Back to GetFilings.com
-1-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (Fee required)
For the fiscal year ended December 31, 1996 or
Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (No fee required)
For the transition period from ___________ to
______________
Commission File Number 0-1052
MILLIPORE CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2170233
(State or Other Jurisdiction of (I.R.S. Employer
Identification No.)
Incorporation or Organization)
80 Ashby Road, Bedford, MA 01730
(Address of principal executive offices) (Zip Code)
(617) 275-9200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Exchange
Title of Class on Which Registered
Common Stock, $1.00 Par Value New York Stock Exchange,
Inc
Securities registered pursuant to Section 12(g) of the Act:
None
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 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 by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein
and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of Form 10-K or any
amendment to this Form 10-K.
As of February 21, 1997, the aggregate market value of the
registrant's voting stock held by non-affiliates of the
registrant was approximately $1,907,834,434 based on the
closing price on that date on the New York Stock Exchange.
As of February 21, 1997, 43,432,561 shares of the
registrant's Common Stock were outstanding.
Item 1. Business.
The Company
Millipore Corporation was incorporated under the laws of
Massachusetts on May 3, 1954. Millipore is a leader in the field
of membrane separations technology and develops, manufactures and
sells products which are used primarily for the analysis,
identification and purification of fluids. Millipore's products
are based on a variety of membrane and other technologies that
effect separations, principally through physical and chemical
methods. Millipore is an integrated multinational manufacturer
of these products. During 1996 approximately 65% of Millipore's
net sales were made to customers outside the United States.
Geographic segment information is discussed in Note Q to the
Millipore Corporation Consolidated Financial Statements (the
"Financial Statements"). Unless the context otherwise requires,
the terms "Millipore" or the "Company" mean Millipore Corporation
and its subsidiaries (including, except where noted, the Amicon
Separation Science Business of W. R. Grace & Co. ("Amicon") and
excluding Tylan General, Inc. ("Tylan"), described below).
On December 31, 1996, Millipore acquired Amicon for a
purchase price of $129,300,000 in cash (including transaction
costs). Amicon develops, manufactures and sells molecular
separation and purification products for the life science
research laboratory and for pharmaceutical/biotechnology
manufacturing applications. The technologies employed in its
products consist primarily of membrane ultrafiltration and liquid
chromatography. Amicon's 1996 revenues were approximately
$57,000,000. For further financial information concerning the
accounting for the purchase of Amicon see Note C to the Financial
Statements. For a discussion of the Tylan General, Inc.
acquisition and business see page 6.
Products and Technologies
For analytical applications, the Company's products are used
to gain knowledge about a molecule, compound or micro-organism by
detecting, identifying and quantifying the relevant components of
a sample. For purification applications, the Company's products
are used in manufacturing and research operations to isolate and
purify specific components or to remove contaminants.
The principal separation technologies utilized by the
Company are based on membrane filters, and certain chemistries,
resins and enzyme immunoassays and liquid chromatography.
Membranes are used to filter either the wanted or the unwanted
particulate, bacterial, molecular or viral entities from fluids,
or to concentrate and retain such entities (in the fluid) for
further processing. Some of the Company's newer membrane
materials also use affinity, ion-exchange or electrical charge
mechanisms for separation.
Both analytical and purification products incorporate
membrane and other technologies. The Company's products include
disc and cartridge filters and housings of various sizes and
configurations, filter-based test kits and precision pumps and
other ancillary equipment and supplies.
The Company sells more than 3,000 products. Most of the
Company's products are listed in its catalogs and are sold as
standard items, systems or devices. For special applications,
the Company assembles custom products, usually based upon
standard modules and components. In certain instances
(particularly with respect to process chromatography), the
Company also designs and engineers process systems to meet
specific needs of the customer. The Company's products also
include, in some cases, proprietary software designed to operate
and/or integrate certain of its other products or systems
(particularly membrane ultrafiltration and chromatography
systems).
Customers and Markets
The Company sells its products primarily to the following
markets: to pharmaceutical/biotechnology, microelectronics,
chemical and food and beverage companies for use in their
manufacturing procedures; and to government, university and
private research and testing analytical laboratories. Within
each of these markets, the Company focuses its sales efforts upon
those segments where customers have specific requirements which
can be satisfied by the Company's products.
Pharmaceutical/Biotechnology Industry. The Company's
products are used by the pharmaceutical/biotechnology industry in
sterilization, including virus reduction, and sterility testing
of products such as antibiotics, vaccines, vitamins and protein
solutions; concentration and fractionation of biological
molecules such as vaccines and blood products; cell harvesting;
isolation and purification of compounds from complex mixtures and
the purification of water for laboratory use. The Company's
membrane products also play an important role in the development
of new drugs. In addition, Millipore has developed and is
developing products for biopharmaceutical applications in order
to meet the purification requirements of the biotechnology
industry.
Microelectronics Industry. The microelectronics industry
uses the Company's products to purify (by removing particles and
unwanted contaminating molecules), deliver, and monitor the
liquids and gases used in the manufacturing processes of
semiconductors and other microelectronics components. Sales to
the microelectronics market accounted for 28.1 percent of
Millipore's 1996 consolidated sales. The microelectronics
manufacturing market has experienced historic volatility, and the
effect of any such volatility in the future could significantly
affect Millipore's sales growth.
Chemical Industry. Chemical manufacturers and processors
use the Company's products for purification of reagent grade
chemicals, for monitoring the atmosphere and waste streams in the
industrial workplace and for the purification of water for
laboratory use.
Food and Beverage Industry. The Company's products are used
by the food and beverage industry in quality control and process
applications principally to monitor for microbiological
contamination; to remove bacteria and yeast from products such as
wine and beer, in order to prevent spoilage.
Universities and Government Agencies. Universities,
governments and private and corporate research and testing
laboratories, environmental science laboratories and regulatory
agencies purchase a wide range of the Company's products.
Typical applications include: purification of proteins; cell
culture, and cell structure studies and interactions;
concentration of biological molecules; fractionation of complex
molecular mixtures; and collection of microorganisms. The
Company's water purification products are used extensively by
these organizations to prepare high purity water for sensitive
assays and the preparation of tissue culture media.
Sales and Marketing
The Company sells its products within the United States
primarily to end users through its own direct sales force and, in
the case of analytical products, to a limited extent through an
independent distributor. The Company sells its products in
foreign markets through the sales forces of its subsidiaries and
branches located in more than 30 major industrialized and
developing countries as well as through independent distributors
in other parts of the world. During 1996, the Company's
marketing, sales and service forces (including Tylan) consisted
of approximately 379 employees in the United States and 702
employees abroad.
The Company's marketing efforts focus on application
development for existing products and on new and differentiated
products for other existing, newly-identified and proposed
customer uses. The Company seeks to educate customers as to the
variety of analytical and purification problems which may be
addressed by its products and to adapt its products and
technologies to separations problems identified by customers.
The Company believes that its technical support services are
important to its marketing efforts. These services include
assisting in defining the customer's needs, evaluating
alternative solutions, designing a specific system to perform the
desired separation; training users, and assisting customers in
compliance with relevant government regulations.
Research and Development
In its role as a pioneer of membrane separations, Millipore
has traditionally placed heavy emphasis on research and
development. Research and development activities include the
extension and enhancement of existing separations technologies to
respond to new applications, the development of new membranes,
and the upgrading of membrane based systems to afford the user
greater purification capabilities. Research and development
efforts also identify new separations applications to which
disposable separations devices would be responsive, and develop
new configurations into which membrane and ion exchange
separations media can be fabricated to efficiently respond to the
applications identified. Instruments, hardware, and accessories
are also developed to incorporate membranes, modules and devices
into total separations systems. Introduction of new applications
frequently requires considerable market development prior to the
generation of revenues. Millipore performs substantially all of
its own research and development and does not provide material
amounts of research services for others. Millipore's research
and development expenses (excluding Amicon and Tylan) in 1994,
1995 and 1996 with respect to continuing operations were,
$34,327,000, $36,515,000 and $38,429,000, respectively. Amicon's
research and development expenses in 1994, 1995 and 1996 were
$4,144,000, $4,439,000, and $5,180,000, respectively. Tylan's
research and development expenses in Fiscal 1994, 1995 and 1996
were $4,189,000, $7,526,000, and $11,807,000, respectively. See
Management's Discussion and Analysis of Financial Condition and
Results of Operations in Item 7 of this report and also footnotes
to Selected Financial Data in Item 6 below for a discussion of
research and development write-offs relating to the Amicon and
Tylan acquisitions.
The Company has traditionally licensed newly developed
technology from unaffiliated third parties and/or acquired
distribution rights with respect thereto, when it believes it is
in its long term interests to do so. In this tradition, in
November of 1995 Millipore entered into an agreement with IBC
Advanced Technologies to combine their technologies to create a
new class of purification products which Millipore intends to
take to its customers in its markets. This technology places
ligands (organic molecules) on membranes in order to selectively
bind with a target molecule in solution, for example a calcium,
iron or aluminum ion. Similarly, in May of 1996 Millipore
entered into an R&D supply and distribution agreement with Celsis
International plc. designed to enhance Millipore's entry into the
rapid microbiological market, where there is a need for faster,
easier and more accurate ways to detect microbiological
contamination. The Celsis technology focuses on the development
and supply of rapid diagnostics and monitoring systems to detect
and measure microbial contamination.
Millipore has been granted a number of patents and licenses
and has other patent applications pending both in the United
States and abroad. While these patents and licenses are viewed
as valuable assets, Millipore's patent position is not of
material importance to its operations. Millipore also owns a
number of trademarks, the most significant being "Millipore."
Competition
The Company faces intense competition in all of its markets.
The Company believes that its principal competitors include Pall
Corporation, Barnstead Thermolyne Corporation and Sartorius GmbH.
Certain of the Company's competitors are larger and have greater
resources than the Company. However, the Company believes that
it offers a broader line of products, making use of a wider range
of separations technologies and addressing a broader range of
applications than any single competitor.
While price is an important factor, the Company competes
primarily on the basis of technical expertise, product quality
and responsiveness to customer needs, including service and
technical support.
Environmental Matters
The Company is subject to numerous federal, state and foreign
laws and regulations that impose strict requirements for the
control and abatement of air, water and soil pollutants and the
manufacturing, storage, handling and disposal of hazardous
substances and waste. These laws and regulations include the
federal Comprehensive Environmental Response, Compensation, and
Liability Act, the Clean Air Act, the Clean Water Act and the
Resource Conservation and Recovery Act. The Company is in
substantial compliance with applicable environmental
requirements. Because regulatory standards under environmental
laws and regulations are becoming increasingly stringent,
however, there can be no assurance that future developments will
not cause the Company to incur material environmental liabilities
or costs.
Under the Clean Air Act Amendments of 1990 ("CAA"), the
Environmental Protection Agency ("EPA") has been directed, among
other things, to develop standards and permit procedures with
respect to certain air pollutants. Because many of the
implementing regulations have not yet been promulgated, the
Company cannot make a final assessment of the impact of the CAA.
Based upon its preliminary review of the CAA, however, the
Company currently believes that compliance with the CAA will not
have a material adverse impact on the operations or financial
condition of the Company.
Tylan General, Inc. Acquisition
Millipore acquired all the shares of Tylan effective as of
January 27, 1997. The acquisition of the shares of Tylan was
at a price of $16 per share, or approximately $133,000,000.
Millipore also assumed Tylan's outstanding debt, net of cash,
of approximately $23,600,000. Tylan develops, manufactures,
markets and sells a broad range of components used in the
handling of process gases for the semiconductor industry.
Tylan had 1996 sales of approximately $148,000,000. For
further financial information concerning the accounting
treatment of the Tylan acquisition, see Note D to the
Financial Statements on Page F-15 of this report.
Products and Technologies
Tylan's mass flow controllers measure mass flow by separating
a small portion of the main gas stream and sensing the heat
transfer it creates as it flows through a small measuring
capillary. This information is used by the product's servo
control circuit as it adjusts the position of the product's
internal control valve. The result is a highly accurate,
reliable and repeatable measurement and control of the process
gas flow rate.
Tylan's pressure products are used to measure and control
pressure in process reactors. Tylan's capacitance diaphragm
gauges can be used to measure total pressure in a process
chamber and, when used in conjunction with a variable
conductance valve and a pressure controller, can be used to
control the pressure in process reactors.
Gas panels are typically comprised of mass flow controllers,
filters, purifiers, shut-off valves, regulators and other
associated hardware. Their purpose is to manage the on-tool
handling of the gases that are supplied to the system. The
process gases in a semiconductor fabrication facility are
generally stored in large bulk containers and are distributed
throughout the facility in highly pressurized pipes or gas
lines. Once delivered to the tool, particles and contaminants
must be removed, gas flow rates must be measured and
controlled and the resultant mixture of process gases must be
routed to the process chamber. These critical functions are
performed by the gas panel. Tylan designs and manufactures
ultraclean gas panels both for new process tools and for
retrofit or replacement on existing tools. In response to the
growing demand for ultraclean gas panels, it has recently
developed the Intelligent Gas Panel, which allows real-time
monitoring of mass flow controller performance.
Sales and Marketing
Tylan primarily sells its products through a worldwide network
of direct sales personnel augmented by strategically located
distributors and representatives.
Tylan services products from six Company-owned service offices
in the United States. Internationally, it provides service
through seven Company-owned service offices: Korea, Japan, the
United Kingdom, France, Germany (two locations) and Scotland.
All of these offices provide calibration of ultraclean mass
flow controllers in modern clean room facilities. In
addition, service is also provided internationally through
agreements with certain key distributors in Taiwan, Singapore,
Ireland and Israel.
Customers and Markets
Tylan's customers are primarily manufacturers of semiconductor
wafer processing equipment. It also sells retrofit or
replacement parts directly to integrated circuit
manufacturers. These manufacturers often specify to their
equipment suppliers which vendor's process instrumentation
should be supplied with a particular process tool.
