U.S. 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 June 30, 2001
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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
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COMMISSION FILE NUMBER 001-16611
Mykrolis Corporation
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
04-3536767
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(I.R.S. Employer Identification No.)
One Patriots Park
Bedford, Massachusetts 01730
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(Address of principal executive offices)
Registrant's telephone number, include area code (877) 695-7654
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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 _____ No X
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The Company had 39,500,000 shares of common stock outstanding as of September
18, 2001.
Mykrolis Corporation
INDEX TO FORM 10-Q
Page No.
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Part I. Financial Information 3
Item 1. Condensed Financial Statements 3
Consolidated and Combined Statements of Operations -
Three and Six Months Ended June 30, 2001 and 2000 3
Consolidated and Combined Balance Sheets -
June 30, 2001 and December 31, 2000 4
Consolidated and Combined Statements of Cash Flows -
Six Months Ended June 30, 2001 and 2000 5
Notes to Condensed Consolidated and Combined
Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about Market Risks 17
Part II. Other Information 18
Item 2. Changes in Securities and Use of Proceeds 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Signatures 18
Item 6. Exhibits and Reports on Form 8-K 18
2
Item 1. Financial Statements
Mykrolis Corporation
Condensed Consolidated and Combined Statements of Operations
(In thousands except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------- ------------------------------------
2001 2000 2001 2000
--------------- ---------------- ---------------- ---------------
Net sales $ 56,383 $ 86,204 $ 139,407 $ 163,843
Cost of sales 36,636 40,234 80,145 78,264
--------------- ---------------- ---------------- ---------------
Gross profit 19,747 45,970 59,262 85,579
Selling, general & administrative expenses 20,265 24,168 45,541 47,210
Research & development expenses 5,560 5,491 11,412 10,527
Restructuring and other charges - - 12,556 -
--------------- ---------------- ---------------- ---------------
Operating income (loss) (6,078) 16,311 (10,247) 27,842
Other expense, net (715) (2,715) (1,018) (2,534)
--------------- ---------------- ---------------- ---------------
Income (loss) before income taxes (6,793) 13,596 (11,265) 25,308
Income tax expense 20,580 5,166 22,150 9,617
--------------- ---------------- ---------------- ---------------
Net income (loss) $ (27,373) $ 8,430 $ ( 33,415) $ 15,691
=============== ================ ================ ===============
Basic and diluted earnings (loss) per share $ (0.84) $ 0.26 $ (1.03) $ 0.48
Shares used in computing basic and diluted earnings
(loss) per share: 32,500 32,500 32,500 32,500
The accompanying notes are an integral part of the condensed consolidated and
combined financial statements.
3
Mykrolis Corporation
Condensed Consolidated and Combined Balance Sheets
(In thousands)
June 30, December 31,
2001 2000
------------------------------------------------------------------------------------------------------------------
ASSETS (Unaudited)
Current assets
Accounts receivable (less allowance for doubtful accounts of
$2,263 at June 30, 2001 and $1,497 at December 31, 2000) $ 73,340 $ 95,248
Inventories 74,165 62,640
Deferred tax assets 924 8,554
Other current assets 1,323 1,266
-------------- --------------
Total current assets 149,752 167,708
Property, plant and equipment, net 69,154 73,784
Deferred tax assets 5,327 22,697
Goodwill (less accumulated amortization of $3,323 at June 30, 2001 and
$2,929 at December 31, 2000) 15,226 15,620
Other intangible assets (less accumulated amortization of $18,774 at
June 30, 2001 and $16,995 at December 31, 2000) 8,662 10,655
Other assets 7,005 8,567
-------------- --------------
Total assets $ 255,126 $ 299,031
============== ==============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Separation revolving credit agreement $ 13,815 $ -
Accounts payable 11,228 20,574
Accrued expenses 16,937 17,097
-------------- --------------
Total current liabilities 41,980 37,671
Other liabilities 9,249 14,871
Commitments and contingencies
Shareholder's equity
Shareholder's net investment 253,732
Preferred stock, par value $0.01 per share, 5,000,000
Shares authorized; no shares issued and outstanding - -
Common stock, par value $0.01 per share, 250,000,000
Shares authorized; 32,500,000 shares issued and outstanding 325 -
Additional paid-in capital 249,592 -
Accumulated deficit (27,373) -
Accumulated other comprehensive loss (18,647) (7,243)
--------------- --------------
Total shareholder's equity 203,897 246,489
--------------- --------------
Total liabilities and shareholder's equity $ 255,126 $ 299,031
=============== ==============
The accompanying notes are an integral part of the condensed consolidated and
combined financial statements.
4
Mykrolis Corporation
Condensed Consolidated and Combined Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended June 30,
-----------------------------------
2001 2000
---------------- -------------
Cash Flows From Operating Activities:
-------------------------------------
Net income (loss) $ (33,415) $ 15,691
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
(Income) loss on investments (34) 2,990
Restructuring and other charges 12,556 -
Depreciation and amortization 7,982 5,913
Amortization of unearned compensation 215 247
Deferred income tax expense 25,000 -
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 16,170 (11,436)
Increase in inventories (13,478) (20,880)
(Decrease) increase in accounts payable (9,804) 957
Decrease in other operating assets 1,047 5,235
Decrease in other operating liabilities (14,582) (8,971)
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Net cash used in operating activities (8,343) (10,254)
Cash Flows From Investing Activities:
-------------------------------------
Additions to property, plant and equipment (4,331) (4,833)
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Net cash used in investing activities (4,331) (4,833)
Cash Flows From Financing Activities:
-------------------------------------
Net borrowings under separation revolving credit agreement 13,815 -
Net transfers (to) from Millipore (1,141) 15,087
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Net cash provided by financing activities 12,674 15,087
Net decrease in cash and cash equivalents - -
Cash and cash equivalents at beginning of period - -
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Cash and cash equivalents at end of period $ - $ -
============= =============
The accompanying notes are an integral part of the condensed consolidated and
combined financial statements.
