- First Quarter Net Sales of $16.9 Million, Down 11% from the Fourth
Quarter of 2006 and Down 6% From the Year-Ago Period
- First Quarter Gross Margin at 26%, Up from the Fourth Quarter Gross
Margin of (3%) and the Year-Ago Period Gross Margin of (1%)
- First Quarter GAAP Net Loss improved to $6.3 Million, Down from a $14.3
Million Net Loss in the Prior Quarter and Down from a $13.8 Million Net
Loss in the Year-Ago Period
- Company Announces Signing of a Definitive Merger Agreement with Exar
Corporation
MILPITAS, Calif., May 8 /PRNewswire-FirstCall/ -- Sipex Corporation
(Nasdaq: SIPX) today reported fiscal first quarter operating results. Net
Sales for the first quarter of 2007 were $16.9 million, down 11% from the
fourth quarter of 2006 net sales of $18.9 million and down 6% from net
sales of $17.9 million recorded in the year-ago period. First quarter 2007
GAAP net loss was $6.3 million, or $0.34 per share, compared with GAAP net
loss of $14.3 million, or $0.80 per share, in the previous quarter and GAAP
net loss of $13.8 million, or $0.78 per share, in the year-ago period. The
first quarter 2007 GAAP net loss included stock-based compensation of $0.9
million, or $0.05 per share.
First quarter 2007 non-GAAP net loss was $5.3 million, or $0.29 per
share, compared to $11.7 million, or $0.66 per share, in the previous
quarter and compared to $5.9 million, or $0.33 per share in the first
quarter of 2006. Non-GAAP results exclude the impact of stock-based
compensation, restructuring and impairment charges, 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.
"This morning we released an announcement that Sipex has signed a
definitive merger agreement with Exar Corporation (please refer to the
press release on our website). This combination will immediately broaden
our product portfolio addressing key networking and industrial segments and
accelerate penetration into high-end consumer applications," stated Ralph
Schmitt, CEO of Sipex. "The combined companies will be able to use Exar's
system level expertise to boost the combined companies' strength in Power
Management, Interface, Serial Communications and Network Transmissions to
provide complete solutions for customer applications, driving toward higher
level integration and delivering more value to our customers. The
combination will also enable a stronger presence in the high growth Asian
marketplace. Having strategic technical resources close to the customer
base is critical to the long-term success of driving integrated
mixed-signal system solutions." While this is exciting news for the
company, we would like to high-light a few of the other key developments at
Sipex during the last quarter.
"While we continued to experience much of the same analog market
slowness as many of our competitors, we are encouraged by the improvement
in our gross margins and a reduction in our net loss from both a GAAP and
non-GAAP perspective. The improvement in our gross margins reflected the
continued transition to our fabless manufacturing model and the benefits of
the lower manufacturing cost structure. During the first quarter, we
continued to experience the decline in our optical storage products
revenues as we wind down our focus in this market. Our optical storage
product family contributed a more pronounced revenue decline in the first
quarter than did our core product families in interface and power
management products," stated Mr. Schmitt.
"Most of the revenue decline of our optical storage products is now
behind us. The decision to minimize our efforts in optical storage will
help our margin improvement plans as well as focus our efforts on our two
larger, under-penetrated markets. The revenue decline in our core product
families in the first quarter was attributed primarily to a decline in our
power products driven by seasonality in the handset markets. Revenues in
our interface products were flat compared to the prior quarter, as we saw a
steady improvement in the industrial portion of that market, offsetting the
seasonality of the consumer based portion of the interface market."
"Sipex's improved delivery of new products continues with the
introduction of 10 new products in the first quarter. Most notable were the
completion of our high speed RS485 product line and our first entry into
the Profibus interface arena. We also released new power products for
display systems. One of these product offerings is used in the new high
growth organic light- emitting diode (OLED) market. This is targeted at
high volume applications such as digital still cameras and portable media
players," described Mr. Schmitt.