Research & Development
Tylan's research and development efforts are focused on
developing products that address the evolving needs of its
customers and enhancing its existing products. The markets in
which it competes are characterized by evolving industry
standards and continuous improvements in products and
services. To compete effectively in such markets, Tylan must
continually improve its products and develop new products that
compare favorably on the basis of price and performance. The
markets in which Tylan's customers compete are also
characterized by rapidly changing technology and emerging
industry standards. Consequently, Tylan must adapt its
products to meet such technological changes and support such
standards.
Competition
The market for Tylan's products is highly competitive.
Significant competitive factors include cost of ownership,
historical relationships, product quality, performance, size
of installed base, breadth of product line and customer
service and support.
Tylan competes with a number of companies in its mass flow
controller markets and with other companies, including MKS
Instruments, in its pressure products markets.
Although Tylan has achieved significant sales of its pressure
products to the Japanese market, the Japanese mass flow
control market has been difficult for non-Japanese companies
to penetrate. In addressing the Japanese mass flow control
market, Tylan is at a competitive disadvantage compared to
Japanese suppliers, many of which have long-standing
collaborative relationships with Japanese integrated circuit
manufacturers and their equipment suppliers.
Restructuring and Divestitures
In August 1994, Millipore completed the divestiture of its
Instrumentation Divisions (the Waters Chromatography business
and the non-membrane bioscience instrument business). The
Company realized a net loss of $3.4 million in 1994 upon the
disposition of those divisions, including all costs estimated to
be incurred in connection with the divestitures as well as the
pre-tax operating losses generated by those divisions from
November 11, 1993 through the date of completion of the
divestitures.
Other Information
Since April of 1988, the Company has had in place a
shareholder rights plan (the "Rights Plan") pursuant to which it
declared a dividend to its shareholders of the right to purchase
(a "Right"), for each share of Millipore Common Stock owned, one
additional share of Millipore Common Stock at a price of $80 for
each share (giving effect to the 1995 two for one stock split).
The Rights Plan is designed to protect Millipore's shareholders
from attempts by others to acquire Millipore on terms or by
using tactics that could deny all shareholders the opportunity
to realize the full value of their investment. The Rights will
be exercisable only if a person or group of affiliated or
associated persons acquires beneficial ownership of 20% or more
of the outstanding shares of the Company Common Stock or
commences a tender or exchange offer that would result in a
person or group owning 20% or more of the outstanding Common
Stock. In such event, or in the event that Millipore is
subsequently acquired in a merger or other business combination,
each Right will entitle its holder to purchase, at the then
current exercise price, shares of the common stock of the
surviving company having a value equal to twice the exercise
price.
Millipore's products are made from a wide variety of raw
materials which are generally available in quantity from
alternate sources of supply; as a result, Millipore is not
substantially dependent upon any single supplier.
As of December 31, 1996, Millipore (excluding Amicon and
Tylan) employed 3,482 persons worldwide, of whom 1,707 were
employed in the United States and 1,775 overseas. Amicon
employed approximately 400 employees at year end 1996, and Tylan
employed approximately 800 employees at year end 1996.
Executive Officers of Millipore
The following is a list as of March 1, 1997 of the Executive
Officers of Millipore. All of the following individuals were
elected to serve until the Directors Meeting next following the
1997 Annual Stockholders Meeting.
First Elected:
To
An Present
Name Age Office Officer Office
C. William Zadel 53 Chairman of the Board 1996 1996
President and Chief
Executive Officer of
the Corporation
Geoffrey Nunes 66 Senior Vice President 1976 1980
of the Corporation
Michael P. Carroll 46 Vice President
of the Corporation 1992 1992
and Chief Financial
Officer
Douglas B. Jacoby 50 Vice President 1989 1989
of the Corporation
John E. Lary 50 Vice President 1994 1994
of the Corporation
Joanna Nikka 45 Vice President 1996 1996
of the Corporation
Jeffrey Rudin 45 Vice President 1996 1996
of the Corporation
and General Counsel
Hideo Takahashi 55 Vice President of 1996 1979
the Corporation and (As President
President of Nihon of Nihon
Millipore Millipore)
Mr. Zadel was elected President, Chief Executive Officer and
Chairman on February 20, 1996. Mr. Zadel had been, since 1986,
President and Chief Executive Officer of Ciba Corning Diagnostics
Corp., a company that develops, manufactures and sells medical
diagnostic products. Prior to that he was Senior Vice President
of Corning Glass Works' (now Corning Inc.) Americas Operations
(1985) and Vice President of business development (1983). Mr.
Zadel currently serves on the Boards of Directors of Kulicke and
Soffa Industries, Inc., Matritech, Inc. and Zoll Medical
Corporation.
Mr. Nunes joined Millipore in 1976 as Vice President and
General Counsel and was elected a Senior Vice President in 1980.
Mr. Nunes has announced that he will be retiring from Millipore
at the end of April 1997.
Mr. Carroll joined Millipore in 1986 as Vice
President/Finance for the Membrane Products Division following a
ten-year career in the general practice audit division of Coopers
and Lybrand. In 1988, Mr. Carroll assumed the position of Vice
President of Information Systems (worldwide) and in December of
1990, he became the Vice President of Finance for the Company's
Waters Chromatography Division. Mr. Carroll was elected to
Corporate Vice President, Chief Financial Officer and Treasurer
in February, 1992. Mr. Carroll has been designated President
Millipore Asia Ltd, a position he will assume once his successor
as Chief Financial Officer has been appointed and installed. He
will remain a Corporate Vice President.
Mr. Jacoby joined Millipore in 1975. After serving in
various sales and marketing capacities, Mr. Jacoby became
Director of Marketing for the Millipore Membrane Products
Division in 1983 and in 1985, he assumed the position of General
Manager of the Membrane Pharmaceutical Division. In 1987, Mr.
Jacoby assumed responsibility for the Company's process membrane
business and in 1994 assumed responsibility for the sales,
marketing and R&D for all of the Company's worldwide business.
Mr. Jacoby was elected a Corporate officer in December, 1989.
Mr. Lary was elected a Corporate Vice President in November
1994, and is responsible for the worldwide operations of the
Company. From May of 1993 until his election as a Corporate Vice
President, Mr. Lary served as Senior Vice President and General
Manager of the Americas Operation. For the ten years prior to
that time, he served as Senior Vice President of the Membrane
Operations Division of Millipore.
Ms. Nikka was elected Corporate Vice President for Human
Resources in November 1996. Ms. Nikka was Vice President at
Fidelity Investments from 1991 to November 1996. Prior to
joining Fidelity in 1991, Ms. Nikka was Vice President of Human
Resources at Symbolics, Inc.
Mr. Rudin was elected Corporate Vice President and General
Counsel in December 1996. Prior to joining Millipore, and since
1993 Mr. Rudin was Senior Vice President and General Counsel of
Ciba Corning Diagnostics Corporation and was Vice President and
General Counsel of that company from 1988 until 1993.
Mr. Takahashi joined Millipore in 1979 as President and
Chief Executive Officer of its Japanese subsidiary, Nihon
Millipore Ltd. Mr. Takahashi was elected as a Vice President of
the Company on February 8, 1996.
Item 2. Properties.
Millipore owns approximately 1.25 million square feet of
facilities located in the United States, Europe and Japan. The
following table identifies the principal properties owned by
Millipore and describes the purpose, floor space and land area of
each.
Floor
Space Land Area
Location Facility Sq. Ft. Acres
Bedford, Executive Offices, research, 352,000 31
MA pilot production & warehouse
Danvers Manufacturing and office 65,000 16
MA
Jaffrey, Manufacturing, warehouse 169,000 31
NH and office
Cidra, Manufacturing, warehouse 134,000 36
Puerto Rico and office
Molsheim, Manufacturing, warehouse 148,000 20
France and office
St. Quentin Office and research 50,000 5
France
Nancy, Office and research 20,000 6
France
Cork, Manufacturing 83,000 20
Ireland
Limerick, Manufacturing and warehouse 20,000 <1
Ireland
Stonehouse Manufacturing and office 35,000 1
United Kingdom
Yonezawa, Manufacturing and warehouse 144,000 7
Japan
TOTAL 1,248,000 173
The facilities located in Cidra, Puerto Rico and Yonezawa, Japan are
currently underutilized by approximately 25% and 50%, respectively,
allowing for future manufacturing and distribution growth. The
small facility in Limerick is approximately 70% underutilized.
_____________________________________
In addition to the above properties, Millipore has entered
into a long term lease for premises abutting its Bedford
facility. This lease makes 75,000 square feet of building
available to Millipore and contains rights of first refusal and
options with respect to the purchase of the premises by Millipore
and the sale of the premises to Millipore. During 1988 Millipore
entered into a 10-year lease for a building of 130,000 square
feet located in Burlington, Massachusetts, approximately 5 miles
from its Bedford headquarters. This lease contains a single 5-
year extension option. In 1991 the Company entered into a 15-year
lease with renewal options for an aggregate of 20 years, as well
as a purchase option covering a 134,000 square foot building
which is adjacent to the leased property referred to in the first
sentence of this paragraph, and which houses the Company's
Process System Business, as well as the customer training
laboratories for this group.
In addition to its foregoing properties, Millipore currently
leases various manufacturing, sales, warehouse, and
administrative facilities throughout the world. Such leases
expire at different times through 2006. The rented space
aggregate is approximately 717,000 square feet (including leased
facilities acquired in the Amicon transaction) and cost was
approximately $9,034,000 in 1996. No single lease, in opinion of
Millipore, is material to its operations.
Tylan maintains offices and a manufacturing facility for its
pressure measurement and control products in a leased 43,700
square foot facility in San Diego, California. The lease on this
facility will expire in March 2006. Tylan's primary
manufacturing facility for mass flow control products is located
in a leased 54,200 square foot facility in Rancho Dominguez,
California. The lease on this facility will expire in July 2005.
Tylan also leases a 9,700 square foot manufacturing facility for
gas panel products in Austin, Texas under a lease that expires in
August 1997, and leases a 85,000 square foot manufacturing
facility in Plano, Texas under a lease expiring in 2005. Tylan
has additional leased sales and service facilities in San Jose,
California, Tempe, Arizona and Salem, New Hampshire.
Tylan's principal European manufacturing facility is leased by
its subsidiary in Swindon, England, The 6,900 square foot
facility serves as the European headquarters for manufacturing.
Tylan's subsidiaries also lease a 6,100 square foot sales and
service facility in Eching, Germany, a 570 square foot sales and
service facility in Dresden, Germany, a 4,800 square foot sales
and service facility in St. Quentin Fallavier, France and a 1,000
square foot facility in Livingston, Scotland.
Tylan General K.K. leases a 9,300 square foot manufacturing,
sales and service center in Yokohama, Japan. In addition, Tylan
General Korea Ltd. leases a 1,700 square foot sales and service
facility and Hanyang General Co., Ltd. leases a 1,700 square foot
manufacturing facility, both of which are located in Kyunggi-Do,
Korea.
Millipore is of the opinion that all the facilities owned or
leased by it are well maintained, appropriately insured, in good
operating condition and suitable for their present uses.
Item 3. Legal Proceedings.
Millipore has been, over the last 13 years, notified that
the EPA has determined that a release or a substantial threat of
a release of hazardous substances (a "Release") as defined in
Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the
Superfund Amendments and Reauthorization Act of 1986 (SARA), or
analogous state law ("CERCLA" or "Superfund") has occurred at
twelve sites to which chemical wastes generated by the
manufacturing operations of Millipore or one of its divisions may
have been sent. These notifications typically also allege that
Millipore is a potentially responsible party ("PRP") under CERCLA
with respect to any remedial action needed to control or prevent
any such Release. Because CERCLA provides for strict, joint and
several liability, a government plaintiff could seek to recover
all remediation costs at a waste disposal site from any one of
the PRPs, including the Company. Generally, where there are a
number of financially viable PRPs, liability has been
apportioned, or the Company believes, based on its experience
with such matters, that liability will be apportioned, based on
the type and amount of waste disposed of by each PRP at such
disposal site and the number of financially viable PRPs. No
assurance can be given, however, that this method of
apportionment will be used at any particular site.
The Company has paid approximately $14 million to date
pursuant to consent decrees with the EPA and relevant state
agencies to settle its liability at seven of the Superfund sites
at which the Company has been named a PRP. These consent decrees
provide the Company with a release from further liability with
respect to certain covered matters. However, as is typical with
such consent decrees, EPA and the relevant state agencies reserve
the right to maintain actions against the settling parties,
including the Company, in the event certain actions occur or do
not occur. In addition, third party private actions could be
brought against the Company for matters not covered in the
consent decrees.
The Company is currently appealing a decision by a federal
district court located in Massachusetts, which held that the
Company's insurers were not required to indemnify the Company for
costs incurred at five of the Superfund sites at which the
Company is named a PRP. If the Company loses on appeal, the
Company will not receive reimbursement from its carriers at any
of the Superfund sites.
The Company believes it has sufficient reserves, which do
not assume recovery from its insurance carriers, to satisfy the
Company's estimated remaining liabilities at the twelve Superfund
sites. The Company believes that, based on the number and size
of financially solvent PRPs participating at each Superfund site,
the amount and types of wastes disposed of by the Company at
these sites, and the likely availability of contribution from
other PRP's in the event the Company were held jointly and
severally liable at any of the sites, the aggregate of any future
remaining potential liabilities should not have a material
adverse effect on the Company's financial condition.
The Company and Waters Corporation are 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. The
Company believes that it has meritorious arguments and should
prevail in these litigations. The ultimate disposition is not
expected to have a material adverse effect on the Company's
financial condition, although any settlement of this matter may
impact the Company's financial statements in a particular period.
Item 4. Submission of Matters to a Vote of Security Holders.
This item is not applicable.
PART II
Item 5. Market for Millipore's Common Stock, and Related Stockholder
Matters.
Millipore Stock Prices
Stock price data from the New York Stock Exchange is based on
high and low sales prices. There were approximately 3,355
shareholders of record as of December 31, 1996.
