FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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 (781) 533-
6000
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 43,851,735 shares of common stock outstanding as
of July 24, 1998.
MILLIPORE CORPORATION
INDEX TO FORM 10-Q
Page No.
Part I. Financial Information
Item 1. Condensed Financial Statements
Consolidated Balance Sheets --
June 30,1998 and December 31, 1997 2
Consolidated Statements of Income --
Three and Six Months Ended June 30, 1998 and 1997 3
Consolidated Statements of Cash Flows --
Six Months Ended June 30, 1998 and 1997 4
Notes to Consolidated Condensed
Financial Statements 5-8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
9-11
Part II. Other Information
Item 1. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders
13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
MILLIPORE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
<S> <C> <C>
ASSETS (Unaudited)
Current assets
Cash $ 2,896 $ 2,240
Short-term investments 26,456 18,029
Accounts receivable, net 161,671 176,585
Inventories 131,836 127,192
Other current assets 13,088 28,362
Total Current Assets 335,947 352,408
Property, plant and equipment, net 219,293 220,094
Intangible assets 87,435 77,394
Deferred income taxes 80,010 88,760
Other assets 22,950 27,588
Total Assets $745,635 $766,244
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Notes payable $172,263 $ 165,576
Accounts payable 41,179 46,088
Accrued expenses 57,776 74,856
Dividends payable 4,823 4,369
Accrued retirement plan 5,389 7,088
contributions
Accrued income taxes payable 1,843 6,896
Total Current Liabilities 283,273 304,873
Long-term debt 279,216 286,844
Other liabilities 25,197 25,533
Shareholders' equity
Common stock 56,988 56,988
Additional paid-in capital 10,927 10,927
Retained earnings 518,051 490,289
Accumulated other comprehensive (44,568) (21,720)
loss
541,398 536,484
Less: Treasury stock, at cost,
13,144 shares in 1998 and 13,291
in 1997 (383,449) (387,490)
Total Shareholders' Equity 157,949 148,994
Total Liabilities and Shareholders' $745,635 $766,244
Equity
</TABLE>
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)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
<S> <C> <C> <C> <C>
1998 1997 1998 1997
Net sales $175,172 $192,498 $360,834 $371,337
Cost of sales 85,507 86,424 171,936 167,058
Gross profit 89,665 106,074 188,898 204,279
Selling, general &
administrative expenses 60,809 63,273 122,496 123,050
Research & development
expenses 13,910 15,003 27,045 28,154
Purchased research &
development expense - - - 114,091
Settlement of litigation - - 11,766 -
Operating income / (loss) 14,946 27,798 27,591 (61,016)
Gain on sale of equity
securities - - 35,594 1,769
Interest income 761 636 1,375 1,397
Interest expense (7,058) (8,159) (14,131) (14,183)
Income / (loss) before
income taxes 8,649 20,275 50,429 (72,033)
Provision for income taxes 1,816 3,894 12,186 9,348
Net income / (loss) $6,833 $16,381 $38,243 $(81,381)
Net income / (loss) per
share:
Basic $ 0.16 $0.38 $0.87 $(1.87)
Diluted $ 0.15 $0.37 $0.86 $(1.87)
Cash dividends declared per $ 0.11 $0.10 $0.21 $0.19
common share
Weighted average common
shares outstanding:
Basic 43,819 43,512 43,774 43,452
Diluted 44,327 44,274 44,317 43,452
</TABLE>
The accompanying notes are an integral part of the consolidated
condensed financial statements.
