UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended October 2, 2004 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 Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
| 290 Concord Road, Billerica, MA | 01821 | |
| (Address of principal executive offices) | (Zip Code) | |
(978) 715-4321
(Registrant’s telephone number, including area code)
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 whether the registrant is an accelerated filer (as defined in Exchange Act
Rule 12b-2). Yes x No ¨
As of October 22, 2004, there were 49,730,078 shares of the registrant’s Common Stock outstanding.
INDEX TO FORM 10-Q
| PART I. |
FINANCIAL INFORMATION |
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| Item 1. |
Condensed Consolidated Financial Statements |
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| Condensed Consolidated Balance Sheets at October 2, 2004 and December 31, 2003 |
3 | |||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
11 | ||
| Item 3. |
22 | |||
| Item 4. |
22 | |||
| PART II. |
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| Item 6. |
22 | |||
| 23 | ||||
| 24 | ||||
2
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| October 2, 2004 |
December 31, 2003 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 150,372 | $ | 147,027 | ||||
| Accounts receivable, net |
173,409 | 174,979 | ||||||
| Inventories |
138,808 | 137,757 | ||||||
| Deferred income taxes |
51,092 | 51,092 | ||||||
| Other current assets |
10,187 | 5,507 | ||||||
| Total current assets |
523,868 | 516,362 | ||||||
| Property, plant and equipment, net |
326,200 | 316,890 | ||||||
| Deferred income taxes |
77,226 | 77,226 | ||||||
| Intangible assets, net |
23,004 | 25,348 | ||||||
| Goodwill |
9,433 | 9,433 | ||||||
| Other assets |
6,736 | 6,014 | ||||||
| Total assets |
$ | 966,467 | $ | 951,273 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Current portion of long-term debt |
$ | — | $ | 75,000 | ||||
| Accounts payable |
52,642 | 60,836 | ||||||
| Accrued expenses |
72,131 | 69,819 | ||||||
| Accrued retirement plan contributions |
5,038 | 6,100 | ||||||
| Accrued income taxes payable |
12,716 | 7,294 | ||||||
| Total current liabilities |
142,527 | 219,049 | ||||||
| Long-term debt |
199,758 | 216,000 | ||||||
| Other liabilities |
57,691 | 55,183 | ||||||
| Total liabilities |
399,976 | 490,232 | ||||||
| Shareholders’ equity: |
||||||||
| Common stock |
56,988 | 56,988 | ||||||
| Additional paid-in capital |
94,220 | 93,035 | ||||||
| Retained earnings |
616,385 | 532,872 | ||||||
| Unearned compensation |
(156 | ) | (631 | ) | ||||
| Accumulated other comprehensive income |
11,376 | 15,773 | ||||||
| 778,813 | 698,037 | |||||||
| Less: Treasury stock at cost |
(212,322 | ) | (236,996 | ) | ||||
| Total shareholders’ equity |
566,491 | 461,041 | ||||||
| Total liabilities and shareholders’ equity |
$ | 966,467 | $ | 951,273 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
| Three Months Ended |
Nine months Ended |
|||||||||||||||
| Oct. 2, 2004 |
Sept. 27, 2003 |
Oct. 2, 2004 |
Sept. 27, 2003 |
|||||||||||||
| Net sales |
$ | 210,724 | $ | 200,053 | $ | 657,861 | $ | 583,872 | ||||||||
| Cost of sales |
97,405 | 91,563 | 301,556 | 262,423 | ||||||||||||
| Gross profit |
113,319 | 108,490 | 356,305 | 321,449 | ||||||||||||
| Selling, general and administrative expenses |
64,021 | 60,030 | 198,779 | 181,869 | ||||||||||||
| Research and development expenses |
15,149 | 14,030 | 47,183 | 41,908 | ||||||||||||
| Restructuring and other |
— | (796 | ) | — | (1,400 | ) | ||||||||||
| Operating income |
34,149 | 35,226 | 110,343 | 99,072 | ||||||||||||
| Interest income |
584 | 441 | 1,225 | 1,205 | ||||||||||||
| Interest expense |
(2,437 | ) | (3,980 | ) | (7,416 | ) | (12,317 | ) | ||||||||
| Income before income taxes |
32,296 | 31,687 | 104,152 | 87,960 | ||||||||||||
| Provision for income taxes |
7,267 | 7,130 | 23,434 | 19,791 | ||||||||||||
| Net income |
$ | 25,029 | $ | 24,557 | $ | 80,718 | $ | 68,169 | ||||||||
| Basic income per share |
$ | 0.50 | $ | 0.50 | $ | 1.63 | $ | 1.41 | ||||||||
| Diluted income per share |
$ | 0.50 | $ | 0.50 | $ | 1.61 | $ | 1.39 | ||||||||
| Weighted average shares outstanding: |
||||||||||||||||
| Basic |
49,649 | 48,630 | 49,382 | 48,499 | ||||||||||||
| Diluted |
50,392 | 49,356 | 50,192 | 48,899 | ||||||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Nine months ended |
||||||||
| Oct. 2, 2004 |
Sept. 27, 2003 |
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| Cash flows from operating activities: |
||||||||
| Net income |
$ | 80,718 | $ | 68,169 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
32,405 | 29,120 | ||||||
| Gain on sale of property, plant and equipment |
— | (796 | ) | |||||
| Compensation expense related to stock options |
1,658 | 620 | ||||||
| Change in operating assets and liabilities: |
||||||||
| Increase in accounts receivable |
(601 | ) | (8,701 | ) | ||||
| Increase in inventories |
(1,909 | ) | (14,759 | ) | ||||
| Increase in other current assets |
