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 September 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from to
COMMISSION FILE NUMBER 0-1052
Millipore Corporation
(Exact name of registrant as specified in its charter)
Massachusetts
(State or other jurisdiction of incorporation or organization)
04-2170233
(I.R.S. Employer Identification No.)
80 Ashby Road
Bedford, Massachusetts 01730
(Address of principal executive offices)
Registrant's telephone number, include area code (617) 275-
9200
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities and Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The Company had 43,275,007 shares of common stock outstanding as
of October 22, 1996.
MILLIPORE CORPORATION
INDEX TO FORM 10-Q
Page No.
Part I. Financial Information
Item 1. Condensed Financial Statements
Consolidated Balance Sheets --
September 30, 1996 and December 31, 1995 2
Consolidated Statements of Income --
Three and Nine Months Ended September 30, 1996 and 1995 3
Consolidated Statements of Cash Flows --
Nine Months Ended September 30, 1996 and 1995 4
Notes to Consolidated Condensed
Financial Statements 5-6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 7-8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
MILLIPORE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
September December
30, 31,
1996 1995
ASSETS (Unaudited)
Current assets
Cash $ 3,190 $ 2,696
Short-term investments 22,543 21,062
Accounts receivable, net 151,360 147,759
Inventories 90,903 80,386
Other current assets 11,199 6,800
Receivables arising from sale of
businesses - 3,056
Total Current Assets 279,195 261,759
Property, plant and equipment, net 188,617 191,250
Intangible assets 8,395 7,219
Deferred income taxes 53,179 53,179
Other assets 30,219 17,538
Total Assets $ 559,605 $ 530,945
LIABILITIES AND SHAREHOLDERS'EQUITY
Current liabilities
Notes payable and current
portion of long-term debt $ 107,089 $ 80,768
Accounts payable 37,897 33,436
Accrued expenses 28,925 32,366
Accrued divestiture costs 3,689 6,543
Dividends payable 3,894 3,537
Accrued retirement plan
contributions 4,464 4,846
Accrued and deferred income
taxes payable 3,226 9,926
Total Current Liabilities 189,184 171,422
Long-term debt 99,312 105,272
Other liabilities 23,995 22,776
Accrued divestiture costs 2,000 5,000
Shareholders' equity
Common stock 56,988 56,988
Additional paid-in capital - -
Retained earnings 581,154 523,633
Unrealized gain on securities
available for sale 11,072 -
Translation adjustments (4,591) 375
644,623 580,996
Less: Treasury stock, at cost,
13,719 shares in 1996 and
12,727 in 1995 (399,509) (354,521)
Total shareholders' equity 245,114 226,475
Total Liabilities and
Shareholders' Equity $ 559,605 $ 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 Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Net sales $ 148,913 $ 147,547 $ 467,317 $ 439,482
Cost of sales 60,774 61,293 188,132 180,581
Gross profit 88,139 86,254 279,185 258,901
Selling, general &
administrative expenses 50,226 48,842 152,425 144,247
Research & development 9,610 9,352 28,760 27,020
expenses
Operating income 28,303 28,060 98,000 87,634
Gain on sale of equity 2,858 - 2,858 -
securities
Interest income 660 427 2,034 1,150
Interest expense (2,995) (2,616) (8,650) (7,785)
Income before income taxes 28,826 25,871 94,242 80,999
Provision for income taxes 6,774 5,821 22,147 18,225
Net Income $ 22,052 $ 20,050 $ 72,095 $ 62,774
Net Income per
common share $ 0.51 $ 0.45 $ 1.65 $ 1.39
Cash Dividends declared
per common share $ 0.09 $ 0.08 $ 0.26 $ 0.235
Weighted average common 43,335 44,642 43,714 45,200
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)
Nine Months Ended
September 30,
1996 1995
Cash Flows From Operating Activities:
Net income $ 72,095 $ 62,774
Adjustments to reconcile net income to
net cash provided:
Depreciation and amortization 22,736 19,975
Gain on sale of equity securities (2,858) -
Deferred income tax provision - 543
Change in operating assets and
liabilities:
(Increase) in accounts receivable (9,042) (8,101)
(Increase) in inventories (13,377) (6,024)
(Increase) in other current assets (3,223) (2,058)
(Increase) in other assets (4,582) (7,123)
Increase in accounts payable and
