ST. LOUIS, April 24, 2012 /PRNewswire/ --
HIGHLIGHTS:2012 Results (all percentages are to comparable periods in 2011)
2012 Outlook (all percentages are compared to full year 2011 results)
CEO's STATEMENT: Commenting on first quarter 2012 performance, President and CEO Rakesh Sachdev said, "We are pleased with our reported sales of $665 million and diluted adjusted EPS of $0.99 which are the best quarterly results in our history. The 4% organic growth in our Research business was slightly higher than our expectation, even as uncertainties in the global economic environment and in pharma and academic research funding in the U.S. and Europe continued. SAFC had its strongest quarter ever with sales of $197 million. As expected, the organic sales growth rate for SAFC in the first quarter was in the low single digits due to the pre-buy in the SAFC Bioscience business in early 2011, temporary weakness in the LED markets and production capacity constraints in Hitech. We continue to expect sales growth in SAFC to move from low to mid single digits in the first half of the year to low double digits for the second half.
Following the acquisition of BioReliance in January 2012, we continued to pursue our M&A strategy to add bolt-on businesses with the recently announced acquisition of Research Organics, a leading supplier of high purity biochemicals for use in life sciences markets. This acquisition is an outstanding complement to SAFC's existing raw materials portfolio and is expected to help us provide our customers more innovative and enhanced quality solutions and true dual sourcing of biological buffers."
Sachdev concluded, "We've reaffirmed our organic sales expectation for 2012 of mid-single digit percentage growth. Our plans are to continue to execute on our Research business' strategic initiatives to drive sales of our analytical chemistry, biology and materials science products, and to deliver high single digit organic sales growth in SAFC. We also plan to continue to enhance our e-commerce and Asia Pacific and Latin American market sales. In addition, the acquisitions of BioReliance and Research Organics are expected to add roughly 6% to Sigma-Aldrich's sales growth in 2012.
We've also reaffirmed our diluted adjusted EPS outlook for 2012 in the range of $3.90 to $4.05. Our plan is to continue prudent cost control without sacrificing a commitment to longer term growth initiatives as we deal with market uncertainties. Our management team remains fully engaged and committed to deliver this performance."
2012 RESULTS:Reported sales for the first quarter of 2012 of $665 million increased 5% over the first quarter of 2011. Excluding changes in foreign currency exchange rates which reduced otherwise reportable sales by 2% and acquisitions which increased sales by 4%, first quarter organic sales growth was 3%. First quarter sales for the Company's Research business grew organically by 4%, driven by strong growth in the Asia Pacific and Latin American regions. First quarter sales for the SAFC business grew organically by 1% over the first quarter of 2011, in-line with expectations.
SAFC sales were impacted by tougher comparisons related to the customer pre-buy in the SAFC Bioscience business early in 2011 arising out of our plant consolidations, temporary weakness in the LED markets and production capacity constraints in Hitech. We expect Hitech capacity to start ramping up beginning in Q2 2012 with the opening of a new plant in Taiwan.
A reconciliation of reported to adjusted (organic) sales can be found on page 10.
The adjusted operating income margin in the first quarter of 2012 was 26.6% of sales compared to 26.9% of sales in the first quarter of 2011. The benefit to operating margins from the higher sales levels was offset primarily by higher amortization of intangible assets related to our recent acquisitions. Amortization of acquisition related intangibles amounted to $6 million, or $0.03 per diluted share in the first quarter of 2012 compared to $3 million or $0.02 per diluted share in the first quarter of 2011. First quarter 2012 adjusted operating income excludes $5 million, or $0.03 per diluted share, of one-time transaction costs associated with our recent acquisitions of BioReliance and Research Organics. A reconciliation of reported to adjusted operating income and margin is provided on page 11.
The effective tax rate for the first quarter of 2012 was 32% compared to 28% in the first quarter of 2011. The first quarter 2011 tax rate included a benefit from the resolution and related release of certain tax contingencies amounting to $0.04 per diluted share. The effective tax rate for all of 2012 is expected to be approximately 30% to 31% of pretax income.
Free cash flow (defined on page 9) for the first quarter of 2012 was $112 million, compared to $133 in the first quarter of 2011. Higher capital spending primarily associated with the completion of new facilities in the U.S and Asia-Pacific region and higher uses of cash for working capital to support sales growth were the primary drivers for the lower free cash flow. A reconciliation of net cash provided by operating activities to free cash flow is provided on page 11.
