SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
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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 001-09781 (0-1052)
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Millipore Corporation
- ---------------------
(Exact name of registrant as specified in its charter)
Massachusetts
- -------------
(State or other jurisdiction of incorporation or organization)
04-2170233
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(I.R.S. Employer Identification No.)
80 Ashby Road
Bedford, Massachusetts 01730
- -----------------------------
(Address of principal executive offices)
Registrant's telephone number, include area code (781) 533-6000
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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 48,328,643 shares of common stock outstanding as of April 26,
2002.
MILLIPORE CORPORATION
INDEX TO FORM 10-Q
Page No.
--------
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 2002 and December 31, 2001 2
Condensed Consolidated Statements of Income -
Three Months Ended March 31, 2002 and 2001 3
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2002 and 2001 4
Notes to Condensed Consolidated
Financial Statements 5-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 8-11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 12
Part II. Other Information
Item 1 Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
MILLIPORE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2002 2001
-------------- -------------
ASSETS (Unaudited)
- ------
Current assets
Cash and cash equivalents $ 69,530 $ 62,450
Accounts receivable, net 141,093 152,108
Deferred income taxes 8,509 8,509
Inventories 93,269 84,415
Other current assets 7,165 4,513
-------------- -------------
Total Current Assets 319,566 311,995
Property, plant and equipment, net 206,809 200,330
Deferred income taxes 82,622 82,622
Intangible assets 29,402 29,991
Other assets 12,598 11,674
Net assets of discontinued operations - 279,155
-------------- -------------
Total Assets $ 650,997 $ 915,767
============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities
Notes payable $ 4,100 $ 1,958
Accounts payable 46,057 47,403
Accrued expenses 62,372 65,405
Dividends payable - 5,266
Accrued retirement plan contributions 3,836 7,741
Accrued income taxes payable 7,825 6,546
-------------- -------------
Total Current Liabilities 124,190 134,319
Long-term debt 328,000 320,000
Other liabilities 21,094 22,075
Minority interest in discontinued operations - 45,417
Shareholders' equity
Common stock 56,988 56,988
Additional paid-in capital 88,908 88,584
Retained earnings 369,141 600,479
Unearned compensation (2,164) (2,785)
Accumulated other comprehensive loss (73,415) (83,457)
-------------- -------------
439,458 659,809
Less: Treasury stock, at cost, 8,949
shares in 2002 and 9,112 in 2001 (261,745) (265,853)
-------------- -------------
Total Shareholders' Equity 177,713 393,956
-------------- -------------
Total Liabilities and Shareholders' Equity $ 650,997 $ 915,767
============== =============
The accompanying notes are an integral part of the condensed
consolidated financial statements.
2
MILLIPORE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
------------------------
2002 2001
---------- ----------
Net sales $ 166,632 $ 162,517
Cost of sales 69,231 73,953
---------- ----------
Gross profit 97,401 88,564
Selling, general and administrative expenses 54,566 47,822
Research and development expenses 12,387 10,729
Restructuring and other charges - 17,962
---------- ----------
Operating income 30,448 12,051
Interest income 240 718
Interest expense (5,483) (6,627)
---------- ----------
Income from continuing operations before income taxes 25,205 6,142
Provision (benefit) for income taxes 5,545 (983)
---------- ----------
Income from continuing operations 19,660 7,125
---------- ----------
Loss from discontinued operations, net of taxes - (1,954)
Income on disposal of discontinued operations, net of taxes 2,900 -
---------- ----------
Total discontinued operations 2,900 (1,954)
---------- ----------
Net income $ 22,560 $ 5,171
========== ==========
Basic income (loss) per share:
Continuing operations $ 0.41 $ 0.15
Discontinued operations 0.06 (0.04)
---------- ----------
Net income $ 0.47 $ 0.11
========== ==========
Diluted income (loss) per share:
Continuing operations $ 0.40 $ 0.15
Discontinued operations 0.06 (0.04)
---------- ----------
Net income $ 0.46 $ 0.11
========== ==========
Cash dividends declared per share - $ 0.11
Weighted average shares outstanding:
Basic 47,940 46,414
Diluted 48,580 47,414
The accompanying notes are an integral part of the condensed
consolidated financial statements.
