ST. LOUIS, April 25, 2013 /PRNewswire/ --
HIGHLIGHTS:Q1 2013 Results (all percentages are to comparable periods in 2012)
2013 Outlook (all percentages are to comparable periods in 2012)
CEO's STATEMENT:Commenting on first quarter 2013 performance, Pr#160;pursue opportunities that enhance shareholder value: adjusted net income and EPS; adjusted operating income margin (reconciled on page 11); and free cash flow (defined on page 9). Management believes this non-GAAP information is useful to investors as well.
Pubget is a registered trademark of Pubget Corporation.
SIGMA-ALDRICH CORPORATIONConsolidated Statements of Income (Unaudited)(in millions except per share amounts)Three Months EndedMarch 31,20132012Net sales$
5Cost of products and services sold331310Gross profit344355Selling, general and administrative expenses161160Research and development expenses1718Acquisition transaction costs-5Operating income166172Interest, net11Income before income taxes165171Provision for income taxes4354Net income$
7Net income per share - Basic$
.97Net income per share - Diluted$
.96Weighted average number of shares outstanding - Basic120121Weighted average number of shares outstanding - Diluted121122
SIGMA-ALDRICH CORPORATIONConsolidated Balance Sheets (Unaudited)(in millions)(Unaudited)March 31,December 31,20132012ASSETSCurrent assets:Cash and cash equivalents$
724Accounts receivable, net398356Inventories711722Deferred taxes3032Other 9095Total current assets1,7001,929Property, plant and equipment:Property, plant and equipment2,0012,011Less - accumulated depreciation(1,190)(1,182)Property, plant and equipment, net811829Goodwill, net675691Intangibles, net270282Other12589Total assets$
3,820LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Notes payable$
383Accounts payable154160Payroll 5255Income taxes 4526Other7477Total current liabilities414701Long-term debt300300Pension and post-retirement benefits132135Deferred taxes6664Other7274Total liabilities9841,274Stockholders' equity:Common stock202202Capital in excess of par value294276Common stock in treasury(2,294)(2,271)Retained earnings4,3664,270Accumulated other comprehensive income2969Total stockholders' equity2,5972,546Total liabilities and stockholders' equity$
SIGMA-ALDRICH CORPORATIONConsolidated Statements of Cash Flows (Unaudited)(in millions)Three Months EndedMarch 31,20132012Cash flows from operating activities:Net income$
7Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization3532Deferred income taxes620Stock-based compensation expense86Other(2)(3)Changes in operating assets and liabilities:Accounts receivable(51)(46)Inventories4(16)Accounts payable(4)6Income taxes2113Other, net1515Net cash provided by operating activities154144Cash flows from investing activities:Capital expenditures(25)(32)Purchases of short-term investments(51)(16)Proceeds from sales of short-term investments2021Acquisitions of businesses, net of cash acquired-(389)Other, net(3)(3)Net cash used in investing activities(59)(419)Cash flows from financing activities:Net issuance of short-term debt(294)193Dividends(26)(24)Share repurchases(27)(25)Proceeds from exercise of stock options1014Excess tax benefits from stock-based payments37Net cash used in financing activities(334)165Effect of exchange rate changes on cash(14)3Net change in cash and cash equivalents(253)(107)Cash and cash equivalents at January 1724665Cash and cash equivalents at March 31$
558Free cash flow(1)$
2(1) Net cash provided by operating activities less capital expenditures.
SIGMA-ALDRICH CORPORATIONSupplemental Financial Information - (Unaudited)Sales Growth by Business UnitThree Months EndedMarch 31, 2013AcquisitionAdjustedReportedCurrencyBenefit(Organic)Research(3)%(2)%—%(1)%Applied & Industrial4 %(1)%2 %3 %SAFC11 %(1)%9 %3 %Total Customer Sales2 %(1)%2 %1 %Business Unit Sales(in millions)First
361Applied & Industrial159———159SAFC155———155Total Customer Sales$
,398Applied & Industrial153151148146598SAFC140165156166627Total Customer Sales$
2,623Income Statement RatiosThree Months EndedMarch 31,20132012Gross profit51.0 %53.4 %S,G&A expenses23.9 %24.1 %Acquisition transaction costs—%0.7 %Operating income24.6 %25.9 %Net income18.1 %17.6 %Effective tax rate26.1 %31.6 %
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 31,2013201220132012Reported net income$
.96Acquisition transaction costs—4—0.03Adjusted net income$
.99Reconciliation of Reported Operating Income to Adjusted Operating Income(in millions)Three Months EndedMarch 31,20132012Reported operating income$$
72Acquisition transaction costs—5Adjusted operating income$$
77Reconciliation of Reported Operating Income Margin to Adjusted Operating Income MarginThree Months EndedMarch 31,December 31,September 30,June 30,2013201220122012Reported Operating Income Margin24.6%25.0%24.4%25.2%Restructuring cost—%0.2%0.6%0.6%Adjusted Operating Income Margin24.6%25.2%25.0%25.8%Reconciliation of Reported Earnings Per Share to Adjusted Earnings Per ShareThree Months EndedMarch 31,20132012Reported Earnings Per Share$
.96Currency0.02n/a Adjusted Earnings Per Share$
.96Reconciliation of Free Cash Flow(in millions)Three Months EndedMarch 31,20132012Net cash provided by operating activities$
44Less: Capital expenditures(25)(32)Free cash flow$
I am very pleased with the progress we are making in all three of our newly formed market-facing business units – Research, Applied and SAFC Commercial. Our teams are energized and focused on providing the best science, service and solutions to address customers' needs in these markets.
