Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the transition period from to
For Quarter Ended Commission File Number
March 31, 1996 0-1052
Millipore Corporation
(Exact name of registrant as specified in its charter)
Massachusetts
(State or other jurisdiction of
incorporation or organization)
80 Ashby Road
Bedford, Massachusetts
(Address of principal executive
offices)
04-2170233
(I.R.S. Employer Identification No.)
01730
(Zip Code)
Registrant's telephone number, include area code (617) 275-9200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities and Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of March 31, 1996: 43,556,051
MILLIPORE CORPORATION
INDEX
Page No.
Part I. Financial Information:
Item 1. Condensed Financial Statements
Consolidated Balance Sheets --
March 31, 1996 and December 31, 1995 2
Consolidated Statements of Income --
Three Months ended March 31, 1996 and 1995 3
Consolidated Statements of Cash Flows --
Three Months Ended March 31, 1996 and 1995 4
Notes to Consolidated Condensed
Financial Statements 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 6-7
Part II. Other Information 8
Signatures 9
MILLIPORE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
1996 1995
(Unaudited)
ASSETS
Current assets
Cash $ 3,561 $ 2,696
Short-term investments 21,473 21,062
Accounts receivable, net 150,518 147,759
Inventories
Raw materials 23,628 21,357
Work in process 12,009 9,621
Finished goods 51,288 49,408
86,925 80,386
Other current assets 9,776 6,800
Receivables arising from sale of - 3,056
businesses
Total Current Assets 272,253 261,759
Property, plant and equipment, net of
accumulated depreciation of $186,039
in 1996 and $182,690 in 1995 188,836 191,250
Intangible assets 6,995 7,219
Deferred income taxes 53,179 53,179
Other assets 19,328 17,538
Total Assets $ 540,591 $ 530,945
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable and current portion
oflong-term debt $ 114,136 $ 80,768
Accounts payable 37,643 33,436
Accrued expenses 26,272 32,366
Accrued divestiture costs 6,191 6,543
Dividends payable 3,513 3,537
Accrued retirement plan 2,391 4,846
contributions
Accrued and deferred income taxes 11,569 9,926
payable
Total Current Liabilities 201,715 171,422
Long-term debt 102,215 105,272
Other liabilities 22,900 22,776
Accrued divestiture costs 3,000 5,000
Shareholders' equity
Common stock 56,988 56,988
Additional paid-in capital - -
Retained earnings 543,293 523,633
Translation adjustments (3,362) 375
596,919 580,996
Less: Treasury stock, at cost,13,433
shares in 1996 and 12,727 in 1995 (386,158) (354,521)
Total Shareholders' Equity 210,761 226,475
Total Liabilities and Shareholders'
Equity $ 540,591 $ 530,945
The accompanying notes are an integral part of the consolidated condensed
financial statements.
-2-
MILLIPORE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(Unaudited)
Three Months Ended March 31,
1996 1995
Net Sales $ 156,476 $ 141,427
Cost of sales 61,946 58,509
Gross profit 94,530 82,918
Selling, general & 50,140 45,795
administrative expenses
Research & development 9,409 8,513
expenses
Operating income 34,981 28,610
Interest income 713 386
Interest expense (2,710) (2,318)
Income before income taxes 32,984 26,678
Provision for income taxes 7,751 6,003
Net Income $ 25,233 $ 20,675
Per share information:
Net income per common share $ 0.57 $ 0.45
Cash dividends declared per $ 0.08 $0.075
common share
Weighted average common 44,163 45,960
shares
The accompanying notes are an integral part of the consolidated condensed
financial statements.