Dividends
Declared
Range of Stock Prices Per Share
1996 1995 1996 1995
High Low High Low
First Quarter $47.13 $36.00 $28.69 $22.88 $0.080 $0.075
Second Quarter 47.13 35.50 34.56 27.00 0.090 0.080
Third Quarter 43.13 33.88 39.13 31.75 0.090 0.080
Fourth Quarter 43.00 33.63 41.50 34.13 0.090 0.080
Item 6. Selected Financial Data.
(In thousands except
per share) 1996(a) 1995 1994 1993 1992
Net sales $618,735 $594,466 $497,252 $445,366 $427,188
Cost of sales 249,443 243,849 212,675 193,575 195,462
Gross profit 369,292 350,617 284,577 251,791 231,726
Selling, general and 202,140 195,026 159,591 145,647 142,701
administrative expenses
Research and development 38,429 36,515 34,327 34,952 32,953
expenses
Purchased research & 68,311 - - - -
development expense(b)
Operating income 60,412 119,076 90,659 71,192 56,072
Gain on sale of equity 5,329 - - - -
securities
Other income (expense), net - - (10,800) - (2,415)
Interest income 2,780 1,682 4,091 4,069 6,888
Interest expense (11,498) (10,623) (7,035) (12,038) (14,692)
Income from continuing
operations before income taxes 57,023 110,135 76,915 63,223 45,853
Provision for income taxes 13,401 24,781 17,306 14,225 10,317
Income from continuing
operations before extraordinary 43,622 85,354 59,609 48,998 35,536
item
Earnings (loss) from - - - (10,851) 2,715
discontinued operations
Loss on disposal of - - (3,400) - -
discontinued operations(c)
Income before extraordinary
item and cumulative effect
of change in accounting 43,622 85,354 56,209 38,147 38,251
principle
Extraordinary item-loss on - - - (3,544) -
early extinguishment of debt
Cumulative effect of change in
accounting
for postretirement - - - - (5,068)
benefits
Net income $43,622 $85,354 $56,209 $34,603 $33,183
Net income per common share:
Income from continuing $1.00 $1.90 $1.09 $0.88 $0.63
operations
Net income per common 1.00 1.90 1.03 0.62 0.59
share
Cash dividends declared per 0.35 0.315 0.295 0.275 0.255
share
Average common shares and 43,602 44,985 54,726 55,902 56,484
equivalents
Financial Data
Working capital $95,512 $90,337 $100,649 $232,865 $220,378
Total assets 682,892 530,945 536,980 728,573 764,950
Long-term debt 224,359 105,272 109,327 110,067 103,332
Shareholders' equity $217,605 $226,475 $221,277 $461,154 $452,835
(a) On December 31, 1996, the Company acquired Amicon for $129.3
million in cash, including transaction costs. This
acquisition was accounted for as a purchase. As this
transaction was completed on the last business day of 1996,
the accompanying 1996 consolidated statement of income
excludes all 1996 business activity conducted by Amicon.
However, the assets acquired and liabilities assumed are
included in the Company's consolidated balance sheet at
December 31, 1996.
(b) Purchased research and development represents the write-off
of in-process research and development arising from the
acquisition of Amicon on December 31, 1996.
(c) The loss on disposal of discontinued operations in 1994
include pre-tax operating losses generated by the
discontinued businesses from November 11, 1993 through the
completion of such divestitures.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Forward-Looking Statements
The matters discussed herein, as well as in future oral and
written statements by management of the Company, that are forward-
looking statements are based on current management expectations
that involve substantial risks and uncertainties which could
cause actual results to differ materially from the results
expressed in, or implied by, these forward-looking statements.
When used herein or elsewhere, the words "anticipate", "believe",
"estimate", "expect", "may", "will", "should" or the negative
thereof and similar expressions as they relate to the Company or
its management are intended to identify such forward-looking
statements. Potential risks and uncertainties that could affect
the Company's future operating results include, without
limitation, foreign exchange rates; increased regulatory concerns
on the part of the biopharmaceutical industry; further
consolidation of drug manufacturers; competitive factors such as
new membrane technology, and/or a new method of chip manufacture
which relies less heavily on purified chemicals and gases;
availability of component products on a timely basis; inventory
risks due to shifts in market demand; change in product mix;
conditions in the economy in general and in the microelectronics
manufacturing market in particular; the difficulty in integrating
acquired companies; potential environmental liabilities; the
inability to utilize technology in current or planned products
due to overridding rights by third parties, and the risk factors
listed from time to time in the Company's filings with the SEC.
See also "Business -- Environmental Matters", "Legal Proceedings"
and "--Business Outlook and Uncertainties".
Recent Developments
On December 31, 1996, the Company acquired Amicon for a price of
$129.3 million in cash, including transaction costs. This
transaction was accounted for as a purchase and resulted in a pre-
tax write-off for purchased research and development of $68.3
million in the fourth quarter of 1996. As this transaction was
completed on the last business day of 1996, the accompanying 1996
consolidated statement of income excludes all 1996 business
activity conducted by Amicon. However, the assets acquired and
liabilities assumed are included in the Company's consolidated
balance sheet at December 31, 1996.
On January 22, 1997, the Company announced the successful
completion of its tender offer for all of the outstanding common
shares of Tylan for $16.00 per share. Tylan became a wholly
owned subsidiary of the Company on January 27, 1997. The
purchase price was $133.0 million, plus the assumption of Tylan's
outstanding debt, net of cash, totaling $23.6 million. This
acquisition will be accounted for as a purchase in the first
quarter of 1997.
Results of Operations
Net Sales
Consolidated net sales, measured in U.S. dollars, increased 4
percent in 1996 compared to an increase of 20 percent in 1995.
The lower sales growth rate in 1996 compared to 1995 was
primarily attributable to the microelectronics manufacturing
market entering one of its periodic downturns as well as
unfavorable foreign exchange comparisons. Sales growth rates by
geography and market, measured in local currencies and U.S.
dollars, are summarized in the table below:
Sales growth Sales growth
rates rates
measured in measured in
local currencies U.S. dollars
199 1995 1994 199 199 199
6 6 5 4
Americas 8% 15% 8% 7% 13% 8%
Europe 6% 10% 6% 4% 20% 7%
Asia/Pacific 14% 18% 16% 2% 27% 21%
Consolidated 10% 15% 10% 4% 20% 12%
Microelectroni 8% 43% 33% 0% 50% 39%
cs Mfg
BioPharmaceuti 14% 9% 4% 10% 14% 6%
cal Mfg
Analytical 8% 3% 4% 3% 8% 6%
Laboratory
Consolidated 10% 15% 10% 4% 20% 12%
Full year sales in 1996 to microelectronics manufacturing
customers measured in local currencies increased 8 percent
compared to 1995. A downturn in the microelectronics market
began to impact the Company's sales growth around the middle of
1996, as sales to customers in this market grew 24 percent in the
first six months of 1996 compared to 1995 and declined 7 percent
in the second half of 1996 compared to 1995. The slowdown
significantly impacted growth in both the Americas and Japan
while sales growth in the remaining Asia/Pacific microelectronics
market remained strong. Sales into the microelectronics market
comprised 28 percent of total consolidated sales in 1996, versus
29 percent of total sales in 1995.
Sales to the BioPharmeceutical manufacturing market grew 14
percent in local currencies during 1996, compared to 9 percent
growth in 1995. The higher growth rate in 1996 was due to
increased sales of large protein processing systems to
biotechnology customers in both the Americas and Europe, and
higher sales to beer manufacturing customers in Japan,
particularly in the first six months of the year. Sales to
BioPharmeceutical customers comprised 31 percent of total sales
in 1996 and 29 percent in 1995.
Sales to the analytical laboratory market measured in local currencies
grew at faster rates in 1996 than in 1995 and 1994. New product
introductions and a new distribution strategy in the United States
fueled sales growth in this market, particularly in the last six months
of 1996. Sales growth was strongest in the Americas and Japan, while
sales grew more modestly in Europe due to a difficult economic
environment. Sales to analytical laboratory customers comprised 41
percent of total sales in 1996 and 42 percent in 1995.
Foreign exchange rates, primarily the U.S. dollar strengthening against
the Japanese yen, reduced reported sales growth by 6 percent in 1996,
compared to increasing sales by 5 percent in 1995 and 2 percent in
1994. Approximately 29 percent of the Company's sales in 1996 and 1995
were generated in Japan. On average, the U.S. dollar was 15 percent
stronger against the Japanese yen in 1996 compared to 1995. The year
to year comparisons were particularly unfavorable in the second and
third quarters of 1996 as the dollar was at historic post-war lows
against the yen during this time frame in 1995. Though a weaker dollar
will benefit, and a strong dollar will adversely affect future reported
sales growth, the Company is unable to predict future currency
fluctuations and to quantify their effect on net income. Price changes
and inflation have not significantly affected the comparability of
sales during the past three years.
Gross Margins
Gross Margins were 59.7 percent in 1996, 59.0 percent in 1995, and 57.2
percent in 1994. The margin improvement in 1996 was due to continued
cost containment and increased volume in the Company's manufacturing
plants. The significant volume of business transacted in foreign
currencies as discussed above exposes the Company to risks associated
with currency rate fluctuations which impact the Company's sales and
net income. To partially mitigate this risk, the Company has entered
into foreign currency transactions, forward and option contracts to
sell yen, on a continuing basis in amounts and timing consistent with
underlying currency exposure on inventory purchases so that the gains
or losses on these transactions offset gains or losses on the
underlying exposure. A realized gain of $2.7 million in 1996 and
realized losses of $2.3 million in 1995 and $1.0 million in 1994
relating to these contracts were recognized. These gains and losses
were reflected in cost of sales each year, partially offsetting the
impact of foreign exchange fluctuations. At December 31, 1996, the
Company has open forward exchange contracts to sell yen aggregating
$13.4 million and open forward option contracts to sell yen aggregating
$27.0 million pertaining to this hedging program. These open contracts
have an unrealized gain of $1.7 million at December 31, 1996. All open
contracts mature within 15 months.
Operating Expenses
Selling, General and Administrative (S, G & A) Expenses, excluding the
effects of foreign exchange, grew 8 percent in 1996, 17 percent in 1995
and 8 percent in 1994. The Company continued to invest in selling and
marketing resources to support both new product launches and future
sales growth initiatives, particularly in the microelectronics and
analytical laboratory markets.
Research and Development Expenses increased by 5 percent in 1996
compared to 1995 after increasing 6 percent in 1995 compared to 1994.
The increase in spending the past two years is principally due to
investments in new products in the microelectronics manufacturing
market.
Purchased Research and Development Expense of $68.3 million in 1996
represents the write-off of in-process research and development arising
from the acquisition of Amicon on December 31, 1996.
Other Income/Expense
Gain on Sale of Equity Securities reflects the sale of a significant
portion of the Company's stock holdings in a Japanese Company. The
Company sold these securities in the third and fourth quarters of 1996
to fund a new headquarters and research and development facility in
Japan. The cost of moving to this new facility was $2.0 million and
was recorded in S,G & A expense.
Other Expense in 1994 reflects a non-recurring charge of $10.8 million
to settle litigation which arose from the Company's sale of its Process
Water Division in 1989.
Net Interest Expense in 1996 was comparable with net interest expense
in 1995, as the impact of slightly higher net borrowings during 1996
was offset by lower short term interest rates. Net interest expense in
1994 was significantly lower compared to 1995 and 1996 as 1994
benefited from the substantial net proceeds received from the divested
business
The Provision for Income Taxes was 23.5 percent of pre-tax income in
1996, versus an effective rate in 1995 and 1994 of 22.5 percent.
While the Company continues to benefit from low tax rates in Puerto
Rico and Ireland and tax incentives attributable to its U.S. export
operations, the overall increase in profitability in 1996 slightly
diminished the relative benefit derived from these low tax
jurisdictions.
The Net Loss on Disposal of Discontinued Operations reflects the
after tax loss of disposing of the Company's Instrumentation
Divisions, the sale of which was concluded in 1994.
Earnings Per Share in the past three years include certain non-
recurring charges. Earnings per share from continuing operations
adjusted for these charges are summarized as follows:
1996 1995 1994
Earnings from continuing $1.00 $1.90 $1.09
operations after charges
Charges 1.20 - 0.15
Earnings from continuing
operations before charges $2.20 $1.90 $1.24
The charge in 1996 relates to the write-off of purchased in-process
research and development arising from the acquisition of Amicon.
The charge in 1994 resulted from the settlement of litigation
relating to the Company's sale of the Process Water Division in 1989.
Legal Proceedings
The Company and Waters Corporation are engaged in an arbitration
proceeding and related state and federal litigation, which commenced
in 1995 and 1996, 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
. In the opinion of the Company, although final settlement of this
matter may impact the Company's financial statements in a particular
period, it is not expected to have a material adverse effect on the
Company's financial condition.
Capital Resources and Liquidity
In 1996, the Company generated $102.2 million of cash from operating
activities, compared to $99.1 million in 1995 and $88.6 million in
1994. Net cash provided by operating activities continued to be the
Company's primary source of funding capital expenditures, dividends
and open market share repurchases in 1996. The slight increase in
cash generated from operating activities in 1996 compared to 1995 was
primarily due strong collections of accounts receivable, which helped
fund an $11.6 million increase in inventories.
Capital spending in 1996 was the same as in 1995. The Company
continued to invest in capacity expansions in the Company's
manufacturing facilities and in information technology systems. In
addition, the Company moved into a new headquarters and research and
development facility in Japan. As previously discussed, the cost of
this move was funded by a sale of equity securities in Japan. The
Company expects capital expenditures and depreciation expense in 1997
to be higher than capital spending and depreciation expense in 1996.
At December 31, 1996, the Company had no significant commitments for
capital expenditures.
