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| To Our shareholders, employees and customers:
Nineteen ninety-eight was a difficult year for Millipore. The impact of the worldwide microelectronics industry downturn, the market softness in Asia, including Japan, and the continuing strength of the US dollar negatively impacted the revenue and profitability of the company. In total, revenues were $699 million, a decline of 8 percent from 1997. In local currency the decline was 5 percent. Earnings per share for 1998 were $0.60 compared to $1.65 in 1997, after excluding unusual items for each year. With this Annual Report, and in accordance with new financial reporting standards, we are starting to provide revenues and income for two business segments – Biopharmaceutical & Research, and Microelectronics. The downturn in the microelectronics industry affected our top line and bottom line performance. Revenues were down 32 percent or $84 million compared to last year. Microelectronics profitability, in local currency, was down $51 million compared to the prior year. In Asia, across both business segments, our revenues were down 21 percent, reflecting the financial turmoil in that region. The continued strength of the US dollar reduced our 1998 earnings by $0.33 per share. Revenues in our Biopharmaceutical & Research segment grew 5 percent or 7 percent in local currency. Except for Asia, this segment had double digit revenue growth. It also showed growth in profitability of 8 percent in local currency. However, this was not enough to overcome the shortfalls outlined above. We are not happy with these financial results. Early in 1998 we determined we could not stand fast and wait for market conditions and currency exchange rates to improve. We engaged in a major, company-wide restructuring program to lower our cost of doing business. We concentrated on areas where market conditions could not support our expense base – our Microelectronics business segment and our Asian infrastructure. We also challenged our entire organization to improve productivity and efficiency. We made the following changes: – Consolidation of our Microelectronics gas operations in Allen, Texas. This move allowed us to eliminate three facilities that were supporting this business and create economies and product quality that were impossible to achieve in our former, dispersed operations. The new plant is fully operational and has gotten high marks from major microelectronics customers. The project was completed ahead of schedule, in keeping with our need to reduce costs sooner rather than later. – Restructuring of our Microelectronics operations worldwide to size the business expenses to be consistent with current business conditions. Included in this restructuring was the difficult step of reducing the workforce. We were careful to protect our field presence, customer support, and research and development activities. We believe we are ready for the expected upturn in the industry, and better able to manage the fluctuations in this cyclical market. – Restructuring actions in other parts of our business to lower costs and improve efficiency. These actions included some reduction in workforce, rationalization of product lines, the consolidation of manufacturing operations, the outsourcing of several administrative and non-value-added activities, and the renegotiation of alliance agreements to gain cost effectiveness. |