3
MILLIPORE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
----------------------
2002 2001
-------- --------
Cash Flows From Operating Activities:
- -------------------------------------
Net income $ 22,560 $ 5,171
Less: Loss from discontinued operations, net of taxes - (1,954)
Income on disposal of discontinued operations, net of taxes 2,900 -
-------- --------
Income from continuing operations 19,660 7,125
Adjustments to reconcile income from continuing operations to net
cash provided by operating activities:
Restructuring and other charges - 17,962
Depreciation and amortization 7,940 7,151
Changes in operating assets and liabilities, net:
Decrease (increase) in accounts receivable 9,571 (12,575)
(Increase) in inventories (10,064) (1,272)
(Increase) in other current assets and other assets (1,674) (2,089)
(Decrease) in accounts payable and accrued expenses (2,441) (6,006)
(Decrease) in accrued retirement plan contributions (3,857) (2,622)
Increase (decrease) in accrued income taxes 1,397 (20,780)
(Decrease) increase in other (929) 1,352
-------- --------
Net cash provided (used) by operating activities 19,603 (11,754)
-------- --------
Cash Flows From Investing Activities:
- -------------------------------------
Additions to property, plant and equipment (14,544) (9,830)
Additions to investments and intangible assets (2,559) -
-------- --------
Net cash used in investing activities (17,103) (9,830)
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Cash Flows From Financing Activities:
- -------------------------------------
Proceeds from issuance of treasury stock under stock plans 4,732 8,167
Net change in debt 10,142 17,456
Dividends paid (5,276) (5,103)
Decrease in cash held as collateral - 3,212
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Net cash provided by financing activities 9,598 23,732
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Effect of foreign exchange rates on cash and cash equivalents (2,254) (3,665)
-------- --------
Net cash provided (used) by continuing operations 9,844 (1,517)
Net cash (used) provided by discontinued operations (2,764) 4,754
-------- --------
Net increase in cash and cash equivalents 7,080 3,237
Cash and cash equivalents on January 1 62,450 55,186
-------- --------
Cash and cash equivalents on March 31 $ 69,530 $ 58,423
======== ========
The accompanying notes are an integral part of the condensed
consolidated financial statements.
4
MILLIPORE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, shares in thousands)
1. General: The accompanying unaudited condensed consolidated 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 which substantially duplicate information provided in the
Company's latest audited financial statements. These financial statements
should be read in conjunction with the financial statements and notes
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001. In the opinion of management, these financial statements
reflect all adjustments necessary for a fair presentation of the results
for the interim periods presented. The accompanying unaudited condensed
consolidated financial statements are not necessarily indicative of future
trends or the Company's operations for the entire year.
2. Inventories: Inventories consisted of the following:
March 31, December 31,
2002 2001
--------------- -------------
Raw materials $ 29.6 $ 28.5
Work in process 21.8 16.9
Finished goods 41.9 39.0
--------------- -------------
Total $ 93.3 $ 84.4
=============== =============
3. Property, Plant and Equipment: Accumulated depreciation on property, plant
and equipment was $162.9 at March 31, 2002 and $157.4 at December 31, 2001.
4. Restructuring Program and Other Charges: In the first quarter of 2001, the
Company initiated a restructuring program and recorded a $16.5
restructuring charge, consisting primarily of employee termination costs,
and $1.5 of fixed asset write-offs for assets which were no longer in use.
Approximately 215 positions were eliminated and through March 31, 2002,
approximately 165 employees have left the Company. The restructuring
actions are proceeding as planned and the remaining reserve balance, which
is included in accrued expenses at March 31, 2002, will be substantially
paid by the end of 2002.
The following is a summary of the 2001 Restructuring Program reserve
balance at March 31, 2002:
Balance at Cash Balance at
December 31, 2001 disbursements March 31, 2002
------------------- --------------- ----------------
Employee severance costs $ 4.6 $ 1.0 $ 3.6
Leasehold and other costs 0.7 - 0.7
--------- --------- ---------
-
Total $ 5.3 $ 1.0 $ 4.3
========= ========= =========
5. Basic and Diluted Earnings Per Share: Share information used to calculate
earnings per share ("EPS") is as follows:
Three Months Ended
March 31,
----------------------
2002 2001
---- ----
Weighted average common shares outstanding for basic EPS 47,940 46,414
Dilutive effect of stock options and restricted stock 640 1,000
------- -------
Weighted average common shares outstanding for diluted EPS 48,580 47,414
======= =======
5
MILLIPORE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, shares in thousands)
6. Comprehensive Income: The following table presents the components of
comprehensive income (loss), net of taxes:
Three Months Ended
March 31,
----------------------
2002 2001
---- ----
Net unrealized loss on securities available for sale $ (0.1) $ (1.4)
Impact of adopting SFAS No. 133 - (5.1)
Change in value of foreign currency interest rate swaps
designated as hedges - 5.9
Foreign currency translation adjustments (5.2) (24.1)
-------- -------
Other comprehensive loss (5.3) (24.7)
Net income 22.6 5.2
-------- -------
Total comprehensive income (loss) $ 17.3 $(19.5)
======== =======
7. Adoption of New Accounting Pronouncements: Effective January 1, 2002, the
Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS
No. 142 requires that ratable amortization of goodwill be replaced with
periodic tests of the goodwill's impairment and that intangible assets
other than goodwill be amortized over their economic lives. The adoption of
SFAS No. 142 did not have an impact on the Company's continuing operations
presented in the consolidated financial statements. SFAS No. 142 did not
have a significant impact on the Company's discontinued operations. See
note 10 for additional information regarding the impact of the adoption on
the Company's discontinued operations.