5
Mykrolis Corporation
Notes to Condensed Consolidated and Combined Financial Statements
(In thousands except share and per share data)
1. Background and Basis of Presentation
Background
On October 3, 2000, Millipore Corporation ("Millipore") announced its plan to
spin-off as a separate company, Millipore's microelectronics business which
serves the semiconductor industry and certain related industries with products
needed to manufacture semiconductor devices as well as a range of other
products. On October 16, 2000, Mykrolis Corporation (the "Company") was
incorporated in Delaware as a wholly-owned subsidiary of Millipore to receive
Millipore's microelectronics business and to be the spun off company. Initially,
10,000 shares of the Company's common stock $.01 par value were authorized and
issued. In March 2001, the Company adopted an Amended and Restated Certificate
of Incorporation which, among other things, increased the authorized capital of
the Company to 250,000,000 shares of common stock, $0.01 par value and 5,000,000
shares of preferred stock, $.01 par value per share. Effective March 31, 2001,
Millipore transferred to the Company substantially all of the assets and
liabilities associated with its microelectronics business (the "Separation")
except for certain pension and post-retirement liabilities that will be
transferred at the distribution. In addition, as it was impractical in some
jurisdictions to transfer certain account balances to different legal entities
at the Separation date, Millipore retained certain of the Company's accounts
payable and accounts receivable balances and the Company assumed certain of
Millipore's accounts payable and accounts receivable balances. Historically the
Company's business had been operated as a fully integrated business unit of
Millipore. On July 12, 2001, the Company's Board of Directors declared a
3,250-for-1 stock split increasing the issued and outstanding common stock to
32,500,000 shares, all of which were owned by Millipore. An initial public
offering ("IPO") of 7,000,000 shares of Mykrolis common stock, representing
approximately 17.7% of the Company's 39,500,000 total shares of common stock
outstanding, was completed on August 9, 2001 (see footnote 11- Subsequent
Events). Millipore has indicated that it intends to distribute the 32,500,000
shares of the Company's common stock that it owns to Millipore shareholders
through a tax-free dividend approximately six months following the IPO. The
distribution by Millipore is subject to conditions, which may not occur by the
contemplated time or at all.
Basis of Presentation
The condensed combined financial statements include amounts prior to March 31,
2001 that have been derived from the consolidated financial statements and
accounting records of Millipore using the historical results of operations and
historical basis of assets and liabilities of the Company's business. Management
believes the assumptions underlying the combined financial statements are
reasonable. However, the condensed combined financial information included
herein may not necessarily reflect the Company's operating results, financial
position and cash flows in the future or what they would have been had the
Company been a separate, stand-alone entity during the periods presented.
Because a direct ownership relationship did not exist among all the various
units comprising the Company, Millipore's net investment in the Company is shown
in lieu of stockholders' equity in the condensed combined financial statements
prior to the Separation. The Company began accumulating retained earnings on
April 1, 2001, following the effective date of the separation agreement with
Millipore, pursuant to which the assets and liabilities of the Company's
business were transferred to the Company. Beginning April 1, 2001, the Company's
condensed consolidated financial statements include all wholly-owned
subsidiaries and assets and liabilities of the Company. All material
intercompany transactions and balances between and among the Company's
subsidiaries have been eliminated.
Prior to March 31, 2001 Millipore allocated certain corporate expenses,
including centralized research and development, legal, accounting, employee
benefits, officers' salaries, facilities, insurance, information technology
services, distribution, treasury and other Millipore corporate and
infrastructure costs. These expense allocations were determined on a basis that
Millipore and the Company considered to be a reasonable assessment of the
utilization of services provided or the benefit received by the Company. At the
Separation, the Company and Millipore entered into transition service agreements
for Millipore to provide specified functions and for the Company to reimburse
Millipore for the cost of these functions. The agreements do not necessarily
reflect the costs of obtaining the services from unrelated third parties or of
the Company providing the applicable services itself. However, management
believes that purchasing these services from Millipore provides the Company with
an efficient means of obtaining these services during the transition period. In
addition, the Company has agreed to provide transition services to Millipore,
for which the Company will be reimbursed at its cost.
6
Millipore uses a centralized approach to cash management and the financing of
its operations. Prior to the Separation, cash deposits from the Company were
transferred to Millipore on a regular basis and netted against Millipore's net
investment. As a result, none of Millipore's cash, cash equivalents or debt at
the corporate level were allocated to the Company in the consolidated and
combined financial statements. Changes in invested equity include net earnings
of the Company plus net cash transfers to or from Millipore. After the
Separation but prior to the IPO, cash deposits were netted against the
Separation Revolving Credit Agreement (see note 8 - Transactions with
Millipore).
Interim Financial Statements
These condensed financial statements have been prepared in accordance with the
rules of the Securities and Exchange Commission for interim financial statements
and do not include all disclosures required by generally accepted accounting
principles. These financial statements should be read in conjunction with the
audited combined financial statements and notes thereto included in the
Company's Form S-1 Registration Statement (Reg. No. 333-57182) declared
effective August 9, 2001. The condensed financial information as of June 30,
2001 and for the three and six month periods ended June 30, 2001 and 2000 is
unaudited, but includes all adjustments that management considers necessary for
a fair presentation of the Company's condensed consolidated and combined results
of operations, financial position and cash flows. All of these adjustments are
of a normal recurring nature. Results for the three and six month periods ended
June 30, 2001 are not necessarily indicative of results to be expected for the
full fiscal year 2001 or any other future periods.
2. Restructuring Program and Other Charges
During the first quarter of 2001, the Company recorded restructuring and other
charges of $12,556 in connection with the Company's separation from Millipore to
improve the Company's manufacturing asset utilization and to resize the
Company's overall cost structure. The restructuring and other charges included
$11,260 of employee severance costs, a $946 write-off of equipment and leasehold
improvements and $350 of lease cancellation costs. Key initiatives of the
restructuring program included:
. Consolidating manufacturing operations to eliminate redundant
manufacturing processes. The Company is in the process of relocating some of the
operations of two of its manufacturing facilities in the U.S. and downsizing its
manufacturing facility in England. The consolidation of the Company's
manufacturing operations is expected to be completed in the first quarter of
2002.
. Realigning the Company's European organizational structure to focus on
the Company's operating business units, thereby consolidating the Company's
sales and administrative activities into fewer locations that are closer to the
Company's customer base. The Company expects to complete this transition during
2001.
. Reducing the Company's administrative and management infrastructure
costs in Asia. These cost reductions are expected to result in lower overhead
for administrative and management infrastructure in Asia and will be achieved
through reduced facility costs and administrative positions during 2001.
. Reducing the Company's workforce in the U.S. in order to address
anticipated changes in the demand for the Company's products due to the current
semiconductor industry downturn. This action was completed during the second
quarter of 2001.
The restructuring initiatives resulted in the elimination of 205 positions
worldwide. Notification to employees was completed in the first quarter of 2001,
however a number of these employees will continue in their existing positions
through the first quarter of 2002 with their related salary costs charged to
operations as incurred. In the first six months of 2001, approximately $7,418 of
restructuring reserve, consisting primarily of severance and associated benefits
for 97 employees, was utilized. At June 30, 2001, approximately $5,138 of
restructuring costs remained accrued and the Company believes that such amounts
will be substantially paid by the end of the first quarter of 2002.
