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, 1999
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 44,123,810 shares of common stock outstanding as
of April 30, 1999.
MILLIPORE CORPORATION
INDEX TO FORM 10-Q
Page No.
Part I. Financial Information
Item 1. Condensed Financial Statements
Consolidated Balance Sheets -
March 31,1999 and December 31, 1998 2
Consolidated Statements of Income -
Three Months Ended March 31, 1999 and 1998 3
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1999 and 1998 4
Notes to Consolidated Condensed
Financial Statements 5-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
8-12
Part II. Other Information
Item 1. Legal proceedings 13
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>
March 31, December 31,
1999 1998
<S> <C> <C>
ASSETS (Unaudited)
Current assets
Cash and cash equivalents $ 28,736 $ 36,022
Accounts receivable, net 158,915 154,258
Inventories 101,434 107,241
Other current assets 9,153 7,231
Total Current Assets 298,238 304,752
Property, plant and equipment, net 228,225 237,414
Deferred income taxes 108,545 108,545
Intangible assets 74,040 76,507
Other assets 34,116 35,222
Total Assets $ 743,164 $ 762,440
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ 165,000 $ 171,340
Accounts payable 39,940 39,729
Accrued expenses 70,343 75,544
Dividends payable 4,849 4,847
Accrued retirement plan contributions 3,414 6,931
Accrued income taxes payable 4,382 290
Total Current Liabilities 287,928 298,681
Long-term debt 296,016 299,110
Other liabilities 28,055 27,741
Shareholders' equity
Common stock 56,988 56,988
Additional paid-in capital 11,780 11,780
Retained earnings 478,846 472,746
Accumulated other comprehensive loss (39,944) (27,668)
507,670 513,846
Less: Treasury stock, at cost, 12,905
shares in 1999 and 12,921 in 1998 (376,505) (376,938)
Total Shareholders' Equity 131,165 136,908
Total Liabilities and Shareholders' $ 743,164 $ 762,440
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
March 31,
1999 1998
<S> <C> <C>
Net sales $180,403 $185,662
Cost of sales 84,895 86,429
Gross profit 95,508 99,233
Selling, general & administrative 61,833 61,687
expenses
Research & development expenses 12,345 13,135
Settlement of litigation - 11,766
Operating income 21,330 12,645
Gain on sale of equity securities - 35,594
Interest income 699 614
Interest expense (7,779) (7,073)
Income before income taxes 14,250 41,780
Provision for income taxes 2,993 10,370
Net income $11,257 $ 31,410
Net income per share:
Basic $ 0.26 $ 0.72
Diluted $ 0.25 $ 0.71
Cash dividends declared per share $ 0.11 $ 0.10
Weighted average shares outstanding:
Basic 44,078 43,727
Diluted 44,477 44,307
</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>
Three Months Ended
March 31,
1999 1998
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 11,257 $31,410
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 11,279 10,716
Gain on sale of equity securities - (35,594)
Deferred tax benefit - 8,750
Changes in operating assets and
liabilities, net:
(Increase) in accounts receivable (10,288) (924)
Decrease (increase) in inventories 1,011 (16,945)
(Increase) in other current assets and
other assets (160) (3,985)
(Decrease) increase in accounts payable
and accrued expenses (1,715) 10,115
(Decrease) in accrued retirement plan
contributions, accrued income taxes and
other (1,602) (4,424)
Net cash provided by (used in) operating
activities 9,782 (881)
Cash Flows From Investing Activities:
Additions to property, plant and equipment (4,834) (10,735)
Proceeds from sale of equity securities - 35,594
Net cash (used in) provided by investing
activities (4,834) 24,859
Cash Flows From Financing Activities:
Issuance of treasury stock under stock
plans 439 1,851
Net change in short-term debt (6,340) (6,821)
Dividends paid (4,851) (4,369)
Net cash provided by financing activities (10,752) (9,339)
Effect of foreign exchange rates on cash
and cash equivalents (1,482) (1,169)
Net (decrease) increase in cash and cash
equivalents (7,286) 13,470
Cash and cash equivalents on January 1 36,022 20,269
Cash and cash equivalents on March 31 $ 28,736 $33,739
</TABLE>
The accompanying notes are an integral part of the consolidated
condensed financial statements.
