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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2000 or
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-1052
MILLIPORE CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2170233
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
80 Ashby Road, Bedford, MA 01730
(Address of principal executive (Zip Code)
offices)
(781) 533-6000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Exchange on
Title of Class Which Registered
-------------- -----------------------------
Common Stock, $1.00 par value New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of Form 10-K or any amendment
to this Form 10-K. [_]
As of March 2, 2001, the aggregate market value of the registrant's voting
stock held by non-affiliates of the registrant was approximately
$2,129,984,024 based on the closing price on that date on the New York Stock
Exchange.
As of March 2, 2001, 46,648,127 shares of the registrant's Common Stock were
outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Document Incorporated into Form 10-K
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Definitive Proxy Statement, dated March 16, 2001 Part III
PART I
Item 1. Business.
The Company
Millipore Corporation was incorporated under the laws of Massachusetts on
May 3, 1954. Millipore is a market leader in the field of separations
technology and develops, manufactures and sells products which are used
primarily for the analysis, identification and purification of liquids and
gases. In addition, Millipore sells products to monitor and control critical
aspects of the manufacturing process for integrated circuits (semiconductors).
Millipore's separations products are based on a variety of membrane and other
technologies that effect separations through physical and chemical methods.
These technologies are applied to life science research applications,
including genomics, proteomics and drug discovery, as well as to general
analytical laboratory applications including laboratory water purification and
microbiological testing. On the process scale, these technologies are used in
the biotechnology, pharmaceutical and food and beverage industries for
separation, purification and sterilization applications. Millipore's
technologies are also applied to the purification and control of process
liquids and gases for integrated circuit ("IC") manufacturing operations.
Millipore's IC process control products use electro-mechanical, pressure
differential and related technologies to permit IC manufacturers to monitor
and control the flow and condition of process gases used in the IC fabrication
process. On the process scale, these technologies are used in the
biotechnology, pharmaceutical and food and beverage industries for separation,
purification and sterilization applications. Millipore's technologies are also
applied to the purification and control of process liquids and gases for
integrated circuit ("IC") manufacturing operations. Millipore's IC process
control products use electro-mechanical, pressure differential and related
technologies to permit IC manufacturers to monitor and control the flow and
condition of process gases used in the IC fabrication process.
Millipore is an integrated multinational manufacturer of its products.
Millipore's role as a market leader has been recognized by independent surveys
of filtration markets. Unless the context otherwise requires, the terms
"Millipore" or the "Company" mean Millipore Corporation and its subsidiaries.
On October 3, 2000, Millipore announced plans to separate into two distinct
companies by making its Microelectronics business segment an independent,
publicly traded company. The Company is planning an initial public offering
for less than 20% of the shares of the new Microelectronics company and
subsequently intends to spin-off the remaining shares to Millipore
shareholders through a dividend distribution within approximately three to six
months following the initial public offering. The transaction is expected to
be tax-free to the Company and its shareholders and is contingent upon
receiving certain tax and regulatory approvals, accommodation of certain debt
covenants as well as market conditions.
Information About Operating Segments
Millipore operates in two business segments: Bioscience (previously referred
to as Biopharmaceutical & Research) and Microelectronics. Millipore has
traditionally organized its business and management structures around the
markets and customers which it serves. The Bioscience segment includes
products and services sold to pharmaceutical, biotechnology, and food and
beverage companies, life sciences companies engaged in genomics, proteomics
and drug discovery, and university, government and private laboratories and
research institutes. The Microelectronics segment includes products and
services sold to semiconductor fabrication companies as well as OEM and
material suppliers to those companies. While there is some overlap in the
products sold to each business segment, the economic environments in which
these two segments operate are distinct. The Bioscience business segment is
characterized by customer needs for reliability and consistency of
standardized products used in validated production processes and for assured
continuity and comparability of analytical results; this segment has
demonstrated relatively stable patterns of revenue growth and profitability.
While technical innovation is important to the Bioscience business segment,
the adoption of new technologies and products often requires that a lengthy
validation process be completed prior to adoption. On the other hand, the
Microelectronics business segment is characterized by rapid technological
change and economic cycles with dramatic shifts in revenue growth and decline
with corresponding impacts on profitability.
2
During 2000 approximately 63% of Millipore's net sales were made to
customers in the Bioscience segment and approximately 37% to customers in the
Microelectronics segment. In addition, approximately 60% of Millipore's net
sales were made to customers outside the Americas. Industry and geographic
segment information is discussed in Note 16 to the Millipore Corporation
Consolidated Financial Statements (the "Financial Statements") included in
Item 8 below, which Note is hereby incorporated herein by reference.
Products, Technologies and Applications
Millipore sells approximately 25,000 products which are listed in its
catalogs and are sold as standard items, systems or devices. For special
applications, the Company assembles custom products, usually based upon
standard modules and components. In certain instances, the Company also
designs and engineers process filtration systems and process chromatography
systems to meet specific needs of the customer. The Company's products also
include, in some cases, proprietary software designed to operate and/or
integrate certain of its other products or systems.
Bioscience Business Segment. The products sold to customers in the
Bioscience business segment include disc filters, OEM membranes, filter
devices and ancillary equipment and supplies, filter-based test kits,
laboratory water purification systems, cartridge filters and housings of
various sizes and configurations, process liquid chromatography media and
systems and process filtration systems and filter- and chromatography media-
based sample preparation devices.
The principal separation technologies utilized by products sold to
Bioscience segment customers are based on membrane filters and on certain
chemistries and resins as well as liquid chromatography. Membranes are used to
filter either the wanted or the unwanted particulate or bacterial, molecular
or viral entities from fluids. Some of the Company's newer membrane materials
also use affinity, ion-exchange or electrical charge mechanisms to effect the
desired separation. Membranes are incorporated into both microfiltration and
ultrafiltration devices, cartridges and modules of different configurations to
address a variety of customer separation needs. Liquid chromatography media is
used in process chromatography systems to remove contaminants at the molecular
level from biopharmaceutical products. The Company's laboratory water
purification products combine membrane, resin and other separations
technologies to provide ultrapure water for critical applications.
Millipore has also introduced novel technologies and products to meet the
needs of the burgeoning life sciences research industry, including sample
preparation products using both membranes and chromatographic separation
techniques. In addition, products based on the Company's proprietary size
exclusion membrane technology have been introduced to improve speed,
automation and cost-effectiveness of a number of DNA-based separations for
sequencing, plasmid prep, PCR, diagnostic and microarray applications. These
novel technologies are also being used for new applications in the drug
discovery markets for the screening of potential drug compounds and for sample
preparation in the rapidly emerging field of proteomics.
Customers use the Company's products in the Bioscience segment to gain
knowledge about a molecule, compound or microorganism by detecting,
identifying and quantifying the relevant components of a fluid sample. In
addition Millipore products are used for the purification of small and large
volumes of critical fluids. The Company's products are also used in
biopharmaceutical manufacturing and research operations to isolate and
purify/separate specific components of fluid streams for analysis and to
concentrate identified compounds for further processing. Bioscience segment
customers use the Company's laboratory water purification products to provide
ultrapure water for critical laboratory analysis and for clinical testing.
Microelectronics Business Segment. The products sold to customers in the
Microelectronics business segment include polymeric cartridge filters and
housings of various sizes, materials and configurations, metal filters,
precision liquid dispense filtration pumps, resin based gas purifiers and gas
monitors as well as mass flow controllers and pressure and vacuum control
products.
3
Membrane products sold to customers in the Microelectronics business segment
are based on essentially the same membrane technologies described above but
with membranes and housings made from distinct polymers as required by the
nature of the liquids being purified. Gas purification and monitoring products
rely on resin based chemistries which react with process gases to either
remove contaminants or to monitor the purity of the process gas. Gas
purification products also include metal filters which operate as both screen
and depth filters to exclude contaminants from process gas streams. In
addition, the Company's IC process control products use electro-mechanical,
pressure differential and thermal-dynamic technologies to create pressurized
or vacuum environments to precisely measure and control the flow of IC process
gases.
The Company's separations products are used by Microelectronics customers in
manufacturing operations to remove contaminants in a process liquid stream and
to purify and precisely dispense process liquids during critical IC
fabrication operations. The Company's products are also used in process gas
applications to precisely monitor and control the purity of and rate at which
process gases are introduced into the IC process chamber, the conditions in
the chamber during processing and the rate at which the gas is evacuated from
the IC process chamber.
Customers and Markets
Within each customer group served by Millipore, the Company focuses its
sales efforts upon those segments where customers have specific requirements
which can be satisfied by the Company's products.
Bioscience Business Segment. Major customer groups served by this business
segment include pharmaceutical/biotechnology and food and beverage companies,
as well as life sciences companies engaged in genomics, proteomics and drug
discovery, and government, university and private laboratories and research
institutes. The Company's products are used by the
pharmaceutical/biotechnology industry in sterilization, including virus
reduction, and sterility testing of products such as antibiotics, vaccines,
vitamins and protein solutions; concentration and fractionation of biological
molecules such as vaccines and blood protein products; cell harvesting;
isolation and purification of compounds from complex mixtures and the
purification of water for laboratory use. The Company's membrane and
chromatography products also play an important role in the development of new
drugs by offering customers a continuum of products capable of being scaled-up
to match customer needs at different stages during the development process
from laboratory research through full scale drug production. In addition,
Millipore has developed and is developing products for biopharmaceutical
applications in order to meet the purification requirements of the
biotechnology industry. The Company also sells its analytical products, filter
cartridges and laboratory water purification systems to chemical manufacturers
and processors.
Universities, governments and private and corporate research and testing
laboratories, life science companies, environmental science laboratories and
regulatory agencies purchase a wide range of the Company's products. Typical
applications include: sample preparation; purification of proteins; cell
culture, and cell structure studies and interactions; concentration of
biological molecules; fractionation of complex molecular mixtures; and
collection of microorganisms. The Company's water purification products are
used extensively by these organizations to prepare high purity water for
sensitive assays and the preparation of tissue culture media.
The food and beverage industry uses the Company's products for quality
control and process applications principally to monitor for microbiological
contamination and to prevent spoilage by removal of bacteria and yeast from
products such as wine, beer and bottled juices and water.
Sales to the Bioscience business segment accounted for approximately 63% of
Millipore's 2000 consolidated sales and 73% of 1999 and 1998 consolidated
sales.