7
The following is a summary of the 2001 Restructuring Program and Other Charges
for the six months ended June 30, 2001:
Restructuring Non-
------------- ----
and Other Cash cash Balance at
--------- ---- ---- ----------
Charges Activity Activity June 30, 2001
------- -------- -------- -------------
(unaudited)
-----------
Employee severance costs $ 11,260 $ 3,009 $ 3,148 $ 5,103
Leasehold and other costs 1,296 - 1,261 35
----------------------------------------------------------
Total $ 12,556 $ 3,009 $ 4,409 $ 5,138
==========================================================
3. Income Taxes
SFAS 109, " Accounting for Income Taxes," requires that a valuation allowance be
established when, based on an evaluation of objective verifiable evidence, there
is a likelihood that some portion or all of the deferred tax assets will not be
realized. The Company continually reviews the adequacy of the valuation
allowance for deferred tax assets. In the second quarter of 2001, the Company
increased its valuation allowance against deferred tax assets by $22,300. The
valuation allowance is primarily attributed to foreign tax credits on unremitted
earnings from foreign subsidiaries of $18,000, and other U.S. deferred tax
assets of $ 4,300. The increase in the valuation allowance is the result of the
Company's continuing review, including an assessment of the Company's future
prospects as described in its press release dated September 4, 2001 and the
significant uncertainty surrounding the cyclical downturn in the semiconductor
industry.
If the Company generates future taxable income in the U.S. against which these
tax attributes may be applied, some portion or all of the valuation allowance
would be reversed and increase net income reported in future periods.
4. Supplementary Financial Information
Balance Sheet Information
June 30,2001 December 31, 2000
------------ -------------------
(unaudited)
-----------
Inventories
Raw materials.............................. $ 38,586 $ 31,128
Work in process............................ 11,061 12,194
Finished goods............................. 24,518 19,318
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$ 74,165 $ 62,640
========== =========
5. Comprehensive Income (Loss)
Total comprehensive income (loss) represents net income (loss) plus the results
of certain equity changes not reflected in the condensed consolidated and
combined statements of operations.
The components of accumulated other comprehensive income (loss) are shown below.
Three Months Ended June 30, Six Months Ended June 30,
---------------------------- -------------------------
2001 2000 2001 2000
---- ---- ---- ----
(unaudited) (unaudited)
----------- -----------
Net income (loss) $ (27,373) $ 8,430 $ (33,415) $ 15,691
Other comprehensive income (loss):
Foreign currency translation adjustments (4,389) 1,150 (11,404) 1,391
------------------------------------------------------------------------
$ (31,762) $ 9,580 $ (44,819) $ 17,082
Total comprehensive income (loss)
8
6. Earnings Per Share
As discussed in Note 1, "Background and Basis of Presentation," the Company
effected a stock split resulting in 32,500,000 common shares outstanding after
giving effect to the split. Basic and diluted earnings (loss) per share have
been computed by dividing the net income (loss) for each period presented by the
32,500,000 common shares outstanding subsequent to completion of the
recapitalization.
7. Business Segment Information
The Company has one reportable segment that develops, manufactures and sells
consumables and capital equipment to semiconductor fabrication companies and
other companies using similar manufacturing processes, as well as OEM suppliers
to those companies. The Company also provides capital equipment warranty and
repair services to customers in this segment. The Company's products include
membrane and metal based filters, housings, precision liquid dispense filtration
pumps, resin based gas purifiers and mass flow and pressure controllers. The
products are used by customers in manufacturing operations to remove
contaminants in liquid and gas processes, to purify liquids and gases, to
measure and control flow rates and to control and monitor pressure and vacuum
levels during the manufacturing process. The Company's products are sold
worldwide through a direct sales force and through distributors in selected
regions.
The Company attributes net sales to different geographic areas as presented
in the table below.
Net Sales
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
(unaudited) (unaudited)
----------- -----------
2001 2000 2001 2000
-------- -------- -------- --------
United States...... $ 18,423 $ 33,327 $ 48,350 $ 63,420
Japan.............. 21,080 32,464 50,856 62,568
Asia............... 9,321 11,740 22,600 21,445
Europe............. 7,559 8,673 17,601 16,410
--------- -------- -------- --------
Total......... $ 56,383 $ 86,204 $139,407 $163,843
========= ======== ======== ========
8. Transactions with Millipore
The Separation Revolving Credit Agreement (the "Credit Agreement") provides for
Millipore to lend the Company funds between the Separation date and the date of
the IPO in order to satisfy working capital needs. Under the Credit Agreement,
the Company may borrow up to $100,000, from Millipore at any time or from time
to time prior to the repayment date. As of June 30, 2001, $13,815 was due to
Millipore under this agreement. In the event this is not repaid on the repayment
date specified in the Credit Agreement, interest will accrue on borrowed amounts
at the per annum rate of twelve-month LIBOR plus 1.5%. At June 30, 2001, the
interest rate would have been 5.56% per annum.
Since it was impractical in some jurisdictions to transfer certain account
balances to different legal entities as of the date of the Company's separation
from Millipore, Millipore retained certain of the Company's accounts payable and
accounts receivable balances and the Company assumed certain of Millipore's
accounts payable and accounts receivable balances. The net amount due from
Millipore at the Separation related to these exchanges was approximately $6,994
and was reflected as a reduction in the amount due to Millipore under the Credit
Agreement that was used by Millipore to fund the Company's cash needs from the
Separation date until the closing of the IPO.
Products purchased from Millipore were $750 and $1,090 for the three months
ended June 30, 2001 and 2000, respectively, and $1,807 and $1,970 for the six
months ended June 30, 2001 and 2000, respectively. Products sold to Millipore
were not material for the periods presented. In addition, the consolidated and
combined financial statements include amounts for certain allocated corporate
expenses and services purchased under the transition service agreements between
Millipore and the Company. These amounts are of $3,537 and $11,097 for the three
months ended June 30, 2001 and 2000 and $13,799 and $22,331, for the six months
ended June 30, 2001 and 2000 respectively.
9
9. Commitments and Contingencies
In July 2000, Kurabo Industries Ltd. sued Millipore's Japanese subsidiary in the
Osaka District Court, Osaka, Japan. As a part of the separation, this subsidiary
was transferred to the Company. This suit alleges that certain filter cartridges
manufactured in Japan by the Company's subsidiary, Nihon Mykrolis KK ("NMKK")
infringes a Japanese patent held by the plaintiff. The suit seeks $11,000 in
damages and an injunction against the future use of these filter cartridges.
