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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 2001 or
[_] Transition report pursuant to Section 13 or 15(d) of the Securities Act
of 1934
For the transition period from to
Commission File Number 001-09781 (0-1052)
MILLIPORE CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2170233
(State or Other (I.R.S. Employer
Jurisdiction of Identification No.)
Incorporation or 01730
Organization (Zip Code)
80 Ashby Road, Bedford, MA
(Address of principal
executive 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 Which
Title of Class Registered
------------------------- -------------------------
Common Stock, $1.00 Par New York Stock Exchange,
Value 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 or registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of Form 10-K or any amendment to this
Form 10-K. [_]
As of February 26, 2002, the aggregate market value of the registrant's
voting stock held by non-affiliates of the registrant was approximately
$1,846,353,611 based on the closing price on that date on the New York Stock
Exchange.
As of February 26, 2002, 48,012,498 shares of the registrant's Common Stock
were outstanding.
------------------------------------------
Documents Incorporated by Reference
Incorporated into Form
Document 10-K
------------------------------------------------ -------------------------
Definitive Proxy Statement, dated March 14, 2002 Part III
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PART I
Item 1. Business.
The Company
Millipore Corporation was incorporated under the laws of Massachusetts on
May 3, 1954. Unless the context otherwise requires, the terms "Millipore" or
the "Company" shall mean Millipore Corporation and its subsidiaries.
Millipore is a multinational bioscience company that provides technologies,
tools and services for the discovery, development and production of new
therapeutic drugs. The Company's products serve the worldwide life science
research, biotechnology and pharmaceutical industries. Millipore's products are
based on a variety of enabling technologies, including the Company's membrane
filtration and chromatography technologies. In life science research, Millipore
offers products for genomics, proteomics, drug discovery and general laboratory
applications. For the biotechnology and pharmaceutical industries, Millipore
offers products for development, scale-up, production and quality assurance of
therapeutics, as well as validation services.
On October 3, 2000, the Company announced its plans, subject to certain
conditions, to separate into two distinct companies by making its
Microelectronics business segment an independent, publicly traded company.
These plans called for an initial public offering of less than 20% of the
shares of the new Microelectronics company and a subsequent spin-off of the
remaining shares to Millipore shareholders through a dividend distribution.
In accordance with these plans, the Microelectronics business segment was
separated into a wholly owned Millipore subsidiary named Mykrolis Corporation
("Mykrolis") on March 31, 2001. During the second quarter of 2001, the Company
received a ruling from the Internal Revenue Service that the Mykrolis spin-off
transaction, as planned, would be tax-free to the Company and its shareholders.
Thereafter, the Company's management and Board of Directors approved the plan
of disposition for Mykrolis. On August 9, 2001, Mykrolis completed its initial
public offering (the "Mykrolis IPO"). Prior to the Mykrolis IPO, the Company's
ownership in Mykrolis' outstanding common shares was 100%, and following the
Mykrolis IPO the Company's ownership in Mykrolis' outstanding common shares was
approximately 82%.
The Company distributed its remaining ownership interest in Mykrolis common
stock on February 27, 2002 as a dividend to its shareholders of record as of
February 13, 2002.
As part of the separation of Mykrolis from Millipore in 2001, the two
companies entered into a number of agreements covering a range of issues
relating to the separation, including transitional services, intellectual
property rights, product manufacturing and supply, research and development
services and employee matters.
As of the end of the second quarter of 2001, the Company's consolidated
financial statements were restated to reflect the Company's Microelectronics
business segment as a discontinued operation in accordance with applicable
accounting principles. See Note 2 to the Millipore Corporation Consolidated
Financial Statements (the "Financial Statements") included in Item 8 below.
Information About Operating Segments
In conjunction with the reporting of the Company's Microelectronics business
segment as a discontinued operation, the Company evaluated its continuing
business activities and determined that it operates in one reportable business
segment: Bioscience. The Bioscience segment includes consumable products,
capital equipment and services sold principally to pharmaceutical,
biotechnology and life science research companies, university and government
laboratories and research institutes. The Company's product offerings are used
in the discovery, development and manufacture of therapeutic compounds. During
2001, approximately 55% of net sales in the Company's Bioscience business were
made to customers outside the Americas, and approximately 77% of such net sales
were of consumable products. Geographic and segment information is discussed
in Note 15 to the Financial Statements, which Note is hereby incorporated
herein by reference.
2
Except as otherwise indicated or as the context otherwise requires, all
references hereafter to Millipore or its business or operations shall be to its
continuing operations (i.e. its Bioscience business) only and not to
Millipore's former Microelectronics business or Mykrolis.
Products, Technologies and Applications
Millipore sells approximately 5,500 products (not including spare parts)
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 its customers.
Millipore's products include membranes, filter devices and ancillary
equipment and supplies, laboratory water purification systems, cartridge
filters and housings of various sizes and configurations, process liquid
chromatography media and systems, process filtration systems, and filter- and
chromatography media-based sample preparation devices and kits.
The principal technologies utilized by Millipore's products are based on
membranes and 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. Chromatography media is used to purify biopharmaceutical
compounds or to remove contaminants from these compounds by chemical
adsorption. 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. During 2001, Millipore
launched a series of kits based on these technologies that are intended for a
variety of genomics and proteomics applications. More such kits are expected to
be released in 2002.
The Company's products are used in biopharmaceutical manufacturing and
research operations to isolate and purify specific components of fluid streams
for analysis, to concentrate identified compounds for further processing and to
purify small and large volumes of critical fluids. Customers also use the
Company's products to gain knowledge about a molecule, compound or
microorganism by detecting, identifying and quantifying the relevant components
of a fluid sample. The Company's laboratory water purification products are
used by customers to provide ultrapure water for critical laboratory analysis
and for clinical testing.
Customers and Markets
Major customer groups served by Millipore include pharmaceutical,
biotechnology and life science research companies, university and government
laboratories and research institutes.
The Company's products are used by the pharmaceutical and biotechnology
industries in sterilization, including virus reduction, and sterility testing
of products such as antibiotics, vaccines, vitamins and protein solutions;
concentration and purification 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
3
drug production. In addition, Millipore has developed and is continuing to
develop products specifically targeted to meet the purification requirements of
the biotechnology industry.
Life science research companies, university and government laboratories,
private and corporate research and testing 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 Company's products are used to a lesser extent in several other
industries as well. The food and beverage industry uses the Company's products
for quality control and process applications principally to monitor for
microbiological contamination and to prevent spoilage by removal of bacteria
and yeast from products such as wine, beer, bottled juices and water. Chemical
manufacturers and processors and environmental service laboratories use the
Company's analytical products, and laboratory water purification systems for a
variety of applications.
While no single customer is material to the Company taken as a whole, some
of the Company's individual customers do purchase significant quantities of the
Company's products.
Sales and Marketing
The Company focuses its sales efforts upon those areas where customers have
specific requirements that can be satisfied by the Company's products and
services.
The Company sells its products within the United States to end users
primarily through its own direct sales force and web site and, in the case of
products used in laboratory applications, to a limited extent through an
independent distributor. The Company sells its products 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. As of December 31, 2001, the Company's marketing,
sales and service forces consisted of approximately 1,100 employees worldwide.
The Company's marketing efforts focus on application development for
existing products and on new and differentiated products for newly identified
and proposed customer uses. The Company seeks to educate customers as to the
variety of analytical and purification problems which may be addressed by its
products and to adapt its products and technologies to separations 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.
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, chemically modified 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 polyethylene membrane in 1993, and non-dewetting PTFE
membrane in 1997.
4
The Company's ongoing research and development activities include the
extension and enhancement of existing Millipore 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. Over the last several years, through acquisitions,
alliances, licenses and research and development investments, Millipore has
expanded and diversified its technology base significantly. Millipore has
focused this expansion and diversification strongly on life science research
and biotechnology applications. The rapidly changing life science 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. Millipore has very rapidly become a leader in chromatography hardware
and has progressed substantially in its efforts to develop a differentiated
line of chromatography media products for the rapidly growing biotechnology
market. For biopharmaceutical manufacturing applications, process scale
integrated systems have been introduced that include chromatography hardware
and media as well as software and membrane devices.
