Add
MIL to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| MIL > SEC Filings for MIL > Form 10-Q on 12-Aug-2009 | All Recent SEC Filings |
12-Aug-2009
Quarterly Report
Basis of Presentation
The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Condensed Consolidated Financial Statements and related notes thereto and other financial information included elsewhere in this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2008. Our interim fiscal quarters end 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 second fiscal quarters of 2009 and 2008 ended on July 4, 2009 and June 28, 2008, respectively.
The year-over-year comparisons of our operating results for the six months ended July 4, 2009 reflected the favorable effect of having 94 days in our first quarter ended April 4, 2009 versus 89 days in the first quarter ended March 29, 2008. The effect cannot be precisely quantified in either dollar or percentage terms and average daily revenues and related costs are not meaningful measures of our operating results. The positive impact of these extra days will be offset in the fourth quarter when we will have six fewer days in the quarter this year compared to last year.
Effective January 1, 2009, we adopted Financial Accounting Standards Board (the "FASB") Staff Position No. APB 14-1, "Accounting for Convertible Debt Instruments That May be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("FSP APB 14-1") and Statement of Financial Accounting Standards ("SFAS") No. 160, "Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 51" ("SFAS No. 160"). These changes in accounting rules required retrospective adjustments to prior period financial statements to conform with current accounting treatment.
General Overview
We are a global leader in life science. We provide innovative products, services and solutions that help our academic, biotechnology and pharmaceutical customers advance their research, development and production. They use our products and services to increase their speed and to improve their consistency, while reducing costs in laboratory applications and in biopharmaceutical manufacturing. Our extensive technical expertise and applications knowledge give us the unique ability to engage in peer-to-peer discussions with scientists to confront challenging human health issues.
We have two operating divisions. Our Bioscience Division provides innovative products and technologies that improve laboratory productivity and work flows for life science research. Our Bioprocess Division helps pharmaceutical and biotechnology companies develop their manufacturing processes, optimize their manufacturing productivity and ensure the quality of their drugs.
We provide a wide range of products and services to a variety of customers around the world. We do not rely on any single business, market or economy, and the breadth of our products and services allows us to target growth on a number of dimensions.
22 MILLIPORE FORM 10-Q
PART I
The following table sets forth revenues derived from the Bioprocess and
Bioscience divisions as a percentage of our total revenues.
Three Months Ended Six Months Ended
July 4, June 28, July 4, June 28,
2009 2008 2009 2008
Bioprocess 56 % 55% 56 % 55%
Bioscience 44 % 45% 44 % 45%
Total 100 % 100% 100 % 100%
|
The composition of our geographic revenues is as follows:
Three Months Ended Six Months Ended
July 4, June 28, July 4, June 28,
2009 2008 2009 2008
Americas 41 % 37% 41 % 37%
Europe 40 % 46% 40 % 44%
Asia/Pacific 19 % 17% 19 % 19%
Total 100 % 100% 100 % 100%
|
The following tables set forth reported and organic revenue growth rates by division compared with the prior year.
Bioprocess Bioscience Consolidated
Three Months Ended Three Months Ended Three Months Ended
July 4, June 28, July 4, June 28, July 4, June 28,
2009 2008 2009 2008 2009 2008
Reported growth - 1 % (3 )% 18 % (1 )% 8 %
Deduct/(add):
Foreign currency translation (7 )% 8 % (7 )% 9 % (6 )% 8 %
Acquisitions - - 4 % - 1 % -
Organic growth 7 % (7 )% - 9 % 4 % -
Bioprocess Bioscience Consolidated
Six Months Ended Six Months Ended Six Months Ended
July 4, June 28, July 4, June 28, July 4, June 28,
2009 2008 2009 2008 2009 2008
Reported growth 3 % 1 % (2 )% 16 % 1 % 7 %
Deduct/(add):
Foreign currency translation (7 )% 8 % (7 )% 9 % (7 )% 8 %
Acquisitions - - 2 % - 1 % -
Organic growth 10 % (7 )% 3 % 7 % 7 % (1 )%
|
Consolidated revenues of $408.6 million for the three months ended July 4, 2009 decreased $5.6 million, or 1 percent, versus the prior year comparable period. The revenue decrease included an unfavorable foreign currency translation effect of 6 percent. Adjusting for this item and the effect of our acquisition of Guava Technologies, Inc. ("Guava"), our consolidated revenues for the three months ended July 4, 2009 grew 4 percent versus the prior year comparable period. Changes in product pricing had a slightly positive effect on the year-over-year comparison. This revenue growth was primarily attributable to higher spending levels by our Bioprocess Division's large biotechnology customers in North America.
