-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DFSN9aq/0YdND6IZ21woB270bg4QoCSPKUmOGrWa3BNKVc8c/X0XlAo4l4m0JngL bE91H7t5Fv+o2JX24pHvlg== 0000927016-01-501073.txt : 20010516 0000927016-01-501073.hdr.sgml : 20010516 ACCESSION NUMBER: 0000927016-01-501073 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MILLIPORE CORP /MA CENTRAL INDEX KEY: 0000066479 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY ANALYTICAL INSTRUMENTS [3826] IRS NUMBER: 042170233 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09781 FILM NUMBER: 1637380 BUSINESS ADDRESS: STREET 1: 80 ASHBY RD CITY: BEDFORD STATE: MA ZIP: 01730 BUSINESS PHONE: 7815336000 MAIL ADDRESS: STREET 1: 80 ASHBY ROAD CITY: BEDFORD STATE: MA ZIP: 01730 FORMER COMPANY: FORMER CONFORMED NAME: MILLIPORE CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: MILLIPORE FILTER CORP DATE OF NAME CHANGE: 19661116 10-Q 1 d10q.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 -------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from __________ to __________ COMMISSION FILE NUMBER 0-1052 ------ Millipore Corporation - --------------------- (Exact name of registrant as specified in its charter) Massachusetts - ------------- (State or other jurisdiction of incorporation or organization) 04-2170233 - ---------- (I.R.S. Employer Identification No.) 80 Ashby Road Bedford, Massachusetts 01730 - ----------------------------- (Address of principal executive offices) Registrant's telephone number, include area code (781) 533-6000 -------------- 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 and 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 ----- ----- The Company had 47,098,256 shares of common stock outstanding as of May 2, 2001. MILLIPORE CORPORATION INDEX TO FORM 10-Q Page No. -------- Part I. Financial Information Item 1. Condensed Financial Statements Consolidated Balance Sheets - March 31, 2001 and December 31, 2000 2 Consolidated Statements of Income - Three Months Ended March 31, 2001 and 2000 3 Consolidated Statements of Cash Flows - Three Months Ended March 31, 2001 and 2000 4 Notes to Consolidated Condensed Financial Statements 5-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-11 Item 3. Quantitative and Qualitative Disclosures about Market Risk 11 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders 11 Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12 MILLIPORE CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands)
March 31, December 31, 2001 2000 - ------------------------------------------------------------------------------------------------------------- ASSETS (Unaudited) - ------ Current assets Cash and cash equivalents $ 58,423 $ 55,186 Cash held as collateral - 3,212 Accounts receivable, net 219,887 232,283 Inventories 151,145 146,691 Deferred income taxes 21,631 21,631 Other current assets 8,892 6,480 --------- --------- Total Current Assets 459,978 465,483 Property, plant and equipment, net 230,238 233,604 Deferred income taxes 93,980 93,980 Intangible assets, net 59,695 61,853 Other assets 16,708 20,005 --------- --------- Total Assets $ 860,599 $ 874,925 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities Notes payable $ 70,000 $ 52,544 Accounts payable 69,888 69,770 Accrued expenses 84,353 78,633 Dividends payable 5,332 5,319 Accrued retirement plan contributions 4,189 8,244 Accrued income taxes payable 3,216 20,137 --------- --------- Total Current Liabilities 236,978 234,647 Long-term debt 300,000 300,130 Other liabilities 30,259 34,780 Shareholders' equity Common stock 56,988 56,988 Additional paid-in capital 35,547 30,546 Retained earnings 586,313 586,795 Unearned compensation (4,211) (4,490) Accumulated other comprehensive loss (80,427) (55,791) --------- --------- 594,210 614,048 Less: Treasury stock, at cost, 10,309 shares in 2001 and 10,594 in 2000 (300,848) (308,680) --------- --------- Total Shareholders' Equity 293,362 305,368 --------- --------- Total Liabilities and Shareholders' Equity $ 860,599 $ 874,925 ========= =========
The accompanying notes are an integral part of the consolidated condensed financial statements. 2 MILLIPORE CORPORATION CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share data) (Unaudited) March 31, -------------------------- 2001 2000 ---------- ---------- Net sales $244,496 $224,823 Cost of sales 116,874 100,326 ---------- ---------- Gross profit 127,622 124,497 Selling, general & administrative expenses 69,566 70,034 Research & development expenses 16,580 14,714 Restructuring and other charges 30,518 - Separation costs 3,506 - ---------- ---------- Operating income 7,452 39,749 Interest income 718 466 Interest expense (6,627) (7,034) ---------- ---------- Income before income taxes 1,543 33,181 Income tax (benefit) expense (3,628) 6,968 ---------- ---------- Net income $ 5,171 $ 26,213 ========== =========== Net income per share: Basic $ 0.11 $ 0.58 Diluted $ 0.11 $ 0.56 Cash dividends declared per share $ 0.11 $ 0.11 Weighted average shares outstanding: Basic 46,414 45,273 Diluted 47,414 46,452 The accompanying notes are an integral part of the consolidated condensed financial statements. 