-3-
MILLIPORE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
<S> <C> <C>
1998 1997
Cash Flows From Operating Activities:
Net income (loss) $38,243 $(81,381)
Adjustments to reconcile net income
(loss) to net
cash provided:
Purchased research and development - 114,091
expense
Write-off of acquired inventory step- - 5,000
up
Depreciation and amortization 21,783 19,323
Gain on sale of equity securities (35,594) (1,769)
Deferred tax provision 8,750 -
Change in operating assets and
liabilities, net:
Decrease (increase) in accounts 10,212 (17,287)
receivable
(Increase) in inventories (9,378) (6,413)
(Increase) in other current assets (1,920) (7,603)
Decrease (increase) in other assets 2,806 (1,090)
(Decrease) in accounts payable and (19,583) (13,231)
accrued expenses
(Decrease) in accrued retirement (1,710) 137
plan contributions
(Decrease) in accrued income taxes (5,053) (2,844)
Other (1,435) 4,903
Net cash provided by operating 7,121 11,836
activities
Cash Flows From Investing Activities:
Additions to property, plant and (26,634) (16,993)
equipment
Acquisition of Tylan, net of cash - (159,158)
acquired
Proceeds from sale of equity 35,594 1,769
securities
Investment in intangibles (3,453) -
Net cash used by discontinued (2,340) (2,775)
operations
Net cash provided by (used in) 3,167 (177,157)
investing activities
Cash Flows From Financing Activities:
Issuance of treasury stock under stock 2,637 4,284
plans
Increase in short-term debt 6,761 80,567
Proceeds from issuance of long-term - 197,950
debt
Payments on long-term debt - (123,914)
Dividends paid (8,743) (7,820)
Net cash provided by financing 655 151,067
activities
Effect of foreign exchange rates on
cash and (1,860) (3,264)
short-term investments
Net increase (decrease) in cash and 9,083 (17,518)
short-term investments
Cash and short-term investments on 20,269 46,870
January 1
Cash and short-term investments on $29,352 $29,352
June 30
</TABLE>
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. General: 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, 1997. The accompanying
unaudited consolidated condensed financial statements are not
necessarily indicative of future trends or the Company's operations
for the entire year.
2. Inventories: Inventories consisted of the following:
December 31,
June 30, 1998 1997
Raw materials $36,295 $42,518
Work in 22,311 16,545
process
Finished 73,230 68,129
goods
$131,836 $127,192
3. Property, Plant and Equipment: Accumulated depreciation on
property, plant and equipment was $182,679 at June 30,1998, and
$166,585 at December 31, 1997.
4. Acquisitions: During the first quarter of 1998, the Company
finalized the allocation of the purchase price relating to the
acquisition of Tylan General, Inc. as discussed in Note C to the
Company's financial statements for the year ended December 31, 1997.
The final accrual for additional costs associated with the
acquisition was $32,000. The final adjusted purchase price included
current assets of $42,544, property and equipment of $15,559, other
assets of $16,477 and liabilities of $22,042. Intangible assets
valued at $28,742 are being amortized over their estimated useful
lives ranging from 6 to 20 years.
5. Legal Proceedings: On May 2, 1997, the Environmental Quality
Board (EQB) of Puerto Rico served an administrative order on
Millipore Cidra, Inc., a wholly-owned subsidiary of the Company. The
administrative order (EQB order) alleged: (I) that the
nitrocellulose filter membrane scrap produced by Millipore Cidra's
manufacturing operations is a hazardous waste as defined in EQB
regulations; (ii) that Millipore Cidra, Inc. failed to manage,
transport and dispose of the nitrocellulose membrane scrap as a
hazardous waste; and (iii) that such failure violated EQB
regulations. The EQB order proposed penalties in the amount of
$96,500 and ordered Millipore Cidra, Inc. to manage the
nitrocellulose membrane scrap as a hazardous waste. The Company
recorded a charge of $5,000 in the first quarter of 1998 reflecting
its costs to settle this matter.
The Company also recorded a charge of $3,100 in the first quarter
of 1998 reflecting its costs to settle a separate lawsuit with an
intervening party in the EQB administrative case described above.
The Company recorded a charge of $3,666 in the first quarter of
1998 to settle a patent lawsuit with Mott Metallurgical
Corporation. In the lawsuit, each party claimed infringement of
one of its patents by the other. As part of the settlement, the
parties agreed to cross license the two patents at issue.
-5-
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(In thousands)
Legal Proceedings (cont'd):
6. The Company and Waters Corporation were engaged in an
arbitration proceeding and a related litigation in the Superior
Court, Middlesex, Massachusetts, 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. In
the second quarter of 1996, Waters filed a Complaint in the Federal
District Court of Massachusetts alleging that the Company's operation
of the Retirement Plan violates ERISA and certain sections of the
Internal Revenue Code. Judgments in the Company's favor were handed
down by both the Massachusetts Superior Court and the Federal
District Court in May 1997 and July 1997, respectively. Waters
appealed the federal court judgment, which was affirmed by the United
States Court of Appeals for the First Circuit by opinion dated April
3, 1998. On June 2, 1998, the Company transferred $2,439 (including
interest through the date of transfer) from its Retirement Plan to
the Waters Retirement Plan as provided by the amended and restated
Purchase and Sale Agreement. In order to fund the transfer, the
Company made a contribution of $2,255 to its Retirement Plan in
accordance with ERISA funding requirements.