Microelectronics Business Segment. Major customer groups served by this
business segment include IC manufacturers and OEM manufacturers that sell a
variety of equipment used in the manufacture of ICs to IC
4
manufacturers. IC manufacturers use the Company's products to purify (by
removing particles and unwanted contaminating molecules), deliver, control and
monitor the liquids and gases used in the manufacturing processes of
semiconductors and other microelectronics components. The Company's mass flow
and pressure control products and precision liquid dispense filtration
products are sold to OEM capital equipment suppliers, to semiconductor
manufacturers as well as directly to manufacturers of ICs. Sales to the
Microelectronics business segment accounted for approximately 37% of
Millipore's 2000 consolidated sales and 27% of 1999 and 1998 consolidated
sales. As noted above, this business segment has experienced historic
volatility, and the effect of such volatility has, in the past, affected
Millipore's sales growth.
While no single customer is material to the Company taken as a whole, the
Microelectronics business segment does rely on a relatively narrow group of
customers, some of whom purchase significant quantities of the Company's
products.
Sales and Marketing
The Company sells its products in both business segments within the United
States primarily to end users through its own direct sales force and web site
and, in the case of analytical and laboratory water products, to a limited
extent through an independent distributor. The Company sells its products in
both business segments in international markets through the sales forces of
its subsidiaries and branches located in more than 30 major industrialized and
developing countries as well as through independent distributors in other
parts of the world. As of December 31, 2000, the Company's marketing, sales
and service forces consisted of approximately 1,400 employees worldwide of
which approximately 1,100 were employed in the Bioscience business segment and
approximately 300 were employed in the Microelectronics business segment.
The Company's marketing efforts focus on application development for
existing products and on new and differentiated products for other existing,
newly identified and proposed customer uses. The Company seeks to educate
customers as to the variety of analytical, purification and process control
problems which may be addressed by its products and to adapt its products and
technologies to separations and process control problems identified by its
customers.
The Company believes that its technical support services are important to
its marketing efforts. These services include assisting in defining the
customer's needs, evaluating alternative solutions, designing a specific
system to perform the desired separation, training users, and assisting
customers in compliance with relevant government regulations. In addition, the
Company maintains a network of service centers located in the United States
and in key international markets to support its Microelectronics process gas
measurement/control products as well as its Bioscience laboratory water
products.
Research and Development
In its role as a pioneer of membrane separations, Millipore has
traditionally placed heavy emphasis on research and development. This emphasis
has permitted Millipore to be the first company to introduce a number of major
new enabling separations membranes and membrane devices examples include:
nitrocellulose microfiltration membrane in 1954, compact high purity
laboratory water systems in 1972, membrane based syringe filter devices in
1973, membrane based filters for intravenous drug therapy in 1975, tangential
flow filtration cassette devices in 1975, polyvinylidene fluoride membrane in
1978, continuous electro-deionization water purification systems in 1988,
composite ultrafiltration membranes in 1989, melt-cast PFA membranes in 1990,
composite microfiltration membranes for the removal of viruses from solution
in 1991, ultra-high weight polythylene membrane in 1993, high flow high
efficiency metal membrane for gas filtration in 1996 and non-dewetting PTFE
membrane in 1997. Over the last five years, through acquisitions, licenses and
research and development investments, Millipore has expanded and diversified
its technology base very significantly. For semiconductor process
applications, a unique two-stage photochemical dispense system that integrates
filtration with dispense and connectology was launched in 1997 and the first
truly digital mass flow controller was
5
introduced in 1999. Millipore has also focused strongly on life sciences
research applications. The rapidly changing life sciences markets require
novel technologies to meet the needs of high throughput sample analysis. This
has led to products utilizing both membranes and chromatographic separation
techniques, including an entire platform based on chromatographic media
embedded in membrane structures which was introduced for the proteomics
market. For biopharmaceutical manufacturing applications, process scale
integrated systems have been introduced that include membrane devices and
chromatography hardware, software and media. Millipore has very rapidly become
a leader in chromatography hardware, and efforts are underway to develop a
differentiated line of chromatography media products for the rapidly growing
biotechnology market. Research and development activities include the
extension and enhancement of existing separations technologies to respond to
new applications, the development of new membranes and chromatography media,
and the upgrading of membrane- and media-based systems to afford the user
greater purification capabilities.
Millipore performs most of its own research and development and does not
provide material amounts of research services for others. Millipore's
aggregate research and development expenses in 2000, 1999 and 1998 were $62.7
million, $52.1 million and $53.6 million, respectively.
The Company has followed a practice of supplementing its internal research
and development efforts by acquiring or licensing newly developed technology
from unaffiliated third parties and/or acquiring distribution rights with
respect thereto, when it believes it is in its long term interests to do so.
Millipore has been granted and has licensed rights under a number of patents
and has other patent applications pending both in the United States and
abroad. While these patents and licenses are viewed as valuable assets,
Millipore's patent position is not of material importance to its operations.
Millipore also owns a number of trademarks, the most significant being
"Millipore."
Competition
The Company faces intense competition in all of its markets. The Company
believes that its principal competitors in the Bioscience business segment
include Pall Corporation, Barnstead Thermolyne Corporation, Sartorius GmbH,
Qiagen NV, Amersham Ph A.B. and United States Filter Corporation. The
principal competitors in the Microelectronics business segment are Pall
Corporation, United States Filter Corporation, Aera, MKS Instruments, Nagano,
STEC, VAT, Iwaki and IDI-Cybor. Certain of the Company's competitors are
larger and have greater resources than the Company. However, the Company
believes that, within the markets it serves, it offers a broader line of
products, making use of a wider range of separations and IC process control
technologies and addressing a broader range of applications than any single
competitor.
While price is an important factor, the Company competes primarily on the
basis of technical expertise, product quality and responsiveness to customer
needs, including service and technical support.
Environmental Matters
The Company is subject to numerous federal, state and foreign laws and
regulations that impose strict requirements for the control and abatement of
air, water and soil pollutants and the manufacturing, storage, handling and
disposal of hazardous substances and waste. The Company is in substantial
compliance with all applicable environmental requirements. Compliance with the
foregoing environmental laws during 2000, 1999 and 1998 has had no material
effect on the Company's capital expenditures, earnings or competitive
position. Because regulatory standards under environmental laws and
regulations are becoming increasingly stringent, however, there can be no
assurance that future developments will not cause the Company to incur
material environmental liabilities or costs.
Other Information
Since April of 1988, the Company has had in place a shareholder rights plan
(the "Rights Plan") pursuant to which Millipore declared a dividend to its
shareholders of the right to purchase (a "Right") one additional
6
share of Millipore Common Stock for each share of Millipore Common Stock
owned, at a price of $80 for each share (after giving effect to the 1995 two
for one stock split). In April of 1998, the Rights Plan was amended and
restated to, among other things, extend the expiration date until April 30,
2008, to increase the purchase price on the exercise of a Right to $200, to
permit the Directors to exchange certain of the Rights for shares of Company
Common Stock (on a 1 for 1 basis) under certain circumstances and to make
certain other updating changes. The Rights Plan, as amended and restated, is
designed to protect Millipore's shareholders from attempts by others to
acquire Millipore on terms or by using tactics that could deny all
shareholders the opportunity to realize the full value of their investment.
The Rights will be exercisable only if a person or group of affiliated or
associated persons acquires beneficial ownership of 20% or more of the
outstanding shares of the Company Common Stock or commences a tender or
exchange offer that would result in a person or group owning 20% or more of
the outstanding Common Stock. In such event, or in the event that Millipore is
subsequently acquired in a merger or other business combination, each Right
will entitle its holder to purchase, at the then current exercise price,
shares of the common stock of the surviving company having a value equal to
twice the exercise price.
Millipore's products are made from a wide variety of raw materials which are
generally available from alternate sources of supply. For certain critical raw
materials, Millipore has qualified only a single source. With sufficient lead
times, the Company believes it would be able to validate alternate suppliers
for each of such materials.
As of December 31, 2000, Millipore employed approximately 5,200 persons
worldwide, of whom approximately 2,700 were employed in the United States and
approximately 2,500 were employed overseas.
7
Executive Officers of Millipore
The following is a list, as of March 2, 2001, of the Executive Officers of
Millipore, including corporate officers of Millipore Corporation and heads of
Millipore's operating divisions. All of the officers of Millipore Corporation
listed below were elected to serve until the first Directors Meeting following
the 2001 Annual Stockholders Meeting. All of the divisional officers listed
below have been appointed to the Corporate Executive Committee (the Company's
senior policy setting management body).
First Elected or Appointed
--------------------------
An Executive To Present
Name Age Office Officer Office
---- --- ------ ------------ -------------
C. William Zadel 57 Chairman of the Board, President and 1996 1996
Chief Executive Officer of Millipore
Corporation
Francis J. Lunger 55 Executive Vice President and Chief 1997 2000
Operating Officer of Millipore
Corporation
Kathleen B. Allen 45 Vice President, Treasurer and Chief 2000 2000
Financial Officer of Millipore
Corporation
John E. Lary 55 Vice President of Millipore Corporation 1994 1994
Joanna Nikka 49 Vice President of Millipore Corporation 1996 1996
Jeffrey Rudin 49 Vice President and General Counsel of 1996 1996
Millipore Corporation; Clerk of
Millipore Corporation
Kevin D. Sanborn 33 Vice President of Millipore Corporation 2000 2000
Hideo Takahashi 59 Vice President of Millipore Corporation 1996 1979
and President of Nihon Millipore (As President
of Nihon
Millipore)
Dominique F. Baly 52 President, Laboratory Water Division and 2000 2001
Bioscience International
William C. Emhiser 46 President, Life Sciences Division 2001 2001
Vinay Goel 52 President, Membrane Technology Division 2000 2001
Jean-Marc Pandraud 47 Vice President & General Manager, 2000 1999
Microelectronics Divisions
Susan Vogt 47 President 2000 1999
BioPharmaceutical Division
Mr. Zadel was elected President, Chief Executive Officer and Chairman on
February 20, 1996. Mr. Zadel had been, since 1986, President and Chief
Executive Officer of Ciba Corning Diagnostics Corp., a company that develops,
manufactures and sells medical diagnostic products. Prior to that he was
Senior Vice President of Corning Glass Works' (now Corning Inc.) Americas
Operations (1985) and Vice President of Business Development (1983). Mr. Zadel
currently serves on the Boards of Directors of Kulicke and Soffa Industries,
Inc., Matritech, Inc., Citizens Bank of Massachusetts, the Massachusetts High
Technology Council , and the American Business Conference. He is a trustee of
the Boston Museum of Science. He has also served as Chairman of the Board of
Directors of the Massachusetts High Technology Council (1999-2001) and as
Chairman of the Health Industry Manufacturers Association (1994-1995).
