Form 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from to For Quarter Ended Commission File Number March 31, 1995 0-1052 Millipore Corporation (Exact name of registrant as specified in its charter) Massachusetts (State or other jurisdiction of 04-2170233 incorporation or organization) (I.R.S. Employer Identification No.) 80 Ashby Road Bedford, Massachusetts 01730 (Address of principal executive (Zip Code) offices) Registrant's telephone number, include area code (617) 275-9200 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 and 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. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of March 31, 1995: 22,581,983 MILLIPORE CORPORATION INDEX Page No. Part I. Financial Information: Item 1. Condensed Financial Statements Consolidated Balance Sheets -- March 31, 1995 and December 31, 1994 2 Consolidated Statements of Income -- Three Months Ended March 31, 1995 and 1994 3 Consolidated Statements of Cash Flows -- Three Months Ended March 31, 1995 and 1994 4 Notes to Consolidated Condensed Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6-7 Part II. Other Information 8 Signatures 9 MILLIPORE CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands except share data) March 31, December 31, 1995 1994 ASSETS (Unaudited) Current assets Cash $ 2,240 $ 2,898 Short-term investments 23,855 27,338 Accounts receivable, net 147,471 136,944 Inventories Raw materials 23,254 19,895 Work in process 8,965 8,992 Finished goods 44,379 42,322 76,598 71,209 Other current assets 7,622 5,351 Receivables arising from sale of 10,206 15,064 businesses Total current assets 267,992 258,804 Property, plant and equipment, net of accumulated depreciation of $174,139 in 1995 and $165,036 in 1994 195,081 187,525 Intangible assets 5,090 5,177 Deferred income taxes 57,580 58,123 Other assets 29,732 27,351 Total assets $555,475 $536,980 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes payable and current portion of long-term debt $93,316 $56,289 Accounts payable 32,154 30,510 Accrued expenses 34,474 33,350 Accrued divestiture costs 4,102 16,470 Dividends payable 3,467 3,500 Accrued retirement plan 3,180 5,987 contributions Accrued and deferred income taxes 8,179 12,049 payable Total current liabilities 178,872 158,155 Long-term debt 117,956 109,558 Other liabilities 20,576 18,990 Accrued divestiture costs 27,000 29,000 Shareholders' equity Common stock 28,494 28,494 Additional paid-in capital 23,603 23,603 Retained earnings 473,133 458,579 Translation adjustments 9,698 5,147 534,928 515,823 Less: Treasury stock, at cost, 5,912 shares in 1995 and 5,361 in 1994 (323,857) (294,546) Total shareholders' equity 211,071 221,277 Total liabilities and shareholders' equity $555,475 $536,980 The accompanying notes are an integral part of the consolidated condensed financial statements. -2- MILLIPORE CORPORATION CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share data) (Unaudited) Three Months Ended March 31, 1995 1994 Net sales $141,427 $118,959 Cost of sales 58,509 51,265 Gross profit 82,918 67,694 Selling, general & administrative 45,795 38,109 expenses Research & development expenses 8,513 8,558 Operating income 28,610 21,027 Interest income 386 565 Interest expense (2,318) (1,858) Income before income taxes 26,678 19,734 Provision for income taxes 6,003 4,440 Net income $20,675 $15,294 Net income per common share $ 0.90 $ 0.54 Cash dividends declared per common share $ 0.15 $ 0.14 Weighted average common shares 22,980 28,123 The accompanying notes are an integral part of the consolidated condensed financial statements. -3- MILLIPORE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended March 31, 1995 1994 Cash Flows From Operating Activities: Net income $ 20,675 $ 15,294 Adjustments to reconcile net income to net cash provided: Depreciation and amortization 6,508 6,047 Deferred income tax provision 543 (500) Change in operating assets and liabilities: (Increase) in accounts receivable (2,816) (2,143) (Increase) in inventories (1,854) (5,205) (Increase) in other current assets (1,958) (3,087) (Increase) decrease in other assets (2,690) 2,255 Increase in accounts payable and accrued 216 91 expenses (Decrease) in accrued retirement plan (2,868) (4,122) contributions (Decrease) increase in accrued income (5,251) 1,173 taxes Other 2,021 (2,693) Net cash provided by continuing operating 12,526 7,110 activities Cash Flows From Investing Activities: Additions to property, plant, and equipment (8,171) (4,158) Net cash generated by (spent by) (7,946) 5,437 discontinued operations Net cash used in investing activities (16,117) 1,279 Cash Flows From Financing Activities: Treasury stock acquired (36,397) (463) Issuance of treasury stock under stock 4,432 9,767 plans Cash paid to extinguish long-term debt - (5,088) Cash paid to close out foreign currency (3,546) (10,287) swap Net change in short-term debt 37,908 (17,846) Net change in long-term debt (43) 797 Dividends Paid (3,500) (3,921) Net cash used for financing activities (1,146) (27,041) Effect of foreign exchange rates on cash and 596 1,754 short-term investments Net decrease in cash and short-term (4,141) (16,898) investments Cash and short-term investments on January 1 30,236 40,642 Cash and short-term investments on March 31 $26,095 $23,744 Interest Paid $3,678 $3,480 Taxes Paid $10,823 $3,716 The accompanying notes are an integral part of the consolidated condensed financial statements. -4- MILLIPORE CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (in thousands) 1.The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with the instructions to Form 10-Q and, accordingly, these footnotes condense or omit certain information and disclosures normally included in financial statements. These financial statements, which in the opinion of management reflect all adjustments necessary for a fair presentation, should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1994. The accompanying unaudited consolidated condensed financial statements are not necessarily indicative of future trends or the Company's