Millipore performs most of its own research and development. Other than a
limited amount of research and development work related to membrane surface
modification that is being provided to Mykrolis as part of the separation of
Mykrolis from Millipore, the Company does not provide material amounts of
research services for others. As a percent of sales, Millipore has increased
its research and development spending to 7.0% in 2001 from 6.8% in 2000 and
6.1% in 1999.
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, acquiring distribution rights with respect
thereto, and undertaking collaborative or sponsored research and development
activities with unaffiliated third parties, 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 in the aggregate are viewed as valuable
assets, the Company believes that no individual patent is critical to its
ongoing operations. Millipore also owns a number of trademarks, the most
significant being "Millipore."
Competition
The Company faces intense competition in all of its markets. The Company
believes that its principal competitors include Amersham Biosciences, Pall
Corporation, Qiagen NV, Whatman PLC, Promega Corporation, Apogent Technologies
Inc., and United States Filter Corporation. 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 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 2001, 2000 and 1999 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.
5
Other Information
Millipore's products are made from a wide variety of raw materials that 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 these raw materials. Two of these critical raw materials are used
in a significant portion of the Company's products. If the Company were unable
to obtain supply of either of these raw materials, the loss of revenues to the
Company would be material.
As of December 31, 2001, Millipore employed approximately 4,160 persons
worldwide, of whom approximately 1,900 were employed in the United States and
approximately 2,260 were employed overseas.
Executive Officers of Millipore
The following is a list, as of March 1, 2002, of the Executive Officers of
Millipore. All of such Executive Officers were elected to serve until the first
Directors Meeting following the Company's 2002 Annual Stockholders
Meeting.
First Elected or
Appointed
-----------------------
An Executive To Present
Name Age Office Officer Office
---- --- ------ ------------ ----------
C. William Zadel... 58 Chairman of the Board of Directors of 1996 1996
Millipore Corporation
Francis J. Lunger.. 56 President, Chief Executive Officer 1997 2001
and Director of Millipore Corporation
Kathleen B. Allen.. 46 Vice President and Chief Financial 2000 2000
Officer of Millipore Corporation
Dominique F. Baly.. 53 Vice President of Millipore Corporation 2000 2001
William C. Emhiser. 47 Vice President of Millipore Corporation 2001 2001
Vinay Goel......... 53 Vice President of Millipore Corporation 2000 2001
John E. Lary....... 56 Vice President of Millipore Corporation 1994 1994
Jeffrey Rudin...... 50 Vice President, General Counsel and 1996 1996
Clerk of Millipore Corporation
Kevin D. Sanborn... 34 Vice President of Millipore Corporation 2000 2000
Kathleen M. Stearns 49 Vice President of Millipore Corporation 2001 2001
Susan L.N. Vogt.... 48 Vice President of Millipore Corporation 2000 2001
Mr. Zadel was elected Chairman of the Board, President and Chief Executive
Officer of Millipore in February 1996. As of April 2001, after becoming
Chairman and Chief Executive Officer of Mykrolis, Mr. Zadel continued as
Chairman and Chief Executive Officer of Millipore until August 2001, at which
time he stepped down from his position of Chief Executive Officer of Millipore
but remained as Chairman. Prior to joining Millipore, Mr. Zadel had been, since
1986, President and Chief Executive Officer of Ciba Corning Diagnostics Corp.,
a developer, manufacturer and seller of 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
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 President of Millipore in April 2001 and Chief
Executive Officer in August 2001. Mr. Lunger was also elected to the Company's
Board of Directors in August 2001. Before being elected President, Mr. Lunger
was Executive Vice President and Chief Operating Officer of Millipore
(2000-2001) and
6
Vice President, Chief Financial Officer and Treasurer of Millipore (1997-2000).
Prior to joining Millipore, Mr. Lunger had been, since 1995, Senior Vice
President and Chief Financial Officer of Oak Industries, Inc., a developer,
manufacturer and supplier of components to the telecommunications industry.
From 1994 until 1995, Mr. Lunger had been acting Chief Executive Officer and
Chief Administrative Officer of Nashua Corporation, a conglomerate with diverse
businesses ranging from office supplies to photo finishing. During the period
1983-1994, Mr. Lunger served in various business operations and financial
management positions with Raychem Corporation, an international material
science company serving the telecommunication, automotive, energy and defense
markets, including Vice President and Group General Manager (1992-1994), Vice
President and Assistant Sector General Manager (1991-1992) and Vice President,
Finance (1988-1991).
Ms. Allen was elected Vice President and Chief Financial Officer of
Millipore in January 2000. Prior to that, Ms. Allen held a wide variety of
positions in Millipore's financial organization since joining the Company in
1983, most recently as the Company's Corporate Controller and Chief Accounting
Officer (1998-2000). Prior to joining Millipore, Ms. Allen practiced public
accounting for six years with Arthur Young and Company.
Mr. Baly was elected Vice President of Millipore in December 2001 and
continues as President of the Laboratory Water Division and of Millipore
International (formerly Millipore Bioscience International), to which he was
appointed in February 2001. Prior to that, Mr. Baly held a wide variety of
positions since joining Millipore in 1972, most recently as Vice President of
the Analytical Divisions of Millipore from 1994 until February 2001.
Mr. Emhiser was elected Vice President of Millipore in December 2001 and
continues as President of the Company's Life Sciences Division, to which he was
appointed in February 2001. Since joining Millipore in 1997 as a result of
Millipore's acquisition of Amicon Inc., Mr. Emhiser has served as Vice
President & General Manager, Applied Microbiology Division (1997-1999) and Vice
President & General Manager, Analytical Products Division (1999-2001). Mr.
Emhiser was 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.
Mr. Goel was elected Vice President of Millipore in December 2001 and also
continues as President of the Company's Membrane Technology Division, to which
he was appointed in February 2001. 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, and from 1999 through 2001, Mr. Goel served as Vice
President, Corporate Technology Operations.
Mr. Lary was elected Vice President of Millipore 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 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.
Mr. Rudin was elected Vice President and General Counsel of Millipore in
December 1996. Prior to joining Millipore, Mr. Rudin served Ciba Corning
Diagnostics Corp. 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 in September 2000. Prior to joining Millipore, Mr.
Sanborn was a Manager (1997-2000) and Consultant (1994-1997) 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).
7
Ms. Stearns was elected Vice President for Human Resources of Millipore in
April 2001. From 1993 to 2001, Ms. Stearns served the Company in several senior
human resources management positions and as country manager of the Company's
United Kingdom subsidiary. From 1991 to 1993, Ms. Stearns was Director, Human
Resources for Ionpure Technologies, Inc., a process water company.
Ms. Vogt was elected Vice President of Millipore in December 2001 and
continues as President of the Company's BioPharmaceutical Division, to which
she was appointed in February 2001. Prior to that, Ms. Vogt held a wide variety
of positions since joining the Company in 1981, most recently as Vice President
& General Manager, Laboratory Water Division (1999-2001) and General Manager of
the Analytical Products Division (1997-1999).
Item 2. Properties.
Millipore operates 11 manufacturing sites located in the United States,
France, Ireland, United Kingdom, Japan and Brazil. The following table
identifies the major production sites that are owned by Millipore, and
describes the purpose, floor space and land area of each.
Floor Space Land Area
Location Facility Sq. Ft. Acres
- ------------------ -------------------------------------------------------- ----------- ---------
Bedford, MA....... Executive Offices, research, manufacturing and warehouse 384,000 31
Billerica, MA..... Manufacturing, warehouse, research and office 88,000 5
Danvers, MA....... Manufacturing, research and office 65,000 16
Jaffrey, NH....... Manufacturing, warehouse and office 177,000 31
Cidra, Puerto Rico Manufacturing, warehouse and office 125,000 29
Molsheim, France.. Manufacturing, research, warehouse and office 163,000 20
Cork, Ireland..... Manufacturing, warehouse and office 120,000 7
Millipore owns a total of approximately 1.1 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
721,000 square feet and cost was approximately $6,213,000 in 2001. The
following leased facilities are the most significant:
1. A lease of a 134,000 square foot building in Bedford, Massachusetts near
the Company's headquarters provides for a term ending in 2006, with
renewal options for an aggregate of 20 years as well as a purchase
option.
2. 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 2007 and has a single
5-year extension option.
3. A lease of a building of 26,000 square feet located in Consett, England
that is used for manufacture of the company's chromatography media
products and for related research and development provides for a term
expiring in 2016.
