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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 SEPTEMBER 30, 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
(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 22,382,424 shares of the Registrant's Common Stock issued and
outstanding as of September 30, 2000.
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SIPEX CORPORATION
FORM 10-Q
NINE MONTHS ENDED SEPTEMBER 30, 2000
INDEX
<TABLE>
<CAPTION>
ITEM NUMBER PAGE
----------- ----
<S> <C> <C> <C>
Part I: Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at September 30, 2000
and December 31, 1999....................................... 2
Condensed Consolidated Statements of Operations for the
three months and nine months ended September 30, 2000 and
October 2, 1999............................................. 3
Condensed Consolidated Statements of Cash Flows for the Nine
months ended September 30, 2000 and October 2, 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... 9
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......... *
Item 5. Other Information........................................... *
Item 6. Exhibits and Reports on Form 8-K............................ 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>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED)
<S> <C> <C>
Assets:
Current Assets
Cash and cash equivalents................................. $ 4,020 $ 1,355
Short-term investment securities.......................... -- 5,734
Accounts receivable, less allowances of $1,506 and $1,280
at September 30, 2000 and December 31, 1999,
respectively........................................... 23,267 14,002
Inventories............................................... 31,971 23,128
Deferred income taxes-current............................. 8,585 10,428
Prepaid expenses and other current assets................. 2,749 2,084
-------- --------
Total current assets.............................. 70,592 56,731
Restricted cash equivalents and securities.................. 36,750 36,750
Property, plant, and equipment, net......................... 26,361 17,834
Intangible assets (net of accumulated amortization)......... 3,455 3,739
Deferred income taxes....................................... 6,312 4,575
Other assets................................................ 128 166
-------- --------
Total assets...................................... $143,598 $119,795
======== ========
Liabilities and Shareholders' Equity:
Current Liabilities
Notes payable............................................. $ 242 $ 413
Accounts payable.......................................... 8,436 6,661
Accrued expenses.......................................... 6,152 7,620
-------- --------
Total current liabilities......................... 14,830 14,694
Long term note payable...................................... 1,926 --
Other long term liabilities................................. 797 --
-------- --------
Total liabilities................................. 17,553 14,694
Shareholders' Equity:
Preferred stock, $.01 par value, 1,000 shares authorized
and no shares issued or outstanding at September 30,
2000 and December 31, 1999, respectively............... -- --
Common stock, $.01 par value, 40,000 shares authorized and
22,382 and 21,768 shares issued and outstanding at
September 30, 2000 and December 31, 1999,
respectively........................................... 224 218
Additional paid-in capital................................ 122,863 110,951
Accumulated income (deficit).............................. 2,973 (6,128)
Accumulated other comprehensive income (loss)............. (15) 60
-------- --------
Total shareholders' equity........................ 126,045 105,101
-------- --------
Total liabilities and shareholders' equity................ $143,598 $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 NINE MONTHS ENDED
-------------------------- --------------------------
SEPTEMBER 30, OCTOBER 2, SEPTEMBER 30, OCTOBER 2,
2000 1999 2000 1999
------------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Net sales....................................... $35,711 $22,437 $93,848 $67,848
Cost of sales................................... 20,531 13,279 57,125 39,761
------- ------- ------- -------
Gross profit............................... 15,180 9,158 36,723 28,087
------- ------- ------- -------
Operating expenses
Research and development................... 3,333 2,666 9,450 7,566
Marketing and selling...................... 2,637 2,503 7,805 7,285
General and administrative................. 2,203 1,532 6,700 4,712
Facility exit costs........................ -- (1,083) -- (1,083)
------- ------- ------- -------
Total operating expenses.............. 8,173 5,618 23,955 18,480
------- ------- ------- -------
Income from operations.......................... 7,007 3,540 12,768 9,607
Other income, net............................... 408 366 1,452 1,029
------- ------- ------- -------
Income before income taxes...................... 7,415 3,906 14,220 10,636