-4-
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in millions, shares 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, 1998. 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:
March 31, December 31,
1999 1998
Raw materials $ 35.3 $ 35.4
Work in process 20.6 18.6
Finished goods 45.5 53.2
Total $ 101.4 $ 107.2
3. Property, Plant and Equipment: Accumulated depreciation on
property, plant and equipment was $191.4 at March 31,1999, and
$188.3 at December 31, 1998.
4. Restructuring Charges: In the second quarter of 1998, the
Company announced a restructuring program which was undertaken to
improve the competitive position of the Company by streamlining
worldwide operations and reducing the overall cost structure. The
program included the consolidation of certain manufacturing
operations, realignment of various international subsidiary
organizations to focus on operating business units and discontinuance
of non-strategic product lines. In the third quarter of 1998, the
Company recorded an expense associated with these activities of $42.8
($29.1 after tax) including a restructuring charge of $33.6 and a
$9.2 charge against cost of sales for inventory and fixed asset write-
offs associated with the rationalization of its product offering and
elimination of non-strategic business lines. The non-strategic
product lines consisted of high pressure liquid chromatography
equipment, semiconductor fab monitoring and control software and
various filtration devices. The $33.6 restructuring charge included
$18.3 of employee severance costs, $1.8 for the write-down to fair
value of fixed assets and $7.7 for intangible assets associated with
the discontinued product lines, $3.8 of lease cancellation costs and
$2.0 of contract termination costs.
The restructuring initiatives combined with the consolidation of
the Company's microelectronics plants resulted in the elimination
of 620 positions worldwide (400 positions in manufacturing
operations, 160 in selling, general and administrative positions
and 60 in research and development). Notification to employees
was completed in 1998, although a small number of the employees
affected will continue working in their existing positions through
1999 with their related salary costs charged to operations as
incurred. Under the terms of the severance agreements, the Company
expects to pay the majority of the severance and associated
benefits during the second half of the year and into the early
part of 2000.
Following is a summary of the restructuring program reserve
balances at March 31, 1999:
<TABLE>
<CAPTION>
Balance at Balance at
December 31, Cash March 31,
1998 Disbursements 1999
<S> <C> <C> <C>
Employee severance costs $ 12.8 $ 1.8 $ 11.0
Lease cancellation costs 3.7 0.2 3.5
Contract terminations 2.0 - 2.0
and other costs
Total $ 18.5 $ 2.0 $ 16.5
</TABLE>
-5-
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in millions, shares in thousands)
5. Business Segment Information: The Company has two reportable
business segments Biopharmaceutical & Research and Microelectronics.