The Company's headquarters in Bedford, Massachusetts currently operates at
approximately 95% of capacity. The facilities located in Cidra, Puerto Rico and
Cork, Ireland currently operate at approximately 65% and 85%, respectively, of
capacity. 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.
8
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 (now known as Amersham
Biosciences 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 appealed this decision and, on
July 5, 2001, the British Appeals Court affirmed the decision of the High
Court. On February 13, 2002, the House of Lords rejected APB's request for
leave to appeal the decision of the Appeals Court. The High Court also ruled
that a discontinued product did infringe one of the APB patents. A hearing on
damages has yet to be scheduled with respect to this matter. In any event, the
outcome of this suit is not expected to have a material adverse effect on the
Company's financial position, cash flows and results of operations.
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 February 26, 2002 there
were approximately 2,668 shareholders of record.
Dividends
Range of Stock Prices Declared
--------------------------- -----------
2001 2000 2001 2000
- ------------- ------------- ----- -----
High Low High Low
- ------ ------ ------ ------ (Per Share)
First Quarter. $62.00 $44.82 $64.00 $36.63 $0.11 $0.11
Second Quarter $61.98 $43.16 $76.00 $53.00 $0.11 $0.11
Third Quarter. $66.67 $51.23 $76.31 $46.31 $0.11 $0.11
Fourth Quarter $62.73 $50.95 $63.13 $44.00 $0.11 $0.11
Item 6. Selected Financial Data.
The following selected consolidated financial data for Millipore are derived
from the Company's Financial Statements and related notes thereto. The
following selected consolidated financial data should be read in connection
with and is qualified in its entirety by Millipore's Financial Statements and
related notes thereto and other financial information included elsewhere in
this Form 10-K report.
During 2001, the Company adopted a plan of disposition of its subsidiary
Mykrolis Corporation ("Mykrolis"). In accordance with Accounting Principles
Board Opinion No. 30, the Company's consolidated financial statements and notes
reflect Mykrolis as a discontinued operation.
Prior to the Mykrolis initial public offering, the Company's ownership in
Mykrolis' outstanding common shares was 100%, and at December 31, 2001 the
Company's ownership was approximately 82%. On February 27, 2002, the Company
distributed its remaining ownership interest in Mykrolis common stock.
9
Millipore Corporation--Five-year Summary of Operations
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
(In thousands, except per share data)
Net sales.......................................... $656,898 $600,161 $566,295 $521,566 $501,372
Cost of sales...................................... 291,219 266,227 252,940 246,176 211,242
-------- -------- -------- -------- --------
Gross profit................................... 365,679 333,934 313,355 275,390 290,130
Selling, general and administrative expenses....... 200,757 190,556 186,389 165,918 174,082
Research and development expenses.................. 45,816 40,580 34,443 33,808 30,863
Restructuring and other items...................... 17,962(1) 320(1) (3,979)(1) 34,621(2) --
-------- -------- -------- -------- --------
Operating income............................... 101,144 102,478 96,502 41,043 85,185
Net gain on sale of equity securities.............. -- 7,151(1) -- 35,594(3) 8,330(3)
Interest income.................................... 2,591 3,486 3,025 3,090 2,937
Interest expense................................... (25,336) (26,922) (30,155) (29,474) (30,484)
-------- -------- -------- -------- --------
Income before income taxes......................... 78,399 86,193 69,372 50,253 65,968
Provision for income taxes......................... 14,913 20,108 15,125 8,436 13,853
-------- -------- -------- -------- --------
Income from continuing operations.............. 63,486 66,085 54,247 41,817 52,115
-------- -------- -------- -------- --------
(Loss) income from discontinued operations, net of
taxes............................................. (6,736) 53,109 10,081 (31,953) (90,899)
(Loss) on disposal of discontinued operations, net
of taxes.......................................... (24,400) -- -- -- --
-------- -------- -------- -------- --------
Total discontinued operations.................. (31,136) 53,109 10,081 (31,953) (90,899)
-------- -------- -------- -------- --------
Extraordinary loss on early extinguishment of debt,
net of taxes...................................... (1,233) -- -- -- --
-------- -------- -------- -------- --------
Net income (loss).................................. $ 31,117 $119,194 $ 64,328 $ 9,864 $(38,784)
======== ======== ======== ======== ========
Basic income (loss) per share
Continuing operations............................ $ 1.35 $ 1.44 $ 1.21 $ 0.95 $ 1.20
Discontinued operations.......................... (0.66) 1.16 0.23 (0.73) (2.09)
Extraordinary item............................... (0.03) -- -- -- --
-------- -------- -------- -------- --------
Net income (loss)................................ $ 0.66 $ 2.60 $ 1.44 $ 0.22 $ (0.89)
======== ======== ======== ======== ========
Diluted income (loss) per share
Continuing operations............................ $ 1.32 $ 1.40 $ 1.20 $ 0.94 $ 1.20
Discontinued operations.......................... (0.65) 1.13 0.22 (0.72) (2.09)
Extraordinary item............................... (0.02) -- -- -- --
-------- -------- -------- -------- --------
Net income (loss)................................ $ 0.65 $ 2.53 $ 1.42 $ 0.22 $ (0.89)
======== ======== ======== ======== ========
Cash dividends declared per share.................. $ 0.44 $ 0.44 $ 0.44 $ 0.43 $ 0.39
Weighted average shares outstanding:
Basic............................................ 47,100 45,803 44,731 43,864 43,527
Diluted.......................................... 48,060 47,039 45,274 44,289 43,527
Financial Data
Working capital.................................. $177,676 $103,083 $ 21,114 $(33,762) $ (9,557)
Total assets..................................... 915,767 820,099 743,835 720,895 708,397
Total assets from continuing operations.......... 636,612 571,309 543,391 536,262 541,492
Long-term debt................................... 320,000 300,130 313,107 299,110 286,844
Shareholders' equity............................. $393,956 $305,368 $176,851 $133,791 $140,809
- --------
(1) See Notes 3 and 14 of the Notes to the Financial Statements.
(2) Includes the litigation settlements of $5,000 for proceeding related to an
administrative order issued by the Environmental Quality Board ("EQB") of
Puerto Rico and $3,100 of a private lawsuit brought by an intervening party
in the same EQB administrative case and 1998 restructuring charges of
$26,521.
(3) Represents the 1998 sale of all of the Company's shares of Perkin-Elmer
stock and Glyko Biomedical Ltd. common shares and the 1997 sale of a
portion of the Company's holdings in PerSeptive Biosystems common shares.
Note: Certain reclassifications have been made to previously reported financial
data to conform with the 2001 presentation.
10
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.
Discontinued Operations
On October 3, 2000, the Company announced its plans, subject to certain
conditions, to separate into two distinct companies by making its
Microelectronics business segment an independent, publicly traded company. In
accordance with these plans, the Microelectronics business segment was
separated into a wholly owned Millipore subsidiary named Mykrolis Corporation
("Mykrolis") on March 31, 2001.
During the second quarter of 2001, the Company received a ruling from the
Internal Revenue Service that the Mykrolis spin-off transaction, as planned,
would be tax-free to the Company and its shareholders. Thereafter, the
Company's management and Board of Directors approved the plan of disposition
for Mykrolis. Accordingly, the Company's consolidated financial statements and
notes reflect the Company's Microelectronics business as a discontinued
operation in accordance with Accounting Principles Board Opinion No. 30.
On August 9, 2001, Mykrolis completed an initial public offering (the
"Mykrolis IPO") of 7 million of its common shares at a price of $15.00 per
share. Net proceeds from the Mykrolis IPO, after deducting the underwriting
discount, commissions and other direct costs, were approximately $94.1 million.
Of that amount, Mykrolis paid $19.1 million to the Company as a repayment of
amounts outstanding under the separation agreements between the two companies.
No additional Mykrolis shares were purchased pursuant to the underwriters'
overallotment option provided for as part of the Mykrolis IPO. Prior to the
Mykrolis IPO, the Company's ownership in Mykrolis' outstanding common shares
was 100%, and at December 31, 2001 the Company's ownership in Mykrolis'
outstanding common shares was approximately 82%. On January 28, 2002, the
Company announced a stock dividend of all of the shares of common stock of
Mykrolis owned by the Company. The dividend distribution occurred on February
27, 2002 to shareholders of record as of the close of business on February 13,
2002.
