Millipore Reports Second Quarter Financial Results

Millipore Corporation (NYSE:MIL), a life science leader that provides technologies, tools and services for bioscience research and biopharmaceutical manufacturing, today reported financial results for its second quarter ended June 30, 2007. Revenues for the second quarter grew 40 percent, totaling $383.2 million. Changes in foreign exchange rates increased total revenue growth by approximately 4 percent. Excluding currency rate changes and acquisitions, Millipore’s organic revenue growth in the second quarter was 11 percent, which included 14 percent organic growth in its Bioprocess Division and 5 percent organic growth in its Bioscience Division. On a GAAP basis, the Company reported second quarter net income of $28.4 million, or $0.52 per share, compared to $29.1 million, or $0.54 per share in the same period last year. Non-GAAP net income in the second quarter was $44.4 million, or $0.81 per share, compared to $36.7 million, or $0.68 in the second quarter of 2006. Stock-based compensation expense in the second quarter of 2007 was $4.3 million, or $0.05 per diluted share, and is reflected in both GAAP and non-GAAP earnings per share. A reconciliation of all GAAP to non-GAAP financial measures is provided in the Company’s financial tables accompanying this press release. For the first six months of 2007, revenues grew 39 percent. Changes in foreign exchange rates increased total revenue growth by approximately 4 percent. Excluding currency rate changes and acquisitions, Millipore’s organic revenue growth for the first six months of 2007 was 9 percent, which included 12 percent organic revenue growth from its Bioprocess Division and 5 percent organic revenue growth in its Bioscience Division. On a GAAP basis, the Company reported net income of $55.1 million, or $1.01 per share for the first six months of 2007, compared to $63.7 million, or $1.18 per share in the same period last year. Non-GAAP net income for the first six months was $85.0 million, or $1.55 per share, compared to $74.8 million, or $1.38 per share in the second quarter of 2006. "Our Bioprocess Division reported outstanding revenue growth and the Company generated a significant year-over-year increase in our non-GAAP operating margin for the fourth straight quarter,” said Martin Madaus, Chairman & CEO of Millipore. "We also successfully completed the integration of Serologicals in the second quarter. During the intense twelve-month integration process, we met more than 800 milestones and are now operating as one company, on common systems. "Despite this strong overall performance, our Bioscience Division is not delivering the double-digit organic revenue growth we expected at the beginning of the year. Our efforts to grow our market share and increase the productivity of our sales organization are taking longer than expected due to our focus on completing the integration. As a result, we no longer expect the Bioscience Division’s organic growth in 2007 to outpace the growth of the overall market. With the integration now complete, all of our focus will be on leveraging our investments in sales training, new products, new marketing initiatives, and a revamped e-business platform to accelerate our performance.” Second Quarter Highlights Bioprocess Division generated 14 percent organic revenue growth and delivered strong growth in all geographic regions Bioscience Division delivered solid performance in its Laboratory Water business unit led by the continued strength of its new Milli-Q® Advantage product Non-GAAP operating margins increased 300 basis points year-over-year from 16.8 percent to 19.8 percent The Company completed the twelve-month integration of its Serologicals acquisition The Company continued to strengthen its new product development pipeline as part of its efforts to increase its R&D productivity Revenue Growth by Geography ($ millions): Three Months Ended Six Months Ended June 30,2007 July 1,2006 %Growth June 30,2007 July 1,2006 %Growth Americas $ 170.6 $ 116.9 46% $ 333.4 $ 230.0 45% Europe 149.4 111.4 34% 295.8 220.5 34% Asia/Pacific   63.2   45.5 39%   126.0   91.7 37% Total $ 383.2 $ 273.8 40% $ 755.2 $ 542.2 39% Revenue Growth by Division ($ millions): Three Months Ended Six Months Ended June 30,2007 July 1,2006 %Growth June 30,2007 July 1,2006 %Growth Bioprocess $ 226.8 $ 166.9 36% $ 441.1 $ 330.6 33% Bioscience   156.4   106.9 46%   314.1   211.6 48% Total $ 383.2 $ 273.8 40% $ 755.2 $ 542.2 39% Quarterly Earnings Call Millipore will host a conference call and webcast to discuss its financial results, business outlook, and related corporate and financial matters at 