accrued expenses 4,407 2,247
(Decrease) in accrued retirement
plan contributions (310) (490)
Increase in accrued income taxes 1,746 1,364
Other 2,993 (4,390)
Net cash provided by operating
activities 70,585 58,717
Cash Flows From Investing Activities:
Additions to property, plant and
equipment (22,808) (20,262)
Investment in businesses (3,990) -
Investment in intangible assets (1,523) -
Proceeds from sale of equity
securities 2,979 -
Net cash spent by discontinued
operations (7,735) (6,210)
Net cash used in investing activities (33,077) (26,472)
Cash Flows From Financing Activities:
Treasury stock acquired (57,552) (76,350)
Issuance of treasury stock under stock
plans 8,454 14,764
Cash paid to close out foreign
currency swap - (3,546)
Net change in short-term debt 26,147 45,878
Repayment of long-term debt (735) (47)
Dividends paid (11,109) (10,553)
Net cash used in financing activities (34,795) (29,854)
Effect of foreign exchange rates
on cash and (738) 693
short-term investments
Net increase in cash and short-term $ 1,975 $ 3,084
investments
Cash and short-term investments on
January 1 $ 23,758 $ 30,236
Cash and short-term investments on
September 30 $ 25,733 $ 33,320
The accompanying notes are an integral part of the
consolidated condensed financial statements.
-4-
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(In thousands, except share data)
1.The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with the instructions
to Form 10-Q and, accordingly, these footnotes condense or omit
certain information and disclosures normally included in financial
statements. These financial statements, which in the opinion of
management reflect all adjustments necessary for a fair
presentation, should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995. The
accompanying unaudited consolidated condensed financial statements
are not necessarily indicative of future trends or the Company's
operations for the entire year.
Certain reclassifications have been made to prior years' financial
statements to conform with the 1996 presentation.
2.On June 8, 1995, the Company's Board of Directors authorized a 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 28,494,000 additional shares of common stock
from authorized but unissued shares. Accordingly, weighted
average share and per share amounts for 1995 have been restated to
reflect the stock split.
At the Company's Annual Meeting on April 18, 1996, shareholders
voted to adopt an amendment to the Company's restated Articles of
Incorporation, increasing the number of authorized Common Shares
from 80,000,000 to 120,000,000.
3. Inventories consist of the following:
September December 31,
30, 1996 1995
Raw materials $23,392 $21,357
Work in process 11,459 9,621
Finished goods 56,052 49,408
$90,903 $80,386
4. Accumulated depreciation on property, plant and equipment was
$192,891 at September 30, 1996, and $182,690 at December 31, 1995.
5. During the first quarter of 1996, the Company invested
approximately $3,000 to acquire shares of common stock of a privately-
held company, IBC Advanced Technologies, Inc. During the second
quarter of 1996, the Company invested approximately $1,000 to acquire
shares of common stock of Celsis International plc, a company based
in England that specializes in technology used in the detection and
measurement of microbial contamination. These investments are
included in Other Assets and are carried at cost, which approximates
market value. Also during the second quarter of 1996, the Company
invested an additional $1,500 to acquire certain technology license
rights from Celsis, and this amount was recorded in Intangible
Assets.
6. The Company and Waters Corporation are engaged in an arbitration
proceeding and related litigation, both of which commenced in the
second quarter of 1995, with respect to the amount of assets
required to be transferred by the Company's Retirement Plan in
connection with the Company's divestiture of its former
Chromatography Division. The Company believes that it has
meritorious arguments and should prevail. The ultimate disposition
of this matter is not expected to have a material adverse effect on
the Company's financial condition.