During the past three years, the Company has used cash generated from its
operations and, in 1995 and 1994, cash generated from the sale of its
Waters Chromatography and BioScience divisions, to purchase shares of its
outstanding common stock. The Company spent, net of stock option exercise
amounts, $46.9 million, $64.0 million and $293.0 million in 1996, 1995, and
1994 respectively to repurchase shares of its outstanding common stock. At
December 31, 1996, the Company had $9.0 million remaining to spend on a
$50.0 million share repurchase program announced in the first quarter of
1996. Share repurchases were stopped at the end of the third quarter of
1996 to maintain financial flexibility in light of pending acquisitions.
The Company does not expect to repurchase additional shares of its
outstanding common stock in 1997 as cash generated from operations will be
used to pay down borrowings required to finance the acquisitions of Amicon
and Tylan.
The net cash outflow of $7.9 million in 1996 for operations discontinued in
1994 was in line with the Company's expectations. The Company believes
that the net cash it will spend in 1997 with respect to such divestitures
will approximate the accrued divestiture liability of $3.6 million recorded
on the consolidated balance sheet at December 31, 1996. The amount
expected to be spent in 1997 will be lower than the amount spent in 1996 as
contractual support services provided to the divested businesses will
expire.
The Company incurred one-time finance related costs in both 1995 and 1994,
which did not repeat in 1996. In 1995, the Company paid $3.5 million to
close out the Company's German Deutsche mark swap. In 1994, the Company
paid a total of $15.4 million in financing related transactions; $5.1
million was used to pre-pay the Company's $100.0 million notes payable due
in 1998, while $10.3 million was used to close out the Company's yen
currency swap.
The Company has $46.9 million of cash and short-term investments on hand at
the end of 1996. The amount on hand at December 31, 1996 is higher than
that normally held by the Company and consists primarily of balances held
by the Company's international subsidiaries which will be used to fund
their respective portions of the Amicon and Tylan acquisitions. In
addition, the Company has a $450.0 million five-year credit facility (the
"credit facility") in place which was drawn on to fund both acquisitions.
Borrowings required to fund the acquisition of Amicon were drawn on in
December, 1996. Borrowings drawn on in the first quarter of 1997 to fund
the acquisition of Tylan would have caused the Company to violate a
covenant with respect to the $100.0 million 6.78 percent notes payable due
in 2004 which required that the Company prevent total debt from exceeding
60% of total debt plus equity. However, the holder of these notes waived
the requirement that the Company comply with this covenant through March
21, 1997. The Company is currently negotiating to change the financial
covenant included in this note agreement. If a revised agreement is not
reached by March 21, 1997, the Company may redeem the notes using either
proceeds from a planned public debt offering for up to $300.0 million or
borrowings potentially available upon request by the Company under the
Credit Facility. The use of debt to finance the acquisitions of Amicon and
Tylan substantially increases the Company's debt-to-equity ratio. However,
the Company's financial position remains strong and the Company has
flexibility in financing future requirements, although such flexibility is
more limited than it had been prior to these acquisitions.
Dividends
The quarterly dividend was increased in the second quarter of 1996 from
$0.08 to $0.09 per share. Dividends paid in 1996 were $14.9 million.
Business Outlook and Uncertainties
The following statements are based on current expectations. These
statements are forward looking and actual results may differ materially.
Business Acquisitions - Operations related to the acquisitions of both
Amicon and Tylan will be included in the Company's statements of income
commencing in the first quarter of 1997. As both acquisitions are
accounted for as purchases, all growth rates in the Company's statement of
income for 1997 will include the impact of adding these two businesses to
the Company's operations. In addition, the Company expects to record in
the first quarter of 1997 a non-tax deductible charge in the range of $50.0
million to $100.0 million for purchased research and development arising
from the Tylan acquisition. The successful completion of these
acquisitions requires the integration of two companies that have previously
operated independently. The process of integrating acquired businesses may
involve unforeseen difficulties and there can be no assurance that the
potential benefits of such integration will be realized to the extent or on
the schedule expected by the Company. Moreover, such integration may
require a disproportionate amount of the time and attention of the
Company's management and the Company's financial and other resources. Any
delays or unexpected costs in connection with such integration could have a
material adverse effect on the Company's financial condition and results of
operations.
Sales - As previously noted, sales to the microelectronics market in 1996
represented 28 percent of consolidated 1996 sales. In 1995 and the first
six months of 1996, the microelectronics market was the fastest growing
market in which the Company participated. However, sales into this market
declined 7 percent in the last six months of 1996. Market research data
for the microelectronics manufacturing market is forecasting 1997 industry
sales growth rate ranging from flat to slightly negative. Sales growth in
this market in the past has been volatile, due to general cyclically
historically exhibited by this market. The acquisition of Tylan in 1997
increases the Company's presence in the microelectronics manufacturing
market. As this market has become a more significant component of the
Company's consolidated sales, the effects of future industry volatility
could significantly impact the Company's consolidated sales growth.
Approximately 65 percent of the Company's sales are transacted outside of
the Americas in currencies other than the U.S. dollar. Late in 1996 and
early in 1997, the U.S. dollar began to further strengthen against the
Japanese yen and French franc. If foreign exchange rates remain at
February 1, 1997 levels, the effect of foreign exchange will reduce first
quarter 1997 and full-year 1997 reported sales growth by 3 percent and 2
percent, respectively compared to 1996. Any change in foreign exchange
rates will be reflected in the results of operations.
Gross Margins - The Company expects gross margin percentages in 1997 before
the effect of the Amicon and Tylan acquisitions to be comparable with those
in 1996, as improved margins resulting from increased volume in the
Company's manufacturing plants to support anticipated sales growth is
expected to offset slightly lower margins associated with the new U.S.
distribution agreement. Lower than expected sales growth will negatively
impact the Company's ability to maintain or improve gross margin
percentages. Other than the U.S. distribution agreement noted above, the
Company anticipates no significant changes in the pricing of it's products.
Historical gross margin percentages generated by Amicon approximate those
experienced by the Company. However, historical gross margin percentages
generated by Tylan have been approximately 18-20 percentage points lower
than those experienced by the Company. If anticipated synergies are
achieved, the Company expects that the acquisition of Tylan will reduce
1997 consolidated gross margins percentages by 1 to 2 percent compared to
1996.
Operating Expenses - The Company expects to continue investing in operating
expenses in a manner consistent with previous years. The acquisitions at
both Amicon and Tylan will result in incremental operating expenses
required to support these additional businesses.
Interest Expense - The Company expects net interest expense in 1997 will be
significantly higher than in 1996 due to increased borrowings of
approximately $282.0 million required to complete the acquisitions of
Amicon and Tylan. The Company anticipates that 1997 borrowings will
fluctuate on a quarterly basis but anticipates no significant increase in
borrowings on a full year basis other than the $282.0 million discussed
above.
Provision for Income Taxes - Excluding the impact of a non-deductible in
process research and development write-off associated with the acquisition
of Tylan, the effective tax rate in 1997 is projected to be in the 24 to 26
percent range, up from 23.5 percent in 1996 as the acquisitions of Amicon
and Tylan will result in additional income being earned outside of the
Company's low tax rate manufacturing sites. The tax rate estimate is based
on current tax law and is subject to change. At December 31, 1996, the
Company had a net deferred tax asset of $69.1 million. Although
realization of the asset is not assured, the Company believes it is more
likely than not that this net deferred tax asset will be realized. The
amount of the deferred tax considered realizable, however, could be reduced
if the near term estimates of future taxable income are reduced, which
could result in the Company's 1997 effective tax rate increasing above the
expected 24 to 26 percent range.
Capital Spending - The Company expects to spend more for fixed asset
additions in 1997 than it spent in 1996. The Company does not believe it
needs to significantly expand or add manufacturing capacity in 1997 to
handle its anticipated 1997 sales growth. The Company, however, expects to
launch manufacturing operations in China in 1997 and will invest in
leasehold improvements and machinery and equipment to support this new
operation. The Company will also continue to invest in tooling within its
manufacturing plants and in information technology as required. The
Company also expects that 1997 depreciation expense will be higher than
1996 depreciation expense.
Item 8. Financial Statements and Supplementary Data.
The information called for by this item is attached to the back of
this report commencing with Page F-1.
Item 9. Disagreements on Accounting and Financial Disclosure.
This item is not applicable.
PART III
Item 10. Directors and Executive Officers of Millipore.
The information called for by this item with respect to registrant's
directors and compliance with Section 16(a) of the Securities Exchange Act of
1934 as amended is set forth under the caption "Management and Election of
Directors--Nominees for Election as Directors" in Millipore's definitive
Proxy Statement for Millipore's Annual Meeting of Stockholders to be held on
April 17, 1997, and to be filed with the Securities and Exchange Commission
on or about March 21, 1997, which information is hereby incorporated herein
by reference.
Information called for by this item with respect to registrant's
executive officers is set forth under "Executive Officers of Millipore" in
Item 1 of this report.
Item 11. Executive Compensation.
The information called for by this item is set forth under the caption
"Management and Election of Directors-Executive Compensation" in Millipore's
definitive Proxy Statement for Millipore's Annual Meeting of Stockholders to
be held on April 17, 1997, and to be filed with the Securities and Exchange
Commission on or about March 21, 1997, which information is hereby
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information called for by this item is set forth under the caption
"Ownership of Millipore Common Stock" in Millipore's definitive Proxy
Statement for Millipore's Annual Meeting of Stockholders to be held April 17,
1997, and to be filed with the Securities and Exchange Commission on or about
March 21, 1997, which information is hereby incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The information called for by this item is set forth under the caption
"Management and Election of Directors - Executive Compensation" in Millipore's
definitive Proxy Statement for Millipore's Annual Meeting of Stockholders to
be held on April 17, 1997, and to be filed with the Securities and Exchange
Commission on or about March 21, 1997, which information is hereby
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements.
The following financial statements are filed as part of this
report: (See Index on page F-1)
Consolidated Statements of Income for the three years ended
December 31, 1996, 1995 and 1994.
Consolidated Balance Sheets for the years ended December 31, 1996
and 1995
Consolidated Statements of Shareholders' Equity for the three
years ended December 31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows for the three years ended
December 31, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements
Report of Independent Accountants
2. Financial Statement Schedules.
No financial statement schedules have been included because they
are not applicable or not required under Regulation S-X.
3. List of Exhibits.
A. The following exhibits are incorporated by reference:
Reg. S-K
Item 601(b) Referenced Document on
Reference Document Incorporated file with
the Commission
(2) Amicon Worldwide Purchase and Sale Exhibit (2) to Form 8-K
Report,
Agreement, dated November 18, 1996, dated December 31, 1996,
as Amended by Amendment Agreement [Commission File No. 0-1052]
dated December 31, 1996, by and among
Company and W. R. Grace & Co.-Conn.
Agreement and Plan of Merger, dated Exhibit (c)(1) to Schedule 14D-
1,
as of December 16, 1996, by and Filed December 20, 1996
among Company and its wholly owned
subsidiary MCTG Acquisition Corp.
and Tylan General, Inc.
Reg. S-K
Item 601(b) Referenced Document on
Reference Document Incorporated file with
the Commission
(3) (ii) By Laws, as amended Form 10-K Report for year
ended December 31, 1990 [Commission File No. 0-1052]
(4) Indenture dated as of May 3, 1995, Registration Statement on
Form S-4
relating to the issuance of (No. 33-58117); and an accompanying
$100,000,000 principal amount Form T-1)
of Company's 6.78% Senior
Notes due 2004
(10) Shareholder Rights Agreement Form 8-K Report for April, 1988
dated as of April 15, 1988 [Commission File No. 0-1052]
between Millipore and The
First National Bank of Boston
Long Term Restricted Stock Form 10-K Report for the year
(Incentive) Plan for Senior ended December 31, 1984.
Management* [Commission File No. 0-1052]
1985 Combined Stock Option Plan* Form 10-K Report for the year
ended December 31, 1985
[Commission File No. 0-1052]
Supplemental Savings and Form 10-K Report for the year
Retirement Plan for Key ended December 31, 1984.
Salaried Employees of [Commission File No. 0-1052]
Millipore Corporation*
Executive Termination Form 10-K Report for the year
Agreement* ended December 31, 1984.
[Commission File No. 0-1052]
Executive "Sale of Business" Form 10-K Report for the year
Incentive Termination Agreements (2)* ended December 31, 1993.
[Commission File No. 0-1052]
1995 Employee Stock Purchase Plan Form 10-K Report for the
year ended December 31, 1994
[Commission File No. 0-1052]
1995 Management Incentive Plan* Form 10-K Report for the year
ended December 31, 1994.
[Commission File No. 0-1052]
* A "management contract or compensatory plan"
B. The following Exhibits are filed herewith:
(3) (i) Restated Articles of Organization, as amended May 6, 1996
(10) Distribution Agreement, dated as of July 1, 1996, by and among
Company and Fisher Scientific Company (all schedules and Exhibits
have been omitted; Company agrees to furnish the Commission with
a copy of any such schedule or exhibit upon request)
(10) Revolving Credit Agreement, dated as of January 22, 1997, among
Millipore Corporation and The First National Bank of Boston, ABM
AMRO Bank N.V. and certain other lending institutions which are
or become parties thereto
(11) Computation of Per Share Earnings
(21) Subsidiaries of Millipore
(23) Consent of Independent Accountants relating to the incorporation of
their report on the Consolidated Financial Statements into
Company's Securities Act Registration Nos. 2-72124, 2-85698, 2-
91432, 2-97280, 33-37319, 33-37323, 33-11-790, 33-59005 and 33-
10801 on Form S-8 and Securities Act Registration Nos. 2-84252, 33-
9706, 33-22196, 33-47213 on Form S-3, and 33-58117 on Form S-4.
(24) Power of Attorney
(b) Reports on Form 8-K.
Current Report on Form 8-K, dated December 31, 1996, reporting
under items 2 and 7 the acquisition of the Amicon Separation
Science Business of W.R. Grace & Co.
Current Report on Form 8-K, dated January 31, 1997, reporting under
items 2 and 7 the acquisition of Tylan General, Inc.
