ST. LOUIS, Oct. 21 /PRNewswire-FirstCall/ --
2010 Results (all percentages are to comparable periods in 2009)
2010 Outlook (all percentages are compared to full year 2009 results)
CEO's STATEMENT:Commenting on third quarter 2010 performance, Chairman, President and CEO Jai Nagarkatti said: "Our earnings for the third quarter of 2010 continued the strong performance achieved in the earlier quarters of 2010, driving our adjusted diluted EPS for the first nine months of the year up by 20% over the comparable prior year level. Our third quarter sales growth for SAFC again improved over prior 2010 quarterly gains. Each of our research initiatives in analytical, biology and materials science products also made a positive contribution to our sales growth.
Our SAFC business continued its strong quarterly sales performance with another double digit percentage organic sales increase in 2010's third quarter, with continued strong growth of materials and precursors for semi-conductor and L.E.D. applications, industrial cell culture media for biological drugs and improved growth in the sale of bulk chemical products for development and manufacturing. Each of our Research business units had organic sales growth in 2010's third quarter that was largely equivalent to or exceeded results in this year's first half driven in part by continued strength in non-European international markets."
Nagarkatti continued, "We've increased our adjusted diluted EPS for 2010 to a new range of $3.20 to $3.28, fully expecting to deliver another record year of earnings in 2010. We reaffirm our mid-single digit percentage organic sales growth expectation for the full year of 2010. We expect to deliver improved profit margins driven by our sales expectation, ability to effectively manage costs and a weaker than anticipated U. S. dollar."
2010 RESULTS:Reported sales for the third quarter of 2010 were $563 million, an increase of 5% from the third quarter of 2009. Excluding a 2% impact from unfavorable currency rates, third quarter organic sales growth was 7%, consistent with the organic sales growth achieved in 2010's second quarter and above the first quarter organic sales growth of 4%. Sales for the Company's Research business grew 5% on a currency adjusted basis for the third quarter of 2010, driven primarily by volume growth in each of the three geographic regions. Third quarter sales for the Company's SAFC business grew 14% on a currency adjusted basis, with sales growth improving over the prior quarters of the year as sales of our Supply Solutions, Bioscience and Hitech products again reflected stronger demand. A reconciliation of reported to adjusted (organic) sales is on page 8.
The operating income margin in the third quarter of 2010 was 23.4% of sales. Excluding restructuring and impairment costs, the operating income margin in the third quarter of 2010 would have been 25.4%, an increase of 260 basis from 2009's third quarter. Gross margin of 52.9% was up 330 basis points due to our ability to enhance margins from higher sales volumes, currency benefits and favorable product mix. This improvement was partially offset by higher S,G&A costs, primarily from variable incentive compensation costs related to the improved financial performance. The pretax restructuring costs of $4 million related to the previously announced consolidation of certain manufacturing facilities in the U.S. and Europe. These restructuring actions reflect the Company's efforts to improve operating efficiencies and lower the fixed cost structure as part of its longer term goal to improve operating margins to a 26% to 27% range. The pretax impairment cost of $7 million related to the reduction in the value of a long-term investment.
Free cash flow (defined on page 7) for the first nine months of 2010 was $332 million, an increase of $58 million compared to the same period in 2009. Higher net income and lower capital expenditures were the primary contributors to this increase. A reconciliation of net cash provided by operating activities to free cash flow is on page 9.
Other highlights from global sales growth initiatives and profit enhancement activities include:
OTHER INFORMATION:Cash Flow and Debt: Net cash provided by operating activities for the nine months ended September 30, 2010 was $397 million compared to $362 million for the comparable period of 2009. This increase is largely due to higher net income. Capital expenditures for the first nine months were $65 million in 2010 compared to $88 million in 2009. Inventory levels were 6.3 months at September 30, 2010 compared to 6.5 months at December 31, 2009. Overall free cash flow of $332 million for the first nine months of 2010 was used to repay $100 million in debt and return $134 million to shareholders through share repurchases and a 10% increase in the quarterly dividend rate. The Company's debt to capital ratio was reduced to 20% at September 30, 2010 from 26% at December 31, 2009.
Share Repurchase: Another 0.3 million shares were acquired in the third quarter of 2010 at an average share price of $57.05. There were 121 million shares outstanding at September 30, 2010. The Company expects to continue to offset the dilutive impact of issuing share based incentive compensation with future repurchases. The Company may repurchase additional shares, but the timing and amount will depend upon market conditions and other factors.
