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Millipore Corporation (MIL)

Q3 2009 Earnings Call Transcript

November 5, 2009 4:45 pm ET


Joshua Young – Director, IR

Martin Madaus – Chairman, President and CEO

Charlie Wagner – Corporate VP and CFO


Derik DeBruin – UBS

Tycho Peterson – JPMorgan

Isaac Ro – Leerink Swann

Marshall Urist – Morgan Stanley

Jon Groberg – Macquarie Capital

Dan Leonard – First Analysis

Eric [ph] – Thomas Weisel Partners



Good afternoon. My name is Casey and I will your conference operator today. At this time, I would like to welcome everyone to the Millipore’s third quarter 2009 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions) Thank you. Mr. Young, you may begin your conference.

Joshua Young

Thank you very much, Casey. Good evening. I would like to welcome everyone to Millipore's third quarter 2009 earnings conference call. My name is Joshua Young and I am the Director of Investor Relations for Millipore. And joining me on today's call are Martin Madaus, Chairman, President and CEO; and Charlie Wagner, Chief Financial Officer.

In addition to the earnings release we issued earlier today, we will be referencing a slide presentation as part of today's call. This presentation can be viewed by clicking on the webcast link on the homepage or by accessing Millipore's Investor Relations website. A PDF copy of the slides will be posted to our website after the call. We will also be highlighting non-GAAP information. A reconciliation of our GAAP financials to our non-GAAP financial measures is included in our earnings release and posted on our website.

Before we begin, I will make the usual Safe Harbor statement that during the course of this conference call, we will be making forward-looking statements regarding future events or the financial performance of the company that involve risks and uncertainties. The company's actual results may differ materially from the projections described in such statements. Factors that might cause such differences include but are not limited to those discussed in today's earnings release and in our Form 10-K, as well as other subsequent SEC filings.

Also note that the following information is related to current business conditions and our outlook as of today, November 5, 2009. Consistent with our prior practice, we do not intend to update our projections based on new information, future events or other reasons prior to the release of our fourth quarter financial results.

Now I would like to turn the call over to Martin Madaus.

Martin Madaus

Thanks, Joshua. Good evening, everybody. Thank you for joining us on the call today. Q3 was another very strong quarter of operational performance for Millipore. Many of the same trends that began early in the year continued in the third quarter. There are parts of our business that are performing extremely well, while there are few other areas that remained somewhat soft, but overall driving very strong growth in revenues and earnings and in cash flow.

The key contributors for this quarter’s great results are the following. First, our Bioprocess Division is sustaining its strong momentum and is generating very attractive growth. Just as we projected last year, the division’s performance has returned to tracking the strong fundamentals of the biotech industry and that we have seen also an additional benefit of an increase in vaccine productions.

Second, we saw an improvement in our Bioscience Division performance, but segment of the bioscience market remained soft. It’s right now a difficult environment to sell laboratory instrumentation and spending from large pharmaceutical customers remains weak. The good news is that we continue to grow faster than many of our peers, but the division is still well below the levels of growth we’ve seen over the past five years.

Third, we are capitalizing on the strength of our business to invest in our future growth. We continue to increase our R&D spending in the third quarter and we are improving our innovation capabilities throughout the company. Our higher growth and profitability gives us the opportunity now to invest while the general market is in a downturn. This investment will benefit our competitive position over time.

Finally, our cash flow performance continued to be outstanding. We generated approximately $112 million in free cash flow in the third quarter. And in the first nine months, we have generated $234 million of free cash flow already surpassing the cash flow that we generated all of last year. This exceptional performance is primarily the result of a substantial improvement in our working capital efficiency.

The programs we launched to improve our cash flow have been a resounding success, and we continued to use our cash to pay down our debt, which is increasing our flexibility to make strategic growth investments in the business.

So with that brief summary, let me move into some more specific comments about Q3. Third quarter revenue increased 4% to $412 million. If you exclude a 3% unfavorable effect from changes in foreign currency exchange rates, organic revenue growth in the quarter was 7%. From a divisional perspective, if you exclude the effects of changes in foreign exchange rates, the Bioprocess grew 8% organically while the Bioscience Division generated 4% organic growth.

On the bottom line, we reported $0.95 in non-GAAP earnings per share, which is about $0.02 higher than last year. We took advantage of the high levels of profitability we generated through the first six months of ’09 to make investments in our business during the second half of the year. This higher level of spending combined with a higher year-over-year tax rate lowered our earnings growth in Q3.

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