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 April 2, 2005 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 April 25, 2005, 49,946,694 shares of the registrant’s Common Stock were outstanding.
INDEX TO FORM 10-Q
2
In this Form 10-Q, unless the context otherwise requires, the terms “Millipore”, the “Company”, “we” or “us” shall mean Millipore Corporation and its subsidiaries.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| April 2, 2005 |
December 31, 2004 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 141,330 | $ | 152,144 | ||||
| Accounts receivable, net |
198,644 | 181,911 | ||||||
| Inventories |
139,125 | 143,714 | ||||||
| Deferred income taxes |
45,315 | 54,247 | ||||||
| Other current assets |
10,164 | 8,840 | ||||||
| Total current assets |
534,578 | 540,856 | ||||||
| Property, plant and equipment, net |
343,478 | 351,004 | ||||||
| Deferred income taxes |
91,740 | 85,197 | ||||||
| Intangible assets, net |
18,887 | 19,584 | ||||||
| Goodwill |
9,433 | 9,433 | ||||||
| Other assets |
7,352 | 7,745 | ||||||
| Total assets |
$ | 1,005,468 | $ | 1,013,819 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 62,915 | $ | 66,970 | ||||
| Accrued expenses |
79,153 | 88,407 | ||||||
| Accrued income taxes payable |
7,862 | 7,633 | ||||||
| Total current liabilities |
149,930 | 163,010 | ||||||
| Deferred income taxes |
7,309 | 7,495 | ||||||
| Long-term debt |
133,000 | 147,000 | ||||||
| Other liabilities |
56,097 | 57,464 | ||||||
| Total liabilities |
346,336 | 374,969 | ||||||
| Shareholders’ equity: |
||||||||
| Common stock |
49,922 | 49,816 | ||||||
| Additional paid-in capital |
17,384 | 10,654 | ||||||
| Retained earnings |
561,834 | 529,534 | ||||||
| Unearned compensation |
(363 | ) | (4 | ) | ||||
| Accumulated other comprehensive income |
30,355 | 48,850 | ||||||
| Total shareholders’ equity |
659,132 | 638,850 | ||||||
| Total liabilities and shareholders’ equity |
$ | 1,005,468 | $ | 1,013,819 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
| Three Months Ended |
||||||||
| April 2, 2005 |
April 3, 2004 |
|||||||
| Net sales |
$ | 250,178 | $ | 222,469 | ||||
| Cost of sales |
114,103 | 100,910 | ||||||
| Gross profit |
136,075 | 121,559 | ||||||
| Selling, general and administrative expenses |
77,433 | 67,782 | ||||||
| Research and development expenses |
16,073 | 15,997 | ||||||
| Operating income |
42,569 | 37,780 | ||||||
| Interest income |
675 | 416 | ||||||
| Interest expense |
(1,834 | ) | (2,878 | ) | ||||
| Income before income taxes |
41,410 | 35,318 | ||||||
| Provision for income taxes |
9,110 | 8,123 | ||||||
| Net income |
$ | 32,300 | $ | 27,195 | ||||
| Basic income per share |
$ | 0.65 | $ | 0.55 | ||||
| Diluted income per share |
$ | 0.64 | $ | 0.55 | ||||
| Weighted average shares outstanding: |
||||||||
| Basic |
49,851 | 49,080 | ||||||
| Diluted |
50,327 | 49,889 | ||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three months ended |
||||||||
| April 2, 2005 |
April 3, 2004 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 32,300 | $ | 27,195 | ||||
| Adjustments to reconcile income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
11,623 | 10,319 | ||||||
| Tax benefit from stock plan activities |
725 | 2,937 | ||||||
| Non-cash stock-based compensation |
2,716 | 206 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Increase in accounts receivable |
(23,111 | ) | (13,937 | ) | ||||
| Decrease (increase) in inventories |
113 | (2,169 | ) | |||||
| Increase in other current assets |
(1,563 | ) | (38 | ) | ||||
| Decrease in other assets |
24 | 67 | ||||||
| Decrease in accounts payable |
(1,816 | ) | (7,033 | ) | ||||
| Decrease in accrued expenses |
(7,895 | ) | (10,817 | ) | ||||
| Increase (decrease) in accrued income taxes |
5,827 | (267 | ) | |||||
| (Decrease) increase in other liabilities |
(455 | ) | 1,522 | |||||
| Net cash provided by operating activities |
18,488 | 7,985 | ||||||
| Cash flows from investing activities: |
||||||||
| Additions to property, plant and equipment |
(10,897 | ) | (12,927 | ) | ||||
| Net cash used in investing activities |
(10,897 | ) | (12,927 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Proceeds from issuance of common stock under stock plans |
3,036 | 13,011 | ||||||
| Repayment of debt |
— | (75,000 | ) | |||||
| Net repayments of revolver borrowings |
(14,000 | ) | (21,000 | ) | ||||
| Net cash used in financing activities |
(10,964 | ) | (82,989 | ) | ||||
| Effect of foreign exchange rates on cash and cash equivalents |
(7,441 | ) | (5,243 | ) | ||||
| Net decrease in cash and cash equivalents |
(10,814 | ) | (93,174 | ) | ||||
| Cash and cash equivalents at beginning of period |
152,144 | 147,027 | ||||||
| Cash and cash equivalents at end of period |
$ | 141,330 | $ | 53,853 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
1. General
Millipore 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 our membrane filtration and chromatography technologies.