Mr. Lunger was elected Executive Vice President, Chief Operating Officer of
Millipore in January 2000; prior to that Mr. Lunger was Vice President, Chief
Financial Officer and Treasurer of Millipore, a position he assumed upon
joining the Company in June 1997. Prior to joining Millipore, Mr. Lunger had
been, since 1995, Senior Vice President and Chief Financial Officer of Oak
Industries, Inc., a developer, manufacturer and supplier of components to the
telecommunications industry. From 1994 until 1995, Mr. Lunger had been acting
Chief
8
Executive Officer and Chief Administrative Officer of Nashua Corporation, a
conglomerate with diverse businesses ranging from office supplies to photo
finishing. During the period 1983-1994, Mr. Lunger served in various business
operations and financial management positions with Raychem Corporation, an
international material science company serving the telecommunication,
automotive, energy and defense markets, including Vice President and Group
General Manager (1992-1994); Vice President and Assistant Sector General
Manager (1991-1992) and Vice President, Finance (1988-1991).
Ms. Allen was elected Vice President, Treasurer and Chief Financial Officer
of Millipore in January 2000. Since joining Millipore in 1983 she held a wide
variety of positions in the Company's financial organization, most recently as
Corporate Controller and Chief Accounting Officer of Millipore. Prior to
joining Millipore, Ms. Allen practiced public accounting for six years with
Arthur Young and Company.
Mr. Lary was elected a Vice President of Millipore Corporation in November
1994, and is responsible for the Company's device manufacturing, facilities
and supply chain organizations. From May of 1993 until his election as a
Corporate Vice President, Mr. Lary served as Senior Vice President and General
Manager of the Americas Operation. For the ten years prior to that time, he
served as Senior Vice President of the Membrane Operations Division of
Millipore.
Ms. Nikka was elected Vice President for Human Resources of Millipore
Corporation in November 1996. Ms. Nikka was Vice President at Fidelity
Investments from 1991 to November 1996. Prior to joining Fidelity in 1991, Ms.
Nikka was Vice President of Human Resources at Symbolics, Inc.
Mr. Rudin was elected Vice President and General Counsel of Millipore
Corporation in December 1996. Prior to joining Millipore, Mr. Rudin served
Ciba Corning Diagnostics Corporation as Senior Vice President and General
Counsel (since 1993) and as Vice President and General Counsel (1988-1993).
Prior to that, Mr. Rudin was Assistant Division Counsel for the Pharmaceutical
Division of Ciba-Geigy Corporation. Mr. Rudin was appointed Clerk of Millipore
Corporation in 1999.
Mr. Sanborn was elected Vice President of Strategic Planning and Business
Development of Millipore Corporation in September 2000. Prior to joining
Millipore, Mr. Sanborn was a Consultant (1994-1997) and Manager (1997-2000) of
Bain & Company, a global consulting firm specializing in management and
business strategy development at the organizational and business unit levels.
Mr. Sanborn also served as a Financial Analyst at Goldman Sachs & Co., a
leading investment banking and securities firm (1989-1992). He received his
Masters of Business Administration from The Amos Tuck School of Business
Administration, Dartmouth College (1994) and graduated from Bowdoin College
(1989).
Mr. Takahashi joined Millipore in 1979 as President and Chief Executive
Officer of its Japanese subsidiary, Nihon Millipore Ltd. Mr. Takahashi was
elected as a Vice President of Millipore Corporation on February 8, 1996.
Mr. Baly joined Millipore's French subsidiary in 1972 as an Application
Specialist. From 1984 until 1991 Mr. Baly served as Vice President and General
Manager for Europe; in 1991 he was appointed President of Millipore Asia Ltd.
Mr. Baly has served as the Vice President of the Analytical Divisions of
Millipore from 1994 until February 2001, and was appointed to his current
positions as President of the Laboratory Water Division and of Millipore
Bioscience International in February 2001.
Mr. Emhiser joined Millipore in 1997 as a result of Millipore's acquisition
of Amicon Separation Science Business ("Amicon") Prior to joining Millipore,
Mr. Emhiser had been with Amicon from 1991 to 1997 where he served as
President from 1995 to 1997. Prior to joining Amicon, Mr. Emhiser was
President and Chief Operating Officer of Gelman Sciences, Inc. from 1986 to
1990. At Millipore, Mr. Emhiser has served as Vice President & General
Manager, Applied Microbiology Division (1997-1999) and Vice President &
General Manager, Analytical Products Division from 1999 to February 2001. In
February 2001, Mr. Emhiser was appointed to his current position as President,
Life Sciences Division.
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Mr. Goel joined Millipore in 1977 as a product development engineer for high
purity water products. From 1988 through 1998 Mr. Goel served as Vice
President Membrane Research & Development, Analytical Laboratory. Mr. Goel
served as Vice President, Corporate Technology Operations from 1999 through
February 2001, and was appointed to his current position as President,
Membrane Technology Division, in February 2001.
Mr. Pandraud joined Millipore's French subsidiary in 1978 as an Application
Specialist for the contamination laboratory market. From 1994 until 1999 Mr.
Pandraud served as the Vice President & General Manager of the Laboratory
Water Division. In July 1999 he was appointed to his current position as Vice
President & General Manager, Microelectronics Divisions.
Ms. Vogt joined Millipore in 1981 as a Financial Analyst. In 1990 Ms. Vogt
was appointed Vice President of Marketing for the Analytical Division and in
1995 she was made Vice President of Marketing and Research & Development for
the Analytical Division. From 1997 until 1999 she served as General Manager of
the Analytical Products Division and from 1999 until January 2001 she served
as Vice President & General Manager, Laboratory Water Division. In February
2001, Ms. Vogt was appointed as President, BioPharmaceutical Division.
Item 2. Properties.
Millipore operates 14 manufacturing sites located in the United States,
France, Japan, Ireland, United Kingdom, Brazil and China. The following table
identifies the major production sites which are owned by Millipore, and
describes the purpose, floor space and land area of each.
Business
Floor Space Land Area Segment
Location Facility Sq. Ft. Acres Served
-------- -------- ----------- --------- ----------
Bedford, MA Executive Offices, research, membrane 384,000 31 Bio; Micro
manufacturing & warehouse
Danvers, MA Manufacturing, research and office 65,000 16 Bio
Jaffrey, NH Manufacturing, warehouse & office 177,000 31 Bio; Micro
Cidra, Puerto Rico Manufacturing, warehouse & office 125,000 29 Bio
Molsheim, France Manufacturing, warehouse & office 148,000 20 Bio
Cork, Ireland Manufacturing 98,000 20 Bio
Yonezawa, Japan Manufacturing & warehouse 169,000 7 Bio; Micro
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Bio = Bioscience Business Segment
Micro = Microelectronics Business Segment
Millipore owns a total of approximately 1.17 million square feet of
facilities worldwide, which are used for office, research and development,
manufacturing (including the manufacturing facilities listed above) and
warehouse purposes. All of these facilities are owned in fee and are not
subject to any material encumbrances.
In addition to its owned properties, Millipore currently leases facilities
throughout the world for manufacturing, sales, research, warehouse, and
administrative uses. The aggregate area of rented space is approximately
1,100,000 square feet and cost was approximately $11,408,000 in 2000. The
following leased facilities are the most significant:
1. A lease of a 198,000 square foot building located on 13 acres in
Allen, Texas (Dallas-Fort Worth vicinity). This lease expires in 2008
and provides for two 5-year extension options. This facility is used
to support the Microelectronics business segment.
2. A lease of premises abutting the Company's Bedford headquarters; this
lease makes 75,000 square feet of building available to Millipore,
provides for a term expiring in 2005 and contains rights of first
refusal and options with respect to the purchase of the premises by
Millipore and the sale of the premises to Millipore. This building
supports both business segments.
10
3. A lease of a 134,000 square foot building which is adjacent to the
leased property referred to in the preceding paragraph for a term
ending in 2006, with renewal options for an aggregate of 20 years, as
well as a purchase option. This building is used primarily to serve
the Bioscience business segment.
4. A lease of a building of 130,000 square feet located in Burlington,
Massachusetts, approximately 5 miles from Millipore's Bedford
headquarters provides for a term expiring in 2002 and has a single 3-
year extension option. This building supports both business segments.
With the exception of the Allen lease described above, in the opinion of
Millipore, no single lease is material to the Company's operations.
The facilities located in Allen, Texas, Cidra, Puerto Rico and Yonezawa,
Japan currently operate at approximately 70%, 50% and 70%, of capacity,
respectively. All of the other above listed owned and leased major facilities
are fully utilized.
Millipore is of the opinion that all the facilities owned or leased by it
are well maintained, appropriately insured, in good operating condition and
suitable for their present uses.
Item 3. Legal Proceedings.
The Company currently is not a party to any material legal proceeding and
the Company knows of no material legal proceeding contemplated by any
governmental authority.
On July 21, 1999 Amersham Pharmacia Biotech AB ("APB") of Sweden filed a
complaint in the High Court of Justice in the United Kingdom against the
Company and two of its subsidiaries alleging that the sale of the Company's
ISOPAK chromatography valve infringed one or more of the claims contained in
certain APB patents. APB sought an injunction against the alleged infringement
as well as damages. On October 26, 2000, the High Court ruled that the
chromatography valve currently sold by the Company did not infringe the APB
patents. APB has been granted leave to appeal this decision. The High Court
also ruled that a discontinued product did infringe one of said patents. A
hearing on damages will be scheduled with respect to this matter. In any
event, the outcome of this suit is not expected to have a material adverse
impact on the Company's financial condition or results of operations. The
Company first disclosed this matter in a press release issued during the third
quarter of 1999.
Item 4. Submission of Matters to a Vote of Security Holders.
This item is not applicable.
PART II
Item 5. Market for Millipore's Common Stock, and Related Stockholder Matters.
Millipore's Common Stock, $1.00 par value, is listed on the New York Stock
Exchange and is traded under the symbol "MIL". The following table sets forth,
for the indicated fiscal periods, the high and low sales prices of Millipore's
Common Stock (as reported on the New York Stock Exchange Composite Tape) and
the dividends declared (on a per share basis). As of March 2, 2001 there were
approximately 2,751 shareholders of record.
Dividends
Range of Stock Prices Declared
--------------------------- -----------
2000 1999 2000 1999
------------- ------------- ----- -----
High Low High Low
------ ------ ------ ------ (Per Share)
First Quarter........................... $64.00 $36.63 $33.88 $23.75 $0.11 $0.11
Second Quarter.......................... $76.00 $53.00 $40.81 $23.44 $0.11 $0.11
Third Quarter........................... $76.31 $46.31 $42.13 $34.75 $0.11 $0.11
Fourth Quarter.......................... $63.13 $44.00 $40.00 $30.00 $0.11 $0.11
11
Item 6. Selected Financial Data.