Critical Accounting Policies and Estimates
The Company's discussion and analysis of its financial condition and results
of operations are based upon Millipore's consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires Millipore to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure
of contingent assets and liabilities. On an on-going basis, the Company
evaluates its estimates and judgments, including those related to revenue
recognition, bad debts, inventories, intangible assets and income taxes.
Millipore bases its estimates and judgments on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances. Actual results may differ materially from these estimates under
different assumptions or conditions. The Company believes the following
critical accounting policies affect its more significant estimates and
judgments used in the preparation of its consolidated financial statements.
Revenue is recognized when contractual obligations have been satisfied,
title and risk of loss have been transferred to the customer and collection of
the resulting receivable is reasonably assured. Certain contracts associated
with the Company's process equipment business are recorded on the percentage of
completion method. Revenue is recognized based on the ratio of hours expended
compared to the total estimated hours to complete the construction of the
process equipment. The cumulative impact of any revisions in estimates of the
percent complete is reflected in the period in which the changes become known.
Revenue from deferred service arrangements is recognized when the services are
provided.
11
Millipore maintains allowances for doubtful accounts for specifically
identified estimated losses resulting from the inability of its customers to
make required payments. If the financial condition of the Company's customers
were to deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required.
The Company writes down its inventory for estimated obsolescence or
unmarketable inventory equal to the difference between the cost of inventory
and the estimated market value based upon assumptions about historic usage,
future demand and market conditions. If actual market conditions are less
favorable than those projected by management, additional inventory write-downs
may be required.
The Company periodically reviews intangible assets to determine if
impairment has taken place due to changed business conditions or technological
obsolescence and accordingly, the net book value of the asset may be reduced.
Millipore records a valuation allowance to reduce its deferred tax assets to
the amount that is more likely than not to be realized. While the Company has
considered future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance, in the event the
Company were to determine that it would be able to realize its deferred tax
assets in the future in excess of its net recorded amount, an adjustment to the
deferred tax asset would increase income in the period such determination was
made. Likewise, should the Company determine that it would not be able to
realize all or part of its net deferred tax asset in the future, an adjustment
to the deferred tax asset would be charged to income in the period such
determination was made.
Results of Operations
Basis of Presentation
As noted above, the Company's consolidated financial statements and notes
reflect the Company's Microelectronics business as a discontinued operation in
accordance with Accounting Principles Board Opinion No. 30. Unless otherwise
indicated, the remainder of this discussion is on a continuing operations basis
only.
The following discussion of the Results of Operations includes reference to
"local currencies". Local currency results represent the foreign currency
balances translated, in all periods presented, at Millipore's budgeted exchange
rates for 2001, 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 because it believes that
the local currency results provide a clearer presentation of underlying
business trends. The U.S. dollar results represent the foreign currency
balances translated at actual exchange rates.
Reported Earnings
The Company reported diluted earnings per share of $0.65, $2.53 and $1.42
for 2001, 2000 and 1999, respectively. The Company reported diluted earnings
per share from continuing operations of $1.32, $1.40 and $1.20 for 2001, 2000
and 1999, respectively. Excluding unusual items, the Company would have
reported diluted earnings per share from continuing operations of $1.56, $1.32
and $1.14 for 2001, 2000 and 1999, respectively.
Below is a summary of the unusual items affecting diluted earnings per share
from continuing operations. Refer to the discussions in Restructuring and Other
Items and Gain on Sale of Equity Securities for additional information related
to these items.
12
Summary of Unusual Items
Year Ended December 31,
----------------------
2001 2000 1999
------ ----- -----
(In millions, except
per share data)
Restructuring and other items.................................. $(18.0) $(0.3) $ 4.0
Gain on sale of equity securities, net......................... -- 7.2 --
------ ----- -----
Impact on income from continuing operations before income taxes (18.0) 6.9 4.0
Tax impact of unusual items.................................... 6.3 (2.7) (1.4)
------ ----- -----
Net income (loss) from unusual items........................... $(11.7) $ 4.2 $ 2.6
====== ===== =====
Diluted income (loss) per share from unusual items............. $(0.24) $0.08 $0.06
====== ===== =====
Net Sales
Net sales, measured in U.S. dollars, increased 9% in 2001 compared to 6% in
2000. The net sales increase in 2001 as compared to 2000 was primarily due to
continued growth in the biotech and life sciences markets which was partially
offset by negative net currency effects.
Sales growth by 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
--------------- ------------
2001 2000 2001 2000
---- ---- ---- ----
Americas........ 11% 14% 11% 13%
Europe.......... 14% 7% 12% (5)%
Asia/Pacific.... 16% 8% 4% 12%
-- -- -- --
Consolidated. 13% 10% 9% 6%
-- -- -- --
In general, a stronger U.S. dollar will adversely affect sales growth. Since
the Company has a higher percentage of sales in Europe than Asia, strengthening
of the dollar against the European currencies will have a larger impact on
sales. The impact of translating sales denominated in currencies other than the
U.S. dollar reduced the reported sales growth rate by approximately 400 basis
points in 2001. During 2001 as compared to 2000 the Yen weakened on average
against the U.S. dollar by approximately 12% and the Euro weakened against the
U.S. dollar on average by approximately 4%. Although the percentage decline in
the Euro was much smaller than the percentage decline in the Yen, the dollar
impact of both currencies' decline was approximately equivalent since sales in
Europe represent almost 34% of the Company's sales compared to approximately
15% for Japan. In 2000, the reported sales growth rate was negatively impacted
by approximately 400 basis points due to exchange rates. While the Japanese Yen
favorably impacted reported sales as it strengthened against the U.S. dollar by
approximately 5%, it was more than offset by the Euro which weakened by 15%.
Non-currency related price changes have not significantly affected the
comparability of sales during the past three years.
The Company's sales, measured in local currencies, increased 13% in 2001
compared to 2000. The growth was broad-based across product lines and
geographies. By market, revenue growth was strongest for products used in
advanced life science research and in the biotechnology markets, which
collectively grew at 18% and account for 45% of sales. The growth in these
markets resulted from increases in new biotech drugs currently in clinical
approval phases, biotech drugs that have been approved and are in production as
well as increased spending in genomics and proteomics research. In addition,
products sold to the Company's legacy markets, which include classical
pharmaceutical, clinical and analytical laboratories, and food and beverage
markets, also experienced strong growth at 9% in 2001 as compared to 2000. By
product, growth was strongest in higher margin consumables and services, which
grew 14% and 27%, respectively. These products represented approximately 80% of
total revenues in 2001. Lower margin equipment sales increased 6% as compared
to 2000.
13
The Company's sales, measured in local currencies, increased 10% in 2000
compared to 1999. Growth was strongest in the biotechnology and life science
research markets where sales increased approximately 14% compared to 1999.
Sales to these markets comprised approximately 43% of total sales in 2000.
Legacy sales increased 7% versus sales in 1999. By product, consumables and
services increased 11% and 27%, respectively, over 1999 levels. Equipment
increased 6% as compared to 1999.
Gross Profit Margins
Gross profit margin percentages were 56% in 2001 and 2000 and 55% in 1999.
The gross profit margin percentage for 2001 as compared to 2000 and 1999 was
positively impacted by a favorable mix in higher margin consumables products,
volume efficiencies and cost reduction programs, as well as by the benefit in
manufacturing in overseas locations where production costs benefited from a
weaker local exchange rate. This was partially offset as the strengthening U.S.
dollar adversely impacted sales. In local currencies, the gross profit margin
for 2001 was 57% versus 56% for the prior two years.
Operating Expenses
Selling, general and administrative ("SG&A") expenses increased 5% in 2001
and 2% in 2000. In local currencies, SG&A increased 9% and 6% in the two years,
respectively. The increase in 2001 was primarily due to higher head count and
related expenses needed to support sales. As a percentage of sales, SG&A
expenses in local currencies decreased approximately one percentage point
during 2001 to 31%. 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 ("R&D") expenses increased 13% in 2001 and 18% in
2000, as compared to the prior years. In local currencies, R&D, which is
primarily based in the United States, increased 14% in 2001 and 20% in 2000,
versus prior years. As a percentage of sales, R&D expenses in local currencies
increased from 6.0% in 1999 to 6.6% in 2000 to 6.7% in 2001. The Company has
pursued a strategy of increased research and development spending to fund
future growth opportunities including membrane and chromatography based
solutions for genomics, proteomics, and biopharmaceutical manufacturing
applications.