NMKK has responded to this suit by denying any infringement. The Company does
not expect this suit to have a material adverse impact on its financial position
or results of operations.
There have been no significant developments with respect to the Company's legal
proceedings, which were disclosed in the Company's Form S-1. The Company is also
subject to a number of claims and legal proceedings which, in the opinion of the
Company's management, are incidental to the Company's normal business
operations. In the opinion of the Company, although final settlement of these
suits and claims may impact the Company's financial statements in a particular
period, they will not, in the aggregate, have a material adverse effect on the
Company's financial position, results of operations or cash flows.
10. Recently Issued Accounting Pronouncements
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets" effective January 1, 2002. SFAS 142 requires, among other things, the
cessation of the amortization of goodwill. In addition, the standard includes
provisions for the reclassification of certain existing recognized intangibles
as goodwill, reassessment of the useful lives of existing recognized
intangibles, reclassification of certain intangibles out of previously reported
goodwill and the identification of reporting units for purposes of assessing
potential future impairments of goodwill. SFAS 142 also requires the Company to
complete a transitional goodwill impairment test six months from the date of
adoption. We are currently assessing the impact of this new statement on our
consolidated financial position and results of operations and have not yet
determined the impact of adoption.
11. Subsequent Events
On August 9, 2001 the Company completed its initial public offering, receiving
net proceeds of approximately $94,490, after deducting underwriting commissions
and offering expenses, from the sale of 7,000,000 shares of common stock. The
Company has retained $75,000 of the net proceeds and paid the balance to
Millipore as repayment of amounts outstanding under the Credit Agreement. After
completion of the IPO, Millipore owned approximately 82.3% of the Company's
outstanding shares of common stock.
10
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
You should read the following discussion of our financial condition and
results of operations with the condensed consolidated and combined financial
statements and notes to the condensed consolidated and combined financial
statements included herein. This discussion contains forward-looking statements
and involves numerous risks and uncertainties, which are described under
"Forward Looking Statements" below. Our actual results may differ materially
from those contained in any forward-looking statements.
Overview and Financial Condition
On October 3, 2000, Millipore Corporation ("Millipore") announced its plan to
spin-off its microelectronics business which serves the semiconductor industry
and certain related industries with products needed to manufacture semiconductor
devices as well as a range of other products that now comprises the Company. On
October 16, 2000, Mykrolis Corporation was incorporated in Delaware as a
wholly-owned subsidiary of Millipore to receive Millipore's microelectronics
business and to be the spun off company. As used herein, the terms the
"Company", "Mykrolis", "we", "us" and "our" each refer to Mykrolis Corporation
and subsidiaries and to the historical operations of the microelectronics
business of Millipore. Our business historically has been operated as a fully
integrated business unit of Millipore. On March 31, 2001, Millipore transferred
to us substantially all of the assets and liabilities associated with its
microelectronics business. We completed our initial public offering of 7 million
shares of common stock on August 9, 2001. After the initial public offering,
Millipore owned 32.5 million shares or approximately 82.3% of our total
outstanding common stock. Millipore has announced that it intends to distribute
the shares of our common stock that it owns to Millipore shareholders through a
tax-free dividend approximately six months following the initial public
offering. The distribution by Millipore is subject to conditions, which may not
occur by the contemplated time or at all.
In connection with our separation from Millipore, we entered into agreements
with Millipore under which Millipore agreed to provide services to us during a
transition period after the separation date. The agreements relate to facilities
services, information technology services, distribution, accounting, finance and
other services and arrangements. Under these agreements, we will reimburse
Millipore for the cost of these services. The duration of each of the different
transition services varies depending on the anticipated time it will take for us
to replace the service, but is generally for a one-year period. In addition, we
have entered into agreements with Millipore for membrane manufacturing and
supply, research and development, product distribution and contract
manufacturing, generally for a five-year period. Many of the agreements may be
extended beyond the initial transition period by mutual agreement of the
parties. The agreements do not necessarily reflect the costs of obtaining the
services from unrelated third parties or of our providing the applicable
services ourselves. However, we believe that purchasing these services from
Millipore provides us with an efficient means of obtaining these services during
the transition period. In addition, we have agreed to provide transition
services to Millipore, for which we will be reimbursed at our cost. As these
transition agreements expire without renewal, we must negotiate new agreements
with various third parties as a separate, stand-alone entity. There can be no
assurance that the terms we will be able to negotiate for these agreements will
be as favorable as those we enjoyed as part of Millipore. In addition, as part
of Millipore, we benefited from various economies of scale including shared
global administrative functions, facilities and volume purchase discounts. We
expect that our costs and expenses will increase as a result of the loss of
these economies of scale, although the amount is not determinable at this time.
Basis of Presentation
Our condensed combined financial statements include amounts prior to March 31,
2001 that have been derived from the consolidated financial statements and
accounting records of Millipore using the historical results of operations and
historical basis of assets and liabilities of our business. We believe the
assumptions underlying the condensed combined financial statements are
reasonable. However, the condensed combined financial information included
herein may not necessarily reflect our operating results, financial position and
cash flows in the future or what they would have been had we been a separate,
stand-alone entity during the periods presented. Because a direct ownership
relationship did not exist among all our various units, Millipore's net
investment in us is shown in lieu of stockholders' equity in the condensed
combined financial statements prior to the separation. We began accumulating
retained earnings on April 1, 2001, following the effective date of the
11
separation agreement with Millipore, pursuant to which our assets and
liabilities were transferred to us. Beginning April 1, 2001, our condensed
consolidated financial statements include all our wholly-owned subsidiaries and
our assets and liabilities. All material intercompany transactions and balances
between and among our subsidiaries have been eliminated.
Prior to March 31, 2001 Millipore allocated certain corporate expenses,
including centralized research and development, legal, accounting, employee
benefits, officers' salaries, facilities, insurance, information technology
services, distribution, treasury and other Millipore corporate and
infrastructure costs. These expense allocations were determined on a basis that
Millipore and we consider to be a reasonable assessment of the utilization of
services provided or the benefit received by us. At the separation date, we
entered into transition service agreements with Millipore for Millipore to
provide specified functions and for us to reimburse Millipore for the cost of
these functions. The agreements do not necessarily reflect the costs of
obtaining the services from unrelated third parties or of our providing the
applicable services ourselves. However, we believe that purchasing these
services from Millipore provides us with an efficient means of obtaining these
services during the transition period. In addition, we have agreed to provide
transition services to Millipore, for which we will be reimbursed at our cost.