The following is the summary of amortized intangible assets and aggregate
amortization expense:
As of March 31, 2002
-------------------------------
Gross
Carrying Accumulated
Amount Amortization
-------------------------------
Amortized intangible assets:
Patented and unpatented technology $ 18.4 $ 9.4
Trade names 19.0 4.4
Licenses and other 8.8 3.0
-------- --------
Total $ 46.2 $ 16.8
======== ========
Aggregate amortization expense for the three months ended:
March 31, 2001 $ 0.9
March 31, 2002 $ 0.9
Estimated amortization expense for the year ended:
2002 $ 3.3
2003 $ 2.9
2004 $ 2.8
2005 $ 2.6
2006 $ 2.6
Effective January 1, 2002, the Company adopted SFAS No.144, "Accounting for
the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 supersedes
SFAS No. 121, "Accounting for the
6
MILLIPORE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, shares in thousands)
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" and provides a single accounting model for long-lived assets to be
disposed of. In addition, the standard eliminates the requirement to accrue
for losses through the estimated date of disposal of a business. The
adoption of SFAS No. 144 did not have an impact on the Company's
consolidated financial statements.
8. Legal proceedings: On July 21, 1999 Amersham Pharmacia Biotech AB ("APB")
(now known as Amersham Biosciences AB) of Sweden filed a complaint in the
High Court of Justice in the United Kingdom against the Company and two of
its subsidiaries alleging that the sale of the Company's ISOPAK
chromatography valve infringed one or more of the claims contained in
certain APB patents. APB sought an injunction against the alleged
infringement as well as damages. On October 26, 2000, the High Court ruled
that the chromatography valve currently sold by the Company did not
infringe the APB patents. APB appealed this decision and, on July 5, 2001,
the British Appeals Court affirmed the decision of the High Court. On
February 13, 2002, the House of Lords rejected APB's request for leave to
appeal the decision of the Appeals Court. The High Court also ruled that a
discontinued product did infringe one of the APB patents. A hearing on
damages has yet to be scheduled with respect to this matter. In any event,
the outcome of this suit is not expected to have a material adverse effect
on the Company's financial position, cash flows and results of operations.
9. Business Segment Information: The Company's chief decision makers evaluate
the performance of the Company and make resource allocation decisions based
on total consolidated company results. As a result of this evaluation, the
Company determined that it has three operating segments: BioPharmaceutical,
Laboratory Water and Life Sciences.
BioPharmaceutical develops, manufactures and sells consumable products and
capital equipment and related services used in drug development and
manufacturing. Laboratory Water and Life Sciences manufacture and sell
benchtop equipment and consumable products used in drug discovery and
development. Laboratory Water also provides services to its respective
customers. For all three of these operating segments within the bioscience
industry economic characteristics, production processes, products and
services, types and classes of customers, methods of distribution and
regulatory environments are similar. Because of these similarities, the
three segments have been aggregated into one reporting segment for
financial statement purposes. Please refer to the condensed consolidated
financial statements for financial information regarding the one reportable
segment of the Company.
10. Discontinued Operations: On February 27, 2002, the Company distributed its
remaining ownership interest in Mykrolis Corporation common stock as a
dividend to the Company's shareholders. At that date, the net assets of
discontinued operations less minority interest was recorded as a $300.2
reduction to shareholders' equity.
In the first quarter of 2002, the $24.4 (net of tax) estimated loss on
disposal of discontinued operations recorded in 2001 was reduced by $2.9
(net of tax) to reflect the actual operating losses through the
distribution date.
