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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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, 1999 or
[_]Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number 0-1052
MILLIPORE CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 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:
Title of Class Name of Exchange on Which Registered
-------------- ------------------------------------
Common Stock, $1.00 Par Value New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of Form 10-K or any amendment
to this Form 10-K. [_]
As of March 3, 2000, the aggregate market value of the registrant's voting
stock held by non-affiliates of the registrant was approximately
$2,709,745,162 based on the closing price on that date on the New York Stock
Exchange.
As of March 3, 2000, 45,663,624 shares of the registrant's Common Stock were
outstanding.
Documents Incorporated by Reference
Document Incorporated into Form 10-K
-------- ---------------------------
Definitive Proxy Statement, dated March 17,
2000 Part III
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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 and
are applied primarily to biological and environmental laboratory research and
testing, to pharmaceutical and food and beverage research, manufacturing and
quality control operations and 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 these
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.
Information About Operating Segments
Millipore operates in two business segments: Biopharmaceutical & Research
and Microelectronics. Millipore has traditionally organized its business and
management structures around the markets and customers which it serves. The
Biopharmaceutical & Research segment includes products and services sold to
pharmaceutical companies, biotechnology companies, food and beverage
companies, university and government 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 Biopharmaceutical & Research 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 Biopharmaceutical & Research 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. During 1999 approximately 73% of
Millipore's net sales were made to customers in the Biopharmaceutical &
Research segment and approximately 27% 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 P 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 7,000 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 (particularly membrane
ultrafiltration and chromatography systems and gas monitoring equipment).
1
Biopharmaceutical & Research Business Segment. The products sold to
customers in the Biopharmaceutical & Research 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.
The principal separation technologies utilized by products sold to
Biopharmaceutical & Research 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,
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 fluid 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.
Customers use the Company's products in the Biopharmaceutical & Research
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 by
pharmaceutical manufacturing and research operations to isolate and purify
specific components of fluid streams for analysis and to concentrate
identified compounds for further processing. Biopharmaceutical & Research
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.
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.
Biopharmaceutical & Research Business Segment. Major customer groups served
by this business segment include pharmaceutical/biotechnology and food and
beverage companies and government, university
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and private research and testing analytical laboratories. 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.
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, bottled juices and water.
Universities, governments and private and corporate research and testing
laboratories, environmental science laboratories and regulatory agencies
purchase a wide range of the Company's products. Typical applications include:
purification of proteins; cell culture, and cell structure studies and
interactions; concentration of biological molecules; fractionation of complex
molecular mixtures; and collection of microorganisms. The Company's water
purification products are used extensively by these organizations to prepare
high purity water for sensitive assays and the preparation of tissue culture
media.
Sales to the Biopharmaceutical & Research business segment accounted for
approximately 73% of Millipore's 1999 and 1998 consolidated sales, and 65% of
1997 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 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 27% of Millipore's 1999 and 1998 consolidated
sales as contrasted with 35% of 1997 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 to both business segments within the United
States primarily to end users through its own direct sales force and, in the
case of analytical products, to a limited extent through an independent
distributor. The Company sells its products to 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, 1999, the Company's marketing, sales and service forces consisted
of approximately 1,300 employees worldwide of which approximately 1,000 were
employed in the Biopharmaceutical & Research 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
3
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 process gas
measurement/control products as well as its 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). Research and development activities include the extension
and enhancement of existing separations technologies to respond to new
applications, the development of new membranes, and the upgrading of membrane
based systems to afford the user greater purification capabilities. Research
and development efforts also identify new separations applications to which
disposable separations devices would be responsive, and develop new
configurations into which membrane and ion exchange separations media can be
fabricated to efficiently respond to the applications identified. Instruments,
hardware, and accessories are also developed to incorporate membranes, modules
and devices into total separations systems. Research and development
activities related to the Company's IC process control products focuses upon
developments which will address the evolving needs of IC manufacturers and
development of enabling technologies which will anticipate those needs.
Introduction of new applications frequently requires considerable market
development prior to the generation of revenues. 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 1999, 1998 and 1997 were $52,140,000, $53,578,000 and $55,899,000,
respectively. For discussion of research and development write-offs relating
to the Tylan acquisition, see Management's Discussion and Analysis of
Financial Condition and Results of Operations--Acquisitions and Note C to the
Financial Statements, which discussions are hereby incorporated herein by
reference.
In addition, the Company has followed a practice of supplementing its
internal research and development efforts by 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 a number of patents and licenses and has other
patent applications pending both in the United States and abroad. While these
patents and licenses are viewed as valuable assets, Millipore's patent
position is not of material importance to its operations. Millipore also owns
a number of trademarks, the most significant being "Millipore."
Competition
The Company faces intense competition in all of its markets. The Company
believes that its principal competitors in the Biopharmaceutical & Research
business segment include Pall Corporation, Barnstead Thermolyne Corporation,
Sartorius GmbH, Qiagen NV, Amersham Pharmacia Biotech A.B. and United States
4
principal competitors in the Microelectronics business segment are Pall
Corporation, United States Filter Corporation, Aera and MKS Instruments.
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 1999, 1998 and 1997 has had no material
effect on the Company's capital expenditures, earnings or competitive
position. However, because regulatory standards under environmental laws and
regulations are becoming increasingly stringent, 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 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 in quantity from alternate sources of supply. Accordingly,
as a general matter, Millipore is not substantially dependent upon any single
supplier. However, see Management's Discussion and Analysis of Financial
Condition and Results of Operations--Business Outlook and Uncertainties, for a
discussion of the Company's need to develop alternate sources for a critical
raw material used to manufacture one of the Company's membranes, which
discussion is hereby incorporated herein by reference.
As of December 31, 1999, Millipore employed approximately 4,600 persons
worldwide, of whom approximately 2,050 were employed in the United States and
approximately 2,550 were employed overseas.
Executive Officers of Millipore
The following is a list, as of March 3, 2000, of the Executive Officers of
Millipore. All of the officers of Millipore Corporation listed below were
elected to serve until the first Directors Meeting following the
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2000 Annual Stockholders Meeting; Divisional officers were appointed to the
Corporate Executive Committee (the Company's senior policy setting management
body) effective January 10, 2000.
First Elected
--------------------------
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 54 Executive Vice President, and Chief 1997 2000
Operating Officer of Millipore
Corporation
Kathleen B. Allen 44 Vice President, Treasurer and Chief 2000 2000
Financial Officer of Millipore
Corporation
Michael P. Carroll 49 Vice President of Millipore 1992 1999
Corporation; General Manager, Gas
Division of Microelectronics Divisions
John E. Lary 53 Vice President of Millipore 1994 1994
Corporation
Joanna Nikka 48 Vice President of Millipore 1996 1996
Corporation
Jeffrey Rudin 48 Vice President and General Counsel of 1996 1996
Millipore Corporation; Clerk of the
Corporation
Hideo Takahashi 59 Vice President of Millipore 1996 1979
Corporation and President of Nihon
Millipore
(As President
of Nihon
Millipore)
Dominique F. Baly 50 Vice President, Analytical Divisions 2000 1994
Vinay Goel 51 Vice President, Corporate Technology 2000 1999
Operations
Nicholas Lambo 55 Vice President & General Manager, 2000 1993
BioProcess Division
Jean-Marc Pandraud 46 Vice President & General Manager, 2000 1999
Microelectronics Divisions
Susan Vogt 46 Vice President & General Manager, 2000 1999
Laboratory Water 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. and Matritech, Inc. Mr. Zadel is Chairman of the Board of Directors of
the Massachusetts High Technology Council (February 1999). He has also served
as the 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
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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 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. Carroll joined Millipore in 1986 as Vice President/Finance for the
Membrane Products Division following a ten-year career in the general practice
audit division of Coopers and Lybrand. In 1988, Mr. Carroll assumed the
position of Vice President of Information Systems (worldwide) and in December
of 1990, he became the Vice President of Finance for the Company's Waters
Chromatography Division. Mr. Carroll was elected Corporate Vice President,
Chief Financial Officer and Treasurer in February, 1992. In 1997 Mr. Carroll
was elected President of Millipore Asia Ltd. in which position he served until
1999 when he was appointed to his current position as General Manager, Gas
Division of the Microelectronics Divisions. Mr. Carroll remains a Vice
President of Millipore Corporation.
Mr. Lary was elected a Vice President of Millipore Corporation in November
1994, and is responsible for the worldwide operations of the Company. From May
of 1993 until his election as a Corporate Vice President, Mr. Lary served as
Senior Vice President and General Manager of the Americas Operation. For the
ten years prior to that time, he served as Senior Vice President of the
Membrane Operations Division of Millipore.
Ms. Nikka was elected 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. 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 in his current position as the Vice President of the
Analytical Divisions of Millipore since July of 1994.
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. In January
1999 Mr. Goel was appointed to his current position of Vice President,
Corporate Technology Operations.
Mr. Lambo joined Millipore in 1977 as Product Manager for its Biochemical
Product Line. Since June of 1993 Mr. Lambo has served as the Vice President &
General Manager of the BioProcess Division.
7
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 of the Millipore Analytical Divisions. In
July 1999 Ms. Vogt was appointed to her current position of Vice President &
General Manager, Laboratory Water Division.
Item 2. Properties.
Millipore operates 15 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 352,000 31 B&R; Micro.
manufacturing & warehouse
Danvers, MA Manufacturing and office 65,000 16 B&R.
Jaffrey, NH Manufacturing, warehouse & office 177,000 31 B&R; Micro.
Cidra, Puerto Rico Manufacturing, warehouse & office 125,000 29 B&R.
Molsheim, France Manufacturing, warehouse & office 148,000 20 B&R.
Cork, Ireland Manufacturing 98,000 20 B&R.
Yonezawa, Japan Manufacturing & warehouse 169,000 7 B&R; Micro.
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B&R = Biopharmaceutical & Research business segment
Micro. = Microelectronics Business Segment
Millipore owns a total of approximately 1.25 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 various
manufacturing, sales, warehouse, and administrative facilities throughout the
world. Such leases expire at different times through 2008. The aggregate area
of rented space is approximately 1,000,000 square feet and cost was
approximately $12,325,000 in 1999. 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.
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
8
well as a purchase option. This building is used primarily to serve the
Biopharmaceutical & Research 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. This lease was amended during 1997 to, among other
things, extend the initial term until February 2002 and to provide for
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, Danvers,
Massachusetts and Yonezawa, Japan currently operate at approximately 50%, 60%,
70% 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 is seeking an injunction against the alleged
infringement as well as damages. The Company believes that its ISOPAK product
does not infringe the patents in question. The Company intends to vigorously
defend this action. In any event, the outcome of this suit will not 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 3, 2000 there were
approximately 2,962 shareholders of record.
Dividends
Range of Stock Prices Declared
--------------------------- -----------
1999 1998 1999 1998
------------- ------------- ----- -----
High Low High Low (Per Share)
------ ------ ------ ------
First Quarter........................... $33.88 $23.75 $38.44 $30.00 $0.11 $0.10
Second Quarter.......................... $40.81 $23.44 $36.94 $26.82 $0.11 $0.11
Third Quarter........................... $42.13 $34.75 $27.50 $17.50 $0.11 $0.11
Fourth Quarter.......................... $40.00 $30.00 $29.88 $17.25 $0.11 $0.11
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.