Our interim fiscal quarter 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 first fiscal quarters for 2005 and 2004 ended on April 2, 2005 and April 3, 2004, respectively.
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 audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2004.
Certain reclassifications have been made to prior year’s financial statements to conform to the 2005 presentation.
In the opinion of our management, these financial statements reflect all adjustments necessary for a fair statement 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
We have a stock-based employee compensation plan and a non-employee director stock option plan from which we currently grant stock options. As permitted under Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” we apply the recognition and measurement provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees”, and related interpretations in accounting for these plans. No stock-based employee compensation expense has been recorded in connection with the issuance of employee and director stock options as all options granted under these plans were fixed awards and had an exercise price equal to the market value of our common stock at the date of grant. Stock-based employee compensation expense in relation to the separation agreements for the former Chief Executive Officer and President and several executive officers and the vesting of restricted stock, granted at no cost to certain employees, is reflected in net income.
SFAS No. 123, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure, an Amendment of FASB Statement No. 123,” requires the presentation of certain pro forma information as if we had accounted for our stock-based employee compensation under the fair value method. For purpose of this disclosure, the fair value of the fixed option grants was estimated using the Black-Scholes option-pricing model with the following weighted average assumptions for option grants:
| Three Months Ended |
||||||
| April 2, 2005 |
April 3, 2004 |
|||||
| Risk-free interest rate |
3.6 | % | 3.0 | % | ||
| Volatility factor |
35.0 | % | 40.0 | % | ||
| Weighted average expected life (in years) |
5 | 5 | ||||
| Dividend rate |
0.0 | % | 0.0 | % | ||
The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, the model requires the use of highly subjective assumptions, including the expected stock price volatility and average expected life of the options. Although our employee stock options have characteristics significantly different from those of traded options, we believe that the Black-Scholes model provides a reasonable estimate for the fair value of these options.
6
MILLIPORE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
The table below illustrates the effect on net income and net income per share if we had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation.
| Three Months Ended |
||||||||
| April 2, 2005 |
April 3, 2004 |
|||||||
| Net income, as reported |
$ | 32,300 | $ | 27,195 | ||||
| Add: Stock-based employee compensation expense included in reported net income, net of related tax effects |
1,763 | 160 | ||||||
| Deduct: Pro forma stock-based employee compensation expense determined under fair value based method, net of related tax effects |
(3,906 | ) | (4,672 | ) | ||||
| Pro forma net income |
$ | 30,157 | $ | 22,683 | ||||
| Net income per share: |
||||||||
| Basic, as reported |
$ | 0.65 | $ | 0.55 | ||||
| Basic, pro forma |
$ | 0.60 | $ | 0.46 | ||||
| Diluted, as reported |
$ | 0.64 | $ | 0.55 | ||||
| Diluted, pro forma |
$ | 0.60 | $ | 0.45 | ||||
3. Inventories
Inventories at April 2, 2005 and December 31, 2004, stated at the lower of first-in, first-out (“FIFO”) cost or market, consisted of the following:
| April 2, 2005 |
December 31, 2004 | |||||
| Raw materials |
$ | 28,048 | $ | 29,880 | ||
| Work in process |
47,855 | 46,351 | ||||
| Finished goods |
63,222 | 67,483 | ||||
| Total inventories |
$ | 139,125 | $ | 143,714 | ||
4. Property, Plant and Equipment
Accumulated depreciation on property, plant and equipment was $248,006 at April 2, 2005 and $257,249 at December 31, 2004.
7
MILLIPORE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
5. Intangible Assets
Intangible assets, net, consisted of the following at April 2, 2005 and December 31, 2004: