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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2000 or
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-1052
MILLIPORE CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2170233
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
80 Ashby Road, Bedford, MA 01730
(Address of principal executive (Zip Code)
offices)
(781) 533-6000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Exchange on
Title of Class 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 March 2, 2001, the aggregate market value of the registrant's voting
stock held by non-affiliates of the registrant was approximately
$2,129,984,024 based on the closing price on that date on the New York Stock
Exchange.
As of March 2, 2001, 46,648,127 shares of the registrant's Common Stock were
outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Document Incorporated into Form 10-K
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Definitive Proxy Statement, dated March 16, 2001 Part III
PART I
Item 1. Business.
The Company
Millipore Corporation was incorporated under the laws of Massachusetts on
May 3, 1954. Millipore is a market leader in the field of separations
technology and develops, manufactures and sells products which are used
primarily for the analysis, identification and purification of liquids and
gases. In addition, Millipore sells products to monitor and control critical
aspects of the manufacturing process for integrated circuits (semiconductors).
Millipore's separations products are based on a variety of membrane and other
technologies that effect separations through physical and chemical methods.
These technologies are applied to life science research applications,
including genomics, proteomics and drug discovery, as well as to general
analytical laboratory applications including laboratory water purification and
microbiological testing. On the process scale, these technologies are used in
the biotechnology, pharmaceutical and food and beverage industries for
separation, purification and sterilization applications. Millipore's
technologies are also applied to the purification and control of process
liquids and gases for integrated circuit ("IC") manufacturing operations.
Millipore's IC process control products use electro-mechanical, pressure
differential and related technologies to permit IC manufacturers to monitor
and control the flow and condition of process gases used in the IC fabrication
process. On the process scale, these technologies are used in the
biotechnology, pharmaceutical and food and beverage industries for separation,
purification and sterilization applications. Millipore's technologies are also
applied to the purification and control of process liquids and gases for
integrated circuit ("IC") manufacturing operations. Millipore's IC process
control products use electro-mechanical, pressure differential and related
technologies to permit IC manufacturers to monitor and control the flow and
condition of process gases used in the IC fabrication process.
Millipore is an integrated multinational manufacturer of its products.
Millipore's role as a market leader has been recognized by independent surveys
of filtration markets. Unless the context otherwise requires, the terms
"Millipore" or the "Company" mean Millipore Corporation and its subsidiaries.
On October 3, 2000, Millipore announced plans to separate into two distinct
companies by making its Microelectronics business segment an independent,
publicly traded company. The Company is planning an initial public offering
for less than 20% of the shares of the new Microelectronics company and
subsequently intends to spin-off the remaining shares to Millipore
shareholders through a dividend distribution within approximately three to six
months following the initial public offering. The transaction is expected to
be tax-free to the Company and its shareholders and is contingent upon
receiving certain tax and regulatory approvals, accommodation of certain debt
covenants as well as market conditions.
Information About Operating Segments
Millipore operates in two business segments: Bioscience (previously referred
to as Biopharmaceutical & Research) and Microelectronics. Millipore has
traditionally organized its business and management structures around the
markets and customers which it serves. The Bioscience segment includes
products and services sold to pharmaceutical, biotechnology, and food and
beverage companies, life sciences companies engaged in genomics, proteomics
and drug discovery, and university, government and private laboratories and
research institutes. The Microelectronics segment includes products and
services sold to semiconductor fabrication companies as well as OEM and
material suppliers to those companies. While there is some overlap in the
products sold to each business segment, the economic environments in which
these two segments operate are distinct. The Bioscience business segment is
characterized by customer needs for reliability and consistency of
standardized products used in validated production processes and for assured
continuity and comparability of analytical results; this segment has
demonstrated relatively stable patterns of revenue growth and profitability.
While technical innovation is important to the Bioscience business segment,
the adoption of new technologies and products often requires that a lengthy
validation process be completed prior to adoption. On the other hand, the
Microelectronics business segment is characterized by rapid technological
change and economic cycles with dramatic shifts in revenue growth and decline
with corresponding impacts on profitability.
2
During 2000 approximately 63% of Millipore's net sales were made to
customers in the Bioscience segment and approximately 37% to customers in the
Microelectronics segment. In addition, approximately 60% of Millipore's net
sales were made to customers outside the Americas. Industry and geographic
segment information is discussed in Note 16 to the Millipore Corporation
Consolidated Financial Statements (the "Financial Statements") included in
Item 8 below, which Note is hereby incorporated herein by reference.
Products, Technologies and Applications
Millipore sells approximately 25,000 products which 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, the Company also
designs and engineers process filtration systems and process chromatography
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.
Bioscience Business Segment. The products sold to customers in the
Bioscience business segment include disc filters, OEM membranes, filter
devices and ancillary equipment and supplies, filter-based test kits,
laboratory water purification systems, cartridge filters and housings of
various sizes and configurations, process liquid chromatography media and
systems and process filtration systems and filter- and chromatography media-
based sample preparation devices.
The principal separation technologies utilized by products sold to
Bioscience segment customers are based on membrane filters and on certain
chemistries and resins as well as liquid chromatography. Membranes are used to
filter either the wanted or the unwanted particulate or bacterial, molecular
or viral entities from fluids. Some of the Company's newer membrane materials
also use affinity, ion-exchange or electrical charge mechanisms to effect the
desired separation. Membranes are incorporated into both microfiltration and
ultrafiltration devices, cartridges and modules of different configurations to
address a variety of customer separation needs. Liquid chromatography media is
used in process chromatography systems to remove contaminants at the molecular
level from biopharmaceutical products. The Company's laboratory water
purification products combine membrane, resin and other separations
technologies to provide ultrapure water for critical applications.
Millipore has also introduced novel technologies and products to meet the
needs of the burgeoning life sciences research industry, including sample
preparation products using both membranes and chromatographic separation
techniques. In addition, products based on the Company's proprietary size
exclusion membrane technology have been introduced to improve speed,
automation and cost-effectiveness of a number of DNA-based separations for
sequencing, plasmid prep, PCR, diagnostic and microarray applications. These
novel technologies are also being used for new applications in the drug
discovery markets for the screening of potential drug compounds and for sample
preparation in the rapidly emerging field of proteomics.
Customers use the Company's products in the Bioscience segment to gain
knowledge about a molecule, compound or microorganism by detecting,
identifying and quantifying the relevant components of a fluid sample. In
addition Millipore products are used for the purification of small and large
volumes of critical fluids. The Company's products are also used in
biopharmaceutical manufacturing and research operations to isolate and
purify/separate specific components of fluid streams for analysis and to
concentrate identified compounds for further processing. Bioscience segment
customers use the Company's laboratory water purification products to provide
ultrapure water for critical laboratory analysis and for clinical testing.
Microelectronics Business Segment. The products sold to customers in the
Microelectronics business segment include polymeric cartridge filters and
housings of various sizes, materials and configurations, metal filters,
precision liquid dispense filtration pumps, resin based gas purifiers and gas
monitors as well as mass flow controllers and pressure and vacuum control
products.
3
Membrane products sold to customers in the Microelectronics business segment
are based on essentially the same membrane technologies described above but
with membranes and housings made from distinct polymers as required by the
nature of the liquids being purified. Gas purification and monitoring products
rely on resin based chemistries which react with process gases to either
remove contaminants or to monitor the purity of the process gas. Gas
purification products also include metal filters which operate as both screen
and depth filters to exclude contaminants from process gas streams. In
addition, the Company's IC process control products use electro-mechanical,
pressure differential and thermal-dynamic technologies to create pressurized
or vacuum environments to precisely measure and control the flow of IC process
gases.
The Company's separations products are used by Microelectronics customers in
manufacturing operations to remove contaminants in a process liquid stream and
to purify and precisely dispense process liquids during critical IC
fabrication operations. The Company's products are also used in process gas
applications to precisely monitor and control the purity of and rate at which
process gases are introduced into the IC process chamber, the conditions in
the chamber during processing and the rate at which the gas is evacuated from
the IC process chamber.
Customers and Markets
Within each customer group served by Millipore, the Company focuses its
sales efforts upon those segments where customers have specific requirements
which can be satisfied by the Company's products.
Bioscience Business Segment. Major customer groups served by this business
segment include pharmaceutical/biotechnology and food and beverage companies,
as well as life sciences companies engaged in genomics, proteomics and drug
discovery, and government, university and private laboratories and research
institutes. 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 protein products; cell harvesting;
isolation and purification of compounds from complex mixtures and the
purification of water for laboratory use. The Company's membrane and
chromatography products also play an important role in the development of new
drugs by offering customers a continuum of products capable of being scaled-up
to match customer needs at different stages during the development process
from laboratory research through full scale drug production. In addition,
Millipore has developed and is developing products for biopharmaceutical
applications in order to meet the purification requirements of the
biotechnology industry. The Company also sells its analytical products, filter
cartridges and laboratory water purification systems to chemical manufacturers
and processors.
Universities, governments and private and corporate research and testing
laboratories, life science companies, environmental science laboratories and
regulatory agencies purchase a wide range of the Company's products. Typical
applications include: sample preparation; 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.
The food and beverage industry uses the Company's products for quality
control and process applications principally to monitor for microbiological
contamination and to prevent spoilage by removal of bacteria and yeast from
products such as wine, beer and bottled juices and water.
Sales to the Bioscience business segment accounted for approximately 63% of
Millipore's 2000 consolidated sales and 73% of 1999 and 1998 consolidated
sales.
Microelectronics Business Segment. Major customer groups served by this
business segment include IC manufacturers and OEM manufacturers that sell a
variety of equipment used in the manufacture of ICs to IC
4
manufacturers. IC manufacturers use the Company's products to purify (by
removing particles and unwanted contaminating molecules), deliver, control and
monitor the liquids and gases used in the manufacturing processes of
semiconductors and other microelectronics components. The Company's mass flow
and pressure control products and precision liquid dispense filtration
products are sold to OEM capital equipment suppliers, to semiconductor
manufacturers as well as directly to manufacturers of ICs. Sales to the
Microelectronics business segment accounted for approximately 37% of
Millipore's 2000 consolidated sales and 27% of 1999 and 1998 consolidated
sales. As noted above, this business segment has experienced historic
volatility, and the effect of such volatility has, in the past, affected
Millipore's sales growth.
While no single customer is material to the Company taken as a whole, the
Microelectronics business segment does rely on a relatively narrow group of
customers, some of whom purchase significant quantities of the Company's
products.
Sales and Marketing
The Company sells its products in both business segments within the United
States primarily to end users through its own direct sales force and web site
and, in the case of analytical and laboratory water products, to a limited
extent through an independent distributor. The Company sells its products in
both business segments in international 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. As of December 31, 2000, the Company's marketing, sales
and service forces consisted of approximately 1,400 employees worldwide of
which approximately 1,100 were employed in the Bioscience business segment and
approximately 300 were employed in the Microelectronics business segment.
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, purification and process control
problems which may be addressed by its products and to adapt its products and
technologies to separations and process control problems identified by its
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. In addition, the
Company maintains a network of service centers located in the United States
and in key international markets to support its Microelectronics process gas
measurement/control products as well as its Bioscience laboratory water
products.
Research and Development
In its role as a pioneer of membrane separations, Millipore has
traditionally placed heavy emphasis on research and development. This emphasis
has permitted Millipore to be the first company to introduce a number of major
new enabling separations membranes and membrane devices examples include:
nitrocellulose microfiltration membrane in 1954, compact high purity
laboratory water systems in 1972, membrane based syringe filter devices in
1973, membrane based filters for intravenous drug therapy in 1975, tangential
flow filtration cassette devices in 1975, polyvinylidene fluoride membrane in
1978, continuous electro-deionization water purification systems in 1988,
composite ultrafiltration membranes in 1989, melt-cast PFA membranes in 1990,
composite microfiltration membranes for the removal of viruses from solution
in 1991, ultra-high weight polythylene membrane in 1993, high flow high
efficiency metal membrane for gas filtration in 1996 and non-dewetting PTFE
membrane in 1997. Over the last five years, through acquisitions, licenses and
research and development investments, Millipore has expanded and diversified
its technology base very significantly. For semiconductor process
applications, a unique two-stage photochemical dispense system that integrates
filtration with dispense and connectology was launched in 1997 and the first
truly digital mass flow controller was
5
introduced in 1999. Millipore has also focused strongly on life sciences
research applications. The rapidly changing life sciences markets require
novel technologies to meet the needs of high throughput sample analysis. This
has led to products utilizing both membranes and chromatographic separation
techniques, including an entire platform based on chromatographic media
embedded in membrane structures which was introduced for the proteomics
market. For biopharmaceutical manufacturing applications, process scale
integrated systems have been introduced that include membrane devices and
chromatography hardware, software and media. Millipore has very rapidly become
a leader in chromatography hardware, and efforts are underway to develop a
differentiated line of chromatography media products for the rapidly growing
biotechnology market. Research and development activities include the
extension and enhancement of existing separations technologies to respond to
new applications, the development of new membranes and chromatography media,
and the upgrading of membrane- and media-based systems to afford the user
greater purification capabilities.
Millipore performs most of its own research and development and does not
provide material amounts of research services for others. Millipore's
aggregate research and development expenses in 2000, 1999 and 1998 were $62.7
million, $52.1 million and $53.6 million, respectively.
The Company has followed a practice of supplementing its internal research
and development efforts by acquiring or licensing newly developed technology
from unaffiliated third parties and/or acquiring distribution rights with
respect thereto, when it believes it is in its long term interests to do so.
Millipore has been granted and has licensed rights under a number of patents
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 in the Bioscience business segment
include Pall Corporation, Barnstead Thermolyne Corporation, Sartorius GmbH,
Qiagen NV, Amersham Ph A.B. and United States Filter Corporation. The
principal competitors in the Microelectronics business segment are Pall
Corporation, United States Filter Corporation, Aera, MKS Instruments, Nagano,
STEC, VAT, Iwaki and IDI-Cybor. Certain of the Company's competitors are
larger and have greater resources than the Company. However, the Company
believes that, within the markets it serves, it offers a broader line of
products, making use of a wider range of separations and IC process control
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. The Company is in substantial
compliance with all applicable environmental requirements. Compliance with the
foregoing environmental laws during 2000, 1999 and 1998 has had no material
effect on the Company's capital expenditures, earnings or competitive
position. 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.
Other Information
Since April of 1988, the Company has had in place a shareholder rights plan
(the "Rights Plan") pursuant to which Millipore declared a dividend to its
shareholders of the right to purchase (a "Right") one additional
6
share of Millipore Common Stock for each share of Millipore Common Stock
owned, at a price of $80 for each share (after giving effect to the 1995 two
for one stock split). In April of 1998, the Rights Plan was amended and
restated to, among other things, extend the expiration date until April 30,
2008, to increase the purchase price on the exercise of a Right to $200, to
permit the Directors to exchange certain of the Rights for shares of Company
Common Stock (on a 1 for 1 basis) under certain circumstances and to make
certain other updating changes. The Rights Plan, as amended and restated, 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 from alternate sources of supply. For certain critical raw
materials, Millipore has qualified only a single source. With sufficient lead
times, the Company believes it would be able to validate alternate suppliers
for each of such materials.
As of December 31, 2000, Millipore employed approximately 5,200 persons
worldwide, of whom approximately 2,700 were employed in the United States and
approximately 2,500 were employed overseas.
7
Executive Officers of Millipore
The following is a list, as of March 2, 2001, of the Executive Officers of
Millipore, including corporate officers of Millipore Corporation and heads of
Millipore's operating divisions. All of the officers of Millipore Corporation
listed below were elected to serve until the first Directors Meeting following
the 2001 Annual Stockholders Meeting. All of the divisional officers listed
below have been appointed to the Corporate Executive Committee (the Company's
senior policy setting management body).
First Elected or Appointed
--------------------------
An Executive To Present
Name Age Office Officer Office
---- --- ------ ------------ -------------
C. William Zadel 57 Chairman of the Board, President and 1996 1996
Chief Executive Officer of Millipore
Corporation
Francis J. Lunger 55 Executive Vice President and Chief 1997 2000
Operating Officer of Millipore
Corporation
Kathleen B. Allen 45 Vice President, Treasurer and Chief 2000 2000
Financial Officer of Millipore
Corporation
John E. Lary 55 Vice President of Millipore Corporation 1994 1994
Joanna Nikka 49 Vice President of Millipore Corporation 1996 1996
Jeffrey Rudin 49 Vice President and General Counsel of 1996 1996
Millipore Corporation; Clerk of
Millipore Corporation
Kevin D. Sanborn 33 Vice President of Millipore Corporation 2000 2000
Hideo Takahashi 59 Vice President of Millipore Corporation 1996 1979
and President of Nihon Millipore (As President
of Nihon
Millipore)
Dominique F. Baly 52 President, Laboratory Water Division and 2000 2001
Bioscience International
William C. Emhiser 46 President, Life Sciences Division 2001 2001
Vinay Goel 52 President, Membrane Technology Division 2000 2001
Jean-Marc Pandraud 47 Vice President & General Manager, 2000 1999
Microelectronics Divisions
Susan Vogt 47 President 2000 1999
BioPharmaceutical Division
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., Citizens Bank of Massachusetts, the Massachusetts High
Technology Council , and the American Business Conference. He is a trustee of
the Boston Museum of Science. He has also served as Chairman of the Board of
Directors of the Massachusetts High Technology Council (1999-2001) and as
Chairman of the Health Industry Manufacturers Association (1994-1995).