The results for Biopharmaceutical & Research, Microelectronics and
Corporate are presented below in "local currencies". For
comparability of financial results, the local currency results are
calculated by translating the foreign currency balances, in the
periods presented, at Millipore's 1999 budgeted exchange rates, which
differ from actual rates of exchange. The foreign exchange impact is
shown separately and reconciles the local currency reporting to the
consolidated results at the actual rates of exchange. This provides
a clearer presentation of underlying trends in the Company's
business, before the impact of foreign currency translation.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
Consolidated Net Sales 1999 1998
<S> <C> <C>
Biopharmaceutical & Research $138.7 $ 129.5
Microelectronics 42.3 62.0
Foreign exchange (0.6) (5.8)
Total net sales $180.4 $ 185.7
</TABLE>
<TABLE>
<CAPTION>
Consolidated Operating 1999 1998
Income
<S> <C> <C>
Biopharmaceutical & Research $30.3 $26.8
Microelectronics 1.0 7.9
Corporate (9.1) (9.2)
Settlement of litigation - (11.8)
Foreign exchange (0.9) (1.1)
Total operating income $ 21.3 $ 12.6
</TABLE>
6. Basic and Diluted Earnings Per Share: The following table sets
forth the computation of basic and diluted earnings per share.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
<S> <C> <C>
Numerator:
Net income $ 11.3 $31.4
Denominator:
For basic earnings per share:
Weighted average shares outstanding 44,078 43,727
Effect of dilutive securities-stock 399 580
options
For diluted earnings per share:
Weighted average shares outstanding 44,477 44,307
Net income per share:
Basic $ 0.26 $0.72
Diluted $ 0.25 $0.71
</TABLE>
-6-
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in millions, shares in thousands)
7. Comprehensive Income: The following table presents the components
of comprehensive income (loss), net of taxes:
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
1999 1998
<S> <C> <C>
Unrealized holding gains $0.9 $10.8
Reclassification adjustment for
gains realized in net income (0.2) (28.1)
Net unrealized gain (loss) 0.7 (17.3)
Foreign currency translation (13.0) (0.8)
adjustments
Other comprehensive loss (12.3) (18.1)
Net income 11.3 31.4
Total comprehensive (loss) income $(1.0) $ 13.3
</TABLE>
8. New Accounting Pronouncements: In June 1998, the 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
embedded 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.
-7-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In millions, except per share data)
Forward Looking Statements
The following discussion and analysis includes certain forward-
looking statements which are subject to substantial risks and
uncertainties described in Management's Discussion and Analysis in
the Company's Annual Report on Form 10-K for the year ended December
31, 1998. Such forward-looking statements are based on management's
current expectations and actual results may differ materially from
the results expressed in, or implied by, these forward-looking
statements.
Local Currency Results
The following discussion of the Results of Operations includes
reference to revenue, margins and expenses in "local currencies".
For comparability of financial results, the foreign currency
balances, for the periods presented, are translated at Millipore's
1999 budgeted exchange rates which differ from actual rates of
exchange. This provides a clearer presentation of underlying trends
in the Company's business, before the impact of foreign currency
translation.
Results of Operations
Consolidated net sales for the first quarter of 1999 were $180
million, a decrease of 3% from sales for the same period last year.
Revenues decreased 5% as measured in local currency terms for the
first quarter of 1999. The Company reported income of $0.25 per share
for the first quarter of 1999 compared to income of $0.32 per share
for the same period last year, excluding the non-recurring gain on
sale of equity securities and the litigation settlement.
The following table summarizes sales growth by business segment and
geography in the first quarter of 1999 as compared to the first
quarter of 1998:
<TABLE>
<CAPTION>
Sales Sales
March 31, Growth Growth
in U.S. Local
1999 1998 Dollars Currency
<S> <C> <C> <C> <C>
Biopharmaceutical $ 138 $ 127 10% 7%
& Research
Microelectronics 42 59 (29%) (32%)
Total $ 180 $186 (3%) (5%)
Americas $ 75 $ 82 (9%) (9%)
Europe 59 56 6% 3%
Asia/Pacific 46 48 (2%) (10%)
Total $ 180 $186 (3%) (5%)
</TABLE>
Biopharmaceutical & Research sales, in local currency, increased 7%
in the first quarter of 1999 as compared to the first quarter of
1998. The growth was primarily attributable to consumable filtration
products used in sterile drug production, laboratory research
applications and water filtration devices. The rate of growth for
this segment was negatively impacted by a decrease in revenue from
the sale of large-scale process systems. The order pattern for large
systems is not linear and large orders are received on a periodic
basis which may negatively or positively impact quarterly
comparisons. Sales growth was positive in all geographies, with the
lowest growth rates in the Asia/Pacific region. Some of the
economies of this region have begun to stabilize, but continuing
recessionary conditions still exist in most of these economies.
This segment anticipates continued sales growth for the remainder of
1999.