3 MILLIPORE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Three Months Ended March 31, ---------------------------- 2001 2000 -------- -------- Cash Flows From Operating Activities: - ------------------------------------- Net income $ 5,171 $ 26,213 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 11,126 11,266 Restructuring and other charges 30,518 - Changes in operating assets and liabilities, net: Increase in accounts receivable (222) (9,913) (Increase) in inventories (11,242) (18,089) Increase in other current assets and other assets (1,650) (3,001) Decrease in accounts payable and accrued expenses (13,197) (261) Decrease in accrued retirement plan contributions (3,904) (3,657) (Decrease) increase in accrued income taxes (18,136) 3,049 (Decrease) increase in other (3,282) 1,843 -------- -------- Net cash (used in) provided by operating activities (4,818) 7,450 Cash Flows From Investing Activities: - ------------------------------------- Additions to property, plant and equipment (12,012) (7,584) Proceeds from sale of property - 8,808 -------- -------- Net cash (used in) provided by investing activities (12,012) 1,224 Cash Flows From Financing Activities: - ------------------------------------- Issuance of treasury stock under stock plans 8,167 14,600 Net change in short-term debt 17,456 12,355 Decrease in cash held as collateral 3,212 3,856 Dividends paid (5,103) (4,982) -------- -------- Net cash provided by financing activities 23,732 25,829 Effect of foreign exchange rates on cash and cash equivalents (3,665) (1,358) -------- -------- Net change in cash and cash equivalents 3,237 33,145 Cash and cash equivalents on January 1 55,186 32,420 -------- -------- Cash and cash equivalents on March 31 $ 58,423 $ 65,565 ======== ========
The accompanying notes are an integral part of the consolidated condensed financial statements. 4 MILLIPORE CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Dollars in millions, shares in thousands) 1. GENERAL: The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with the instructions to Form 10-Q and, accordingly, these footnotes condense or omit certain information and disclosures which substantially duplicate information provided in the Company's latest audited financial statements. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2000. In the opinion of management, these financial statements reflect all adjustments necessary for a fair presentation of the results for the interim periods presented. The accompanying unaudited consolidated condensed financial statements are not necessarily indicative of future trends or the Company's operations for the entire year. 2. INVENTORIES: Inventories consisted of the following: March 31, December 31, 2001 2000 --------------- ----------------- Raw materials $ 58.6 $ 53.9 Work in process 33.0 29.8 Finished goods 59.5 63.0 --------------- ----------------- Total $151.1 $146.7 =============== ================= 3. PROPERTY, PLANT AND EQUIPMENT: Accumulated depreciation on property, plant and equipment was $209.7 at March 31, 2001 and $209.3 at December 31, 2000. 4. 1998 RESTRUCTURING PROGRAM: The 1998 Restructuring Program has been completed and substantially all final cash payments will occur in the second quarter of 2001. The payments consist primarily of lease termination costs. Of the planned 620 employees, 615 left the Company pursuant to this initiative. The following is a summary of the 1998 Restructuring Program reserve balances at March 31, 2001:
Balance at Cash Balance at December 31, 2000 disbursements March 31, 2001 ----------------- ------------- -------------- Employee severance costs $0.9 $0.2 $0.7 Leasehold and other costs 1.7 0.3 1.4 ---- ---- ---- Total $2.6 $0.5 $2.1 ==== ==== ====
5. 2001 RESTRUCTURING PROGRAM AND OTHER CHARGES: In the first quarter of 2001, in connection with the previously announced separation of the Company into two independent companies, a restructuring program was initiated to reorganize both the Microelectronics and BioScience businesses of the Company. There were also costs associated with resizing the Microelectronics business in view of the current microelectronics industry downturn. The program included reducing, consolidating and outsourcing of certain manufacturing operations, centralization of European shared services (including order processing, cash collections and cash applications processes) and streamlining certain corporate shared services and divisional overhead functions to serve smaller organizations. 5 MILLIPORE CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Dollars in millions, shares in thousands) These initiatives included a $28.1 million restructuring charge and $2.4 million of fixed asset write-offs for assets that are no longer in use. The restructuring charge included $26.7 million of employee severance costs and $1.4 million of lease cancellation costs. The severance costs included non- cash stock based compensation expense related to changes in stock awards. Approximately 420 positions will be eliminated and the affected employees were notified by March 31, 2001, however a number of these employees will continue in their existing positions with their related salary costs charged to operations as incurred. Under the terms of the severance agreements, the Company expects to pay severance and associated benefits through 2002. Through March 31, 2001, approximately 100 employees have left the Company and $2.8 million of cash severance benefits have been paid. The following is a summary of the 2001 Restructuring Program reserve balances at March 31, 2001:
Restructuring Cash Non-cash Balance at Charge activity activity March 31, 2001 --------------------------------------------------------------- Employee severance costs $26.7 $2.8 $5.4 $18.5 Leasehold and other costs 1.4 - - 1.4 ----- ---- ---- ----- Total $28.1 $2.8 $5.4 $19.9 ===== ==== ==== =====
In the first quarter of 2001, the Company also incurred professional fees of approximately $3.5 million related to the separation of the Company's Microelectronics and BioScience business segments. 6. BUSINESS SEGMENT INFORMATION: The Company has two reportable business segments: BioScience and Microelectronics. The results for BioScience, Microelectronics and Corporate are presented below in "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's business segments because it believes that the local currency results provides a clearer presentation of underlying business trends. The U.S. dollar results represent the foreign currency balances translated at actual exchange rates. Three Months Ended March 31, Consolidated Net Sales 2001 2000 - --------------------------------------------------------------------------- BioScience $173.3 $151.6 Microelectronics 85.6 75.1 Foreign exchange (14.4) (1.9) ------ ------ Total net sales at actual exchange rates $244.5 $224.8 ====== ====== Three Months Ended March 31, Consolidated Operating Income 2001 2000 - ---------------------------------------------------------------------------- BioScience $ 44.6 $ 36.1 Microelectronics 14.0 16.8 Corporate (11.8) (14.0) Restructuring and other charges (30.5) - Separation costs ( 3.5) - Foreign exchange ( 5.3) 0.8 ------ ------ Total operating income at actual exchange rates $ 7.5 $ 39.7 ====== ====== 6 MILLIPORE CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Dollars in millions, shares in thousands) 7. BASIC AND DILUTED EARNINGS PER SHARE: The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended March 31, 2001 2000 ------------------ Numerator: Net income $ 5.2 $ 26.2 ======= ======= Denominator: Basic weighted average shares outstanding 46,414 45,273 Effect of dilutive securities 1,000 1,179 ------- ------- Diluted weighted average shares outstanding 47,414 46,452 ======= ======= Net income per share: Basic $ 0.11 $ 0.58 Diluted $ 0.11 $ 0.56 8. COMPREHENSIVE INCOME (LOSS): The following table presents the components of comprehensive income (loss), net of taxes: Three Months Ended March 31, 2001 2000 ------------------ Net unrealized gain (loss) on securities available for sale $ (1.4) $ 5.8 Impact of adopting SFAS No. 133 (5.1) - Change in value of foreign currency interest rate swaps designated as hedges 5.9 Foreign currency translation adjustments (24.1) (8.2) ------ ----- Other comprehensive loss (24.7) (2.4) Net income 5.2 26.2 ------ ----- Total comprehensive income (loss) $(19.5) $23.8 ====== ===== 9. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT: 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 its swap agreements. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Local Currency Results - ---------------------- The following discussion of the Results of Operations includes reference to revenue, margins and expenses in "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's business segments 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. Results of Operations - --------------------- Consolidated net sales for the first quarter of 2001 were $245 million, an increase of 9% over sales for the same period last year. The Company reported earnings per share of $0.11 for the first quarter of 2001 compared to earnings per share of $0.56 for the first quarter of 2000. Excluding restructuring charges and other costs incurred to separate the Microelectronics business in the first quarter of 2001, earnings per share were $0.59. The following table summarizes sales growth by business segment and geography in the first quarter of 2001 as compared to the first quarter of 2000 (U.S. dollars in millions):
March 31, Sales Growth 2001 2000 In U.S. Dollars Local Currency --------------------------------------------------------------- BioScience $ 162 $ 148 9% 14% Microelectronics 83 77 8% 14% ----- ----- -- -- Total $ 245 $ 225 9% 14% ===== ===== == == Americas $ 105 $ 97 9% 9% Europe 66 60 9% 17% Asia/Pacific 74 68 9% 20% ----- ----- -- -- Total $ 245 $ 225 9% 14% ===== ===== == ==