Mr. Lunger was elected Executive Vice President, Chief Operating Officer of
Millipore in January 2000; prior to that Mr. Lunger was Vice President, Chief
Financial Officer and Treasurer of Millipore, a position he assumed upon
joining the Company in June 1997. Prior to joining Millipore, Mr. Lunger had
been, since 1995, Senior Vice President and Chief Financial Officer of Oak
Industries, Inc., a developer, manufacturer and supplier of components to the
telecommunications industry. From 1994 until 1995, Mr. Lunger had been acting
Chief
8
Executive Officer and Chief Administrative Officer of Nashua Corporation, a
conglomerate with diverse businesses ranging from office supplies to photo
finishing. During the period 1983-1994, Mr. Lunger served in various business
operations and financial management positions with Raychem Corporation, an
international material science company serving the telecommunication,
automotive, energy and defense markets, including Vice President and Group
General Manager (1992-1994); Vice President and Assistant Sector General
Manager (1991-1992) and Vice President, Finance (1988-1991).
Ms. Allen was elected Vice President, Treasurer and Chief Financial Officer
of Millipore in January 2000. Since joining Millipore in 1983 she held a wide
variety of positions in the Company's financial organization, most recently as
Corporate Controller and Chief Accounting Officer of Millipore. Prior to
joining Millipore, Ms. Allen practiced public accounting for six years with
Arthur Young and Company.
Mr. Lary was elected a Vice President of Millipore Corporation in November
1994, and is responsible for the Company's device manufacturing, facilities
and supply chain organizations. 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 Vice President for Human Resources of Millipore
Corporation 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 Vice President and General Counsel of Millipore
Corporation in December 1996. Prior to joining Millipore, Mr. Rudin served
Ciba Corning Diagnostics Corporation as Senior Vice President and General
Counsel (since 1993) and as Vice President and General Counsel (1988-1993).
Prior to that, Mr. Rudin was Assistant Division Counsel for the Pharmaceutical
Division of Ciba-Geigy Corporation. Mr. Rudin was appointed Clerk of Millipore
Corporation in 1999.
Mr. Sanborn was elected Vice President of Strategic Planning and Business
Development of Millipore Corporation in September 2000. Prior to joining
Millipore, Mr. Sanborn was a Consultant (1994-1997) and Manager (1997-2000) of
Bain & Company, a global consulting firm specializing in management and
business strategy development at the organizational and business unit levels.
Mr. Sanborn also served as a Financial Analyst at Goldman Sachs & Co., a
leading investment banking and securities firm (1989-1992). He received his
Masters of Business Administration from The Amos Tuck School of Business
Administration, Dartmouth College (1994) and graduated from Bowdoin College
(1989).
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 Millipore Corporation on February 8, 1996.
Mr. Baly joined Millipore's French subsidiary in 1972 as an Application
Specialist. From 1984 until 1991 Mr. Baly served as Vice President and General
Manager for Europe; in 1991 he was appointed President of Millipore Asia Ltd.
Mr. Baly has served as the Vice President of the Analytical Divisions of
Millipore from 1994 until February 2001, and was appointed to his current
positions as President of the Laboratory Water Division and of Millipore
Bioscience International in February 2001.
Mr. Emhiser joined Millipore in 1997 as a result of Millipore's acquisition
of Amicon Separation Science Business ("Amicon") Prior to joining Millipore,
Mr. Emhiser had been with Amicon from 1991 to 1997 where he served as
President from 1995 to 1997. Prior to joining Amicon, Mr. Emhiser was
President and Chief Operating Officer of Gelman Sciences, Inc. from 1986 to
1990. At Millipore, Mr. Emhiser has served as Vice President & General
Manager, Applied Microbiology Division (1997-1999) and Vice President &
General Manager, Analytical Products Division from 1999 to February 2001. In
February 2001, Mr. Emhiser was appointed to his current position as President,
Life Sciences Division.
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Mr. Goel joined Millipore in 1977 as a product development engineer for high
purity water products. From 1988 through 1998 Mr. Goel served as Vice
President Membrane Research & Development, Analytical Laboratory. Mr. Goel
served as Vice President, Corporate Technology Operations from 1999 through
February 2001, and was appointed to his current position as President,
Membrane Technology Division, in February 2001.
Mr. Pandraud joined Millipore's French subsidiary in 1978 as an Application
Specialist for the contamination laboratory market. From 1994 until 1999 Mr.
Pandraud served as the Vice President & General Manager of the Laboratory
Water Division. In July 1999 he was appointed to his current position as Vice
President & General Manager, Microelectronics Divisions.
Ms. Vogt joined Millipore in 1981 as a Financial Analyst. In 1990 Ms. Vogt
was appointed Vice President of Marketing for the Analytical Division and in
1995 she was made Vice President of Marketing and Research & Development for
the Analytical Division. From 1997 until 1999 she served as General Manager of
the Analytical Products Division and from 1999 until January 2001 she served
as Vice President & General Manager, Laboratory Water Division. In February
2001, Ms. Vogt was appointed as President, BioPharmaceutical Division.
Item 2. Properties.
Millipore operates 14 manufacturing sites located in the United States,
France, Japan, Ireland, United Kingdom, Brazil and China. The following table
identifies the major production sites which are owned by Millipore, and
describes the purpose, floor space and land area of each.
Business
Floor Space Land Area Segment
Location Facility Sq. Ft. Acres Served
-------- -------- ----------- --------- ----------
Bedford, MA Executive Offices, research, membrane 384,000 31 Bio; Micro
manufacturing & warehouse
Danvers, MA Manufacturing, research and office 65,000 16 Bio
Jaffrey, NH Manufacturing, warehouse & office 177,000 31 Bio; Micro
Cidra, Puerto Rico Manufacturing, warehouse & office 125,000 29 Bio
Molsheim, France Manufacturing, warehouse & office 148,000 20 Bio
Cork, Ireland Manufacturing 98,000 20 Bio
Yonezawa, Japan Manufacturing & warehouse 169,000 7 Bio; Micro
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Bio = Bioscience Business Segment
Micro = Microelectronics Business Segment
Millipore owns a total of approximately 1.17 million square feet of
facilities worldwide, which are used for office, research and development,
manufacturing (including the manufacturing facilities listed above) and
warehouse purposes. All of these facilities are owned in fee and are not
subject to any material encumbrances.
In addition to its owned properties, Millipore currently leases facilities
throughout the world for manufacturing, sales, research, warehouse, and
administrative uses. The aggregate area of rented space is approximately
1,100,000 square feet and cost was approximately $11,408,000 in 2000. The
following leased facilities are the most significant:
1. A lease of a 198,000 square foot building located on 13 acres in
Allen, Texas (Dallas-Fort Worth vicinity). This lease expires in 2008
and provides for two 5-year extension options. This facility is used
to support the Microelectronics business segment.
2. A lease of premises abutting the Company's Bedford headquarters; this
lease makes 75,000 square feet of building available to Millipore,
provides for a term expiring in 2005 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. This building
supports both business segments.
10
3. A lease of a 134,000 square foot building which is adjacent to the
leased property referred to in the preceding paragraph for a term
ending in 2006, with renewal options for an aggregate of 20 years, as
well as a purchase option. This building is used primarily to serve
the Bioscience business segment.
4. A lease of a building of 130,000 square feet located in Burlington,
Massachusetts, approximately 5 miles from Millipore's Bedford
headquarters provides for a term expiring in 2002 and has a single 3-
year extension option. This building supports both business segments.
With the exception of the Allen lease described above, in the opinion of
Millipore, no single lease is material to the Company's operations.
The facilities located in Allen, Texas, Cidra, Puerto Rico and Yonezawa,
Japan currently operate at approximately 70%, 50% and 70%, of capacity,
respectively. All of the other above listed owned and leased major facilities
are fully utilized.
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.
The Company currently is not a party to any material legal proceeding and
the Company knows of no material legal proceeding contemplated by any
governmental authority.
On July 21, 1999 Amersham Pharmacia Biotech AB ("APB") of Sweden filed a
complaint in the High Court of Justice in the United Kingdom against the
Company and two of its subsidiaries alleging that the sale of the Company's
ISOPAK chromatography valve infringed one or more of the claims contained in
certain APB patents. APB sought an injunction against the alleged infringement
as well as damages. On October 26, 2000, the High Court ruled that the
chromatography valve currently sold by the Company did not infringe the APB
patents. APB has been granted leave to appeal this decision. The High Court
also ruled that a discontinued product did infringe one of said patents. A
hearing on damages will be scheduled with respect to this matter. In any
event, the outcome of this suit is not expected to have a material adverse
impact on the Company's financial condition or results of operations. The
Company first disclosed this matter in a press release issued during the third
quarter of 1999.
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's Common Stock, $1.00 par value, is listed on the New York Stock
Exchange and is traded under the symbol "MIL". The following table sets forth,
for the indicated fiscal periods, the high and low sales prices of Millipore's
Common Stock (as reported on the New York Stock Exchange Composite Tape) and
the dividends declared (on a per share basis). As of March 2, 2001 there were
approximately 2,751 shareholders of record.
Dividends
Range of Stock Prices Declared
--------------------------- -----------
2000 1999 2000 1999
------------- ------------- ----- -----
High Low High Low
------ ------ ------ ------ (Per Share)
First Quarter........................... $64.00 $36.63 $33.88 $23.75 $0.11 $0.11
Second Quarter.......................... $76.00 $53.00 $40.81 $23.44 $0.11 $0.11
Third Quarter........................... $76.31 $46.31 $42.13 $34.75 $0.11 $0.11
Fourth Quarter.......................... $63.13 $44.00 $40.00 $30.00 $0.11 $0.11
11
Item 6. Selected Financial Data.
The following selected consolidated financial data for Millipore are derived
from the Company's Financial Statements and related notes thereto. The
following selected consolidated financial data should be read in connection
with and is qualified in its entirety by Millipore's Financial Statements and
related notes thereto and other financial information included elsewhere in
this Form 10-K report.
Millipore Corporation--Five-year Summary of Operations
2000 1999 1998 1997(2) 1996
-------- -------- -------- -------- --------
(In thousands, except per share data)
Net sales............... $953,771 $771,188 $699,307 $758,919 $618,735
Cost of sales........... 440,132 358,169 364,467 342,237 249,443
-------- -------- -------- -------- --------
Gross profit.......... 513,639 413,019 334,840 416,682 369,292
Selling, general and
administrative
expenses............... 278,037 256,598 236,521 245,585 202,140
Research and development
expenses............... 62,661 52,140 53,578 55,899 38,429
Purchased research &
development expense.... -- -- -- 114,091 68,311(2)
Settlement of
litigation(1).......... 1,500 -- 11,766 -- --
Restructuring items(1).. (1,500) (5,200) 33,641 -- --
-------- -------- -------- -------- --------
Operating income
(loss)............... 172,941 109,481 (666) 1,107 60,412
Net gain on sale of
equity securities...... 4,161(1) -- 35,594(1) 8,330 5,329
Interest income......... 3,486 3,025 3,090 2,937 2,780
Interest expense........ (26,922) (30,155) (29,474) (30,484) (11,498)
-------- -------- -------- -------- --------
Income (loss) from
continuing operations
before income taxes.. 153,666 82,351 8,544 (18,110) 57,023
Provision (benefit) for
income taxes........... 34,472 18,023 (1,320) 20,674 13,401
-------- -------- -------- -------- --------
Income (loss) from
continuing
operations........... 119,194 64,328 9,864 (38,784) 43,622
Loss on disposal of
discontinued
operations............. -- -- -- -- 2,036(3)
-------- -------- -------- -------- --------
Net income (loss)....... $119,194 $ 64,328 $ 9,864 $(38,784) $ 41,586
======== ======== ======== ======== ========
Basic net income (loss)
per share:
Income (loss) from
continuing
operations........... $ 2.60 $ 1.44 $ 0.22 $ (0.89) $ 1.00
Net income (loss) per
share................ $ 2.60 $ 1.44 $ 0.22 $ (0.89) $ 0.95
Diluted net income
(loss) per share:
Income (loss) from
continuing
operations........... $ 2.53 $ 1.42 $ 0.22 $ (0.89) $ 0.98
Net income (loss) per
share................ $ 2.53 $ 1.42 $ 0.22 $ (0.89) $ 0.94
Cash dividends declared
per share.............. $ 0.44 $ 0.44 $ 0.43 $ 0.39 $ 0.35
Weighted average shares
outstanding:
Basic................. 45,803 44,731 43,864 43,527 43,602
Diluted............... 47,039 45,274 44,289 43,527 44,457
Financial Data
Working capital....... $230,836 $113,584 $ 22,383 $ 68,629 $110,573
Total assets.......... 874,925 792,733 759,323 769,963 680,305
Long-term debt........ 300,130 313,017 299,110 286,844 224,359
Shareholders' equity.. $305,368 $176,851 $133,791 $140,809 $209,676
- --------
(1) See Notes 3, 11 and 15 of the Notes to the Financial Statements.
(2) Reflects the acquisitions of Tylan General Inc. in January 1997 and
Amicon Separation Science Business in December 1996.
(3) Represents a loss on the disposal of discontinued operations related to
the sale of the Company's Waters Chromatography Division and certain
assets of its non-membrane bioscience business.
Note: Certain reclassifications have been made to previously reported
financial data to conform with the 2000 presentation.
12
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in connection with Millipore's
Consolidated Financial Statements and related notes thereto and other
financial information included elsewhere in this Form 10-K report.
Business Realignment
On October 3, 2000, Millipore announced plans to separate into two distinct
companies by making its Microelectronics business segment an independent,
publicly traded company. The Company is planning an initial public offering
for less than 20% of the shares of the new Microelectronics company and
subsequently intends to spin-off the remaining shares to Millipore
shareholders through a dividend distribution within approximately three to six
months following the initial public offering. The transaction is expected to
be tax-free to the Company and its shareholders and is contingent upon
receiving certain tax and regulatory approvals, accommodation of certain debt
covenants as well as market conditions. The full impact of the realignment on
the Company's financial position, results of operations and cash flows cannot
be predicted at this time. However, certain expenses are expected to be
incurred in future periods in order to implement the realignment.
Additionally, in connection with the separation, we are currently engaged in a
review of the operations and anticipate an associated restructuring charge in
the first quarter of 2001.
Results of Operations
The Company reported diluted earnings per share of $2.53, $1.42 and $0.22
for 2000, 1999 and 1998, respectively. Excluding unusual items, the Company
would have reported diluted earnings per share of $2.48, $1.35 and $0.60 for
2000, 1999 and 1998, respectively.
The Company initiated a restructuring program in 1998 to streamline
worldwide operations and reduce the overall cost structure. This program is
discussed in its entirety in Restructuring Items. Reference is also made to
the discussion of Gross Margins, Gain on Sale of Equity Securities, and Legal
Proceedings below for additional information related to the other unusual
items on the following schedule.
Summary of Unusual Items:
Year Ended December 31,
--------------------------------------
2000 1999 1998
------------ ------------ ------------
(In millions, except per share data)
Cost of sales
Write-off of inventory and
manufacturing equipment............. $ -- $ -- $ 9.2
Provision for excess and obsolete
inventory........................... -- -- 6.0
----------- ----------- ------------
Impact on gross margin................. -- -- (15.2)
Operating expenses
Restructuring items.................. (1.5) (5.2) 33.6
Litigation settlements............... 1.5 -- 11.8
----------- ----------- ------------
Income (loss) before income taxes...... 0 5.2 (60.6)
Net gain on sale of equity securities.. 4.2 -- 35.6
----------- ----------- ------------
Impact on income (loss) before income
taxes................................. 4.2 5.2 (25.0)
Tax impact of unusual items............ 1.6 1.8 (8.4)
----------- ----------- ------------
Net income (loss) from unusual items... $ 2.6 $ 3.4 $ (16.6)
=========== =========== ============
Net income (loss) per share from
unusual items......................... $ 0.05 $ 0.07 $ (0.37)
=========== =========== ============
13
Local Currency Results
The following discussion of Net Sales, Gross Profit Margins and Operating
Expenses refers to revenue, margins and expenses in "local currencies". Local
currency results represent the foreign currency balances translated, in all
periods presented, at Millipore's 2000 budgeted exchange rates, thus excluding
the impact of fluctuations in the actual foreign currency rates. The Company's
management uses this presentation for internal evaluation of the financial
performance of the Company's business segments because it believes that the
local currency results provide a clearer presentation of the underlying
business trends. The U.S. dollar results represent the foreign currency
balances translated at actual exchange rates.
Net Sales
Net sales, measured in U.S. dollars, increased 24% in 2000 compared to 10%
in 1999. The net sales increase in 2000 as compared to 1999 was primarily due
to a continued recovery in the semiconductor industry coupled with continued
growth in the biopharmaceutical business offset by negative net currency
effects. Growth in the Americas and Asia/Pacific regions was heavily
influenced by the improvements in the semiconductor industry.