The following selected consolidated financial data for Millipore are derived
from the Company's Financial Statements and related notes thereto. The
following selected consolidated financial data should be read in connection
with and is qualified in its entirety by Millipore's Financial Statements and
related notes thereto and other financial information included elsewhere in
this Form 10-K report.
Millipore Corporation--Five-year Summary of Operations
2000 1999 1998 1997(2) 1996
-------- -------- -------- -------- --------
(In thousands, except per share data)
Net sales............... $953,771 $771,188 $699,307 $758,919 $618,735
Cost of sales........... 440,132 358,169 364,467 342,237 249,443
-------- -------- -------- -------- --------
Gross profit.......... 513,639 413,019 334,840 416,682 369,292
Selling, general and
administrative
expenses............... 278,037 256,598 236,521 245,585 202,140
Research and development
expenses............... 62,661 52,140 53,578 55,899 38,429
Purchased research &
development expense.... -- -- -- 114,091 68,311(2)
Settlement of
litigation(1).......... 1,500 -- 11,766 -- --
Restructuring items(1).. (1,500) (5,200) 33,641 -- --
-------- -------- -------- -------- --------
Operating income
(loss)............... 172,941 109,481 (666) 1,107 60,412
Net gain on sale of
equity securities...... 4,161(1) -- 35,594(1) 8,330 5,329
Interest income......... 3,486 3,025 3,090 2,937 2,780
Interest expense........ (26,922) (30,155) (29,474) (30,484) (11,498)
-------- -------- -------- -------- --------
Income (loss) from
continuing operations
before income taxes.. 153,666 82,351 8,544 (18,110) 57,023
Provision (benefit) for
income taxes........... 34,472 18,023 (1,320) 20,674 13,401
-------- -------- -------- -------- --------
Income (loss) from
continuing
operations........... 119,194 64,328 9,864 (38,784) 43,622
Loss on disposal of
discontinued
operations............. -- -- -- -- 2,036(3)
-------- -------- -------- -------- --------
Net income (loss)....... $119,194 $ 64,328 $ 9,864 $(38,784) $ 41,586
======== ======== ======== ======== ========
Basic net income (loss)
per share:
Income (loss) from
continuing
operations........... $ 2.60 $ 1.44 $ 0.22 $ (0.89) $ 1.00
Net income (loss) per
share................ $ 2.60 $ 1.44 $ 0.22 $ (0.89) $ 0.95
Diluted net income
(loss) per share:
Income (loss) from
continuing
operations........... $ 2.53 $ 1.42 $ 0.22 $ (0.89) $ 0.98
Net income (loss) per
share................ $ 2.53 $ 1.42 $ 0.22 $ (0.89) $ 0.94
Cash dividends declared
per share.............. $ 0.44 $ 0.44 $ 0.43 $ 0.39 $ 0.35
Weighted average shares
outstanding:
Basic................. 45,803 44,731 43,864 43,527 43,602
Diluted............... 47,039 45,274 44,289 43,527 44,457
Financial Data
Working capital....... $230,836 $113,584 $ 22,383 $ 68,629 $110,573
Total assets.......... 874,925 792,733 759,323 769,963 680,305
Long-term debt........ 300,130 313,017 299,110 286,844 224,359
Shareholders' equity.. $305,368 $176,851 $133,791 $140,809 $209,676
- --------
(1) See Notes 3, 11 and 15 of the Notes to the Financial Statements.
(2) Reflects the acquisitions of Tylan General Inc. in January 1997 and
Amicon Separation Science Business in December 1996.
(3) Represents a loss on the disposal of discontinued operations related to
the sale of the Company's Waters Chromatography Division and certain
assets of its non-membrane bioscience business.
Note: Certain reclassifications have been made to previously reported
financial data to conform with the 2000 presentation.
12
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in connection with Millipore's
Consolidated Financial Statements and related notes thereto and other
financial information included elsewhere in this Form 10-K report.
Business Realignment
On October 3, 2000, Millipore announced plans to separate into two distinct
companies by making its Microelectronics business segment an independent,
publicly traded company. The Company is planning an initial public offering
for less than 20% of the shares of the new Microelectronics company and
subsequently intends to spin-off the remaining shares to Millipore
shareholders through a dividend distribution within approximately three to six
months following the initial public offering. The transaction is expected to
be tax-free to the Company and its shareholders and is contingent upon
receiving certain tax and regulatory approvals, accommodation of certain debt
covenants as well as market conditions. The full impact of the realignment on
the Company's financial position, results of operations and cash flows cannot
be predicted at this time. However, certain expenses are expected to be
incurred in future periods in order to implement the realignment.
Additionally, in connection with the separation, we are currently engaged in a
review of the operations and anticipate an associated restructuring charge in
the first quarter of 2001.
Results of Operations
The Company reported diluted earnings per share of $2.53, $1.42 and $0.22
for 2000, 1999 and 1998, respectively. Excluding unusual items, the Company
would have reported diluted earnings per share of $2.48, $1.35 and $0.60 for
2000, 1999 and 1998, respectively.
The Company initiated a restructuring program in 1998 to streamline
worldwide operations and reduce the overall cost structure. This program is
discussed in its entirety in Restructuring Items. Reference is also made to
the discussion of Gross Margins, Gain on Sale of Equity Securities, and Legal
Proceedings below for additional information related to the other unusual
items on the following schedule.
Summary of Unusual Items:
Year Ended December 31,
--------------------------------------
2000 1999 1998
------------ ------------ ------------
(In millions, except per share data)
Cost of sales
Write-off of inventory and
manufacturing equipment............. $ -- $ -- $ 9.2
Provision for excess and obsolete
inventory........................... -- -- 6.0
----------- ----------- ------------
Impact on gross margin................. -- -- (15.2)
Operating expenses
Restructuring items.................. (1.5) (5.2) 33.6
Litigation settlements............... 1.5 -- 11.8
----------- ----------- ------------
Income (loss) before income taxes...... 0 5.2 (60.6)
Net gain on sale of equity securities.. 4.2 -- 35.6
----------- ----------- ------------
Impact on income (loss) before income
taxes................................. 4.2 5.2 (25.0)
Tax impact of unusual items............ 1.6 1.8 (8.4)
----------- ----------- ------------
Net income (loss) from unusual items... $ 2.6 $ 3.4 $ (16.6)
=========== =========== ============
Net income (loss) per share from
unusual items......................... $ 0.05 $ 0.07 $ (0.37)
=========== =========== ============
13
Local Currency Results
The following discussion of Net Sales, Gross Profit Margins and Operating
Expenses refers to revenue, margins and expenses in "local currencies". Local
currency results represent the foreign currency balances translated, in all
periods presented, at Millipore's 2000 budgeted exchange rates, thus excluding
the impact of fluctuations in the actual foreign currency rates. The Company's
management uses this presentation for internal evaluation of the financial
performance of the Company's business segments because it believes that the
local currency results provide a clearer presentation of the underlying
business trends. The U.S. dollar results represent the foreign currency
balances translated at actual exchange rates.
Net Sales
Net sales, measured in U.S. dollars, increased 24% in 2000 compared to 10%
in 1999. The net sales increase in 2000 as compared to 1999 was primarily due
to a continued recovery in the semiconductor industry coupled with continued
growth in the biopharmaceutical business offset by negative net currency
effects. Growth in the Americas and Asia/Pacific regions was heavily
influenced by the improvements in the semiconductor industry.
The impact of translating sales denominated in currencies other than the
U.S. dollar reduced reported sales growth by 2% in 2000. During 2000 as
compared to 1999 the Japanese yen strengthened on average against the U.S.
dollar by approximately 5% and the Euro weakened against the U.S. dollar on
average by approximately 15%. The negative effect from the declining Euro more
than offset the positive effect from the stronger yen. In 1999 the reported
sales growth was positively impacted by 2% as a result of the Japanese yen
which strengthened against the U.S. dollar by approximately 13% partially
offset by the Euro weakening by 5%. In general, a stronger U.S. dollar will
adversely affect the sales growth of both business segments. However, since
the Microelectronics segment has a higher percentage of sales in Asia,
strengthening of the dollar against Asian currencies will have a somewhat
larger impact on that segment. Similarly, the Bioscience (previously referred
to as the Biopharmaceutical & Research segment) has a higher percentage of
sales in Europe than the Microelectronics segment. Therefore, strengthening of
the dollar against the European currencies will have a larger impact on the
Bioscience segment sales growth. Non-currency related price changes have not
significantly affected the comparability of sales during the past three years.
Sales growth by business segment and geography, measured in local currencies
and U.S. dollars, is summarized in the table below.
Sales Growth in Sales Growth in
Local Currencies U.S. Dollars
------------------- ------------------
2000 1999 2000 1999
-------- -------- ------- -------
Bioscience.......................... 10% 8% 6% 9%
Microelectronics.................... 70% 9% 71% 15%
-------- -------- ------- -------
Consolidated...................... 26% 8% 24% 10%
-------- -------- ------- -------
Americas............................ 28% 10% 28% 10%
Europe.............................. 12% 3% (1)% (1)%
Asia/Pacific........................ 40% 13% 45% 27%
-------- -------- ------- -------
Consolidated...................... 26% 8% 24% 10%
-------- -------- ------- -------
Bioscience sales, measured in local currencies, increased 10% in 2000
compared to 1999. The growth was broad-based across product lines and
geographies. Revenue growth was strongest for products used in life science
laboratory research and in hardware and consumables used in the
biopharmaceutical markets which collectively account for approximately 45
percent of the sales of this business segment. The growth in these markets
resulted from increases in new biotech drugs approved and in production as
well as continued strengthening in genomics and proteomics research spending.
Bioscience sales, measured in local currencies, increased 8% in 1999
compared to 1998. The growth was broad-based across product lines and
geographies. Sales growth was strongest for the biotechnology and
14
pharmaceutical markets utilizing laboratory research applications, water
filtration devices and consumable filtration products and systems used in drug
production. Revenue growth from the sale of process systems was positive,
although to a lesser extent than other product lines.
Microelectronics segment sales growth measured in local currency increased
70% in 2000 compared to 1999. This growth was the result of significant
improvements in the semiconductor industry and strengthening of the Asian
economies, which began in 1999. Sales growth for this segment was most
significant in the Americas and the Asia/Pacific region and, to a lesser
extent, in Europe.
Microelectronics segment sales growth measured in local currency increased
9% in 1999 compared to 1998. During 1999, the Company's sales growth was
positively impacted by improvements in the semiconductor industry and
strengthening of the Asian economies.
