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 June 30, 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 June 30, 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 01730 Bedford, Massachusetts (Zip Code) (Address of principal executive 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 June 30, 1995: 44,823,754 MILLIPORE CORPORATION INDEX Page No. Part I. Financial Information: Item 1. Condensed Financial Statements Consolidated Balance Sheets -- June 30, 1995 and December 31, 1994 2 Consolidated Statements of Income -- Three Months and Six Months Ended June 30, 1995 and 1994 3 Consolidated Statements of Cash Flows -- Six Months Ended June 30, 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) June 30, December 31, 1995 1994 ASSETS (Unaudited) Current assets Cash $ 2,073 $ 2,898 Short-term investments 20,565 27,338 Accounts receivable, net 153,645 136,944 Inventories Raw materials 24,489 19,895 Work in process 9,687 8,992 Finished goods 49,749 42,322 83,925 71,209 Other current assets 9,462 5,351 Receivables arising from sale of 10,329 15,064 businesses Total current assets 279,999 258,804 Property, plant and equipment, net of accumulated depreciation of $181,257 in 1995 and $165,036 in 1994 196,321 187,525 Intangible assets 4,938 5,177 Deferred income taxes 57,580 58,123 Other assets 29,407 27,351 Total assets $ 568,245 $ 536,980 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes payable and current portion of long-term debt $ 90,393 $ 56,289 Accounts payable 28,932 30,510 Accrued expenses 32,611 33,350 Accrued divestiture costs 7,906 16,470 Dividends payable 3,586 3,500 Accrued retirement plan 4,546 5,987 contributions Accrued and deferred income taxes 18,383 12,049 payable Total current liabilities 186,357 158,155 Long-term debt 123,721 109,558 Other liabilities 21,396 18,990 Accrued divestiture costs 17,000 29,000 Shareholders' equity Common stock 56,988 28,494 Additional paid-in capital - 23,603 Retained earnings 484,993 458,579 Translation adjustments 12,478 5,147 554,459 515,823 Less: Treasury stock, at cost, 12,165 shares in 1995 and 5,361 in 1994 (334,688) (294,546) Total shareholders' equity 219,771 221,277 Total liabilities and shareholders' equity $ 568,245 $ 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 Six Months Ended June 30, June 30, 1995 1994 1995 1994 Net sales $150,508 $124,690 $291,935 $243,649 Cost of sales 60,779 52,910 119,288 104,175 Gross profit 89,729 71,780 172,647 139,474 Selling, general & 49,610 39,456 95,405 77,565 administrative expenses Research & development 9,155 8,446 17,668 17,004 expenses Operating income 30,964 23,878 59,574 44,905 Interest income 337 713 723 1,278 Interest expense (2,851) (1,917) (5,169) (3,775) Income before income taxes 28,450 22,674 55,128 42,408 Provision for income taxes 6,401 5,102 12,404 9,542 Net income $22,049 $17,572 $42,724 $32,866 Net income per common share $ 0.49 $ 0.31 $ 0.94 $ 0.58 Cash dividends declared per common share $ 0.08 $ 0.075 $ 0.155 $ 0.145 Weighted average common 44,998 56,776 45,479 56,512 shares The accompanying notes are an integral part of the consolidated condensed financial statements. -3- MILLIPORE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended June 30, 1995 1994 Cash Flows From Operating Activities: Net income $ 42,724 $ 32,866 Adjustments to reconcile net income to net cash provided: Depreciation and amortization 13,068 13,845 Deferred income tax provision 543 (1,000) Change in operating assets and liabilities: (Increase) in accounts receivable (3,724) (8,448) (Increase) in inventories (6,940) (6,193) (Increase) in other current assets (3,554) (1,977) (Increase) decrease in other assets (6,964) (573) (Decrease) in accounts payable and (4,870) (2,115) accrued expenses (Decrease) in accrued retirement plan (1,534) (3,484) contributions Increase in accrued income taxes 3,001 4,145 Income tax refund received - 14,035 Other (2,482) (1,887) Net cash provided by continuing operating 29,268 39,214 activities Cash Flows From Investing Activities: Additions to property, plant, and equipment (14,125) (9,911) Net cash (spent by) discontinued operations (4,220) (1,905) Net cash used in investing activities (18,345) (11,816) Cash Flows From Financing Activities: Treasury stock acquired (51,485) (15,804) Issuance of treasury stock under stock 6,898 16,905 plans Cash paid to extinguish long-term debt - (5,088) Common stock issued - 7,350 Cash paid to close out foreign currency (3,546) (10,287) swap Net change in short-term debt 35,074 (35,147) Repayment of long-term debt (56) (92) Dividends Paid (6,967) (7,844) Net cash used for financing activities (20,082) (50,007) Effect of foreign exchange rates on cash and short-term investments 1,561 2,475 Net decrease in cash and short-term (7,598) (20,134) investments Cash and short-term investments on January 1 30,236 40,642 Cash and short-term investments on June 30 $22,638 $20,508 Interest Paid $ 5,254 $ 4,343 Taxes Paid $14,931 $ 8,199 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.On June 8, 1995, the Company's Board of Directors authorized a two-for-one stock split in the form of a 100% stock dividend, payable on July 21, 1995 to shareholders of record as of June 23, 1995. Par value per share remained at $1.00. The stock split resulted in the issuance of 28,494 additional shares of common stock from authorized but unissued shares. The issuance of additional shares resulted in the transfer of $23,603 from additional paid in capital and $4,891 from retained earnings to common stock, representing the par value of the shares issued. Accordingly, common shares outstanding as of June 30, 1995 and all weighted average share and per share amounts have been restated to reflect the stock split. 