9
Millipore Corporation--Five-year Summary of Operations
1999 1998 1997(2) 1996 1995
-------- -------- --------- -------- --------
(In thousands, except per share data)
Net sales............... $771,188 $699,307 $ 758,919 $618,735 $594,466
Cost of sales........... 358,169 364,467 342,237 249,443 243,849
-------- -------- --------- -------- --------
Gross profit.......... 413,019 334,840 416,682 369,292 350,617
Selling, general and
administrative
expenses............... 256,598 236,521 245,585 202,140 195,026
Research and development
expenses............... 52,140 53,578 55,899 38,429 36,515
Purchased research &
development expense.... -- -- 114,091 68,311(2) --
Settlement of
litigation............. -- 11,766(1) -- -- --
Restructuring items..... (5,200) 33,641(1) -- -- --
-------- -------- --------- -------- --------
Operating income
(loss)............... 109,481 (666) 1,107 60,412 119,076
Gain on sale of equity
securities............. -- 35,594(1) 8,330 5,329 --
Interest income......... 3,025 3,090 2,937 2,780 1,682
Interest expense........ (30,155) (29,474) (30,484) (11,498) (10,623)
-------- -------- --------- -------- --------
Income (loss) from
continuing operations
before income taxes.. 82,351 8,544 (18,110) 57,023 110,135
Provision (benefit) for
income taxes .......... 18,023 (1,320) 20,674 13,401 24,781
-------- -------- --------- -------- --------
Income (loss) from
continuing
operations........... 64,328 9,864 (38,784) 43,622 85,354
Loss on disposal of
discontinued
operations............. -- -- -- 2,036(3) --
-------- -------- --------- -------- --------
Net income (loss)....... $ 64,328 $ 9,864 $ (38,784) $ 41,586 $ 85,354
======== ======== ========= ======== ========
Basic net income (loss)
per share:
Income (loss) from
continuing
operations........... $ 1.44 $ 0.22 $ (0.89) $ 1.00 $ 1.90
Net income (loss) per
share................ $ 1.44 $ 0.22 $ (0.89) $ 0.95 $ 1.90
Diluted net income
(loss) per share:
Income (loss) from
continuing
operations........... $ 1.42 $ 0.22 $ (0.89) $ 0.98 $ 1.86
Net income (loss) per
share................ $ 1.42 $ 0.22 $ (0.89) $ 0.94 $ 1.86
Cash dividends declared
per share.............. $ 0.44 $ 0.43 $ 0.39 $ 0.35 $ 0.315
Weighted average shares
outstanding:
Basic................. 44,731 43,864 43,527 43,602 44,985
Diluted............... 45,274 44,289 43,527 44,457 45,887
Financial Data
Working capital....... $ 89,164 $ 6,071 $ 36,169 $ 90,708 $ 88,160
Total assets.......... 792,733 759,323 769,963 680,305 528,685
Long-term debt........ 313,017 299,110 286,844 224,359 105,272
Shareholders' equity.. $176,851 $133,791 $ 140,809 $209,676 $221,500
- --------
(1) See Note K on page F-16 below, Note B on page F-9 below, Note O on page
F-22 below 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.
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.
10
Results of Operations
The Company reported a profit per share of $1.42 and $0.22 for 1999 and
1998, respectively, compared to a loss of $0.89 per share for 1997. Excluding
unusual items, the Company would have reported diluted earnings per share of
$1.35, $0.60 and $1.65 for 1999, 1998 and 1997, 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,
Acquisitions 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,
----------------------------------------
1999 1998 1997
------------ ------------ -------------
(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 --
Purchase accounting adjustment..... -- -- 5.0
----------- ------------ -------------
Impact on gross margin............... -- (15.2) (5.0)
Operating expenses
Purchased research and development
expenses.......................... -- -- 114.1
Restructuring items................ (5.2) 33.6 --
Litigation settlements............. -- 11.8 --
----------- ------------ -------------
Income (loss) before income taxes.... 5.2 (60.6) (119.1)
Gain on sale of equity securities.... -- 35.6 8.3
----------- ------------ -------------
Impact on income (loss) before income
taxes............................... 5.2 (25.0) (110.8)
Tax impact of unusual items.......... 1.8 (8.4) 1.2
----------- ------------ -------------
Net income (loss) from unusual
items............................... $ 3.4 $ (16.6) $ (112.0)
=========== ============ =============
Net income (loss) per share from
unusual items....................... $ 0.07 $ (0.37) $ (2.54)
=========== ============ =============
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 1999 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 10 percent in 1999, compared
to a decrease of 8 percent in 1998. The net sales increase in 1999 as compared
to 1998 was primarily due to the beginning of a recovery in the semiconductor
industry coupled with continued growth in the biopharmaceutical business and
positive net currency effects. Growth in the Americas and Asia/Pacific regions
was heavily influenced by the improvements in the semiconductor industry. The
net sales decrease in 1998 compared to 1997 was primarily due to the downturn
in the semiconductor industry, economic difficulties in Asian markets and
negative currency effects.
11
During 1999 as compared to 1998 the Japanese yen strengthened against the
U.S. dollar by approximately 13 percent and the Euro weakened against the U.S.
dollar by approximately 5 percent. The positive effect from the stronger yen
more than offset the decline in the Euro resulting in an increase in reported
sales growth by 2 percentage points over the preceding year. In 1998 the
reported sales growth was negatively impacted by 3 percent as a result of the
Japanese yen which weakened against the U.S. dollar by approximately 8
percent, as did the European currencies, although to a lesser extent. As a
general matter, 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
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
Biopharmaceutical & Research 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 Sales Growth
in Local in U.S.