Millipore uses a centralized approach to cash management and the financing of
its operations. Prior to the separation, our cash deposits were transferred to
Millipore on a regular basis and netted against Millipore's net investment. As a
result, none of Millipore's cash, cash equivalents or debt at the corporate
level were allocated to us in our consolidated and combined financial
statements. Changes in invested equity include our net earnings plus net cash
transfers to or from Millipore. After the separation but prior to the initial
public offering, cash deposits were netted against the Separation Revolving
Credit Agreement.
Restructuring and Other Charges and Non-recurring Separation Expenses
During the first quarter of 2001, we recorded restructuring and other charges
of $12.6 million in connection with our separation from Millipore to improve our
manufacturing asset utilization and resize our overall cost structure. The
restructuring and other charges included approximately $11.3 million of employee
severance costs, approximately $1.0 million of equipment and leasehold
improvements write-off and approximately $0.3 million of lease cancellation
costs. Key initiatives of the restructuring program included:
. Consolidating manufacturing operations to eliminate redundant
manufacturing processes. We are in the process of relocating the
operations of two of our manufacturing facilities in the U.S. and
downsizing our manufacturing facility in England. The consolidation of
our manufacturing operations is expected to be substantially completed
in the first quarter of 2002.
. Realigning our European organizational structure to focus on our
operating business units, thereby consolidating our sales and
administrative activities into fewer locations that are closer to our
customer base. We expect to complete this transition during 2001.
. Reducing our administrative and management infrastructure costs
in Asia. These cost reductions are expected to result in lower overhead
for administrative and management infrastructure in Asia and will be
achieved through reduced facility costs and administrative positions
during 2001.
. Reducing our workforce in the U.S. in order to address
anticipated changes in the demand for our products due to the current
semiconductor industry downturn. This action was completed during the
second quarter of 2001.
The restructuring initiatives resulted in the elimination of 205 positions
worldwide. Notification to employees was completed in the first quarter of 2001.
However, a number of these employees will continue in their existing positions
through the first quarter of 2002 with their related salary costs charged to
operations as incurred. In the first six months of 2001, approximately $7.4
million of restructuring reserve, consisting primarily of severance and
associated benefits for 97 employees, was utilized. At June 30, 2001,
approximately $5.1 million of restructuring costs remained accrued. We believe
that such amounts will be substantially paid by the end of the first quarter of
2002. The restructuring program is expected to yield annualized savings of
approximately $8.8 million. The savings will result from reduced wages, facility
related costs and depreciation. The savings will be reflected in costs of sales,
selling, general and administrative expenses and research and development
12
expenses. The savings began in the second quarter of 2001 but are not expected
to be fully realized until the first quarter of 2002.
In addition, in connection with our separation from Millipore and the
implementation of our worldwide manufacturing strategy, we expect to incur
incremental, non-recurring operating costs and expenses which, we estimate,
could amount to approximately $17.5 million over a three-year period from 2001
to 2003. These anticipated costs and expenses are associated with the following:
. Continued implementation of our manufacturing strategy,
including our plan to open a new manufacturing facility and to
relocate production activities to this new facility. We anticipate
that these expenses will total approximately $7.0 million and will
include severance costs, retention bonuses and increased depreciation
due to decreases in the estimated useful lives of fixed assets and
leasehold improvements. The majority of these costs will be incurred
by 2002.
. Other separation-related costs and expenses including legal
fees, increased marketing expenses related to establishing a new brand
identity, retention bonuses, increased depreciation due to decreases
in the estimated useful lives of fixed assets and leasehold
improvements. These costs and expenses totaled $3.8 million in the six
months ended June 30, 2001. Through the end of 2002, we anticipate
incurring additional similar costs and expenses totaling approximately
$6.7 million.
We will also incur other third party costs, fees and expenses relating to
our separation from Millipore. Such costs, fees and expenses include, among
others, start-up costs related to designing and constructing our computer
infrastructure and implementing treasury, real estate, pension and records
retention management services. We expect to outsource these services and
functions and will need to negotiate service agreements with new service
providers. We expect these future costs to be consistent with the historical
costs incurred for these services.
Results of Operations
Operating trends and recent developments
We are continuing to experience softening demand for our liquid and gas delivery
systems, components and consumables from a number of our large customers. These
customers have placed fewer orders as they attempt, we believe, to manage their
demand and their inventories in response to weakness in their market. As a
result, we anticipate our revenues and our operating income to decrease in 2001
as compared to 2000. There can be no assurance as to the extent or duration of
this cyclical downturn or as to its impact on us. We are taking actions to
reduce capital expenditures, operating costs and expenses in response to these
recent adverse trends. In connection with this, on September 4, 2001 we
announced that we expect our revenues for the third quarter of 2001 to be in the
range of $36 million to $40 million, which is below our previous internal
expectations. We also announced that we will take a series of expense reduction
actions to respond to anticipated lower revenues.
Three months ended June 30, 2001 compared to three months ended June 30, 2000
Net Sales
Net sales were $56.4 million for the three months ended June 30, 2001, which
represented a 34.6%, or $29.8 million, decrease from the three months ended June
30, 2000. This decrease is due to lower sales volume as a result of the current
downturn in the semiconductor industry, which has reduced our customer demand.
Although recently published industry results and forecasts predict continued
weakness of demand for both semiconductors and semiconductor capital equipment
for at least the remainder of 2001, the extent and duration of this industry
downturn is unknown.
13
Sales by geography are summarized in the table below.
Net Sales in U.S. Dollars As a Percentage of Total Net Sales
------------------------- ---------------------------------
Three Months Ended June 30,
(unaudited)
-----------------------------------------------------------------
2001 2000 2001 2000
------ ------ ------ ------
United States.......... $ 18.4 $ 33.3 32.6% 38.6%
Japan.................. 21.1 32.5 37.4 37.7
Asia................... 9.3 11.7 16.5 13.6
Europe................. 7.6 8.7 13.5 10.1
------ ------ ------ ------
Total............. $ 56.4 $ 86.2 100.0% 100.0%
====== ====== ====== ======
Gross Profit Margins
Our gross profit as a percentage of net sales was 35% for the three months ended
June 30, 2001 as compared to 53.3% for the three months ended June 30, 2000. The
decrease is primarily due to reductions in product demand and related reduced
production volumes. We have responded to this change in demand during the first
quarter of 2001 by restructuring our manufacturing operations.
Operating Expenses
Selling, general and administrative expenses decreased 16.1% or $3.9 million,
from $24.1 million in the prior year quarter to $20.2 million for the three
months ended June 30, 2001. Excluding $0.3 million of non-recurring separation
related costs and expenses, selling, general and administrative expenses
decreased by 17.5% or $4.2 million. The decrease for the three months ended June
30, 2001 was due to lower selling, general and administrative head count
primarily as a result of the restructuring initiated in the first quarter of
2001 as well as reduced discretionary spending.