3.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 $23,546 at June 30, 1995 is recorded in long-term debt in the Company's unaudited June 30, 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. 4.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 21 percent in the second quarter of 1995 compared to the second quarter of 1994; led by a 43 percent increase in worldwide sales to customers in the electronics / industrial market. Sales to biotechnology / pharmaceutical customers increased 13 percent in the second quarter of 1995 compared to the second quarter of 1994. The following table summarizes sales growth by geography and market: Sales growth rates Sales growth rates measured in local currencies measured in U.S. dollars Three months Six months Three months Six months ended ended ended ended 6/30/95 6/30/95 6/30/95 6/30/95 Americas 12% 13% 10% 11% Europe 6% 5% 19% 18% Asia/Pacific 15% 16% 35% 33% Consolidated 11% 11% 21% 20% Electronics/Industrial 31% 37% 43% 48% Pharmaceutical/Biotechnology 5% 4% 13% 11% University/Government 1% (1%) 11% 8% Medical/Health Care (14%) (13%) (5%) (6%) Consolidated 11% 11% 21% 20% 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 10 percent in the second quarter of 1995 and 9 percent for the first six months of 1995. Gross margins increased in the second quarter of 1995 to 59.6 percent of sales as compared to 57.6 percent in the second 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 26 percent in the second quarter of 1995 compared to the second quarter of 1994, an increase consistent with sales growth. The Company continued to invest in sales and marketing programs to support future sales growth, particularly in the Asia/Pacific region. Research and development expenses in the second quarter of 1995 were slightly higher than the second quarter of 1994, as the Company continued to fund all major programs. Net interest expense in the second quarter was higher in 1995 compared to 1994 primarily due to increased short- term borrowings made during the first quarter of 1995. The Company's effective income tax rate for the first six months of 1995 is 22.5 percent, consistent with the full year effective rate in 1994. -6- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) 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 gains or losses on these transactions offset gains or losses on the underlying exposure. In the second quarter of 1995, a loss of $804K was realized on the Company's forward exchange contracts and was recorded in cost of sales. For the six months ended June 30, 1995, losses of $1,274 have been realized on the Company's forward exchange contracts and recorded in cost of sales. The Company does not engage in any speculative trading activity. The Company generated $29.3 million of cash from continuing operations in the first six months of 1995 compared to $39.2 million in the first six months of 1994. Cash generated from operations and $35.0 million of additional short-term borrowings in the first six months of 1995 was used to invest in fixed assets, satisfy ongoing obligations relating to the divested businesses, pay dividends, and buy back shares of the Company's stock. Property, plant and equipment expenditures in the first half of 1995 were higher than in the first half of 1994. The Company expects second half 1995 capital expenditures to be in line with those of the first half. During the first six months of 1995, the Company spent $51.5 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 has spent $29.5 million in share repurchases. The Company expects that further 1995 share repurchases will be funded by cash generated from its operations. The Company generated approximately $3.7 million of net cash from discontinued operations in the second quarter of 1995, principally due to $10.0 million of proceeds related to the discontinued businesses. Cash spent in the second quarter of 1995 to satisfy obligations arising from the discontinued operations was lower than the first quarter of 1995 and in line with the Company's expectations. The Company expects further quarterly 1995 cash expenditures related to its discontinued operations to be in line with those of the second quarter. -7- PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders a. The Annual Meeting of Stockholders of Millipore Corporation was held on April 20, 1995. c. There were three matters voted upon at the annual meeting: the election of directors, the adoption of the Millipore Corporation 1995 Employees' Stock Purchase Plan, the adoption of the Millipore Corporation Management Incentive Plan. The following votes were tabulated: Election of Directors Number of Shares For Withheld Samuel C. Butler 19,231,340 64,848 Steven Muller 19,229,641 66,547 Adoption of Millipore Corporation 1995 Employees' Stock Purchase Plan Number of Shares For 19,119,641 Withheld 130,869 Abstentions 45,679 Adoption of Millipore Corporation Management Incentive Plan Number of Shares For 18,329,309 Withheld 908,370 Abstentions 58,510 There were no broker "non-votes" recorded on any of the matters voted on at the meeting. The shares listed in this item were not adjusted to reflect the stock split discussed in Note 4 to the Consolidated Financial Statements. 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 June 30, 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-