to Non-GAAP Net Loss
(In thousands)
(Unaudited)
For the Three Months For the Six Months
Ended Ended
June 30, March 31, July 1, June 30, July 1,
2007 2007 2006 2007 2006
GAAP - Net loss $(7,980) $(6,290) $(6,858) $(14,270) $(20,657)
Increased depreciation
due to shorter
economic
life of Hillview
facility included in:
Total cost of sales - - - - 4,519
Research and
development - - - - 1,118
Marketing and
selling - - - - 322
General and
administrative - - - - 744
Stock-based compensation
included in:
Total cost of sales 124 111 (59) 235 68
Research and
development 142 231 311 373 649
Marketing and
selling 242 258 235 499 425
General and
administrative 424 304 309 729 587
Restructuring and
other (103) 63 (22) (40) 285
Non-GAAP - Net loss $(7,151) $(5,323) $(6,084) $(12,474) $(11,940)
SIPEX CORPORATION
Reconciliation of GAAP Net Loss Per Share to Non-GAAP Net Loss Per Share
(In thousands, except per share data)
(Unaudited)
For the Three Months For the Six Months
Ended Ended
June 30, March 31, July 1, June 30, July 1,
2007 2007 2006 2007 2006
GAAP - Net loss per share $(0.42) $(0.34) $(0.39) $(0.76) $(1.16)
Increased depreciation due
to shorter economic
life of Hillview facility
included in:
Total cost of sales - - - - 0.25
Research and development - - - - 0.06
Marketing and selling - - - - 0.02
General and
administrative - - - - 0.04
Stock-based compensation
included in:
Total cost of sales 0.01 0.01 (0.00) 0.01 0.00
Research and development 0.01 0.01 0.02 0.02 0.04
Marketing and selling 0.01 0.01 0.01 0.03 0.02
General and
administrative 0.02 0.02 0.02 0.04 0.03
Restructuring and other (0.01) 0.00 (0.00) (0.00) 0.02
Non-GAAP - Net loss per share
(1) $(0.38) $(0.29) $(0.34) $(0.67) $(0.67)
Weighted average common shares
outstanding - basic
and diluted 18,798 18,547 17,775 18,673 17,775
(1) Amounts may not aggregate to the total due to rounding
Web site: http://www.sipex.com/