------------ ------------
Currencies Dollars
--------------- ----------------
1999 1998 1999 1998
------ ------ ------ ------
Biopharmaceutical & Research............... 8% 7% 9% 5%
Microelectronics........................... 9% (28)% 15% (32)%
------ ------ ------ ------
Consolidated............................. 8% (5)% 10% (8)%
------ ------ ------ ------
Americas................................... 10% (9)% 10% (9)%
Europe..................................... 2% 8% (2)% 7%
Asia/Pacific............................... 14% (13)% 29% (21)%
------ ------ ------ ------
Consolidated............................. 8% (5)% 10% (8)%
------ ------ ------ ------
Biopharmaceutical & Research sales, measured in local currencies, increased
8 percent in 1999 compared to 1998. The growth was broad-based across product
lines and geographies. Sales growth was strongest for the biotechnology and
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. However, the order
pattern for process systems is variable and large orders are received on a
periodic basis which may positively or negatively impact growth comparisons.
The growth for this segment was positively impacted in 1999 by the increase in
new drugs approved and in production.
Biopharmaceutical & Research sales, measured in local currencies, increased
7 percent in 1998 compared to 1997. The growth of the Biopharmaceutical &
Research segment in 1998 reflected the combination of increased demand for
consumable products and process equipment used in the production of sterile
drugs and analytical and water filtration devices used in research
laboratories. The growth in the Americas and Europe for this segment was
attributed to an increase in the number of new drugs approved and in
production. This segment was adversely affected in Asia by a decrease in
demand as a result of region-wide recessionary pressures.
Microelectronics segment sales growth measured in local currency increased 9
percent in 1999 compared to 1998. During 1999, the Company's sales growth has
been positively impacted by improvements in the semiconductor industry and
strengthening of the Asian economies. Recent industry results and published
reports indicate a reduction in excess capacity in the semiconductor industry
and increase in overall semiconductor demand which generally signals an upturn
in this market. Sales growth for this segment was positive in the Asia/Pacific
region and, to a lesser extent, the Americas region offset by a decline in
sales in Europe.
12
Microelectronics segment sales growth, measured in local currency, decreased
28 percent in 1998 as compared to 1997. The decrease in 1998 sales was
directly attributable to the continuation of the semiconductor industry slump,
which began in the middle of 1996. The reduction in equipment sales from the
Microelectronics segment was the result of a decrease in new plant
construction and upgrades. Sales of consumable purification devices also
declined although to a lesser extent, consistent with lower worldwide
semiconductor plant capacity utilization.
Gross Profit Margins
Gross profit margins in local currencies were 53.9 percent in 1999, 48.1
percent in 1998, and 53.3 percent in 1997. Excluding unusual items, gross
profit margins in 1998 were 50.2 percent and 54.0 percent in 1997. 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. The unusual item recorded in 1997 was the effect of an
inventory write-up to net realizable value of $5.0 million related to
acquisition accounting for Tylan General Inc. ("Tylan"). Gross profit margin
percentages were higher in 1999 than those in 1998 as a result of Company-wide
increased volume as well as savings realized from the restructuring
initiatives which began in the third quarter of 1998. Gross profit margin
percentages were lower in 1998 as compared to 1997, excluding the unusual
items recorded in both years, reflecting the impact of significantly reduced
volumes in the Company's manufacturing plants serving the Microelectronics
segment combined with duplicative manufacturing costs resulting from
concurrent operations at three existing plants located in California and Texas
and operations at the new manufacturing facility in Allen, Texas. The
redundant facilities were closed in September 1998 and their operations
consolidated into the Allen, Texas facility.
Operating Expenses
Selling, general and administrative ("S,G&A") expenses in local currencies
increased 7 percent in 1999 and decreased 1 percent in 1998. The increase in
1999 compared to 1998 was primarily attributable to $14.7 million of
incremental variable employee compensation earned in 1999 over amounts earned
in the preceding year. The decrease in 1998 compared to 1997 was due to cost
containment programs initiated as part of the restructuring activities and
reductions in employee compensation programs due to the financial performance
of the Company in that year. 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. As a
percentage of sales S,G&A expenses decreased slightly in 1999 as compared to
1998 and increased 1 percent in 1998 as compared to 1997.
Research and development expenses in local currencies decreased 3 percent in
1999 and 4 percent in 1998. The decreases in 1999 and 1998 were primarily 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.
Litigation settlements totaling $11.8 million were recorded in the first
quarter of 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 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.
13
Key initiatives of the restructuring program included:
1. Discontinue non-strategic product lines and rationalize 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. Consolidate certain manufacturing operations to eliminate duplicate
manufacturing processes. Identified manufacturing operations in Ireland and
the U.S. are in the process of being consolidated into existing facilities
within the Company, which will result in similar production activities
occurring at the same location. The consolidation of manufacturing operations
will be completed in 2000.
3. Realign European country organizational structure to focus on operating
business units and establish a regional transaction service center, resulting
in the consolidation of financial and administrative activities into a single
location. The Company completed the transition to the service center during
1999.
4. Reduce administrative and management infrastructure costs in Asia. These
cost reductions resulted in a lower overhead structure for administrative and
management infrastructure in Asia and were achieved through reduced facility
costs and administrative positions as offices in the region were consolidated
during 1998.
5. Renegotiate 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. Streamline 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.
During 1999, approximately $5.7 million of restructuring costs, consisting
primarily of severance, were paid. 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 is
attributed to higher levels of attrition than originally anticipated and to
impacted employees filling open positions as demand increased due to improved
sales volume. At December 31, 1999, approximately $7.6 million remains accrued
and will be substantially paid in 2000.
The restructuring initiatives combined with the 1998 consolidation of the
Company's Microelectronics plants resulted in the elimination of 620 positions
worldwide. Notification to employees was completed in the third quarter of
1998, however a small number of these employees will continue 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 2000.
14
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
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.
Gain on sale of equity securities in 1997 reflected the sale of a portion of
the Company's holdings in PerSeptive Biosystems common shares.
Net Interest Expense
Net interest expense in 1999 was $0.7 million more than 1998. This increase
is attributed 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. Net interest
expense in 1998 was $1.2 million less than 1997, primarily as a result of the
yen debt swap agreement entered into during December 1997.