-5-
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(In thousands, except share data)
7. In August, 1994, the Company sold certain assets of its non-
membrane bioscience business to PerSeptive Biosystems, Inc. Proceeds
from this sale included four thousand shares of PerSeptive's
preferred stock, which was redeemable in four equal annual
installments of $10,000 each payable in either cash or shares of
PerSeptive common stock beginning in August 1995. The preferred
stock was recorded at management's estimate of fair market value on
the date of receipt.
As of September 30, 1996, the Company has received 2,160,000
shares of Perseptive common stock in connection with Perseptive's
preferred stock redemption requirement. These common shares are
considered available-for-sale securities under the provisions of
FAS 115 "Accounting for Certain Investments in Debt and Equity
Securities" and are recorded at fair market value and included in
Other Assets in the Company's balance sheet at September 30, 1996.
The unrealized holding gain on the common stock, net of income
tax, is recorded separately in shareholders' equity. Any realized
gain on the sale of these securities will be recognized when the
shares are sold.
-6-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Discussion and Analysis includes certain forward-
looking statements which are subject to a number of risks and
uncertainties as described in Management's Discussion and Analysis in
the Company's Annual Report on Form 10-K for the year ended December
31, 1995. Such forward-looking statements are based on current
expectations and actual results may differ materially.
Consolidated net sales for the third quarter of 1996 were $149.0
million, an increase of 1% over sales for the same period last year.
Sales growth measured in local currency terms was 7% in the third
quarter of 1996, but fluctuations in foreign currency exchange rates,
primarily the strengthening of the U.S. dollar against the Japanese
Yen, decreased reported sales growth by 6 percentage points. If
foreign exchange rates remain at October 31, 1996 levels, the effect
of foreign currency is expected to reduce reported fourth quarter
sales growth by approximately 4 percentage points and full year 1996
sales growth by approximately 5 percentage points. The following
table summarizes sales growth by geography and market:
Sales growth rates Sales growth rates
measured in local measured in U.S.
currencies dollars
Three Nine Three Nine
months months months months
ended ended ended ended
9/30/96 9/30/96 9/30/96 9/30/96
Americas 5% 11% 3% 10%
Europe (1)% 4% (4)% 3%
Asia/Pacific 16% 21% 2% 6%
Consolidated 7% 13% 1% 6%
Microelectronics Mfg. 0% 16% (8)% 7%
Biopharmaceutical Mfg. 9% 18% 4% 12%
Analytical Laboratory 11% 7% 6% 2%
Consolidated 7% 13% 1% 6%
A slowdown in the semiconductor industry affected the Company's
microelectronics manufacturing business in the third quarter, which
posted no growth after 13 successive quarters of double-digit sales
growth. The 9 percent growth in the biopharmaceutical market in the
third quarter was lower than the growth achieved through the first
nine months of 1996, primarily due to a lower sales to the European
and Japanese markets and timing issues associated with shipments of
large protein purification systems. The 11 percent growth in the
Analytical Laboratory business was significantly higher than the 5
percent growth posted for the second quarter of 1996, as well as the
6 percent growth recorded in the first quarter. The sales increase
was largely driven by new products and market initiatives in applied
microbiology, biotech research, and laboratory water.
Gross margins in the third quarter of 1996 was equal to 59.2 percent
of sales, compared to 58.5 percent in the third quarter of 1995. The
gross margin percentage in the third quarter of 1996 is slightly
lower than the 59.6 percent recorded in the second quarter of 1996,
primarily due to lower production volume in the Company's
microelectronics manufacturing plants. The Company expects that
gross margin percentages for the fourth quarter of 1996 will be
slightly lower than those of the first nine months of 1996.
-7-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Selling, general and administrative expenses (S,G & A) in the third
quarter of 1996 increased approximately 3 percent over S,G & A
expenses for the third quarter of 1995. Included in S,G & A in the
third quarter is a non-recurring charge of approximately $2.0 million
incurred to move the Company's Japanese subsidiary into a new
headquarters and R & D facility. The Company expects that S,G & A
spending in the fourth quarter of 1996 will increase slightly over
spending in the third quarter.