The impact of translating sales denominated in currencies other than the
U.S. dollar reduced reported sales growth by 2% in 2000. During 2000 as
compared to 1999 the Japanese yen strengthened on average against the U.S.
dollar by approximately 5% and the Euro weakened against the U.S. dollar on
average by approximately 15%. The negative effect from the declining Euro more
than offset the positive effect from the stronger yen. In 1999 the reported
sales growth was positively impacted by 2% as a result of the Japanese yen
which strengthened against the U.S. dollar by approximately 13% partially
offset by the Euro weakening by 5%. In general, a stronger U.S. dollar will
adversely affect the sales growth of both business segments. However, since
the Microelectronics segment has a higher percentage of sales in Asia,
strengthening of the dollar against Asian currencies will have a somewhat
larger impact on that segment. Similarly, the Bioscience (previously referred
to as the Biopharmaceutical & Research segment) has a higher percentage of
sales in Europe than the Microelectronics segment. Therefore, strengthening of
the dollar against the European currencies will have a larger impact on the
Bioscience segment sales growth. Non-currency related price changes have not
significantly affected the comparability of sales during the past three years.
Sales growth by business segment and geography, measured in local currencies
and U.S. dollars, is summarized in the table below.
Sales Growth in Sales Growth in
Local Currencies U.S. Dollars
------------------- ------------------
2000 1999 2000 1999
-------- -------- ------- -------
Bioscience.......................... 10% 8% 6% 9%
Microelectronics.................... 70% 9% 71% 15%
-------- -------- ------- -------
Consolidated...................... 26% 8% 24% 10%
-------- -------- ------- -------
Americas............................ 28% 10% 28% 10%
Europe.............................. 12% 3% (1)% (1)%
Asia/Pacific........................ 40% 13% 45% 27%
-------- -------- ------- -------
Consolidated...................... 26% 8% 24% 10%
-------- -------- ------- -------
Bioscience sales, measured in local currencies, increased 10% in 2000
compared to 1999. The growth was broad-based across product lines and
geographies. Revenue growth was strongest for products used in life science
laboratory research and in hardware and consumables used in the
biopharmaceutical markets which collectively account for approximately 45
percent of the sales of this business segment. The growth in these markets
resulted from increases in new biotech drugs approved and in production as
well as continued strengthening in genomics and proteomics research spending.
Bioscience sales, measured in local currencies, increased 8% in 1999
compared to 1998. The growth was broad-based across product lines and
geographies. Sales growth was strongest for the biotechnology and
14
pharmaceutical markets utilizing laboratory research applications, water
filtration devices and consumable filtration products and systems used in drug
production. Revenue growth from the sale of process systems was positive,
although to a lesser extent than other product lines.
Microelectronics segment sales growth measured in local currency increased
70% in 2000 compared to 1999. This growth was the result of significant
improvements in the semiconductor industry and strengthening of the Asian
economies, which began in 1999. Sales growth for this segment was most
significant in the Americas and the Asia/Pacific region and, to a lesser
extent, in Europe.
Microelectronics segment sales growth measured in local currency increased
9% in 1999 compared to 1998. During 1999, the Company's sales growth was
positively impacted by improvements in the semiconductor industry and
strengthening of the Asian economies.
Gross Profit Margins
Gross profit margins in local currencies were 54% for 2000 and 1999, and 48%
in 1998. Excluding unusual items in 1998, gross profit margins would have been
50%. The unusual items recorded in 1998 were a $9.2 million charge for the
write-off of inventory and manufacturing equipment associated with product
line rationalization activities and a provision of $6.0 million for excess and
obsolete inventory. Gross profit margin percentages for 2000 as compared to
1999 were positively impacted by volume efficiencies and automation
efficiencies in both segments offset by an increased mix of lower margin
Microelectronics business. The 4 percentage point gross profit increase in
1999 versus 1998, excluding one-time items, was the result of Company-wide
increased volume as well as savings realized from the restructuring
initiatives, which began in the third quarter of 1998.
Operating Expenses
Selling, general and administrative ("S,G&A") expenses in local currencies
increased 11% in 2000 and 7% in 1999. The increase in 2000 was primarily due
to higher head count and related expenses needed to support sales volume and
incremental variable employee compensation earned in 2000 as compared to 1999
due to improved operating performance. As a percentage of sales, S,G&A
expenses in local currencies decreased approximately 4 points during 2000 to
29%. The increase in 1999 was primarily attributable to $14.7 million of
incremental variable employee compensation earned in 1999 over amounts earned
in the preceding year due to the relative better operating performance and
lower expenses in 1998 due to cost containment programs initiated as part of
the 1998 restructuring activities. The Company continues to invest in sales,
service and marketing resources focused on maintaining or improving customer
services, supporting the launch of new products and development of future
sales initiatives aimed at improving the Company's competitive positions.
Research and development expenses in local currencies increased 21% in 2000
due to additional R&D programs and increased headcount. As a percentage of
sales, R&D expenses in local currencies declined from 6.7% in 1999 to 6.5% in
2000 due to the growth in sales during 2000. During 1999, R&D decreased 3% due
to the elimination of research and development expenses for non-strategic
product lines in the Microelectronics segment and the Microelectronics
consolidation into the Allen, Texas facility thus eliminating duplicate
operations.
In 2000, the Company recorded a charge of $1.5 million for past royalties as
part of the settlement of a patent lawsuit. Litigation settlements totaling
$11.8 million were recorded in 1998 and are described under "Legal
Proceedings" below.
Restructuring Items
In the second quarter of 1998, the Company announced a restructuring program
to improve the competitive position of the Company by streamlining worldwide
operations and reducing the overall cost structure. The
15
restructuring program was initiated to bring operating costs in line with
lower revenues resulting from the financial difficulties in Asian economies,
the strong U.S. dollar and the continuation of the semiconductor industry
slump. The combination of the restructuring programs and the 1998
Microelectronics plant consolidation resulted in estimated savings of
approximately $40.0 million in 1999. The savings resulted from reduced wages,
facility related costs, depreciation and amortization and were primarily
reflected as reductions in cost of sales.
Key initiatives of the restructuring program included:
1. Discontinuation of non-strategic product lines and rationalization of
product offerings to improve product line focus. The non-strategic product
lines consisted of high pressure liquid chromatography equipment,
semiconductor fab monitoring and control software and various filtration
devices. The rationalization of product offerings was a result of management's
review which identified specific products with limited profitability or
products which were inconsistent with current strategic marketing plans, such
as non-standard products. These actions to improve product line focus were
completed by September 30, 1998.
2. Consolidation of certain manufacturing operations which eliminated
duplicate manufacturing processes in Ireland and the U.S. The consolidation of
manufacturing operations was completed in 2000.
3. Realignment of European country organizational structure to focus on
operating business units and establishment of a regional transaction service
center, resulting in the consolidation of financial and administrative
activities. The Company completed the transition to the service center during
1999.
4. Reduction of administrative and management infrastructure costs in Asia
through reduced facility costs and administrative positions as offices in the
region were consolidated during 1998.
5. Renegotiations of marketing, research and development and supply
agreements. These agreements were amended to eliminate the cost of maintaining
certain exclusivity rights and to reduce purchasing commitments for non-
strategic products. These actions were completed during 1999.
6. Streamlining of the supply chain management function through the
centralization of worldwide procurement functions and the consolidation of
vendors to significantly reduce the aggregate number of vendors, resulting in
cost savings and shorter cycle time within the procurement function as well as
materials cost reductions. These actions were completed during 1999.
In the third quarter of 1998, the Company recorded an expense associated
with these activities of $42.8 million ($29.1 million after tax) including a
restructuring charge of $33.6 million and a $6.2 million charge for inventory
and $3.0 million of fixed asset write-offs against cost of sales. The $33.6
million restructuring charge included $18.3 million of employee severance
costs, $9.5 million write-off of real and intangible assets associated with
discontinued product lines and with the termination of certain rights under
two technology development collaboration agreements, $3.8 million of lease
cancellation costs and $2.0 million of contract termination costs.
The Company reevaluated the accrual for the restructuring program and in the
third quarter of 1999 reversed $5.2 million of the remaining balance. The
reversal reflects a lower estimate for employee severance and lease
cancellation costs. Although the planned number of employee positions had been
eliminated, the reduction in severance cost was attributed to higher levels of
attrition than originally anticipated and to impacted employees filling open
positions as demand increased due to improved sales volume. During the third
quarter of 2000, the Company reversed $1.5 million in restructuring reserves
primarily related to additional proceeds from the sale of facilities. At
December 31, 2000 $2.6 million relating primarily to final facility closure
payments remains and will be paid in early 2001.
The restructuring initiatives combined with the 1998 consolidation of the
Company's Microelectronics plants resulted in the elimination of 615 positions
worldwide. Notification to employees was completed in the
16
third quarter of 1998, however a small number of these employees continued in
their existing positions through 2000 with their related salary costs charged
to operations as incurred. Under the terms of the severance agreements, the
Company expects to pay severance and associated benefits through the early
part of 2001.
During the third quarter of 1998, the Company also recorded in Cost of Sales
an incremental provision for excess and obsolete inventory of $6.0 million in
response to adverse changes in demand attributable to declining business
conditions in Asia and the slowdown in the semiconductor industry.
Gain on Sale of Equity Securities
During the second quarter of 2000, the Company sold its holdings in Oxford
GlycoSciences Plc, resulting in a gain on sale of securities of $7.5 million
which was partially offset by the write-off of investment holdings in a
privately held U.S. company of $3.3 million.
The gain on sale of equity securities in 1998 primarily reflects the sale of
the Company's equity holdings in PerSeptive Biosystems. As of December 31,
1997, the Company held 2.2 million shares of PerSeptive Biosystems common
stock and 1,000 shares of PerSeptive Biosystems preferred stock. On January
22, 1998, PerSeptive merged with The Perkin-Elmer Corporation. Pursuant to the
merger, all of the Company's holdings of common and preferred shares in
PerSeptive were converted into an aggregate of 587,000 shares of Perkin-Elmer
common stock. In the first quarter of 1998, the Company sold all of its shares
of Perkin-Elmer stock for approximately $32.5 million in cash. The Company
also sold all of its common shares of Glyko Biomedical Ltd. in the first
quarter of 1998 and recognized a gain of $3.1 million.
Net Interest Expense
Net interest expense decreased $3.7 million in 2000 as compared 1999
primarily as a result of lower average borrowings and additional interest
income from increased cash and cash equivalents offset by an increase in
average rates. During 1999 net interest expense increased $0.7 million over
1998. This increase was due to higher average interest rates resulting from
the 1998 renegotiation of the Company's revolving Credit Agreement and higher
effective interest due to the impact of foreign exchange under the yen debt
swap agreements which was somewhat offset by lower average borrowings.
Provision (Benefit) for Income Taxes
The Company's effective tax rate on net income for 2000 and 1999 was 22.4%
and 21.9%, respectively, and a benefit of 15.4% in 1998. Excluding the effect
of the restructuring items recorded in 1999 and 1998, the Company's tax rate
on income from operations was 21%. In 2000 the Company's tax rate on income
from operations increased to 22%. This increase was due to improved operating
results in countries with higher tax rates.
Earnings Per Share
Restructuring charges and several unusual items impacted earnings per share
in 2000, 1999 and 1998. The impact of these items is reflected in the Summary
of Unusual Items above.
In addition, earnings per share were positively impacted in 2000 as compared
to 1999 by approximately $0.04 per share due to the impact of a stronger Yen
offset by the weakening Euro. Additionally, in 1999 as compared to 1998,
earnings per share were positively impacted by approximately $0.02 per share
as a result of the impact of the stronger Yen offset by the weaker European
currencies.
17
Acquisition
On May 18, 1999, the Company acquired all outstanding shares of
Bioprocessing Corporation Limited ("Bioprocessing") in exchange for 660,000
shares of Millipore common stock. The transaction was accounted for as a
pooling-of-interests. The consolidated financial statements for prior periods
were not restated because the addition of Bioprocessing did not have a
material impact on the Company's results of operations. Bioprocessing
develops, manufactures and sells a wide range of proprietary products and
services for the chromatographic purification of proteins.
Market Risk
The Company is exposed to market risks, which include changes in interest
rates and changes in foreign currency exchange rates as measured both against
the U.S. dollar and each other. The Company manages these market risks through
its normal financing and operating activities and, when appropriate, through
the use of derivative financial instruments. The Company does not invest in
derivative financial instruments for speculative purposes.
Foreign Currency Exchange Rate Risk
The Company derives approximately 60% of its revenues from customers outside
of the Americas. This business is transacted through the Company's network of
international subsidiaries generally in the local currency. This exposes the
Company to risks associated with changes in foreign currency that can impact
revenues, net income and cash flow. Approximately 28% of the Company's sales
are derived from Europe where the U.S. dollar strengthened against the Euro
during 2000 and 1999. Continued strengthening of the U.S. dollar against the
Euro may negatively impact the results of operations of the Company. The
Company is able to partially mitigate the impact of fluctuations in the Euro
by active management of cross border currency flows and material sourcing. The
Company has significant exposure against the Japanese yen which strengthened
against the U.S. dollar in 2000 and 1999. Generally, a stronger yen has a
positive impact on results of operations. The Company is exposed to changes in
the Japanese yen that can not be mitigated through normal financing or
operating activities. Accordingly, the net equity exposure risk is managed
through the use of debt swap agreements.
Historically, the Company entered into foreign currency option contracts to
sell yen on a continuing basis in amounts and timing consistent with the
underlying currency transactions. This program was discontinued in 1999. The
gains on these transactions, if any, partially offset the realized foreign
exchange losses on the underlying exposure. In 1998, gains, net of premium
costs, of $2.2 million were realized from these contracts and were recorded in
cost of sales. All open options expired in 2000.
The Company's net equity exposure to the Japanese yen has been hedged
through debt swap agreements covering both principal and interest. Pursuant to
these agreements $110,000 of debt with a weighted average fixed interest rate
of 6.7 percent was swapped for an equivalent value of yen at a weighted
average exchange rate of 114.6 yen to the dollar and a weighted average fixed
interest rate of 3.6 percent. The swap agreements mature in 2003 and 2004. See
Capital Resources and Liquidity below for a discussion of cash
collateralization requirements under these agreements.
Although the Company manages its foreign currency exchange risk through the
above activities, when the U.S. dollar strengthens against the basket of
currencies in which the Company transacts its business, generally sales and
net income will be adversely impacted.
Credit Risk
The Company is exposed to concentrations of credit risk in cash and cash
equivalents, trade receivables and derivative financial instruments.
18
Cash and cash equivalents are placed with major financial institutions with
high quality credit ratings. The amount placed with any one institution is
limited by policy.
Trade receivables credit risk exposure is limited due to the large number of
customers and their dispersion across different industries and geographies.
The Company is exposed to credit related risks associated with the potential
nonperformance by counterparties to the debt swap agreements. 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.
Capital Resources and Liquidity
Cash flow provided from operations was $98.9 million in 2000, $105.1 million
in 1999 and $51.3 million in 1998. Reported cash flow from operations was
reduced by $2.4 million in 2000, $9.9 million in 1999 and $28.1 million in
1998 for costs associated with the 1998 restructuring program and the
integration of acquisitions made during 1996 and 1997. Excluding the
restructuring and acquisition related expenditures, cash flow from operations
was $101.3 million in 2000, $115.0 million in 1999 and $79.4 million in 1998.
The decrease in cash flow from operations in 2000 over 1999 was primarily
the result of increased accounts receivable and inventories offset by improved
operating income. The increase in accounts receivable was attributable to
increased sales volume primarily in the United States and Asia Pacific. The
increase in sales in the Asia Pacific region further impacted accounts
receivable where regional business practices result in longer collection
periods. Accounts receivable days sales outstanding increased from 83 days in
1999 to 84 days in 2000 primarily a result of the increased mix of Asia
Pacific receivables. The Company continues to aggressively manage its
collection activities. Inventory levels increased due to stocking levels of
new products and efforts to increase customer service levels through increased
product availability predominately in the Microelectronics business segment.
Partially offsetting the impact of accounts receivable and inventory increases
were increases in accounts payable and accrued expenses, also primarily due to
higher business activity and variable compensation programs resulting from
improved financial performance.
The increase in cash flow from operations in 1999 over 1998, excluding the
restructuring and acquisition expenditures, is primarily a result of improved
income from operations, increases in accounts payable due to higher business
activity in the fourth quarter of 1999, accrued expenses primarily resulting
from variable compensation programs and continued asset management initiatives
launched in 1998. Partially offsetting this is an increase in account
receivables resulting from significantly higher sales volume in the second
half of 1999 combined with the increased revenues in the Asia Pacific region.
This resulted in days sales outstanding in accounts receivable increasing from
77 days in 1998 to 83 days in 1999.
Operating cash flow generated by the Company during 2000 was used to reduce
short-term debt, invest in property, plant and equipment, and pay dividends.
The Company spent $52.2 million for property, plant and equipment during 2000.