Gross Profit Margins
Gross profit margins in local currencies were 54% for 2000 and 1999, and 48%
in 1998. Excluding unusual items in 1998, gross profit margins would have been
50%. The unusual items recorded in 1998 were a $9.2 million charge for the
write-off of inventory and manufacturing equipment associated with product
line rationalization activities and a provision of $6.0 million for excess and
obsolete inventory. Gross profit margin percentages for 2000 as compared to
1999 were positively impacted by volume efficiencies and automation
efficiencies in both segments offset by an increased mix of lower margin
Microelectronics business. The 4 percentage point gross profit increase in
1999 versus 1998, excluding one-time items, was the result of Company-wide
increased volume as well as savings realized from the restructuring
initiatives, which began in the third quarter of 1998.
Operating Expenses
Selling, general and administrative ("S,G&A") expenses in local currencies
increased 11% in 2000 and 7% in 1999. The increase in 2000 was primarily due
to higher head count and related expenses needed to support sales volume and
incremental variable employee compensation earned in 2000 as compared to 1999
due to improved operating performance. As a percentage of sales, S,G&A
expenses in local currencies decreased approximately 4 points during 2000 to
29%. The increase in 1999 was primarily attributable to $14.7 million of
incremental variable employee compensation earned in 1999 over amounts earned
in the preceding year due to the relative better operating performance and
lower expenses in 1998 due to cost containment programs initiated as part of
the 1998 restructuring activities. The Company continues to invest in sales,
service and marketing resources focused on maintaining or improving customer
services, supporting the launch of new products and development of future
sales initiatives aimed at improving the Company's competitive positions.
Research and development expenses in local currencies increased 21% in 2000
due to additional R&D programs and increased headcount. As a percentage of
sales, R&D expenses in local currencies declined from 6.7% in 1999 to 6.5% in
2000 due to the growth in sales during 2000. During 1999, R&D decreased 3% due
to the elimination of research and development expenses for non-strategic
product lines in the Microelectronics segment and the Microelectronics
consolidation into the Allen, Texas facility thus eliminating duplicate
operations.
In 2000, the Company recorded a charge of $1.5 million for past royalties as
part of the settlement of a patent lawsuit. Litigation settlements totaling
$11.8 million were recorded in 1998 and are described under "Legal
Proceedings" below.
Restructuring Items
In the second quarter of 1998, the Company announced a restructuring program
to improve the competitive position of the Company by streamlining worldwide
operations and reducing the overall cost structure. The
15
restructuring program was initiated to bring operating costs in line with
lower revenues resulting from the financial difficulties in Asian economies,
the strong U.S. dollar and the continuation of the semiconductor industry
slump. The combination of the restructuring programs and the 1998
Microelectronics plant consolidation resulted in estimated savings of
approximately $40.0 million in 1999. The savings resulted from reduced wages,
facility related costs, depreciation and amortization and were primarily
reflected as reductions in cost of sales.
Key initiatives of the restructuring program included:
1. Discontinuation of non-strategic product lines and rationalization of
product offerings to improve product line focus. The non-strategic product
lines consisted of high pressure liquid chromatography equipment,
semiconductor fab monitoring and control software and various filtration
devices. The rationalization of product offerings was a result of management's
review which identified specific products with limited profitability or
products which were inconsistent with current strategic marketing plans, such
as non-standard products. These actions to improve product line focus were
completed by September 30, 1998.
2. Consolidation of certain manufacturing operations which eliminated
duplicate manufacturing processes in Ireland and the U.S. The consolidation of
manufacturing operations was completed in 2000.
3. Realignment of European country organizational structure to focus on
operating business units and establishment of a regional transaction service
center, resulting in the consolidation of financial and administrative
activities. The Company completed the transition to the service center during
1999.
4. Reduction of administrative and management infrastructure costs in Asia
through reduced facility costs and administrative positions as offices in the
region were consolidated during 1998.
5. Renegotiations of marketing, research and development and supply
agreements. These agreements were amended to eliminate the cost of maintaining
certain exclusivity rights and to reduce purchasing commitments for non-
strategic products. These actions were completed during 1999.
6. Streamlining of the supply chain management function through the
centralization of worldwide procurement functions and the consolidation of
vendors to significantly reduce the aggregate number of vendors, resulting in
cost savings and shorter cycle time within the procurement function as well as
materials cost reductions. These actions were completed during 1999.
In the third quarter of 1998, the Company recorded an expense associated
with these activities of $42.8 million ($29.1 million after tax) including a
restructuring charge of $33.6 million and a $6.2 million charge for inventory
and $3.0 million of fixed asset write-offs against cost of sales. The $33.6
million restructuring charge included $18.3 million of employee severance
costs, $9.5 million write-off of real and intangible assets associated with
discontinued product lines and with the termination of certain rights under
two technology development collaboration agreements, $3.8 million of lease
cancellation costs and $2.0 million of contract termination costs.
The Company reevaluated the accrual for the restructuring program and in the
third quarter of 1999 reversed $5.2 million of the remaining balance. The
reversal reflects a lower estimate for employee severance and lease
cancellation costs. Although the planned number of employee positions had been
eliminated, the reduction in severance cost was attributed to higher levels of
attrition than originally anticipated and to impacted employees filling open
positions as demand increased due to improved sales volume. During the third
quarter of 2000, the Company reversed $1.5 million in restructuring reserves
primarily related to additional proceeds from the sale of facilities. At
December 31, 2000 $2.6 million relating primarily to final facility closure
payments remains and will be paid in early 2001.
The restructuring initiatives combined with the 1998 consolidation of the
Company's Microelectronics plants resulted in the elimination of 615 positions
worldwide. Notification to employees was completed in the
16
third quarter of 1998, however a small number of these employees continued in
their existing positions through 2000 with their related salary costs charged
to operations as incurred. Under the terms of the severance agreements, the
Company expects to pay severance and associated benefits through the early
part of 2001.
During the third quarter of 1998, the Company also recorded in Cost of Sales
an incremental provision for excess and obsolete inventory of $6.0 million in
response to adverse changes in demand attributable to declining business
conditions in Asia and the slowdown in the semiconductor industry.
Gain on Sale of Equity Securities
During the second quarter of 2000, the Company sold its holdings in Oxford
GlycoSciences Plc, resulting in a gain on sale of securities of $7.5 million
which was partially offset by the write-off of investment holdings in a
privately held U.S. company of $3.3 million.
The gain on sale of equity securities in 1998 primarily reflects the sale of
the Company's equity holdings in PerSeptive Biosystems. As of December 31,
1997, the Company held 2.2 million shares of PerSeptive Biosystems common
stock and 1,000 shares of PerSeptive Biosystems preferred stock. On January
22, 1998, PerSeptive merged with The Perkin-Elmer Corporation. Pursuant to the
merger, all of the Company's holdings of common and preferred shares in
PerSeptive were converted into an aggregate of 587,000 shares of Perkin-Elmer
common stock. In the first quarter of 1998, the Company sold all of its shares
of Perkin-Elmer stock for approximately $32.5 million in cash. The Company
also sold all of its common shares of Glyko Biomedical Ltd. in the first
quarter of 1998 and recognized a gain of $3.1 million.
Net Interest Expense
Net interest expense decreased $3.7 million in 2000 as compared 1999
primarily as a result of lower average borrowings and additional interest
income from increased cash and cash equivalents offset by an increase in
average rates. During 1999 net interest expense increased $0.7 million over
1998. This increase was due to higher average interest rates resulting from
the 1998 renegotiation of the Company's revolving Credit Agreement and higher
effective interest due to the impact of foreign exchange under the yen debt
swap agreements which was somewhat offset by lower average borrowings.
Provision (Benefit) for Income Taxes
The Company's effective tax rate on net income for 2000 and 1999 was 22.4%
and 21.9%, respectively, and a benefit of 15.4% in 1998. Excluding the effect
of the restructuring items recorded in 1999 and 1998, the Company's tax rate
on income from operations was 21%. In 2000 the Company's tax rate on income
from operations increased to 22%. This increase was due to improved operating
results in countries with higher tax rates.
Earnings Per Share
Restructuring charges and several unusual items impacted earnings per share
in 2000, 1999 and 1998. The impact of these items is reflected in the Summary
of Unusual Items above.
In addition, earnings per share were positively impacted in 2000 as compared
to 1999 by approximately $0.04 per share due to the impact of a stronger Yen
offset by the weakening Euro. Additionally, in 1999 as compared to 1998,
earnings per share were positively impacted by approximately $0.02 per share
as a result of the impact of the stronger Yen offset by the weaker European
currencies.
17
Acquisition
On May 18, 1999, the Company acquired all outstanding shares of
Bioprocessing Corporation Limited ("Bioprocessing") in exchange for 660,000
shares of Millipore common stock. The transaction was accounted for as a
pooling-of-interests. The consolidated financial statements for prior periods
were not restated because the addition of Bioprocessing did not have a
material impact on the Company's results of operations. Bioprocessing
develops, manufactures and sells a wide range of proprietary products and
services for the chromatographic purification of proteins.
Market Risk
The Company is exposed to market risks, which include changes in interest
rates and changes in foreign currency exchange rates as measured both against
the U.S. dollar and each other. The Company manages these market risks through
its normal financing and operating activities and, when appropriate, through
the use of derivative financial instruments. The Company does not invest in
derivative financial instruments for speculative purposes.
Foreign Currency Exchange Rate Risk
The Company derives approximately 60% of its revenues from customers outside
of the Americas. This business is transacted through the Company's network of
international subsidiaries generally in the local currency. This exposes the
Company to risks associated with changes in foreign currency that can impact
revenues, net income and cash flow. Approximately 28% of the Company's sales
are derived from Europe where the U.S. dollar strengthened against the Euro
during 2000 and 1999. Continued strengthening of the U.S. dollar against the
Euro may negatively impact the results of operations of the Company. The
Company is able to partially mitigate the impact of fluctuations in the Euro
by active management of cross border currency flows and material sourcing. The
Company has significant exposure against the Japanese yen which strengthened
against the U.S. dollar in 2000 and 1999. Generally, a stronger yen has a
positive impact on results of operations. The Company is exposed to changes in
the Japanese yen that can not be mitigated through normal financing or
operating activities. Accordingly, the net equity exposure risk is managed
through the use of debt swap agreements.
Historically, the Company entered into foreign currency option contracts to
sell yen on a continuing basis in amounts and timing consistent with the
underlying currency transactions. This program was discontinued in 1999. The
gains on these transactions, if any, partially offset the realized foreign
exchange losses on the underlying exposure. In 1998, gains, net of premium
costs, of $2.2 million were realized from these contracts and were recorded in
cost of sales. All open options expired in 2000.