operations for the entire year. 2.As discussed in footnote F to the December 31, 1994 annual report, the cumulative unrealized loss on the Company's foreign currency Yen and DM swaps of $9,327 at December 31, 1994 was recorded as a reduction in other assets in the Company's December 31, 1994 consolidated balance sheet. The Company's DM swap expired on March 31, 1995. The Company paid $3,546 in cash to close out the swap. The cash payment represented the cumulative effect of the foreign currency rate fluctuations over the life of the swap. The cumulative unrealized loss on the Company's Yen currency swap of $17,768 at March 31, 1995 is recorded in long-term debt in the Company's unaudited March 31, 1995 consolidated balance sheet. Accordingly, the cumulative unrealized loss of $9,327 at December 31, 1994, as discussed above, has been reclassified to long-term debt in the December 31, 1994 consolidated balance sheet to conform to the 1995 presentation. 3.Depreciation on property, plant and equipment acquired before January 1, 1989 generally is provided using accelerated methods over the estimated useful lives of the assets. Assets acquired after January 1, 1989 primarily are depreciated using straight-line methods. The estimated useful lives of the Company's depreciable assets are as follows: Leasehold Improvements Life of the Lease Buildings and Improvements 10-30 Years Production and Other Equipment 3-15 Years -5- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Consolidated net sales increased 19 percent in the first quarter of 1995 compared to the first quarter of 1994; led by a 53 percent increase in worldwide sales to customers in the electronics / industrial market. Sales to biotechnology / pharmaceutical customers increased 8 percent in the first quarter of 1995 compared to the first quarter of 1994. Sales growth in the first quarter was broadbased across all geographies, as summarized in the following table: Sales growth rates Sales growth rates measured in local currencies measured in U.S. dollars Americas 13% 11% Europe 5% 17% Asia/Pacific 18% 30% Consolidated 12% 19% Foreign currency rate fluctuations, specifically the strengthening of the Yen, French Franc, and German Deutsch Mark against the U.S. dollar, increased reported sales growth by 7 percent in the first quarter of 1995. Gross margins increased in the first quarter of 1995 to 58.6 percent of sales as compared to 56.9 percent in the first quarter of 1994. The improvement in gross margins is primarily due to significantly increased production volume in the Company's electronics / industrial plants as well as continued cost control activities in all of the Company's manufacturing operations. Selling, general and administrative expenses increased 20 percent in the first quarter of 1995 compared to the first quarter of 1994, an increase consistent with sales growth. The Company continued to invest in sales and marketing programs to support future sales growth. Research and development expenses in the first quarter of 1995 were essentially flat with the first quarter of 1994, as the Company continued to fund all major programs. Net interest expense in the first quarter was higher in 1995 compared to 1994 primarily due to increased short-term borrowings during the first quarter of 1995. The Company's effective income tax rate for 1995 is 22.5 percent, consistent with the full year effective rate in 1994. A substantial portion of the Company's business is conducted outside of the United States through its foreign subsidiaries. This exposes the Company to risks associated with foreign currency rate fluctuations which can impact the Company's revenue and net income. To partially mitigate this risk, the Company has entered into foreign currency transactions, primarily forward exchange contracts to sell Yen, on a continuing basis in amounts and timing consistent with the underlying currency exposure so that the gain or losses on these transactions offset gains or losses on the underlying exposure. In the first quarter of 1995, a loss of $470K was realized on the Company's forward exchange contracts and was recorded in cost of sales. The Company does not engage in any speculative trading activity. The Company generated $12.5 million of cash from continuing operations in the first quarter of 1995 compared to $7.1 million in the first quarter of 1994, primarily due to increased net income in the first quarter of 1995 compared to the first quarter of 1994. Property, plant and equipment expenditures in the first quarter of 1995 were significantly higher than in the first quarter of 1994. The Company expects future 1995 quarterly capital expenditures to be in line with those of the first quarter. During the first quarter of 1995, the Company spent $36.4 million to re-purchase shares of its common stock. Of this amount, $22 million was spent to close out the Company's $100 million share repurchase program announced in the fourth quarter of 1994. In the first quarter of 1995, the Company announced plans to spend an additional $50 million on open market share repurchases and spent $14.4 million in share repurchases. The $36.4 million spent on share repurchases in the first quarter of 1995 was funded by short-term borrowings, which increased by $37.9 million in the first quarter. The Company expects that further 1995 share repurchases will be funded by cash generated from its operations. -6- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cash spent on discontinued operations in the first quarter of 1995 was in line with the Company's expectations. The Company expects further quarterly 1995 cash expenditures related to its discontinued operations to be lower than those of the first quarter. -7- PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. b. Reports on Form 8-K - There were no reports on Form 8-K filed for the quarter ended March 31, 1995. -8- 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. Millipore Corporation Registrant /S/Michael P. Carroll Date Michael P. Carroll Vice President, Chief Financial Officer and Treasurer -9-