(c) Exhibits.
The Company hereby files as exhibits to this Annual Report on Form
10-K those exhibits listed in Item 14(a)(3)(B) above, which are
attached hereto.
(d) Financial Statement Schedules.
No financial statement schedules have been included because they
are not applicable or not required under Regulation S-X.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Dated: March 7,1997 By Geoffrey Nunes, Senior Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacity and on the dates indicated.
SIGNATURE TITLE DATE
C. WILLIAM ZADEL* Chairman, President, March 7, 1997
C. William Zadel Chief Executive Officer,
and Director
Michael P. Carroll Chief Financial Officer
Vice President, and Treasurer
CHARLES D. BAKER* Director March 7, 1997
Charles D. Baker
SAMUEL C. BUTLER* Director March 7, 1997
Samuel C. Butler
ROBERT E. CALDWELL* Director March 7, 1997
Robert E. Caldwell
MAUREEN A. HENDRICKS* Director March 7, 1997
Maureen A. Hendricks
MARK HOFFMAN* Director March 7, 1997
Mark Hoffman
STEVEN MULLER* Director March 7, 1997
Steven Muller
THOMAS O. PYLE* Director March 7, 1997
Thomas O. Pyle
JOHN F. RENO* Director March 7, 1997
John F. Reno
*By
Geoffrey Nunes, Attorney-in-Fact
Millipore Corporation
Index to Consolidated Financial Statements
Consolidated Statements of Income for the
three years ended December 31, 1996, 1995 and 1994 F-2
Consolidated Balance Sheets for the
years ended December 31, 1996 and 1995 F-3
Consolidated Statements of Shareholders' Equity
for the three years ended December 31, 1996, 1995 and 1994 F-4
Consolidated Statements of Cash Flows for the
three years ended December 31, 1996, 1995 and 1994 F-5
Notes to Consolidated Financial Statements F-6
Report of Independent Accountants F-14
Item 8. Financial Statements and Supplementary Data.
Consolidated Statements of Income
Millipore Corporation
Year ended December 31
(In thousands except per 1996 1995 1994
share data)
Net sales $618,735 $594,466 $497,252
Cost of sales 249,443 243,849 212,675
Gross profit 369,292 350,617 284,577
Selling, general and 202,140 195,026 159,591
administrative expenses
Research and development 38,429 36,515 34,327
expenses
Purchased research & 68,311 - -
development expense
Operating income 60,412 119,076 90,659
Other expense - - (10,800)
Gain on sale of equity 5,329 - -
securities
Interest income 2,780 1,682 4,091
Interest expense (11,498) (10,623) (7,035)
Income from continuing
operations before 57,023 110,135 76,915
income taxes
Provision for income taxes 13,401 24,781 17,306
Income from continuing 43,622 85,354 59,609
operations
Net loss on disposal of - - (3,400)
discontinued operations
Net Income $ 43,622 $ 85,354 $ 56,209
Income per share
Income from continuing $ 1.00 $ 1.90 $ 1.09
operations
Net income per common share $ 1.00 $ 1.90 $ 1.03
Weighted average common 43,602 44,985 54,726
shares outstanding
The accompanying notes are an integral part of the consolidated
financial statements.
Consolidated Balance Sheets
Millipore Corporation
December 31
(In thousands) 1996 1995
Assets
Current assets:
Cash $4,010 $2,696
Short-term investments 42,860 21,062
Accounts receivable (less allowance for
doubtful accounts of $2,490 in 1996 151,653 147,759
and $2,054 in 1995)
Inventories 106,410 80,386
Other current assets 6,979 6,800
Receivables arising from sale of - 3,056
businesses
Total current assets 311,912 261,759
Property, plant and equipment, net 203,017 191,250
Intangible assets (less accumulated
amortization of $3,084 in 1996 and $2,506 58,866 7,219
in 1995)
Deferred income taxes 69,086 53,179
Other assets 40,011 17,538
Total assets $682,892 $530,945
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $101,546 $ 80,768
Accounts payable 34,404 33,436
Accrued expenses 57,011 32,366
Accrued divestiture costs 3,604 6,543
Dividends payable 3,899 3,537
Accrued retirement plan contributions 4,705 4,846
Accrued income taxes payable 11,231 9,926
Total current liabilities 216,400 171,422
Long-term debt 224,359 105,272
Other liabilities 24,528 22,776
Accrued divestiture costs - 5,000
Commitments and contingent liabilities - -
Shareholders' equity:
Common stock, par value $1.00 per share,
120,000 shares authorized; 56,988 shares
issued as of December 31, 1996 and 1995, 56,988 56,988
respectively
Additional paid-in capital 8,800 -
Unrealized gain on securities 9,536 -
available for sale
Retained earnings 548,598 523,633
Translation adjustments (8,280) 375
615,642 580,996
Less: Treasury stock at cost, 13,666 and
12,727 shares as of December 31, 1996 and (398,037) (354,521)
1995, respectively
Total shareholders' equity 217,605 226,475
Total liabilities and shareholders' equity $ 682,892 $ 530,945
The accompanying notes are an integral part of the consolidated
financial statements.
Consolidated Statements of Shareholders' Equity
Millipore Corporation
Year ended Dec. 31, 1994,
1995 and 1996
(In thousands except per share data)
Unrealized
Gain on
Additional Securities Total
Par Paid-in Retained Available Translation Treasury Shareholders
Shares Value Capital Earnings for Sale Adjustments Shares Cost Equity
Balance at January 1,
1994 28,344 $28,344 $16,803 $434,988 $ - $(7,624) (341) $(11,357) 461,154
Net income 56,209 56,209
Cash dividends declared,
$0.295 per share (15,381) (15,361)
Treasury stock acquired (400) (6,148) (334,702) (335,102)
Stock options exercised 101 101 4,848 (15,479) 1,072 48,898 38,368
Employees' stock purchase 49 49 2,352 (1,712) 47 2,120 2,809
plan proceeds
Incentive plan awards (54) 8 431 377
Stock awards 8 1 64 72
Translation adjustments 12,771 12,771
Balance at December 31, 28,494 $28,494 23,603 $458,579 $- $5,147 (5,361) $(294,546) 221,277
1994
Net income 85,354 85,354
Effect of two-for-one 28,494 28,494 (23,603) (4,891) (5,361) -
stock split
Cash dividends declared, (14,071) (14,071)
$0.315 per share
Treasury stock acquired (2,962) (90,113) (90,113)
Stock options exercised (1,553) 895 28,366 26,813
Employees' stock purchase (4) 33 905 901
plan proceeds
Savings and Participation 86 14 456 542
Plan proceeds
Incentive plan awards 124 13 354 478
Stock awards 9 2 57 66
Translation adjustments (4,772) (4,772)
Balance at December 31, 56,988 $56,988 523,633 $- 375 (12,727) $(354,521) $226,475
1995
Net income 43,622 43,622
Cash dividends declared, (15,261) (15,261)
$0.35 per share
Treasury stock acquired (1,462) (58,362) (58,362)
Stock options exercised (4,218) 384 10,880 6,662
Employees' stock purchase 195 72 2,076 2,271
plan proceeds
Savings and Participation 209 27 735 944
Plan proceeds
Incentive plan awards 408 39 1,120 1,528
Stock awards 10 1 35 45
Unrealized gain on securities 9,536 9,536
available for sale
U.S. tax benefit from 8,800 8,800
stock plan activity
Translation adjustments (8,655) (8,655)
Balance at December 31, 56,988 $56,988 8,800 $548,598 $9,536 $(8,280) $(13,666) $(398,037) $217,605
1996
The accompanying notes are an integral part of the consolidated financial
statements.
Consolidated Statements of Cash Flows
Millipore Corporation
Year ended December 31
(In thousands) 1996 1995 1994
Cash Flows from Operating
Activities:
Net income $43,622 $85,354 $56,209
Adjustments to reconcile net income
to net cash provided by
operating activities
Purchased research and 68,311 - -
development expense
Gain on sale of (5,329) - -
securities
Net loss on disposal of - - 3,400
discontinued operations
Depreciation and 30,587 27,478 27,604
amortization
Deferred income tax (8,212) 1,372 (2,227)
provision
Change in operating assets and liabilities:
Decrease (increase) 247 (10,548) (14,672)
in accounts receivable
(Increase) in inventories (11,612) (7,218) (1,894)
Decrease in other 1,661 409 1,427
current assets
(Increase) in other (8,747) (8,209) (695)
assets
(Decrease) increase
in accounts payable and
accrued expenses (11,087) 5,931 2,876
expenses
(Decrease) increase
in accrued retirement plan
contributions (36) 543 (269)
Increase in accrued 1,723 6,475 6,123
income taxes
Income tax refund received - - 14,035
Other 1,058 (2,438) (3,334)
Net cash provided by 102,186 99,149 88,583
operating activities
Cash Flows from Investing
Activities:
Net proceeds from sales of - - 257,899
businesses
Additions to property, plant and (30,427) (30,010) (21,009)
equipment, net
Additions to intangible assets (1,760) (2,135) (2,718)
Investments in businesses (4,010) - -
Acquisition of Amicon, net of cash (122,576) - -
acquired
Net cash used by discontinued (7,939) (6,967) -
businesses
Proceeds from sale of securities 5,745 - -
Net cash provided by (used in) (160,967) (39,112) 234,172
investing activities
Cash Flows from Financing
Activities:
Treasury stock acquired (58,362) (90,113) (334,702)
Issuance of treasury stock under 11,450 16,937 33,876
stock plans
Cash paid to extinguish long-term - - (5,088)
debt
Common stock issued - - 7,350
Cash paid to close out foreign - (3,546) (10,287)
currency swap
Net change in short-term debt 20,045 25,795 (9,539)
Borrowings (payments) of long-term 124,397 - (1,820)
debt
Dividends paid (14,899) (14,117) (15,802)
Net cash used for financing 82,631 (65,044) (336,012)
activities
Effect of foreign exchange rates on
cash and short-term investments (738) (1,471) 2,851
Net increase (decrease) in cash and 23,112 (6,478) (10,406)
short-term investments
Cash and short-term investments on 23,758 30,236 40,642
January 1
Cash and short-term investments on $46,870 $23,758 $30,236
December 31
Notes to Consolidated Financial Statements (In thousands except share
and per share data)
Note A - Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries, all of which are wholly owned.
Intercompany balances and transactions have been eliminated.
Translation of Foreign Currencies
For all of the Company's foreign subsidiaries except Brazil, assets and
liabilities are translated at exchange rates prevailing on the balance
sheet date, revenues and expenses are translated at average exchange
rates prevailing during the period, and elements of shareholders'
equity are translated at historical rates. Any resulting translation
gains and losses are reported separately in shareholders' equity. The
aggregate transaction gains and losses included in the consolidated
statements of income are not material. For the Company's subsidiary in
Brazil, where inflation is very high, the translation is the same
except that inventories, cost of sales, property, plant and equipment,
and depreciation are translated at historical rates. Resulting
translation gains and losses for this subsidiary are included in
income.
Short-term Investments
Short-term investments consisting primarily of time deposits, are
classified as available for sale and are carried at cost plus accrued
interest, which approximates market value. All short-term investments
have original maturities of three months or less and are considered
cash equivalents for purposes of the consolidated statements of cash
flows.
Inventories
The Company values the majority of its inventories manufactured in the
United States at the lower of cost or market, principally on a last-in,
first-out (LIFO) basis. Inventories manufactured outside of the United
States are valued on a first-in, first-out (FIFO) basis.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost. Expenditures for
maintenance and repairs are charged to expense while the costs of
significant improvements are capitalized. Depreciation on assets
acquired before January 1, 1989 generally is provided using accelerated
methods over the estimated useful lives of the assets. Assets acquired
after January 1, 1989 primarily are depreciated using straight-line
methods. Upon retirement or sale, the cost of assets disposed and the
related accumulated depreciation are eliminated and related gains or
losses reflected in income.
The estimated useful lives of the Company's depreciable assets are as
follows:
Leasehold Improvements Life of the Lease
Buildings and Improvements 10-30 Years
Production and Other Equipment 3-15 Years
Intangible Assets
Intangible assets consist primarily of acquired patented and unpatented
technology, trade names, and licenses and are recorded at cost.
Intangible assets are amortized on a straight line basis over periods
ranging from 5 to 30 years. The carrying value of intangible assets is
periodically reviewed by the Company and, if necessary, impairments of
values are recognized. If there is a permanent impairment in the
carrying value of tradenames or other intangible assets, the amount of
such impairment is computed by comparing the anticipated discounted
future operating income of the acquired business or trademark to the
carrying value of the assets. In performing this analysis, the Company
considers current results and trends, future prospects and other
economic factors.
Marketable Securities
The Company's investments in equity securities are categorized as
available-for-sale as defined by Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities". Equity securities are included in Other Assets in
the accompanying consolidated balance sheets and are recorded at fair
value. Unrealized holding gains and losses are reflected, net of
income tax, as a separate component of shareholders' equity.
Income Taxes
Deferred tax assets and liabilities reflect the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial statement purposes and the amounts used for
income tax purposes. With respect to the unremitted earnings of the
Company's foreign and Puerto Rican subsidiaries, deferred taxes are
provided only on amounts expected to be repatriated.
Stock Options
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-
Based Compensation," which became effective for the Company in 1996.
SFAS 123 defines a fair-value method of accounting for employee stock
option or similar equity instruments. However, SFAS 123 also allows
companies to continue to use the intrinsic value method of accounting
prescribed by APB Opinion 25 "Accounting for Stock Issued to
Employees." The Company has elected to continue to account for stock
options in accordance with APB 25 and has adopted the disclosure only
aspects of SFAS 123.
Treasury Stock
Treasury stock is recorded at its cost on the date acquired and is
relieved at its weighted average cost upon reissuance. The excess of
cost over the proceeds of reissued treasury stock is charged to
retained earnings.