"We hit a significant milestone in April, by being listed on the NASDAQ
Capital Market. This is a major step in our continuing improvement of
Sipex. In the first quarter of 2007 our overall financial results improved
as we began to realize the benefits of our restructuring initiatives,"
explained Ray Wallin, CFO of Sipex. "We reduced our operating expenses,
excluding restructuring and impairment charges, in the first quarter of
2007 by $1.1 million, compared to the previous quarter. We also improved
our gross margins as we transitioned to the lower cost fabless model. While
we continue to sell off older, higher cost inventory, we anticipate
continuing improvements in our gross margins as we source more of our
revenues from the fabless model."
"While we continued to experience the impact of the soft market
conditions in the first quarter, we believe the inventory correction for
the overall analog market is now behind us," stated Mr. Schmitt. "Besides
our near term, stand alone business prospects, we are very excited about
the opportunity of the combined companies of Sipex and Exar. We will
diligently work to get this transaction closed over the next few months in
order to accelerate our plans to drive improved shareholder value."
Conference Call -- Today, Sipex will host a conference call at 4:30
p.m. Eastern time (1:30 p.m. Pacific time). Chief Executive Officer, Ralph
Schmitt and Chief Financial Officer, Ray Wallin will present an overview of
the financial results for the first quarter of 2007 and answer any
questions.
The call is available, live, to any interested party by dialing (888)
423-3272. For international callers, please dial (612) 332-0632. Interested
callers should dial in at least five minutes before the scheduled start
time and ask to be connected to the Sipex Investor Call. A replay of the
investor call will be available approximately 24 hours after the event at
http://www.sipex.com/investors.
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 gross margin improvement, reduction in net loss,
revenue contribution from the optical storage product family, the impact of
reductions in inventory levels for Sipex and the analog market, the impact
of our move to a fabless manufacturing model, benefits of the transaction
with Exar, potential synergies resulting from the transaction and other
statements regarding the proposed transaction. 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 products 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 the transition to
the fabless manufacturing model may not result in financial improvements,
that general market conditions in the semiconductor industry may decline,
that Sipex or Exar stockholders do not approve the proposed merger, that
the challenges and costs of closing, integrating, restructuring and
achieving anticipated synergies are greater than expected and that key
employees are not retained. 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. 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 impairment
charges, 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 will file 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 when it
becomes available 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 investorrelations@Exar.com or by telephone at 1-510-668-7201 or
by contacting Sipex Investor Relations by e-mail at
investorrelations@Sipex.com 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 investorrelations@Exar.com 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 investorrelations@Sipex.com 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)
March 31, December 30,
2007 2006
ASSETS
Current assets:
Cash and cash equivalents $8,135 $13,041
Restricted cash 350 350
Short-term investment securities 399 2,388
Accounts receivable, net 4,432 6,222
Accounts receivable, related party, net 2,865 949
Inventories 15,790 15,586
Prepaid expenses and other current assets 1,383 1,641
Total current assets 33,354 40,177
Property, plant and equipment, net 19,686 19,113
Restricted cash - noncurrent 57 57
Other assets 204 202
Total assets $53,301 $59,549
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term bank borrowing $667 $667
Current portion of lease financing obligation 205 191
Accounts payable 8,518 10,331
Accrued expenses 7,509 7,185
Accrued restructuring costs 1,346 1,728
Deferred income, related party 5,689 5,543