Provision for Income Taxes
The effective income tax rate in 1999, 1998 and 1997 was 21.0 percent,
excluding the effect of the restructuring items recorded in 1999 and 1998 and
the non-tax deductible write-off of purchased research and development
associated with the Tylan acquisition in 1997.
Earnings Per Share
Earnings per share in 1999 were impacted by the reversal of the
restructuring charges. Earnings per share in 1998 were impacted by
restructuring charges and several unusual items and 1997 earnings per share
included write-offs of purchased research and development associated with the
Company's acquisition of Tylan. The impact of these items is reflected in the
Summary of Unusual Items on page 11 above.
Additionally, in 1999 as compared to 1998, earnings per share were
positively impacted by $0.02 per share as a result of the net currency impact
of the stronger Japanese yen offset by the weaker European currencies.
Earnings per share were adversely impacted in 1998 by the comparatively
stronger U.S. dollar, reducing earnings by $0.33 per share as compared to
1997.
Acquisitions
On January 22, 1997, the Company completed its cash tender offer for all of
the outstanding common shares of Tylan General, Inc. ("Tylan") for $16.00 per
share. Tylan became a wholly owned subsidiary of the Company on January 27,
1997. The aggregate purchase price was $133.0 million, plus the assumption of
Tylan's outstanding debt, net of cash, totaling $23.6 million. This
acquisition was accounted for as a purchase and resulted in a write-off for
in-process research and development ("IPR&D") of $114.1 million in the first
quarter of 1997.
15
Included in the IPR&D write-off were two major IPR&D projects acquired as a
part of Tylan. The first of these was a project to develop intracavity laser
spectroscopy technologies for application in semiconductor and related
industries. This project had an estimated fair value of $53.5 million, was
expected to require the investment of an additional $3.2 million and twenty-
two man years to complete (generally, the Company regards 2,000 hours as
comprising one "man year"). If proven to be technologically feasible, it was
expected that this project would yield a break-through enabling technology and
would become a major revenue source for the Company. The products expected to
result from this project were to be used in monitoring moisture and other
contaminant levels within vacuum deposition chambers for semiconductor
manufacturing. The valuable element of this project was that the expected
future products would be differentiated from Tylan's current products, would
offer enhanced sensitivity and the ability to monitor corrosive gas streams
and would also have applications for different target gases and sample
environments. While Tylan retained management direction over this project,
development was performed by a third party pursuant to a development and
license agreement.
Under this development and license agreement Tylan directed the research
with the objective of developing intracavity laser spectroscopy technologies
for application in semiconductor, flat panel, and fiber optic manufacturing
industries. According to this agreement, Tylan was to have the rights and
responsibilities to utilize the technology, were it to be successfully
developed, and to manufacture products for sale to the above industries. This
agreement provided for aggregate development fees of $8.0 million, payable
$0.3 million at signing and the balance in equal quarterly installments
thereafter over the five year term of the agreement. The agreement was
terminable at will by Tylan but required the payment of a termination fee
equal to six quarters of development fees ($2.4 million). Development fees
were charged against research and development expense.
This project was written off because, at the time of the Tylan acquisition,
it was very early in the development process and had not achieved
technological feasibility. There was also significant uncertainty as to the
precise configuration and market requirements of the expected products based
on the intracavity laser spectroscopy technology. In addition, there was
considerable uncertainty as to how long it would take to develop a
commercializable product from this technology. Further, technological
feasibility for potential alternative future uses of this technology had not
been achieved.
As a result of the prolonged downturn in the microelectronics industry, the
Company reprioritized research and development programs and further
development of this project was suspended in late 1997. This resulted in a
decision to terminate the third party development and license agreement in
December 1997 and the termination fee was charged to the acquisition reserve.
The Company retains certain post-termination residual rights to this
technology and is currently re-evaluating the future of this project.
The second significant IPR&D project acquired with Tylan which has been
written off was the development of a new more versatile, sensitive and easily
manufactured transducer based on thin film technology. This project had an
estimated fair value of $15.0 million, was expected to require the investment
of an additional $1.2 million and ten man years to complete and was
anticipated to generate significant revenues over the estimated life of the
resulting products. If proven technologically feasible, the valuable element
of this project was that it was expected to generate a transducer which was
superior to current transducers in that it could operate in both high and low
pressure environments with enhanced sensitivity and would be easier and less
expensive to manufacture.
This project was written off because, as of the date of the Tylan
acquisition, it was unknown whether or not the thin film transducer technology
could be manufactured successfully on a large scale. Significant issues
relating to manufacturability and whether product physical dimensions and
other product criteria could be achieved remained to be resolved. In addition,
there was uncertainty concerning customer acceptance of this product. Further,
the technology underlying this project had no alternative future uses not
included in its estimated fair value within the markets served by the Company.
This project successfully achieved technological feasibility and yielded one
commercializable product which was launched during 1999. However, the
objective of ease and cost effectiveness to manufacture continues to be a
challenge. Accordingly, the current revenue projection for the resulting
products is approximately one-third of
16
the original estimate. The estimated cost to complete this project is
currently expected to be less than one-half of the original estimate.
In addition, to the foregoing IPR&D projects, the Tylan acquisition included
eight other IPR&D projects with an aggregate value of $45.6 million, not
considered to be individually significant and which were expected to cost an
aggregate of $2.5 million and twenty-nine man years to complete. These
projects were written off because technological feasibility had not been
demonstrated as of the date of the acquisition of Tylan. As of December 31,
1999, three of these eight projects have been completed, two have been
cancelled, one is ongoing, one has had a major change in its scope and has
been integrated into a post acquisition project and one has been suspended. As
of December 31, 1999, an aggregate of $5.4 million had been invested on these
individually insignificant Tylan IPR&D projects and it was estimated that an
additional $0.2 million would be required to achieve technological feasibility
for the one ongoing project. The reasons for the aggregate increase in
investment in these insignificant IPR&D projects included the change in the
direction of three of these IPR&D projects to adapt to the evolving needs of
the target customer base, the unanticipated technical complexity in adapting
promising miniaturization technologies from other industries to Tylan product
applications and the expansion of the scope of certain of these projects since
the date of the Tylan 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 Exchange
The Company derives approximately 60 percent 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 30% of the
Company's sales are derived from Europe where the U.S. dollar strengthened
against the Euro during 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 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 and 1997, gains, net of
premium costs, of $2.2 million and $4.4 million,
17
respectively were realized from these contracts and were recorded in cost of
sales. At December 31, 1999, the Company had open option contracts to sell yen
aggregating $27.1 million. All open options expire within 12 months. Premiums
to purchase foreign currency option contracts are amortized over the life of
the contract.