4:45 p.m. Eastern Time today. The call can be accessed through Millipore’s website: http://www.millipore.com. A replay of the call will be archived on the Investor Relations section of the website and will also be available via telephone by dialing (800) 642-1687 or (706) 645-9291 and entering confirmation code: 3838336. The telephonic replay will be available beginning at 8:00 p.m. ET on July 31, 2007 until 11:59 p.m. ET on August 3, 2007. About Millipore Millipore is a leading provider of products and services that improve productivity and results in biopharmaceutical manufacturing and in clinical, analytical and research laboratories. The Company is organized in two operating divisions. Its Bioprocess Division helps pharmaceutical and biotechnology companies to optimize their manufacturing productivity, ensure the quality of drugs, and scale up the production of difficult-to-manufacture biologics. Its Bioscience Division helps optimize laboratory productivity and workflows by providing reagents, kits and other enabling technologies and products for life science research and development. Millipore has a deep understanding of its customers' research and manufacturing process needs, and offers reliable and innovative tools, technologies and services. The Company is part of the S&P 500 Index and employs approximately 6,000 employees worldwide. For additional information on Millipore Corporation, please visit its website at: www.millipore.com. Use of Non-GAAP Financial Measures The non-GAAP financial measures used in this press release – which are non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP pre-tax income, non-GAAP net income, and non-GAAP diluted earnings per share – exclude costs related to our manufacturing consolidation strategy, acquisition integration and restructuring expenses related to the acquisition of Serologicals, amortization of intangible assets, inventory fair value adjustments related to business acquisitions, bridge loan commitment fees in connection with the acquisition of Serologicals and a change in a tax accrual. There are limitations in using non-GAAP financial measures as they are not prepared in accordance with generally accepted accounting principles and may be different than non-GAAP financial measures used by other companies. We believe that the non-GAAP financial measures provide useful and supplementary information to investors regarding our quarterly performance. It is our belief that these non-GAAP financial measures have been particularly useful to investors over the last couple of years because of the significant changes that have occurred outside of our day-to-day business in accordance with the execution of our new strategy. This strategy includes strengthening our leadership position with bioscience customers, becoming a strategic supplier in bioscience research markets, leading our industry in product quality and manufacturing effectiveness, becoming a magnet for talent, and doubling the value of the Company between 2004 and 2009. The financial impact of certain elements of these activities, particularly our manufacturing consolidation strategy and acquisitions, are often large relative to our overall financial performance and most of the related charges are recorded in one or two financial quarters but not in other financial quarters, which can adversely affect the comparability of our results on a period-to-period comparable basis. As an example, the scope and scale of our manufacturing consolidation strategy was the largest in our history. When we complete this initiative, we will have closed six manufacturing plants. We regularly use non-GAAP financial measures internally to understand, manage, and evaluate our business results and make operating decisions. We also measure our employees and compensate them, in part, based on such non-GAAP measures. For the same reasons, we also use this information for our forecasting activities. The non-GAAP financial measures presented herein also facilitate comparisons to our historical operating results, which have consistently been presented in this manner. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. They are limited in value because they exclude charges that have a material effect on our reported results and, therefore, should not be relied upon as the sole financial measures to evaluate our financial results. The non-GAAP financial measures are meant to supplement, and to be viewed in conjunction with, GAAP financial measures. Investors are encouraged to review the reconciliation of the financial measures to their most directly comparable GAAP financial measures as provided in the tables accompanying this press release. Our earnings guidance, however, is only provided on a non-GAAP basis. It is not feasible to provide GAAP diluted earnings per share guidance because the items excluded, other than amortization expense, are difficult to predict and estimate and are primarily dependent on future events. Forward Looking Statements: The matters discussed herein, as well as in future oral and written statements by management of Millipore Corporation 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. Potential risks and uncertainties that could affect Millipore's future operating results include, without limitation, the inability to successfully integrate Serologicals or other acquired businesses; failure to achieve design wins into our pharmaceutical and biotechnology customers’ manufacturing design phase for a particular drug; delay, suspension or termination of a customer’s volume production; lack of availability of raw materials or component products on a timely basis; regulatory delay in the approval of new therapeutics; limitations on cash flow available for operations and investment due to increased debt service obligations; the inability to establish and maintain necessary product and process quality levels; reduced demand for cell culture products using bovine serum; the inability to realize the expected benefits of development, marketing, licensing and other alliances; competitive factors such as new membrane or chromatography technology; the inability to achieve anticipated cost benefits of our supply chain initiative; risks relating to our concentration of principal manufacturing operations; the inability to utilize technology in current or planned products due to overriding rights by third parties; potential environmental liabilities; conditions in the economy in general and in the bioscience and bioprocess markets in particular; foreign exchange fluctuations; reduced private and government research funding; exposure to product liability claims; and difficulties inherent in transferring or outsourcing of manufacturing operations. Please refer to our filings with the SEC, including our most recent Annual Report on Form 10-K, for more information on these and other risks that could cause actual results to differ. Millipore Corporation Condensed Consolidated Statements of Operations (In thousands, except per share data) (Unaudited)   Three Months Ended Six Months Ended June 30, July 1, June 30, July 1,   2007     2006     2007     2006     Net sales $ 383,175 $ 273,775 $ 755,167 $ 542,190 Cost of sales   182,782     130,249     364,911     256,021   Gross profit 200,393 143,526 390,256 286,169   Selling, general and administrative expenses 123,060 87,538 245,904 169,824 Research and development expenses   25,993     19,717     53,457     38,130   Operating income 51,340 36,271 90,895 78,215   Interest income 299 9,268 770 16,160 Interest expense   (16,325 )   (7,992 )   (33,073 )   (12,185 ) Income before income taxes and minority interest 35,314 37,547 58,592 82,190 Provision for income taxes 5,869 7,986 1,519 18,001 Minority interest   1,032     424     2,001     521     Net income $ 28,413   $ 29,137   $ 55,072   $ 63,668     Diluted earnings per share $ 0.52   $ 0.54   $ 1.01   $ 1.18     Diluted weighted average shares outstanding   54,910     54,207     54,745     54,051   Millipore Corporation Condensed Consolidated Balance Sheets (In thousands) (Unaudited)   June 30, December 31,   2007   2006 ASSETS Current assets: Cash and cash equivalents $ 53,885 $ 77,481 Accounts receivable, net 301,275 277,410 Inventories 263,356 256,666 Assets held for sale 18,948 17,150 Deferred income taxes and other current assets   88,580   80,648 Total current assets 726,044 709,355 Property, plant and equipment, net 546,715 525,903 Deferred income taxes 7,978 8,366 Intangible assets, net 459,907 488,303 Goodwill 1,015,779 1,014,194 Other assets   24,182   25,370 Total assets $ 2,780,605 $ 2,771,491   LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $ - $ 100,000 Accounts payable 111,283 110,017 Accrued expenses and other current liabilities 132,505 172,091 Income taxes payable and deferred income taxes   10,888   19,722 Total current liabilities 254,676 401,830 Long-term debt 1,383,614 1,316,256 Deferred income taxes 15,285 16,121 Other liabilities 81,500 83,793 Minority interest 5,651 5,080 Shareholders' equity   1,039,879   948,411 Total liabilities and shareholders' equity $ 2,780,605 $ 2,771,491 Millipore Corporation Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)   Six Months Ended June 30, July 1,   2007     2006   Cash flows from operating activities: Net income $ 55,072 $ 63,668 