Bioprocess revenues were also higher in Asia reflecting biotechnology infrastructure investments in the region. Bioscience revenues were essentially the same as the prior year comparable period. This reflected increased demand for consumable products and services used in academic and biotechnology research, which was offset by lower demand for laboratory instruments.
Our year-over-year revenue growth during the current economic environment reflects the resiliency of our business model, the relative health of our customers, and our ability to deliver innovative solutions. Approximately ninety percent of our revenues are derived from consumable products and services, which are less affected by the contraction of our customers' capital spending. Our business is well diversified across end-markets, product lines, and geographies. This diversity provides us important balance and flexibility in managing our business, especially during these challenging times.
Operating profit for the three months ended July 4, 2009 of $69.0 million, representing 17 percent of revenues, was essentially the same as the prior year comparable period.
Diluted earnings per share ("EPS") of $0.72 in the three months ended July 4, 2009 increased $0.03 from the prior year comparable period because of lower interest expense as we continued to repay our debt.
We generated $156.8 million of operating cash flows for the six months ended July 4, 2009, which was an increase of $54.3 million, or 53 percent, versus the prior year comparable period. Operating cash flow generation was driven by the improved operating leverage and improved working capital management. This level of operating cash flow generation enables us to invest more in marketing programs and research and development activities, invest in new businesses, and continue to pay down our debt.
Results of Operations
REVENUES
The following table sets forth revenues and percent of revenue growth by
division compared with the prior year.
Three Months Ended Six Months Ended
July 4, June 28, July 4, June 28,
($ in millions): 2009 2008 Growth 2009 2008 Growth
Bioprocess $ 229.9 $ 229.8 - $ 459.9 $ 446.4 3 %
Bioscience 178.7 184.4 (3 )% 356.6 364.0 (2 )%
Total $ 408.6 $ 414.2 (1 )% $ 816.5 $ 810.4 1 %
|
Bioprocess Division
Bioprocess revenues of $229.9 million for the three months ended July 4, 2009 were the same as the prior year comparable period. Foreign currency translation had a 7 percent adverse effect on the year-over-year growth. Adjusting for this item, Bioprocess revenues increased 7 percent in the three months ended July 4, 2009.
The revenue growth was primarily attributable to higher sales of our downstream bioprocessing products used in biopharmaceutical manufacturing, such as chromatography media, clarification, sterilizing, tangential flow filtration and virus filtration products. This was the result of higher spending levels by our large biotechnology customers in North America. Our large biotechnology customers' spending levels in the prior year comparable period were adversely affected by a reduction in their rate of monoclonal antibody production as a result of their evaluation of market demand for their products, and their efforts to lower their costs and to improve their working capital positions.
24 MILLIPORE FORM 10-Q
Bioprocess revenues were also higher in Asia reflecting biotechnology infrastructure investments in the region. Additionally, Bioprocess revenues increased from sales of products used in vaccine production, partly resulting from expanded vaccine production in response to the H1N1 virus. We expect this trend to continue through the remainder of 2009. Also contributing to the Bioprocess revenue increase was the continued growth in process monitoring tools, primarily as a result of our differentiated NovaSeptum sampling products.
Bioprocess revenues of $459.9 million for the six months ended July 4, 2009 increased $13.5 million, or 3 percent, versus the prior year comparable period. The increase included an unfavorable foreign currency translation effect of 7 percent. Adjusting for this item, Bioprocess revenues increased 10 percent in the six months ended July 4, 2009. Similar market dynamics affecting our revenue growth in the three months ended July 4, 2009 also affected the six-month period.
Bioscience Division
Bioscience revenues of $178.7 million for the three months ended July 4, 2009 decreased $5.7 million, or 3 percent, versus the prior year comparable period. The decrease included an unfavorable foreign currency translation effect of 7 percent and a favorable effect of 4 percent from the Guava acquisition. Adjusting for these items, Bioscience revenues were essentially the same as the prior year comparable period. The effects of the pharmaceutical industry consolidation and the global economic recession have lowered demand for our Bioscience products and services. Laboratory water consumables and services revenue increases were offset by declines in laboratory water instrument revenues. We expect this trend to continue until economic conditions improve, at least through the remainder of the year. Demand for our research products serving academic and biotechnology customers was steady in the three months ended July 4, 2009.
Bioscience revenues of $356.6 million for the six months ended July 4, 2009 decreased $7.4 million, or 2 percent, versus the prior year comparable period. The decrease included an unfavorable foreign currency translation effect of 7 percent. Adjusting for this item and the effect of our Guava acquisition, Bioscience revenues for the six months ended July 4, 2009 grew 3 percent versus the prior year comparable period. Similar market dynamics affecting our revenue growth in the three months ended July 4, 2009 also affected the six-month period.