Currency Translation - -------------------- Currency translation reduced reported sales growth rates by 5 percentage points in the first quarter of 2001 due to the weakening of the Euro, the British pound and the Japanese yen. If foreign exchange rates remain at April 27, 2001 levels, the expected second quarter and full year 2001 sales growth rates in dollars will be lower than local currency growth rates. Business Segment Results - ------------------------ BioScience Segment: BioScience sales, in local currency, increased 14% in the first quarter of 2001 compared to the first quarter of 2000. Double digit sales growth, in local currency, was reported in all geographies. Sales growth was strongest to customers in biotechnology markets and also to life science customers. BioScience operating income, in local currency, increased 23% in the first quarter of 2001 over the first quarter of 2000 as a result of the increased sales combined with improved gross profit margins. The improved gross profit margin percentage was attributed to an increased mix of consumable product sales that generally have higher margins. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Microelectronics Segment: Microelectronics sales, in local currency, increased 14% in the first quarter of 2001 compared to the same period last year. Sales growth was positive in all geographies with the most significant growth in Europe and Asia/Pacific. First quarter of 2001, sequential quarter sales growth was down 15% from the fourth quarter of 2000. Although recently published industry results and forecasts depict trends of continued decline in demand for both semiconductors and semiconductor capital equipment for at least the remainder of 2001, the extent and the duration of this industry downturn to the Microelectronics segment is unknown. Microelectronics operating income, in local currency, decreased from $16.8 million or 22% of sales in the first quarter of 2000 to $14.0 million or 16% of sales in the first quarter of 2001. The decrease is primarily due to reduced gross profit margins offset by sales growth and operating expense leverage. The gross profit margins were negatively impacted by having more manufacturing employees than needed based on the reduced demand. The Company responded during the quarter by restructuring its manufacturing operations for the industry downturn. Corporate Expenses: Corporate expenses, in local currency decreased from $14.0 million to $11.8 million in the first quarter of 2001 as compared to the same quarter of the prior year. The decreased expenses related primarily to reduced variable compensation expense. Restructuring and Other Charges - ------------------------------- In the first quarter of 2001, in connection with the previously announced separation of the Company into two independent companies, a restructuring program was initiated to reorganize both the Microelectronics and BioScience businesses and to prepare them to operate successfully as two independent companies. There were also costs associated with resizing the Microelectronics business in view of the current microelectronics industry downturn. Key initiatives which will be substantially concluded in the next twelve months include: o Globally streamlining certain corporate shared services and divisional overhead functions to serve smaller organizations o Centralizing into two locations European shared services including order processing, cash collections and cash applications processes o Closing the manufacturing operation in China in order to reduce manufacturing infrastructures o Outsourcing certain manufacturing processes in Puerto Rico to third party vendors in order to create a more flexible cost structure o Reducing and reorganizing Microelectronics manufacturing including reduction of manufacturing workforce due to the current industry downturn and reorganizing manufacturing to better leverage worldwide manufacturing capacity These initiatives included a $28.1 million restructuring charge and $2.4 million of fixed asset write-offs for assets which are no longer in use. The restructuring charge included $26.7 million of employee severance costs and $1.4 million of lease cancellation costs. Approximately 420 positions will be 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 expects to pay severance and associated benefits through 2002. Through March 31, 2001, approximately 100 employees have left the Company and $2.8 million of severance benefits have been paid. The restructuring program is expected to yield annualized savings of approximately $20 million. The savings will result in reduced wages, facility related costs and depreciation. The savings will be reflected in cost of sales, selling, general and administrative expenses and research and development expenses. The savings will begin in the second quarter of 2001 but will not be fully realizable until the second half of this year and into the first quarter of 2002. 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS During the next several quarters, the Company expects to incur approximately $4 million of additional operating expenses associated with the restructuring program. These costs primarily relate to the closure of leased facilities and fixed assets that are currently in use and employee retention bonuses. In addition, the Company plans to open a Microelectronics manufacturing plant in Ireland in 2002 and will incur additional restructuring and operating expenses to relocate production activities. In the first quarter of fiscal 2001, the Company also incurred professional fees of $3.5 million related to the separation of the Company's Microelectronics and BioScience business segments. Consolidated Results - -------------------- Gross profit margins, in local currencies, were 53% in the first quarter of 2001 compared to 