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 60,820 28,094 Stock-based compensation 7,223 5,762 Deferred income tax (benefit) provision (7,717 ) 4,776 Business acquisition inventory fair value adjustments 11,121 - Other (3,095 ) (6,456 ) Changes in operating assets and liabilities: Accounts receivable (20,604 ) (12,972 ) Inventories (13,764 ) (10,279 ) Other assets 4,929 (1,735 ) Accrued income taxes (4,239 ) (21,909 ) Other liabilities   (40,823 )   (24,718 ) Net cash provided by operating activities   48,923     24,231   Cash flows from investing activities: Additions to property, plant and equipment (53,580 ) (51,351 ) Proceeds/purchases of marketable securities, net - (152,762 ) Acquisition of businesses, net of cash acquired - (8,584 ) Other   632     -   Net cash used in investing activities   (52,948 )   (212,697 ) Cash flows from financing activities: Proceeds from issuance of common stock under stock plans 29,580 41,967 Payment of long term debt (100,000 ) - Borrowings (repayments) under the revolving credit facility 50,459 (20,108 ) Issuance of debt - 860,877 Other   (1,874 )   4,465   Net cash (used in) provided by financing activities   (21,835 )   887,201   Effect of foreign exchange rates on cash and cash equivalents   2,264     3,340   Net (decrease) increase in cash and cash equivalents (23,596 ) 702,075 Cash and cash equivalents at beginning of period   77,481     537,052   Cash and cash equivalents at end of period $ 53,885   $ 1,239,127   Millipore Corporation Reconciliation of GAAP to Non-GAAP Financial Measures Three Months Ended June 30, 2007 (dollars in thousands, except EPS data)   Gross Profit Gross Profit Margin   Operating Income   Operating Margin   Pre-tax Income   Net Income Diluted EPS GAAP results, three months ended June 30, 2007 $ 200,393 52.3% $ 51,340 13.4% $ 35,314 $ 28,413 $ 0.52 Non-GAAP adjustments: Costs related to manufacturing consolidation strategy 3,484 0.9% 3,484 0.9% 3,484 2,282 0.04 Business acquisition inventory fair value adjustments 1,956 0.5% 1,956 0.5% 1,956 1,281 0.02 Acquisition integration and restructuring expenses 1,487 0.4% 4,465 1.2% 4,465 2,925 0.05 Purchased intangibles amortization 2,363 0.6% 14,568 3.8% 14,568 9,543 0.18 Change in tax accrual - -               Total non-GAAP adjustments   9,290 2.4%   24,473 6.4%   24,473   16,031   0.29 Non-GAAP results, three months ended June 30, 2007 $ 209,683 54.7% $ 75,813 19.8% $ 59,787 $ 44,444 $ 0.81   Millipore Corporation Reconciliation of GAAP to Non-GAAP Financial Measures Six Months Ended June 30, 2007 (dollars in thousands, except EPS data)   Gross Profit   Gross Profit Margin   Operating Income   Operating Margin   Pre-tax Income   Net Income   Diluted EPS GAAP results, six months ended June 30, 2007 $ 390,256 51.7 % $ 90,895 12.0 % $ 58,592 $ 55,072 $ 1.01 Non-GAAP adjustments: Costs related to manufacturing consolidation strategy 7,232 0.9 % 7,232 0.9 % 7,232 4,934 0.09 Business acquisition inventory fair value adjustments 11,121 1.5 % 11,121 1.5 % 11,121 7,765 0.14 Acquisition integration and restructuring expenses 2,073 0.3 % 9,485 1.3 % 9,485 6,476 0.12 Purchased intangibles amortization 4,718 0.6 % 29,113 3.9 % 29,113 19,833 0.36 Change in tax accrual (9,100 ) (0.17 )               Total non-GAAP adjustments   25,144 3.3 %   56,951 7.6 %   56,951   29,908     0.54   Non-GAAP results, six months ended June 30, 2007 $ 415,400 55.0 % $ 147,846 19.6 % $ 115,543 $ 84,980   $ 1.55     Millipore Corporation Reconciliation of GAAP to Non-GAAP Financial Measures Three Months Ended July 1, 2006 (dollars in thousands, except EPS data)   Gross Profit Gross Profit Margin   Operating Income   Operating Margin   Pre-tax Income   Net Income Diluted EPS GAAP results, three months ended July 1, 2006 $ 143,526 52.4 % $ 36,271 13.2 % $ 37,547 $ 29,137 $ 0.54 Non-GAAP adjustments: Costs related to manufacturing consolidation strategy 6,339 2.3 % 6,339 2.3 % 6,339 4,329 0.08 Acquisition related expenses 70 0.1 % 1,955 0.7 % 1,955 1,335 0.02 Purchased intangibles amortization 1,488 0.6 % 1,488 1,016 0.02 Bridge loan commitment fees in connection with acquisition of Serologicals 1,310 895 0.02               Total non-GAAP adjustments   6,409 2.4 %   9,782 3.6 %   11,092   7,575   0.14 Non-GAAP results, three months ended July 1, 2006 $ 149,935 54.8 % $ 46,053 16.8 % $ 48,639 $ 36,712 $ 0.68   Millipore Corporation Reconciliation of GAAP to Non-GAAP Financial Measures Six Months Ended July 1, 2006 (dollars in thousands, except EPS data)   Gross Profit   Gross Profit Margin   Operating Income   Operating Margin   Pre-tax Income   Net Income   Diluted EPS GAAP results, six months ended July 1, 2006 $ 286,169 