The Company's net equity exposure to the Japanese yen has been hedged
through debt swap agreements covering both principal and interest. Pursuant to
these agreements $110,000 of debt with a weighted average fixed interest rate
of 6.7 percent was swapped for an equivalent value of yen at a weighted
average exchange rate of 114.6 yen to the dollar and a weighted average fixed
interest rate of 3.6 percent. The swap agreements mature in 2003 and 2004. See
Capital Resources and Liquidity below for a discussion of cash
collateralization requirements under these agreements.
Although the Company manages its foreign currency exchange risk through the
above activities, when the U.S. dollar strengthens against the basket of
currencies in which the Company transacts its business, generally sales and
net income will be adversely impacted.
Credit Risk
The Company is exposed to concentrations of credit risk in cash and cash
equivalents, trade receivables and derivative financial instruments.
18
Cash and cash equivalents are placed with major financial institutions with
high quality credit ratings. The amount placed with any one institution is
limited by policy.
Trade receivables credit risk exposure is limited due to the large number of
customers and their dispersion across different industries and geographies.
The Company is exposed to credit related risks associated with the potential
nonperformance by counterparties to the debt swap agreements. The
counterparties to these contracts are major financial institutions. The
Company continually monitors its positions and the credit ratings of its
counterparties and limits the amount of contracts it enters into with any one
party.
Capital Resources and Liquidity
Cash flow provided from operations was $98.9 million in 2000, $105.1 million
in 1999 and $51.3 million in 1998. Reported cash flow from operations was
reduced by $2.4 million in 2000, $9.9 million in 1999 and $28.1 million in
1998 for costs associated with the 1998 restructuring program and the
integration of acquisitions made during 1996 and 1997. Excluding the
restructuring and acquisition related expenditures, cash flow from operations
was $101.3 million in 2000, $115.0 million in 1999 and $79.4 million in 1998.
The decrease in cash flow from operations in 2000 over 1999 was primarily
the result of increased accounts receivable and inventories offset by improved
operating income. The increase in accounts receivable was attributable to
increased sales volume primarily in the United States and Asia Pacific. The
increase in sales in the Asia Pacific region further impacted accounts
receivable where regional business practices result in longer collection
periods. Accounts receivable days sales outstanding increased from 83 days in
1999 to 84 days in 2000 primarily a result of the increased mix of Asia
Pacific receivables. The Company continues to aggressively manage its
collection activities. Inventory levels increased due to stocking levels of
new products and efforts to increase customer service levels through increased
product availability predominately in the Microelectronics business segment.
Partially offsetting the impact of accounts receivable and inventory increases
were increases in accounts payable and accrued expenses, also primarily due to
higher business activity and variable compensation programs resulting from
improved financial performance.
The increase in cash flow from operations in 1999 over 1998, excluding the
restructuring and acquisition expenditures, is primarily a result of improved
income from operations, increases in accounts payable due to higher business
activity in the fourth quarter of 1999, accrued expenses primarily resulting
from variable compensation programs and continued asset management initiatives
launched in 1998. Partially offsetting this is an increase in account
receivables resulting from significantly higher sales volume in the second
half of 1999 combined with the increased revenues in the Asia Pacific region.
This resulted in days sales outstanding in accounts receivable increasing from
77 days in 1998 to 83 days in 1999.
Operating cash flow generated by the Company during 2000 was used to reduce
short-term debt, invest in property, plant and equipment, and pay dividends.
The Company spent $52.2 million for property, plant and equipment during 2000.
The $20.9 million increase versus 1999 was primarily due to additional
manufacturing capacity and new laboratories for the Bioscience business.
During 2000, the Company received $8.8 million from the sale of property, $7.5
million from the sale of securities and $28.0 million from the exercise of
employee stock options. The Company expects capital expenditures for 2001 to
be in the range of $90.0 to $95.0 million. This increase will be driven by the
on-going need to add manufacturing capacity and laboratories for the
Bioscience business and capital needed to provide Microelectronics a corporate
headquarters and additional manufacturing capacity.
Cash generated by the Company during 1999 was used to reduce short-term
debt, to invest in property, plant and equipment and to pay dividends.
Property, plant and equipment expenditures for 1999 were less than 1998
expenditures by $28.5 million primarily due expenditures in 1998 of $10.0
million for the expansion of the
19
Bioscience membrane manufacturing facility in Cork, Ireland and $24.4 million
for the construction of the new Microelectronics manufacturing facility in
Allen, Texas. This decrease was offset in part by $4.0 million for
expenditures made in 1999 to complete the membrane manufacturing facility. The
Company also received $9.5 million in cash for the sale of securities in
Waters Corporation.
Cash generated by the Company during 1998 was used to invest in property,
plant and equipment, and to pay dividends. Property, plant and equipment
expenditures for 1998 included $10.0 million spent for the expansion of the
Bioscience membrane manufacturing facility in Cork, Ireland and $24.4 million
spent for the construction of the new Microelectronics manufacturing facility
in Allen, Texas. The total cost of the Allen facility was approximately $28.0
million.
The Company maintains an unsecured Revolving Credit Agreement, dated January
22, 1997, with a consortium of commercial banks (the "Credit Agreement") which
currently makes $250 million available to the Company. During 2000, the
Company reduced its borrowings under the Credit Agreement to $52.0 million so
that, at December 31, 2000, the Company had additional borrowing capacity of
$198.0 million. The Credit Agreement was renegotiated during 1998 to waive
defaults under certain financial covenants relating to operating cash flow and
interest coverage and to permit less restrictive operating cash flow and
interest coverage covenants for 1999 and a portion of 2000. The Company also
agreed to an additional minimum earnings covenant as well as to increases in
both the interest rate and the facility fees. As renegotiated, interest is
payable under the Credit Agreement at a floating U.S. dollar deposit rate,
defined as LIBOR, plus a margin in the range of 0.23 to 1.125 percent.
The Company also has an additional $20.0 million of other short-term
borrowing capacity available of which $0.5 million was outstanding at December
31, 2000.
In November 1998 Moody's Investor Services and Standard & Poors Corporation
graded the Company's debt at a rating of Ba2 and BB+, respectively. Both
ratings are characterized as below "investment grade". The Company expects
that these ratings may make it more difficult for the Company to access money
markets should it become necessary to do so.
In addition, the foregoing debt ratings coupled with the strengthening of
the Japanese yen triggered a requirement in 1999 to provide cash
collateralization under one of the Company's yen denominated debt swap
agreements in the event that the net value of its position was below the net
value of the counterparty's position. In the event that the Company's debt
rating improves, these agreements provide for less stringent collateralization
requirements. While this collateralization requirement will not impact the
Company's foreign exchange exposure, it could impact short-term liquidity if
there were a serious deterioration in the value of the Company's swap
position. The amount of the cash collateral is dependent, among other things,
on the exchange rate of the yen to the U.S. dollar; generally, as the yen
strengthens, the amount of cash collateral required from the Company
increases. At December 31, 2000, this cash collateralization amount was $3.2
million.
The Company believes that its balances of cash and cash equivalents, funds
available under the Credit Agreement and cash flows expected to be generated
by future operating activities will be sufficient to meet its cash
requirements over the next twelve to twenty-four months.
Dividends
The quarterly dividend was $0.11 per share throughout 2000. The Company paid
dividends of $20.2 million in 2000.
Euro
On January 1, 1999, several member countries of the European Union
established fixed conversion rates between their existing sovereign "legacy"
currencies, and adopted the Euro as their new common legal currency.
20
As of that date, the Euro began trading on currency exchanges and the legacy
currencies will remain legal tender in the participating countries for a
transition period between January 1, 1999 and January 1, 2002. In the first
quarter of 1999, the Company began invoicing certain customers and
intercompany transactions in the Euro. The Company also assessed its
pricing/marketing strategy in order to ensure that it remains competitive in a
broader European market. It also has evaluated its cash management
opportunities. Further, the Company has commenced a plan to upgrade its
computer systems to enable business transactions in the Euro effective January
1, 2002.
Legal Proceedings
In 2000, the Company recorded a charge of $1.5 million for past royalties as
part of the settlement of a patent lawsuit.
On July 21, 1999 Amersham Pharmacia Biotech AB ("APB") of Sweden filed a
complaint in the High Court of Justice in the United Kingdom against the
Company and two of its subsidiaries alleging that the sale of the Company's
ISOPAK chromatography valve infringed one or more of the claims contained in
certain APB patents. APB sought an injunction against the alleged infringement
as well as damages. On October 26, 2000, the High Court ruled that the
chromatography valve currently sold by the Company did not infringe the APB
patents. APB has been granted leave to appeal this decision. The High Court
also ruled that a discontinued product did infringe one of said patents. A
hearing on damages will be scheduled with respect to this matter. In any
event, the outcome of this suit is not expected to have a material adverse
impact on the Company's financial condition or results of operations. The
Company first disclosed this matter in a press release issued during the third
quarter of 1999.
In 1998, the Company recorded a litigation settlement of $11.8 million
related to 3 matters:
1. A proceeding arising out of an administrative order issued by the
Environmental Quality Board ("EQB") of Puerto Rico alleging that the
Company's wholly owned subsidiary failed to properly manage, transport
and dispose of nitrocellulose membrane scrap as a hazardous waste; and
proposed penalties in the amount of $96.5 million. The Company settled
this proceeding in 1998 and recorded a charge of $5.0 million.
2. A private lawsuit brought by an intervening party in the EQB
administrative case described above; the Company recorded a charge of
$3.1 million in the 1998 reflecting its costs to settle this suit.
3. A patent lawsuit with Mott Metallurgical Corporation in which each
party claimed infringement of one of its patents by the other. The
Company recorded a charge of $3.7 million in 1998 to settle this suit;
the parties also agreed to cross license the two patents at issue.
As has been previously disclosed, Millipore has, in the past, been named as
a potentially responsible party ("PRP") under the Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("Superfund") by the U.S.
Environmental Protection Agency ("EPA") with respect to a "release" (as
defined in Section 101 of Superfund), at twelve sites to which chemical wastes
generated by the manufacturing operations of Millipore or one of its divisions
may have been sent. The Company has settled its liability pursuant to consent
decrees releasing Millipore from further liability with respect to certain
covered matters at all of these Superfund sites. However, as is typical with
consent decrees in such Superfund proceedings, EPA and the relevant state
agencies have reserved the right to maintain actions against the settling
parties, including the Company, in the event certain events occur or do not
occur at those sites. The Company does not expect that the conditions in the
consent decrees permitting these governmental parties to "re-open" the cases
will occur. In any event, the Company believes that the aggregate of any
future potential liabilities should not have a material adverse effect on the
Company's future results of operations or financial condition in light of the
advanced stage of funded remedial action at each site and the likely
availability of contribution from numerous other financially solvent PRPs
participating at each such Superfund site.