55% reported in the first quarter of 2000. The margin reduction can be primarily attributed to relatively higher manufacturing costs in the Microelectronics segment. Selling, general and administrative expenses (SG&A), in local currencies, increased 4% in the first quarter of 2001 as compared to the first quarter of 2000. This increase is primarily attributed to additional headcounts and increased spending due to higher sales volume. As a percentage of net sales, SG&A expenses in local currencies decreased approximately 2 percentage points. Research and development (R&D) expenses, in local currencies, increased 14% in the first quarter of 2001 as compared to the first quarter of 2000. This increase is due to additional research and development programs. As a percentage of sales, R&D expenses remained constant at 6.5%. Operating income, excluding restructuring and other costs, in the first quarter of 2001 as compared to the same period of the prior year in U.S. dollars, was adversely effected by the impact of the weakened Euro, British pound and Japanese Yen. If current foreign exchange rates remain in effect for the second quarter and full year of 2001 then foreign exchange will have a more significant negative impact on operating income as compared to the same periods of the prior year. Net interest expense decreased in the first quarter of 2001 as compared to the first quarter of 2000 primarily attributed to lower average borrowings. The effective income tax rate, excluding unusual expenses for the 2001 restructuring program, for the first quarter of 2001 was 22.0% compared to 21.0% for the first quarter of 2000. The effective income tax rate on the restructuring and other charges was 35% because these charges occurred in countries with higher tax rates. Change in Accounting for Derivative Financial Instruments - --------------------------------------------------------- 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 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 it's Japanese subsidiary. The Company recorded a net derivative liability transition adjustment of $5.1 million, on January 1, 2001, to record the difference between the Company's carrying value and the fair value of this derivative. This transition adjustment 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 to 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 its swap agreements. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Foreign Exchange - ---------------- A substantial portion of the Company's business is conducted outside of the United States through its foreign subsidiaries. This business is transacted through the Company's network of international subsidiaries generally in the local currency. Approximately 30% of the Company's sales are derived from Europe where the U.S. dollar continued to strengthen against the Euro during the first quarter of 2001. The Company is able to partially mitigate the impact of fluctuations in the Euro by active management of cross border currency flows and material sourcing. Additionally, the Company has significant exposure to changes in the Japanese yen that can not be mitigated through normal financing or operating activities. Accordingly, the net equity exposure had been managed through the use of debt swap agreements. The Company terminated the debt swap agreements in the first quarter of 2001 and intends to pursue other instruments in the second quarter of 2001 to mitigate the yen exposure. Generally, when the U.S. dollar strengthens against currencies in which the Company transacts its business, sales and net income will be adversely impacted. Capital Resources and Liquidity - ------------------------------- Cash used by operations in the first three months of 2001 was $4.8 million compared to cash generated by operations of $7.5 million in the first three months of 2000. In the first quarter of 2001, net income of $5.2 million (excluding the $30.5 million ($19.8 million after tax) of restructuring and other expenses) was primarily offset by increases in inventories of $11.2 million and decreases in both accrued expenses of $16.3 million and accrued income taxes of $18.1 million. The inventory growth related to both future sales for the BioScience segment and purchase commitments for Microelectronics. The accrued expense decrease related to payments for employee compensation accrued in 2000. The Company also borrowed $17.5 million under its revolving credit facility and received $8.2 million for stock option exercises and $3.2 million of cash previously restricted as part of the close out of the debt swap agreements. Cash was used to invest $12.0 million in property, plant and equipment and to pay dividends of $5.1 million. Forward Looking Statements - -------------------------- The foregoing Management's Discussion and Analysis of Financial Condition and Results of Operations contain certain forward-looking statements based on current management expectations involving substantial risks and uncertainties that could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. These risks and uncertainties include, without limitation, difficulties in the successful implementation of our restructuring activities, as well as those risks and uncertainties described in our Form 10-K for the year ended December 31, 2000. 