The $20.9 million increase versus 1999 was primarily due to additional
manufacturing capacity and new laboratories for the Bioscience business.
During 2000, the Company received $8.8 million from the sale of property, $7.5
million from the sale of securities and $28.0 million from the exercise of
employee stock options. The Company expects capital expenditures for 2001 to
be in the range of $90.0 to $95.0 million. This increase will be driven by the
on-going need to add manufacturing capacity and laboratories for the
Bioscience business and capital needed to provide Microelectronics a corporate
headquarters and additional manufacturing capacity.
Cash generated by the Company during 1999 was used to reduce short-term
debt, to invest in property, plant and equipment and to pay dividends.
Property, plant and equipment expenditures for 1999 were less than 1998
expenditures by $28.5 million primarily due expenditures in 1998 of $10.0
million for the expansion of the
19
Bioscience membrane manufacturing facility in Cork, Ireland and $24.4 million
for the construction of the new Microelectronics manufacturing facility in
Allen, Texas. This decrease was offset in part by $4.0 million for
expenditures made in 1999 to complete the membrane manufacturing facility. The
Company also received $9.5 million in cash for the sale of securities in
Waters Corporation.
Cash generated by the Company during 1998 was used to invest in property,
plant and equipment, and to pay dividends. Property, plant and equipment
expenditures for 1998 included $10.0 million spent for the expansion of the
Bioscience membrane manufacturing facility in Cork, Ireland and $24.4 million
spent for the construction of the new Microelectronics manufacturing facility
in Allen, Texas. The total cost of the Allen facility was approximately $28.0
million.
The Company maintains an unsecured Revolving Credit Agreement, dated January
22, 1997, with a consortium of commercial banks (the "Credit Agreement") which
currently makes $250 million available to the Company. During 2000, the
Company reduced its borrowings under the Credit Agreement to $52.0 million so
that, at December 31, 2000, the Company had additional borrowing capacity of
$198.0 million. The Credit Agreement was renegotiated during 1998 to waive
defaults under certain financial covenants relating to operating cash flow and
interest coverage and to permit less restrictive operating cash flow and
interest coverage covenants for 1999 and a portion of 2000. The Company also
agreed to an additional minimum earnings covenant as well as to increases in
both the interest rate and the facility fees. As renegotiated, interest is
payable under the Credit Agreement at a floating U.S. dollar deposit rate,
defined as LIBOR, plus a margin in the range of 0.23 to 1.125 percent.
The Company also has an additional $20.0 million of other short-term
borrowing capacity available of which $0.5 million was outstanding at December
31, 2000.
In November 1998 Moody's Investor Services and Standard & Poors Corporation
graded the Company's debt at a rating of Ba2 and BB+, respectively. Both
ratings are characterized as below "investment grade". The Company expects
that these ratings may make it more difficult for the Company to access money
markets should it become necessary to do so.
In addition, the foregoing debt ratings coupled with the strengthening of
the Japanese yen triggered a requirement in 1999 to provide cash
collateralization under one of the Company's yen denominated debt swap
agreements in the event that the net value of its position was below the net
value of the counterparty's position. In the event that the Company's debt
rating improves, these agreements provide for less stringent collateralization
requirements. While this collateralization requirement will not impact the
Company's foreign exchange exposure, it could impact short-term liquidity if
there were a serious deterioration in the value of the Company's swap
position. The amount of the cash collateral is dependent, among other things,
on the exchange rate of the yen to the U.S. dollar; generally, as the yen
strengthens, the amount of cash collateral required from the Company
increases. At December 31, 2000, this cash collateralization amount was $3.2
million.
The Company believes that its balances of cash and cash equivalents, funds
available under the Credit Agreement and cash flows expected to be generated
by future operating activities will be sufficient to meet its cash
requirements over the next twelve to twenty-four months.
Dividends
The quarterly dividend was $0.11 per share throughout 2000. The Company paid
dividends of $20.2 million in 2000.
Euro
On January 1, 1999, several member countries of the European Union
established fixed conversion rates between their existing sovereign "legacy"
currencies, and adopted the Euro as their new common legal currency.
20
As of that date, the Euro began trading on currency exchanges and the legacy
currencies will remain legal tender in the participating countries for a
transition period between January 1, 1999 and January 1, 2002. In the first
quarter of 1999, the Company began invoicing certain customers and
intercompany transactions in the Euro. The Company also assessed its
pricing/marketing strategy in order to ensure that it remains competitive in a
broader European market. It also has evaluated its cash management
opportunities. Further, the Company has commenced a plan to upgrade its
computer systems to enable business transactions in the Euro effective January
1, 2002.
Legal Proceedings
In 2000, the Company recorded a charge of $1.5 million for past royalties as
part of the settlement of a patent lawsuit.
On July 21, 1999 Amersham Pharmacia Biotech AB ("APB") of Sweden filed a
complaint in the High Court of Justice in the United Kingdom against the
Company and two of its subsidiaries alleging that the sale of the Company's
ISOPAK chromatography valve infringed one or more of the claims contained in
certain APB patents. APB sought an injunction against the alleged infringement
as well as damages. On October 26, 2000, the High Court ruled that the
chromatography valve currently sold by the Company did not infringe the APB
patents. APB has been granted leave to appeal this decision. The High Court
also ruled that a discontinued product did infringe one of said patents. A
hearing on damages will be scheduled with respect to this matter. In any
event, the outcome of this suit is not expected to have a material adverse
impact on the Company's financial condition or results of operations. The
Company first disclosed this matter in a press release issued during the third
quarter of 1999.
In 1998, the Company recorded a litigation settlement of $11.8 million
related to 3 matters:
1. A proceeding arising out of an administrative order issued by the
Environmental Quality Board ("EQB") of Puerto Rico alleging that the
Company's wholly owned subsidiary failed to properly manage, transport
and dispose of nitrocellulose membrane scrap as a hazardous waste; and
proposed penalties in the amount of $96.5 million. The Company settled
this proceeding in 1998 and recorded a charge of $5.0 million.
2. A private lawsuit brought by an intervening party in the EQB
administrative case described above; the Company recorded a charge of
$3.1 million in the 1998 reflecting its costs to settle this suit.
3. A patent lawsuit with Mott Metallurgical Corporation in which each
party claimed infringement of one of its patents by the other. The
Company recorded a charge of $3.7 million in 1998 to settle this suit;
the parties also agreed to cross license the two patents at issue.
As has been previously disclosed, Millipore has, in the past, been named as
a potentially responsible party ("PRP") under the Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("Superfund") by the U.S.
Environmental Protection Agency ("EPA") with respect to a "release" (as
defined in Section 101 of Superfund), at twelve sites to which chemical wastes
generated by the manufacturing operations of Millipore or one of its divisions
may have been sent. The Company has settled its liability pursuant to consent
decrees releasing Millipore from further liability with respect to certain
covered matters at all of these Superfund sites. However, as is typical with
consent decrees in such Superfund proceedings, EPA and the relevant state
agencies have reserved the right to maintain actions against the settling
parties, including the Company, in the event certain events occur or do not
occur at those sites. The Company does not expect that the conditions in the
consent decrees permitting these governmental parties to "re-open" the cases
will occur. In any event, the Company believes that the aggregate of any
future potential liabilities should not have a material adverse effect on the
Company's future results of operations or financial condition in light of the
advanced stage of funded remedial action at each site and the likely
availability of contribution from numerous other financially solvent PRPs
participating at each such Superfund site.
21
New Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended by SFAS No. 138, which is
effective January 1, 2001 for the Company. SFAS No. 133 establishes accounting
and reporting standards requiring that every derivative instrument, including
certain derivative instruments embedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement also requires that changes in the derivative's fair value be
recognized in earnings unless specific hedge accounting criteria are met.
With respect to all derivative instruments, SFAS No. 133 requires that
companies record an adjustment to record the difference between a derivative's
previous carrying amount and its current fair market value as a transition
adjustment. At December 31, 2000, the Company is a party to U.S. dollar to
Japanese yen foreign currency fixed rate-to-fixed rate interest rate swap
agreements, which are designated as a hedge of the Company's net investment
exposure in its Japanese subsidiary. The Company will record a transition
adjustment of $5.1 million, on January 1, 2001, to record the difference
between the Company's carrying value and the fair value of this derivative.
This transition adjustment will be recorded as a cumulative-effect type
adjustment to other comprehensive income.
Business Outlook and Uncertainties
The following statements are based on current expectations. These statements
are forward looking and actual results may differ materially.
Business Realignment: On October 3, 2000, Millipore announced plans to
separate into two distinct companies by making its Microelectronics business
segment an independent, publicly traded company. The Company is planning an
initial public offering for less than 20% of the shares of the new
Microelectronics company and subsequently intends to spin-off the remaining
shares to Millipore shareholders through a dividend distribution within
approximately three to six months following the initial public offering. The
transaction is expected to be tax-free to the Company and its shareholders and
is contingent upon receiving certain tax and regulatory approvals,
accommodation of certain debt covenants as well as market conditions.
Restructuring Charges and Separation Expenses: In connection with the
separation, the Company is currently engaged in a review of operations and
anticipates an associated restructuring charge in the first quarter of 2001.
Costs could be incurred within both business segments to reduce manufacturing
capacity, terminate certain contracts and leases and relocate operations
closer to individual business segment customer base, although the specific
nature and amount of the charges is not known at this time.
Sales: The semiconductor industry in which the Microelectronics business
segment participates is highly cyclical. A downturn, which began in the middle
of 1996, continued into early 1999. Since then, this business segment reported
eight sequential quarters of increased sales during 2000 and 1999. Recent
industry results and published reports indicate that an industry wide decline
has begun. We expect Microelectronics revenues to be 15% to 25% lower in the
first quarter of 2001 than revenues in the fourth quarter of 2000. While some
published reports suggest little or no growth for 2001; others remain
optimistic that growth will return to this market in the second half of 2001.
There can be no assurance as to the extent and duration of this cyclical
downturn or as to its impact on Millipore, however, the Company does
anticipate growth over the long term.
The Bioscience segment has demonstrated relatively stable patterns of
revenue growth. Customers in this segment, particularly those involved in the
production of sterile drugs, purchase products for use in validated production
processes. Accordingly, it is important to participate in the development of
new drugs in order to be designed into the ultimate manufacturing process.
Adoption of new technologies and products requires a lengthy validation
process prior to adoption. The growth of this segment is highly dependent on
the development and approval of new drugs. It is difficult to ascertain the
number or timing of such approvals, however, the number
22
of drugs at various stages in the approval process has increased over the past
two years. The remaining driver of this segment is life science research and
development spending. Recently published industry reports in the area of life
science anticipate increased research and development spending. However the
impact on the Company is unknown.
During 1999 and 2000, the Company has seen relatively flat sales growth in
the European region, in U.S. dollars, which resulted from increased sales
growth, in local currencies, offset by the effect of the declining Euro. This
region impacts the Bioscience segment more than the Microelectronics segment.
The recent economic pressures in Europe combined with the U.S. dollar
strengthening against most European currencies may continue to adversely
affect the Bioscience segment in 2001. In the Asia/Pacific region, the Company
has benefited principally from the strong growth of the microelectronics
industry. This growth combined with the strengthening of the Yen has further
contributed to the positive growth rate.
Approximately 60 percent of the Company's sales are to customers outside of
the Americas and are generally made in local currency. As previously noted,
currencies had a net negative impact to both sales and earnings in 2000 as
compared to 1999. This was the composite result of a stronger yen in 2000
mostly offset by the weak Euro. Since the end of 2000, the dollar has
strengthened against the yen and the Euro. Therefore, if rates of exchange
remain at the March 2, 2001 level, there could be a significant negative
impact on sales for the first quarter and full year 2001 as compared to 2000.
Gross Margins: The Company expects lower gross margin percentages, in local
currencies, in 2001 as compared to 2000. The lower Microelectronics revenues
will negatively impact margins by reduced absorption of manufacturing overhead
combined with margin reductions due to sales growth for process systems which
traditionally have lower gross margins, increased costs of certain raw
materials and labor, continued new product start up costs and volume driven
pricing arrangements. To the extent that foreign currency exchange rates
relative to the U.S. dollar remain at March 2, 2001 levels, first quarter 2001
and full year margins could be significantly impacted by foreign currency
exchange rate fluctuations.
In December 1999 the Company's sole supplier of a critical raw material used
in the manufacture of one type of membrane incorporated into products sold by
the Bioscience business segment advised the Company that it would discontinue
manufacture of that raw material during the second half of 2000. In the second
quarter of 2000 the Company established supply arrangements with a successor
company to the former supplier of this raw material. In addition, the Company
is in the process of identifying alternative sources of supply of this
material. The Company believes that these arrangements will provide an
adequate source of supply for this raw material.
Operating Expenses: Without the impact of the spin-off of Microelectronics
and any assumed restructuring charge, the Company expects that operating
expenses in local currencies, as a percentage of sales, in 2001 will be
greater than the percentage achieved in the previous year primarily as a
result of the lower Microelectronics revenues.
Interest Expense: The Company expects net interest expense in 2001 will be
slightly lower than 2000 as a result of lower average debt.
Provision for Income Taxes: The effective tax rate in 2001, is projected to
be approximately 23%, or 1% greater than the effective rate for 2000,
excluding unusual items. The tax rate estimate is based on the Company's
current expectations for 2001 income, current tax law and the expectation that
the Company's revenues could reflect a higher proportion of income generated
by products manufactured in the United States, and therefore is subject to
change. Additionally, the impact of the spin-off on the overall tax rate can't
be determined at this time. Further, in the event that the Company's cash
needs significantly increase above those currently projected and exceed the
resources identified under Capital Resources and Liquidity above, then an
additional upward influence on the Company's tax rate could develop if the
Company were required to repatriate cash from certain foreign operations.
23
Capital Spending: The Company expects to spend between $90 to $95 million
for fixed asset additions in 2001. This increase will be driven by the on-
going need to add manufacturing capacity and laboratories for the Bioscience
business and capital needed to provide Microelectronics a corporate
headquarters and additional manufacturing capacity. The Company will continue
to invest in tooling within its manufacturing plants, upgrades of its research
and development labs and in information technology. Accordingly, the Company
also expects that 2001 depreciation expense will be higher than reported in
2000.
Capital Resources and Liquidity: The Company intends to liquidate its yen
denominated debt swap agreement in the first quarter of 2001. At current rates
of exchange, the impact on liquidity is approximately $3.0 million.
Forward-Looking Statements
The matters discussed in this Form 10-K Annual Report, 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 in such statements, 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. In
addition to the matters discussed herein, potential risks and uncertainties
that could affect the Company's future operating results include, without
limitation, difficulties in the successful separation of the Microelectronics
and Bioscience business segments; 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 raw materials or 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
and Bioscience markets in particular; potential environmental liabilities; the
inability to utilize technology in current or planned products due to
overriding rights by third parties; difficulties inherent in research and
development activities; and the other risk factors described elsewhere in this
Form 10-K Annual Report, and in particular the matters described in Item 1
above under the heading "Environmental Matters". Specific reference is also
made to the risks and uncertainties described in the Registration Statement on
Form S-3 (Registration 333-80781) filed by the Company in connection with its
offering of 660,000 shares of its Common Stock, $1.00 par value in November
1999 (in particular, to those risks described under "Risk Factors") and to the
Registration Statement on Form S-3 (Registration 333-23025) filed by the
Company in connection with its offering of $300 million of Debt Securities in
May 1997 (in particular, to those risks described under "Factors Which May
Affect Future Results"). See also "Legal Proceedings" and "Business Outlook
and Uncertainties" above.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The information called for by this item is set forth under the heading
"Market Risk" in Management's Discussion and Analysis contained in Item 7
above which information is hereby incorporated by reference.
24
Item 8. Financial Statements and Supplementary Data.
The information called for by this item is set forth in the Financial
Statements at the end of this report commencing at the pages indicated below:
Consolidated Statements of Income for the years ended December 31, 2000,
1999 and 1998........................................................... 31
Consolidated Balance Sheets at December 31, 2000 and 1999................ 32
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 2000, 1999 and 1998........................................ 33
Consolidated Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998..................................................... 34
Notes to Consolidated Financial Statements............................... 35
Report of Independent Accountants........................................ 54
Quarterly Results (Unaudited)............................................ 55
All of the foregoing Financial Statements are hereby incorporated by
reference.
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 captions "Management and Election of
Directors--Nominees for Election as Directors" and "Ownership of Millipore
Common Stock--Section 16(a) Beneficial Ownership Reporting Compliance",
respectively, in Millipore's definitive Proxy Statement for Millipore's Annual
Meeting of Stockholders to be held on April 26, 2001, and to be filed with the
Securities and Exchange Commission on or about March 16, 2001, 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
"Executive Compensation" in Millipore's definitive Proxy Statement for
Millipore's Annual Meeting of Stockholders to be held on April 26, 2001, and
to be filed with the Securities and Exchange Commission on or about March 16,
2001, 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--Management Ownership of Millipore Common
Stock" in Millipore's definitive Proxy Statement for Millipore's Annual
Meeting of Stockholders to be held April 26, 2001, and to be filed with the
Securities and Exchange Commission on or about March 16, 2001, which
information is hereby incorporated herein by reference.