In the second quarter of 2001, the Company and Mykrolis Corporation entered
into various agreements covering a range of issues relating to the
separation of Mykrolis Corporation from the Company. Among other things,
these agreements provide for facilities, services, contract manufacturing
and research for various periods of time and under various pricing
arrangements. For the period from January 1, 2002 through February 27,
2002, the Company recognized revenues of $0.5 and expenses were reduced by
$1.3 as a result of these agreements.
As discussed above in note 7, the Company adopted SFAS No. 142 effective
January 1, 2002. The adoption of SFAS No. 142 did not have a significant
impact on the Company's discontinued operations included in the
consolidated financial statements. The aggregate amortization expense
included in the accrued loss on disposal of discontinued operations was
$0.4 in the first quarter of 2001 which would not have changed the basic or
diluted income (loss) per share.
7
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Basis of Presentation
- ---------------------
The following discussion of the Results of Operations includes reference to
"local currencies". Local currency results represent the foreign currency
balances translated, in all periods presented, at Millipore's budgeted exchange
rates for 2002, thus excluding the impact of fluctuations in the actual foreign
currency rates. The Company's management uses this presentation for internal
evaluation of the financial performance of the Company because it believes that
the local currency results provide a clearer presentation of underlying business
trends. The U.S. dollar results represent the foreign currency balances
translated at actual exchange rates.
Results of Operations
- ---------------------
The following table summarizes sales growth by geography in the first quarter of
2002 as compared to the first quarter of 2001:
March 31, Sales Growth In
U.S. dollars in millions 2002 2001 U.S. Dollars Local Currency
---------------------------------------------------------
Americas $ 76 $ 76 1% 1%
Europe 59 56 5% 9%
Asia/Pacific 32 31 3% 12%
------ ------ --- ---
Total $ 167 $ 163 3% 6%
====== ====== === ===
Net sales for the first quarter of 2002 were $166.6 million as compared to
$162.5 million for the same period of the prior year, an increase of 3 percent.
In local currencies, sales increased 6 percent due to the unfavorable effects of
a stronger U.S. dollar. In general, a stronger U.S. dollar will adversely affect
sales growth. During the first quarter of 2002 as compared to the first quarter
of 2001 the U.S. dollar strengthened against the Euro on average by
approximately 6% and strengthened against the Yen by approximately 12%. Although
the percentage increase against the Euro was about half the percentage increase
against the Yen, the dollar impact of both currencies' decline was approximately
equivalent since sales in Europe represent almost 37% of the Company's sales
compared to approximately 15% for Japan. The impact of translating sales
denominated in currencies other than the U.S. dollar reduced the reported sales
growth rate by approximately 300 basis points in the first quarter of 2002.
Sales growth was strongest in Asia/Pacific and Europe reflecting major
investments by U.S. biotechnology and pharmaceutical companies expanding
capacity outside the U.S. By market, revenue growth was strongest for products
used in the biotechnology markets (10%) and advanced life science research (9%)
which together account for 48% of sales. The legacy product markets which
include classical pharmaceutical, clinical and analytical laboratories, and food
and beverage markets grew at 3%.
Gross profit margins were 58.5% in the first quarter of 2002 compared to 54.5%
reported in the first quarter of 2001. The improved margins were the result of a
favorable mix of sales in high margin consumables, increased sales in higher
margin geographies, volume efficiencies, as well as manufacturing in overseas
locations where production benefited from a weaker local exchange rate.
Selling, general and administrative (SG&A) expenses increased 14% in the first
quarter of 2002 as compared to the first quarter of 2001 due primarily to
increased spending driven by higher sales and marketing activities. The Company
continues to invest in sales and support resources focused on maintaining or
improving customer services, supporting the launch of new products and
development of future sales initiatives aimed at improving the Company's
competitive positions. As a percentage of net sales, SG&A expenses in local
currencies were 33% in the first quarter of 2002 compared to 30% for the first
quarter last year.
8
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Research and development (R&D) expenses increased 15% in the first quarter of
2002, as compared to the first quarter of 2001. This increase is due to planned
investments in strategic R&D programs particularly in the R&D areas of membrane
and chromatography based solutions for genomics, proteomics, and
biopharmaceutical manufacturing applications. As a percentage of sales, R&D
expenses represented 7.4% as compared to 6.6% in the same quarter of 2001.