Income tax expense.............................. 2,669 1,309 5,119 3,613
------- ------- ------- -------
Net income...................................... $ 4,746 $ 2,597 $ 9,101 $ 7,023
======= ======= ======= =======
Net income per common share-basic............... $ 0.21 $ 0.12 $ 0.41 $ 0.33
======= ======= ======= =======
Net income per common share-assuming dilution... $ 0.20 $ 0.12 $ 0.38 $ 0.32
======= ======= ======= =======
Weighted average common shares
outstanding-basic............................. 22,178 21,393 22,017 21,362
======= ======= ======= =======
Weighted average common and common equivalent
shares outstanding-assuming dilution.......... 24,078 22,008 23,655 21,958
======= ======= ======= =======
</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>
NINE MONTHS ENDED
---------------------------
SEPTEMBER 30, OCTOBER 2,
2000 1999
------------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income................................................ $ 9,101 $ 7,023
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...................... 106 129
Depreciation and amortization.......................... 4,247 2,038
Loss on disposal of assets............................. -- 51
Changes in current assets and liabilities:
Increase in accounts receivable................... (9,265) (979)
Increase in inventories........................... (8,843) (3,278)
Increase in prepaid expenses...................... (627) (1,686)
Increase in accounts payable...................... 1,775 120
(Decrease) increase in accrued expenses........... (1,468) 3,460
Increase in other liabilities..................... 797 --
-------- ---------
Net cash (used in) provided by operating activities......... (4,177) 7,887
-------- ---------
INVESTING ACTIVITIES:
Proceeds from maturity of investment securities........... 5,734 103,898
Purchase of investment securities......................... -- (105,350)
Increase in restricted cash equivalents and securities.... -- (12,394)
Purchase of property, plant and equipment................. (12,490) (6,145)
-------- ---------
Net cash used in investing activities....................... (6,756) (19,991)
-------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock.................... 11,918 574
Increase in debt obligations.............................. 1,755 533
-------- ---------
Net cash provided by financing activities................... 13,673 1,107
Effect of foreign currency translation adjustments........ (75) (144)
-------- ---------
Increase (decrease) in cash and cash equivalents............ 2,665 (11,141)
Cash and cash equivalents, beginning of period.............. 1,355 17,810
-------- ---------
Cash and cash equivalents, end of period.................... $ 4,020 $ 6,669
======== =========
SUPPLEMANTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes........................................... $ 522 $ 299
Interest............................................... $ -- $ 475
</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 (the "Company") and all of its wholly owned subsidiaries. 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 nine month periods ended September 30, 2000 are not
necessarily indicative of the results to be expected for the full fiscal year.
2. FACILITY EXIT COSTS
In the third quarter of 1999, Sipex recorded net proceeds of $1.1 million
from the sale of the tangible assets of our semiconductor wafer fab located in
Milpitas, California, a portion of such assets had been written off as part of
facility exit costs in 1998.
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 vacated several California leased facilities and moved these
operations to its newly completed facility in Milpitas, California. The balance
of the accrual at September 30, 2000 will be paid over an estimated fifteen
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 third quarter of
2000.
<TABLE>
<CAPTION>
1999 INCURRED BALANCE INCURRED ADJUSTMENTS BALANCE
CHARGE 1999 12/31/99 2000 TO CHARGE 9/30/00
(IN THOUSANDS) ------ -------- -------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
People related costs................. $ 640 $ -- $ 640 $ 822 $182 $ --
Facility related costs............... 930 -- 930 254 (90) 586
Equipment related costs.............. 300 -- 300 -- (92) 208
------ ---- ------ ------ ---- ----
$1,870 $ -- $1,870 $1,076 $ -- $794
====== ==== ====== ====== ==== ====
</TABLE>
Sipex has completed exiting the majority of its facilities in the third
quarter of 2000 and is renegotiating the remaining leases in the fourth quarter
and may revise its estimate.
3. RESTRICTED CASH EQUIVALENTS AND SECURITIES
Restricted cash equivalents and securities represents 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 ending in August, 2004.
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)
(UNAUDITED)
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 due June 1, 2002 and 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
which Sipex met as of September 30, 2000.