25
Item 13. Certain Relationships and Related Transactions.
The information called for by this item with respect to registrant's
directors' relationships and related transactions is set forth under the
caption "Certain Relationships and Related Transactions" in Millipore's
definitive Proxy Statement for Millipore's Annual Meeting of Stockholders to
be held on April 26, 2001, and to be filed with the Securities and Exchange
Commission on or about March 16, 2001, which information is hereby
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as a part of this Report:
1. Financial Statements.
The following Financial Statements are filed as part of this report:
Consolidated Statements of Income for the years ended December 31,
2000, 1999 and 1998
Consolidated Balance Sheets at December 31, 2000 and 1999
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998
Notes to Consolidated Financial Statements
Report of Independent Accountants
Quarterly Results (Unaudited)
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
----------- --------------------- ------------------------
(3) (i) Restated Articles of Organization, as Form 10-K Report for year
amended May 6, 1996 ended December 31, 1996
[Commission File No. 0-
1052]
(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
relating to the issuance of Form S-4 (No. 33-58117)
$100,000,000 principal amount of the
Company's 6.78% Senior Notes due 2004
(4) Indenture dated as of April 1, 1997, Registration Statement on
relating to the issuance of Debt Form S-3 (No. 333-23025)
Securities in Series
26
Reg. S-K
Item 601(b) Referenced Document on
Reference Document Incorporated file with the Commission
----------- --------------------- ------------------------
(10) Shareholder Rights Agreement dated as Form 8-K Report for
of April 15, 1988, as amended and April, 1998 [Commission
restated April 16, 1998 between File No. 0-1052]
Millipore and The First National Bank
of Boston
Distribution Agreement, dated as of Form 10-K Report for the
July 1, 1996, by and among the Company year ended December 31,
and Fisher Scientific Company 1996 [Commission File No.
0-1052]
Revolving Credit Agreement, dated as Form 10-K Report for the
of January 22, 1997, among Millipore year ended December 31,
Corporation and The First National 1996 [Commission File No.
Bank of Boston, ABN AMRO Bank N.V. and 0-1052]
certain other lending institutions
Second Amendment, effective as of Form 10-K Report for the
September 30, 1998, to Revolving year ended December 31,
Credit Agreement, dated as of January 1998 [Commission File No.
22, 1997, among Millipore Corporation 0-1052]
and The First National Bank of Boston,
ABN AMRO Bank N.V. and certain other
lending institutions
Note Purchase and Exchange Agreement, Form 10-K Report for the
as amended through November 2, 1998, year ended December 31,
between Millipore Corporation and 1998 [Commission File No.
Metropolitan Life Insurance Company 0-1052]
Form of letter agreement with Form 10-K Report for the
directors relating to the deferral of year ended December 31,
directors fees and conversion into 1998 [Commission File No.
phantom stock units* 0-1052]
1989 Stock Option Plan for Non- Form 10-K Report for the
Employee Directors* year ended December 31,
1998 [Commission File No.
0-1052]
Commercial Lease Agreement between EBP Form 10-K Report for the
3, Ltd. and Millipore Corporation with year ended December 31,
respect to Premises located in Allen, 1998 [Commission File No.
TX 0-1052]
ISDA Master Agreement, dated January Form 10-K/A Report for
27, 1994, as amended, with Morgan the year ended December
Guaranty Trust Company of New York 31, 1998 [Commission File
No. 0-1052]
Standard Executive Termination Form 10-K Report for the
Agreement, as amended* year ended December 31,
1999 [Commission File No.
0-1052]
Millipore Corporation 1999 Stock Form 10-K Report for the
Incentive Plan* year ended December 31,
1999 [Commission File No.
0-1052]
Millipore Corporation 1995 Employees' Form 10-K Report for the
Stock Purchase Plan, as amended* year ended December 31,
1999 [Commission File No.
0-1052]
27
Reg. S-K
Item 601(b) Referenced Document on
Reference Document Incorporated file with the Commission
----------- --------------------- ------------------------
(10) [Cont'd] Millipore Corporation 1999 Stock Form 10-K Report for the
Option Plan for Non-Employee year ended December 31,
Directors* 1999 [Commission File
No. 0-1052]
Employment and Relocation Agreement, Form 10-K Report for the
dated November 10, 1999, between year ended December 31,
Millipore Corporation and Michael P. 1999 [Commission File
Carroll* No. 0-1052]
- --------
* A "management contract or compensatory plan"
B. The following exhibits are filed herewith:
Reg. S-K
Item 601(b)
Reference Documents Filed Herewith
----------- ------------------------
Millipore Corporation 2000 Deferred Compensation Plan for Senior
(10) Management*
Standard Deferred Compensation Plan Agreement*
Supplemental Savings and Retirement Plan for Key Salaried
Employees of Millipore Corporation, as amended*
2000 Management Incentive Plan*
(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, 33-11790, 33-59005, 33-10801,
333-79227, 333-90127 and 333-30918 on Form S-8, Securities Act
Registration Nos. 2-84252, 33-9706, 33-22196, 33-47213, 333-23025
and 333-80781 on Form S-3, and Securities Act Registration No. 33-
58117 on Form S-4
(24) Power of Attorney
- --------
* A "management contract or compensatory plan"
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed by Registrant during the last quarter
of the fiscal year ended December 31, 2000.
(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 are not required under Regulation S-X.
28
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 9, 2001 /s/ Jeffrey Rudin
By: _________________________________
Jeffrey Rudin, 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
--------- ----- ----
/s/ C. William Zadel Chairman, President, Chief March 9, 2001
______________________________________ Executive Officer, and
C. William Zadel Director
/s/ Kathleen B. Allen Vice President, Treasurer March 9, 2001
______________________________________ and Chief Financial
Kathleen B. Allen Officer
/s/ Donald B. Melson Corporate Controller March 9, 2001
______________________________________ (Chief Accounting
Donald B. Melson Officer)
/s/ Daniel Bellus* Director March 9, 2001
______________________________________
Daniel Bellus
/s/ Robert C. Bishop* Director March 9, 2001
______________________________________
Robert C. Bishop
/s/ Robert E. Caldwell* Director March 9, 2001
______________________________________
Robert E. Caldwell
/s/ Maureen A. Hendricks* Director March 9, 2001
______________________________________
Maureen A. Hendricks
/s/ Mark Hoffman* Director March 9, 2001
______________________________________
Mark Hoffman
/s/ Thomas O. Pyle* Director March 9, 2001
______________________________________
Thomas O. Pyle
/s/ Richard J. Lane* Director March 9, 2001
______________________________________
Richard J. Lane
/s/ John F. Reno* Director March 9, 2001
______________________________________
John F. Reno
/s/ Jeffrey Rudin Director March 9, 2001
*By: ______________________________
Jeffrey Rudin, Attorney-in-Fact
29
MILLIPORE CORPORATION
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Statements of Income for the years ended December 31, 2000,
1999 and 1998............................................................ 31
Consolidated Balance Sheets at December 31, 2000 and 1999................. 32
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 2000, 1999 and 1998......................................... 33
Consolidated Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998...................................................... 34
Notes to Consolidated Financial Statements................................ 35
Report of Independent Accountants......................................... 54
Quarterly Results (Unaudited)............................................. 55
30
MILLIPORE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year ended December 31
----------------------------
2000 1999 1998
-------- -------- --------
(In thousands except per
share data)
Net sales........................................ $953,771 $771,188 $699,307
Cost of sales.................................... 440,132 358,169 364,467
-------- -------- --------
Gross profit................................. 513,639 413,019 334,840
Selling, general and administrative expenses..... 278,037 256,598 236,521
Research and development expenses................ 62,661 52,140 53,578
Restructuring items.............................. (1,500) (5,200) 33,641
Settlement of litigation......................... 1,500 -- 11,766
-------- -------- --------
Operating income (loss)...................... 172,941 109,481 (666)
Net gain on sale of equity securities............ 4,161 -- 35,594
Interest income.................................. 3,486 3,025 3,090
Interest expense................................. (26,922) (30,155) (29,474)
-------- -------- --------
Income before income taxes....................... 153,666 82,351 8,544
Provision (benefit) for income taxes............. 34,472 18,023 (1,320)
-------- -------- --------
Net income....................................... $119,194 $ 64,328 $ 9,864
======== ======== ========
Net income per share
Basic.......................................... $ 2.60 $ 1.44 $ 0.22
Diluted........................................ $ 2.53 $ 1.42 $ 0.22
Weighted average shares outstanding..............
Basic.......................................... 45,803 44,731 43,864
Diluted........................................ 47,039 45,274 44,289
The accompanying notes are an integral part of the consolidated financial
statements
31
MILLIPORE CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31
--------------------
2000 1999
--------- ---------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 55,186 $ 32,420
Cash held as collateral................................ 3,212 18,640
Accounts receivable (less allowance for doubtful
accounts of $4,330 in 2000 and $4,323 in 1999)........ 232,283 195,751
Inventories............................................ 146,691 105,040
Deferred income taxes.................................. 21,631 24,420
Other current assets................................... 6,480 7,096
--------- ---------
Total current assets................................. 465,483 383,367
Property, plant and equipment, net....................... 233,604 230,528
Deferred income taxes.................................... 93,980 85,402
Intangible assets (less accumulated amortization of
$34,505 in 2000 and $25,683 in 1999).................... 61,853 70,238
Other assets............................................. 20,005 23,198
--------- ---------
Total assets......................................... $ 874,925 $ 792,733
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable.......................................... $ 52,544 $ 115,645
Accounts payable....................................... 69,770 63,053
Accrued compensation................................... 44,308 39,249
Other accrued expenses................................. 34,325 34,263
Dividends payable...................................... 5,319 4,970
Accrued retirement plan contributions.................. 8,244 7,333
Accrued income taxes payable........................... 20,137 5,270
--------- ---------
Total current liabilities............................ 234,647 269,783
Long-term debt........................................... 300,130 313,107
Other liabilities........................................ 34,780 32,992
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,
2000 and 1999......................................... 56,988 56,988
Additional paid-in capital............................. 30,546 18,272
Retained earnings...................................... 586,795 491,429
Unearned compensation.................................. (4,490) (4,041)
Accumulated other comprehensive loss................... (55,791) (42,292)
--------- ---------
614,048 520,356
Less: Treasury stock at cost, 10,594 and 11,794 shares
as of December 31, 2000 and 1999, respectively........ (308,680) (343,505)
--------- ---------
Total shareholders' equity........................... 305,368 176,851
--------- ---------
Total liabilities and shareholders' equity............... $ 874,925 $ 792,733
========= =========
The accompanying notes are an integral part of the consolidated financial
statements
32
MILLIPORE CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 2000, 1999 and 1998
(In thousands, except per share data)
Accumulated Other
Common Stock Comprehensive Income (Loss) Treasury Stock
-------------- ----------------------------------- ------------------
Additional Unrealized
Par Paid-in Retained Unearned gain (loss) Translation
Shares Value Capital Earnings Compensation on securities Adjustments Total Shares Cost
------ ------- ---------- -------- ------------ ------------- ----------- -------- ------- ---------
Balance at
December 31,
1997............ 56,988 $56,988 $10,927 $484,442 $ (2,338) $18,115 $(39,835) $(21,720) (13,291) $(387,490)
====== ======= ======= ======== ======== ======= ======== ======== ======= =========
Comprehensive
income:
Net income...... 9,864
Unrealized
holding gains
arising during
period, net of
tax of $6,564.. 9,846
Less:
reclassification
adjustment for
gains realized
in net income,
net of tax of
$7,475......... (28,119)
-------
Net unrealized
loss on
securities
available for
sale, net of
tax of
$(12,182)...... (18,273) (18,273)
Translation
adjustments.... 12,325 12,325
Total
comprehensive
income.........
Cash dividends
declared, $0.43
per share....... (18,905)
Stock issued
under stock
plans........... (2,655) (1,579) 370 10,552
Amortization of
unearned
compensation.... 800
U.S. tax benefit
from stock plan
activity........ 853
------- -------- -------- ------- -------- -------- ------- ---------
Balance at
December 31,
1998............ 56,988 $56,988 $11,780 $472,746 $ (3,117) $ ( 158) $(27,510) $(27,668) (12,921) $(376,938)
====== ======= ======= ======== ======== ======= ======== ======== ======= =========
Comprehensive
income:
Net income...... 64,328
Unrealized
holding gains
arising during
period, net of
tax of $325.... 1,221
Less:
reclassification
adjustment for
gains realized
in net income,
net of tax of
$63............ (238)
-------
Net unrealized
gains on
securities
available for
sale, net tax
of $262........ 983 983
Translation
adjustments.... (15,607) (15,607)
Total
comprehensive
income.........
Cash dividends
declared, $0.44
per share....... (19,736)
Stock issued
under stock
plans........... (3,189) (2,144) 467 13,516
Amortization of
unearned
compensation.... 1,220
Shares issued to
pooled company.. 4,763 (22,720) 660 19,917
U.S. tax benefit
from stock plan
activity........ 1,729
------- -------- -------- ------- -------- -------- ------- ---------
Balance at
December 31,
1999............ 56,988 $56,988 $18,272 $491,429 $( 4,041) $ 825 $(43,117) $(42,292) (11,794) $(343,505)
====== ======= ======= ======== ======== ======= ======== ======== ======= =========
Comprehensive
income:
Net income...... 119,194
Unrealized
holding gains
arising during
period, net of
tax of $1,884.. 6,681
Less:
reclassification
adjustment for
gains realized
in net income,
net of tax of
$1,661......... (5,890)
-------
Net unrealized
gains on
securities
Available for
sale, net tax
of $223........ 791 791
Translation
adjustments.... (14,290) (14,290)
Total
comprehensive
income.........
Cash dividends
declared, $0.44
per share....... (20,321)
Stock issued
under stock
plans........... (3,507) (3,041) 1,200 34,825
Amortization of
unearned
compensation.... 2,592
U.S. tax benefit
from stock plan
activity........ 12,274
------- -------- -------- ------- -------- -------- ------- ---------
Balance at
December 31,
2000............ 56,988 $56,988 $30,546 $586,795 $( 4,490) $ 1,616 $(57,407) $(55,791) (10,594) $(308,680)
====== ======= ======= ======== ======== ======= ======== ======== ======= =========
Total
Shareholders'
Equity
-------------
Balance at
December 31,
1997............ $140,809
=============
Comprehensive
income:
Net income...... 9,864
Unrealized
holding gains
arising during
period, net of
tax of $6,564..
Less:
reclassification
adjustment for
gains realized
in net income,
net of tax of
$7,475.........
Net unrealized
loss on
securities
available for
sale, net of
tax of
$(12,182)...... (18,273)
Translation
adjustments.... 12,325
-------------
Total
comprehensive
income......... 3,916
Cash dividends
declared, $0.43
per share....... (18,905)
Stock issued
under stock
plans........... 6,318
Amortization of
unearned
compensation.... 800
U.S. tax benefit
from stock plan
activity........ 853
-------------
Balance at
December 31,
1998............ $133,791
=============
Comprehensive
income:
Net income...... 64,328
Unrealized
holding gains
arising during
period, net of
tax of $325....
Less:
reclassification
adjustment for
gains realized
in net income,
net of tax of
$63............
Net unrealized
gains on
securities
available for
sale, net tax
of $262........ 983
Translation
adjustments.... (15,607)
-------------
Total
comprehensive
income......... 49,704
Cash dividends
declared, $0.44
per share....... (19,736)
Stock issued
under stock
plans........... 8,183
Amortization of
unearned
compensation.... 1,220
Shares issued to
pooled company.. 1,960
U.S. tax benefit
from stock plan
activity........ 1,729
-------------
Balance at
December 31,
1999............ $176,851
=============
Comprehensive
income:
Net income...... 119,194
Unrealized
holding gains
arising during
period, net of
tax of $1,884..
Less:
reclassification
adjustment for
gains realized
in net income,
net of tax of
$1,661.........