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.
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 $105.1 million in 1999, $51.3 million
in 1998 and $51.8 million in 1997. Reported cash flow from operations was
reduced by $9.9 million in 1999, $28.1 million in 1998 and $23.3 million in
1997 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 $115.0 million in 1999, $79.4 million in 1998 and $75.1 million in 1997.
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 revenues
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 geographies with
traditionally longer payment cycles. This has resulted in days sales
outstanding in accounts receivable increasing from 77 days in 1998 to 82 days
in 1999. The Company continues to aggressively manage its collection
activities and does not anticipate increased collections risk.
The improvement in 1998 cash flow from operations over 1997, excluding the
restructuring and acquisition related expenditures, is the result of a
decrease in working capital offset by a significant decline in operating
income before restructuring charges and unusual items. The favorable working
capital comparisons were a combination of a decrease in accounts receivable
balances, lower inventory levels and a reduction in other current
18
assets. The improvement in receivables reflects the impact of the lower sales
volume and improved collection experience. The improvement in inventory
utilization was attributable to asset management initiatives launched in 1998
and reserve actions taken as part of the 1998 restructuring program. The
reduction in other current assets reflects the sale of equity securities in
1998. The decline in 1998 operating income resulted from the downturn in the
semiconductor industry, the financial difficulties in Asia and the strength of
the U.S. dollar.
During 2000 the Company expects to spend approximately $9.0 million in cash
for costs accrued in connection with the restructuring program and for costs
to complete the integration of acquisitions acquired in 1996 and 1997. This
will be funded by cash flow from operating activities.
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 Biopharmaceutical 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 expects capital expenditures for
2000 to be in the range of $50.0 to $55.0 million. Depreciation expense in
2000 is expected to be slightly higher than in 1999 as a result of the
increased capital expenditures in 2000. The Company has no significant
commitments for capital expenditures at December 31, 1999. 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 exceeded 1997 expenditures by $18.7 million primarily
due to $10.0 million spent for the expansion of the Biopharmaceutical 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.
In 1997, cash generated from operating activities, along with increased
borrowings, was used for the acquisition of Tylan, the purchase of certain
other assets and technology and capital expenditures. During 1997 the Company
continued to invest in capacity expansions and the upgrade of manufacturing
facilities and in information technology systems and equipment.
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 1999 the Company
reduced its borrowings under the Credit Agreement by $55.0 million so that, at
December 31, 1999, the Company had additional borrowing capacity thereunder of
$135 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 $10.0 million of other short-term
borrowing capacity available of which $0.7 million was outstanding at December
31, 1999.
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 to provide cash collateralization
under one of the Company's yen denominated debt swap
19
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, 1999, this cash collateralization amount was $18.6
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 1999. The Company paid
dividends of $19.6 million in 1999.
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. 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.
Year 2000
The Company has been aware of the "Year 2000" issue that had the potential
to affect products and systems that were not designed to properly handle the
transition between the twentieth and twenty-first centuries. The Company
recognized the need to ensure that its business operations would not be
adversely impacted by the Year 2000, and it authorized an internal team to
assess the Company's Year 2000 readiness, to determine the steps necessary to
achieve readiness, and to facilitate the necessary readiness preparations.
Through December 31, 1999, the Company incurred approximately $1.5 million
in its Year 2000 assessment and remediation program, and it does not expect to
incur any further costs in this program.
Prior to the end of 1999, the Company completed its readiness assessment and
its implementation of all steps that it determined necessary to make the
Company ready for the Year 2000, including its contingency plans for handling
anticipated readiness risks. The Company's transition from 1999 to 2000
occurred without any business disruption. With the transition into the Year
2000 complete, the Year 2000 issue has not had, and the Company believes it
will not have, a material impact on the Company's business, financial
conditions or results of operations.
Legal Proceedings
The $11.8 million settlement of litigation charge taken in 1998 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.
20
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.
Business Outlook and Uncertainties
The following statements are based on current expectations. These statements
are forward looking and actual results may differ materially.
Sales: The semiconductor industry in which the Microelectronics business
segment participates is highly cyclical. The downturn, which began in the
middle of 1996, continued into 1999. This business segment reported four
sequential quarters of increased sales during 1999. Additionally, recent
industry results and published reports indicate that an industry wide growth
cycle has begun. While some published reports suggest that this growth cycle
could last for up to three years, there can be no assurance as to the extent
and duration of this growth cycle or as to its positive impact on Millipore.
The Company does anticipate, however, that these industry wide improvements
will result in stronger sales growth in 2000.
The Biopharmaceutical & Research 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 of
drugs at various stages in the approval process has increased over the past
two years. The remaining driver of this segment is 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.
21
During 1999, the Company has seen reduced sales growth in the European
region, an area which impacts the Biopharmaceutical & Research segment more
than the Microelectronics segment. The economic pressures in Europe combined
with the U.S. dollar strengthening against most European currencies may
adversely affect the Biopharmaceutical & Research segment in 2000. Both of the
Company's business segments were adversely impacted by the financial
difficulties in the Asian economies, which began in late 1997 and continued
through 1998. During 1999, this region has shown some recovery, although the
economic pressures in Europe have offset it. The continuation of these
conditions in Europe would moderate the growth rate of both segments.