11 Item 3. Quantitative and Qualitative Disclosures About Market Risk The mitigating actions enumerated above under "Foreign Exchange" in Management's Discussion and Analysis of Financial Condition and Results of Operations and in Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's Annual Report on Form 10-K have effectively limited the impact of exchange rate fluctuations and credit risk on the Company's results of operations and financial position to a level which is not material. Part II - Other Information Item 4. Submission of Matters to a Vote of Security Holders The annual Meeting of Stockholders of Millipore Corporation was held on April 26, 2001. At the Annual Meeting the only matter voted on was the election of three Class II Directors for a three-year term (expiring in 2004). The following votes were tabulated with respect to the election: Votes "For" Withheld ----------- -------- Daniel Bellus 40,967,659 449,148 Robert C. Bishop 40,961,229 455,578 Robert E. Caldwell 40,945,964 470,843 Item 6. Exhibits and Reports on Form 8-K a. Exhibits 10 Letter Agreement, dated March 28, 2001, between the Company and Michael P. Carroll b. Report on Form 8-K No reports on Form 8-K have been filed by the Company during the fiscal quarter ended March 31, 2001. SIGNATURES Pursuant to the requirements 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 Registrant May 14, 2001 /s/ Kathleen B. Allen - ------------ ------------------------------------- Date Kathleen B. Allen Vice President and Chief Financial Officer May 14, 2001 /s/ Donald B. Melson - ------------ ------------------------------------- Date Donald B. Melson Corporate Controller and Chief Accounting Officer 12 EX-10 2 dex10.txt LETTER AGREEMENT, DATED MARCH 28, 2001 EXHIBIT 10 Mr. Michael P. Carroll 2 Horizon Point Frisco, Texas Dear Mike: The purpose of this Letter Agreement ("Agreement") is to set forth our agreement with respect to the following matters: (a) the severance compensation and benefits being offered to you as the result of our mutual agreement that the Company accept your resignation as Vice President of Millipore Corporation ("the Company") and General Manager of the Company's Microelectronics Gas Process Division on February 15, 2001 ("Severance Date"); (b) reimbursement to the Company of those sums described as "Relocation Payback" expenses in the Relocation Agreement dated November 10, 1999 ("Relocation Agreement"); and (c) repayment to the Company of the $450,000.00 loan subject to the Relocation Agreement and the Promissory Note dated December 9, 1999 and certain other matters relating to your Frisco, Texas residence, all as more fully described below. A. SEVERANCE AND BENEFITS: (1) You will receive severance payments in the amount of two (2) years of your current total annual target cash compensation ($843,570.00) less the tax liability you incurred as the result of your assignment to Hong Kong ($76,108.00) and less the compensation paid to you after the Severance Date but before the commencement of the severance payments hereunder ("Total Severance"). Total Severance, less appropriate deductions, will be paid to you in 52 equal bi-weekly installments. (2) All unvested stock options previously granted to you shall become immediately vested as of the Severance Date. All of your options must be exercised, if at all, no later than one year after the Severance Date. All restricted stock previously granted to you shall become free of all restrictions on the Severance Date. (3) Millipore will provide you with medical and dental coverage until you are eligible for coverage under another group health plan or until February 15, 2003, whichever occurs first, provided you continue to pay the applicable employee contribution of the premium. Your health care spending account deductions will continue from the Severance Date through December 31, 2001 at which time your participation in the spending account plan will cease. You will receive documentation from Human Resources concerning distributions from the various Millipore benefit plans in accordance with the terms of those plans. (4) The Company will pay you for your accrued but unused vacation up to February 15, 2001. You will be reimbursed for employment-related expenses incurred prior to February 15, 2001, in accordance with standard Millipore procedures. All other benefits provided to employees who are actively employed by Millipore (other than those described in paragraphs (2) and (3) above) terminate on the Severance Date, except that you will be able to convert your group term life insurance coverage (excluding the accidental death and dismemberment portion of such insurance) and long term disability insurance within thirty-one (31) days after your Severance Date, in accordance with the terms of those plans. (5) The Company will provide up to 12 months of outplacement services available to you, at no cost, with an outplacement firm to be determined by Keystone Associates. (6) From the Severance Date until February 15, 2003, you shall not become employed by or act as a consultant for any company or other person or organization that competes