52.8 % $ 78,215 14.4 % $ 82,190 $ 63,668 $ 1.18 Non-GAAP adjustments: Costs related to manufacturing consolidation strategy 10,564 1.9 % 10,564 2.0 % 10,564 6,967 0.13 Acquisition related expenses 70 0.0 % 1,955 0.4 % 1,955 1,335 0.02 Purchased intangibles amortization 2,920 0.5 % 2,920 1,911 0.03 Bridge loan commitment fees in connection with acquisition of Serologicals 1,310 895 0.02               Total non-GAAP adjustments   10,634 1.9 %   15,439 2.9 %   16,749   11,108   0.20 Non-GAAP results, six months ended July 1, 2006 $ 296,803 54.7 % $ 93,654 17.3 % $ 98,939 $ 74,776 $ 1.38   Non-GAAP Gross Profit and Gross Profit Margin The calculation of non-GAAP gross profit and gross profit margin is displayed in the above tables. Non-GAAP gross profit and gross profit margin exclude the costs related to our manufacturing consolidation strategy for the reasons described above in the introductory paragraphs of the "Use of Non-GAAP Financial Measures” section of this press release. Non-GAAP gross margin and gross profit margin exclude the amortization of intangible assets and acquired inventory fair value adjustments from business acquisitions because (1) the amounts are non-cash, (2) we can not influence the timing and amount of future expense recognition, and (3) excluding such expenses provides investors and management better visibility into the components of operating expenses. In addition, non-GAAP gross profit and gross profit margin exclude the one-time acquisition and related integration expenses in connection with the acquisition of Serologicals because this is the largest acquisition in recent Millipore history. Non-GAAP Operating Income and Operating Margin The calculation of non-GAAP operating income and operating margin is displayed in the above tables. Non-GAAP operating income and operating margin exclude the amortization of intangible assets and acquired inventory fair value adjustments related to business acquisitions because (1) the amounts are non-cash, (2) we can not influence the timing and amount of future expense recognition, and (3) excluding such expenses provides investors and management better visibility into the components of operating expenses. The calculation of non-GAAP operating income and operating margin also exclude the costs related to our manufacturing consolidation strategy and severance related to leadership changes and division consolidation for the reasons described above in the introductory paragraphs of the "Use of Non-GAAP Financial Measures” section of this press release. Non-GAAP operating income and operating margin exclude one-time acquisition and related integration expenses in connection with the acquisition of Serologicals because this is the largest acquisition in recent Millipore history. Non-GAAP Pre-tax Income The calculation of non-GAAP pre-tax income is displayed in the above tables. The calculation of non-GAAP pre-tax income also excludes costs related to our manufacturing consolidation strategy; acquisition and integration expenses; amortization of intangible assets; and acquired inventory fair value adjustments related to business acquisitions for the reasons described for operating income and operating margin above. Non-GAAP pre-tax income also excludes bridge loan commitment fees in connection with the acquisition of Serologicals. Non-GAAP Net Income The calculation of non-GAAP net income is displayed in the above tables. Non-GAAP net income excludes an adjustment to the income tax accrual because this is a significant non-recurring item affecting the income tax provision. Because pre-tax income is included in the net income calculation, the net income calculation also excludes costs related to our manufacturing consolidation strategy; acquisition integration expenses in connection with the acquisition of Serologicals; amortization of intangible assets; bridge loan commitment fees and acquired inventory fair value adjustments related to business acquisitions for the reasons described for pre-tax income above. Non-GAAP Diluted Earnings per Share The calculation of non-GAAP diluted earnings per share is displayed in the above tables. Because net income is included in the diluted earnings per share calculation, the diluted earnings per share calculation excludes the amounts for costs related to our manufacturing consolidation strategy; acquisition integration expenses in connection with the acquisition of Serologicals; amortization of intangible assets, acquired inventory fair value adjustments related to business acquisitions; bridge loan commitment fees and an adjustment to the income tax accrual for the reasons described for net income above.