-8-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In millions, except per share data)
Microelectronics sales in local currency, decreased 32% in the first
quarter of 1999 compared to the first quarter of 1998. This segment
has had negative quarterly sales comparisons starting in the second
quarter of 1998 reflecting the impact of the semiconductor industry
downturn and the recessionary conditions of the Asia/Pacific region.
In the first quarter of 1999, the Company began to see an indication
of a recovery in the semiconductor industry coupled with some
stabilization of the Asian economies. These improvements, although
positive, still continued to negatively impact Microelectronics
demand in this period as compared to the same quarter of the prior
year.
The Microelectronics segment reported sequential sales growth of 12%
in local currency in the first quarter of 1999 as compared with the
fourth quarter of 1998. Recent industry reports suggest a reduction
in excess capacity in the semiconductor industry and some increase in
overall semiconductor demand. While the Company expects these
trends, should they continue, to create increased demand for
Microelectronics equipment as well as consumables, the timing and
extent of the overall industry "recovery" is not certain. The Company
expects to report a moderate decrease in the level of sales for the
Microelectronics segment in the second quarter of 1999 as compared to
the second quarter of 1998.
In the first quarter of 1999 as compared to the first quarter of
1998, the U.S. dollar weakened against most European and Asian
currencies. Since the end of the first quarter of 1999, the U.S.
dollar has strengthened against most European and Asian currencies,
although it is still weaker than reported in 1998. Therefore, if
foreign exchange rates remain at April 30, 1999 levels, then expected
second quarter sales growth in dollars would be approximately 2
percentage points higher than local currency growth rates reported in
the second quarter of 1998. Projected full year 1999 reported sales
growth rates are anticipated to be approximately 1 percentage point
higher than local currency growth rates.
Gross profit margins were 53% of sales in local currencies in the
first quarter of 1999 consistent with those reported in the first
quarter of 1998. The Company expects gross margin percentages in the
second quarter of 1999 to increase slightly over those reported in
the first quarter of 1999.
Selling, general and administrative expenses in local currencies
decreased 2% in the first quarter of 1999 as compared to the first
quarter of 1998 due primarily to cost containment and restructuring
programs initiated during 1998. As a percentage of net sales,
selling, general and administrative expenses in local currencies
increased 1% primarily as a result of a $10 million reduction in net
sales in local currencies.
Research and development expenses in local currencies decreased 7% in
the first quarter of 1999 as compared to the first quarter of 1998
due to the restructuring of certain research and development alliance
agreements and the consolidation of the Company's Microelectronics
operations. Research and development expenses remained unchanged as a
percentage of sales in local currencies for the first three months of
1999 compared to those reported in the same period of the prior year.
Net interest expense in the first quarter of 1999 was higher than the
first quarter of 1998 due primarily to higher interest rates
resulting from the September 1998 renegotiation of the Company's
Revolving Credit Agreement. The Company expects that interest
expense in the second quarter and for the year ended 1999 will be
slightly higher than 1998 due primarily to higher interest rates.
The effective income tax rate for the first quarter of 1999 was
21.0%, the same as the effective income tax rate from continuing
operations for the full year of 1998, excluding the one-time impact
of the restructuring program and the litigation settlement. The
Company expects to sustain the 21.0% tax rate for the remainder of
1999.
-9-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In millions, except per share data)
Foreign Exchange
A substantial portion of the Company's business is conducted outside
of the United States through its foreign subsidiaries. This business
is transacted through the Company's network of international
subsidiaries generally in the local currency. This exposes the
Company to risks associated with foreign currency rate fluctuations,
which can impact the Company's revenue and net income and cash flow.
Sourcing of product from international subsidiary plants and active
management of cross border currency flows partially mitigates the
impact of changes in foreign currency. However, the Company has
significant exposure to changes in the Japanese yen that can not be
mitigated through normal financing or operating activities.
Accordingly, this risk is managed through the use of derivative
financial instruments. The income and cash flow exposure is managed
through the use of option contracts and the net equity exposure is
hedged through the use of debt swap agreements.