-3-
MILLIPORE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended March 31,
1996 1995
Cash Flows From Operating Activities:
Net Income $ 25,233 $ 20,675
Adjustments to reconcile net income to net
cash provided:
Depreciation and amortization 7,661 6,508
Deferred income tax provision - 543
Change in operating assets and
liabilities:
(Increase) in accounts receivable (5,784) (2,816)
(Increase) in inventories (8,207) (1,854)
(Increase) in other current assets (1,719) (1,958)
(Increase) in other assets (220) (2,690)
Increase in accounts payable and accrued 887 216
expenses
(Decrease) in accrued retirement plan (2,419) (2,868)
contributions
Increase (Decrease) in accrued income 2,626 (5,251)
taxes
Other 765 2,021
Net cash provided by operating activities 18,823 12,526
Cash Flows From Investing Activities:
Additions to property, plant, and equipment (7,282) (8,171)
Investment in businesses (2,990) -
Net cash used by discontinued operations (2,560) (7,946)
Net cash used by investing activities (12,832) (16,117)
Cash Flows From Financing Activities:
Treasury stock acquired (37,278) (36,397)
Issuance of treasury stock under stock 3,607 4,432
plans
Cash paid to close out foreign currency - (3,546)
swap
Net change in short-term debt 33,144 37,908
Repayment of long-term debt (32) (43)
Dividends paid (3,559) (3,500)
Net cash used by financing activities (4,118) (1,146)
Effect of foreign exchange rates on cash (597) 596
flows
Net increase in cash and short-term 1,276 (4,141)
investments
Cash and short-term investments on January 1 23,758 30,236
Cash and short-term investments on March 31 $ 25,034 $ 26,095
The accompanying notes are an integral part of the consolidated condensed
financial statements.
-4-
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(in thousands)
1.The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with the instructions to
Form 10-Q and, accordingly, these footnotes condense or omit certain
information and disclosures normally included in financial statements.
These financial statements, which in the opinion of management reflect
all adjustments necessary for a fair presentation, should be read
in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995. The accompanying unaudited consolidated
condensed financial statements are not necessarily indicative of future
trends or the Company's operations for the entire year.
Certain reclassifications have been made to the prior year's
financial statements to conform with the 1996 presentation.
2.On June 8, 1995, the Company's Board of Directors authorized a two-
for-one stock split in the form of a 100% stock dividend, payable on
July 21, 1995 to shareholders of record as of June 23, 1995. Par value
per share remained at $1.00. The stock split resulted in the issuance
of 28,494 additional shares of common stock from authorized but unissued
shares. Accordingly, weighted average share and per share amounts
from 1995 have been restated to reflect the stock split.
3.The Company invested approximately $3 million to acquire shares of
common stock of a privately-held company, IBC Advanced
Technologies, Inc. This investment is included in Other Assets and is
carried at cost, which approximates market value.
4.The Company and Waters Corporation are engaged in an arbitration
proceeding and related litigation, both of which commenced in the second
quarter of 1995, with respect to the amount of assets required to
be transferred by the Company's Retirement Plan in connection with the
Company's divestiture of its former Chromatography Division. The
Company believes that it has meritorious arguments and should
prevail. The ultimate disposition of this matter is not expected to
have a material adverse effect on the Company's financial condition.
-5-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Discussion and Analysis includes certain forwardlooking
statements which are subject to a number of risks and uncertainties as
described in Management's Discussion and Analysis in the Company's Annual
Report of Form 10-K for the year ended December 31, 1995. Such forward-
looking statements are based on current expectations and actual results may
differ materially.
Consolidated net sales of $156 million in the first quarter of 1996
represented 11% growth over sales for the same period last year. Sales
growth was achieved in all of the Company's markets and geographies,
with the largest percentage increases coming from sales to customers in
the microelectronics market and the Asia/Pacific region. The following
table summarizes sales growth by geography and
market:
Sales growth rates Sales growth rates
measured in local measured in U.S.
currencies dollars
Americas 13% 13%
Europe 6% 6%
Asia/Pacific 22% 13%
Consolidated 14% 11%
Microelectronics 27% 21%
Mfg.
Biopharmaceutical 15% 11%
Mfg.
