ST. LOUIS, Feb. 9, 2011 /PRNewswire/ --
HIGHLIGHTS:2010 Results (all percentages are to comparable periods in 2009)
2011 Outlook (all percentages are compared to full year 2010 results)
DividendAt a meeting held on February 8, 2011, the Directors increased the Company's quarterly cash dividend by 12.5% to $0.18 per share. The dividend is payable on March 15, 2011 to shareholders of record on March 1, 2011. CEO's STATEMENT:Commenting on the fourth quarter of 2010, President and CEO Rakesh Sachdev said: "The fourth quarter was marked with the tragic loss of our long-time colleagu871,1961,090Selling, general and administrative expenses
143134548518Research and development expenses
22710Income before income taxes
128126544490Provision for income taxes
347Net income per share - Basic
2.84Net income per share - Diluted
2.80Weighted average number of shares outstanding - Basic
121122121122Weighted average number of shares outstanding - Diluted
123124123124SIGMA-ALDRICH CORPORATIONConsolidated Balance Sheets(in millions)(Unaudited)December 31, December 31,20102009AssetsCurrent assets:Cash and cash equivalents
373Accounts receivable, net
139117Total current assets
1,6021,384Property, plant and equipment, net
2,714Liabilities and Stockholders' EquityCurrent liabilities:Notes payable and current maturities of long-term debt
170153Total current liabilities
300100Pension and post-retirement benefits
1,0381,028Stockholders' equity:Common stock
202202Capital in excess of par value
194153Common stock in treasury
3,5363,230Accumulated other comprehensive income
9584Total stockholders' equity
1,9761,686Total liabilities and stockholders' equity$
2,714SIGMA-ALDRICH CORPORATIONConsolidated Statements of Cash Flows (Unaudited)(in millions)Twelve MonthsEnded December 31,20102009Cash flows from operating activities:Net income
347Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
9392Deferred income taxes
(2)(7)Stock-based compensation expense
2217Restructuring costs, net of payments
(7)3Changes in operating assets and liabilities:Accounts receivable
63Net cash provided by operating activities
523516Cash flows from investing activities:Capital expenditures
(99)(120)Purchases of short-term investments
(43)(25)Proceeds from sale of short-term investments
418Purchases of technology
-(19)Acquisitions of businesses, net of cash acquired
(1)2Net cash used in investing activities
(182)(160)Cash flows from financing activities:Net repayment of short-term debt
(238)(135)Issuance of long-term debt
298-Repayment of long-term debt
(100)(7)Payment of dividends
(78)(71)Treasury stock purchases
(99)(67)Proceeds from exercise of stock options
4524Excess tax benefits from stock-based payments
116Net cash used in financing activities
(161)(250)Effect of exchange rate changes on cash1615Net change in cash and cash equivalents196121Cash and cash equivalents at January 1373252Cash and cash equivalents at December 31$
373Free cash flow(1)$
396(1) Net cash provided by operating activities less capital expenditures.SIGMA-ALDRICH CORPORATIONSupplemental Financial Information - (Unaudited)Sales Growth by Business UnitThree MonthsEnded December 31, 2010CurrencyAdjustedReportedImpact(Organic) Research Essentials
2%(2%)4% Research Specialties
3%(2%)5% Research Biotech
(2%)-(2%) Research Chemicals2%(1%)3% SAFC
2%(2%)4% Total Customer Sales2%(1%)3%Twelve MonthsEnded December 31, 2010CurrencyAdjustedReportedImpact(Organic) Research Essentials
2%-2% Research Specialties
6%-6% Research Biotech
3%1%2% Research Chemicals4%-4% SAFC
9%-9% Total Customer Sales6%1%5%Business Unit Sales(in millions)First
2010 Research Essentials
434 Research Specialties
217207207214845 Research Biotech
91838487345 Research Chemicals4203973964111,624 SAFC
152157167171647 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 EndedDecember 31,December 31,2010200920102009Reported net income$
860.070.05Adjusted net income
.80Included above:Currency impact
-Net IncomeDiluted Earnings (in millions)Per ShareTwelve Months EndedTwelve Months EndedDecember 31,December 31,2010200920102009Reported net income$
7-0.05-Adjusted net income
2.85Included above:Currency impact
-Income Statement RatiosThree Months EndedTwelve Months EndedDecember 31,December 31,2010200920102009Gross profit
16.2%16.2%16.9%16.2%Effective tax rate
26.6%26.2%29.4%29.2%Reconciliation of Reported Operating Income to Adjusted Operating Income(in millions)Three Months EndedDecember 31,2010% of Sales2009% of SalesReported operating income
2822.3%Restructuring costs and impairment charge
111.9%91.6%Adjusted operating income
3723.9%Twelve Months EndedDecember 31,2010% of Sales2009% of SalesReported operating income
50023.3%Restructuring costs and impairment charge
311.3%90.4%Adjusted operating income
50923.7%Reconciliation of Free Cash Flow(in millions)Three Months EndedTwelve Months EndedDecember 31,December 31,2010200920102009Net cash provided by operating activities
516Less: Capital expenditures
(34)(32)(99)(120)Free cash flow$
396 e and CEO Jai Nagarkatti. He was a greatly respected leader to the entire Sigma-Aldrich organization and the scientific and business community. Jai left a great legacy and a solid team. We continue to keep his family in our thoughts and prayers.
We are very pleased to have reported improved results in 2010's fourth quarter when compared to the same period last year, our best quarter in 2009. Our fourth quarter sales set a new quarterly record at $582 million. Earnings for the fourth quarter of 2010 continued the strong performance achieved in the earlier quarters of 2010, driving our diluted EPS for the year up by 11% on a reported basis and by 16% on an adjusted basis over the prior year level. The $3.12 of reported, diluted EPS for 2010 is another record, marking our 36th consecutive year of achieving increased EPS.