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 FASB
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 did not have a material impact on
Sipex's financial position, results of operations or cash flows.
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities" establishes accounting and
reporting standards for derivatives and hedging activities. In June 2000, the
Financial Accounting Standards Board issued SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities," and amendment to
SFAS No. 133. These statements require that an entity recognize all derivatives
as either assets or liabilities in the balance sheet and measure those
instruments at fair value. These statements will be effective for our fiscal
2002. We are currently evaluating SFAS No. 133 and SFAS No. 138. We do not
expect these new statements will have a material effect on our consolidated
financial position, results of operations or cash flow.
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 have been restated 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
nine month periods ended September 30, 2000 and October 2, 1999, as a percentage
of net sales and provides the percentage increase of such items comparing the
interim periods ended September 30, 2000 to the corresponding period from the
prior fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------------- ---------------------------------------
PERCENTAGE PERCENTAGE
SEPTEMBER 30, OCTOBER 2, INCREASE SEPTEMBER 30, OCTOBER 2, INCREASE
2000 1999 (DECREASE) 2000 1999 (DECREASE)
------------- ---------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales...................... 100.0% 100.0% 59.2% 100.0% 100.0% 38.3%
Cost of sales.................. 57.5 59.2 54.6 60.9 58.6 43.7
----- ----- ----- ----- ----- -----
Gross profit................... 42.5 40.8 65.8 39.1 41.4 30.7
----- ----- ----- ----- ----- -----
Operating expenses
Research and development..... 9.3 11.9 25.0 10.1 11.2 24.9
Marketing and selling........ 7.4 11.1 5.4 8.3 10.7 7.1
General and administrative... 6.2 6.8 43.8 7.1 6.9 42.2
Facility exit costs.......... -- (4.8) 100.0 -- (1.6) 100.0
----- ----- ----- ----- ----- -----
Total operating expenses....... 22.9 25.0 45.5 25.5 27.2 29.6
----- ----- ----- ----- ----- -----
Operating income............... 19.6 15.8 97.9 13.6 14.2 32.9
Other income, net.............. 1.2 1.6 11.5 1.6 1.5 41.1
----- ----- ----- ----- ----- -----
Income before income taxes..... 20.8 17.4 89.8 15.2 15.7 33.7
Income tax expense............. 7.5 5.8 103.9 5.5 5.3 41.7
----- ----- ----- ----- ----- -----
Net income..................... 13.3% 11.6% 82.7% 9.7% 10.4% 29.6%
===== ===== ===== ===== ===== =====
</TABLE>
Net sales increased 59.2% to $35.7 million for the third quarter and
increased 38.3% to $93.8 million for the first nine months of 2000, as compared
to the same periods of 1999. The increases in the 2000 periods, as compared to
the same periods last year, were mainly the result of continued strong demand,
principally for our interface, power management and electroluminescent products.
International sales increased 73.2% and 49.2% for the third quarter and first
nine months of 2000, respectively, as compared to the same periods in 1999.
7
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Third quarter and year-to-date sales increased in all regions, as compared to
the prior year's respective periods. Sequentially, third quarter sales increased
in all regions except the U.S. which decreased 3.1% from the second quarter of
2000. International sales represented 58.3% and 53.0% for the third quarter and
first nine months of 2000, respectively.
Gross profit increased 65.8% and 30.7% to $15.2 million and $36.7 million
for the third quarter and first nine months of 2000, respectively, as compared
to the same prior year periods. As a percentage of net sales, gross profit
increased to 42.5% for the third quarter of 2000 from 40.8% for the third
quarter of 1999 and decreased to 39.1% for the first nine months of 2000 from
41.4% for the first nine months of 1999. Sequentially, in the third quarter of
2000, gross profit increased to 42.5%, as a percentage of sales, as compared to
37.7% in the second quarter of 2000. The increased gross profit, as a percentage
of net sales for the third quarter of 2000, as compared to the respective 1999
quarter, was primarily due to the increased wafer volume produced by our new
wafer fabrication facility in Milpitas, which replaced the higher priced wafers
that otherwise would have been purchased from our primary wafer suppliers. The
sequential growth in the gross margin of 480 basis points, as a percentage of
net sales, for the third quarter of 2000 over the second quarter, was mainly due
to the higher capacity utilization, as a result of the ramp-up in production in
the new wafer fabrication facility and the increase in wafers produced by the
new fab. We expect our dependency on sub-contract wafers to continue to decrease
during the fourth quarter of 2000, as our new manufacturing facility ramps up
production.
