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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 1, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 0-27892
SIPEX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
MASSACHUSETTS 04-6135748
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
22 LINNELL CIRCLE, BILLERICA, MASSACHUSETTS 01821 01821
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(978) 667-8700
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR
IF CHANGED SINCE LAST REPORT.
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.
[X] Yes [ ] No
There were 22,007,052 shares of the Registrant's Common Stock issued and
outstanding as of July 1,2000.
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SIPEX CORPORATION
FORM 10-Q
SIX MONTHS ENDED JULY 1, 2000
INDEX
<TABLE>
<CAPTION>
ITEM NUMBER PAGE
----------- ----
<S> <C> <C> <C>
Part I: Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at July 1, 2000 and
December 31, 1999........................................... 2
Condensed Consolidated Statements of Operations for the
three months and six months ended July 1, 2000 and July 3,
1999........................................................ 3
Condensed Consolidated Statements of Cash Flows for the Six
months ended July 1, 2000 and July 3, 1999.................. 4
Notes To Condensed Consolidated Financial Statements........ 5-6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 7-9
Item 3. Quantitative and Qualitative Disclosure about Market Risk... 10
Part II: Other Information
Item 1. Legal Proceedings........................................... *
Item 2. Changes in Securities....................................... *
Item 3. Defaults Upon Senior Securities............................. *
Item 4. Submission of Matters to a Vote of Security Holders......... 10
Item 5. Other Information........................................... *
Item 6. Exhibits and Reports on Form 8-K............................ 10
Exhibit 10.1 Business Loan Agreement........................ 10
Exhibit 11.1 Computation of Earnings Per Common Share....... 10
Exhibit 27 Financial Data Schedule.......................... 10
Signatures..................................................................... 11
</TABLE>
---------------
* No information provided due to inapplicability of item.
1
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PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
SIPEX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JULY 1, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
Assets:
Current Assets
Cash and cash equivalents................................. $ 1,853 $ 1,355
Short-term investment securities.......................... -- 5,734
Accounts receivable, less allowances of $1,542 and $1,280
at July 1, 2000 and December 31, 1999, respectively.... 19,431 14,002
Inventories............................................... 28,095 23,128
Deferred income taxes-current............................. 10,360 10,428
Prepaid expenses and other current assets................. 2,472 2,084
-------- --------
Total current assets.............................. 62,211 56,731
Restricted cash equivalents and securities.................. 36,750 36,750
Property, plant, and equipment, net......................... 21,252 17,834
Intangible assets (net of accumulated amortization)......... 3,549 3,739
Deferred income taxes....................................... 4,742 4,575
Other assets................................................ 128 166
-------- --------
Total assets........................................... $128,632 $119,795
======== ========
Liabilities and Shareholders' Equity:
Current Liabilities
Notes payable............................................. $ 242 $ 413
Accounts payable.......................................... 7,444 6,661
Accrued expenses.......................................... 10,003 7,620
-------- --------
Total current liabilities......................... 17,689 14,694
-------- --------
Shareholders' Equity:
Preferred stock, $.01 par value, 1,000 shares authorized
and no shares issued or outstanding at July 1, 2000 and
December 31, 1999, respectively........................ -- --
Common stock, $.01 par value, 40,000 shares authorized and
22,007 and 21,768 shares issued and outstanding at July
1, 2000 and December 31, 1999, respectively............ 220 218
Additional paid-in capital................................ 112,518 110,951
Accumulated deficit....................................... (1,773) (6,128)
Accumulated other comprehensive income (loss)............. (22) 60
-------- --------
Total shareholders' equity............................. 110,943 105,101
-------- --------
Total liabilities and shareholders' equity................ $128,632 $119,795
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
2
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SIPEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ------------------
JULY 1, JULY 3, JULY 1, JULY 3,
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales......................................... $31,401 $22,575 $58,137 $45,411
Cost of sales..................................... 19,559 12,691 36,594 26,482
------- ------- ------- -------
Gross profit................................. 11,842 9,884 21,543 18,929
------- ------- ------- -------
Operating expenses
Research and development..................... 3,352 2,710 6,117 4,900
Marketing and selling........................ 2,683 2,320 5,168 4,782
General and administrative................... 2,249 1,714 4,497 3,180
------- ------- ------- -------
Total operating expenses................ 8,284 6,744 15,782 12,862
------- ------- ------- -------
Income from operations............................ 3,558 3,140 5,761 6,067
Other income, net................................. 666 349 1,044 663
------- ------- ------- -------
Income before income taxes........................ 4,224 3,489 6,805 6,730
Income tax expense................................ 1,521 1,196 2,450 2,304
------- ------- ------- -------
Net income........................................ $ 2,703 $ 2,293 $ 4,355 $ 4,426
======= ======= ======= =======
Net income per common share-basic................. $ 0.12 $ 0.11 $ 0.20 $ 0.21
======= ======= ======= =======
Net income per common share-assuming dilution..... $ 0.12 $ 0.10 $ 0.19 $ 0.20
======= ======= ======= =======
Weighted average common shares
outstanding-basic............................... 21,997 21,367 21,938 21,346
======= ======= ======= =======
Weighted average common and common equivalent
shares outstanding-assuming dilution............ 23,341 21,876 23,389 21,928
======= ======= ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
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SIPEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------
JULY 1, JULY 3,
2000 1999
------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income................................................ $4,355 $ 4,426
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Adjustment to conform year end of pooled entities...... -- 1,009
Increase in deferred income taxes...................... (99) --
Depreciation and amortization.......................... 2,928 1,110
Loss on disposal of assets............................. -- 51
Changes in current assets and liabilities:
Increase in accounts receivable................... (5,429) (761)
Increase in inventories........................... (4,967) (1,743)
Increase in prepaid expenses...................... (350) (1,695)
Increase in accrued taxes......................... 2,358 2,917
Increase (decrease) in accounts payable........... 783 (129)
Increase (decrease) in accrued expenses........... 25 (783)
------ --------
Net cash (used in) provided by operating activities......... (396) 4,402
------ --------
INVESTING ACTIVITIES:
Proceeds from maturity of investment securities........... 5,734 88,149
Purchase of investment securities......................... -- (82,043)
Increase in restricted cash equivalents and securities.... -- (12,489)
Purchase of property, plant and equipment................. (6,156) (4,711)
------ --------
Net cash used in investing activities....................... (422) (11,094)
------ --------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock.................... 1,569 363
Decrease in debt obligations.............................. (171) (8)
------ --------
Net cash provided by financing activities................... 1,398 355
Effect of foreign currency translation adjustments........ (82) (28)
------ --------
Increase (decrease) in cash and cash equivalents............ 498 (6,365)
Cash and cash equivalents, beginning of period.............. 1,355 17,810
------ --------
Cash and cash equivalents, end of period.................... $1,853 $ 11,445
====== ========
Supplemental cash flow information:
Cash paid during the period for:
Income taxes........................................... $ 87 $ 164
Interest............................................... $ -- $ 324
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
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SIPEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Sipex
Corporation ("Sipex" or the "Company") and all of its wholly owned subsidiaries.
In addition, these financial statements have been restated for all periods
presented, on the basis discussed in Note 2 to Sipex's Form 10-K/A for the year
ended December 31, 1999, to reflect the acquisition of Calogic, which was
accounted for as a pooling-of-interests. All intercompany accounts and
transactions have been eliminated.
The accompanying unaudited financial statements have been prepared by Sipex
pursuant to the rules and regulations of the Securities and Exchange Commission
regarding interim financial reporting. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements and should be read in conjunction
with the financial statements and notes thereto for the year ended December 31,
1999, included in Sipex's Form 10-K/A filing. The accompanying financial
statements reflect all adjustments (consisting solely of normal, recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of results for the interim periods presented. The results of
operations for the three and six month periods ended July 1, 2000 are not
necessarily indicative of the results to be expected for the full fiscal year.
2. FACILITY EXIT COSTS
In the fourth quarter of 1999, Management of Sipex and the Board of
Directors approved a plan to close certain manufacturing facilities in
California, which were acquired through the merger with Calogic. As part of the
plan, Sipex will be vacating several California leased facilities and moving
these operations to its newly completed facility in Milpitas, California.The
balance of the accrual at July 1, 2000 will be paid over an estimated 18 month
period.
The following table summarizes the activity in facility exit costs from the
date of the original approval of the plan to the end of the second quarter of
2000.
<TABLE>
<CAPTION>
1999 INCURRED BALANCE INCURRED ADJUSTMENTS BALANCE
CHARGE 1999 12/31/99 2000 TO CHARGE 7/1/00
(IN THOUSANDS) ------ -------- -------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
People related costs.................. $ 640 $ -- $ 640 $729 $ 89 $ --
Facility related costs................ 930 -- 930 181 (89) 660
Equipment related costs............... 300 -- 300 -- -- 300
------ ------ ------ ---- ---- ----
$1,870 $ -- $1,870 $910 $ -- $960
====== ====== ====== ==== ==== ====
</TABLE>
3. RESTRICTED CASH AND CASH EQUIVALENTS AND INVESTMENT SECURITIES
Restricted cash and cash equivalents and investment securities represents
amounts pledged for an operating lease which Sipex entered into for the
construction and lease of a new wafer fabrication facility in Milpitas,
California. The lease agreement is for a five-year period, including a one-year
construction period.
4. NET INCOME PER SHARE
Net income per share-basic is based upon the weighted average number of
common shares outstanding. Net income per share assuming dilution is based upon
the weighted average number of common and common equivalent shares outstanding
assuming dilution. Common equivalent shares, consisting of outstanding stock
options, are included in the per share calculations where the effect of their
inclusion would be dilutive.
5
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SIPEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LINE OF CREDIT
On June 6, 2000, Sipex entered into a loan agreement with a bank for a
$10.0 million line of credit at the bank's base rate minus 0.5%. Funds advanced
under the line are collateralized by accounts receivable, inventory and cash
deposited with the bank. The loan agreement requires compliance with certain
minimum tangible net worth and financial ratios. There were no borrowings under
the line of credit as of July 1, 2000 and the entire line was available.
6. NEW ACCOUNTING STANDARDS
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial
Statements. Sipex is required to adopt this accounting guidance, as amended by
SAB 101A and later by SAB 101B, no later than the fourth quarter of fiscal year
2000. Sipex believes its existing revenue recognition policies and procedures
are in compliance with SAB 101, and therefore, SAB 101's adoption will not have
a material impact on Sipex's financial condition, results of operations or cash
flows.
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation: an Interpretation of APB Opinion No. 25. This Interpretation
clarifies the application of APB No. 25 for certain issues, including: the
definition of an employee, the criteria for determining whether a plan qualifies
as a noncompensatory plan, the accounting consequence of modifications to the
terms of a previously fixed stock option or award, and the accounting for an
exchange of stock compensation awards in a business combination. This
Interpretation is effective July 1, 2000, but certain conclusions apply to
events occurring after December 15, 1998 or January 12, 2000. To the extent that
this Interpretation covers events occurring during the period after December 15,
1998, or January 12, 2000, but before the effective date, the effects of
applying this Interpretation are recognized on a prospective basis from July 1,
2000. The adoption of this Interpretation will not have a material impact on its
financial position, results of operations or cash flows.
6
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Form 10-Q contains certain statements of a forward-looking nature
relating to future events or the future financial performance of Sipex. Sipex's
actual future results may differ significantly from such statements. In
evaluating such statements, the various factors identified in the caption
"Factors Affecting Future Operating Results" should be considered.
OVERVIEW
Sipex designs, manufactures and markets high performance and high
value-added analog integrated circuits using standard BiCMOS, bipolar and
dielectrically isolated BiCMOS technologies. Analog integrated circuits address
a wide range of real-world signal processing applications associated with such
naturally occurring physical phenomena as temperature, pressure, weight,
position, light and sound. These circuits play a fundamental and important role
in coupling the real world to the digital computer. Sipex's products include
single, dual and multi-protocol interface circuits, power management products,
data converters, electroluminescent driver circuits, low power and high voltage
application specific circuits.
On November 23, 1999, Sipex completed its acquisition of Calogic and Alpha
Semiconductor, its subsidiary. In connection with the transaction, Sipex issued
approximately 3.6 million shares of its common stock. The merger was accounted
for on a pooling-of-interests basis. Accordingly, Sipex's consolidated financial
statements for 1999 have been restated from data previously recorded to include
the accounts and operations of Calogic for all periods presented.
RESULTS OF OPERATIONS
The table below presents the statements of operations for the three and six
month periods ended July 1, 2000 and July 3, 1999, as a percentage of net sales
and provides the percentage increase of such items comparing the interim periods
ended July 1, 2000 to the corresponding period from the prior fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------ ------------------------------
PERCENTAGE PERCENTAGE
JULY 1, JULY 3, INCREASE JULY 1, JULY 3, INCREASE
2000 1999 (DECREASE) 2000 1999 (DECREASE)
------- ------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales................................ 100.0% 100.0% 39.1% 100.0% 100.0% 28.0%
Cost of sales............................ 62.3 56.2 54.1 62.9 58.3 38.2
----- ----- ---- ----- ----- ----
Gross profit............................. 37.7 43.8 19.8 37.1 41.7 13.8
----- ----- ---- ----- ----- ----
Operating expenses
Research and development............... 10.7 12.0 23.7 10.5 10.8 24.8
Marketing and selling.................. 8.5 10.3 15.6 8.9 10.5 8.1
General and administrative............. 7.2 7.6 31.2 7.8 7.0 41.4
----- ----- ---- ----- ----- ----
Total operating expenses....... 26.4 29.9 22.8 27.2 28.3 22.7
----- ----- ---- ----- ----- ----
Operating income......................... 11.3 13.9 13.3 9.9 13.4 (5.0)
Other income, net........................ 2.1 1.6 90.8 1.8 1.4 57.5
----- ----- ---- ----- ----- ----
Income before income taxes............... 13.4 15.5 21.1 11.7 14.8 1.1
Income tax expense....................... 4.8 5.3 27.2 4.2 5.1 6.3
----- ----- ---- ----- ----- ----
Net income............................... 8.6% 10.2% 17.9% 7.5% 9.7% (1.6%)
===== ===== ==== ===== ===== ====
</TABLE>
Net sales for the second quarter increased 39.1% to $31.4 million and
increased 28.0% to $58.1 million for the first six months of 2000, as compared
to the same periods in the previous year. The increase in the second quarter and
first six months of 2000, as compared to the same periods last year, was mainly
the result of strong demand principally for our interface, power management and
electroluminescent products. International sales increased 50.9% and 35.6% for
the second quarter and first six months of 2000, respectively, as compared to
the same periods in 1999. Second quarter sales increased in all regions, as
compared to the prior year's
7
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respective periods. Year-to-date sales increased in all regions except Japan,
which reported a 3.6% decrease when compared to the first six months of 1999.
Sequentially, second quarter sales increased in all regions, as compared to the
first quarter of 2000. International sales represented 51.1% and 49.7% for the
second quarter and first six months of 2000, respectively.
Gross profit increased 19.8% and 13.8% to $11.8 million and $21.5 million
for the second quarter and first six months of 2000, respectively, as compared
to the same periods last year. As a percentage of net sales, gross profit
decreased to 37.7% and 37.1% for the second quarter and first six months of
2000, respectively, from 43.8% and 41.7% for the same periods in the previous
year. Sequentially, in the second quarter of 2000, gross profit increased to
37.7%, as a percentage of sales, as compared to 36.3% in the first quarter of
2000. The decreased gross profit as a percentage of net sales for the second
quarter and first six months of 2000, as compared to the respective prior year
periods, was primarily due to the increased wafer pricing from our primary wafer
supplier and also to lower capacity utilization, as a result of the ramp-up in
production in our new wafer manufacturing facility in Milpitas, California. The
increased gross margin in the second quarter of 2000, as compared with the first
quarter of 2000, was mainly due to the introduction of wafers manufactured by
our new manufacturing facility. We expect our dependency on sub-contract wafers
to continue to decrease during the second half of 2000, as our new manufacturing
facility ramps up production.
Research and development expenses for the second quarter and first six
months of 2000 increased $642,000 and $1.2 million, respectively, or 23.7% and
24.8%, as compared to the same periods last year. The increase in the periods
was mainly due to continued process development in the new wafer fabrication
facility and to increased new product development expenses. As a percentage of
net sales, research and development decreased to 10.7% and 10.5% for the second
quarter and first six months of 2000, respectively, as compared to 12.0% and
10.8% for the same periods in the previous year.
Marketing and selling expenses increased 15.6% and 8.1% to $2.7 million and
$5.2 million, respectively, for the second quarter and first six months of 2000,
as compared with $2.3 million and $4.8 million, respectively, for the same
periods of the previous year. Increased commission costs in 2000 due to the
increased sales were offset by reduced staffing, which was mainly the result of
efficiencies from the combined sales and marketing with Calogic, including the
elimination of redundant sales activities. As a percentage of net sales,
marketing and selling expenses for the second quarter and first six months of
2000 decreased to 8.5% and 8.9%, respectively, as compared to 10.3% and 10.5%,
in the same prior year periods as a result of increased sales and the reduced
staffing.
General and administrative expenses increased by $535,000 and $1.3 million
for the second quarter and first six months of 2000, respectively, as compared
to the same periods of the previous year. The increase in spending for the first
six months of 2000, as compared to the same period a year ago, was mainly due to
additional staffing and related employee costs, and also to amortization of
intangible assets and increased professional fees. As a percentage of net sales,
general and administrative expenses decreased to 7.2% for the second quarter of
2000 from 7.6% for the second quarter of 1999 and increased to 7.8% for the
first six months of 2000 from 7.0% for the first six months of 1999.
Other income, net, for the second quarter and first six months of 2000
consisted primarily of interest income on short-term and restricted investment
securities and cash equivalents, reduced by net royalty costs. For the second
quarter and first six months of 2000, other income, net, represented income of
$666,000 and $1,044,000, as compared to $349,000 and $663,000 for the same
periods in the previous year. The increase in the second quarter and first six
months of 2000 over the same 1999 periods was mainly due to decreased interest
expense as a result of the Calogic debt payoff in December 1999, partially
offset by increased royalty costs.
Sipex recorded income tax expense at an effective rate of 36.0% in each of
the 2000 periods and 34.2% in each of the 1999 periods.
8
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LIQUIDITY AND CAPITAL RESOURCES
At July 1, 2000, Sipex had working capital of $44.5 million and available
funds of $1.9 million consisting of cash and cash equivalents. In addition,
there is $36.8 million of restricted cash and cash equivalents and investment
securities representing amounts pledged for an operating lease which Sipex
entered into for the construction and lease of the new wafer fabrication
facility in Milpitas, California. The lease agreement is for a five-year period,
including a one-year construction period. Sipex anticipates that the available
funds and cash provided from operations and bank loans will be sufficient to
meet cash and working capital requirements for the foreseeable future.
On June 6, 2000, Sipex entered into a loan agreement with a bank for a
$10.0 million line of credit at the bank's base rate minus 0.5%. Funds drawn
under the line of credit will be used mainly to support increased year 2000
capital expenditures, consisting principally of the costs of the wafer
fabrication facility and equipment. Advances under the line are collateralized
by accounts receivable, inventory and cash deposited with the bank. The loan
agreement requires compliance with certain minimum tangible net worth and
financial ratios. There were no borrowings under the line of credit as of July
1, 2000 and the entire line was available.
FACTORS AFFECTING FUTURE OPERATING RESULTS
Except for historical information contained herein, the matters set forth
in this Form 10-Q, including the statements in the management's discussion are
forward-looking statements that are dependent on certain risks and uncertainties
including such factors, among others, as the timing, volume and pricing of new
orders received and shipped during the quarter, whether customer cancellations
and delays of outstanding orders increase, timely ramp-up of new facilities, and
the timely introduction of new processes and products.
Important factors affecting Sipex's ability to achieve future revenue
growth and operating results include whether, and to the extent which, demand
for Sipex's products increases and reflects real end-user demand; the ability to
successfully integrate Calogic and Alpha Semiconductor into Sipex's operations;
whether customer cancellations and delays of outstanding orders increase, and
whether Sipex is able to manufacture in the correct mix to respond to orders on
hand and new orders received in the future; the amount of lead time provided by
Sipex's customers; whether Sipex is able to achieve its new product development
and introduction goals, including, without limitation, goals for conceiving and
introducing timely new products that are well received in the marketplace; and
its ability to design and introduce new products based on new technologies. In
addition, Sipex may experience unexpected delays or problems in qualifying and
ramping up production in its new Fab in Milpitas, California and the failure of
Sipex to implement the new Fab successfully and in a timely fashion may impact
future revenue growth and operating results.
Other important factors that could cause actual results to differ
materially from those predicted include overall economic conditions, such as
currency and other economic issues affecting Asian and other countries, demand
for electronic products and semiconductors generally, demand for the end-user
products for which Sipex's semiconductors are suited, timely availability of raw
materials (including subcontractor wafers from Taiwan), equipment, supplies and
services, unanticipated manufacturing problems, technological and product
development risks, competitors' actions, and other risk factors described in
Sipex's filings with the Securities and Exchange Commission.
Past performance of Sipex may not be a good indicator of future performance
due to factors affecting Sipex, its competitors, the semiconductor industry and
the overall domestic and international economy. The semiconductor industry is
characterized by rapid technological change, price erosion, cyclical market
patterns, occasional shortages of materials, capacity constraints, variation in
manufacturing efficiencies and significant expenditures for capital equipment
and product development. Furthermore, new product introductions and patent
protection of existing products are critical factors for future sales growth and
sustained profitability.
Although Sipex believes that it has sufficient product lines, manufacturing
facilities and technical and financial resources for its current operations,
sales and profitability can be significantly affected by the above and other
risks discussed from time to time in Sipex's other filings with the Securities
and Exchange Commission, including its Annual Report on Form 10-K/A for the year
ended December 31, 1999. Additionally, Sipex's common stock could be subject to
significant price volatility should sales and/or earnings fail to meet
expectations of the investment community.
9
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
Sipex owns financial instruments that are sensitive to market risks as part
of its investment portfolio. The investment portfolio is used to preserve
Sipex's capital until it is required to fund operations, including Sipex's
research and development activities. None of these market-risk sensitive
instruments are held for trading purposes. Sipex does not own derivative
financial instruments in its investment portfolio. The investment portfolio
contains instruments that are subject to the risk of a decline in interest
rates.
Investment Rate Risk -- Sipex's investment portfolio includes debt
instruments that are primarily United States government bonds of less than one
year in duration. These bonds are subject to interest rate risk, and could
decline in value if interest rates fluctuate. Sipex's investment portfolio also
consists of certain commercial paper which is also subject to interest rate
risk. Due to the short duration and conservative nature of these instruments,
Sipex does not believe that it has a material exposure to interest rate risk.
PART II: OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held on May 19, 2000. Holders of an
aggregate of 21,980,614 shares at the close of business on April 10, 2000, were
entitled to vote at the meeting. At such meeting, our shareholders voted to
elect Mr. Manfred Loeb, the sole nominated director, to serve as a director for
a term of three years. There were 19,124,088 votes for the election of Mr. Loeb
and 17,216 against such election. There were no broker non-votes or abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 10.1 Business Loan Agreement
Exhibit 11.1 Computation of Earnings Per Common Share
Exhibit 27 Financial Data Schedule
b) Reports on Form 8-K
None
10
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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.
SIPEX CORPORATION
By /s/ FRANK R. DIPIETRO
--------------------------------------
Frank R. DiPietro
Executive Vice President, Finance
Chief Financial Officer & Treasurer
(Duly Authorized Officer &
Principal Financial Officer)
Date: August 14, 2000
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