The Company has entered into foreign currency option contracts to
sell yen, on a continuing basis in amounts and timing consistent with
the underlying currency transactions. The gains on these
transactions, if any, partially offset the realized foreign exchange
losses on the underlying exposure. As of March 31, 1999, the Company
had open option contracts to sell yen. In the event of a significant
strengthening of the U.S. dollar against the yen, the gains realized
from the exercise of these options will partially mitigate losses
incurred by the Company on the underlying currency exposure. The
financial statement impact of the foreign currency option contracts
was immaterial for the first quarters of 1998 and 1999.
The Company's net equity exposure to the Japanese yen has been
effectively hedged through debt swap agreements covering both
principal and interest. Pursuant to these agreements $110 million of
debt with a weighted average fixed interest rate of 6.7% was swapped
for an equivalent value of yen at a weighted average exchange rate of
114.6 yen to the dollar and a weighted average fixed interest rate of
3.6%. The maturities of the swap agreements match those of the
underlying debt.
Although the Company mitigates its foreign currency exchange risk
through the above activities, when the U.S. dollar strengthens
against currencies in which the Company transacts its business, sales
and net income will be adversely impacted.
Restructuring Charges
In the second quarter of 1998, the Company announced a restructuring
program to improve the competitive position of the Company by
streamlining worldwide operations and reducing the overall cost
structure. The restructuring program was initiated to bring
operating costs in line with lower revenues resulting from the
financial difficulties in Asian economies, the strong U.S. dollar and
the continuation of the semiconductor industry slump.
Key initiatives include:
1. Discontinue non-strategic product lines, rationalize product
offerings and consolidate certain manufacturing operations to
eliminate duplicate manufacturing processes and improve product line
focus.
2. Realign European country organizational structure to focus on
operating business units and establish a regional transaction service
center.
3. Reduce administrative and management infrastructure costs in
Asia.
4. Renegotiate marketing, research and vendor contractual
agreements.
5. Streamline the supply chain management function and consolidate
vendors resulting in cost savings and better customer response.
In the third quarter of 1998, the Company recorded an expense
associated with these activities of $42.8 million ($29.1 million
after tax) including a restructuring charge of $33.6 million and a
$9.2 million charge against cost of sales for inventory and fixed
asset write-offs associated with the rationalization of its product
offering and elimination of non-strategic business lines. The $33.6
million restructuring charge included $18.3 million of employee
severance costs, $9.5 million write-down to fair value of real and
intangible assets associated with discontinued product lines, $3.8
million of lease cancellation costs and $2.0 million of contract
termination costs. Approximately $5.6 million of restructuring costs
were paid in 1998 and $2.0 million in the first quarter of 1999.
These expenditures consisted primarily of severance. The remaining
accrual of $16.5 million will be substantially
-10-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In millions, except per share data)
paid out in 1999, with the remainder paid in future years. The major
programs continuing into 1999 include the realignment of European
operating units, establishment of the European regional transaction
center, streamlining the supply chain management function,
consolidating certain manufacturing operations and cancellation of
leases.
The restructuring initiatives combined with the consolidation of the
Company's Microelectronics plants resulted in the elimination of 620
positions worldwide. Notification to employees was completed in
1998, however a small number of these employees will continue in
their existing positions through 1999 with their related salary costs
charged to operations as incurred. Under the terms of the severance
agreements, the Company expects to pay severance and associated
benefits through the early part of 2000.
When fully implemented the combination of the restructuring programs
and the Microelectronics plant consolidation are expected to yield
annualized savings of $38.0 million as compared to the annualized
results of the second quarter of 1998. The savings in employee
compensation, facility related costs, depreciation and amortization
will be primarily reflected as reductions in Cost of Sales. In the
first quarter of 1999, the Company realized savings of approximately
$8.0 million and anticipates approximately $36 million of savings for
the full year.