or otherwise has business interests in conflict with Millipore (including any subsidiary, division or affiliate) or any successor to Millipore (including any subsidiary, division or affiliate). Notwithstanding the preceding sentence, Millipore will agree to your becoming employed by or acting as a consultant to a competitor, if Millipore, in its sole discretion, believes that you can do so without making use of or revealing any confidential proprietary information of Millipore. Should you wish to pursue employment with a firm that might be covered by the non-compete terms of this Paragraph (6), you may ask Millipore for its opinion on the matter. We will promptly let you know whether we believe you are precluded from working with the firm because of this paragraph and in the event you are so precluded whether we are willing to waive your non-compete obligation with respect to that firm. (7) Except for your family and legal and financial advisors, you will keep the terms of this agreement confidential; you will not disclose to third parties the nature or circumstances surrounding your termination of employment and you will not speak disparagingly of Millipore, or its affiliates or successors or of the products or business practices or management of any of them to any third party. (8) You agree to hold in confidence any and all confidential and proprietary information of Millipore to which you have had access during the course of your employment. (9) You will execute the attached Agreement and Release ("Release"). (In the event that you revoke the Release per its terms, this Agreement will be deemed to be revoked as well.) B. RELOCATION PAYBACK The Company agrees that it will not seek reimbursement of those items listed as "Relocation Payback" expenses in the Relocation Agreement. C. LOAN REPAYMENT Millipore agrees to withhold exercising its rights to immediate repayment of the $450,000.00 loan provided for under the Promissory Note dated December 9, 1999 including the documents referenced therein (the "Note") until the date that you sell your residence in Frisco, Texas or August 14, 2001, whichever occurs first ("Payment Date"). Should you fail to repay the principal of the Note in full on the Payment Date, Millipore shall, at its option (a) withhold the amount of the principal due under the Note from all severance compensation that would otherwise be payable to you under paragraph (1) of the Letter Agreement; or (b) liquidate the Collateral (as that term is defined in the Note). Millipore will pay to you in one lump sum payment, the excess, if any, of the sums collected in (a) or (b) over the principal amount due under the Note. Except as described above, the Note shall remain in full force and effect as per its terms. 2 The Company agrees to pay the real estate broker's fee resulting from the sale of your residence in Frisco, Texas and confirms that you agree to pay to the Company any appreciation in the market value of this residence in accordance with the terms of the Relocation Agreement. If the above accurately reflects your understanding as to the matters discussed above, please sign, date and return the enclosed copy of this letter as well as the Release. You will have 21 days from the date of this letter to consider whether you wish to sign this letter agreement and the Release. In addition, you will have seven (7) days after you sign the documents to revoke your acceptance of both. You are encouraged to consult with an attorney with respect to the matter of your termination and this agreement. Very truly yours, MILLIPORE CORPORATION /s/ Robert Crook - ---------------- Robert Crook Manager, Human Resources Microelectronics Division Agreed to and accepted: /s/ Michael P. Carroll - ---------------------- Michael P. Carroll Date: March 28, 2001 -------------- 3 AGREEMENT AND RELEASE --------------------- Millipore Corporation (the "Company") has offered to pay me certain severance benefits as specified in the letter dated March 20, 2001 from Robert Crook, Manager, Human Resources, an executed copy of such letter being attached hereto as Exhibit "A" and incorporated fully herein by reference ("Letter Agreement"), in consideration of my severing my employment, and waiving all claims and releasing the Company, its affiliates and employee benefit plans and their directors, officers, fiduciaries, employees, and agents from liability and damages related to my employment or severance of employment. I choose to accept this offer. I acknowledge and agree that my decision to accept this offer has been made by me on a voluntary basis. No other promise, inducement, threat, agreement or understanding of any kind or description whatsoever has been made with or to me by any person or entity to cause me to sign this Agreement and Release ("Release"). I understand that signing this Release is an important legal act. I acknowledge that the Company has advised me to consult an attorney before signing this Release. I acknowledge that I have been given 21 days from the day I receive this offer to consider this Release, and that I must sign this Release and mail or deliver it to Robert Crook, Manager, Human Resources, Millipore Corporation, Bedford, MA by the end of