Net Income Per Common Share
Net income per common share is calculated by dividing the net income
for the period by the weighted average number of common shares
outstanding for the period. The impact of common stock equivalents,
principally outstanding stock options, is immaterial.
Revenue Recognition
Sales of products and services are recorded at the time of product
shipment or performance of services.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Reclassifications
Certain reclassifications have been made to prior years' financial
statements to conform with the 1996 presentation.
Note B - Stock Split and Increase In Authorized Common Shares
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. The issuance of additional shares resulted in the
transfer of $23,603 from additional paid in capital and $4,891 from
retained earnings to common stock, representing the par value of the
shares issued. Accordingly, all weighted average share and per share
amounts, as well as stock plan data, have been restated to reflect the
stock split. For purposes of presentation in the Consolidated
Statements of Shareholders' Equity, the stock split has been accounted
for as if it occurred on January 1, 1995.
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.
Note C - Acquisition of Amicon Separation Science Business
On December 31, 1996, the Company acquired the net assets of the Amicon
Separation Science Business of W.R. Grace & Co. (Amicon) for
approximately $129,265 in cash, including transaction costs. Amicon
manufactures protein purification tools for the research laboratory and
for biotechnology manufacturing. The acquisition is accounted for as a
purchase, and accordingly, the purchase price has been preliminarily
allocated to the identifiable tangible and intangible assets based on
estimated fair market values of those assets. The Company has accrued
approximately $27,000 for additional costs associated with the
acquisition. These costs include severance payable to Amicon
employees, abandonment of duplicate Amicon manufacturing and sales
facilities, and termination of certain Amicon contractual obligations.
The Company expects that the integration of Amicon's operations into
those of the Company will be substantially complete within one year.
The ultimate execution of the Company's plans and costs incurred may
result in an adjustment to the amounts preliminarily allocated to
assets and liabilities and to amounts accrued for additional costs
associated with the acquisition. The purchase included at estimated
fair value current assets of $30,328, property plant and equipment of
$15,474, other assets of $596 and the assumption of liabilities of
$9,197. Identifiable intangible assets were valued at $50,753 and
included tradenames and patented and unpatented complete technology.
These intangible assets will be amortized over their estimated useful
lives ranging from five to thirty years. The value of in process
research and development for which technical feasibility has not been
achieved was $68,311 and was charged to earnings in the fourth quarter
of 1996. The purchase was financed through the Company's new revolving
credit facility as discussed in Note J.
On the basis of a pro forma consolidation of the results of operations
as if the acquisition had taken place at the beginning of fiscal 1995
rather than at December 31, 1996, consolidated net sales would have
been $651,000 in 1995 and $675,000 in 1996. Consolidated pro forma
income before income taxes, net income and earnings per share would not
have been materially different from the amounts reported for 1995 and
1996. Pro forma amounts are not necessarily indicative of what the
actual consolidated results of operations might have been if the
acquisition had been effective at the beginning of fiscal 1995.
Note D - Subsequent Event
On January 22 1997, the Company successfully completed a cash tender
offer for all of the outstanding common shares of Tylan General, Inc.
("Tylan"). Tylan became a wholly-owned subsidiary on January 27, 1997.
Tylan, which had annual sales of approximately $148,000 for its latest
fiscal year ended October 31, 1996, supplies precision mass flow
controllers, pressure and vacuum measurement and control equipment, and
ultraclean gas panels to the microelectronics industry. The
acquisition was financed through the Company's new revolving credit
agreement discussed in Note J and will be accounted for as a purchase.
Note E - Discontinued Operations
On August 18, 1994, the Company sold its Waters Chromatography Division
to Waters Holdings, Inc. for $330,000 in cash and $10,000 in stock. On
August 23, 1994, the Company sold certain assets of its non-membrane
bioscience business to PerSeptive Biosystems, Inc. for $10,000 in cash
and four thousand shares of preferred stock redeemable in four equal
annual installments of $10,000. The stock proceeds received from each
sale were recorded at their estimated fair value at the date of
receipt. Both sales were recorded in 1994 and resulted in a combined
pre-tax loss of $5,667 ($3,400 or $0.06 per share net of income taxes).
As of December 31, 1996, the Company holds 2,120,249 shares of
PerSeptive Biosystems' common stock as a result of PerSeptive's
preferred stock redemption requirement. These shares are considered
available for sale securities and have been recorded at fair value in
Other Assets, net of income tax, in accordance with SFAS No. 115.
Remaining accruals associated with the divestitures consist primarily
of costs to be incurred in providing future general and administrative
support services for the divested businesses as specified in the sales
agreements, costs associated with abandoning facilities operated under
long-term leases, and employee costs. During 1996, the Company charged
$1,100 of employee costs, $2,000 of contract support services and
$4,839 of facilities and other costs against divestiture accruals. The
Company periodically assesses the adequacy of the divestiture accruals,
and the remaining accrual balances at December 31, 1996 are expected to
be sufficient to satisfy the Company's future obligations with respect
to discontinued operations.
In accordance with each respective sales agreement, the Company
retained certain customer accounts receivable balances generated from
sales of Instrumentation Division products prior to and subsequent to
the completion of the divestitures. These amounts were classified in
Receivables arising from sales of businesses in the accompanying
consolidated balance sheets.
Note F - Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash and
short-term investments, accounts receivable and hedging instruments.
The Company places its temporary cash and short-term investments with
high credit qualified financial institutions, and, by policy, limits
the amount of credit exposure to any one financial institution.
Concentrations of credit risk with respect to accounts receivable is
limited due to the large number of customers comprising the Company's
customer base, and their dispersion across different markets and
geographies. The Company performs ongoing credit evaluations of its
customers and generally does not require collateral.
The Company is exposed to credit-related losses in the event of
nonperformance by counterparties to hedging instruments. The
counterparties to these contracts are major financial institutions.
The Company continually monitors its positions and the credit ratings
of its counterparties and limits the amount of contracts it enters into
with any one party.
Note G - Inventories
Inventories at December 31 consisted of the following:
1996 1995
Raw materials $ 27,502 $ 21,357
Work in process 16,310 9,621
Finished goods 62,598 49,408
$ 106,410 $ 80,386
The value of inventories determined using the LIFO cost method was
$41,458 or 39 percent of the total at December 31, 1996 and $43,101 or
54 percent of the total at December 31, 1995. If these inventories had
been valued using the FIFO cost method, they would have been $44,395 at
December 31, 1996 and $45,608 at December 31, 1995.
Note H - Property, Plant and Equipment
Property, plant and equipment at December 31 consisted of the
following:
1996 1995
Land $ 9,002 $ 7,419
Leasehold improvements 9,587 9,214
Buildings and improvements 123,256 117,932
Production and other equipment 240,612 217,443
Construction in progress 15,957 21,932
398,414 373,940
Less: accumulated depreciation and 195,397 182,690
amortization
$203,017 $ 191,250
Note I - Notes Payable
Short-term borrowings and related lines of credit at December 31 are
summarized as follows:
1996 1995
Notes payable $ 101,546 $ 80,768
Unused lines of credit $ 295,927 $ 266,350
Average amount outstanding at $ 115,461 $ 91,338
month-end during the year
Maximum amount outstanding at $ 132,338 $ 116,721
month-end during the year
Weighted average interest rate 5.6% 6.2%
during the year
Weighted average interest rate at 5.7% 6.1%
year-end
Notes payable generally consist of renewable, uncollateralized
borrowings under lines of credit that are denominated in various
currencies and bear interest at prevailing rates. The majority of
borrowings outstanding, as well as available under lines of credit
which existed at December 31, 1996 were incorporated into the revolving
credit facility agreement discussed in Note J in the first quarter of
1997.
Note J - Long-term Debt
Long-term debt at December 31 consisted of the following:
1996 1995
Amounts outstanding under $ 124,397 $ -
revolving credit agreement
6.78 % notes payable due in 2004 100,000 100,000
Unrealized (gain)/loss on
revaluation of yen-denominated (3,727) 5,272
debt
Other notes payable to banks 3,689 -
Long-term debt $ 224,359 $ 105,272
The Company financed the acquisition of Amicon by drawing down funds on
a 90 day $250,000 bridge loan which was made available to the Company as
temporary financing pending finalization of a long-term revolving credit
facility. On January 22, 1997, the Company entered into an unsecured
revolving credit agreement ("the agreement") with a group of banks. The
agreement allows for borrowings of up to $450,000 and expires on January
22, 2002. Interest is payable on outstanding borrowings at a floating
rate defined in the agreement as LIBOR plus a margin (5.7 percent at
January 22, 1997). The agreement also calls for a commitment fee at a
rate ranging from .10 percent to .65 percent of the available facility.
The exact amount of the margin and the commitment fee is dependent on the
Company's debt rating. The agreement calls for the Company to maintain
certain financial covenants in the areas of operating cash flow and
interest coverage. The amount outstanding at December 31, 1996 of
$124,397 reflects the adjusted purchase price paid to acquire Amicon.
The $100,000 6.78 percent notes payable are due in 2004. Interest on
these notes is payable semi-annually in March and September. The notes
payable agreement calls for the Company to maintain a debt to total debt
and equity ratio which does not exceed a specified threshold. At
December 31, 1996, the Company is in compliance with this requirement.
However, amounts borrowed by the Company in the first quarter of 1997
under the $450,000 credit facility to fund the acquisition of Tylan
would have caused the Company to violate this covenant. However, the
holder of these notes has waived the requirement that the Company comply
with this covenant through March 21, 1997. The Company is currently
negotiating to change the financial covenant included in this note
agreement. If a revised agreement is not reached by March 21, 1997, the
Company may redeem the notes using either proceeds from a planned public
debt offering for up to $300,000 or borrowings potentially available
upon request by the Company under the agreement discussed above.
As of January 1, 1994, the Company had partially hedged its foreign
currency net asset exposure by entering into a currency swap which was
to mature in 1995. Under the terms of the original swap, the Company
exchanged $100,000 of dollar debt service obligations for foreign
obligations of 9,936,000 yen and 33,193 DM. In January, 1994, the
Company closed out the yen denominated swap and simultaneously exchanged
$80,000 of dollar debt service obligations for a yen denominated
obligation of 8,760,000 yen, which bears interest at a rate of 4.49
percent. This swap matures in 2004. In March, 1995, the Company paid
$3,546 to close out the DM swap. This cash payment represented the
cumulative effect of the foreign currency rate fluctuations over the
life of the swap. The Company's foreign currency obligations had
effective weighted average interest rates of 4.86 and 5.39 percent in
1996 and 1995, respectively. The effect of foreign currency exchange
rate fluctuations resulting from the yen swap agreement open at December
31, 1996 is included in translation adjustments.
Other notes payable to banks represents borrowings outstanding at an
Amicon subsidiary acquired by the Company on December 31, 1996. The
Company expects to repay this balance in full in 1997 by drawing funds
from the revolving credit facility discussed above.
The Company capitalized interest costs associated with the acquisition
of certain assets of $785 in 1996, $929 in 1995, and $890 in 1994.
Interest paid on short-term and long-term debt during 1996, 1995, and
1994 amounted to $12,171, $11,481, and $8,946 respectively.
Note K - Foreign Exchange
A significant volume of the Companies business is transacted in
currencies other than the U.S. dollar. This exposes the Company to
risks associated with currency rate fluctuations which impact the
Company's sales and net income. To partially mitigate this risk, the
Company has entered into foreign currency transactions, forward and
option contracts to sell yen, on a continuing basis in amounts and
timing consistent with underlying currency exposure on inventory
purchases so that the gains and losses or these transactions offset
gains and losses on the underlying exposure. A realized gain of $2,687
in 1996, and realized losses of $2,287 in 1995, and $960 in 1994
relating to these contracts are included in cost of sales, partially
offsetting the impact of foreign currency fluctuations.
At December 31, 1996, the Company has open forward exchange contracts to
sell yen aggregating $13,422 and open forward option contracts to sell
yen aggregating $27,025. These open contracts have an unrealized gain
of $1,700 at December 31, 1996. All open contracts mature within 15
months.
Note L - Income Taxes
Income taxes on both continuing and discontinued operations have been
provided in accordance with the provisions of SFAS #109. The Company's
provisions for income taxes are summarized as follows:
1996 1995 1994
Domestic and foreign
income before income taxes:
Domestic $ 195 $51,933 $ 23,042
Foreign 56,828 58,202 48,206
57,023 110,135 71,248
Loss on - - 5,667
disposal of discontinued
operation
Income from $57,023 $110,135 $76,915
continuing operations before
income taxes
Domestic and foreign
provisions for income taxes:
Domestic $(2,362) $ 9,039 $(1,894)
Foreign 15,427 14,642 16,433
State 336 1,100 500
13,401 24,781 15,039
Less: portion applied to - - 2,267
discontinued operations
$13,401 $24,781 $17,306
Current and deferred
provisions for income taxes:
Current $21,613 $ 23,409 $ 28,800
Deferred (8,212) 1,372 (13,761)
$13,401 $ 24,781 $ 15,039
A summary of the differences between the Company's consolidated
effective tax rate and the United States statutory federal income tax
rate is as follows:
1996 1995 1994
U.S. statutory income tax rate 35.0% 35.0% 35.0%
Puerto Rico tax rate benefits (6.4) (4.8) (6.0)
Ireland tax rate benefits (11.0) (5.2) (4.0)
State income tax, net of federal .4 .7 .5
income tax benefit
Foreign Sales Corporation income not (4.0) (2.0) (3.0)
taxed
Tax credits - (1.2) -
Change in valuation allowance 9.5 - -
Effective tax rate applicable to 23.5% 22.5% 22.5%
operations
Tax exemptions relating to Puerto Rico and Ireland operations are
effective through 2004 and 2010, respectively. Income taxes paid (net
of refunds) during 1996, 1995, and 1994 were $24,228, $9,999, and
$25,296, respectively.
The Company has not recorded deferred income taxes applicable to
undistributed earnings of foreign subsidiaries that are indefinitely
reinvested in foreign operations. These earnings amounted to
approximately $73,700 at December 31, 1996. If earnings of such
foreign subsidiaries were not indefinitely reinvested, a deferred tax
liability of approximately $18,425 would have been required.
At December 31, 1996, the Company has foreign tax credit carryforwards
of approximately $20,500 that expire in the years 1997 through 2001.
General business credit carryforwards of approximately $7,300 expire in
the years 2001 through 2010. In addition, the Company has alternative
minimum tax credit carryforwards of approximately $10,800 which can be
carried forward indefinitely.
Significant components of the Company's net deferred tax assets are as
follows:
1996 1995
Intercompany and inventory related $12,734 $13,943
transactions
Postretirement benefits other than 3,500 3,421
pensions
Tax credits (including foreign tax
credits on unremitted earnings) 55,586 43,370
Divestiture related costs 5,109 7,435
Amortization of intangible assets 23,776 -
Depreciation (3,381) (2,704)
Other, net (6,103) 4,349
91,221 69,814
Valuation allowance (22,135) (16,635)
Net deferred tax asset $69,086 $53,179
The valuation allowance is provided primarily against foreign tax
credit carryforwards and foreign tax credits on unremitted earnings
which can be utilized against future taxable income in the United
States. The increase in the valuation allowance in 1996 results from
the growth in foreign tax credits. Although realization is not
assured, the Company believes it is more likely than not that the
remainder of the deferred tax asset, net of the valuation allowance,
will be realized. The amount of the deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of
future taxable income are reduced.
During 1995 the Internal Revenue Service ("IRS") completed its
examination of the Company's federal income tax returns pertaining to
its U.S. and Puerto Rican operations for the years 1991-1992 with no
major adjustments.
Note M - Legal Proceedings
The settlement to date of all environmental claims against all
participants at hazardous waste ("Superfund") sites in which the
Company was named a potentially responsible party by the Environmental
Protection Agency has been significant. Prior to 1995, the Company had
paid $14,000 to settle claims at sites in which the Company was named a
potentially responsible party. Due to the fact that Superfund sites at
which the Company was named a potentially responsible party are in the
late stages of remedy and a significant portion of the remedy cost has
already been funded, the Company believes that its probable future
financial obligation at December 31, 1996 will not materially affect
its future operating results and liquidity. Amounts paid by the
Company in 1996 and 1995 with respect to the Superfund obligations were
insignificant.
In 1994, the Company settled a lawsuit filed by Eastern Enterprises in
connection with Eastern's purchase of the Company's Process Water
Division in 1989. Total settlement costs of $10,800, including a
$9,000 payment to Eastern Enterprises and $1,800 of related costs
incurred by the Company, are included in Other expense in the
accompanying consolidated statements of income.
The Company and Waters Holdings, Inc. are engaged in a dispute with
respect to the amount of assets to be transferred from the Company's
Retirement Plan in connection with the divestitures. The Company
believes that it has meritorious arguments and should prevail. In the
opinion of the Company, although final settlement of this matter may
impact the Company's financial statements in a particular period, it is
not expected to have a material adverse effect on the Company's
financial condition.
Note N - Leases
Lease agreements cover sales offices, warehouse space, computers and
automobiles. These leases have expiration dates through 2006. Certain
land and building leases contain renewal options for periods ranging
from five to ten years and purchase options at fair market value.
Rental expense was $12,547 in 1996, $11,397 in 1995, $12,114 in 1994.
At December 31, 1996 future minimum rents payable under noncancelable
leases with initial terms exceeding one year were as follows:
1997 $ 12,105
1998 8,669
1999 7,528
2000 5,980
2001 3,712
2002 - 2006 10,071
Note O - Stock Plans
Stock Option Plans
The Company has two fixed option plans which reserve shares of common
stock for issuance to key employees and directors respectively. The
Company also has a stock purchase plan which allows employees to
purchase shares of the Company's common stock as discussed below. The
Company has adopted the disclosure-only provisions of Statement of
Financial Accounts Standards No. 123 "Accounting for Stock - Based
Compensation." Accordingly, no compensation cost has been recognized
for grants made in 1995 and 1996 under the stock option and stock
purchase plans. Had compensation cost been determined based on the
fair value at the grant date for awards in 1995 and 1996 consistent
with the provisions of SFAS 123, the Company's net income and earnings
per share would have been unchanged in 1995 and reduced by $1,015 or
$.02 per share in 1996. The proforma expense amounts in 1995 and 1996
assume that the fair value assigned to the 1995 and 1996 option grants
was amortized over the vesting period of the options, which is four
years, while the fair value assigned to grants under the stock purchase
plan is recognized in full at the date of grant.
The fair value of each option grant is estimated on the date of the
grant using the Black - Scholes model with the following weighted
average assumptions in 1995 and 1996: expected life of five years;
expected volatility of 25% and an expected annual dividend increase of
$.04 per year. The risk free interest rate was 6.1 percent in 1996 and
5.5 percent in 1995. This rate approximated that of 5 year U.S.
government interest bearing securities.
Under the Company's Combined Stock Option Plan, stock options to
purchase Millipore common stock may be granted to employees. During
1996, the Company adopted the "1995 Combined Stock Option Plan", which
replaced the "1985 Combined Stock Option Plan". The terms of the 1995
Plan are substantially similar to those of the 1985 Plan. In
conjunction with the adoption of the 1995 Plan, an additional 1,031,000
shares were authorized for issuance. The plan provides that the option
price per share may not be less than the fair market value of the stock
at the time the option is granted and that options must expire not
later than 10 years from the date of grant. Plan data are summarized
as follows:
1996 1995 1994
Option shares:
Outstanding at beginning of 2,940,000 3,518,000 5,440,000
period
Issued during period 461,000 373,000 534,000
Exercised during period (369,000) (885,000) (2,334,000)
Canceled during period (62,000) (66,000) (122,000)
Outstanding at end of period 2,970,000 2,940,000 3,518,000
Exercisable at end of period 1,850,000 1,747,000 2,088,000
Shares available for granting of 1,671,000 1,039,000 1,344,000
options at end of period
Price range of outstanding options $14.50 - $13.56 - $9.72 -
at end of period $42.00 $37.63 $23.69
Average price of outstanding $24.33 $20.82 $17.96
options at end of period
Average price of exercised options $17.41 $16.70 $16.30
during the period
In 1995, as part of the Company's broad-based open market stock
repurchase program, the Company repurchased at market prices, 759,000
shares of common stock which had been issued to current employees and
former employees of the divested businesses under the Company's stock
option plan. The difference between the market price of the shares
repurchased and the stock option exercise price was recognized as
compensation expense and is included in the Company's 1995 consolidated
statement of income or charged against accrued divestiture reserves.
Non-Employee Director Stock Option Plan
In 1990, a stock option plan for non-employee directors was approved by
the Company's shareholders. Under this plan, each eligible director
receives an option to purchase 4,000 shares of Millipore common stock
on the date of his or her first election, and thereafter automatically
receives an additional option to purchase 2,000 shares at the first
board of directors meeting following the Annual Meeting of
Shareholders. The plan provides that the option price per share may
not be less then the fair market value of the stock at the time the
option is granted. At December 31, 1996, 133,000 options have been
issued and 118,000 are outstanding.
Employees' Stock Purchase Plan
Under the Company's Employees' Stock Purchase Plan, all employees of
the Company and its subsidiaries who have 90 days continuous service
prior to the beginning of the plan year, May 1, may purchase shares of
Millipore common stock by payroll deduction. The purchase price per
share during the plan year is the lesser of the fair market value of
the common stock at the time of purchase or on May 1.
In 1996, 1995, and 1994 shares issued under the Plan were 72,000,
33,000, and 192,000, respectively. As of December 31, 1996, 295,000
shares of Millipore common stock were available for sale to employees
under the plan.
Incentive Plan for Senior Management
Under this plan, Millipore common stock is awarded to key members of
senior management at no cost to them. The stock cannot be sold,
assigned, transferred or pledged during a restriction period which is
normally four years. Shares are subject to forfeiture should employment
terminate during the restriction period.
The stock issued under the plan is recorded at its fair market value on
the award date; the related deferred compensation is amortized to
selling, general and administrative expenses over the restriction
period. At the end of 1996, 1995, and 1994, 119,000, 109,000, and
154,000 shares, respectively, were outstanding under the plan. Plan
expense was $559 in 1996, $450 in 1995, and $596 in 1994. As of
December 31, 1996, 92,000 shares of Millipore common stock were
available for future awards under this plan.
Note P - Employee Retirement Plans
Participation and Savings Plan
The Millipore Corporation Employees' Participation and Savings Plan
(Participation and Savings Plan), maintained for the benefit of all
full-time U.S. employees, combines both a defined contribution plan
(Participation Plan) and an employee savings plan (Savings Plan).
Contributions to the Participation Plan are allocated among the U.S.
employees of the Company who have completed at least two years of
continuous service on the basis of the compensation they received
during the year for which the contribution is made. The Savings Plan
allows employees with one year of continuous service to make certain
tax-deferred voluntary contributions which the company matches with a
25 percent contribution (50 percent contribution for employees with 10
or more years of service). Total expense under the Participation and
Savings Plan was $4,866 in 1996, $4,512 in 1995, $6,089 in 1994. Plan
expense in 1994 includes amounts related to employees of the divested
businesses through the date of the divestitures.
Retirement Plan
The Company's Retirement Plan for Employees of Millipore Corporation
(Retirement Plan) is a defined benefit plan for all U.S. employees
which provides benefits to the extent that assets of the Participation
Plan, described above, do not provide guaranteed retirement income
levels. Guaranteed retirement income levels are determined based on
years of service and salary level as integrated with Social Security
benefits. Employees are eligible under the Retirement Plan after one
year of continuous service and are vested after 5 years of service.
For accounting purposes, the Company uses the projected unit credit
method of actuarial valuation. The actuarial method for funding
purposes is the entry age normal method. The Company contributes
annually to the Retirement Plan, subject to Internal Revenue Service
and ERISA funding limitations. No contributions were required for
1996, 1995 and 1994.
The following table summarizes the funded status of the plan and
amounts reflected in the Company's consolidated balance sheets at
December 31. The projected benefit obligation was calculated using a
discount rate of 7.5 percent in 1996 and 7.0 percent in 1995, and a
salary progression rate of 5.0 percent in both years. The pension
income was determined based on an expected long-term rate of return on
assets of 8.0 percent in both years. Plan assets are invested
primarily in mutual funds and money market funds.
Plan data as of December 31, 1996 and 1995 includes assets and
obligations pertaining to employees of the Company's former Waters
Division, as the assets subject to these former employees have not yet
been transferred to Waters Holdings, Inc.
1996 1995
Actuarial present value of benefit
obligations:
Accumulated benefit obligation,
including vested benefits of $5,990 on
December 31, 1996 and $6,460 on $ 6,195 $ 6,693
December 31, 1995
Projected benefit obligation for $(7,022) $(7,595)
service rendered to date
Plan assets at fair value 7,657 7,391
Plan assets in excess of (less 635 (204)
than) projected benefit obligation
Unrecognized net actuarial loss 3,268 4,283
Unrecognized prior service cost 111 121
Unrecognized net asset being (495) (579)
amortized over 16.7 years
Prepaid pension cost included in $3,51 $ 3,621
financial statements
1996 1995 1994
Net pension (expense)/income includes
the following components
Service cost $ 29 $ 179 $ 376
Interest cost (499) (471) (361)
Return on plan assets 788 942 36
Amortization and deferral (420) (630) 246
Net pension (expense)/income $(102) $ 20 $ 297
Postretirement Benefits Other Than Pensions
The Company sponsors several unfunded defined benefit postretirement
plans covering all U.S. employees. The plans provide medical and life
insurance benefits and are, depending on the plan, either contributory
or non-contributory.
The Company recognized $4,007 as a termination settlement in 1994 as a
result of its divestitures. The settlement was included as part of the
net loss on disposal of discontinued operations.
Net periodic postretirement benefit cost included the following
components:
1996 1995 1994
Service cost-benefits attributed $298 $ 357 $ 610
to service during the year
Interest cost on accumulated
postretirement benefit obligation 453 548 662
Net amortization and deferral (205) (93) (62)
Net periodic postretirement $546 $ 812 $1,210
benefit cost
Summary information on the Company's plans as of December 31 is as
follows:
1996 1995
Accumulated postretirement benefit
obligation:
Retirees and dependents $(4,029) $(3,272)
Fully eligible active plan (176) (550)
participants
Other active plan participants (2,604) (5,056)
Accrued postretirement benefit (6,809) (8,878)
obligation
Unrecognized gain from past
experience different
from that assumed and from (3,126) (897)
changes in assumptions
Accrued postretirement benefit $(9,935 $(9,775)
cost
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.5 percent as of December 31,1996 and 7.0
percent as of December 31, 1995. The assumed health care cost trend
rate used in measuring the accumulated postretirement benefit
obligation was 8.0 percent in 1996, declining gradually to 5.0 percent
over 4 years, remaining level thereafter. The assumed health care cost
trend rate used in measuring the accumulated postretirement benefit
obligation was 7.8 percent in 1995, declining gradually to 5.5% over 8
years, remaining level thereafter.
If the health care cost trend rate assumptions were increased by 1
percent, the accumulated postretirement benefit obligation as of
December 31, 1996 would be increased by $862 while the aggregate of the
service and interest cost components of net periodic postretirement
benefit cost for 1996 would be increased by $121.
Note Q - Business Segment Information
Industry Segments
The Company operates in one industry segment. Using primarily
membrane technology, the Company develops, manufactures and
markets products used for analysis and purification.
Geographical Segments
The Company operates in the geographical segments indicated in
the table below. Sales are reflected in the segment from which
the sales are made. The Americas segment includes North and
South America. The European region includes Western and Central
Europe, Russia, the Middle East and Africa. The Asia/Pacific
region includes Japan, Korea, Taiwan, Hong Kong, China,
Southeast Asia and Australia. Transfers between geographic
areas are generally made at a discount from local in-market
price. Operating profits for each geographical segment exclude
general corporate expenses. Identifiable assets consist of those
assets utilized within each respective geographic segment and
exclude cash and short-term investments and receivables arising
from sale of businesses, which are classified as corporate
assets.
Americas Europe Asia/Pacific Eliminations Total
1996
Sales:
Unaffiliated $215,875 $192,838 $208,229 - $616,942
customers
Unaffiliated export:
Pacific customers 839 839
European customers 954 954
Total unaffiliated 217,668 192,838 208,229 - 618,735
Transfer between areas 112,474 68,535 10,880 (191,889) -
Total sales $330,142 261,373 $219,109 $(191,889) $618,735
Operating profits $75,843 $45,341 $13,994 - $135,178
General corporate expenses (6,455)
Purchased research & (68,311)
development expenses
Gain on sale of equity 5,329
securities
Interest expense, net (8,718)
Income from continuing
operations before
income taxes $57,023
Identifiable assets $496,742 $ 212,132 $ 142,882 $(215,734) $636,022
Corporate assets 46,870
Total assets $682,892
1995
Sales:
Unaffiliated customers $202,717 $ 185,402 $ 204,895 $593,014
Unaffiliated export:
Pacific customers 553 553
European customers 899 899
Total unaffiliated 204,169 185,402 204,895 594,466
Transfer between areas 95,267 46,602 14,267 (156,136) -
Total sales $ 299,436 $ 232,004 $ 219,162 $(156,136) $594,466
Operating profits $ 75,663 $ 33,072 $ 20,973 $129,708
General corporate expenses (10,632)
Interest expense, net (8,941)
Income from continuing
operations before income taxes $ 110,135
Identifiable assets $409,750 $219,681 $174,468 $(301,308) $ 502,591
Corporate assets 28,354
Total assets $ 530,945
Americas Europe Asia/Pacific Eliminations Total
1994
Sales:
Unaffiliated $180,569 $154,196 $160,781 $ 495,546
customers
Unaffiliated export:
Pacific customers 806 806
European customers 900 900
Total 182,275 154,196 160,781 497,252
unaffiliated
Transfer between areas 77,877 25,767 6,246 (109,890) -
Total sales $260,152 $179,963 $167,027 $(109,890) $ 497,252
Operating profits $54,301 $ 23,908 $24,879 $ 103,088
General corporate expenses (12,429)
Other expense (10,800)
Interest expense, net (2,944)
Income from continuing
operations before
income taxes $ 76,915
Identifiable assets $341,057 $187,132 $144,890 $(181,285) $491,794
Corporate assets 45,186
Total assets $536,980
Report of Independent Accountants
To the Shareholders and Directors of Millipore Corporation:
We have audited the accompanying consolidated balance sheets of
Millipore Corporation as of December 31, 1996 and 1995, and the
related consolidated statements of income, shareholders' equity, and
cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Millipore Corporation at December 31, 1996 and 1995, and the
consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1996 in conformity
with generally accepted accounting principles.
Boston, Massachusetts Coopers & Lybrand L.L.P.
January 22, 1997
Quarterly Results (Unaudited)
The Company's unaudited quarterly results are summarized
below.
First Second Third Fourth
(In thousands, except per Quarter Quarter Quarter Quarter Year
share data)
1996
Net sales $156,476 $161,928 $148,913 $151,418 $618,735
Cost of sales 61,946 65,412 60,774 61,311 249,443
Gross profit 94,530 96,516 88,139 90,107 369,292
Selling, general and 50,140 52,059 50,226 49,715 202,140
administrative expenses
Research and development 9,409 9,741 9,610 9,669 38,429
expenses
Purchased research & - - - 68,311 68,311
development expense
Operating income (loss) 34,981 34,716 28,303 (37,588) 60,412
Gain on sale of equity - - 2,858 2,471 5,329
securities
Interest income 713 661 660 746 2,780
Interest expense (2,710) (2,945) (2,995) (2,848) (11,498)
Income (loss) 32,984 32,432 28,826 (37,219) 57,023
before income taxes
Provision benefit for 7,751 7,622 6,774 (8,746) 13,401
income taxes
Net income/(loss) $ 25,233 $ 24,810 $22,052 $(28,473) $43,622
Per share information
Net income/(loss) $ 0.57 $ 0.57 $0.51 $ (0.66) $ 1.00
(loss)
Weighted average common 44,163 43,642 43,335 43,284 43,602
shares outstanding
1995
Net sales $141,427 $150,508 $147,547 $154,984 $594,466
Cost of sales 58,509 60,779 61,293 63,268 243,849
Gross profit 82,918 89,729 86,254 91,716 350,617
Selling, general and 45,795 49,610 48,842 50,779 195,026
administrative expenses
Research and development 8,513 9,155 9,352 9,495 36,515
expenses
Operating income 28,610 30,964 28,060 31,442 119,076
Interest income 386 337 427 532 1,682
Interest expense (2,318) (2,851) (2,616) (2,838) (10,623)
Income before 26,678 28,450 25,871 29,136 110,135
income taxes
Provision for income taxes 6,003 6,401 5,821 6,556 24,781
Net income $ 20,675 $ 22,049 $ 20,050 $ 22,580 $ 85,354
Per share information
Net income $ 0.45 $ 0.49 $ 0.45 $ 0.51 $ 1.90
Weighted average common 45,960 44,998 44,642 44,348 44,985
shares outstanding
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT
OF
MILLIPORE CORPORATION
For the Fiscal Year Ended December 31, 1996
****************
EXHIBITS
****************
INDEX TO EXHIBITS
Exhibit No. Description Tab No.
2.1 Amicon Worldwide Purchase and
Sale, **
Agreement, dated November 18,
1996, dated December 31, 1996,
as Amended by Amendment
Agreement, dated December 31,
1996, by and amongCompany and W.
R. Grace & Co.-Conn.
2.2 Agreement and Plan of Merger,
dated **
as of December 16, 1996, by and
among Company and its wholly
owned subsidiary MCTG
Acquisition Corp. and Tylan
General, Inc.
3.1 Restated Articles of
Organization, 1
as amended May 6, 1996
3.2 By Laws, as amended **
4.1 Indenture dated as of May 3,
1995, **
relating to the issuance of
$100,000,000 principal amount of
Company's 6.78% Senior Notes due
2004
10.1 Distribution Agreement, dated as
of July 1, 2
1996, by and among Company and
Fisher Scientific Company (all
schedules and Exhibits have been
omitted; Company agrees to
furnish the Commission with a
copy of any such schedule or
exhibit upon request)
10.2 Revolving Credit Agreement,
dated as of 3
January 22, 1997, among
Millipore Corporation and The
First National Bank of Boston,
ABM AMRO Bank N.V. and certain
other lending institutions which
are or become parties thereto
10.3 Shareholder Rights Agreement,
dated as of **
April 15, 1988, between
Millipore and The First National
Bank of Boston
10.4 Long Term Restricted Stock
(Incentive) Plan **
for Senior Management
** Incorporated by Reference to a prior filing with
the Commission
Exhibit No. Description Tab No.
10.5 1985 Combined Stock Option Plan **
10.6 Supplemental Savings and
Retirement Plan **
for Key Salaried Employees of
Millipore Corporation
10.7 Executive Termination Agreement **
10.8 Executive "Sale of Business"
Incentive **
Termination Agreements
10.9 1995 Employee Stock Purchase
Plan **
10.10 1995 Management Incentive Plan **
11 Computation of Per Share
Earnings 4
21 Subsidiaries of Millipore 5
23 Consent of Coopers & Lybrand
L.L.P. 6
24 Power of Attorney 7
** Incorporated by Reference to a prior filing with
the Commission
Millipore Corporation
Exhibit 11
Computation of Earnings Per Share
(In Thousands Except Per Share Data)
Years Ended December 31,
Calculation of shares: 1996 1995 1994
Weighted average of shares
outstanding during the year 43,602 (b) 44,985 (b) 54,726 (b)
Shares outstanding from
assumed exercise of stock 2,831 3,129 4,325
option
(Treasury Method) (1,494) (1,736) (2,969)
(NQ tax benefit) (452) (465) (438)
Weighted average shares and
common stock equivalents
outstanding during the year 44,487 (a) 45,913 (a) 55,644 (a)
Additional shares assumed
exercised with full - - -
dilution
Weighted average of shares
used in calculation of
fully
diluted earnings per share 44,487 (a) 45,913 (a) 55,644 (a)
Net Income $ 43,622 $ 85,354 $56,209
Earnings per common share as
reported in the
Consolidated
Financial Statements $ 1.00 $ 1.90 $ 1.03
Primary earnings per common $ 0.98 $ 1.86 $ 1.01 (a)
share (a) (a)
Net fully diluted earnings
per common share $ 0.98 $ 1.86 $ 1.01 (a)
(a) (a)
(a) These calculations are submitted in accordance with Securities
Exchange Act of 1934 Release N. 9083 although not required by APB
No. 15 because they result in dilutions of less than 3%.
(b) Represents weighted average of shares outstanding used in the
earnings per share calculations. Common stock equivalents for
1996, 1995, and 1994 were not included in the weighted average
share computation as they were less than 3% dilutive
Exhibit 21
Subsidiaries Of Millipore Corporation
Pursuant to Item 601, Paragraph 21, clause (ii) of Regulation
S-K,the following list excludes subsidiaries who conduct no
business operations or which have no significant assets.
Company Name Jurisdiction of
Organization
Millipore Asia Ltd. Delaware
Millipore Korea Ltd. Korea
Millipore Cidra, Inc. Delaware
Millipore Intertech, (V.I.), Inc. U.S. Virgin Is.
Millipore (Canada) Ltd. Canada
Amicon Canada Limited Canada
Millipore S.A. de C.V. Mexico
Millipore GesmbH Austria
Millipore Kft Hungary
Millipore S.R.O. Czech Republic
Millipore Investment Holdings Ltd. Delaware
Millipore International Holding Company B.V. Netherlands
Millipore Japan Company L.L.C. Delaware
Nihon Millipore Limited Japan
Millipore S.A./N.V. Belgium
Millipore (U.K.) Ltd. United Kingdom
Amicon Limited United Kingdom
Millipore S.A. France
Prochrom S.A. France
Prochrom Recherche et Development S.A. France
Prochrom, Inc. Indiana
Prochrom OY Finland
Millipore Ireland B.V. Netherlands
Millipore Dublin International Finance Company Ireland
Millipore GmbH West Germany
Amicon GmbH West Germany
Millipore S.p.A. Italy
Millipore A.B. Sweden
Millipore AS Norway
Millipore A.G. Switzerland
Millipore A/S Denmark
Millipore Australia Pty. Ltd. Australia
Millipore Iberica S.A. Spain
Millipore I.E.C., Ltda. Brazil
Millipore OY Finland
Millipore B.V. The Netherlands
Millipore China Ltd. Hong Kong
Exhibit 21 [Cont'd]
Millipore Pacific Limited Delaware
Millipore (Suzhou) Filter Company Limited Peoples Republic of
China
Millicorp, Inc. Delaware
Minerva Insurance Corp. Ltd. Bermuda
Tylan General, Inc. Delaware
Tylan General GmbH Germany
Tylan General U.K. Ltd. United Kingdom
TG SARL France
Tylan General K.K. Japan
TG Korea Ltd. Korea
Span Instruments, Inc. Texas
Ocala, Inc. Texas
Span Instruments Singapore, Pte. Ltd. Singapore
Vermeer Ireland
EXHIBIT 23
Consent of Independent Accountants
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Millipore Corporation on Form S-8 (File Nos. 2-
91432, 2-72124, 2-85698, 2-97280, 33-37319, 33-37323, 33-59005, 33-
10801, 33-11-790), on Form S-3 (File Nos. 2-84252, 33-9706, 33-
22196, 33-47213) and on Form S-4 (File No. 33-58117) of our report
dated January 22, 1997 on our audits of the consolidated financial
statements of Millipore Corporation as of December 31, 1996 and
1995, and for the years ended December 31, 1996, 1995, and 1994,
which report is incorporated by reference in this Annual Report on
Form 10-K.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 7, 1997
EXHIBIT 24
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
Directors and Officers of Millipore Corporation (the
"Corporation"), do hereby constitute and appoint C. William Zadel
and Jeffrey Rudin and each of them individually, their true and
lawful attorneys and agents to execute on behalf of the
Corporation the Form 10-K Annual Report of the Corporation for
the fiscal year ended December 31, 1996, and all such additional
instruments related thereto which such attorneys and agents may
deem to be necessary and desirable to enable the Corporation to
comply with the requirements of the Securities Exchange Act of
1934, as amended, and any regulations, orders, or other
requirements of the United States Securities and Exchange
Commission thereunder in connection with the preparation and
filing of said Form 10-K Annual Report, including specifically,
but without limitation of the foregoing, power and authority to
sign the names of each of such Directors and Officers on his
behalf, as such Director or Officer, as indicated below to the
said Form 10-K Annual Report or documents filed or to be filed as
a part of or in connection with such Form 10-K Annual Report; and
each of the undersigned hereby ratifies and confirms all that
said attorneys and agents shall do or cause to be done by virtue
thereof.
SIGNATURE TITLE DATE
/s/C. William Zadel Chairman, President March 7, 1997
C. William Zadel Chief Executive Officer
and Director
/s/Charles D. Baker Director March 7, 1997
Charles D. Baker
/s/Samuel C. Butler Director March 7, 1997
Samuel C. Butler
/s/Robert E. Caldwell Director March 7, 1997
1997
Robert E. Caldwell
/s/Maureen A. Hendricks Director March 7, 1997
Maureen A. Hendricks
/s/Mark Hoffman Director March 7, 1997
Mark Hoffman
/s/Steven Muller Director March 7, 1997
Steven Muller
/s/Thomas O. Pyle Director March 7, 1997
Thomas O. Pyle
/s/John F. Reno Director March 7, 1997
John F. Reno