Capital Resources And Liquidity
Cash generated by operations in the first three months of 1999 was
$9.8 million compared to cash used by operations of $0.9 million in
the first three months of 1998. During the first three months of
1999 and 1998, cash expenditures amounting to $4.1 million and $4.5
million, respectively, were charged against reserves established for
the 1998 restructuring activities and the integration of the Amicon
and Tylan Acquisitions. Excluding the restructuring and acquisition
related expenditures, cash flow from operations for the first three
months of 1999 and 1998 was $13.9 million and $3.6 million,
respectively.
The increase in cash flow from operations, excluding the
restructuring and acquisition expenditures, for the first three
months of 1999 as compared to the same period of the prior year is
primarily a result of improved inventory utilization attributed to
asset management initiatives launched in 1998 and reserve actions
taken as part of the 1998 restructuring program. Partially
offsetting this is an increase in accounts receivables resulting from
significantly higher sales volume late in the first quarter of 1999.
The Company continues to aggressively manage its collection
activities. This resulted in a decrease in the days sales
outstanding from 86 days in the first quarter of 1998 to 79 days in
the first quarter of 1999.
Cash generated by the Company during the first three months of 1999
was used to reduce short-term debt, invest in property, plant and
equipment, and pay dividends. Property, plant and equipment
expenditures for the first three months of 1999 were $5.9 million
lower than the same period of the prior year due to the construction
in 1998 of the new manufacturing facility in Allen, Texas which was
substantially completed during that year. The Company expects to
spend a total of $40.0 to $45.0 million for property, plant and
equipment during 1999.
Euro
On January 1, 1999, several member countries of the European Union
established fixed conversion rates between their existing sovereign
currencies, and adopted the Euro as their new common legal currency.
As of that date, the Euro trades on currency exchanges and the legacy
currencies will remain legal tender in the participating countries
for a transition period between January 1, 1999 and January 1, 2002.
In the first quarter of 1999, the Company began invoicing certain
customers and intercompany transactions in the Euro.
-11-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In millions, except per share data)
Year 2000
The Company is aware of the "Year 2000" issue that will affect
certain products and systems that were not designed to properly
handle the transition between the twentieth and twenty-first
centuries. The Company has recognized the need to ensure that its
business operations will not be adversely impacted by the Year 2000.
Accordingly, 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 have
been or are being assessed are the Company's internal information
systems, its manufacturing equipment, its facilities and its
products. In addition, the team has moved forward in its assessment
of the Year 2000 readiness of the Company's key suppliers and
financial institutions.
As part of the assessment of its Year 2000 readiness, the Company has
identified and substantially completed testing its key internal
information systems (which includes order entry, manufacturing and
financial systems) as well as its facilities, manufacturing and other
key systems for Year 2000 compliance. By mid-1999, the Company
expects to complete implementation of all modifications or
replacements necessary to make all key systems Year 2000 compliant.
The Company has substantially completed its testing of the Year 2000
compliance of its products. A large majority of the Company's
products do not present Year 2000 compliance issues, and for those
products that do present issues the Company has communicated with its
customers regarding appropriate solutions.
In addition to testing of the Company's internal systems and its
products, the Company is implementing its plan of communication with
its suppliers and financial institutions regarding their Year 2000
readiness and the Year 2000 compliance of the products and services
that they provide to the Company. As of March 31, 1999 the Company
has not identified any important Year 2000 readiness issues of its
key supply-chain partners. The Company expects to substantially
complete its risk analysis and to develop contingency plans where
reasonably possible for dealing with risks raised by such non-
readiness before July 1999.
The Company currently estimates that the total costs that will be
incurred in its Year 2000 assessment and remediation program will be
in the range of $1.0 million to $3.0 million, of which approximately
$0.8 million has been incurred through March 31, 1999. Incremental
spending has not been and is not expected to be material because most
Year 2000 readiness costs will be met with amounts that are normally
budgeted for procurement and maintenance of the Company's information
systems and infrastructure. However, the redirection of spending to
the implementation of its Year 2000 readiness program may in some
instances delay productivity improvements.