the 21st day after receipt of this offer, for my election to receive the severance benefits specified in the Letter Agreement. I understand that for a period of Seven (7) days following the signing of this Release I may revoke my acceptance of the offer by either delivering or mailing a written statement revoking my acceptance to Robert Crook, Manager, Human Resources, Millipore Corporation, Bedford, MA and this Release will not become effective. In the event I revoke my acceptance of the offer, the Letter Agreement will be deemed to be revoked as well. In exchange for the Company's payment to me of the severance benefits as set forth in the Letter Agreement, I agree not to sue and I waive all claims and release the Company, its affiliates, its employee benefit plans, their directors and officers, fiduciaries, employees and agents (collectively, the "Released Parties") from and against all liability and damages related in any way to my employment with, or severance from, the Company or any of its affiliates, up through the date of this Release. This waiver and release includes, but is not limited to, all claims and causes of action under Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended; the Civil Rights Act of 1866; the Texas Commission on Human Rights Act; the Americans with Disabilities Act; Section 211 of the Energy Reorganization Act; the Older Workers Benefit Protection Act of 1990; the Employee Retirement Income Security Act of 1974, as amended; the Worker Adjustment and Retraining Notification Act; the Family Medical Leave Act; all state and federal statutes and regulations; all oral or written contract rights, including any rights under any labor agreement as well as rights to file a grievance; and all rights under common law such as breach of contract, tort or personal injury of any sort. I understand that this Release also precludes me from recovering any relief as a result of any lawsuit, grievance or claims brought on my behalf and arising out of my employment or resignation of, or separation from, employment provided that nothing in this Release will affect my entitlement, if any, to workers' compensation or unemployment compensation. However nothing in this Release shall be construed as a limitation on the exercise of any and all rights I may have to enforce the provisions of the Letter Agreement. 4 Additionally, nothing in this Release prohibits me from raising or pursuing any safety concerns with any federal, state, or local government agency or from cooperating in any investigation of a safety issue. Nothing in this Release restricts me in any way from communications with, filing a charge or complaint with, or full cooperation in the investigations of, any governmental agency on matters within their jurisdictions or with the Company or Company-sponsored programs. However, as stated above, this Release does prohibit me from recovering any relief, including monetary relief, as a result of such activities. I agree that in the course of my duties I have acquired information of a proprietary and/or confidential nature relating to the business of the Company. I agree to maintain in strictest confidence and not to use in any way, publish, disclose or authorize anyone else to use, publish or disclose any proprietary, confidential or other non-public information or document relating to the business or affairs of the Company, its parent, or its affiliates. I agree not to remove or retain any figures, calculations, letters, documents, lists, papers or copies thereof, which embody confidential and/or proprietary information of the Company or its affiliates and to immediately return any such information in my possession. I agree that should I be re-hired by Millipore while I am receiving severance pay, my severance payments will terminate on the date of my re- employment. I acknowledge that the financial, tax and similar effects of my decisions relating to the receipt of severance will depend on my particular circumstances, and that I should obtain advice from my own financial or tax adviser and that none of the Released Parties are responsible for, or obligated in any way with respect to the financial, tax or similar effects relating in any way to my decision to receive severance or the severance received. If any term, provision, covenant, or restriction of this Release is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of this Release and the other terms, provisions, covenants and restrictions hereof shall remain in full force and effect and shall in no way be affected, impaired or invalidated. If timely revocation is not made, this Release shall be effective and enforceable. Furthermore, I understand and agree that, in the event of breach by me of any of the terms and conditions of the Letter Agreement and this Release, the Company will be entitled to recover all costs and expenses as a result of my breach. I HAVE READ THIS AGREEMENT AND RELEASE AND I UNDERSTAND ALL OF ITS TERMS. I ENTER INTO AND SIGN THIS AGREEMENT AND RELEASE KNOWINGLY AND VOLUNTARILY, WITH FULL KNOWLEDGE OF WHAT IT MEANS. /s/ Michael P. Carroll - ---------------------- Michael P. Carroll Date: March 28, 2001 ---------------- 5 -----END PRIVACY-ENHANCED MESSAGE-----