Other highlights include:
Cash Flow and Debt: Net cash provided by operating activities for the first quarter of 2012 was $144 million compared to $151 million for the first quarter of 2011. Higher use of cash for working capital to support higher sales levels was the primary contributor to the decline in operating cash flow. Capital expenditures were $32 million in the first quarter of 2012 compared to $18 million in the first quarter of 2011. Free cash flow of $112 million for the first quarter of 2012, $193 million of short-term debt and the partial use of cash on hand were used to fund $389 million of acquisitions, pay $24 million in dividends and return $25 million to shareholders through share repurchases. The Company's debt to capital ratio was 24% at March 31, 2012 and 19% at December 31, 2011.
Share Repurchases: We acquired 0.4 million shares in the first quarter of 2012 at an average share price of $71.86. There were 121 million shares outstanding at March 31, 2012. The Company expects to continue to offset the dilutive impact of issuing share based incentive compensation with future repurchases, the timing and amount of which will depend upon market conditions and other factors.
Cautionary Statement: This release contains forward-looking statements. Such statements involve risk and uncertainty, including financial, business environment and projections, and relate to matters that are not historical facts. Such statements are preceded by, followed by or include the words "believes," "can," "expects," "plans," "anticipates," "should," "enhances," "estimates," "forecasts," "will" or similar expressions. Additionally, this release contains forward-looking statements relating to future performance, goals, strategic actions and initiatives and similar intentions and beliefs, including, without limitation, statements with respect to the Company's expectations, goals, beliefs, intentions, outlook, plans and the like regarding future sales, earnings, return on equity, cost savings, process improvements, free cash flow, share repurchases, capital expenditures, 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. Such 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 release due to such factors as (1) global economic conditions, (2) changes in pricing and the competitive environment and the global demand for the Company's 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 business units, (6) dependence on uninterrupted manufacturing operations and global supply chain, (7) changes in the regulatory environment in which the Company operates, (8) changes in worldwide tax rates or tax benefits from domestic and international operations, including the matters described in Note 10 – Income Taxes, to the Company's consolidated financial statements included in Item 8, Part II in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 (the "10-K"), (9) exposure to litigation, including product liability claims, (10) the ability to maintain adequate quality standards, (11) reliance on third party package delivery services, (12) an unanticipated increase in interest rates, (13) other changes in the business environment in which the Company operates, (14) the outcome of the outstanding matters described in Note 11 – Contingent Liabilities and Commitments, to the Company's consolidated financial statements included in Item 8, Part II in the 10-K and (15) acquisitions or divestitures of businesses. A further discussion of the Company's risk factors can be found in Item 1A of Part I of the 10-K. 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 whose biochemical, organic chemical products, kits and services are used in scientific research, including genomic and proteomic research, biotechnology, pharmaceutical development, the diagnosis of disease and as key components in pharmaceutical, diagnostics and high technology manufacturing. Sigma-Aldrich customers include more than one million scientists and technologists in life science companies, university and government institutions, hospitals and industry. The Company operates in 40 countries and has nearly 9,000 employees whose objective is to provide excellent service worldwide. Sigma-Aldrich is committed to accelerating customer success through innovation and leadership in Life Science, High Technology and Service. For more information about Sigma-Aldrich, please visit its website, 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 (i.e., 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 10 and 11 for these reconciliations.
With over 60% of sales denominated in currencies other than the U.S. dollar, management uses currency adjusted sales growth when analyzing Company performance, and believes it is useful as well to investors to judge the Company's performance. Organic sales growth data presented in this release excludes currency and acquisitions impacts. The Company calculates the impact of changes in foreign currency exchange 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 past currency impacts, we are unable to estimate changes that may occur later in 2012 to applicable exchange rates. Any significant changes in currency exchange rates would likely have a significant impact on reported growth rates due to the volume of sales denominated in foreign currencies.