Deferred income, other 2,459 2,555
Total current liabilities 26,393 28,200
Long-term portion of bank borrowing 1,167 1,333
Long-term lease financing obligation 12,096 12,152
Long-term accrued restructuring costs -- 139
Convertible senior notes 26,025 25,826
Other long-term liabilities 23 24
Total liabilities 65,704 67,674
Stockholders' deficit:
Common stock 187 184
Additional paid-in capital 236,806 234,785
Accumulated deficit (249,377) (243,075)
Accumulated other comprehensive loss (19) (19)
Total stockholders' deficit (12,403) (8,125)
Total liabilities and stockholders' deficit $53,301 $59,549
SIPEX CORPORATION
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
For the Three Months Ended
March 31, December 30, April 1,
2007 2006 2006
Net sales $8,758 $11,629 $9,303
Net sales, related party 8,101 7,230 8,551
Total net sales 16,859 18,859 17,854
Cost of sales 7,073 11,898 10,178
Cost of sales, related party 5,347 7,477 7,871
Total cost of sales 12,420 19,375 18,049
Gross profit (loss) 4,439 (516) (195)
Operating expenses:
Research and development 3,686 4,030 5,496
Marketing and selling 3,293 4,276 3,656
General and administrative 2,968 2,734 4,021
Restructuring and other 63 1,501 307
Impairment of fixed assets -- 12 --
Total operating expenses 10,010 12,553 13,480
Loss from operations (5,571) (13,069) (13,675)
Other income (expense):
Interest income 131 176 49
Interest expense (834) (1,383) (183)
Other income, net 1 -- 42
Total other expense, net (702) (1,207) (92)
Loss before income tax expense (6,273) (14,276) (13,767)
Income tax expense 17 2 32
Net loss $(6,290) $(14,278) $(13,799)
Net loss per common share - basic
and diluted $(0.34) $(0.80) $(0.78)
Weighted average common share
outstanding - basic and diluted 18,547 17,904 17,775
SIPEX CORPORATION
Reconciliation of GAAP Gross Profit (Loss) to Non-GAAP Gross Profit (Loss)
(In thousands)
(Unaudited)
Three Months Ended
March 31, December 30, April 1,
2007 2006 2006
GAAP - gross profit (loss) $4,439 $(516) $(195)
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 111 140 127
Non-GAAP - gross profit (loss) $4,550 $(376) $4,451
GAAP gross profit (loss) as a percent of
net sales 26% (3%) (1%)
Non-GAAP gross profit (loss) as a percent
of net sales 27% (2%) 25%
SIPEX CORPORATION
Reconciliation of GAAP Loss from Operations to Non-GAAP Loss from Operations
(In thousands)
(Unaudited)
Three Months Ended
March 31, December 30, April 1,
2007 2006 2006
GAAP - loss from operations $(5,571) $(13,069) $(13,675)
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 111 140 127
Research and development 231 309 338
Marketing and selling 258 162 190
General and administrative 304 420 278
Restructuring and other 63 1,501 307
Impairment of fixed assets -- 12 --
Non-GAAP - loss from operations $(4,604) $(10,525) $(5,732)
SIPEX CORPORATION
Reconciliation of GAAP Net Loss to Non-GAAP Net Loss
(In thousands)
(Unaudited)
Three Months Ended
March 31, December 30, April 1,
2007 2006 2006
GAAP - Net loss $(6,290) $(14,278) $(13,799)
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 111 140 127
Research and development 231 309 338
Marketing and selling 258 162 190
General and administrative 304 420 278
Restructuring and other 63 1,501 307
Impairment of fixed assets -- 12 --
Non-GAAP - Net loss $(5,323) $(11,734) $(5,856)
SIPEX CORPORATION
Reconciliation of GAAP Net Loss Per Share to Non-GAAP Net Loss Per Share
(In thousands)
(Unaudited)
Three Months Ended
March 31, December 30, April 1,
2007 2006 2006
GAAP - Net loss per share $(0.34) $(0.80) $(0.78)
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 0.01
Research and development 0.01 0.02 0.02
Marketing and selling 0.01 0.01 0.01
General and administrative 0.02 0.02 0.02
Restructuring and other 0.00 0.08 0.02
Impairment of fixed assets -- 0.00 --
Non-GAAP - Net loss per share (1) $(0.29) $(0.66) $(0.33)
Weighted average common shares outstanding
- basic and diluted 18,547 17,904 17,775
(1) Amounts may not aggregate to the total due to rounding
SOURCE Sipex Corporation
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Related links:
http://www.sipex.com/
http://www.prnewswire.com/comp/111683.html/
CONTACT:
Clyde Ray Wallin, Chief Financial Officer of
Sipex Corporation, +1-408-934-7500, fax, +1-408-935-7678,
rwallin@sipex.com
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