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, 1996
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 0-1052
Millipore Corporation
(Exact name of registrant as specified in its charter)
Massachusetts
(State or other jurisdiction of incorporation or organization)
04-2170233
(I.R.S. Employer Identification No.)
80 Ashby Road
Bedford, Massachusetts 01730
(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
The Company had 43,284,444 shares of common stock outstanding as of
July 27, 1996.
MILLIPORE CORPORATION
INDEX TO FORM 10-Q
Page No. Part I.
Financial Information
Item 1. Condensed Financial Statements
Consolidated Balance Sheets --
June 30, 1996 and December 31, 1995 2
Consolidated Statements of Income --
Three and Six Months Ended June 30, 1996 and
1995 3
Consolidated Statements of Cash Flows --
Six Months Ended June 30, 1996 and 1995 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
Item 4. Submission of Matters to a Vote of Security
Holders 8
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 9
MILLIPORE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
1996 1995
ASSETS
(Unaudited)
Current assets
Cash $ 1,830 $ 2,696
Short-term investments 22,009 21,062
Accounts receivable, net 158,637 147,759
Inventories 85,870 80,386
Other current assets 10,081 6,800
Receivables arising from sale of - 3,056
businesses
Total Current Assets 278,427 261,759
Property, plant and equipment, net 187,233 191,250
Intangible assets 8,647 7,219
Deferred income taxes 53,179 53,179
Other assets 25,896 17,538
Total Assets $ 553,382 $530,945
LIABILITIES AND SHAREHOLDERS'EQUITY
Current liabilities
Notes payable and current
portion of long-term debt $ 118,650 $ 80,768
Accounts payable 33,389 33,436
Accrued expenses 26,941 32,366
Accrued divestiture costs 5,803 6,543
Dividends payable 3,921 3,537
Accrued retirement plan 3,483 4,846
contributions
Accrued and deferred income 8,889 9,926
taxes payable
Total Current Liabilities 201,076 171,422
Long-term debt 100,015 105,272
Other liabilities 23,523 22,776
Accrued divestiture costs 2,000 5,000
Shareholders' equity
Common stock 56,988 56,988
Additional paid-in capital - -
Retained earnings 563,272 523,633
Translation adjustments (5,201) 375
615,059 580,996
Less: Treasury stock, at cost,
13,417 shares in 1996 and 12,727 (388,291) (354,521)
in 1995
Total shareholders' equity 226,768 26,475
Total Liabilities and Shareholders'$ 553,382 $ 530,945
Equity
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,
1996 1995 1996 1995
Net sales $161,928 $150,508 $318,404 $291,935
Cost of sales 65,412 60,779 127,358 119,288
Gross profit 96,516 89,729 191,046 172,647
Selling, general & 52,059 49,610 102,199 95,405
administrative expenses
Research & development 9,741 9,155 19,150 17,668
expenses
Operating income 34,716 30,964 69,697 59,574
Interest income 661 337 1,374 723
Interest expense (2,945) (2,851) (5,655) (5,169)
Income before income taxes 32,432 28,450 65,416 55,128
Provision for income taxes 7,622 6,401 15,373 12,404
Net Income $ 24,810 $ 22,049 $ 50,043 $42,724
Net Income per common $ 0.57 $ 0.49 $ 1.14 $ 0.94
share
Cash Dividends declared $ 0.09 $ 0.08 $ 0.17 $ 0.155
per common share
Weighted average common 43,642 44,998 43,901 45,479
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,
1996 1995
Cash Flows From Operating Activities:
Net income $50,043 $ 42,724
Adjustments to reconcile net income to
net cash provided:
Depreciation and amortization 14,770 13,068
Deferred income tax provision - 543
Change in operating assets and
liabilities:
(Increase) in accounts receivable (16,274) (3,724)
(Increase) in inventories (8,328) (6,940)
(Increase) in other current assets (2,096) (3,554)
(Increase) in other assets (3,831) (6,964)
(Decrease) in accounts payable and (2,008) (4,870)
accrued expenses
(Decrease) in accrued retirement (1,288) (1,534)
plan contributions
Increase in accrued income taxes 294 3,001
Other 1,712 (2,482)
Net cash provided by operating 32,994 29,268
activities
Cash Flows From Investing Activities:
Additions to property, plant and (14,006) (14,125)
equipment
Investment in businesses (3,990) -
Investment in intangible assets (1,465) -
Net cash spent by discontinued (5,591) (4,220)
operations
Net cash used in investing activities (25,052) (18,345)
Cash Flows From Financing Activities:
Treasury stock acquired (45,229) (51,485)
Issuance of treasury stock under stock 7,571 6,898
plans
Cash paid to close out foreign - (3,546)
currency swap
Net change in short-term debt 37,719 35,074
Repayment of long-term debt (32) (56)
Dividends paid (7,115) (6,967)
Net cash used in financing activities (7,086) (20,082)
Effect of foreign exchange rates
on cash and short-term investments (775) 1,561
Net increase in cash and short-term 81 (7,598)
investments
Cash and short-term investments on 23,758 30,236
January 1
Cash and short-term investments on
June 30 $ 23,839 $ 22,638
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, 1995. The accompanying unaudited
consolidated condensed financial statements are not
necessarily indicative of future trends or the Company's
operations for the entire year.