Research and development expenses for the third quarter and first nine
months of 2000 increased $667,000 and $1.9 million, respectively, or 25.0% and
24.9%, as compared to the same periods last year. The increase in the 2000
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 9.3% and 10.1%
for the third quarter and first nine months of 2000, respectively, as compared
to 11.9% and 11.2% for the same periods last year.
Marketing and selling expenses increased 5.4% and 7.1% to $2.6 million and
$7.8 million, respectively, for the third quarter and first nine months of 2000,
as compared with $2.5 million and $7.3 million for the same periods of 1999. The
increases in the 2000 periods over the respective 1999 periods were mainly due
to commission costs on the increased sales. As a percentage of net sales,
marketing and selling expenses for the third quarter and first nine months of
2000 decreased to 7.4% and 8.3%, respectively, as compared to 11.1% and 10.7%
for the same prior year periods, as a result of the increased sales.
General and administrative expenses increased by $671,000 and $2.0 million
for the third quarter and first nine months of 2000, respectively, as compared
to the same prior year periods. The increase in spending for the first nine
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 6.2% for the third quarter of
2000 from 6.8% for the third quarter of 1999 and increased to 7.1% for the first
nine months of 2000 from 6.9% for the first nine months of 1999.
Other income, net, for the third quarter and first nine months of 2000
consists primarily of interest income on cash equivalents and restricted cash
equivalents and securities, reduced by net royalty costs. For the third quarter
and first nine months of 2000, other income, net, represented income of $408,000
and $1,452,000, as compared to $366,000 and $1,029,000 for the same periods of
the previous year. The increase in the 2000 periods over the same periods of
1999 was mainly due to decreased interest expense as a result of the Calogic
debt payoff in December 1999.
Sipex recorded income tax expense at an effective rate of 36.0% in each of
the 2000 periods and 33.5% and 33.9% for the third quarter and first nine months
of 1999, respectively.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, Sipex had working capital of $55.8 million and
available funds of $4.0 million consisting of cash and cash equivalents. In
addition, Sipex has pledged $36.8 million of cash equivalents and
8
<PAGE> 10
securities as security under the lease of its wafer fabrication facility in
Milpitas, California. The lease agreement is for a five-year period ending
August 2004. Sipex anticipates that the available funds provided from operations
and bank loans will be sufficient to meet cash and working capital requirements
for the foreseeable future.
Sipex has a bank loan agreement for a $10.0 million line of credit at the
bank's base rate minus 0.5% with a maturity date of June 1, 2002. 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. At September 30, 2000, $1.9 million was
outstanding under the line and $8.1 million was available. The loan agreement
requires compliance with certain minimum tangible net worth and financial ratios
which Sipex met as of September 30, 2000.
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
<PAGE> 11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
Sipex invests excess cash in financial instruments that are sensitive to
market risks as part of its investment strategy. 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 decline due to
interest rate fluctuations.
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. 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 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<S> <C> <C>
a) Exhibit 11.1 Computation of Earnings Per Common Share
Exhibit 27.1 Financial Data Schedule for nine month period ended
September 30, 2000
Exhibit 27.2 Financial Data Schedule for nine month period ended October
2, 1999
b) Reports on Form 8-K
None
</TABLE>
10
<PAGE> 12
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: November 13, 2000
11
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
DESCRIPTION
-----------
<S> <C>
11.1 Computation of Earnings per Common Share
27.1 Financial Data Schedule for nine month period ended
September 30, 2000
22.2 Financial Data Schedule for nine month period ended October
2, 1999
</TABLE>
12