Management also uses the following non-GAAP measures to judge its performance and ability to pursue opportunities that enhance shareholder value: adjusted net income and EPS; adjusted operating income and adjusted operating margin (reconciled on page 11); and free cash flow (defined on page 9). Due to the uncertain timing of future restructuring and other special charges we are unable to include these charges in the 2012 diluted adjusted EPS forecast or provide 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 MonthsEnded March 31,20122011Net sales$
32Cost of products sold310296Gross profit355336Selling, general and administrative expenses160148Research and development expenses1818Restructuring costs-3Acquisition transaction costs5-Operating income172167Interest, net12Income before income taxes171165Provision for income taxes5446Net income$
9Net income per share - Basic$
.98Net income per share - Diluted$
.97Weighted average number of shares outstanding - Basic121122Weighted average number of shares outstanding - Diluted122123
SIGMA-ALDRICH CORPORATIONConsolidated Balance Sheets (Unaudited)(in millions)(Unaudited)March 31,December 31,20122011AssetsCurrent assets:Cash and cash equivalents$
5Accounts receivable, net392319Inventories697668Deferred taxes3755Other 7586Total current assets1,7591,793Property, plant and equipment:Land$
51Buildings and improvements794764Machinery and equipment 959888Construction in progress107120Less - accumulated depreciation(1,092)(1,060)Property, plant and equipment, net824763Goodwill, net698466Intangibles, net297159Other93100Total assets$
3,281Liabilities and Stockholders' EquityCurrent liabilities:Notes payable and current maturities of long-term debt$
221Accounts payable156143Payroll 6567Income taxes 4834Other8573Total current liabilities768538Long-term debt300300Pension and post-retirement benefits147143Deferred taxes6622Other7479Total liabilities1,3551,082Stockholders' equity:Common stock202202Capital in excess of par value242225Common stock in treasury(2,181)(2,165)Retained earnings4,0003,907Accumulated other comprehensive income5330Total stockholders' equity2,3162,199Total liabilities and stockholders' equity$
3,281SIGMA-ALDRICH CORPORATIONConsolidated Statements of Cash Flows (Unaudited)(in millions)Three MonthsEnded March 31,20122011Cash flows from operating activities:Net income$
9Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization3226Deferred income taxes202Stock-based compensation expense65Restructuring costs, net of payments-2Other(3)1Changes in assets and liabilities:Accounts receivable(46)(48)Inventories(16)(12)Accounts payable615Income taxes1333Other, net158Net cash provided by operating activities144151Cash flows from investing activities:Capital expenditures(32)(18)Purchases of short-term investments(16)(4)Proceeds from sales of short-term investments2116Acquisitions of businesses, net of cash acquired(389)(20)Other, net(3)(1)Net cash used in investing activities(419)(27)Cash flows from financing activities:Net issuance (repayment) of short-term debt193(50)Dividends(24)(21)Share repurchases(25)(22)Proceeds from exercise of stock options1414Excess tax benefits from stock-based payments72Net cash provided by/(used in) financing activities165(77)Effect of exchange rate changes on cash37Net change in cash and cash equivalents(107)54Cash and cash equivalents at January 1665569Cash and cash equivalents at March 31$
23Free cash flow(1)$
33(1) Net cash provided by operating activities less capital expenditures.
SIGMA-ALDRICH CORPORATIONSupplemental Financial Information - (Unaudited)Sales Growth by Business UnitThree MonthsEnded March 31, 2012CurrencyAcquisitionAdjustedReportedBenefitBenefit(Organic)Research Chemicals4%(2%)2%4%SAFC9%(1%)9%1%Total Customer Sales5%(2%)4%3%Business Unit Sales(in millions)First
468SAFC197---197Total Customer Sales$
,777SAFC180183180185728Total Customer Sales$
SIGMA-ALDRICH CORPORATIONSupplemental Financial Information - (Unaudited)Reconciliation of Reported net income to Adjusted net incomeNet IncomeDiluted Earnings (in millions)Per ShareThree Months EndedThree Months EndedMarch 31,March 31,2012201120122011Reported net income$
.97Acquisition transaction costs4-0.03-Restructuring costs-2-0.01Tax Benefit-(5)-(0.04)Adjusted net income$
.94Income Statement RatiosThree Months EndedMarch 31,20122011Gross profit53.4%53.2%S,G&A expenses24.1%23.4%Acquisition transaction costs0.7%-Operating income25.9%26.4%Net income17.6%18.8%Effective tax rate31.6%27.9%Reconciliation of Reported Operating Income to Adjusted Operating IncomeThree Months EndedMarch 31,20122011Reported operating income$
7Acquisition transaction costs5-Restructuring costs-3Adjusted operating income$
70Reconciliation of Reported Operating Income Margin to Adjusted Operating Income MarginThree Months EndedMarch 31,20122011Reported operating income margin25.9%26.4%Acquisition transaction costs0.7%-Restructuring costs-0.5%Adjusted operating income margin26.6%26.9%Reconciliation of Free Cash Flow(in millions)Three Months EndedMarch 31,20122011Net cash provided by operating activities$
51Less: Capital expenditures(32)(18)Free cash flow$
Copyright©2010 PR Newswire.
All rights reserved