Certain reclassifications have been made to prior years' financial
statements to conform with the 1996 presentation.
2.On June 8, 1995, the Company's Board of Directors authorized a
twofor-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. Accordingly, weighted
average share and per share amounts from 1995 have been
restated to reflect the stock split.
At the Company's Annual Meeting on April 18, 1996,
shareholders voted to adopt an amendment to the Company's
restated Articles of Incorporation, increasing the number of
authorized Common Shares from 80,000 to 120,000.
3. Inventories consist of the following:
June 30, December 31,
1996 1995
Raw $21,706 $21,357
materials
Work in 10,911 9,621
process
Finished 53,253 49,408
goods
$85,870 $80,386
4. Accumulated depreciation on property, plant and equipment
was $188,906 at June 30, 1996, and $182,690 at December 31, 1995.
5. During the first quarter of 1996, the Company
invested approximately $3 million to acquire shares of common
stock of a privately-held company, IBC Advanced Technologies,
Inc. During the second quarter of 1996, the Company invested
approximately $1 million to acquire shares of common stock of
Celsis International plc, a company based in England that
specializes in technology used in the detection and measurement
of microbial contamination. These investments are included
in Other Assets and are carried at cost, which approximates
market value. Also during the second quarter of 1996, the
Company invested an additional $1.5M to acquire certain
technology license rights from Celsis, and this amount was
recorded in Intangible Assets.
6. The Company and Waters Corporation are engaged in an
arbitration proceeding and related litigation, both of which
commenced in the second quarter of 1995, with respect to the
amount of assets required to be transferred by the
Company's Retirement Plan in connection with the
Company's divestiture of its former
Chromatography Division. The Company believes that it
has meritorious arguments and should prevail. The ultimate
disposition of this matter is not expected to have a material
adverse effect on the Company's financial condition.
-5-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Discussion and Analysis includes certain
forwardlooking statements which are subject to a number of
risks and uncertainties as described in Management's Discussion
and Analysis in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995. Such forward-looking statements
are based on current expectations and actual results may differ
materially.
Consolidated net sales for the second quarter of 1996 were
$162 million, an increase of 8% over sales for the same period last
year. Sales growth measured in local currency terms was 17% in the
second quarter of 1996, but fluctuations in foreign currency
exchange rates, primarily the strengthening of the U.S. dollar
against the Japanese Yen, decreased reported sales growth by 9
percentage points. If foreign exchange rates remain at July 31,
1996 levels, the effect of foreign currency is expected to reduce
reported third quarter sales growth by approximately 7 percentage
points and full year 1996 sales growth by approximately 6
percentage points. The following table summarizes sales growth
by geography and market:
Sales growth rates Sales growth rates
measured in local measured in U.S.
currencies dollars
Three Six Three Six
months months months months
ended ended ended ended
6/30/96 6/30/96 6/30/96 6/30/96
Americas 16% 14% 14% 13%
Europe 8% 7% 5% 6%
Asia/Pacific 26% 24% 4% 8%
17% 16% 8% 9%
Consolidated
Microelectron 22% 24% 9% 15%
ics Mfg.
Biopharmaceut 31% 23% 22% 17%
ical Mfg.
Analytical 5% 5% (3%) 0%
Laboratory
17% 16% 8% 9%
Consolidated
The 31% sales growth in the biopharmaceutical market
was significantly higher than in the growth achieved in this
market in the first quarter of 1996. Contributing to this
increased growth rate was the shipment of a number of large
protein purification systems for biotechnology-derived drugs.