Cautionary Statement: This release contains forward-looking statements relating to future performance, goals, strategic actions and initiatives and similar intentions and beliefs, including phrases "are expected", " expectation", "is expected", "believe", "expects", "are likely", "anticipated", and other statements regarding the Company's expectations, goals, beliefs, intentions and the like regarding future sales, earnings, free cash flow, share repurchases, acquisitions and other matters. These statements are based on assumptions regarding Company operations, investments and acquisitions and conditions in the markets the Company serves. The Company believes these assumptions are reasonable and well founded. The forward looking statements in this release are subject to risks and uncertainties, including, among others, certain economic, political and technological factors. Actual results could differ materially from those stated or implied in this news release, due to, but not limited to, such factors as (1) global economic conditions, (2) changes in pricing and the competitive environment and the global demand for our products, (3) fluctuations in foreign currency exchange rates, (4) changes in research funding and the success of research and development activities, (5) dependence on uninterrupted manufacturing operations, (6) changes in the regulatory environment in which the Company operates, (7) changes in worldwide tax rates or tax benefits from domestic and international operations, including the matters described in Note 3-Income Taxes-to the Consolidated Financial Statements in the Company's Form 10-Q report for the quarter ended June 30, 2010, (8) exposure to litigation, including product liability claims, (9) the ability to maintain adequate quality standards, (10) reliance on third party package delivery services, (11) failure to achieve planned cost reductions in global supply chain initiatives and restructuring actions, (12) an unanticipated increase in interest rates, (13) failure of planned sales initiatives in our Research and SAFC businesses, (14) other changes in the business environment in which the Company operates, and (15) the outcome of the matters described in Note 14-Contingent Liabilities and Commitments-to the Consolidated Financial Statements in the Company's Form 10-Q report for the quarter ended June 30, 2010. A further discussion of the Company's risk factors can be found in Item 1A of Part 1 of the Company's Form 10-K report for the year ended December 31, 2009. The Company does not undertake any obligation to update these forward-looking statements.About Sigma-Aldrich: Sigma-Aldrich is a leading Life Science and High Technology company. Our biochemical and organic chemical products and kits are used in scientific research, including genomic and proteomic research, biotechnology, pharmaceutical development, and as key components in pharmaceutical, diagnostic and other high technology manufacturing. We have customers in life science companies, university and government institutions, hospitals and in industry. Over one million scientists and technologists use our products. Sigma-Aldrich operates in 40 countries and has 7,700 employees providing excellent service worldwide. We are committed to accelerating our Customers' success through leadership in Life Science, High Technology and Service. For more information about Sigma-Aldrich, please visit our award winning web site at www.sigma-aldrich.com.
Non-GAAP Financial Measures:The Company supplements its disclosures made in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") with certain non-GAAP financial measures. The Company does not, and does not suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial information. These non-GAAP measures may not be consistent with the presentation by similar companies in the Company's industry. Whenever the Company uses such non-GAAP measures, it provides a reconciliation of such measures to the most closely applicable GAAP measure. See the Supplemental Financial Information on pages 8 and 9 for these reconciliations.
With over 60% of sales denominated in currencies other than the U.S. dollar, management uses currency adjusted growth, and believes it is useful to investors, to judge the Company's local currency performance. Organic sales growth data presented in this release excludes currency impacts. The Company calculates the impact of changes in foreign currency rates by multiplying current period activity by the difference between current period exchange rates and prior period exchange rates, the result is the defined impact of "changes in foreign currency exchange rates". While we are able to report currency impacts after the fact, we are unable to estimate changes that may occur later in 2010 to applicable exchange rates. Any significant changes in currency exchange rates would likely have a significant impact on our reported growth rates due to the volume of our sales denominated in foreign currencies.