REVENUES BY GEOGRAPHY
The following table sets forth revenues and the percent of revenue growth by
geography compared with the prior year.
Three Months Ended Six Months Ended
July 4, June 28, July 4, June 28,
($ in millions): 2009 2008 Growth 2009 2008 Growth
Americas $ 168.7 $ 153.3 10 % $ 333.9 $ 299.6 11 %
Europe 163.4 189.3 (14 )% 326.3 360.6 (9 )%
Asia/Pacific 76.5 71.6 7 % 156.3 150.2 4 %
Total $ 408.6 $ 414.2 (1 )% $ 816.5 $ 810.4 1 %
|
PART I
The following tables set forth reported and organic revenue growth rates by
geography compared with the prior year.
Americas Europe Asia/Pacific
Three Months Ended Three Months Ended Three Months Ended
July 4, June 28, July 4, June 28, July 4, June 28,
2009 2008 2009 2008 2009 2008
Reported growth 10 % (10 )% (14 )% 27 % 7 % 13 %
Deduct/(add):
Foreign currency translation (1 )% 1 % (14 )% 16 % (1 )% 11 %
Acquisition 2 % - 1 % - 1 % -
Organic growth 9 % (11 )% (1 )% 11 % 7 % 2 %
Americas Europe Asia/Pacific
Six Months Ended Six Months Ended Six Months Ended
July 4, June 28, July 4, June 28, July 4, June 28,
2009 2008 2009 2008 2009 2008
Reported growth 11 % (10 )% (9 )% 22 % 4 % 19 %
Deduct/(add):
Foreign currency translation (1 )% 1 % (14 )% 15 % - 12 %
Acquisition 1 % - 1 % - 1 % -
Organic growth 11 % (11 )% 4 % 7 % 3 % 7 %
|
From a geographic perspective, revenues increased $15.4 million in the Americas, decreased $25.9 million in Europe, and increased $4.9 million in Asia/Pacific during the three months ended July 4, 2009 versus the prior year comparable period. Excluding the effects of foreign currency translation and the Guava acquisition, revenues increased 9 percent in the Americas, decreased 1 percent in Europe, and increased 7 percent in Asia/Pacific. The increase in the Americas was primarily the result of higher spending by our large biotechnology customers in North America. The decrease in Europe was primarily driven by a decrease in sales to some European biotechnology customers as a result of the global economic recession. The increase in Asia/Pacific was primarily driven by revenue growth in our downstream bioprocessing products in China and Singapore, reflecting biotechnology investments in the region. The Asia/Pacific revenue growth was partially offset by continued weak economic conditions in Japan.
Revenues increased $34.3 million in the Americas, decreased $34.3 million in Europe and increased $6.1 million in Asia/Pacific, during the six months ended July 4, 2009 versus the prior year comparable period. Excluding the effects of foreign currency translation and the Guava acquisition, revenues increased 11 percent in the Americas, 4 percent in Europe, and 3 percent in Asia/Pacific. The increase in the Americas was primarily the result of higher spending this year by our large biotechnology customers in North America. The increase in Europe was primarily driven by sales of our life science and upstream bioprocessing products. The increase in Asia/Pacific was primarily driven by sales of our life science, process monitoring tools, and downstream bioprocessing products, offset by weak economic conditions in Japan and India and the timing of non-recurring capital investments by certain customers in the region last year. We continued to experience strong revenue growth in China and Singapore.
GROSS PROFIT MARGIN
Three Months Ended Six Months Ended
July 4, June 28, July 4, June 28,
($ in millions): 2009 2008 2009 2008
Gross profit $ 228.9 $ 230.2 $ 452.2 $ 438.3
Gross profit margin 56 % 56 % 55 % 54 %
|
26 MILLIPORE FORM 10-Q
Gross profit decreased $1.3 million, or 1 percent, and increased $13.9 million, or 3 percent, in the three and six months ended July 4, 2009, respectively, versus the prior year comparable periods. The primary drivers of the decrease in the three months ended July 4, 2009 were unfavorable foreign currency translation, a business mix favoring lower margin Bioprocess products, and a $3.0 million increase in charges associated with our global supply chain initiatives. These factors were partially offset by the favorable effects of increased sales volume and productivity improvements. Amortization of acquired intangible assets was $2.0 million and $2.4 million in the three months ended July 4, 2009 and June 28, 2008, respectively.
The primary drivers of the increase in gross profit in the six months ended July 4, 2009 versus the prior year comparable period were higher sales volume, productivity improvements, and improved product mix from higher margin downstream bioprocessing and life science products. These factors were partially offset by unfavorable effects of foreign currency translation and higher charges in connection with our global supply chain initiatives. Amortization of acquired intangible assets was $4.0 million and $4.7 million in the six months ended July 4, 2009 and June 28, 2008, respectively.