Research and development expenses in the third quarter of 1996
increased approximately 3% over expenses for the third 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.
The gain on sale of equity securities of $2.8 million represents the
sale of a portion of the Company's stock holdings in a Japanese
company. The Company anticipates selling an additional portion of
this equity investment in the fourth quarter of 1996 and to realize
an approximately similar gain.
Net interest expense in the third quarter of 1996 was slightly higher
than that of the third quarter of 1995. Net interest expense for the
full year is expected to approximate that of 1995.
The Company's 23.5 percent effective income tax rate for the third
quarter is the same as the anticipated effective rate for the full
year, compared to 22.5 percent for the full year in 1995.
A substantial portion of the Company's business is conducted outside
of the United States through its foreign subsidiaries. This exposes
the Company to risks associated with foreign currency rate
fluctuations which can impact the Company's revenue and net income.
To partially mitigate this risk, the Company has entered into foreign
currency transactions, primarily forward and option contracts to sell
Yen, on a continuing basis in amounts and timing consistent with the
underlying currency exposure so that the gains or losses on these
transactions offset gains or losses on the underlying exposure. In
the third quarter of 1996, a gain of $400 thousand was realized on
the Company's foreign exchange contracts and was recorded in cost of
sales, compared to a loss of $1.0 million in the third quarter of
1995. The Company does not engage in speculative trading activity.
Cash generated from operations increased to approximately $71.0
million for the first nine months of 1996 from approximately $59.0
million in the first nine months of 1995. The increased cash flow
was primarily the result of increased net income for the period. The
increase in accounts receivable during the first nine months of 1996
is primarily the result of increased sales in the Asia/Pacific region
where collection cycles are typically longer than in the U.S. or
Europe. During the first nine months of 1996, cash from operations
was primarily used to invest in property, plant and equipment, pay
dividends, and repurchase shares of the Company's common stock.
Property, plant and equipment expenditures through the first nine
months of 1996 were slightly higher than for the first nine months of
1995, but are expected to be comparable to full year 1995.
At January 1, 1996, the Company had spent approximately $42.0 million
on share repurchases under a $50.0 million open market share
repurchase program begun in 1995. Early in the first quarter of
1996, the Company announced plans to spend an additional $50.0
million on open market share repurchases. During the first nine
months of 1996, the Company spent approximately $49.0 million, net of
proceeds from stock option exercises, to repurchase shares of its
common stock. Repurchases during 1996 have been funded primarily by
cash generated from operations and an increase in short-term
borrowings of approximately $26.0 million. Repayment of these
additional borrowings and any further share repurchases in 1996 are
expected to be funded by cash generated from operations.
-8-
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 8-
K filed for the quarter ended September 30, 1996.
-9-
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
September 30, 1996 /s/ Michael P. Carroll
Date Michael P. Carroll
Vice President, Chief Financial Officer
and Treasurer
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,190
<SECURITIES> 22,543
<RECEIVABLES> 151,360
<ALLOWANCES> 0
<INVENTORY> 90,903
<CURRENT-ASSETS> 11,199
<PP&E> 381,508
<DEPRECIATION> 192,891
<TOTAL-ASSETS> 559,605
<CURRENT-LIABILITIES> 189,184
<BONDS> 0
<COMMON> 56,988
0
0
<OTHER-SE> 188,126
<TOTAL-LIABILITY-AND-EQUITY> 559,605
<SALES> 467,317
<TOTAL-REVENUES> 470,175
<CGS> 188,132
<TOTAL-COSTS> 369,317
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,616
<INCOME-PRETAX> 94,242
<INCOME-TAX> 22,147
<INCOME-CONTINUING> 72,095
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72,095
<EPS-PRIMARY> 1.65
<EPS-DILUTED> 0
</TABLE>