Restructuring and Other Items
In the first quarter of 2001, the Company initiated a restructuring program.
Key initiatives of the program included:
. Globally streamlining of certain corporate shared services and
divisional overhead functions to serve smaller organizations. This
action was completed in 2001.
. Centralizing into two locations European shared services including order
processing, cash collections and cash applications processes. This
action began in the first quarter of 2001 and will be completed in the
second half of 2002.
. Closing the manufacturing operation in China in order to reduce
manufacturing infrastructures. This action was completed in the first
quarter of 2001.
. Outsourcing certain manufacturing processes in Puerto Rico to third
party vendors in order to create a more flexible cost structure. This
action was completed in the second quarter of 2001.
These initiatives included a $16.5 million restructuring charge and $1.5
million of fixed asset write-offs for assets that were no longer in use. The
restructuring charge included $15.4 million of employee severance costs and
$1.1 million of lease cancellation costs. Approximately 215 positions were
eliminated and the affected employees were notified by March 31, 2001, however,
for employees temporarily continuing in their existing positions, related
salary costs will be charged to operations as incurred. Under the terms of the
severance agreements, the Company
14
expects to pay severance and associated benefits through 2002. Through December
31, 2001, approximately 160 employees have left the Company and $8.6 million of
severance benefits have been paid.
The restructuring program is expected to yield annualized savings of over
$10.0 million related to reduced wages, facility related costs and
depreciation, and will be reflected in cost of sales, SG&A expenses and R&D
expenses. The savings, which began in the second quarter of 2001, will not be
fully realizable until the first quarter of 2002.
In 1998, the Company recorded a restructuring charge related to the
streamlining of its operations. In 1999, the Company reevaluated the accrual
for the 1998 restructuring program and reversed $4.0 million of the remaining
balance. The reversal reflected a lower estimate for employee severance and
lease cancellation costs. In 2000, the Company reversed an additional $1.2
million in restructuring reserves primarily related to additional proceeds from
the sale of facilities. The final cash payments, consisting primarily of lease
termination costs, occurred in the third quarter of 2001. As of December 31,
2001, the 1998 restructuring program has been completed. Of the planned 160
employees, all left the Company pursuant to this initiative.
In 2000, the Company recorded a charge of $1.5 million for past royalties as
part of the settlement of a patent lawsuit.
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.
Net Interest Expense
Net interest expense decreased $0.7 million in 2001 as compared to 2000. The
decrease was the result of lower average borrowings and lower interest rates
partially offset by lower rates on interest income from cash and cash
equivalents. The benefit from the reduction in interest rates was offset in
part by the termination of the Company's Yen debt swap agreement. 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.
Provision (Benefit) for Income Taxes
The Company's effective tax rate on net income for 2001, 2000 and 1999 was
19.0%, 23.3% and 21.8%, respectively. Excluding the effect of the restructuring
items, sales of equity securities, and litigation settlements, the Company's
tax rate on income from operations in 2001 and 2000 was 22%. In 2000, the
Company's tax rate on income from operations increased to 22% from 21% in 1999.
This increase was due to changes in the profitability mix between the various
tax jurisdictions within which the Company operates.
Discontinued Operations
The $6.7 million loss from discontinued operations for 2001 represents the
net losses of Mykrolis from the beginning of 2001 through the adoption of the
plan of disposition in the second quarter of 2001. The income from discontinued
operations for 2000 and 1999 were $53.1 million and $10.1 million,
respectively. The significant fluctuation in the performance of Mykrolis was
primarily due to strong sales growth related to improvements in the
semiconductor industry which began in 1999 and continued into 2000. During
2001, a decline in the semiconductor industry adversely affected sales for
Mykrolis. See Note 2 to the Consolidated Financial Statements.
Loss on disposal of discontinued operations of $24.4 million ($35.1 million
pre-tax) recorded in the second quarter of 2001 included estimated future
operating losses of $18.6 million for Mykrolis through the planned
15
disposition date in the first quarter of 2002 and disposition expenses of $5.8
million. In the third quarter of 2001, the Company revised the $24.4 million
estimated loss on disposal of discontinued operations. The pre-tax revision
included an $8.7 million increase in the estimated future operating losses for
Mykrolis through the planned disposition date offset by reduced disposition
expenses of $2.0 million and a $6.7 million reduction to adjust for the 17.7
percent minority interest share of forecasted operating losses through the
disposition date resulting from the of Mykrolis IPO in the third quarter.
Extraordinary Loss on Early Extinguishment of Debt
The Company recorded an extraordinary loss of $1.2 million after taxes ($1.9
million pre-tax) related to the $25.0 million prepayment under one of the
Company's long term notes.
Earnings Per Share
Restructuring charges, several unusual items as well as discontinued
operations impacted earnings per share in 2001, 2000 and 1999. Also refer to
the Summary of Unusual Items above for additional information. In addition, in
2001, earnings per share reflect the extraordinary loss as described above.
Earnings per share were also negatively impacted in 2001 as compared to 2000
by approximately $0.17 per share due to the impact of the weakening of the Euro
and the Yen. In 2000, earnings per share were negatively impacted as compared
to 1999 by approximately $0.07 per share due to the impact of the weakening
Euro partially offset by a stronger Yen.
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.
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.
Foreign Currency Exchange Rate Risk
The Company is exposed to foreign currency exchange rate risk inherent in
revenues, net income and assets and liabilities denominated in currencies other
than the U.S. dollar. The Company's risk management strategy uses various
derivative financial instruments, including from time to time, swaps, options
and forward contracts to hedge certain foreign currency and interest rate
exposures. The intent is to offset gains and losses that occur on the
underlying exposures, with gains and losses on the derivative contracts hedging
these exposures. Additionally, the Company is able to partially mitigate the
impact of fluctuations in currencies by active management of cross border
currency flows and material sourcing. The Company does not enter into
derivatives for trading purposes. See Notes 1 and 8 to the Consolidated
Financial Statements for more detailed information.
16
Although the Company attempts to manage 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 and trade receivables. 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 geographies.
Capital Resources and Liquidity
Cash flow provided from operations was $61.9 million in 2001, $85.3 million
in 2000 and $101.0 million in 1999. Reported cash flow from operations was
reduced by $8.3 million in 2001, $2.4 million in 2000 and $4.8 million in 1999
for costs associated with the 2001 and 1998 restructuring programs and a 1996
acquisition. Excluding the restructuring and acquisition related expenditures,
cash flow from operations was $70.2 million in 2001, $87.7 million in 2000,
$105.8 million in 1999.
The decrease in cash flow from operations in 2001 from 2000 was primarily
the result of increased accounts receivable and payment of income taxes
partially offset by improved operating income excluding the $11.7 million
(after tax) restructuring charge. The increase in accounts receivable was
attributable to increased sales volume primarily in the United States and
Europe. While the Company continues to aggressively manage its receivables
portfolio, it experienced a slight slowdown during 2001 due to the temporary
disruption in collection activities caused by the Mykrolis reorganization as
well as consolidation of collection activities in the European shared service
center. Accrued income taxes decreased approximately $24.3 million for payments
made in foreign tax jurisdictions. Inventory levels increased $4.3 million due
principally to increased business activity, as days of supply remained flat in
local currencies. Partially offsetting the impact of accounts receivable and
inventory increases and payments for income taxes were increases in accounts
payable and accrued expenses, due to higher business activity and variable
compensation programs resulting from improved financial performance.
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. Inventory levels increased due to stocking levels. Partially
offsetting the impact of accounts receivable and inventory increases were
increases in accounts payable and accrued expenses, due to higher business
activity, and variable compensation programs resulting from improved financial
performance.
Operating cash flow generated by the Company during 2001 was used to invest
in property, plant and equipment, reduce and refinance debt, and pay dividends.
The Company received $49.8 million from the exercise of employee stock options
exercises and $3.2 million of cash previously restricted as part of the close
out of the debt swap agreements. The Company spent $72.3 million for property,
plant and equipment during 2001. The $35.8 million increase in capital
expenditures in 2001 versus 2000 was primarily due to additional manufacturing
capacity and laboratories in the United States and Europe. During 2000, the
Company received $8.8 million from the sale of property, $7.5 million from the
sale of equity securities and $28.0 million from the exercise of employee stock
options. The Company expects capital expenditures for 2002 to be in the range
of $80.0 to $85.0 million. This increase will be driven by the continued need
to add manufacturing capacity and research and development facilities.