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 positive impact to both sales and earnings in 1999 as
compared to 1998. This was the composite result of a stronger yen in 1999
mostly offset by the weak Euro. Since the end of 1999, the dollar has begun to
strengthen against the yen and the Euro. Therefore, if rates of exchange
remain at the March 3, 2000 level, there could be a slight negative impact on
sales for the first quarter and full year 2000 as compared to 1999.
Gross Margins: The Company expects gross margin percentages in 2000 to
improve as compared with those of 1999. Margins will benefit from the impact
of increased volume in the Company's manufacturing plants to support
anticipated sales growth. Somewhat offsetting the increased volume impact will
be margin reductions due to sales growth for process systems which
traditionally have lower gross margins. To the extent that foreign currency
exchange rates relative to the U.S. dollar remain at March 3, 2000 levels,
first quarter 2000 and full year margins will not 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 Biopharmaceutical & Research business segment advised the Company that it
would discontinue manufacture of that raw material during the second half of
2000. This raw material is also used as a critical component in the production
of other widely used industrial products. Millipore products which use this
membrane accounted for approximately $100 million in 1999 sales. The Company
does not currently anticipate difficulty in establishing satisfactory
transitional supply arrangements or in establishing alternative sources of
supply for this raw material. However, while the Company is diligently
pursuing transitional and alternative supply arrangements, there can be no
assurance that it will be successful.
Operating Expenses: The Company expects that operating expenses in local
currencies, as a percentage of sales, in 2000 may somewhat improve as compared
to the percentage achieved in the previous year.
Interest Expense: The Company expects net interest expense in 2000 will be
slightly lower than 1999 as a result of lower average debt.
Provision for Income Taxes: The effective tax rate in 2000 is projected to
be in the range of 21 percent, consistent with the effective rate for 1999,
excluding the effect of restructuring items. The tax rate estimate is based on
the Company's current expectations for 2000 income and current tax law and,
therefore is subject to change. In addition, since the Company's revenues are
expected to reflect a higher proportion of income generated by its
Microelectronics business segment, the products of which are primarily
manufactured in the United States, it is anticipated that a trend increasing
the effective income tax rate will develop during subsequent years as less
revenue is derived from manufacturing sites located in foreign lower tax rate
jurisdictions. Further, in the event that the Company's cash needs
significantly increase above those currently projected and outstrip 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 chose to meet this need by the repatriation of cash indefinitely re-
invested in foreign operations.
Capital Spending: The Company expects to spend between $50.0 to $55.0
million for fixed asset additions in 2000. The Company does not believe it
needs to significantly expand or add manufacturing capacity in 2000 to handle
its anticipated 2000 sales growth. 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 2000 depreciation expense will be higher than reported in 1999.
22
Capital Resources and Liquidity: The Company expects that the ongoing cash
collateralization requirement under the yen denominated debt swap agreement
discussed under Capital Resources and Liquidity above will likely require the
renegotiation of a debt covenant under the Credit Agreement if the value of
the Company's swap position deteriorates below that at December 31, 1999.
Further, if the deterioration in the value of that position were substantial
then the resulting increase in the cash deposited as collateral under that
swap agreement would result in an adverse impact on short-term liquidity.
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, 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, including uncertainties in the
microelectronics manufacturing market in particular; potential environmental
liabilities; the inability to utilize technology in current or planned
products due to overriding rights by third parties, 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.
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, 1999,
1998 and 1997.......................................................... F-2
Consolidated Balance Sheets for the years ended December 31, 1999 and
1998................................................................... F-3
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1999, 1998 and 1997....................................... F-4
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997.................................................... F-5
Notes to Consolidated Financial Statements.............................. F-6
Report of Independent Accountants....................................... F-25
Quarterly Results (Unaudited)........................................... F-26
All of the foregoing Financial Statements are hereby incorporated by
reference.
23
Item 9. Disagreements on Accounting and Financial Disclosure.
This item is not applicable.
PART III
Item 10. Directors and Executive Officers of Millipore.
The information called for by this item with respect to registrant's
directors and compliance with Section 16(a) of the Securities Exchange Act of
1934 as amended is set forth under the caption "Management and Election of
Directors--Nominees for Election as Directors" in Millipore's definitive Proxy
Statement for Millipore's Annual Meeting of Stockholders to be held on April
27, 2000, and to be filed with the Securities and Exchange Commission on or
about March 17, 2000, which information is hereby incorporated herein by
reference.
Information called for by this item with respect to registrant's executive
officers is set forth under "Executive Officers of Millipore" in Item 1 of
this report.
Item 11. Executive Compensation.
The information called for by this item is set forth under the caption
"Management and Election of Directors--Executive Compensation" in Millipore's
definitive Proxy Statement for Millipore's Annual Meeting of Stockholders to
be held on April 27, 2000, and to be filed with the Securities and Exchange
Commission on or about March 17, 2000, which information is hereby
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information called for by this item is set forth under the caption
"Ownership of Millipore Common Stock" in Millipore's definitive Proxy
Statement for Millipore's Annual Meeting of Stockholders to be held April 27,
2000, and to be filed with the Securities and Exchange Commission on or about
March 17, 2000, which information is hereby incorporated herein by reference.