21
New Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended by SFAS No. 138, which is
effective January 1, 2001 for the Company. SFAS No. 133 establishes accounting
and reporting standards requiring that every derivative instrument, including
certain derivative instruments embedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement also requires that changes in the derivative's fair value be
recognized in earnings unless specific hedge accounting criteria are met.
With respect to all derivative instruments, SFAS No. 133 requires that
companies record an adjustment to record the difference between a derivative's
previous carrying amount and its current fair market value as a transition
adjustment. At December 31, 2000, the Company is a party to U.S. dollar to
Japanese yen foreign currency fixed rate-to-fixed rate interest rate swap
agreements, which are designated as a hedge of the Company's net investment
exposure in its Japanese subsidiary. The Company will record a transition
adjustment of $5.1 million, on January 1, 2001, to record the difference
between the Company's carrying value and the fair value of this derivative.
This transition adjustment will be recorded as a cumulative-effect type
adjustment to other comprehensive income.
Business Outlook and Uncertainties
The following statements are based on current expectations. These statements
are forward looking and actual results may differ materially.
Business Realignment: On October 3, 2000, Millipore announced plans to
separate into two distinct companies by making its Microelectronics business
segment an independent, publicly traded company. The Company is planning an
initial public offering for less than 20% of the shares of the new
Microelectronics company and subsequently intends to spin-off the remaining
shares to Millipore shareholders through a dividend distribution within
approximately three to six months following the initial public offering. The
transaction is expected to be tax-free to the Company and its shareholders and
is contingent upon receiving certain tax and regulatory approvals,
accommodation of certain debt covenants as well as market conditions.
Restructuring Charges and Separation Expenses: In connection with the
separation, the Company is currently engaged in a review of operations and
anticipates an associated restructuring charge in the first quarter of 2001.
Costs could be incurred within both business segments to reduce manufacturing
capacity, terminate certain contracts and leases and relocate operations
closer to individual business segment customer base, although the specific
nature and amount of the charges is not known at this time.
Sales: The semiconductor industry in which the Microelectronics business
segment participates is highly cyclical. A downturn, which began in the middle
of 1996, continued into early 1999. Since then, this business segment reported
eight sequential quarters of increased sales during 2000 and 1999. Recent
industry results and published reports indicate that an industry wide decline
has begun. We expect Microelectronics revenues to be 15% to 25% lower in the
first quarter of 2001 than revenues in the fourth quarter of 2000. While some
published reports suggest little or no growth for 2001; others remain
optimistic that growth will return to this market in the second half of 2001.
There can be no assurance as to the extent and duration of this cyclical
downturn or as to its impact on Millipore, however, the Company does
anticipate growth over the long term.
The Bioscience segment has demonstrated relatively stable patterns of
revenue growth. Customers in this segment, particularly those involved in the
production of sterile drugs, purchase products for use in validated production
processes. Accordingly, it is important to participate in the development of
new drugs in order to be designed into the ultimate manufacturing process.
Adoption of new technologies and products requires a lengthy validation
process prior to adoption. The growth of this segment is highly dependent on
the development and approval of new drugs. It is difficult to ascertain the
number or timing of such approvals, however, the number
22
of drugs at various stages in the approval process has increased over the past
two years. The remaining driver of this segment is life science research and
development spending. Recently published industry reports in the area of life
science anticipate increased research and development spending. However the
impact on the Company is unknown.
During 1999 and 2000, the Company has seen relatively flat sales growth in
the European region, in U.S. dollars, which resulted from increased sales
growth, in local currencies, offset by the effect of the declining Euro. This
region impacts the Bioscience segment more than the Microelectronics segment.
The recent economic pressures in Europe combined with the U.S. dollar
strengthening against most European currencies may continue to adversely
affect the Bioscience segment in 2001. In the Asia/Pacific region, the Company
has benefited principally from the strong growth of the microelectronics
industry. This growth combined with the strengthening of the Yen has further
contributed to the positive growth rate.
Approximately 60 percent of the Company's sales are to customers outside of
the Americas and are generally made in local currency. As previously noted,
currencies had a net negative impact to both sales and earnings in 2000 as
compared to 1999. This was the composite result of a stronger yen in 2000
mostly offset by the weak Euro. Since the end of 2000, the dollar has
strengthened against the yen and the Euro. Therefore, if rates of exchange
remain at the March 2, 2001 level, there could be a significant negative
impact on sales for the first quarter and full year 2001 as compared to 2000.
Gross Margins: The Company expects lower gross margin percentages, in local
currencies, in 2001 as compared to 2000. The lower Microelectronics revenues
will negatively impact margins by reduced absorption of manufacturing overhead
combined with margin reductions due to sales growth for process systems which
traditionally have lower gross margins, increased costs of certain raw
materials and labor, continued new product start up costs and volume driven
pricing arrangements. To the extent that foreign currency exchange rates
relative to the U.S. dollar remain at March 2, 2001 levels, first quarter 2001
and full year margins could be significantly impacted by foreign currency
exchange rate fluctuations.
In December 1999 the Company's sole supplier of a critical raw material used
in the manufacture of one type of membrane incorporated into products sold by
the Bioscience business segment advised the Company that it would discontinue
manufacture of that raw material during the second half of 2000. In the second
quarter of 2000 the Company established supply arrangements with a successor
company to the former supplier of this raw material. In addition, the Company
is in the process of identifying alternative sources of supply of this
material. The Company believes that these arrangements will provide an
adequate source of supply for this raw material.
Operating Expenses: Without the impact of the spin-off of Microelectronics
and any assumed restructuring charge, the Company expects that operating
expenses in local currencies, as a percentage of sales, in 2001 will be
greater than the percentage achieved in the previous year primarily as a
result of the lower Microelectronics revenues.
Interest Expense: The Company expects net interest expense in 2001 will be
slightly lower than 2000 as a result of lower average debt.
Provision for Income Taxes: The effective tax rate in 2001, is projected to
be approximately 23%, or 1% greater than the effective rate for 2000,
excluding unusual items. The tax rate estimate is based on the Company's
current expectations for 2001 income, current tax law and the expectation that
the Company's revenues could reflect a higher proportion of income generated
by products manufactured in the United States, and therefore is subject to
change. Additionally, the impact of the spin-off on the overall tax rate can't
be determined at this time. Further, in the event that the Company's cash
needs significantly increase above those currently projected and exceed the
resources identified under Capital Resources and Liquidity above, then an
additional upward influence on the Company's tax rate could develop if the
Company were required to repatriate cash from certain foreign operations.
23
Capital Spending: The Company expects to spend between $90 to $95 million
for fixed asset additions in 2001. This increase will be driven by the on-
going need to add manufacturing capacity and laboratories for the Bioscience
business and capital needed to provide Microelectronics a corporate
headquarters and additional manufacturing capacity. The Company will continue
to invest in tooling within its manufacturing plants, upgrades of its research
and development labs and in information technology. Accordingly, the Company
also expects that 2001 depreciation expense will be higher than reported in
2000.
Capital Resources and Liquidity: The Company intends to liquidate its yen
denominated debt swap agreement in the first quarter of 2001. At current rates
of exchange, the impact on liquidity is approximately $3.0 million.
Forward-Looking Statements
The matters discussed in this Form 10-K Annual Report, as well as in future
oral and written statements by management of the Company, that are forward-
looking statements are based on current management expectations that involve
substantial risks and uncertainties which could cause actual results to differ
materially from the results expressed in, or implied by, these forward-looking
statements. When used herein or in such statements, the words "anticipate",
"believe", "estimate", "expect", "may", "will", "should" or the negative
thereof and similar expressions as they relate to the Company or its
management are intended to identify such forward-looking statements. In
addition to the matters discussed herein, potential risks and uncertainties
that could affect the Company's future operating results include, without
limitation, difficulties in the successful separation of the Microelectronics
and Bioscience business segments; foreign exchange rates; increased regulatory
concerns on the part of the biopharmaceutical industry; further consolidation
of drug manufacturers; competitive factors such as new membrane technology
and/or a new method of chip manufacture which relies less heavily on purified
chemicals and gases; availability of raw materials or component products on a
timely basis; inventory risks due to shifts in market demand; change in
product mix; conditions in the economy in general, and in the Microelectronics
and Bioscience markets in particular; potential environmental liabilities; the
inability to utilize technology in current or planned products due to
overriding rights by third parties; difficulties inherent in research and
development activities; and the other risk factors described elsewhere in this
Form 10-K Annual Report, and in particular the matters described in Item 1
above under the heading "Environmental Matters". Specific reference is also
made to the risks and uncertainties described in the Registration Statement on
Form S-3 (Registration 333-80781) filed by the Company in connection with its
offering of 660,000 shares of its Common Stock, $1.00 par value in November
1999 (in particular, to those risks described under "Risk Factors") and to the
Registration Statement on Form S-3 (Registration 333-23025) filed by the
Company in connection with its offering of $300 million of Debt Securities in
May 1997 (in particular, to those risks described under "Factors Which May
Affect Future Results"). See also "Legal Proceedings" and "Business Outlook
and Uncertainties" above.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The information called for by this item is set forth under the heading
"Market Risk" in Management's Discussion and Analysis contained in Item 7
above which information is hereby incorporated by reference.
24
Item 8. Financial Statements and Supplementary Data.
The information called for by this item is set forth in the Financial
Statements at the end of this report commencing at the pages indicated below:
Consolidated Statements of Income for the years ended December 31, 2000,
1999 and 1998........................................................... 31
Consolidated Balance Sheets at December 31, 2000 and 1999................ 32
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 2000, 1999 and 1998........................................ 33
Consolidated Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998..................................................... 34
Notes to Consolidated Financial Statements............................... 35
Report of Independent Accountants........................................ 54
Quarterly Results (Unaudited)............................................ 55
All of the foregoing Financial Statements are hereby incorporated by
reference.
Item 9. Disagreements on Accounting and Financial Disclosure.
This item is not applicable.
PART III
Item 10. Directors and Executive Officers of Millipore.