Research and development expenses were $5.5 million in the three months ended
June 30, 2001 and 2000. We intend to continue to fund key research and
development programs despite the current industry downturn.
Other Expense-Net
Other expense-net decreased $2 million, from a net expense of $2.7 million for
the three months ended June 30, 2000 to a net expense of $0.7 million for the
same period in 2001. The reduction in net expense was attributed primarily to
the write off of investment holdings in a privately held U.S. company of $3.0
million during the second quarter of 2000 offset by foreign currency transaction
gains. For the three months ended June 2001, other expense, net includes foreign
currency transaction exchange losses of $0.6 million as well as $0.1 million
loss on investments in 20%-50% owned entities accounted for under the equity
method.
Income Taxes Expense
Income taxes were calculated on a separate return basis as if we filed tax
returns separately from Millipore. However, we will be included in the Millipore
consolidated tax return until the date that Millipore distributes our shares to
its stockholders. Millipore is managing its consolidated tax position for the
benefit of its entire portfolio of businesses, and its tax strategies are not
necessarily reflective of the tax strategies that we would have followed or will
follow as a stand-alone company. We will continue to evaluate our tax position
throughout 2001 and to evaluate our effective tax rate in subsequent quarters
depending on the geographic mix of our earnings and the continued development of
our tax strategies during the year.
For the second quarter of 2001, we recorded an income tax expense of $20.6
million on a pre-tax loss of $6.8 million. This expense is primarily
attributable to an increase in the valuation allowance or reserve against
foreign tax credits on unremitted earnings of our foreign subsidiaries of
approximately $18 million and other U.S. deferred tax assets of approximately
$4.3 million. SFAS 109, "Accounting for Income Taxes," requires that we
establish a valuation allowance or reserve when, based on an evaluation of
objective verifiable evidence, we believe there is a likelihood that some
portion or all of the deferred tax assets will not be realized. Our increase in
the valuation allowance or reserve for these tax assets was made based on our
re-assessment of our future revenue prospects as announced in our press release
dated September 4, 2001 relating to our estimate for third quarter revenues and
on the significant uncertainty surrounding the cyclical downturn in the
semiconductor industry.
The Company is currently undertaking tax planning initiatives designed to
generate future U.S. taxable income. If the Company generates future taxable
income in the U.S. against which these tax attributes may be applied, some
portion or all of the valuation allowance or reserve for these tax assets would
be reversed and an increase in net income would consequently be reported in
future periods.
14
For the second fiscal quarter of 2000, the Company recorded income tax expense
of $5.2 million on pre-tax income of $13.6 million.
Six months ended June 30, 2001 compared to six months ended June 30, 2000
Net Sales
Net sales were $139.4 million for the six months ended June 30, 2001, which
represented a 14.9%, or $24.4 million, decrease from the six months ended June
30, 2000. The decline in sales was most significant in the U.S., while sales in
Europe and Asia grew slightly. This sales decrease is due to lower sales volume
as a result of the current downturn in the semiconductor industry. Sales of
microelectronic hardware have declined as new semiconductor plant construction
and upgrades have declined due to industry overcapacity. In addition, sales of
consumable purification products also declined, although to a lesser extent, as
semiconductor fabrication plants have been focusing on achieving manufacturing
efficiencies and reducing material costs.
Sales by geography are summarized in the table below.
Net Sales in U.S. Dollars As a Percentage of Total Net Sales
------------------------- ---------------------------------
Six Months Ended June 30,
(unaudited)
-----------------------------------------------------------------
2001 2000 2001 2000
------ ------ ------ ------
United States.......... $ 48.3 $ 63.4 34.7% 38.7%
Japan.................. 50.9 62.6 36.5 38.2
Asia................... 22.6 21.4 16.2 13.1
Europe................. 17.6 16.4 12.6 10.0
------ ------ ------ ------
Total............. $139.4 $163.8 100.0% 100.0%
====== ====== ====== ======
Gross Profit Margins
Our gross profit as a percentage of net sales was 42.5% for the six months ended
June 30, 2001 as compared to 52.2% for the six months ended June 30, 2000. The
decrease is primarily due to reductions in product demand and related reduced
production volumes. We have responded to this change in demand during the first
quarter of 2001 by restructuring our manufacturing operations as a result of the
industry downturn. We are continuing to assess the impact of the ongoing
industry downturn on manufacturing operations.
Operating Expenses
Selling, general and administrative expenses decreased 3.5% or $1.7 million,
from $47.2 million for the six months ended June 30, 2000 to $45.5 million for
the six months ended June 30, 2001. Excluding $3.8 million of non-recurring
separation related costs and expenses, selling, general and administrative
expenses decreased by 11.7% or $5.5 million. The decrease for the six months
ended June 30, 2001 was due to lower selling, general and administrative head
count primarily as a result of the restructuring initiated in the first quarter
of 2001 as well as reduced discretionary spending.
Research and development expenses were $11.4 million in the six months ended
June 30, 2001 compared to $10.5 million for the six months ended June 30, 2000.
Restructuring and Other Charges
During the six months ended June 30, 2001, we recorded restructuring and other
charges of $12.6 million in connection with our separation from Millipore and to
improve our manufacturing asset utilization and resize our overall cost
structure. The restructuring and other charges included $11.3 million of
employee severance costs, a $1.0 million write-off of equipment and leasehold
improvements, $0.3 million of lease cancellation costs.
Other Expense-net
Other expense-net decreased $1.5 million, from a net expense of $2.5 million for
the six months ended June 30, 2000 to a net expense of $1 million for the same
period in 2001. The reduction of net expense was attributed primarily to the
write off of investment holdings in a privately held U.S. company of $3 million
during the second quarter of 2000 offset by foreign currency transaction gains.
For the six months ended June 2001, other expense, net includes foreign currency
transaction exchange losses of $1 million.
Income Tax Expense
15
For the six months ended June 30, 2001, we recorded income tax expense of $22.1
million on a pre-tax loss of $11.3 million. This expense is primarily
attributable to an increase in the valuation allowance or reserve against
foreign tax credits on unremitted earnings of our foreign subsidiaries of
approximately $18 million and other U.S. deferred tax assets of approximately
$4.3 million. SFAS 109, "Accounting for Income Tax," requires that we establish
a valuation allowance or reserve when, based on an evaluation of objective
verifiable evidence, we believe there is a likelihood that some portion or all
of the deferred tax assets will not be realized. Our increase in the valuation
allowance or reserve for these tax assets was made based on our re-assessment of
our future revenue prospects as announced in our press release dated September
4, 2001 relating to our estimate for third quarter revenues and on the
significant uncertainty surrounding the cyclical downturn in the semiconductor
industry.