17
The Mykrolis IPO resulted in net proceeds of $94.1 million. These proceeds
less $75.0 million retained by Mykrolis pursuant to the separation agreements
between the two companies and an additional $6.8 million of cash generated from
the operations through the date of the Mykrolis IPO resulted in net cash
provided from discontinued operations of approximately $25.9 million.
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 $27.1 million which
included $4.0 million for the completion of the membrane manufacturing facility
expansion in Cork, Ireland. The Company also received $9.5 million in cash for
the sale of securities in Waters Corporation.
On October 5, 2001, the Company entered into a five year unsecured revolving
credit agreement which replaced its prior revolving credit agreement. The new
revolving credit agreement, together with a Lender Joinder Agreement that the
Company entered into on October 23, 2001, (together the "Credit Agreement")
allows for revolving loan borrowings of up to $250.0 million. Interest rates on
individual borrowings are made on terms not to exceed twelve months. Because of
the Company's ability and intent to continuously refinance such borrowings
under the Credit Agreement, short-term borrowings expected to be refinanced,
including $45.0 million of amounts outstanding at December 31, 2001 and $100.0
million due on notes payable with maturities within the next 12 months, have
been classified as long-term. Interest is payable on outstanding borrowings at
a floating rate defined in the agreement as Eurocurrency rate plus a margin.
The Credit Agreement also calls for a facility fee at a rate ranging from 0.25
to 0.625 percent of the available facility. The exact amount of the margin and
the facility fee is dependent on the Company's debt rating. The Credit
Agreement calls for the Company to maintain certain financial covenants in the
areas of leverage ratios and interest coverage. The Company is compliant with
all required covenants.
On October 4, 2001, the Company amended the agreement governing its $100.0
million 7.23% note payable (the "Note Agreement"). The amended Note Agreement's
financial covenants were modified and mirror the financial covenants under the
Credit Agreement. The Company also prepaid $25.0 million of the note at that
time.
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.
The following summarizes the Company's contractual obligations at December
31, 2001 and the maturity periods, and the effect such obligations are expected
to have on its liquidity and cash flow in future periods.
Less than 1-3 After
December 31, Total 1 year years 3 years
------------ ------ --------- ----- -------
(in millions)
Long-term debt.................... $320.0 $100.0 $75.0 $145.0
Non-cancellable operating leases.. 27.5 6.8 10.1 10.6
------ ------ ----- ------
Total contractual cash obligations $347.5 $106.8 $85.1 $155.6
====== ====== ===== ======
Related Party Agreements
At March 31, 2001 (the "Separation Date"), the Company and Mykrolis entered
into various agreements covering a range of issues relating to the separation
of Mykrolis from the Company (the "Separation Agreements"). A list of the
Separation Agreements is provided below. All of the Separation Agreements were
filed with the Securities and Exchange Commission as exhibits to the Company's
Form 10-Q for the quarter ended June 30, 2001. Additionally, refer to Note 16
of the Consolidated Financial Statements for further information. The
Separation Agreements include:
Master Separation and Distribution Agreement
18
General Assignment and Assumption Agreement
Separation Revolving Credit Agreement and Separation Note
Employee Matters Agreement
Tax Sharing Agreement
Intellectual Property Agreements
Membrane Manufacture and Supply Agreement
Product Distribution Agreement
Contract Manufacturing Agreements
Master Transitional Services Agreement
Research Agreement
The Separation Agreements were entered into for the purpose of enabling an
effective separation of Mykrolis from the Company and the operation of Mykrolis
and Millipore as independent companies. The Separation Agreements generally
provide for:
. The transfer from Millipore to Mykrolis of assets and the assumption by
Mykrolis of liabilities relating to Mykrolis' business.
. Ongoing relationships between Millipore and Mykrolis to enable each of
them to carry on their respective businesses as independent companies.
These contractual relationships, including contract research services,
product manufacturing and distribution, are for terms not exceeding five
years from the Separation Date. The prices provided in these agreements
generally allow for the recovery of costs with profit.
. Interim relationships between Millipore and Mykrolis to enable a smooth
transition for the separation and independent existence of Mykrolis.
These relationships are intended to provide for facilities and services
for various periods up to two years, with minimal extensions, at which
point Mykrolis must secure alternative sources of facilities and
services. These include services such as human resources, financial
systems and information technology. The prices provided for in these
agreements generally allow for the recovery of costs without profit.
For the nine months from the Separation Date through December 31, 2001,
Millipore recognized revenues of $1.9 million and expenses were reduced by $6.4
million for the Separation Agreements. Some of the Separation Agreements will
terminate during 2002. Although, the Company does not expect a significant
increase in its expenses in 2002 as a result of these agreements lapsing as a
portion of Millipore's costs related to these expenses are variable and expense
reduction programs are in place, the final outcome is not known at this time.
The $6.4 million expense reduction included $1.1 million for cost of sales,
$4.2 million for selling, general and administrative and $1.1 million for
research and development.
The Company also has significant transactions with companies with which
several of its directors are affiliated. During 2001, Bristol-Myers Squibb
Company purchased an aggregate of approximately $2.0 million of products from
Millipore. Richard J. Lane, a Director of Millipore since 1999, is currently
Executive Vice President and President, Worldwide Medicines of Bristol-Myers
Squibb Company. The relationship between Millipore and Bristol-Myers Squibb
Company predates by many years Mr. Lane's election as a Director. During 2001,
Merck & Co., Inc. purchased approximately $13.0 million of products from
Millipore. Dr. Edward M. Scolnick, a Director of Millipore since December 2001,
is currently Executive Vice President, Science & Technology, Merck & Co., Inc.
and President of Merck Research Laboratories. The relationship between
Millipore and Merck & Co., Inc. predates by many years Dr. Scolnick's election
as a Director. During 2001, the Company paid Salomon Smith Barney, Inc.
approximately $2.3 million of underwriter commissions in connection with the
Mykrolis IPO. Maureen A. Hendricks, a Director of Millipore since 1995, is
currently a Managing Director of Salomon Smith Barney, Inc.
19
Dividends
The quarterly dividend was $0.11 per share throughout 2001. The Company paid
dividends of $20.7 million in 2001.
Euro
On January 1, 1999, several member countries of the European Union
established fixed conversion rates between their existing sovereign currencies,
and adopted the Euro as their new common legal currency. As of that date, the
Euro began trading on currency exchanges and the sovereign currencies remained
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 upgraded its computer
systems in 2001 which successfully enabled all business transactions in the
Euro effective January 1, 2002.
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 (now known as Amersham
Biosciences 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 appealed this decision and, on
July 5, 2001, the British Appeals Court affirmed the decision of the High
Court. On February 13, 2002, the House of Lords rejected APB's request for
leave to appeal the decision of the Appeals Court. The High Court also ruled
that a discontinued product did infringe one of the APB patents. A hearing on
damages has yet to be scheduled with respect to this matter. In any event, the
outcome of this suit is not expected to have a material adverse effect on the
Company's financial position, cash flows and results of operations.
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 financial position, cash flows and results of operations 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.
20
New Accounting Pronouncements
Effective January 1, 2001, the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS No. 138.
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, upon adoption of the new standard, 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
was a party to U.S. dollar to Japanese Yen foreign currency fixed rate-to-fixed
rate interest rate swap agreements, which were designated as a hedge of the
Company's net investment exposure in its Japanese subsidiary. On January 1,
2001, the Company recorded a net derivative liability transition adjustment of
$5.1 million which was the difference between the Company's carrying value and
the fair value of this derivative. This transition adjustment was recorded as a
cumulative-effect type adjustment to other comprehensive income. During the
first quarter of 2001, the swap agreements were terminated and a gain of $0.8
million was realized and recorded in other comprehensive income. In addition,
the Company is no longer required to provide any cash collateralization which
had previously been required as part of one of its swap agreements.