The information called for by this item with respect to registrant's
directors and compliance with Section 16(a) of the Securities Exchange Act of
1934 as amended is set forth under the captions "Management and Election of
Directors--Nominees for Election as Directors" and "Ownership of Millipore
Common Stock--Section 16(a) Beneficial Ownership Reporting Compliance",
respectively, in Millipore's definitive Proxy Statement for Millipore's Annual
Meeting of Stockholders to be held on April 26, 2001, and to be filed with the
Securities and Exchange Commission on or about March 16, 2001, which
information is hereby incorporated herein by reference.
Information called for by this item with respect to registrant's executive
officers is set forth under "Executive Officers of Millipore" in Item 1 of
this report.
Item 11. Executive Compensation.
The information called for by this item is set forth under the caption
"Executive Compensation" in Millipore's definitive Proxy Statement for
Millipore's Annual Meeting of Stockholders to be held on April 26, 2001, and
to be filed with the Securities and Exchange Commission on or about March 16,
2001, which information is hereby incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information called for by this item is set forth under the caption
"Ownership of Millipore Common Stock--Management Ownership of Millipore Common
Stock" in Millipore's definitive Proxy Statement for Millipore's Annual
Meeting of Stockholders to be held April 26, 2001, and to be filed with the
Securities and Exchange Commission on or about March 16, 2001, which
information is hereby incorporated herein by reference.
25
Item 13. Certain Relationships and Related Transactions.
The information called for by this item with respect to registrant's
directors' relationships and related transactions is set forth under the
caption "Certain Relationships and Related Transactions" in Millipore's
definitive Proxy Statement for Millipore's Annual Meeting of Stockholders to
be held on April 26, 2001, and to be filed with the Securities and Exchange
Commission on or about March 16, 2001, which information is hereby
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as a part of this Report:
1. Financial Statements.
The following Financial Statements are filed as part of this report:
Consolidated Statements of Income for the years ended December 31,
2000, 1999 and 1998
Consolidated Balance Sheets at December 31, 2000 and 1999
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998
Notes to Consolidated Financial Statements
Report of Independent Accountants
Quarterly Results (Unaudited)
2. Financial Statement Schedules.
No financial statement schedules have been included because they are not
applicable or not required under Regulation S-X.
3. List of Exhibits.
A. The following exhibits are incorporated by reference:
Reg. S-K
Item 601(b) Referenced Document on
Reference Document Incorporated file with the Commission
----------- --------------------- ------------------------
(3) (i) Restated Articles of Organization, as Form 10-K Report for year
amended May 6, 1996 ended December 31, 1996
[Commission File No. 0-
1052]
(ii) By Laws, as amended Form 10-K Report for year
ended December 31, 1990
[Commission File No. 0-
1052]
(4) Indenture dated as of May 3, 1995, Registration Statement on
relating to the issuance of Form S-4 (No. 33-58117)
$100,000,000 principal amount of the
Company's 6.78% Senior Notes due 2004
(4) Indenture dated as of April 1, 1997, Registration Statement on
relating to the issuance of Debt Form S-3 (No. 333-23025)
Securities in Series
26
Reg. S-K
Item 601(b) Referenced Document on
Reference Document Incorporated file with the Commission
----------- --------------------- ------------------------
(10) Shareholder Rights Agreement dated as Form 8-K Report for
of April 15, 1988, as amended and April, 1998 [Commission
restated April 16, 1998 between File No. 0-1052]
Millipore and The First National Bank
of Boston
Distribution Agreement, dated as of Form 10-K Report for the
July 1, 1996, by and among the Company year ended December 31,
and Fisher Scientific Company 1996 [Commission File No.
0-1052]
Revolving Credit Agreement, dated as Form 10-K Report for the
of January 22, 1997, among Millipore year ended December 31,
Corporation and The First National 1996 [Commission File No.
Bank of Boston, ABN AMRO Bank N.V. and 0-1052]
certain other lending institutions
Second Amendment, effective as of Form 10-K Report for the
September 30, 1998, to Revolving year ended December 31,
Credit Agreement, dated as of January 1998 [Commission File No.
22, 1997, among Millipore Corporation 0-1052]
and The First National Bank of Boston,
ABN AMRO Bank N.V. and certain other
lending institutions
Note Purchase and Exchange Agreement, Form 10-K Report for the
as amended through November 2, 1998, year ended December 31,
between Millipore Corporation and 1998 [Commission File No.
Metropolitan Life Insurance Company 0-1052]
Form of letter agreement with Form 10-K Report for the
directors relating to the deferral of year ended December 31,
directors fees and conversion into 1998 [Commission File No.
phantom stock units* 0-1052]
1989 Stock Option Plan for Non- Form 10-K Report for the
Employee Directors* year ended December 31,
1998 [Commission File No.
0-1052]
Commercial Lease Agreement between EBP Form 10-K Report for the
3, Ltd. and Millipore Corporation with year ended December 31,
respect to Premises located in Allen, 1998 [Commission File No.
TX 0-1052]
ISDA Master Agreement, dated January Form 10-K/A Report for
27, 1994, as amended, with Morgan the year ended December
Guaranty Trust Company of New York 31, 1998 [Commission File
No. 0-1052]
Standard Executive Termination Form 10-K Report for the
Agreement, as amended* year ended December 31,
1999 [Commission File No.
0-1052]
Millipore Corporation 1999 Stock Form 10-K Report for the
Incentive Plan* year ended December 31,
1999 [Commission File No.
0-1052]
Millipore Corporation 1995 Employees' Form 10-K Report for the
Stock Purchase Plan, as amended* year ended December 31,
1999 [Commission File No.
0-1052]
27
Reg. S-K
Item 601(b) Referenced Document on
Reference Document Incorporated file with the Commission
----------- --------------------- ------------------------
(10) [Cont'd] Millipore Corporation 1999 Stock Form 10-K Report for the
Option Plan for Non-Employee year ended December 31,
Directors* 1999 [Commission File
No. 0-1052]
Employment and Relocation Agreement, Form 10-K Report for the
dated November 10, 1999, between year ended December 31,
Millipore Corporation and Michael P. 1999 [Commission File
Carroll* No. 0-1052]
- --------
* A "management contract or compensatory plan"
B. The following exhibits are filed herewith:
Reg. S-K
Item 601(b)
Reference Documents Filed Herewith
----------- ------------------------
Millipore Corporation 2000 Deferred Compensation Plan for Senior
(10) Management*
Standard Deferred Compensation Plan Agreement*
Supplemental Savings and Retirement Plan for Key Salaried
Employees of Millipore Corporation, as amended*
2000 Management Incentive Plan*
(21) Subsidiaries of Millipore
(23) Consent of Independent Accountants relating to the incorporation
of their report on the Consolidated Financial Statements into
Company's Securities Act Registration Nos. 2-72124, 2-85698, 2-
91432, 2-97280, 33-37319, 33-37323, 33-11790, 33-59005, 33-10801,
333-79227, 333-90127 and 333-30918 on Form S-8, Securities Act
Registration Nos. 2-84252, 33-9706, 33-22196, 33-47213, 333-23025
and 333-80781 on Form S-3, and Securities Act Registration No. 33-
58117 on Form S-4
(24) Power of Attorney
- --------
* A "management contract or compensatory plan"
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed by Registrant during the last quarter
of the fiscal year ended December 31, 2000.
(c) Exhibits.
The Company hereby files as exhibits to this Annual Report on Form 10-K
those exhibits listed in Item 14(a)(3)(B) above, which are attached hereto.
(d) Financial Statement Schedules.
No financial statement schedules have been included because they are not
applicable or are not required under Regulation S-X.
28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Millipore Corporation
Dated: March 9, 2001 /s/ Jeffrey Rudin
By: _________________________________
Jeffrey Rudin, Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacity and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ C. William Zadel Chairman, President, Chief March 9, 2001
______________________________________ Executive Officer, and
C. William Zadel Director
/s/ Kathleen B. Allen Vice President, Treasurer March 9, 2001
______________________________________ and Chief Financial
Kathleen B. Allen Officer
/s/ Donald B. Melson Corporate Controller March 9, 2001
______________________________________ (Chief Accounting
Donald B. Melson Officer)
/s/ Daniel Bellus* Director March 9, 2001
______________________________________
Daniel Bellus
/s/ Robert C. Bishop* Director March 9, 2001
______________________________________
Robert C. Bishop
/s/ Robert E. Caldwell* Director March 9, 2001
______________________________________
Robert E. Caldwell
/s/ Maureen A. Hendricks* Director March 9, 2001
______________________________________
Maureen A. Hendricks
/s/ Mark Hoffman* Director March 9, 2001
______________________________________
Mark Hoffman
/s/ Thomas O. Pyle* Director March 9, 2001
______________________________________
Thomas O. Pyle
/s/ Richard J. Lane* Director March 9, 2001
______________________________________
Richard J. Lane
/s/ John F. Reno* Director March 9, 2001
______________________________________
John F. Reno
/s/ Jeffrey Rudin Director March 9, 2001
*By: ______________________________
Jeffrey Rudin, Attorney-in-Fact
29
MILLIPORE CORPORATION
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Statements of Income for the years ended December 31, 2000,
1999 and 1998............................................................ 31
Consolidated Balance Sheets at December 31, 2000 and 1999................. 32
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 2000, 1999 and 1998......................................... 33
Consolidated Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998...................................................... 34
Notes to Consolidated Financial Statements................................ 35
Report of Independent Accountants......................................... 54
Quarterly Results (Unaudited)............................................. 55
30
MILLIPORE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year ended December 31
----------------------------
2000 1999 1998
-------- -------- --------
(In thousands except per
share data)
Net sales........................................ $953,771 $771,188 $699,307
Cost of sales.................................... 440,132 358,169 364,467
-------- -------- --------
Gross profit................................. 513,639 413,019 334,840
Selling, general and administrative expenses..... 278,037 256,598 236,521
Research and development expenses................ 62,661 52,140 53,578
Restructuring items.............................. (1,500) (5,200) 33,641
Settlement of litigation......................... 1,500 -- 11,766
-------- -------- --------
Operating income (loss)...................... 172,941 109,481 (666)
Net gain on sale of equity securities............ 4,161 -- 35,594
Interest income.................................. 3,486 3,025 3,090
Interest expense................................. (26,922) (30,155) (29,474)
-------- -------- --------
Income before income taxes....................... 153,666 82,351 8,544
Provision (benefit) for income taxes............. 34,472 18,023 (1,320)
-------- -------- --------
Net income....................................... $119,194 $ 64,328 $ 9,864
======== ======== ========
Net income per share
Basic.......................................... $ 2.60 $ 1.44 $ 0.22
Diluted........................................ $ 2.53 $ 1.42 $ 0.22
Weighted average shares outstanding..............
Basic.......................................... 45,803 44,731 43,864
Diluted......