The Company is currently undertaking tax planning initiatives designed to
generate future U.S. taxable income. If the Company generates future taxable
income in the U.S. against which these tax assets may be applied, some portion
or all of the valuation allowance or reserve for these tax assets would be
reversed and an increase in net income would consequently be reported in future
periods.
For the six months ended June 30, 2000, the Company recorded income tax expense
of $9.6 million on pre-tax income of $25.3 million.
Liquidity and Capital Resources
During the six month period ended June 30, 2001 our net cash used in operating
activities was $8.3 million as compared to net cash used by operating activities
of $10.3 during the six month period ended June 30, 2000. The net cash used by
operating activities resulted from operating losses related to the continued
industry wide downturn affecting the microelectronics industry and our business,
the growth of inventory of $13.5 million, the reduction in accounts payable of
$9.8 million and the effect of our separation arrangements with Millipore that
impacted the timing of the collection of certain accounts receivable. Our
separation arrangements included the exchange of our U.S. accounts receivable
for Asian accounts receivable of Millipore having substantially equivalent
value. This exchange was made because it was not practical to transfer back to
Millipore the accounts receivable of the former Millipore Asian subsidiaries
that were transferred to us in connection with the separation. We believe that
the credit worthiness of the Asian accounts receivable we assumed is at least
equivalent to the quality of the U.S. accounts that we transferred. Historically
due to regional business practices, accounts receivable in Asia are outstanding
for longer periods than accounts receivable in the U.S. The Company expects that
net cash from operating activities during the third quarter of 2001 will be
positively impacted by the collection of these accounts receivable.
Our principal cash requirements have been to fund working capital requirements
and additions to property, plant and equipment that support the separation of
our business. In the six months ended June 30, 2001, cash flows used in
investing activities were $4.3 million, primarily used in relation to the
construction and purchase of production and research and development equipment,
and the addition to our manufacturing capacity needed as a result of our
separation from Millipore. In the six months ended June 30, 2000, cash flows
used in investing activities were $4.8 million due to the acquisition of
production equipment in our Allen, Texas and Jaffrey, New Hampshire plants as
well as clean room facilities in Yonezawa, Japan. Cash flows from financing
activities of $12.7 million for the six month period ended June 30, 2001
resulted from borrowings under the separation revolving credit agreement with
Millipore. Cash flows from financing activities for the six months ended June
30, 2000 were $15.1 million and resulted from capital contributions from
Millipore. As of June 30, 2001, we did not have any major outstanding capital
commitments.
Our liquidity is affected by many factors, some of which are based on the normal
ongoing operations of our business and some of which arise from uncertainties
related to global economies. We believe that our net proceeds from our initial
public offering of $75 million together with expected cash collections from
existing trade receivables will be sufficient to satisfy our working capital,
capital expenditure, restructuring and research and development requirements for
an eighteen month period following the initial public offering. We expect that
our cash flow needs beyond this eighteen month period will be satisfied through
cash flow generated from operations together with short-term borrowings.
Pursuant to the terms of the lease for our Bedford, Massachusetts facility, the
landlord has an option to sell the facility to us at any time prior to November
2005, the end of the lease term, at 90% of the then current fair market value.
We estimate that the current fair market value of the facility is approximately
$15.8 million. If our cash flows from operations and short term borrowings are
less than we expect, we may need to incur debt or issue additional equity. Also
we may need to incur debt or issue equity to make a strategic acquisition or
investment. Prior to the distribution, our ability to incur debt will be limited
by the covenants in Millipore's existing debt agreements. There can be no
assurance that we will be able to obtain necessary
16
short-term or other financing on favorable terms or at all. If we are unable to
obtain necessary financing, we may not have sufficient cash to operate our
business.
Revolving Credit Facility
Based upon recent discussions with Fleet National Bank and Fleet Securities,
Inc., we expect to enter into a short-term revolving credit facility, which will
provide for borrowings of up to $35 million. We anticipate that this short-term
revolving credit facility will be secured by substantially all of our assets.
Millipore has entered into an amendment under its revolving credit agreement
which permits us to enter into this secured short-term revolving credit
facility. In addition, we believe that this secured, short-term revolving credit
facility qualifies for one of the limited exceptions to the prohibition on the
creation of liens under Millipore's public debt agreements and under its Note
due 2004. To date, no definitive agreement has been executed, and no assurance
can be given that we will be able to enter into the short-term revolving credit
facility on these terms or at all.
Recently Issued Accounting Pronouncements
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets" effective January 1, 2002. SFAS 142 requires, among other things, the
cessation of the amortization of goodwill. In addition, the standard includes
provisions for the reclassification of certain existing recognized intangibles
as goodwill, reassessment of the useful lives of existing recognized
intangibles, reclassification of certain intangibles out of previously reported
goodwill and the identification of reporting units for purposes of assessing
potential future impairments of goodwill. SFAS 142 also requires us to complete
a transitional goodwill impairment test six months from the date of adoption. We
are currently assessing the impact of this new statement on our consolidated
financial position and results of operations and have not yet determined the
impact of adoption.
Forward Looking Statement Disclaimer
The matters discussed herein, as well as in future oral and written statements
by management of Mykrolis Corporation that are forward-looking statements, are
based on current management expectations that involve substantial risks and
uncertainties which could cause actual results to differ materially from the
results expressed in, or implied by, these forward-looking statements. When used
herein or in such statements, the words "anticipate", "believe", "estimate",
"expect", "may", "will", "should" or the negative thereof and similar
expressions as they relate to Mykrolis or its management are intended to
identify such forward-looking statements. Potential risks and uncertainties that
could affect Mykrolis' future operating results include: further deterioration
in our revenues due to a prolonged downturn in the semiconductor industry; our
inability to enter into a definitive agreement for a short term revolving credit
facility; the loss of or reduction in orders from our key customers, who are
likewise adversely impacted by the downturn in the semiconductor industry and
which account for a large percentage of our sales; delays or disruptions in the
transfer of the production of our products to different manufacturing facilities
pursuant to the separation from Millipore; increased competition in our industry
resulting in downward pressure on prices and reduced margins; increased costs
associated with building out our business infrastructure in connection with our
separation from Millipore; and those risks described under the heading "Risk
Factors" in our Registration Statement on Form S-1 (Reg. No. 333-57182) which
was declared effective on August 9, 2001.