The Year 2000 presents a number of risks and uncertainties that could
affect the Company notwithstanding the successful implementation of
its Year 2000 readiness program. Those risks and uncertainties
include, but are not limited to, failure of utilities or
transportation systems, competition for personnel skilled in
remediation of Year 2000 issues, and the nature of government
responses to the Year 2000.
Though the Company continues to believe that the Year 2000 will not
have a material impact on its business, financial condition or
results of operations, the occurrence of any of the above risks or
uncertainties or the failure to successfully implement the Company's
Year 2000 readiness program could result in such a material impact.
-12-
Part II - Other Information
Item 1. Legal Proceedings
In 1991 the Company brought suit against The Travelers Indemnity
Company, Hartford Accident and Indemnity Company and Insurance
Company of North America in U.S. District Court for the District
of Massachusetts with respect to four Superfund sites and one
other site at which the Company had been named a potentially
responsible party, seeking recovery of the full costs of defending
the actions at such sites, indemnification for its liability and
damages for unfair and deceptive insurance practices. The case
against The Travelers Indemnity Company was previously dismissed
and that dismissal upheld on appeal. The case against Hartford
Accident and Indemnity Company was settled during 1998. The case
against Insurance Company of North America was settled effective
April 23, 1999.
Item 4. Submission of Matters to a Vote of Security Holders
a. The Annual Meeting of Stockholders of Millipore Corporation was
held on April 22, 1999.
b. The following four matters were voted upon at the Annual
Meeting: (1) the election of three Class III Directors for a three-
year term; (2) the adoption of the Millipore Corporation 1999 Stock
Incentive Plan; (3) the amendment of the Millipore Corporation 1995
Employee's Stock Purchase Plan and (4) the adoption of the Millipore
Corporation 1999 Stock Option Plan for Non-Employee Directors. The
following votes were tabulated with respect to the election:
<TABLE>
<CAPTION>
Number of shares
<S> <C> <C> <C> <C> <C>
Matter Voted Upon Votes Absten- Broker
"For" Withheld Against tions Non-Votes
Election of
Directors:
Elaine L. Chao 36,733,165 2,097,815
Maureen A. Hendricks 36,737,643 2,093,337
Thomas O. Pyle 36,725,275 2,105,705
Adoption of the
Millipore Corporation
1999 Stock Incentive
Plan 22,486,175 12,691,325 153,812 3,499,668
Amendment of the
Millipore Corporation
1995 Employee's Stock
Purchase Plan 30,539,488 4,634,298 148,478 3,508,716
Adoption of the
Millipore Corporation
1999 Stock Option
Plan for Non-Employee
Directors 28,698,062 6,478,482 154,767 3,499,669
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
27 Article 5 Financial Data Schedule - for the three months
ended March 31, 1999
-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
May 7, 1999 /s/ Kathleen B. Allen
Date Kathleen B. Allen
Chief Accounting Officer
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 28,736
<SECURITIES> 0
<RECEIVABLES> 158,915
<ALLOWANCES> 0
<INVENTORY> 101,434
<CURRENT-ASSETS> 298,238
<PP&E> 419,612
<DEPRECIATION> 191,387
<TOTAL-ASSETS> 743,164
<CURRENT-LIABILITIES> 287,928
<BONDS> 0
<COMMON> 56,988
0
0
<OTHER-SE> 74,177
<TOTAL-LIABILITY-AND-EQUITY> 743,164
<SALES> 180,403
<TOTAL-REVENUES> 180,403
<CGS> 84,895
<TOTAL-COSTS> 84,895
<OTHER-EXPENSES> 74,178
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,779
<INCOME-PRETAX> 14,250
<INCOME-TAX> 2,993
<INCOME-CONTINUING> 11,257
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,257
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.25
</TABLE>