6. Restructuring: On June 15, 1998, the Company announced a
restructuring program to streamline operations and reduce the cost
structure. This program includes consolidation of transaction
processing into regional business centers, outsourcing of certain
administration, distribution and manufacturing activities, realigning
and downsizing geographic support organizations and consolidating
manufacturing operations. The Company has not yet determined the
magnitude of the restructuring charge which will be recorded in the
third quarter of 1998.
7. Gain on sale of equity securities: In partial consideration for
the sale of its non-membrane bioscience instrument division in 1994,
the Company received four thousand shares of preferred stock of
PerSeptive Biosystems, Inc. ("PerSeptive"). The preferred stock was
redeemable in four equal annual installments of $10,000, commencing
in August 1995, in the equivalent value as of each redemption date in
common stock, $0.01 par value of PerSeptive. Effective January 22,
1998, PerSeptive completed a merger with Perkin-Elmer Corporation
("Perkin-Elmer") and became a wholly-owned subsidiary of Perkin-
Elmer. Pursuant to this merger all of the Company's remaining
holdings in PerSeptive, which consisted of 2,213,357 shares of common
stock and one thousand shares of preferred stock were converted into
586,541 shares of Perkin-Elmer common stock. In the first quarter of
1998, the Company sold all 586,541 shares of its Perkin-Elmer common
stock and recognized a net gain of $32,500. The Company also sold
all of its common shares of Glyko Biomedical in the first quarter of
1998 and recognized a gain of $3,100.
8. Basic and Diluted Earnings Per Share: The following table
reconciles the numerator and denominator for basic and diluted
earnings per share for the three months and six months ended June 30,
1998 and June 30, 1997. For the six months ended June 30, 1997, the
Company was in a loss position and therefore, basic and diluted
earnings per share are the same. The effect of anti-dilutive
securities for the six months in 1997 amounted to 796 shares.
<TABLE>
<CAPTION>
Three Months Ended June 1998 1997
30,
<S> <C> <C> <C> <C> <C> <C>
Net Net
Income Shares EPS Income Shares EPS
Basic earnings per $6,833 43,819 $0.16 $16,381 43,512 $0.38
share
Effect of dilutive
securities: 508 762
Stock options
Diluted earnings per $6,833 44,327 $0.15 $16,381 44,274 $0.37
share
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 1998 1997
30,
<S> <C> <C> <C> <C> <C> <C>
Net Net
Income Shares EPS Income Shares EPS
Basic earnings per $38,243 43,774 $0.87 $(81,381) 43,452 $(1.87)
share
Effect of dilutive
securities: 543 -
Stock options
Diluted earnings per $38,243 44,317 $0.86 $(81,381) 43,452 $(1.87)
share
</TABLE>
-6-
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(In thousands)
9. New Accounting Pronouncements: The Company has adopted Statement
of Financial Accounting Standard ("SFAS") No. 130, "Reporting
Comprehensive Income", which requires that all components of
comprehensive income and total comprehensive income be reported
and that changes be shown in a financial statement displayed with
the same prominence as other financial statements. The Company
has elected to disclose this information in its statement of
stockholders' equity. For the three months and six months ended
June 30, 1998 and 1997, total comprehensive income/(loss), was
comprised of the following:
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Net income/(loss) $ 6,833 $16,381 $38,243 $(81,381)
Foreign currency (3,852) 2,582 (4,660) (11,504)
translation
Unrealized holding
loss on equity
securities (893) (2,599) (18,188) (2,724)
arising during
period, net of
tax
Total comprehensive
income/(loss) $ 2,088 $16,364 $15,395 $(95,609)
In July 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information", which is effective for fiscal years
beginning after December 15, 1997. The interim reporting
disclosures are not required in the first year of adoption. SFAS
131 specifies revised guidelines for determining an entity's
operating segments and the type and level of financial information
to be disclosed. SFAS 131 changes current practice under SFAS 14
by establishing a new framework on which to base segment
reporting. The "management" approach expands the required
disclosures for each segment. The Company will adopt SFAS 131 in
the fourth quarter ended December 31, 1998 and has not yet
determined the impact of such adoption on its segment reporting as
currently presented.