ITEM 3. Quantative and Qualitative Disclosures about Market Risk
We are exposed to foreign currency exchange rate risk inherent in our sales
commitments, anticipated sales, and assets and liabilities denominated in
currencies other than the U.S. dollar. Historically, our exposure to exchange
rate risk has been managed on an enterprise-wide basis as part of Millipore's
risk management strategy. Millipore manages these market risks through its
normal financing and operating activities and, when appropriate, through the use
of derivative financial instruments. We do not currently hold derivative
financial instruments and are currently evaluating our future hedging strategy.
We sell our products in many countries and a substantial portion of our net
sales and a portion of our costs and expenses are denominated in foreign
currencies. Approximately 65% of our net sales in the six months ended June 30,
2001 were derived from customers located outside of the U.S., principally in
Asia including Japan, where we also manufacture. This exposes us to risks
associated with changes in foreign currency that can adversely impact revenues,
net income and cash flow. In addition, we are potentially subject to
concentrations of credit risk, principally in accounts receivable, as
historically we have relied on a limited number of customers for a substantial
portion of our net sales. We perform ongoing credit evaluations of our customers
and we generally do not require collateral. Our
17
major customers are large, well-established microelectronics companies that have
historically paid their accounts receivable balances with us.
Part II - Other Information
ITEM 2. Changes in Securities and Use of Proceeds
On August 9, 2001, the Securities and Exchange Commission declared our
Registration Statement on Form S-1 (Reg. No. 333-57182) effective. On August 15,
2001, we closed our offering for an aggregate of 7,000,000 shares of our common
stock at an offering price of $15.00 per share. The managing underwriters for
the offering were Banc of America Securities LLC, Salomon Smith Barney Inc. and
ABN AMRO Rothschild LLC. Net proceeds to us were approximately $94.5 million
after deducting underwriting discounts and commissions of approximately $7.3
million and estimated offering expenses of approximately $3.2 million. None of
such offering expenses were paid, directly or indirectly, to any of our
directors, officers, affiliates or ten percent or greater stockholders. The
underwriters were granted an option to purchase up to an additional 1,050,000
shares of our common stock to cover over-allotments, if any; this option expired
unexercised on September 9, 2001.
ITEM 4. Submission of Matters to a Vote of Security Holders
Effective May 5, 2001, our sole stockholder as of that date, Millipore
Corporation, voted by written consent to re-elect Robert E. Caldwell as a Class
I director to serve until the Annual Meeting of Stockholders to be held in 2004.
The terms of C. William Zadel, Michael A. Bradley and Thomas O. Pyle continue
beyond the effective date of this sole stockholder's consent.
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits
99.1 Press Release, dated September 4, 2001
b. Report on Form 8-K
No reports on Form 8-K have been filed by the Company during the fiscal
quarter ended June 30, 2001.
18
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.
Mykrolis Corporation
Registrant
September 18, 2001 /s/ Bertrand Loy
------------------ ----------------------------------------
Date Bertrand Loy
Vice President and Chief Financial Officer
September 18, 2001 /s/ Donna Wargo
------------------- -----------------------------------
Date Donna Wargo
Corporate Controller and Chief Accounting Officer
19
Exhibit 99.1
FOR IMMEDIATE RELEASE
Mykrolis Announces Third Quarter Revenue Estimate
-------------------------------------------------
Bedford, Massachusetts - September 4, 2001 - Mykrolis Corporation (NYSE: MYK),
formerly the Microelectronics Division of Millipore Corporation (NYSE: MIL) and
a leading supplier to the semiconductor industry, announced today that it
expects revenues for the third quarter of 2001 to be in the range of $36 million
to $40 million, which is below previous internal expectations. This compares to
second quarter 2001 revenue of $56.4 million and represents a decline of 29
percent to 36 percent versus prior quarter.
C. William Zadel, Mykrolis Chairman and CEO, said: "The prolonged and severe
downturn in the semiconductor industry continues to affect Mykrolis, resulting
in lower expectations for our third-quarter revenues. Of particular note is the
very recent reduction in our revenue forecast for Japan, which is consistent
with late-breaking announcements from Japanese device manufacturers and OEM
equipment manufacturers."
Zadel continued: "Given the current environment, we will be taking a series of
expense reduction actions, which will be announced prior to the end of this
month. While we do this we will continue to be dedicated to long-term growth by
protecting key R&D programs and fostering partnerships with our customers in
order to meet their technology and growth needs in the next upturn."
The Company further announced that it expects earnings per share in the third
quarter to range from a loss of $0.38 to a loss of $0.45.
Conference Call
---------------
Mykrolis will hold a teleconference and a webcast conference call on its Q3
revenue estimate on September 4, 2001, 9:00 AM EDT. For the teleconference, the
dial-in number is 888-273-9885; outside the U.S. the number is 612-332-0530. For
the webcast, go to the Mykrolis web site at www.mykrolis.com and click on the
"investors" link for details on this event.
20
About Mykrolis
--------------
Mykrolis Corporation, based in Bedford, Massachusetts, is a global supplier of
advanced process solutions for gas and liquids filters and delivery systems for
the semiconductor, flat panel, fiber optic and optical disc industries.
Mykrolis Forward Looking Statement Disclaimer
The matters discussed herein, as well as in future oral and written statements
--------------------------------------------------------------------------------
by management of Mykrolis Corporation that are forward-looking statements, are
--------------------------------------------------------------------------------
based on current management expectations that involve substantial risks and
--------------------------------------------------------------------------------
uncertainties which could cause actual results to differ materially from the
--------------------------------------------------------------------------------
results expressed in, or implied by, these forward-looking statements. When used
--------------------------------------------------------------------------------
herein or in such statements, the words "anticipate", "believe", "estimate",
--------------------------------------------------------------------------------
"expect", "may", "will", "should" or the negative thereof and similar
--------------------------------------------------------------------------------
expressions as they relate to Mykrolis or its management are intended to
--------------------------------------------------------------------------------
identify such forward-looking statements. Potential risks and uncertainties that
--------------------------------------------------------------------------------
could affect Mykrolis' future operating results include, without limitation,
--------------------------------------------------------------------------------
those risks described under the heading "Risk Factors" in the Mykrolis
--------------------------------------------------------------------------------
Corporation Form S-1 Registration Statement, dated August 9, 2001.
--------------------------------------------------------------------------------
# # #
Investor Contact Media Contact
---------------- -------------
Bertrand Loy Barbara Russo
Chief Financial Officer Director, Corporate Communications
781-533-5335 781-533-2980
Bertrand_Loy@mykrolis.com Barbara_Russo@mykrolis.com
21