In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other
Intangible Assets". SFAS No. 141 requires that all business combinations be
accounted for under the purchase method only and that certain acquired
intangible assets in a business combination be recognized as assets apart from
goodwill. SFAS No. 142 requires that ratable amortization of goodwill be
replaced with periodic tests of the goodwill's impairment and that intangible
assets other than goodwill be amortized over their useful lives. SFAS No. 141
is effective for all business combinations initiated after June 30, 2001. The
provisions of SFAS No. 142 will be effective for fiscal years beginning after
December 15, 2001, and will thus be adopted by the Company as required in the
first quarter of fiscal year 2002. The adoption of SFAS No. 142 is not expected
to have a significant impact on the Company's consolidated financial statements.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" effective January 1, 2002. SFAS
No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" and provides a single
accounting model for long-lived assets to be disposed of. In addition, the
standard eliminates the requirement to accrue for losses through the estimated
date of disposal of a business. The provisions of this standard do not apply to
the Company's disposal of Mykrolis Corporation in the second quarter of 2001.
The adoption of SFAS No. 144 is not expected to have a significant impact on
the Company's consolidated financial statements.
Business Outlook and Uncertainties
The following statements are based on current expectations. These statements
are forward looking and actual results may differ materially.
Sales: The Company has demonstrated relatively stable patterns of sales
growth and expect 2002 revenues in local currencies to increase 12 to 14
percentage points over 2001. The Company's customers, particularly those
involved in the production of therapeutic compounds, purchase products for use
in validated production processes. Accordingly, it is important to participate
in the development of the manufacturing process for these new drugs in order to
be specified into the ultimate manufacturing process. Adoption of new
technologies and products requires a lengthy validation process prior to
adoption. Growth in this market is highly dependent on the
21
development and approval of new drugs. It is difficult to ascertain the number
or timing of such approvals, however, the number of drugs at various stages in
the approval process has increased over the past two years. The remaining
driver of this segment is life science research and development spending.
Recently published industry reports in the area of life science anticipate
increased research and development spending for genomics, proteomics and drug
discovery. The Company will benefit if these trends prove out, however the
extent to which the Company will benefit from this trend is not quantifiable.
Approximately 55 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 2001 as
compared to 2000. This was the composite result of both a weaker Yen and a
weaker Euro in 2001. Since the end of 2001, the dollar has continued to
strengthen against the Yen and the Euro. Therefore, if rates of exchange remain
at the March 1, 2002 level, there could be a significant negative impact on
sales for the first quarter and full year 2002 as compared to 2001.
Gross Margins: The Company expects slightly higher gross margin percentages
in 2002 as compared to 2001. The continued favorable mix of higher margin
consumable products versus lower margin process systems hardware combined with
automation and volume efficiencies will combine to more than offset increased
costs of certain raw materials and labor, continued new product start up costs,
volume driven pricing arrangements and additional costs due to increased
manufacturing capacity. However, to the extent that foreign currency exchange
rates relative to the U.S. dollar remain at March 1, 2002 levels, first quarter
2002 and full year margins could be significantly negatively impacted by
foreign currency exchange rate fluctuations as compared to the same periods of
the prior year.
Millipore's products are made from a wide variety of raw materials that 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 these raw materials. Two of these critical raw materials are used
in a significant portion of the Company's products. If the Company were unable
to obtain supply of either of these raw materials, the loss of revenues to the
Company would be material. In December 1999, the Company's sole supplier of one
of these two critical raw materials, which is used in the manufacture of one
type of membrane sold by the Company, 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 raw material. The Company believes that these arrangements will provide
an adequate source of supply for this raw material.
Operating Expenses: The Company expects that operating expenses, before the
impact of changes in foreign currency rates of exchange, as a percentage of
sales, in 2002 will be slightly greater than the percentage achieved in the
previous year primarily as a result of continued investment in strategic R&D
projects. In addition, the Company will continue 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.
Net Interest Expense, Capital Resources and Liquidity: The Company intends
to use its excess borrowing capacity under the Credit Agreement to satisfy the
$100.0 million 7.23% unsecured note due on April 1, 2002. Accordingly, the
Company expects that its interest expense should decline due to a lower
interest rate under the Credit Agreement.
Provision for Income Taxes: The effective tax rate in 2002 is projected to
be approximately 22%, equivalent to the effective rate for 2001, excluding
unusual items. The tax rate estimate is based on the Company's current
expectations for 2002 income, current tax law and tax jurisdiction mix of
revenues and profits. 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.
22
Capital Spending: The Company expects to spend between $80.0 and $85.0
million for fixed asset additions in 2002. This increase will be driven by the
on-going need to add manufacturing capacity, expand automated manufacturing
processes and upgrade research and development facilities. Accordingly, the
Company also expects that 2002 depreciation expense will be higher than
reported in 2001.
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 associated with the separation of Mykrolis from the
Company; 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; lack of 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 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"). See also
"Legal Proceedings" and "Business Outlook and Uncertainties" above.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The information called for by this item is set forth under the heading
"Market Risk" in Management's Discussion and Analysis contained in Item 7 above
which information is hereby incorporated by reference.
Item 8. Financial Statements and Supplementary Data.
The information called for by this item is set forth in the Financial
Statements at the end of this report commencing at the pages indicated below:
Consolidated Statements of Income for the years ended December 31, 2001, 2000 and 1999.......... 31
Consolidated Balance Sheets at December 31, 2001 and 2000....................................... 32
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2001, 2000 and
1999.......................................................................................... 33
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999...... 34
Notes to Consolidated Financial Statements...................................................... 35
Report of Independent Accountants............................................................... 57
Quarterly Results (Unaudited)................................................................... 58
All of the foregoing Financial Statements are hereby incorporated by
reference.
Item 9. Disagreements on Accounting and Financial Disclosure.
This item is not applicable.
23
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 25, 2002, and to be filed with the
Securities and Exchange Commission on or about March 14, 2002, 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 25, 2002, and to
be filed with the Securities and Exchange Commission on or about March 14,
2002, 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 25, 2002, and to be filed with the Securities
and Exchange Commission on or about March 14, 2002, which information is hereby
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information called for by this item with respect to registrant's
directors' relationships and related transactions is set forth under the
caption "Certain Relationships and Related Transactions" in Millipore's
definitive Proxy Statement for Millipore's Annual Meeting of Stockholders to be
held on April 25, 2002, and to be filed with the Securities and Exchange
Commission on or about March 14, 2002, which information is hereby incorporated
herein by reference.