In February 1998, FASB issued SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits".
SFAS No. 132 establishes new increased requirements for disclosure
of a Company's pensions and other postretirement benefit
obligations. SFAS No. 132 is effective for fiscal years beginning
after December 15, 1997, but may be adopted earlier. The Company
will adopt the increased disclosure requirements of SFAS No. 132
in the fourth quarter ended December 31, 1998.
In March 1998, Statement of Position 98-1, "Accounting for the
Cost of Computer Software Developed or Obtained for Internal Use"
("SOP 98-1"), was issued which provides guidance on applying
generally accepted accounting principles in addressing whether and
under what conditions the costs of internal-use software should be
capitalized. SOP 98-1 is effective for transactions entered into
in fiscal years beginning after December 15, 1998, however,
earlier adoption is encouraged. The Company adopted the
guidelines of SOP 98-1 as of January 1, 1998 and the impact of
such adoption was not material to the results of operations or
cash flows for the period ended June 30, 1998.
-7-
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(In thousands)
New Accounting Pronouncements (cont'd):
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" effective January 1, 2000 for
the Company. SFAS 133 establishes accounting and reporting
standards requiring that every derivative instrument, including
certain derivative instruments imbedded in other contracts, be
recorded in the balance sheet as either an asset or liability
measured at its fair value. The statement also requires that
changes in the derivative's fair value be recognized in earnings
unless specific hedge accounting criteria are met. The Company is
currently assessing the impact of this new statement on its
consolidated financial position, liquidity and results of
operations.
-8-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands)
Forward Looking Statements
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, 1997. Such forward-looking statements are based on current
expectations and actual results may differ materially.
Recent Developments
On June 15, 1998, the Company announced a restructuring program to
streamline operations and reduce the cost structure. This program
includes consolidation of transaction processing into regional
business centers, outsourcing of certain administration, distribution
and manufacturing activities, realigning and downsizing geographic
support organizations and consolidating manufacturing operations.
The Company has not yet determined the magnitude of the restructuring
charge which will be recorded in the third quarter of 1998.
Results of Operations
Consolidated net sales for the second quarter of 1998 were $175,172,
a decrease of 9% from sales for the same period last year. Revenues
decreased 4% as measured in local currency terms for the second
quarter of 1998. Second quarter diluted earnings per share were $0.15
per share, compared to $0.37 per share last year. The following table
summarizes revenue growth by market and geography in the second
quarter of 1998 as compared to the second quarter of 1997 (in
millions):
%
Increase/
% (Decrease)
June June Increase/ Local
30,1997 30,1998 (Decrease) Currency
Microelectronics $66 $49 (26%) (21%)
BioPharmaceutical 56 54 (4%) 0%
Analytical 70 72 3% 10%
Laboratory
TOTAL $192 $175 (9%) (4%)
Americas $80 $73 (9%) (8%)
Europe 57 59 4% 7%
Asia/Pacific 55 43 (22%) (8%)
TOTAL $192 $175 (9%) (4%)
Sales to microelectronics customers, in local currency, decreased 21%
in the second quarter of 1998 compared to the second quarter of 1997.
The Company continues to be negatively impacted by the semiconductor
industry downturn and weakening economic conditions in Asia during
the first half of 1998. The downturn in the semiconductor industry
began in 1996 and there is no consensus opinion amongst the industry
experts on how long this current cycle will last. Sales to the
BioPharmaceutical sector, in local currency, in the second quarter
were equal to those of the prior year's second quarter. This result
is the combination of a 4% increase in the sales to pharmaceutical
and biotech customers and a 17% decrease in sales to food and
beverage customers. For the remaining six months of 1998, the rate
of growth is expected to accelerate in the BioPharmaceutical sector
on the strength of increased demand for filters used in biotech
process plants. Sales growth in the Analytical Laboratory business
was 10%, in local currency, reflecting an increase in market
penetration of core products and new products introduced to ultra
pure water customers and research laboratories. This business
expects a similar growth rate for the remainder of 1998.
-9-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands)
Results of Operations (continued)
In the second quarter of 1998, the U.S. dollar strengthened against
most European and Asian currencies. Expected third quarter and full
year 1998 sales growth rates will be approximately 4 to 5 percentage
points lower then local currency growth rates if foreign exchange
rates remain at June 30, 1998 levels.
Gross profit margins in the second quarter of 1998 were 51% of sales,
compared to 55% in the second quarter of 1997. Gross margin
percentages were lower than those in the same period last year
reflecting the impact of a stronger U.S. dollar and reduced volume in
the Company's manufacturing plants. The Company expects gross margin
percentages in the third quarter of 1998 to approximate those
reported in the second quarter of 1998.
Total operating expenses decreased 5% from total operating expenses
for the second quarter of 1997 primarily due to decreases in selling,
general and administrative expenses attributable to cost containment
programs and the U.S. dollar strengthening against European and Asian
currencies, as well as a slight decrease in research and development
spending.
Net interest expense in the second quarter of 1998 was lower than the
first quarter of 1997 due to both lower borrowings and interest
rates. The Company expects that interest expense in the third
quarter and for the year ended 1998 will be slightly lower than 1997
as cash generated from operating activities and the proceeds from the
sale of equity securities is used to reduce outstanding borrowings.
The Company's effective income tax rate for the second quarter of
1998 was 21.0%, the same as the full year of 1997, excluding the non-
tax deductible write-offs associated with the Tylan acquisition. The
Company expects to sustain the 21.0% tax rate for the remainder of
1998.
The Company has authorized an internal team to assess the Company's
Year 2000 readiness and to determine the steps necessary to address
its Year 2000 issues. Among the areas that are being assessed are
the Company's internal software systems, its products, its
manufacturing equipment, and its facilities. In addition, the
Company is undertaking to work with its key suppliers and financial
institutions in assessing their Year 2000 readiness. The Company
utilizes a common worldwide software system for its financial and
business processes. The vendor of this system has certified it as
being Year 2000 compliant, and the Company is conducting its own
tests to verify compliance. A large majority of the Company's
products do not include software or have embedded microprocessors,
and of those that do, most have been determined to be Year 2000
compliant. Though a full assessment is not yet complete, the Company
currently does not believe that either its Year 2000 issues or any
future costs necessary to ensure the Company's Year 2000 readiness
will have a material effect on its business, results of operations or
financial condition.
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.
The Company had entered into foreign currency 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 partially offset the realized foreign exchange gains or
losses on the underlying exposure. The gains or losses resulting from
these transactions are recorded in cost of sales. In the second
quarter of 1998, a gain of $510 was realized on the Company's foreign
exchange contracts compared to a gain of $1,515 in the second quarter
of 1997. As of June 30, 1998, the Company has only forward option
contracts to sell yen. In the event of a significant strengthening
of the U.S. dollar against the yen, the exercise of these forward
options will partially mitigate losses incurred by the Company on the
underlying currency exposure. The Company does not engage in
speculative trading activity.
-10-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands)
Capital Resources And Liquidity
Cash generated by operations in the first six months of 1998 was
$7,121 compared to $11,836 in the first six months of 1997. During
the first six months of 1998, cash expenditures amounting to $16,907
were charged against restructuring reserves established during 1997;
$5,037 of employee costs, $9,248 of contract termination costs, and
$2,622 of other integration expenses.
Cash generated by the Company during the six months of 1998 was used
to invest in property, plant and equipment, and pay dividends.
Property, plant and equipment expenditures for the first six months
of 1998 exceeded those for the same period in 1997 by $9,641
primarily due to $10,100 for the construction of the new
manufacturing facility in Allen, Texas. The total cost of this
facility will be approximately $28,000. The Company expects
property, plant and equipment expenditures to increase over the
remainder of 1998 as it completes this facility.
-11-
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On May 2, 1997, the Environmental Quality Board (`EQB') of Puerto
Rico served an administrative order on Millipore Cidra, Inc., a
wholly-owned subsidiary of the Company. The administrative order
(EQB Order) alleged: (i) that the nitrocellulose filter membrane
scrap produced by Millipore Cidra's manufacturing operations is a
hazardous waste as defined in EQB regulations; (ii) that Millipore
Cidra, Inc. failed to manage, transport and dispose of the
nitrocellulose membrane scrap as a hazardous waste; and (iii) that
such failure violated EQB regulations. The EQB Order proposed
penalties in the amount of $96,500,000 and ordered Millipore Cidra,
Inc. to manage the nitrocellulose membrane scrap as a hazardous
waste.
On March 12, 1998 Millipore Cidra and the EQB entered into a
Stipulation settling the administrative proceeding with respect to
the EQB Order. On March 27, 1998 the Governing Board of the EQB
voted to approve the recommendation of the hearing examiner for this
proceeding that the Stipulation be ratified. Formal notice of this
EQB Governing Board vote was mailed to Millipore Cidra on May 7,
1998. The Stipulation provides that: (i) it does not constitute any
admission or determination of fact or any conclusion of law with
respect to any of the allegations contained in the EQB Order; (ii)
Millipore Cidra and its affiliates are released and exonerated from
any claims related to the EQB Order; (iii) Millipore Cidra shall pay
the EQB $4,600,000 in full satisfaction of all claims under the EQB
Order; and (iv) Millipore Cidra shall manage the nitrocellulose
membrane scrap as if it were a hazardous waste. All payments
required by the Stipulation have now been made to the EQB.
On March 12, 1998 the Company entered into a settlement agreement
with respect to a separate lawsuit (subject to court approval) with
Redondo Waste Systems, Inc., d/b/a Celsius, an intervening party in
the administrative proceeding with respect to the EQB Order. This
suit was filed in the Superior Court for Caguas County, Puerto Rico
in 1991 and related to damages claimed to result from a fire at a
landfill owned by such intervening party. Under this settlement
agreement the Company agreed to pay $3,000,000 to such intervening
party in complete satisfaction of all claims under such lawsuit.
The settlement agreement has now been approved by the Courts and
payment has been made by the Company.
The Company and Waters Corporation were engaged in an arbitration
proceeding and a related litigation in the Superior Court, Middlesex,
Massachusetts, 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. In the second
quarter of 1996, Waters filed a Complaint in the Federal District
Court of Massachusetts alleging that the Company's operation of the
Retirement Plan violates ERISA and certain sections of the Internal
Revenue Code. Judgments in the Company's favor were handed down by
both the Massachusetts Superior Court and the Federal District Court
in May 1997 and July 1997, respectively. Waters appealed the federal
court judgment, which was affirmed by the United States Court of
Appeals for the First Circuit by opinion dated April 3, 1998. On
June 2, 1998, the Company transferred $2,439,561 (including interest
through the date of transfer) from the Company's Retirement Plan to
the Waters Retirement Plan as provided by the amended and restated
Purchase and Sale Agreement. In order to fund the transfer, the
Company made a contribution of $2,254,567 to its Retirement Plan in
accordance with ERISA funding requirements.
-12-
PART II - OTHER INFORMATION (cont'd)
Item 4. Submission of Matters to a Vote of Security Holders.
a. The Annual Meeting of Stockholders of Millipore Corporation was
held on April 16, 1998.
c. The following matter was voted upon at the Annual Meeting: the
election of three Class II Directors for a three-year term. The
following votes were tabulated with respect to the election:
Matter Voted Upon Votes "For" Withheld
Election of Directors:
Robert C. Bishop 36,898,010 209,078
Samuel C. Butler 36,901,543 205,545
Robert E. Caldwell 36,901,164 205,924
There were no votes against any nominee and no broker non-
votes.
Item 6. Exhibits and Reports on Form 8-K.
a.Exhibits
27 Article 5 Financial Data Schedule - second Quarter 1998
b. Reports on Form 8-K
The Company filed the following report on Form 8-K during the
second quarter of 1998:
Form 8-K report dated April 16, 1998 filed on April 30, 1998;
Common Stock Rights Agreement, amended and restated.
-13-
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
August 14, 1998 /s/ Kathleen B. Allen
Date Kathleen B. Allen
Chief Accounting Officer
-14-
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