In the first quarter of 2001, the Company initiated a restructuring program and
recorded a $16.5 million restructuring charge, consisting primarily of employee
termination costs and $1.5 million of fixed asset write-offs for assets which
were no longer in use. Approximately 215 positions were eliminated and, through
March 31, 2002, approximately 165 employees have left the Company. The $4.3
million remaining balance of the restructuring reserve at March 31, 2002 relates
primarily to employee severance costs which will be substantially paid by the
end of 2002.
Net interest expense decreased in the first quarter of 2002 as compared to the
first quarter of 2001 primarily attributed to lower average borrowings and
decreased average rates which were partially offset by lower interest income
from cash and cash equivalents.
The effective income tax rate for the first quarter of 2002 was 22% as compared
to a beneficial rate of 16% in the first quarter of 2001. The effective income
tax rate in the first quarter of 2001 was 22% excluding the impact of the
restructuring program.
Discontinued Operations
- -----------------------
On February 27, 2002, the Company distributed its remaining ownership interest
in Mykrolis Corporation common stock as a dividend to Millipore shareholders. At
that date, the net assets of discontinued operations less minority interest was
recorded as a $300.2 million reduction to shareholders' equity.
In the first quarter of 2002, the $24.4 million estimated loss on disposal of
discontinued operations (net of tax) recorded in 2001 was reduced by $2.9
million (net of tax) to reflect the actual operating losses through the
distribution date.
In the second quarter of 2001, the Company and Mykrolis Corporation entered into
various agreements covering a range of issues relating to the separation of
Mykrolis Corporation from the Company. Among other things, these agreements
provide for facilities, services, contract manufacturing and research for
various periods of time and under various pricing arrangements. For the period
from January 1, 2002 through February 27, 2002, the Company recognized revenues
of $0.5 million and expenses were reduced by $1.3 million as a result of these
agreements.
Foreign Currency Exchange Rate Risks
- ------------------------------------
A substantial portion of the Company's business is conducted outside of the
United States through its foreign subsidiaries, generally in the local currency.
Approximately 37% of the Company's sales are derived from Europe where the U.S.
dollar continued to strengthen against the Euro during the first quarter of
2002, and 20% of the sales are from Asia/Pacific where the U.S. dollar
strengthened against the Japanese Yen. The Company is able to partially mitigate
the impact of currency fluctuations by active management of cross border
currency flows and material sourcing and the use of forward contracts to hedge
certain foreign currency exposures. Generally, when the U.S. dollar strengthens
against currencies in which the Company transacts its business, sales and net
income will be adversely impacted.
The Company enters into forward foreign exchange contracts principally to hedge
the impact of currency fluctuations on certain intercompany balances. Principal
hedged currencies include the Euro, Japanese Yen and British Pound. The periods
of these forward contracts typically range for less than three months. At March
31, 2002, the Company held forward foreign exchange contracts with notional
9
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
amounts totaling approximately $31.2 million. The fair value of these contracts
is not material at March 31,2002.
Capital Resources and Liquidity
- -------------------------------
Cash generated by operations in the first three months of 2002 was $19.6
million, compared to cash used by operations of $11.8 million in the first three
months of 2001. The increase in cash flow from operations was primarily the
result of improvements in the collections of accounts receivable which was
partially offset by increased inventory in 2002, as well as the payment of
income taxes in first quarter of 2001. The decrease in accounts receivable of
$9.6 million related to increased collection activity primarily in the United
States. The Company continues to aggressively manage its receivables portfolio
and to improve on global collections processes. Inventory levels increased $10.1
million (5 days of supply in local currency) due to increased activity partially
in the large process systems business and due to temporary safety stock levels
needed as production is shifted between manufacturing locations. Accrued income
taxes decreased approximately $20.8 million in the first quarter of 2001 for
payments made in foreign tax jurisdictions.
Operating cash flow generated in 2002 was used to invest in $17.1 million of
property plant and equipment, other assets and intangibles. The Company also
paid $5.3 million of dividends in the first quarter of 2002. The Company has
announced that it will discontinue future dividend payments and instead will
focus on investing in R&D, building productive capacity and reducing debt. The
Company received $4.7 million from the exercise of employee stock options and
increased borrowings under its revolving credit facility by $10.1 million.
On April 1, 2002, the Company used excess borrowing capacity under its revolving
credit facility to satisfy the $100.0 million 7.23% unsecured note due at that
time. Because of the Company's ability and intent to continuously refinance such
borrowings under its revolving credit facility, short-term borrowings with
maturities within the next 12 months have been classified as long-term.