24
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, 2001,
2000 and 1999
Consolidated Balance Sheets at December 31, 2001 and 2000
Consolidated Statements of Shareholders' Equity for the years ended December
31, 2001, 2000 and 1999
Consolidated Statements of Cash Flows for the years ended December 31, 2001,
2000 and 1999
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
- --------- ------------------------------------------------ ------------------------
(2) Form of Master Separation and Distribution Form 10-Q for the quarter ended June 30, 2001
Agreement between Millipore and Mykrolis [Commission File No. 0-1052]
Corporation ("Mykrolis")+
Form of General Assignment and Assumption Form 10-Q for the quarter ended June 30, 2001
Agreement between Millipore and Mykrolis+ [Commission File No. 0-1052]
(3)(i) Restated Articles of Organization, as amended Form 10-K Report for year ended December 31,
May 6, 1996 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, relating to Registration Statement on Form S-4
the issuance of $100,000,000 principal amount (No. 33-58117)
of the Company's 6.78% Senior Notes due 2004
Indenture dated as of April 1, 1997, relating to Registration Statement on Form S-3
the issuance of Debt Securities in Series (No. 333-23025)
(10) Shareholder Rights Agreement dated as of April Form 8-K Report for April, 1998
15, 1988, as amended and restated April 16, [Commission File No. 0-1052]
1998 between Millipore and The First National
Bank of Boston
Distribution Agreement, dated as of July 1, Form 10-K Report for the year ended
1996, by and among the Company and Fisher December 31, 1996 [Commission File
Scientific Company No. 0-1052]
25
Reg. S-K
Item
601(b) Referenced Document on
Reference Document Incorporated file with the Commission
- --------- ------------------------------------------------ ------------------------
Note Purchase and Exchange Agreement, as Form 10-K Report for the year ended December 31,
amended through November 2, 1998, between 1998 [Commission File No. 0-1052]
Millipore and Metropolitan Life Insurance
Company
Amendment No. 3, dated October 4, 2001, to Form 10-Q Report for the quarter ended
Note Purchase and Exchange Agreement September 30, 2001 [Commission File No. 0-1052]
between Millipore and Metropolitan Life
Insurance Company
Form of letter agreement with directors relating Form 10-K Report for the year ended December 31,
to the deferral of directors fees and conversion 1998 [Commission File No. 0-1052]
into phantom stock units*
1989 Stock Option Plan for Non-Employee Form 10-K Report for the year ended December 31,
Directors* 1998 [Commission File No. 0-1052]
Standard Executive Termination Agreement, as Form 10-K Report for the year ended December 31,
amended* 1999 [Commission File No. 0-1052]
1999 Stock Incentive Plan* Form 10-K Report for the year ended December 31,
1999 [Commission File No. 0-1052]
1995 Employees' Stock Purchase Plan, as Form 10-K Report for the year ended December 31,
amended* 1999 [Commission File No. 0-1052]
1999 Stock Option Plan for Non-Employee Form 10-K Report for the year ended December 31,
Directors* 1999 [Commission File No. 0-1052]
2000 Deferred Compensation Plan for Senior Form 10-K Report for the year ended December 31,
Management* 2000 [Commission File No. 0-1052]
Standard Deferred Compensation Agreement* Form 10-K, Report for the year ended December
31, 2000 [Commission File No. 0-1052]
Supplemental Savings and Retirement Plan for Form 10-K Report for the year ended December 31,
Key Salaried Employees of Millipore 2000 [Commission File No. 0-1052]
Corporation, as amended*
2000 Management Incentive Plan* Form 10-K Report for the year ended December 31,
2000 [Commission File No. 0-1052]
Master Patent Assignment between Millipore Form 10-Q for the quarter ended June 30, 2001
and Mykrolis [Commission File No. 0-1052]
Master Patent License Agreement between Form 10-Q for the quarter ended June 30, 2001
Millipore and Mykrolis [Commission File No. 0-1052]
Master Patent Grantback License Agreement Form 10-Q for the quarter ended June 30, 2001
between Millipore and Mykrolis [Commission File No. 0-1052]
Master Trademark Assignment between Form 10-Q for the quarter ended June 30, 2001
Millipore and Mykrolis [Commission File No. 0-1052]
26
Reg. S-K
Item
601(b) Referenced Document on
Reference Document Incorporated file with the Commission
- --------- ------------------------------------------------- ------------------------
Master Trademark License Agreement between Form 10-Q for the quarter ended June 30, 2001
Millipore and Mykrolis [Commission file No. 0-1052]
Master Invention Disclosure Assignment Form 10-Q for the quarter ended June 30, 2001
between Millipore and Mykrolis [Commission File No. 0-1052]
Master Trade Secret and Know-How Agreement Form 10-Q for the quarter ended June 30, 2001
between Millipore and Mykrolis [Commission File No. 0-1052]
Tax Sharing Agreement between Millipore and Form 10-Q for the quarter ended June 30, 2001
Mykrolis [Commission File No. 0-1052]
Employee Matters Agreement between Form 10-Q for the quarter ended June 30, 2001
Millipore and Mykrolis [Commission File No. 0-1052]
Master Transitional Services Agreement Form 10-Q for the quarter ended June 30, 2001
between Millipore and Mykrolis [Commission File No. 0-1052]
Reorganization of Operations Outside the U.S. Form 10-Q for the quarter ended June 30, 2001
[Commission File No. 0-1052]
Membrane Manufacture and Supply Agreement Form 10-Q for the quarter ended June 30, 2001
between Millipore and Mykrolis [Commission File No. 0-1052]
Research Agreement between Millipore and Form 10-Q for the quarter ended June 30, 2001
Mykrolis [Commission File No. 0-1052]
Product Distribution Agreement between Form 10-Q for the quarter ended June 30, 2001
Millipore and Mykrolis [Commission File No. 0-1052]
Millipore Contract Manufacturing Agreement Form 10-Q for the quarter ended June 30, 2001
[Commission File No. 0-1052]
Mykrolis Contract Manufacturing Agreement Form 10-Q for the quarter ended June 30, 2001
[Commission File No. 0-1052]
Form of Mykrolis Separation Note Form 10-Q for the quarter ended June 30, 2001
[Commission File No. 0-1052]
Separation Revolving Credit Agreement Form 10-Q for the quarter ended June 30, 2001
between Millipore and Mykrolis [Commission File No. 0-1052]
Credit Agreement between Millipore and certain Form 10-Q for the quarter ended September 30,
of its subsidiaries, Bank of America, N.A., and 2001 [Commission File No. 0-1052]
certain other lending and arranging institutions,
dated October 5, 2001
Lender Joinder Agreement between Millipore Form 10-Q for the quarter ended September 30,
and certain of its subsidiaries, Bank of America, 2001 [Commission File No. 0-1052]
N.A., and PB Capital Corporation, dated
October 23, 2001
- --------
+ Millipore Corporation agrees to furnish supplementally to the Commission a
copy of any omitted schedule or exhibit to such agreement upon request by the
Commission.
* A "management contract or compensatory plan"
27
B. The following exhibits are filed herewith:
Reg. S-K
Item
601(b)
Reference Documents Filed Herewith
- --------- ---------------------------------------------------------------------------------------------
(10) Amendment No. 1, dated March 31, 2001, to 2000 Deferred Compensation Plan for Senior
Management *
Amendment, dated March 31, 2001, to Supplemental Savings and Retirement Plan for key salaried
Employees of Millipore Corporation *
(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, 2-97280, 33-37319, 33-37323, 33-11790, 33-55613, 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 and 33-48960 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, 2001.
(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 8, 2002
By: /S/ JEFFREY RUDIN
-----------------------------
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 of the Board of March 8, 2002
- ----------------------------- Directors
C. William Zadel
/S/ FRANCIS J. LUNGER March 8, 2002
- ----------------------------- President, Chief Executive
Francis J. Lunger Officer, and Director
/S/ KATHLEEN B. ALLEN March 8, 2002
- ----------------------------- Vice President, Chief
Kathleen B. Allen Financial Officer
/S/ DONALD B. MELSON March 8, 2002
- ----------------------------- Corporate Controller (Chief
Donald B. Melson Accounting Officer)
/S/ DANIEL BELLUS* Director March 8, 2002
- -----------------------------
Daniel Bellus
/S/ ROBERT C. BISHOP* Director March 8, 2002
- -----------------------------
Robert C. Bishop
/S/ MAUREEN A. HENDRICKS* Director March 8, 2002
- -----------------------------
Maureen A. Hendricks
/S/ MARK HOFFMAN* Director March 8, 2002
- -----------------------------
Mark Hoffman
/S/ RICHARD J. LANE* Director March 8, 2002
- -----------------------------
Richard J. Lane
/S/ JOHN F. RENO* Director March 8, 2002
- -----------------------------
John F. Reno
/S/ EDWARD M. SCOLNICK* Director March 8, 2002
- -----------------------------
Edward M. Scolnick
*By: /S/ JEFFREY RUDIN
-------------------------
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, 2001, 2000 and 1999.............. 31
Consolidated Balance Sheets at December 31, 2001 and 2000........................................... 32
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2001, 2000 and 1999 33
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999.......... 34
Notes to Consolidated Financial Statements.......................................................... 35
Report of Independent Accountants................................................................... 57
Quarterly Results (Unaudited)....................................................................... 58
30
MILLIPORE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year ended December 31
------------------------------------
2001 2000 1999
-------- -------- --------
(In thousands, except per share data)
Net sales....................................................... $656,898 $600,161 $566,295
Cost of sales................................................... 291,219 266,227 252,940
-------- -------- --------
Gross profit............................................. 365,679 333,934 313,355
Selling, general and administrative expenses.................... 200,757 190,556 186,389
Research and development expenses............................... 45,816 40,580 34,443
Restructuring and other items................................... 17,962 320 (3,979)
-------- -------- --------
Operating income......................................... 101,144 102,478 96,502
Net gain on sale of equity securities........................... -- 7,151 --
Interest income................................................. 2,591 3,486 3,025
Interest expense................................................ (25,336) (26,922) (30,155)
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Income before income taxes...................................... 78,399 86,193 69,372
Provision for income taxes...................................... 14,913 20,108 15,125
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Income from continuing operations............................... 63,486 66,085 54,247
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(Loss) income from discontinued operations, net of taxes........ (6,736) 53,109 10,081
Loss on disposal