Our fourth quarter sales showed positive organic growth in both our Research and SAFC businesses. Our traditional research products in analytical chemistry, biology and traditional chemistry together with continued strong growth from our materials science products all made a positive contribution to our research sales growth. Our SAFC business continued its strong quarterly sales performance, achieving the best quarterly sales in 2010, with strong growth in sales of materials and precursors for semi-conductor and L.E.D. applications as well as in industrial cell culture media for biological drugs. SAFC also enjoyed steady growth in the sale of bulk chemical products for development and manufacturing."
Sachdev continued, "For 2011, we again expect organic sales growth in the mid-single digit range as we continue to drive toward our longer term organic growth goal of 7% to 8%. Market conditions are not likely to change much, so our plans are to continue to execute on our strategic initiatives to drive sales of our analytical, biology, chemistry and materials science products, to continue the high single digit organic growth in SAFC, and to enhance our e-commerce and Asia Pacific-Latin American market sales. All of these efforts are intended in an effort to once again boost sales growth above the underlying market rate.
Excluding any special charges, we also expect to hold our operating profit margin close to the level achieved in 2010. Our 2011 plans include continuing benefits from our sales growth and operations improvement initiatives. We plan to reinvest some of those benefits in the initiatives that are expected to accelerate sales growth rate in the future. In addition, we also plan to create our new European headquarters in Switzerland to more effectively manage our efforts in the important EMEA market. These additional expenses are included in our earnings outlook. Our diluted EPS, exclusive of any restructuring and other extraordinary special charges, should increase by 4% to 9% to a range of $3.45 to $3.60. Let me assure you that our management team is fully engaged and committed to deliver this performance."
2010 RESULTS:Reported sales for the fourth quarter of 2010 of $582 million increased 2% from the fourth quarter of 2009. Excluding a 1% impact from unfavorable currency rates, fourth quarter organic sales growth was 3%. Fourth quarter sales for the Company's Research business grew 3% on a currency-adjusted basis, driven primarily by growth in the Asia Pacific-Latin American markets. Fourth quarter sales for the Company's SAFC business grew 4% on a currency-adjusted basis, as sales of our Supply Solutions, Bioscience and Hitech products again reflected stronger demand. A reconciliation of reported to adjusted (organic) sales is below.
The operating income margin in the fourth quarter of 2010 was 22.3% of sales, comparable to that reported for the fourth quarter of 2009. Excluding restructuring costs, the operating income margin in the fourth quarters of 2010 and 2009 would have been 24.2% and 23.9%, respectively. A reconciliation of reported to adjusted operating margins is below. The Q4 2010 gross margin of 51.7% was up 160 basis points over the 2009 level due to our ability to enhance margins from higher sales and favorable product mix, partially offset by currency impacts. This improvement was partially offset by higher S,G&A costs, primarily from incentive compensation costs resulting from the improved financial performance for the full year. The Q4 2010 pretax restructuring costs of $11 million related to the previously announced voluntary early retirement program and the 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 its fixed cost structure as part of a longer term goal to improve operating margins to a range of 26% to 27%. The retroactive reinstatement of the U.S. R&D tax credit in the fourth quarter of 2010 provided a $0.02 benefit to diluted EPS in the fourth quarter. This benefit was offset by a currency impact of an equal amount.
Free cash flow (defined below) for 2010 was a record $424 million, an increase of $28 million over 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 below.
Other highlights from global sales growth initiatives include:
OTHER INFORMATION:Cash Flow and Debt: Net cash provided by operating activities for 2010 was $523 million compared to $516 million for 2009. This increase reflects the net effect of higher net income and non-cash charges partially offset by a smaller contribution from the Company's working capital management initiatives. Capital expenditures were $99 million for 2010 compared to $120 million in 2009. Inventory levels were 6.3 months at December 31, 2010 compared to 6.5 months at December 31, 2009. Free cash flow of $424 million for 2010 was used to return $177 million to shareholders through share repurchases and a 10% increase in the quarterly dividend rate, repay $40 million in debt and fund acquisitions of $80 million. The Company's debt to capital ratio was reduced to 21% at December 31, 2010 from 25% at December 31, 2009.
Share Repurchase: Another 0.4 million shares were acquired in the fourth quarter of 2010 at an average share price of $64.49. There were 122 million shares outstanding at December 31, 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 "is expected", "expects", "aren't likely", "seek", "should", 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) failure of planned sales initiatives in our Research and SAFC businesses, (6) dependence on uninterrupted manufacturing operations, (7) failure to achieve planned cost reductions in global supply chain initiatives and restructuring actions, (8) changes in the regulatory environment in which the Company operates, (9) 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 September 30, 2010, (10) exposure to litigation, including product liability claims, (11) the ability to maintain adequate quality standards, (12) reliance on third party package delivery services, (13) an unanticipated increase in interest rates, (14) other changes in the business environment in which the Company operates, and (15) the outcome of the outstanding 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 September 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 and the Company's Form 8-K filed on October 25, 2010. 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 7,900 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 below 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 in 2011 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 and EPS and adjusted operating income and operating income margins (reconciled below) and free cash flow (defined below), non-GAAP measures, to judge its performance and ability to pursue opportunities that enhance shareholder value. Due to the uncertain timing of future restructuring and other extraordinary special charges, we are unable to include these charges in the 2011 diluted EPS forecast or provide a reconciliation to the corresponding GAAP measures. 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 MonthsTwelve MonthsEnded December 31,Ended December 31,2010200920102009Net sales
2,148Cost of products sold
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