Net unrealized
gains on
securities
Available for
sale, net tax
of $223........ 791
Translation
adjustments.... (14,290)
-------------
Total
comprehensive
income......... 105,695
Cash dividends
declared, $0.44
per share....... (20,321)
Stock issued
under stock
plans........... 28,277
Amortization of
unearned
compensation.... 2,592
U.S. tax benefit
from stock plan
activity........ 12,274
-------------
Balance at
December 31,
2000............ $305,368
=============
The accompanying notes are an integral part of the consolidated financial
statements
33
MILLIPORE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31
----------------------------
2000 1999 1998
-------- -------- --------
(In thousands)
Cash Flows from Operating Activities:
Net income...................................... $119,194 $ 64,328 $ 9,864
Adjustments to reconcile net income to net cash
provided by operating activities:
Restructuring items............................ (1,500) (5,200) 42,816
Net gain on sale of equity securities.......... (4,161) -- (35,594)
Depreciation and amortization.................. 46,145 44,291 44,409
Deferred income tax provision (benefit)........ 1,305 5,673 (12,762)
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable.... (50,803) (39,259) 32,327
(Increase) decrease in inventories............ (48,072) (663) 21,053
Decrease in other current assets.............. 369 44 3,558
(Increase) in other assets.................... (492) (3,472) (1,952)
Increase (decrease) in accounts payable and
accrued expenses............................. 18,738 30,244 (38,177)
Increase (decrease) in accrued retirement plan
contributions................................ 1,060 602 (342)
Increase (decrease) in accrued income taxes... 14,007 3,369 (14,713)
Other......................................... 3,082 5,102 808
-------- -------- --------
Net cash provided by operating activities.... 98,872 105,059 51,295
Cash Flows from Investing Activities:
Additions to property, plant and equipment...... (52,218) (31,271) (59,787)
Additions to intangible assets.................. -- (1,201) (3,953)
Net cash used by discontinued businesses........ -- -- (2,255)
Proceeds from sale of property.................. 8,808 -- --
Proceeds from sale of securities................ 7,498 9,500 35,594
-------- -------- --------
Net cash used in investing activities........ (35,912) (22,972) (30,401)
Cash Flows from Financing Activities:
Issuance of treasury stock under stock plans... 28,012 8,574 6,274
Net change in short-term debt.................. (63,101) (55,695) 5,821
Cash held as collateral........................ 15,428 (18,640) --
Dividends paid................................. (20,193) (19,614) (18,427)
-------- -------- --------
Net cash used in financing activities........ (39,854) (85,375) (6,332)
Effect of foreign exchange rates on cash and
cash equivalents............................... (340) (314) 1,191
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents.................................... 22,766 (3,602) 15,753
Cash and cash equivalents on January 1.......... 32,420 36,022 20,269
-------- -------- --------
Cash and cash equivalents on December 31........ $ 55,186 $ 32,420 $ 36,022
======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements
34
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
1. Summary of Significant Accounting Policies
Nature of Operations
Millipore Corporation and its subsidiaries are engaged primarily in the
development, manufacture and sale of products which are based on separations
technology and which are used for the analysis, identification and
purification of liquids and gases. Millipore also generates revenues from the
manufacture and sale of products based on electro-mechanical and pressure
differential technologies to monitor and control critical aspects of the
manufacturing process for integrated circuits (semiconductors). Millipore is
an integrated multinational manufacturer and markets its products throughout
the world. The principal customer groups to which the Company's products are
sold include pharmaceutical companies, biotechnology companies, food and
beverage companies, university and government, life science research
companies, laboratories and research institutes as well as semiconductor
fabrication companies and OEM and material suppliers to the semiconductor
industry.
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, 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.
Cash Equivalents
Cash equivalents consisting primarily of time deposits are carried at cost
plus accrued interest, which approximates market value. All cash equivalents
have maturities of three months or less.
Cash Held as Collateral
The Company is required to provide cash collateralization on one of its yen
denominated debt swap agreements. The amount of the collateral is dependent,
among other things, on the exchange rate of the yen to the U.S. dollar and is
restricted as to withdrawal or alternative usage.
Inventories
The Company values its inventories at actual cost 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 which extend the life of the underlying asset are capitalized.
Assets are primarily 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 are reflected in income.
35
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
The Company capitalizes internal use software development costs. These
costs, which are included in Production and Other Equipment, are amortized on
a straight-line basis over the estimated useful lives of the related software,
generally three to five years.
The estimated useful lives of the Company's depreciable assets are as
follows:
Leasehold Improvements.. The shorter of the life of the improvement or the life
of the lease
Buildings and
Improvements........... 10-40 years
Production and Other
Equipment.............. 3-15 years
Intangible Assets
Intangible assets, primarily acquired through the acquisitions of Amicon
Separation Science Business in 1996 and Tylan General, Inc. in 1997, consist
primarily of patented and unpatented technology, trade names, licenses and
goodwill. The assets are recorded at cost and amortized on a straight-line
basis over periods ranging from 3 to 20 years. On a periodic basis the value
of the intangible assets is reviewed to determine if impairment has taken
place due to changed business conditions or technological obsolescence. The
amount of such impairment, if any, is computed by comparing the discounted
future cash flows associated with the underlying intangible asset to the then
current net book value. If an impairment exists, the net book value of the
intangible asset is reduced accordingly.
Marketable Securities
The Company's investments in equity securities are categorized as available-
for-sale as defined by Statement of Financial Accounting Standards (SFAS) 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. The cost of each
investment is determined primarily on a specific identification method.
Unrealized holding gains and losses are reflected, net of income tax, as a
separate component of accumulated other comprehensive income (loss). As of
December 31, 2000, marketable securities had a fair value of $3,254 and a cost
of $1,088.
Financial Instruments
The Company has entered into U.S. dollar to Japanese yen debt swap
agreements and had entered into foreign exchange option contracts to manage
interest and foreign currency exchange rate exposures. The Company does not
hold or issue derivative financial instruments for trading purposes.
The cash differential paid or received under the interest rate component of
the debt swap agreements are accrued and recognized as an adjustment to
interest expense. Net amounts receivable or payable to counterparties are
included in Long-Term Debt. Cash flows related to the interest rate swap are
classified as part of Operating Activities in the Consolidated Statement of
Cash Flows consistent with the interest payments on the underlying debt. The
U.S. dollar to Japanese yen swap is designated as a hedge of the Company's net
investment exposure. Unrealized gains and losses are recorded as an adjustment
of the underlying Long-Term Debt and the cumulative Translation Adjustments in
Shareholders' Equity.
The Company had entered into option contracts to hedge against significant
fluctuations in the value of the U.S. dollar versus the Japanese yen. Gains
realized on the exercise of the option contracts are recorded as an
36
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
offset to the loss on the underlying transactions. Contract premiums are
recorded in Other Current Asset and amortized over the term of the contract.
The realized gains and the amortization of the contract premiums are recorded
in cost of sales. Cash flows related to the exercise of the option contracts
are included in Operating Activities in the Consolidated Statement of Cash
Flows. At December 31, 2000, there were no outstanding option contracts.
Income Taxes
Deferred tax assets 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.
Treasury Stock
Treasury stock is recorded at its cost on the date acquired and is reissued
at its weighted average cost. The excess of cost over the proceeds of reissued
treasury stock is charged to retained earnings.
Net Income Per Share
Basic net income per share is calculated by dividing the net income for the
period by the weighted average number of shares outstanding for the period.
Diluted net income per share is calculated by considering the impact of common
stock equivalents (outstanding stock options and restricted stock) as if they
were converted into common stock at the beginning of the period. Common stock
equivalents are not included in periods of net losses as they are anti-
dilutive.
Revenue Recognition
Revenue is recognized when contractual obligations have been satisfied,
title and risk of loss have been transferred to the customer and collection of
the resulting receivable is reasonably assured. Certain contract revenues
associated with the Company's process equipment business are recorded on the
percentage of completion method. Revenue is recognized based on the ratio of
hours expended compared to the total estimated hours to complete the
construction of the process equipment. The cumulative impact of any revisions
in estimates of the percent complete is reflected in the period in which the
changes become known. Revenue from services is recognized when the services
are provided.
Warranty Costs
The Company provides for estimated warranty costs at the time of the product
sale.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and cash
equivalents, accounts receivable and debt swap agreements.
The Company places its temporary cash and cash equivalents with high credit
qualified financial institutions, and, by policy, limits the amount of credit
exposure to any one financial institution.
37
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
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 industries 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.
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 2000 presentation.
New Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended by SFAS No. 138, which is
effective January 1, 2001 for the Company. SFAS No. 133 establishes accounting
and reporting standards requiring that every derivative instrument, including
certain derivative instruments embedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement also requires that changes in the derivative's fair value be
recognized in earnings unless specific hedge accounting criteria are met.
With respect to all derivative instruments, SFAS No. 133 requires that
companies record an adjustment to record the difference between a derivative's
previous carrying amount and its current fair market value as a transition
adjustment. At December 31, 2000, the Company is a party to U.S. dollar to
Japanese yen foreign currency fixed rate-to-fixed rate interest rate swap
agreements, which are designated as a hedge of the Company's net investment
exposure in it's Japanese subsidiary. The Company will record a transition
adjustment of $5,103, on January 1, 2001, to record the difference between the
Company's carrying value and the fair value of this derivative. This
transition adjustment will be recorded as a cumulative-effect type adjustment
to other comprehensive income.
2. Business Realignment
On October 3, 2000, Millipore announced plans to separate into two distinct
companies by making its Microelectronics business segment an independent,
publicly traded company. The Company is planning an initial public offering
for less than 20% of the shares of the new Microelectronics company and
subsequently intends to spin-off the remaining shares to Millipore
shareholders through a dividend distribution within approximately three to six
months following the initial public offering. The transaction is expected to
be tax-free to the Company and its shareholders and is contingent upon
receiving certain tax and regulatory approvals,
38
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
accommodation of certain debt covenants as well as market conditions. The full
impact of the realignment on the Company's financial position, results of
operations and cash flows cannot be predicted at this time. However, certain
expenses are expected to be incurred in future periods in order to implement
the realignment. Additionally, in connection with the separation, we are
currently engaged in a review of the operations and anticipate an associated
restructuring charge in the first quarter of 2001.
3. Restructuring Program and Provision for Excess Inventory
In the second quarter of 1998, the Company announced a restructuring program
which was undertaken to improve the competitive position of the Company by
streamlining worldwide operations and reducing the overall cost structure. The
program included the consolidation of certain manufacturing operations,
realignment of various international subsidiary organizations to focus on
operating business units, discontinuance of non-strategic product lines and
the rationalization of its product offerings to improve product line focus.
This rationalization process included a management review of product offerings
to identify and eliminate specific products with limited profitability as well
as products which were inconsistent with current strategic marketing plans,
such as non-standard products. In the third quarter of 1998, the Company
recorded an expense associated with these activities of $42,816 ($29,115 after
tax) including a restructuring charge of $33,641 and a $6,244 charge against
cost of sales for inventory provisions and $2,931 for fixed asset write-offs.
The non-strategic product lines consisted of high pressure liquid
chromatography equipment, semiconductor fab monitoring and control software
and various filtration devices. The $33,641 restructuring charge included
$18,290 of employee severance costs, $3,847 of lease cancellation costs,
$2,049 of marketing, research and supply contract termination costs, $7,667
for the write-off of intangible assets including those associated with the
discontinued product lines consisting of both unpatented completed technology
and tradenames as well as with termination of certain rights under two
technology development collaborations and $1,788 for the write-off of fixed
assets. As of September 30, 1998, there were no assets that remained in use
which had been written off. During the fourth quarter of 1998 assets which had
been held for disposal relating to one of the non-strategic product lines were
divested. There are no remaining assets being held for disposal.
During the third quarter of 1999, the Company reevaluated the accrual for
the restructuring program and reversed $5,200 of the remaining balance. The
reversal reflected a lower estimate for severance pay and lease cancellation
costs. Although the planned number of employee positions had been eliminated,
the reduction in severance cost was attributed to higher levels of attrition
than originally anticipated and impacted employees filling open positions as
demand increased due to improved sales volume. During the third quarter of
2000, the Company reversed an additional $1,500 in restructuring reserves
primarily related to proceeds from the sale of facilities exceeding estimated
proceeds.
The restructuring initiatives combined with the consolidation of the
Company's Microelectronics plants resulted in the elimination of 620 positions
worldwide (400 positions in manufacturing operations, 160 in selling, general
and administrative positions and 60 in research and development). Notification
to employees was completed in 1998, although a small number of the employees
affected will continue working in their existing positions through early 2001
with their related salary costs charged to operations as incurred. As of
December 31, 2000, 615 employees had left the Company pursuant to this
initiative. Under the terms of the severance agreements, the Company expects
to pay severance and associated benefits through the early part of 2001.
39
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
Following is a summary of the restructuring charges and related reserve
balances at December 31, 2000 and 1999:
Balance at Balance at
December 31, Reversal of Cash December 31,
1998 Reserve Disbursements 1999
------------ ----------- ------------- ------------
Employee severance
costs.................. $12,843 $4,700 $4,614 $3,529
Lease cancellation
costs.................. 3,678 500 704 2,474
Other costs............. 1,963 -- 376 1,587
------- ------ ------ ------
Total................. $18,484 $5,200 $5,694 $7,590
======= ====== ====== ======
Balance at Cash Balance at
December 31, Reversal of and non-cash December 31,
1999 Reserve activity 2000
------------ ----------- ------------- ------------
Employee severance
costs.................. $ 3,529 $ 363 $2,229 $ 937
Leasehold and other
costs.................. 4,061 1,137 1,240 1,684
------- ------ ------ ------
Total................. $ 7,590 $1,500 $3,469 $2,621
======= ====== ====== ======
The Company also recorded an incremental provision for excess and obsolete
inventory of $6,000 during the third quarter of 1998 in response to adverse
changes in demand attributable to recessionary conditions in Asia and the
slowdown in the semiconductor industry.
4. Acquisition
On May 18, 1999, the Company acquired all outstanding shares of
Bioprocessing Corporation Limited ("Bioprocessing") in exchange for 660,000
shares of Millipore common stock. The transaction was accounted for as a
pooling-of-interests. The consolidated financial statements for prior periods
were not restated because the addition of Bioprocessing did not have a
material impact on the Company's results of operations and financial position.
Bioprocessing develops, manufactures and sells products and services for the
chromatographic purification of proteins.
5. Basic and Diluted Earnings per Share
The following table sets forth the computation of basic and diluted earnings
per share for 2000, 1999 and 1998:
2000 1999 1998
-------- ------- ------
Numerator:
Net income....................................... $119,194 $64,328 $9,864
======== ======= ======
Denominator:
Basic weighted average shares outstanding........ 45,803 44,731 43,864
Effect of dilutive securities-stock options and
restricted stock................................ 1,236 543 425
-------- ------- ------
Diluted weighted average shares outstanding...... 47,039 45,274 44,289
======== ======= ======
Net income per share:
Basic............................................ $ 2.60 $ 1.44 $ 0.22
Diluted.......................................... $ 2.53 $ 1.42 $ 0.22
40
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
6. Inventories
Inventories at December 31, stated at the lower of first-in, first-out
(FIFO) cost or market, consisted of the following:
2000 1999
-------- --------
Raw materials.............................................. $ 53,898 $ 38,132
Work in process............................................ 29,819 26,069
Finished goods............................................. 62,974 40,839
-------- --------
$146,691 $105,040
======== ========
7. Property, Plant and Equipment
Property, plant and equipment at December 31 consisted of the following:
2000 1999
-------- --------
Land...................................................... $ 6,759 $ 8,786
Leasehold improvements.................................... 35,456 35,722
Buildings and improvements................................ 130,750 134,714
Production and other equipment............................ 239,801 244,195
Construction in progress.................................. 30,113 13,874
-------- --------
442,879 437,291
Less: accumulated depreciation............................ 209,275 206,763
-------- --------
$233,604 $230,528
======== ========
Depreciation expense for the years ended 2000, 1999 and 1998 was $34,782,
$34,713 and $36,778 respectively.
8. Notes Payable
Short-term borrowings and related lines of credit at December 31 are
summarized as follows:
2000 1999
-------- --------
Notes payable.......................................... $ 52,544 $115,645
-------- --------
Unused lines of credit................................. $217,456 $144,355
Average amount outstanding at month-end during the
year.................................................. $101,906 $162,790
Maximum amount outstanding at month-end during the
year.................................................. $137,000 $175,068
Weighted average interest rate during the year......... 7.5% 6.4%
Weighted average interest rate at year-end............. 7.8% 6.9%
The Company has entered into an unsecured Revolving Credit Agreement ("the
agreement") with a group of banks. The agreement allows for borrowings of up
to a maximum $250,000 and expires on January 22, 2002. Individual borrowings
under the agreement are made on terms not to exceed six months. At December
31, 2000 the Company had $198,000 available under this facility. Interest is
payable on outstanding borrowings at a floating rate of LIBOR plus a margin.
The agreement also calls for a facility fee. The exact amount of the margin
and the facility fee is dependent on the Company's debt rating. The agreement
calls for the Company to maintain certain financial covenants relating to
operating cash flow, interest coverage and minimum earnings.
41
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
The Company has an additional $20,000 of other short-term borrowing capacity
available of which $544 was outstanding at December 31, 2000.
9. Long-term Debt
Long-term debt at December 31 consisted of the following:
2000 1999
-------- --------
7.2% unsecured notes due in 2002....................... $100,000 $100,000
7.5% unsecured notes due in 2007....................... 100,000 100,000
7.23% note payable due in 2004......................... 100,000 100,000
Unrealized loss on revaluation of yen-denominated
debt.................................................. 130 13,107
-------- --------
Long-term debt......................................... $300,130 $313,107
======== ========
Weighted average interest rate, net of impact of swap
agreements............................................ 6.7% 6.8%
Interest on the 7.2% unsecured notes and the 7.5% unsecured notes is payable
semi-annually in April and October. At December 31, 2000, these notes had a
fair market value of $99,230 and $93,380, respectively.
Interest on the 7.23% notes is payable semi-annually in March and September.