Gross margin in the second quarter of 1996 was equal to 59.6
percent of sales, the same percentage as recorded in the second
quarter of 1995. Gross margin percentage decreased compared to
the 60.4 percent recorded in the first quarter of 1996, and that
decrease is primarily due to the higher mix of lower-margin
capital equipment sales to biopharmaceutical manufacturing
customers discussed above. Although quarterly results may
fluctuate, the Company expects that gross margin percentages
for the full year 1996 will approximate those of the first half of
1996.
Selling, general and administrative expenses in the second quarter
of 1996 increased approximately 5% over expenses for the second
quarter of 1995. The Company expects that spending for the full
year 1996 will continue to increase over 1995 at a rate consistent with
or slightly lower than sales growth.
-6-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Research and development expenses in the second quarter of
1996 increased approximately 6% over expenses for the second
quarter of 1995, representing an increased level of investment in
new product development for the microelectronics market in
addition to the continued funding of all major programs.
Net interest expense in the second quarter of 1996 was
approximately equal to net interest expense for the second
quarter of 1995. Net interest expense is expected to decrease
slightly in the third quarter as compared to the second quarter
of 1996 as cash generated from operations is used to reduce short-
term borrowings.
The Company's 23.5 percent effective income tax rate for the
first quarter is the same as the anticipated effective rate for
the full year, compared to 22.5 percent for the full year in 1995.
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 and
option 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
1996, a gain of $546k was realized on the Company's forward
exchange contracts and was recorded in cost of sales, compared
to a loss of $804k in the second quarter of 1995. The Company
does not engage in any speculative trading activity.
Cash generated from operations increased to approximately $33
million for the first six months of 1996 from approximately $29
million in the first six months of 1995. The increased cash flow
was primarily the result of increased net income for the period,
less a slight increase in net working capital. The increase in
accounts receivable during the first half of 1996 is primarily
the result of increased sales in the Asia/Pacific region
where collection cycles are typically longer than in the U.S. or
Europe. During the first six months of 1996, cash from
operations was primarily used to invest in property, plant and
equipment and to pay dividends. Property, plant and equipment
expenditures through the first six months of 1996 were
approximately the same as for the first six months of 1995, but
are expected to increase in the second half of 1996.
At January 1, 1996, the Company had spent approximately $42
million on share repurchases under a $50 million open market share
repurchase program begun in 1995. Early in the first quarter
of 1996, the Company announced plans to spend an additional $50
million on open market share repurchases. During the first six
months of 1996, the Company spent approximately $38 million, net
of proceeds from stock option exercises, to repurchase shares
of its common stock. Repurchases during 1996 have been funded
primarily by an increase in short-term borrowings of
approximately $38 million. Repayment of these additional
borrowings and further share repurchases in 1996 are expected to be
funded by cash generated from operations.
-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 18, 1996.
c. The following four matters were voted upon at
the Annual Meeting: (1) the election of three
Class III Directors for a three-year term and one Class
I Director for a one-year term; (2) the adoption of the
Amendment to Millipore's Restated Articles of
Organization to increase Millipore's authorized
capital from 80,000,000 to 120,000,000 shares of
Common Stock, $1.00 Par Value; (3) the adoption of
the Millipore 1995 Combined Stock Option Plan; and (4)
the adoption of an amendment to the Millipore Corporation
Long Term Restricted Stock (Incentive) Plan. The
following votes were tabulated with respect to each
matter.
Number of Shares
Broker
Matter Voted Upon Votes"For" Withheld Abstent NonVotes
Election of Directors:
Charles Baker 35,809,920 214,457
Maureen Hendricks 35,804,882 219,495
Thomas Pyle 35,812,162 212,215
C. William Zadel 35,605,051 419,326
(Class I)
Amendment to
Millipore's Restated 34,068,220 1,829,762 126,394 1
Articles of
Incorporation
Adoption of the
Millipore 1995 34,655,023 1,246,596 122,755 2
Combined Stock Option
Plan
Amendment to the Long
Term Restricted Stock 34,397,736 1,486,698 139,941 2
(Incentive) Plan
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, 1996.
-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
July 30, 1996 /s/ Michael P. Carroll
Date Michael P. Carroll
Vice President, Chief Financial Officer
and Treasurer