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 "Management and Election of Directors--Nominees for Election as
Directors" in Millipore's definitive Proxy Statement for Millipore's Annual
Meeting of Stockholders to be held on April 27, 2000, and to be filed with the
Securities and Exchange Commission on or about March 17, 2000, 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 (See
index on page F-1):
Consolidated Statements of Income for the years ended December 31,
1999, 1998 and 1997
Consolidated Balance Sheets for the years ended December 31, 1999 and
1998
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997
Notes to Consolidated Financial Statements
Report of Independent Accountants
Quarterly Results (Unaudited)
24
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 ended
amended May 6, 1996 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 Form S-4
relating to the issuance of (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 Form S-3
relating to the issuance of Debt (No. 333-23025)
Securities in Series
(10) Shareholder Rights Agreement dated as Form 8-K Report for April, 1998
of April 15, 1988, as amended and [Commission File No. 0-1052]
restated April 16, 1998 between
Millipore and The First National Bank
of Boston
Distribution Agreement, dated as of Form 10-K Report for the year ended
July 1, 1996, by and among the Company December 31, 1996 [Commission File
and Fisher Scientific Company No. 0-1052]
Revolving Credit Agreement, dated as Form 10-K Report for the year ended
of January 22, 1997, among Millipore December 31, 1996 [Commission File
Corporation and The First National No. 0-1052]
Bank of Boston, ABN AMRO Bank N.V. and
certain other lending institutions
Long Term Restricted Stock (Incentive) Form 10-K Report for the year ended
Plan for Senior Management* December 31, 1984 [Commission File
No. 0-1052]
1995 Combined Stock Option Plan, as Form 10-K Report for the year ended
amended* December 31, 1997 [Commission File
No. 0-1052]
1985 Combined Stock Option Plan* Form 10-K Report for the year ended
December 31, 1985 [Commission File
No. 0-1052]
- --------
*A "management contract or compensatory plan"
25
Reg. S-K
Item 601(b) Referenced Document on
Reference Document Incorporated file with the Commission
----------- --------------------- ------------------------
(10) [Cont'd] Supplemental Savings and Retirement Form 10-K Report for the year ended
Plan for Key Salaried Employees of December 31, 1984 [Commission File
Millipore Corporation* No. 0-1052]
1995 Management Incentive Plan* Form 10-K Report for the year ended
December 31, 1994 [Commission File
No. 0-1052]
Second Amendment, effective as of Form 10-K Report for the year ended
September 30, 1998, to Revolving December 31, 1998 [Commission File
Credit Agreement, dated as of January No. 0-1052]
22, 1997, among Millipore Corporation
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 year ended
as amended through November 2, 1998, December 31, 1998 [Commission File
between Millipore Corporation and No. 0-1052]
Metropolitan Life Insurance Company
Form of letter agreement with Form 10-K Report for the year ended
directors relating to the deferral of December 31, 1998 [Commission File
directors fees and conversion into No. 0-1052]
phantom stock units*
1989 Stock Option Plan for Non- Form 10-K Report for the year ended
Employee Directors* December 31, 1998 [Commission File
No. 0-1052]
Commercial Lease Agreement between EBP Form 10-K Report for the year ended
3, Ltd. and Millipore Corporation with December 31, 1998 [Commission File
respect to Premises located in Allen, No. 0-1052]
TX
ISDA Master Agreement, dated January Form 10-K/A Report for the year ended
27, 1994, as amended, with Morgan December 31, 1998 [Commission File
Guaranty Trust Company of New York No. 0-1052]
(11) Computation of Per Share Earnings The computation can be clearly
determined from the material set forth
in Note D to the Financial Statements
contained on page F-12.
26
B. The following Exhibits are filed herewith:
Reg. S-K
Item 601(b)
Reference Documents Filed Herewith
----------- ------------------------
(10) Standard Executive Termination Agreement, as amended*
Millipore Corporation 1999 Stock Incentive Plan*
Millipore Corporation 1995 Employees' Stock Purchase Plan, as
amended*
Millipore Corporation 1999 Stock Option Plan for Non-Employee
Directors*
Employment and Relocation Agreement, dated November 10, 1999,
between Millipore Corporation and Michael P. Carroll*
(21) Subsidiaries of Millipore
(23) Consent of Independent Accountants relating to the incorporation
of their report on the Consolidated Financial Statements into
Company's Securities Act Registration Nos. 2-72124, 2-85698, 2-
91432, 2-97280, 33-37319, 33-37323, 33-11-790, 33-59005, 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
(27) Financial Data Schedule
- --------
*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, 1999.
(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.
27
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 10, 2000
/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
--------- ----- ----
C. William Zadel* Chairman, President, Chief March 10, 2000
______________________________________ Executive Officer, and
C. William Zadel Director
/s/ Kathleen B. Allen Vice President, Treasurer March 10, 2000
______________________________________ and Chief Financial
Kathleen B. Allen Officer (Chief Accounting
Officer)
Director March , 2000
______________________________________
Daniel Bellus
Robert C. Bishop* Director March 10, 2000
______________________________________
Robert C. Bishop
Robert E. Caldwell* Director March 10, 2000
______________________________________
Robert E. Caldwell
Elaine L. Chao* Director March 10, 2000
______________________________________
Elaine L. Chao
Maureen A. Hendricks* Director March 10, 2000
______________________________________
Maureen A. Hendricks
Mark Hoffman* Director March 10, 2000
______________________________________
Mark Hoffman
Thomas O. Pyle* Director March 10, 2000
______________________________________
Thomas O. Pyle
Richard J. Lane* Director March 10, 2000
______________________________________
Richard J. Lane
John F. Reno* Director March 10, 2000
______________________________________
John F. Reno
/s/ Jeffrey Rudin
*By: _________________________________
Jeffrey Rudin, Attorney-in-Fact
28
MILLIPORE CORPORATION
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Statements of Income for the years ended December 31, 1999,
1998 and 1997........................................................... F-2
Consolidated Balance Sheets for the years ended December 31, 1999 and
1998.................................................................... F-3
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1999, 1998 and 1997........................................ F-4
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997..................................................... F-5
Notes to Consolidated Financial Statements............................... F-6
Report of Independent Accountants........................................ F-25
Quarterly Results (Unaudited)............................................ F-26
F-1
MILLIPORE CORPORATION
CONSOLIDATED STATEMENTS