As this note is not publicly traded, the fair value is not readily
determinable. However, the Company believes that the above carrying values
approximate fair value. These notes require the Company to maintain the same
covenants as the Revolving Credit Agreement.
The Company has two yen denominated swap agreements including a swap of
$80,000 in debt service obligations for a yen denominated obligation of
8,760,000 yen, bearing interest at a rate of 4.49 percent and maturing in 2004
and a swap of $30,000 in debt service obligations for a yen denominated
obligation of 3,840,000 yen, bearing interest at a rate of 1.39 percent and
maturing in 2003. The effect of foreign currency exchange rate fluctuations
resulting from the yen swap agreements open at December 31, 2000 are included
in translation adjustments.
In November 1998 Moody's Investor Services and Standard & Poors Corporation
graded the Company's debt at a rating of Ba2 and BB+, respectively. Both
ratings are characterized as below "investment grade". This rating coupled
with the strengthening of the yen triggered a requirement to provide cash
collateralization under one of the Company's yen denominated debt swap
agreements in the event that the net value of the Company's position falls
below the net value of the counterparty's position. In the event that the
Company's debt rating improves, these agreements provide for less stringent
collateralization requirements. The amount of the cash collateral is
dependent, among other things, on the exchange rate of the yen to the U.S.
dollar; generally, as the yen strengthens, the amount of cash collateral
required from the Company increases. At December 31, 2000 and 1999, this cash
collateralization amount was $3,212 and $18,640, respectively.
The Company capitalized interest costs associated with the construction of
certain capital assets of $1,436 in 2000, $1,121 in 1999 and $1,282 in 1998.
Interest paid on short-term and long-term debt during 2000, 1999 and 1998
amounted to $27,755, $30,804 and $30,690 respectively.
42
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
10. Income Taxes
The Company's provisions for income taxes are summarized as follows:
2000 1999 1998
-------- ------- --------
Domestic and foreign income before income
taxes:
Domestic.................................... $ 53,534 $10,985 $(27,116)
Foreign..................................... 100,132 71,366 35,660
-------- ------- --------
Income before income taxes.................. $153,666 $82,351 $ 8,544
======== ======= ========
Domestic and foreign provision (benefit) for
income taxes:
Domestic.................................... $ 4,537 $ 448 $ (4,801)
Foreign..................................... 29,948 18,085 3,295
State....................................... (13) (510) 186
-------- ------- --------
$ 34,472 $18,023 $ (1,320)
======== ======= ========
Current and deferred provision (benefit) for
income taxes:
Current..................................... $ 33,167 $12,350 $ 9,747
Deferred.................................... 1,305 5,673 (11,067)
-------- ------- --------
$ 34,472 $18,023 $ (1,320)
======== ======= ========
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:
2000 1999 1998
---- ----- ------
U.S. statutory income tax rate......................... 35.0% 35.0% 35.0%
Puerto Rico tax rate benefit........................... (3.8) (5.0) (10.8)
Ireland tax rate benefit............................... (9.3) (12.4) (25.8)
State income tax, net of federal income tax benefit.... (0.1) (0.4) 1.4
Foreign Sales Corporation income not taxed............. (2.6) (2.6) (15.2)
Change in valuation allowance.......................... 3.2 7.3 --
---- ----- ------
Effective tax rate..................................... 22.4% 21.9% (15.4)%
==== ===== ======
Tax exemptions relating to Puerto Rico and Ireland operations are effective
through 2004 and 2010, respectively. Income taxes paid (net of refunds) during
2000, 1999 and 1998 were $17,267, $5,700 and $20,359, 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
$205,016 at December 31, 2000. If earnings of such foreign subsidiaries were
not indefinitely reinvested, a deferred tax liability of approximately $56,949
would have been required.
At December 31, 2000, the Company has foreign tax credit carryforwards of
approximately $32,291 that expire in the years 2003 through 2005. General
business credit carryforwards of approximately $4,889 expire in the years 2002
through 2009. Net operating loss carryforwards of $78,544 expire through the
year 2018. In addition, the Company has alternative minimum tax credit
carryforwards of approximately $15,712, which can be carried forward
indefinitely.
43
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
Significant components of the Company's net deferred tax assets are as
follows:
2000 1999
-------- --------
Intercompany and inventory related transactions........ $ 18,416 $ 16,254
Postretirement benefits other than pensions............ 4,095 3,859
Tax credits (including foreign tax credits on
unremitted earnings).................................. 73,844 55,752
Net operating loss carryforwards....................... 27,490 34,811
Restructuring related costs............................ 2,333 5,250
Amortization of intangible assets...................... 9,764 19,007
Depreciation........................................... (2,992) (7,648)
Other, net............................................. 6,795 1,671
-------- --------
139,745 128,956
Valuation allowance.................................... (24,134) (19,134)
-------- --------
Net deferred tax asset................................. $115,611 $109,822
======== ========
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
valuation allowance for the year results from the growth in foreign tax
credits and changes in the geographic mix of income. 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.
11. Legal Proceedings
In 2000, the Company recorded a charge of $1,500 for past royalties as part
of the settlement of a patent lawsuit.
On July 21, 1999 Amersham Pharmacia Biotech AB ("APB") of Sweden filed a
complaint in the High Court of Justice in the United Kingdom against the
Company and two of its subsidiaries alleging that the sale of the Company's
ISOPAK chromatography valve infringed one or more of the claims contained in
certain APB patents. APB sought an injunction against the alleged infringement
as well as damages. On October 26, 2000, the High Court ruled that the
chromatography valve currently sold by the Company did not infringe the APB
patents. APB has been granted leave to appeal this decision. The High Court
also ruled that a discontinued product did infringe one of said patents. A
hearing on damages will be scheduled with respect to this matter. In any
event, the outcome of this suit is not expected to have a material adverse
impact on the Company's financial condition or results of operations.
In 1998, the Company recorded a litigation settlement of $11,766 for the
following three matters:
1. A proceeding related to an administrative order issued by the
Environmental Quality Board ("EQB") of Puerto Rico alleging that the
Company's wholly owned subsidiary failed to properly manage, transport
and dispose of nitrocellulose membrane scrap as a hazardous waste; and
proposed penalties in the amount of $96,500. The Company settled this
proceeding in 1998 and recorded a charge of $5,000.
2. A private lawsuit brought by an intervening party in the EQB
administrative case described above; the Company recorded a charge of
$3,100 in the 1998 reflecting its costs to settle this suit.
44
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
3. A patent lawsuit with Mott Metallurgical Corporation in which each party
claimed infringement of one of its patents by the other. The Company
recorded a charge of $3,666 in 1998 to settle this suit; the parties
also agreed to cross license the two patents at issue.
Millipore has, in the past, been named as a potentially responsible party
("PRP") under the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986 ("Superfund") by the U.S. Environmental Protection
Agency ("EPA") with respect to a "release" (as defined in Section 101 of
Superfund), at twelve sites to which chemical wastes generated by the
manufacturing operations of Millipore or one of its divisions may have been
sent. The Company has settled its liability pursuant to consent decrees
releasing Millipore from further liability with respect to certain covered
matters at all of these Superfund sites. However, as is typical with consent
decrees in such Superfund proceedings, EPA and the relevant state agencies
have reserved the right to maintain actions against the settling parties,
including the Company, in the event certain events occur or do not occur at
those sites. The Company does not expect that the conditions in the consent
decrees permitting these governmental parties to "re-open" the cases will
occur. In any event, the Company believes that the aggregate of any future
potential liabilities should not have a material adverse effect on the
Company's future results of operations or financial condition in light of the
advanced stage of funded remedial action at each site and the likely
availability of contribution from numerous other financially solvent PRPs
participating at each such Superfund site.
The Company is also subject to a number of other claims and legal
proceedings which, in the opinion of the Company's management, are incidental
to the Company's normal business operations. In the opinion of the Company,
although final settlement of these suits and claims may impact the Company's
financial statements in a particular period, they will not, in the aggregate,
have a material adverse effect on the Company's financial position.
12. Leases
Operating lease agreements cover sales offices, manufacturing and warehouse
space. These leases have expiration dates through 2008. Certain land and
building leases contain renewal options for periods ranging from one to ten
years and purchase options at fair market value. Rental expense was $11,408 in
2000, $12,325 in 1999 and $12,033 in 1998. At December 31, 2000 future minimum
rents payable under noncancelable leases with initial terms exceeding one year
were as follows:
2001............................................................. $11,026
2002............................................................. 8,906
2003............................................................. 7,797
2004............................................................. 7,246
2005............................................................. 7,146
2006-2008........................................................ 6,953
As part of the restructuring program the Company established regional
transaction service centers resulting in the elimination of duplicate
facilities. The Company will vacate these facilities in the first half of
2001. Accordingly, future rents payable under these leases are included
through 2001. Costs expected to be incurred by the Company to vacate these
premises prior to completion of each respective lease term are accrued as
discussed in Note 3.
45
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
13. Stock Plans
Stock Incentive Plans
During 1999, the Company adopted the "1999 Stock Incentive Plan" (the "1999
Plan"), which combined the features of the "1995 Combined Stock Option Plan"
and the "Long Term Restricted Stock (Incentive) Plan". The 1999 Plan provides
for the issuance of stock options and restricted stock to key employees as
incentive compensation. The 1999 Plan allows for the issuance of 4,000,000
shares of common stock of which a maximum of 250,000 shares can be issued as
restricted stock. The exercise price of the stock options may not be less than
the fair market value of the stock at the date of grant and the stock options
must expire no later than 10 years from the date of grant. At December 31,
2000, 1,404,000 shares were available for issuance under the 1999 Plan. With
the adoption of the 1999 Plan, stock options are no longer granted under the
1995 Combined Stock Option Plan or any predecessor plans although 2,416,000
shares issued under such predecessor plans remain outstanding.
The 1999 Plan provides that the restricted stock, which is awarded to key
members of senior management at no cost to them, cannot be sold, assigned,
transferred or pledged during a restriction period. The restriction period is
normally four years but in some cases may be less and may be accelerated based
on exceeding annual performance targets. In most instances, shares are subject
to forfeiture should employment terminate during the restriction period. The
restricted stock 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 2000, 1999
and 1998 173,000, 167,000, and 139,000 shares, respectively, were outstanding
as restricted shares. As of December 31, 2000, 139,000 shares of Millipore
common stock were available for future awards of restricted stock under this
plan.
Non-Employee Director Stock Option Plan
During 1999, the Company adopted the 1999 Stock Option Plan for Non-Employee
Directors (the "Directors Plan") which replaced the 1989 Non-Employee Director
Stock Option Plan. The Directors Plan allows for the issuance of 250,000
shares of common stock. Each newly elected eligible director is awarded a
stock option to purchase 4,000 shares of common stock on the date of his or
her first election. Following the initial grant, each director shall
automatically be awarded options to purchase 2,000 shares of common stock for
each subsequent year of service as a director. The exercise price of the stock
options may not be less than the fair market value of the stock at the date of
grant. At December 31, 2000, 41,000 options were outstanding.
Employees' Stock Purchase Plan
During 1999, the Company's Employees' Stock Purchase Plan ("ESPP") was
amended to allow for the issuance of up to 1,300,000 shares of common stock.
The amended plan allows eligible employees to purchase the stock at 85% of the
lesser of the fair market value of the common stock on June 1, the beginning
of the plan year, or the closing price at the end of each subsequent quarter.
Each employee may purchase up to 10% (up to a maximum of $25,000) of eligible
compensation.
In 2000, 1999 and 1998, shares issued under the ESPP were 90,000, 51,000,
and 38,000, respectively. As of December 31, 2000, 1,159,000 shares of
Millipore common stock were available for sale to employees under the ESPP.
46
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
Stock option activity under the 1999 Stock Option Plan, 1995 Combined Stock
Option Plan and the Non-Employee Director Stock Option Plans is presented as
follows:
2000 1999 1998
---------------------------------- --------------------------------- ---------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Option Price Price Shares Option Price Price Shares Option Price Price
---------- ------------- -------- --------- ------------- -------- --------- ------------- --------
Outstanding at
January 1 4,826,000 $13.81-$48.13 $30.28 4,111,000 $13.81-$48.13 $28.08 3,461,000 $13.81-$44.13 $27.54
Granted 1,465,000 $46.06-$74.06 $46.73 1,239,000 $29.63-$37.13 $36.23 884,000 $18.88-$48.13 $29.07
Exercised (1,079,000) $13.81-$43.50 $23.16 (349,000) $13.81-$37.63 $18.77 (155,000) $14.50-$23.69 $17.32
Canceled (160,000) $17.31-$69.94 $33.92 (167,000) $16.88-$43.50 $35.48 (79,000) $17.25-$43.50 $36.74
---------- ------------- ------ --------- ------------- ------ --------- ------------- ------
Outstanding at
December 31 5,052,000 $13.81-$74.06 $36.45 4,826,000 $13.81-$48.13 $30.28 4,111,000 $13.81-$48.13 $28.08
---------- --------- ---------
Exercisable at
December 31 2,212,000 2,605,000 2,408,000
The following table summarizes information about stock options at December
31, 2000:
Options Outstanding Options Exercisable
- -------------------------------------------------- --------------------------
Weighted
Range of Average Weighted Weighted
Exercise Remaining Average Average
Price Outstanding Life in years Exercise Price Exercisable Exercise Price
- -------- ----------- ------------- -------------- ----------- --------------
$13.81-
$28.94 1,338,000 6 $24.46 984,000 $22.88
$29.63-
$34.50 17,000 8 $30.18 3,000 $30.26
$35.13-
$35.13 1,148,000 9 $35.13 283,000 $35.13
$35.63-
$42.00 1,028,000 6 $38.62 899,000 $38.83
$42.88-
$74.06 1,521,000 10 $46.61 43,000 $44.34
--------- ---------
$13.81-
$74.06 5,052,000 2,212,000
Accounting for Stock Based Compensation
The Company has adopted the disclosure-only provisions of SFAS No. 123
"Accounting for Stock-Based Compensation." Accordingly, no compensation cost
has been recognized. Had compensation cost been determined based on the fair
value at the grant date consistent with the provisions of SFAS 123, the
Company's net income and basic earnings per share would have been reduced by
$7,104 or $0.15 per share in 2000, $5,174 or $0.11 per share in 1999 and
$3,748 or $0.08 per share in 1998. The weighted average fair value of options
granted under the stock option plan was $20.11 in 2000, $12.86 in 1999 and
$8.29 in 1998. The weighted average fair value of shares issued under the
employee stock purchase plan was $11.33 in 2000, $7.43 in 1999, and $4.61 in
1998. The pro forma expense amounts assume that the fair value assigned to the
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 assumptions in 2000, 1999 and
1998: expected life of five years and a dividend rate of $0.44, $0.44 and
$0.53, respectively. The expected volatility was 45% in 2000, 35% in 1999 and
30% in 1998. The weighted average risk-free interest rate was 5.3% in 2000,
6.2% in 1999 and 4.5% in 1998.
Non-Employee Director Deferred Compensation Agreements
Non-Employee Directors may elect to defer their fees earned as Directors.
The fees are converted to deferred compensation phantom stock units based on
100% of the fair market value of Millipore Common Stock on periodic conversion
dates. Upon retirement or earlier termination of service from the Board of
Directors, the
47
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
phantom stock units are converted at fair market value of Millipore Common
Stock on the date of conversion to cash equivalents and distributed in annual
installments over ten years. The Company records a compensation adjustment
related to the change in the fair market value of stock at the grant date as
compared to the current fair market value of the stock.
14. 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 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 to make certain tax-deferred voluntary
contributions upon hire date, which the Company matches after 1 year of
service with a 25% contribution (50% contribution for employees with 10 or
more years of service). Total expense under the Participation and Savings Plan
was $7,940 in 2000, $6,979 in 1999 and $7,392 in 1998.
Supplemental Savings and Retirement Plan for Key Salaried Employees
The Company offers a Supplemental Savings and Retirement Plan for Key
Salaried Employees (the "Supplemental Plan") to certain senior executives that
allows certain salary deferral benefits that would otherwise be lost by reason
of restrictions imposed by the Internal Revenue Code limiting the amount of
compensation which may be deferred under tax-qualified plans. Total expense
under the Supplemental Plan was $475 in 2000, $1,164 in 1999 and $268 in 1998.
Retirement Plans
The Company's Retirement Plan for Employees of Millipore Corporation ("U.S.
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 five 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 U.S. Retirement Plan, subject to
Internal Revenue Service and ERISA funding limitations. No contributions were
required for 2000, 1999 and 1998. Plan assets are invested primarily in mutual
funds and money market funds.
In addition to the U.S. Retirement Plan, the Company sponsors several
unfunded defined benefit postretirement plans covering all U.S. employees,
which are included in Other Benefits. The plans provide medical and life
insurance benefits and are, depending on the plan, either contributory or non-
contributory.
48
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
The following tables summarize the funded status of the U.S. Employee
Retirement Plans and amounts reflected in the Company's consolidated balance
sheets at December 31, based on Statement No. 132, Employers' Disclosures
about Pensions and Other Postretirement Benefits.