Legal Proceedings
- -----------------
On July 21, 1999 Amersham Pharmacia Biotech AB ("APB") (now known as Amersham
Biosciences AB) of Sweden filed a complaint in the High Court of Justice in the
United Kingdom against the Company and two of its subsidiaries alleging that the
sale of the Company's ISOPAK chromatography valve infringed one or more of the
claims contained in certain APB patents. APB sought an injunction against the
alleged infringement as well as damages. On October 26, 2000, the High Court
ruled that the chromatography valve currently sold by the Company did not
infringe the APB patents. APB appealed this decision and, on July 5, 2001, the
British Appeals Court affirmed the decision of the High Court. On February 13,
2002, the House of Lords rejected APB's request for leave to appeal the decision
of the Appeals Court. The High Court also ruled that a discontinued product did
infringe one of the APB patents. A hearing on damages has yet to be scheduled
with respect to this matter. In any event, the outcome of this suit is not
expected to have a material adverse effect on the Company's financial position,
cash flows and results of operations.
Adoption of New Accounting Pronouncements
- -----------------------------------------
Effective January 1, 2002, the Company adopted SFAS No.142, "Goodwill and Other
Intangible Assets" and SFAS No.144, "Accounting for the Impairment or Disposal
of Long-Lived Assets". SFAS No. 142 requires that ratable amortization of
goodwill be replaced with periodic tests of the goodwill's impairment and that
intangible assets other than goodwill be amortized over their economic lives.
The adoption of SFAS No.142 did not have a significant impact on the Company's
consolidated financial statements.
SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and provides a
single accounting model for long-lived assets to be disposed of. In addition,
the standard eliminates the requirement to accrue for losses through the
10
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
estimated date of disposal of a business. The adoption of SFAS No.144 did not
have an impact on the Company's consolidated financial statements.
Forward Looking Statements
- --------------------------
The foregoing Management's Discussion and Analysis of Financial Condition and
Results of Operations contain certain forward-looking statements based on
current management expectations involving substantial risks and uncertainties
that could cause actual results to differ materially from the results expressed
in, or implied by, these forward-looking statements. These risks and
uncertainties include, without limitation those risks and uncertainties
described in our Form 10-K for the year ended December 31, 2001.
11
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The mitigating actions enumerated above under "Foreign Exchange" in Management's
Discussion and Analysis of Financial Condition and Results of Operations and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's Annual Report on Form 10-K have
effectively limited the impact of exchange rate fluctuations and credit risk on
the Company's results of operations and financial position to a level which is
not material.
Part II - Other Information
Item 1 Legal Proceedings
On July 21, 1999 Amersham Pharmacia Biotech AB ("APB") (now known as Amersham
Biosciences AB) of Sweden filed a complaint in the High Court of Justice in the
United Kingdom against the Company and two of its subsidiaries alleging that the
sale of the Company's ISOPAK chromatography valve infringed one or more of the
claims contained in certain APB patents. APB sought an injunction against the
alleged infringement as well as damages. On October 26, 2000, the High Court
ruled that the chromatography valve currently sold by the Company did not
infringe the APB patents. APB appealed this decision and, on July 5, 2001, the
British Appeals Court affirmed the decision of the High Court. On February 13,
2002, the House of Lords rejected APB's request for leave to appeal the decision
of the Appeals Court. The High Court also ruled that a discontinued product did
infringe one of the APB patents. A hearing on damages has yet to be scheduled
with respect to this matter. In any event, the outcome of this suit is not
expected to have a material adverse effect on the Company's financial position,
cash flows and results of operations.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits. None.
b. Reports on Form 8-K
The Company filed the following reports on Form 8-K during the first quarter of
2002:
Form 8-K report filed on January 29, 2002, reporting Millipore's declaration of
a dividend consisting of 32,500,000 shares of the common stock of Mykrolis
Corporation and reporting the record and distribution dates for such dividend.
Form 8-K report filed on February 14, 2002, reporting the distribution ratio for
the dividend of Mykrolis common stock.
Form 8-K report filed on February 28, 2002, reporting Millipore's completion of
its separation from Mykrolis Corporation through the distribution to Millipore's
shareholders of all of the remaining shares of Mykrolis common stock owned by
Millipore.
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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.
Millipore Corporation
Registrant
May 6, 2002 /s/ Kathleen B. Allen
- ----------- --------------------------------------------
Date Kathleen B. Allen
Vice President and Chief Financial Officer
May 6, 2002 /s/ Donald B. Melson
- ----------- --------------------------------------------
Date Donald B. Melson
Corporate Controller and Chief Accounting
Officer
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