In September 2008, we announced the second phase of our global supply chain initiative, which is part of our long term strategy to further improve the efficiency of our global supply chain. Including charges associated with this second phase, we expect to incur approximately $12 million of additional costs related to our global supply chain initiatives in 2009. We incurred charges associated with our global supply chain initiatives of $4.7 million and $8.3 million for the three and six months ended July 4, 2009, respectively. We incurred charges associated with our global supply chain initiatives of $1.7 million, and $3.9 million, for the three and six months ended June 28, 2008, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Three Months Ended Six Months Ended
July 4, June 28, July 4, June 28,
($ in millions): 2009 2008 2009 2008
Selling, general and administrative
expenses $ 130.7 $ 134.5 $ 257.5 $ 260.0
Percentage of revenues 32 % 32 % 32 % 32 %
|
Selling, general and administrative ("SG&A") expenses decreased $3.8 million, or 3 percent, and $2.5 million, or 1 percent, in the three and six months ended July 4, 2009, respectively, versus the prior year comparable periods. Excluding the effect of foreign currency translation, SG&A expenses increased $3.5 million, or 3 percent, and $12.1 million, or 5 percent, in the three and six months ended July 4, 2009, respectively, versus the prior year comparable periods. For both periods, the primary drivers of the higher SG&A expenses were increased incentive compensation costs largely attributable to higher achievement of performance targets and the inclusion this year of Guava expenses and related acquisition costs. These increases were partially offset by lower amortization expense. Amortization expense related to acquired intangible assets was $12.2 million and $24.3 million, respectively, in the three and six months ended July 4, 2009 versus $13.5 million and $26.9 million, respectively, in the prior year comparable periods. We expect 2009 full year amortization of intangible assets affecting SG&A to be approximately $49 million compared with $53.7 million in 2008.
RESEARCH AND DEVELOPMENT EXPENSES
Three Months Ended Six Months Ended
July 4, June 28, July 4, June 28,
($ in millions): 2009 2008 2009 2008
Research and development expenses $ 29.1 $ 26.2 $ 54.3 $ 51.2
Percentage of revenues 7 % 6 % 7 % 6 %
|
Research and development ("R&D") expenses increased $2.9 million, or 11 percent, and $3.1 million, or 6 percent, for the three and six months ended July 4, 2009, respectively, versus the prior year comparable periods. Foreign currency translation had an insignificant effect on the year-over-year comparison. For both periods, the increases were primarily the result of higher labor expenses, the inclusion this year of Guava R&D expenses, the timing of project spending, and strategic investments to support innovation. Our strategy is to enhance our internal R&D capabilities through investments in technology collaborations and license arrangements that will help us to develop innovative new products and capture greater value for our customers. We expect R&D expenses to be approximately 7 percent of revenues for the remainder of 2009.
INTEREST INCOME/EXPENSE
Three Months Ended Six Months Ended
June 28, June 28,
July 4, 2008 July 4, 2008
($ in millions): 2009 (As adjusted) 2009 (As adjusted)
Interest income $ 0.2 $ 0.3 $ 0.4 $ 0.4
Interest expense $ 14.5 $ 18.3 $ 29.1 $ 36.5
Average interest rate during
the period 5.5 % 6.0 % 5.5 % 5.9 %
|
Interest expense decreased $3.8 million, or 21 percent, and $7.4 million, or 20 percent, for the three and six months ended July 4, 2009, respectively, versus the prior year comparable periods. The decreases were primarily the result of lower overall debt balances as we continued to repay our debt and, to a lesser extent, lower base rates under our revolver borrowings. Our adoption of FSP APB 14-1 added non-cash interest expense of $3.6 million and $7.2 million for the three and six months ended July 4, 2009, respectively. For the three and six months ended June 28, 2008, non cash interest on our convertible debt was $3.4 million and $6.7 million, respectively. Our revolving credit facilities are comprised of floating rate borrowings.
PROVISION FOR INCOME TAXES
Three Months Ended Six Months Ended
June 28, June 28,
July 4, 2008 July 4, 2008
2009 (As adjusted) 2009 (As adjusted)
Effective income tax rate 24.0 % 23.1 % 20.9 % 22.2 %
|
Our effective income tax rate for the three months ended July 4, 2009 was 24.0% compared with 23.1% for the prior year comparable period. The higher current period effective income tax rate is attributable to a shift in the jurisdictional mix of our profits to higher tax rate jurisdictions. Our effective income tax rate for the six months ended July 4, 2009 was 20.9% compared with 22.2% for the prior year comparable period. During the six months . . .
|
|