Pension
Benefits Other Benefits
-------------- ------------------
2000 1999 2000 1999
------ ------ -------- --------
Change in benefit obligation:
Benefit obligation at beginning of year.. $8,271 $7,842 $ 7,801 $ 7,573
Service cost............................. (231) 62 518 495
Interest cost............................ 706 597 611 451
Plan participants' contributions......... 50 242 70 64
Actuarial loss (gain).................... 1,667 205 634 (414)
Benefits paid............................ (892) (677) (400) (368)
------ ------ -------- --------
Benefit obligation at end of year........ $9,571 $8,271 $ 9,234 $ 7,801
====== ====== ======== ========
Change in plan assets:
Fair value of plan assets at beginning of
year.................................... $9,625 $9,235 $ -- $ --
Actual return on plan assets............. 331 824 -- --
Company contributions.................... -- -- 330 303
Plan participant contribution............ 50 242 70 64
Benefits paid............................ (892) (677) (400) (368)
------ ------ -------- --------
Fair value of plan assets at end of
year.................................... $9,114 $9,625 $ -- $ --
====== ====== ======== ========
Funded status.............................. $ (457) $1,354 $ (9,234) $ (7,801)
Unrecognized net loss (gain)............... 4,003 2,108 (2,468) (3,224)
Unrecognized prior service cost............ 67 78 -- --
Unrecognized net transition obligation..... (151) (231) -- --
------ ------ -------- --------
Prepaid (accrued) benefit cost............. $3,462 $3,309 $(11,702) $(11,026)
====== ====== ======== ========
Pension
Benefits Other Benefits
---------------- ----------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Weighted average assumptions as of December
31:
Discount rate............................ 7.5% 8.0% 6.5% 7.50% 8.0% 6.5%
Expected return on plan assets........... 8.0% 8.0% 8.0% N/A N/A N/A
Rate of compensation increase............ 5.0% 5.0% 5.0% N/A N/A N/A
49
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
For measurement purposes, a 5% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 2001. The rate was
assumed to remain at this level.
Pension Benefits Other Benefits
------------------- -------------------
2000 1999 1998 2000 1999 1998
----- ----- ----- ----- ----- -----
Components of net periodic
benefit cost:
Service cost.................. $(231) $ 62 $ 27 $ 518 $ 495 $ 379
Interest cost................. 706 597 524 611 451 449
Expected return on plan
assets....................... (738) (714) (690) -- -- --
Amortization of unrecognized
gain......................... (80) (80) (82) (122) (129) (133)
Amortization of prior service
cost......................... 11 11 11 -- -- --
Recognized actuarial loss..... 179 222 121 -- -- --
----- ----- ----- ----- ----- -----
Net periodic benefit cost..... $(153) $ 98 $ (89) $1007 $ 817 $ 695
===== ===== ===== ===== ===== =====
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change in
the assumed health care cost trend rates would have the following effects.
1% Point 1% Point
Increase Decrease
-------- --------
Effect on total of services and interest cost
components............................................. $ 222 $ (175)
Effect on postretirement benefit obligations............ 1,278 (1,034)
The Company's retirement plan for all employees of Japan is a defined
benefit plan. The tables below set forth the estimated net periodic cost and
funded status of the Nihon Millipore Pension Plan.
Pension Benefits
------------------
2000 1999
-------- --------
Change in benefit obligation:
Benefit obligation at beginning of year............... $ 17,328 $ 15,409
Service cost.......................................... 1,589 1,555
Interest cost......................................... 494 469
Actuarial loss (gain)................................. 2,211 (1,677)
Benefits paid......................................... (1,604) (398)
Foreign exchange impact............................... (1,984) 1,970
-------- --------
Benefit obligation at end of year..................... $ 18,034 $ 17,328
======== ========
Change in plan assets:
Fair value of plan assets at beginning of year........ $ 3,502 $ 2,920
Actual return on plan assets.......................... 59 (45)
Company contributions................................. 251 231
Foreign exchange impact............................... (387) 396
-------- --------
Fair value of plan assets at end of year.............. $ 3,425 $ 3,502
======== ========
Funded status........................................... $(14,609) $(13,826)
Unrecognized net loss (gain)............................ 5,411 3,881
-------- --------
Prepaid (accrued) benefit cost.......................... $ (9,198) $ (9,945)
======== ========
50
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
Pension Benefits
----------------------
2000 1999 1998
------ ------ ------
Weighted average assumptions as of December 31:
Discount rate......................................... 3.00% 3.00% 3.00%
Expected return on plan assets........................ 1.50% 1.50% 1.50%
Rate of compensation increase......................... 3.00% 3.00% 3.00%
Pension Benefits
----------------------
2000 1999 1998
------ ------ ------
Components of net periodic benefit cost:
Service cost.......................................... $1,589 $1,555 $1,183
Interest cost......................................... 494 469 421
Expected return on plan assets........................ (50) (44) (34)
Recognized actuarial loss............................. 142 257 120
------ ------ ------
Net periodic benefit cost............................... $2,175 $2,237 $1,690
====== ====== ======
Nihon Millipore Directors Retirement Plan
The Nihon Millipore Directors Retirement Plan (the "Nihon Retirement Plan")
is offered to certain members of senior management of Nihon Millipore Ltd. The
Nihon Retirement Plan provides a basic retirement allowance for participants
based on factors including final monthly salary, length of service and
positions held within Nihon Millipore Ltd. during employment. Payments are
made in one lump sum upon retirement.
15. Gain on Sale of Equity Securities
During the second quarter of 2000, the Company sold its holdings in Oxford
GlycoSciences Plc, resulting in a gain on sale of securities of $7,500 which
was partially offset by the write-off of investment holdings in a privately
held U.S. company of $3,300.
The $9,500 of proceeds on sale of securities in 1999 reflects the sale by
the Company of 100 shares of Series A Preferred Stock of Waters Corporation,
which the Company received in connection with the divestiture of its Waters
Chromatography Division in 1994.
Net gains in 1998 consisted of the sale of all of the Company's shares of
Perkin-Elmer stock for approximately $32,500 in cash and all of the Company's
common shares of Glyko Biomedical Ltd. which resulted in a recognized gain of
$3,100.
16. Business Segment Information
The Company has two reportable business segments--Bioscience (previously
referred to as Biopharmaceutical & Research) and Microelectronics.
In the Bioscience segment the Company develops, manufactures and sells
consumable products and capital equipment to pharmaceutical, biotechnology and
food and beverage companies, life sciences research companies, university and
government laboratories and research institutes. The Company's product
offerings to the Bioscience segment include membranes, chromatographic media,
membrane and/or media based filter and separation devices, test kits,
laboratory water purification systems, resin and membrane based cartridge
filters, laboratory test equipment and manufacturing process equipment. These
products are used in laboratory and research applications for detecting and
identifying molecules, compounds or microorganisms in a fluid sample, and in
the manufacture of biopharmaceutical products, diagnostic devices and
beverages to isolate and purify specific components or to remove contaminants
in a fluid stream. The products are sold worldwide principally through a
direct sales force. Distributors are used in selected regions and for specific
product lines.
51
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
In the Microelectronics segment the Company develops, manufactures and sells
consumables and capital equipment to semiconductor fabrication companies as
well as OEM suppliers to those companies. Microelectronics products include
membrane and metal based filters, housings, precision liquid dispense
filtration pumps, resin based gas purifiers and mass flow and pressure
controllers. The products are used by customers in manufacturing operations to
remove contaminants in process fluid streams and process gas applications to
purify process gases, to measure and control flow rates in process gas streams
and to control and monitor pressure and vacuum levels in process chambers.
Microelectronics products are sold worldwide through a direct sales force and
through distributors in selected regions.
Corporate operations primarily include unallocated costs for certain shared
service departments including MIS, corporate finance, executive offices, human
resources and research and development activities and corporate wide expenses
related to variable employee compensation programs.
The operating segment results for Bioscience, Microelectronics and Corporate
included below are presented in "local currencies". For comparability of
financial results, the foreign currency balances, in all periods presented,
are translated at Millipore's 2000 budgeted exchange rates, which differ from
actual rates of exchange. This provides a clearer presentation of underlying
trends in the Company's business, before the impact of foreign currency
translation. The foreign exchange impact is shown separately and reconciles
the local currency reporting to the consolidated results at the actual rates
of exchange.
Operating Segments:
Consolidated Net Sales
----------------------------------------
2000 1999 1998
------------ ------------ ------------
Bioscience....................... $ 627,535 $ 570,763 $ 527,888
Microelectronics................. 351,493 206,782 189,261
Foreign exchange................. (25,257) (6,357) (17,842)
------------ ------------ ------------
Total net sales................ $ 953,771 $ 771,188 $ 699,307
============ ============ ============
Consolidated Operating Income (Loss)
----------------------------------------
2000 1999 1998
------------ ------------ ------------
Bioscience....................... $ 149,037 $ 126,454 $ 109,415
Microelectronics................. 80,890 20,015 (13,020)
Corporate........................ (54,890) (37,567) (30,843)
Restructuring and unusual items.. 0 5,200 (60,582)
Foreign exchange................. (2,096) (4,621) (5,636)
------------ ------------ ------------
Total operating income (loss).. $ 172,941 $ 109,481 $ (666)
============ ============ ============
Depreciation and Amortization Expense,
Included in Operating Income (Loss)
----------------------------------------
2000 1999 1998
------------ ------------ ------------
Bioscience....................... $ 19,084 $ 19,261 $ 18,786
Microelectronics................. 12,404 12,226 12,169
Corporate........................ 13,660 13,596 13,390
Foreign exchange................. 997 (792) 64
------------ ------------ ------------
Total depreciation and
amortization.................. $ 46,145 $ 44,291 $ 44,409
============ ============ ============
52
MILLIPORE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(In thousands except share and per share data)
Segment Assets--
Inventory only
------------------
2000 1999
-------- --------
Bioscience............................................... $ 83,096 $ 73,787
Microelectronics......................................... 64,625 34,092
Corporate................................................ 8,291 (1,676)
Foreign exchange......................................... (9,321) (1,163)
-------- --------
Total segment assets................................... $146,691 $105,040
======== ========
Geographical Segments:
The Company attributes net sales and long-lived assets to different
geographic areas on the basis of the location of the customer. The Company has
three geographic regions. The United States represents greater than 90% of the
Americas region. Net sales and long-lived asset information by geographic area
in U.S. dollars for each of the three years ended December 31, 2000 and as of
December 31, 2000, 1999 and 1998 is presented as follows:
Net Sales
--------------------------
2000 1999 1998
-------- -------- --------
Americas.......................................... $406,473 $318,446 $289,084
Europe............................................ 234,298 236,338 239,381
Asia/Pacific...................................... 313,000 216,404 170,842
-------- -------- --------
Total........................................... $953,771 $771,188 $699,307
======== ======== ========
Long-Lived Assets
-----------------
2000 1999
-------- --------
Americas................................................... $236,394 $235,439
Europe..................................................... 45,666 50,645
Asia/Pacific............................................... 33,403 37,880
-------- --------
Total.................................................... $315,463 $323,964
======== ========
53
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Directors of Millipore Corporation:
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Millipore Corporation and its subsidiaries at December 31, 2000
and 1999, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States of America.
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 of these statements in accordance
with auditing standards generally accepted in the United States of America,
which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
January 17, 2001
54
MILLIPORE CORPORATION
Quarterly Results (Unaudited)
The Company's unaudited quarterly results are summarized below.
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
-------- -------- -------- -------- --------
(In thousands, except per share data)
2000
Net sales................... $224,823 $238,948 $239,382 $250,618 $953,771
Cost of sales............... 100,326 108,590 112,575 118,641 440,132
-------- -------- -------- -------- --------
Gross profit.............. 124,497 130,358 126,807 131,977 513,639
Selling, general and
administrative expenses.... 70,034 70,877 68,335 68,791 278,037
Research and development
expenses................... 14,714 15,287 16,214 16,446 62,661
Litigation settlement....... 1,500 1,500
Restructuring items......... -- -- (1,500) -- (1,500)
-------- -------- -------- -------- --------
Operating income.......... 39,749 44,194 42,258 46,740 172,941
Net gain on sale of equity
securities................. -- 4,161 -- -- 4,161
Interest income............. 466 1,067 1,006 947 3,486
Interest expense............ (7,034) (7,259) (6,436) (6,193) (26,922)
-------- -------- -------- -------- --------
Income before income
taxes.................... 33,181 42,163 36,828 41,494 153,666
Provision for income taxes.. 6,968 10,273 8,102 9,129 34,472
-------- -------- -------- -------- --------
Net income.............. $ 26,213 $ 31,890 $ 28,726 $ 32,365 $119,194
======== ======== ======== ======== ========
Net income per share:
Basic..................... $ 0.58 $ 0.70 $ 0.62 $ 0.70 $ 2.60
Diluted................... $ 0.56 $ 0.67 $ 0.61 $ 0.69 $ 2.53
Weighted average shares
outstanding
Basic..................... 45,273 45,849 46,073 46,123 45,803
Diluted................... 46,452 47,314 47,328 47,057 47,039
1999
Net sales................... $180,403 $187,466 $188,635 $214,684 $771,188
Cost of sales............... 84,895 86,080 86,920 100,274 358,169
-------- -------- -------- -------- --------
Gross profit.............. 95,508 101,386 101,715 114,410 413,019
Selling, general and
administrative expenses.... 61,833 62,883 64,387 67,495 256,598
Research and development
expenses................... 12,345 13,362 13,305 13,128 52,140
Restructuring items......... -- -- (5,200) -- (5,200)
-------- -------- -------- -------- --------
Operating income (loss)... 21,330 25,141 29,223 33,787 109,481
Interest income............. 699 691 671 964 3,025
Interest expense............ (7,779) (7,333) (7,482) (7,561) (30,155)
-------- -------- -------- -------- --------
Income (loss) before
income taxes............. 14,250 18,499 22,412 27,190 82,351
Provision (benefit) for
income taxes............... 2,993 3,885 5,435 5,710 18,023
-------- -------- -------- -------- --------
Net income (loss)....... $ 11,257 $ 14,614 $ 16,977 $ 21,480 $ 64,328
======== ======== ======== ======== ========
Net income (loss) per share:
Basic..................... $ 0.26 $ 0.33 $ 0.38 $ 0.48 $ 1.44
Diluted................... $ 0.25 $ 0.32 $ 0.37 $ 0.47 $ 1.42
Weighted average shares
outstanding
Basic..................... 44,078 44,791 44,994 45,096 44,731
Diluted................... 44,477 45,308 45,681 45,632 45,274
55
INDEX TO EXHIBITS
Exhibit
No. Description Page
------- --------------------------------------------------------------- ----
3.1 Restated Articles of Organization, 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.......................................................
4.2 Indenture dated as of April 1, 1997, relating to the issuance **
Debt Securities in Series......................................
10.1 Millipore Corporation 2000 Deferred Compensation Plan for --
Senior Management..............................................
10.2 Standard Deferred Compensation Plan Agreement.................. --
10.3 Supplemental Savings and Retirement Plan for Key Salaried --
Employees of Millipore Corporation, as amended.................
10.4 2000 Management Incentive Plan................................. --
10.5 Distribution Agreement, dated as of July 1, 1996, by and among **
the Company and Fisher Scientific Company......................
10.6 Revolving Credit Agreement, dated as of January 22, 1997, among **
Millipore Corporation and The First National Bank of Boston,
ABN AMRO Bank N.V. and certain other lending institutions which
are or become parties thereto..................................
10.7 Shareholder Rights Agreement, dated as of April 15, 1988, as **
amended and restated April 16, 1998 between Millipore and The
First National Bank of Boston..................................
10.8 Standard Executive Termination Agreement, as amended........... **
10.9 Millipore Corporation 1999 Stock Incentive Plan................ **
10.10 Millipore Corporation 1995 Employee Stock Purchase Plan, as **
amended........................................................
10.11 Second Amendment, effective as of September 30, 1998, to **
Revolving Credit Agreement, dated as of January 22, 1997, among
Millipore Corporation and The First National Bank of Boston,
ABN AMRO Bank N.V. and certain other lending institutions......
10.12 Note Purchase and Exchange Agreement, as amended through **
November 2, 1998, between Millipore Corporation and
Metropolitan Life Insurance Company............................
10.13 Form of letter agreement with directors relating to the **
deferral of directors fees and conversion into phantom stock
units..........................................................
10.14 Millipore Corporation 1989 Stock Option Plan for Non-Employee **
Directors......................................................
10.15 Commercial Lease Agreement between EBP 3, Ltd. and Millipore **
Corporation with respect to Premises located in Allen, Texas...
10.16 ISDA Master Agreement, dated January 27, 1994, as amended, with **
Morgan Guaranty Trust Company of New York......................
10.17 Millipore Corporation 1999 Stock Option Plan for Non-Employee **
Directors......................................................
10.18 Employment and Relocation Agreement, dated November 10, 1999, **
between Millipore Corporation and Michael P. Carroll...........
21 Subsidiaries of Millipore Corporation.......................... --
23 Consent of PricewaterhouseCoopers LLP.......................... --
24 Power of Attorney.............................................. --
- --------
** Incorporated by reference to a prior filing with the Commission