(4,695 | ) | (1,487 | ) | ||||
| (Increase) decrease in other assets |
(954 | ) | 1,436 | |||||
| (Decrease) increase in accounts payable and accrued expenses |
(4,908 | ) | 7,164 | |||||
| Decrease in accrued retirement plan contributions |
(1,069 | ) | (1,102 | ) | ||||
| Increase in accrued income taxes |
5,453 | 5,737 | ||||||
| Increase in other liabilities |
1,771 | 2,820 | ||||||
| Net cash provided by operating activities |
107,869 | 88,221 | ||||||
| Cash flows from investing activities: |
||||||||
| Additions to property, plant and equipment |
(40,669 | ) | (49,326 | ) | ||||
| Proceeds from sale of property, plant and equipment |
— | 1,250 | ||||||
| Net cash used in investing activities |
(40,669 | ) | (48,076 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Proceeds from issuance of treasury stock under stock plans |
27,453 | 10,611 | ||||||
| Repayment of debt |
(75,000 | ) | — | |||||
| Net repayments of revolver borrowings |
(16,242 | ) | (5,500 | ) | ||||
| Net cash (used in) provided by financing activities |
(63,789 | ) | 5,111 | |||||
| Effect of foreign exchange rates on cash and cash equivalents |
(66 | ) | 6,606 | |||||
| Net increase in cash and cash equivalents |
3,345 | 51,862 | ||||||
| Cash and cash equivalents at beginning of period |
147,027 | 101,242 | ||||||
| Cash and cash equivalents at end of period |
$ | 150,372 | $ | 153,104 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
1. General
Millipore Corporation (“Millipore”, “our” or “we”) is a multinational bioscience company that provides technologies, tools and services for the discovery, development and production of therapeutic drugs and for other purposes. We serve customers in the worldwide biotechnology, life science research and other bioscience markets with a variety of products and services used in the purification, separation and analysis of fluids. Our products are based on a variety of enabling technologies, including membrane filtration and chromatography.
A variety of our products are used in the biotechnology market by biotechnology and pharmaceutical companies that manufacture therapeutic products based on recombinant proteins. A number of our products are used by our customers in the life science research market for drug discovery and drug development. A range of our products have general applications in the other bioscience market in non-biological pharmaceutical manufacturing, clinical and analytical laboratories, environmental monitoring and quality control.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, accordingly, these footnotes condense or omit information and disclosures which substantially duplicate information provided in our latest audited financial statements. These financial statements should be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2003.
Certain reclassifications have been made to prior year’s financial statements to conform to the 2004 presentation.
Our interim fiscal quarter typically ends on the thirteenth Saturday of each quarter. Since our fiscal year-end is December 31, the first and fourth fiscal quarters may not consist of precisely thirteen weeks. The third fiscal quarters for 2004 and 2003 ended on October 2, 2004 and September 27, 2003, respectively.
In the opinion of our management, these financial statements reflect all adjustments necessary for a fair presentation of the results for the interim periods presented. The accompanying unaudited condensed consolidated financial statements are not necessarily indicative of future trends or our operations for the entire year.
2. Stock-based Compensation
At October 2, 2004, we have a stock-based employee compensation plan and a non-employee director stock option plan from which we currently grant stock options. We apply the recognition and measurement provisions of Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees,” and related interpretations in accounting for those plans. Stock-based employee compensation expense was recognized as an expense during the quarter ended October 2, 2004 in relation to the CEO separation agreement. Stock-based employee compensation expense related to vesting of shares of restricted stock is recognized as an expense. These shares of restricted stock were granted at no cost to employees in prior years.
6
MILLIPORE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
The following table illustrates the effect on net income and earnings per share as if we had applied the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-based Compensation,” to stock-based employee compensation for the three and nine months ended October 2, 2004 and September 27, 2003.
| Three Months Ended |
Nine months ended |
|||||||||||||||
| Oct. 2, 2004 |
Sept. 27, 2003 |
Oct. 2, 2004 |
Sept. 27, 2003 |
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| Net income, as reported |
$ | 25,029 | $ | 24,557 | $ | 80,718 | $ | 68,169 | ||||||||
| Add: Stock-based employee compensation expense included in reported net income, net of related tax effects |
580 | |||||||||||||||