Analytical Laboratory 6% 3%
Consolidated 14% 11%
Foreign currency rate fluctuations, primarily the strengthening of the
U.S. dollar against the Japanese Yen, decreased reported sales growth by 3
percentage points in the first quarter of 1996. Towards the end of first
quarter of 1996, the dollar further strengthened against the Japanese Yen
and various European currencies. If foreign exchange rates remain at April
1, 1996 levels, the effect of foreign currency is expected to reduce
reported second quarter sales growth by approximately 8 percentage points
and full year 1996 sales growth by approximately 5 percentage points.
Gross margins increased in the first quarter of 1996 to 60.4 percent of
sales as compared to 58.6 percent for the first quarter of 1995 and 59.0
percent for the full year 1995. The improvement in gross margins is
primarily due to increased production volume in the Company's
biopharmaceutical and microelectronics manufacturing operations, as
well as a favorable sales mix of higher-margin
consumable products. Although quarterly results may fluctuate, the
Company expects to maintain approximately the same gross margin
percentage for the full year 1996 as for the first quarter of 1996.
Selling, general and administrative expenses in the first quarter of 1996
increased 9.5 percent over the first quarter of 1995. The
Company expects that spending for the full year 1996 will increase over
1995 at a rate consistent with or slightly lower than sales growth.
Research and development expenses in the first quarter of 1996
increased 10.5 percent over the first quarter of 1995, representing an
increased level of investment in new product development for the
microelectronics market in addition to the continued funding of all major
programs.
Net interest expense in the first quarter of 1996 was approximately equal
to net interest expense for the first quarter of 1995. Net
interest expense is expected to increase slightly in the second
quarter as compared to the first quarter of 1996 due to the increased level
of short-term borrowings used to finance share repurchases in the first
quarter.
The Company's 23.5 percent effective income tax rate for the first quarter
is the same as the anticipated effective rate for the full year, compared
to 22.5 percent for the full year in 1995.
-6-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(continued)
A substantial portion of the Company's business is conducted outside of the
United States through its foreign subsidiaries. This exposes the Company
to risks associated with foreign currency rate fluctuations which can
impact the Company's revenue and net income. To partially mitigate this
risk, the Company has entered into foreign currency transactions, primarily
forward and option contracts to sell Yen, on a continuing basis in amounts
and timing consistent with the underlying currency exposure so that the
gains or losses on these transactions offset gains or losses on the
underlying exposure. In the first quarter of 1996, a gain of $414K was
realized on the Company's forward exchange contracts and was recorded in
cost of sales, compared to a loss of $470K in the first quarter of 1995.
The Company does not engage in any speculative trading activity.
Cash flow from operations increased to $18.8 million in the first quarter of
1996 compared to $12.5 million in the first quarter of 1995, primarily as a
result of increased net income. During the first quarter of 1996, cash from
operations was primarily used to invest in property, plant and equipment and
to pay dividends. Property, plant and equipment expenditures in the first
quarter of 1996 were lower than for the same period in 1995 due to the timing
of certain projects, but are expected to increase in subsequent quarters
during 1996.
At January 1, 1996, the Company had approximately $8 million of repurchases
remaining under an open market share repurchase program begun in 1995. Early
in the first quarter of 1996, the Company announced plans to spend an
additional $50 million on open market share repurchases. During the quarter,
the Company spent approximately $34 million, net of proceeds from stock
option exercises, to repurchase shares of its common stock. The first
quarter repurchases were primarily funded by an increase in shortterm
borrowings of approximately $33 million. Repayment of these additional
borrowings and further share repurchases in 1996 are expected to be funded by
cash generated from operations.
The Company spent approximately $2.6 million in the first quarter to satisfy
obligations related to discontinued operations. The Company expects that
cash expenditures related to its discontinued operations will decline
slightly in subsequent quarters during 1996.
-7-
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
b. Reports on Form 8-K - There were no reports on Form 8K filed
for the quarter ended March 31, 1996.
-8-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Millipore Corporation
Registrant
April 24, 1996 /s/ Michael P. Carroll
Date Michael P. Carroll
Vice President, Chief Financial Officer and
Treasurer
-9-
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