Management also uses adjusted net income (reconciled on page 9) and free cash flow (defined on page 7), non-GAAP measures, to judge its performance and ability to pursue opportunities that enhance shareholder value. Due to the uncertain timing of future restructuring charges, we are unable to include these charges in the 2010 diluted EPS forecast. Management believes this non-GAAP information is useful to investors as well. SIGMA-ALDRICH CORPORATIONConsolidated Statements of Income (Unaudited)(in millions except per share amounts)Three MonthsNine MonthsEnded September 30,Ended September 30,2010200920102009Net sales
,575Cost of products sold
298265895803Selling, general and administrative expenses
139127405384Research and development expenses
1258Income before income taxes
131120416364Provision for income taxes
254Net income per share - Basic
2.08Net income per share - Diluted
2.06Weighted average number of shares outstanding - Basic
121122121122Weighted average number of shares outstanding - Diluted
123124123124SIGMA-ALDRICH CORPORATIONConsolidated Balance Sheets(in millions)(Unaudited)September 30, December 31,20102009AssetsCurrent assets:Cash and cash equivalents
373Accounts receivable, net
125117Total current assets
1,5451,384Property, plant and equipment, net
2,714Liabilities and Stockholders' EquityCurrent liabilities:Notes payable and current maturities of long-term debt
192153Total current liabilities
100100Pension and post-retirement benefits
9811,028Stockholders' equity:Common stock
202202Capital in excess of par value
175153Common stock in treasury
3,4623,230Accumulated other comprehensive income
9184Total stockholders' equity
1,8881,686Total liabilities and stockholders' equity$
2,714SIGMA-ALDRICH CORPORATIONConsolidated Statements of Cash Flows (Unaudited)(in millions)Nine MonthsEnded September 30,20102009Cash flows from operating activities:Net income
254Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
6968Deferred income taxes
5-Stock-based compensation expense
1513Restructuring costs, net of payments
(4)(2)Changes in operating assets and liabilities:Accounts receivable
(3)(12)Pension obligationOther, net
3630Net cash provided by operating activities
397362Cash flows from investing activities:Capital expenditures
(65)(88)Purchases of short-term investments
(27)(15)Proceeds from sale of short-term investments
254Acquisitions of businesses, net of cash acquired
(2)1Net cash used in investing activities
(74)(104)Cash flows from financing activities:Net issuance/(repayment) of short-term debt
1(142)Repayment of long-term debt
(100)(7)Payment of dividends
(58)(53)Treasury stock purchases
(76)(46)Proceeds from exercise of stock options
2413Excess tax benefits from stock-based payments
52Net cash used in financing activities
(204)(233)Effect of exchange rate changes on cash815Net change in cash and cash equivalents12740Cash and cash equivalents at January 1373252Cash and cash equivalents at September 30$
292Free cash flow(1)$
274(1) Net cash provided by operating activities less capital expenditures.SIGMA-ALDRICH CORPORATIONSupplemental Financial Information - (Unaudited)Sales Growth by Business UnitThree MonthsEnded September 30, 2010CurrencyAdjustedReportedImpact(Organic) Research Essentials
1%(2%)3% Research Specialties
5%(2%)7% Research Biotech
1%(1%)2% Research Chemicals3%(2%)5% SAFC
12%(2%)14% Total Customer Sales5%(2%)7%Nine MonthsEnded September 30, 2010CurrencyAdjustedReportedImpact(Organic) Research Essentials
2%1%1% Research Specialties
7%1%6% Research Biotech
5%1%4% Research Chemicals5%1%4% SAFC
12%1%11% Total Customer Sales7%1%6%Business Unit Sales(in millions)First
2010 Research Essentials
324 Research Specialties
217207207631 Research Biotech
918384258 Research Chemicals4203973961,213 SAFC
152157167476 Total Customer Sales$
2009 Research Essentials
425 Research Specialties
197193198208796 Research Biotech
82808389334 Research Chemicals3863793854051,555 SAFC
133143149168593 Total Customer Sales$
2,148SIGMA-ALDRICH CORPORATIONSupplemental Financial Information - (Unaudited)Reconciliation of Reported net income to Adjusted net incomeNet IncomeDiluted Earnings (in millions)Per ShareThree Months EndedThree Months EndedSeptember 30,September 30,2010200920102009Reported net income$
7-0.05-Adjusted net income
.70Included above:Currency benefit
-Net IncomeDiluted Earnings (in millions)Per ShareNine Months EndedNine Months EndedSeptember 30,September 30,2010200920102009Reported net income$
7-0.05-Adjusted net income
2.06Included above:Currency benefit
-Income Statement RatiosThree Months EndedNine Months EndedSeptember 30,September 30,2010200920102009Gross profit
16.5%16.1%17.2%16.1%Effective tax rate
29.0%28.3%30.3%30.2%Reconciliation of Free cash flow(in millions)Nine Months EndedSeptember 30,20102009Net cash provided by operating activities
362Less: Capital expenditures
(65)(88)Free cash flow$
Copyright©2010 PR Newswire.
All rights reserved