In Research, we continue to see signs that headwinds are abating from the large pharma site consolidations that occurred over the last several years. We are gaining new business with our solutions-based initiatives such as The Science PlaceSM, a single source marketplace solution to simplify procurement processes and channels. We also recently signed an agreement with a large biotech customer to manage their medicinal chemistry and biologics portfolio.
Dealers continue to generate steady organic sales growth, and our Dealers as Partners program has been successfully launched in Europe. As we anticipated, sales to Academic/Government customers continue to be negatively impacted primarily due to U.S. sequestration-related issues and European funding uncertainties. We expect the Academic/Government market to remain soft for the remainder of the year, which we have incorporated in our reaffirmed 2013 outlook.
Within our Applied business unit, our sales to Diagnostics and Testing labs grew strongly in the high single digits. With a rich product portfolio of analytical products, kits and solutions, our sales and marketing teams are developing new accounts and expanding into new geographies.
Within SAFC Commercial, we experienced mid-single digit organic sales growth of our Life Science Products and Services. We remain well positioned to benefit from the therapeutic trend to biologics and high-potency compounds, which was again evidenced by solid growth in our industrial cell culture media business and strong double-digit growth in our custom pharma business. BioReliance achieved a solid quarter with mid-single digit organic sales growth. As expected, year-over-year price declines for chemical precursors to the LED industry resulted in lower sales in our Hitech electronics segment. We are launching new products for the semiconductor and electronic display markets, which are not as price sensitive as the LED market, and are expected to provide growth in the second half of the year.
We generated strong free cash flow in the quarter and raised our cash dividend for the 38th consecutive year. We continue to look for growth investments, both organic and inorganic, that fit our strategy of increasing our presence in faster growing Applied and Commercial markets, broadening our Research portfolio to leverage our worldwide sales and distribution channels, increasing our presence in faster growing emerging countries and generating opportunities to significantly increase shareholder value."
Q1 2013 RESULTS:Reported sales for the first quarter of 2013 were $675 million, a 2% increase from the first quarter of 2012. Organic sales growth in the quarter was 1%. Acquisitions completed in 2012 increased sales by 2% and changes in foreign currency exchange rates caused sales to decline by 1%.
Research ($361 million in sales, 53% of overall sales)
Applied ($159 million in sales, 24% of overall sales)
SAFC Commercial ($155 million in sales, 23% of overall sales)
Operating income margin in the first quarter of 2013 was 24.6%. Compared with the prior quarter (fourth quarter of 2012), adjusted operating income margin declined by 60 basis points. The primary driver for the decline was higher SG&A expense for incentive compensation and increased investments in the realigned business units to better position for future growth. A reconciliation of reported to adjusted operating income margin is provided on page 11.
The effective tax rate for the first quarter of 2013 was 26% compared to 32% in the same period last year. As anticipated, the first quarter of 2013 benefited from the full-year reinstatement of the 2012 US R&D tax credit.
Free cash flow for the first quarter of 2013 was a strong $129 million, an increase of $17 million from the same period last year.
Other first quarter 2013 highlights include:
OTHER INFORMATION:Cash Flow and Debt: Net cash provided by operating activities for the first quarter of 2013 was $154 million compared to $144 million for the same period in 2012. Capital expenditures were $25 million compared to $32 million for the same period last year. Free cash flow of $129 million in the quarter was used to return $53 million to shareholders through share repurchases and dividends. The Company's debt to capital ratio was 13% at March 31, 2013 and 24% at March 31, 2012.
Share Repurchases: In the first quarter of 2013, the Company repurchased 0.3 million shares for $27 million. There were 120 million shares outstanding at March 31, 2013. 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. Such statements are preceded by, followed by or that include the words "expected," "expects," "expect," "forecast," "would," "estimate," "will," or similar expressions, and other statements contained herein regarding matters that are not historical facts. 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, 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 the Company operations, investments, acquisitions and conditions in the markets the Company serves. The Company believes these statements 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, but not limited to, such factors as (1) global economic conditions, particularly the uncertainties in the Eurozone and other factors affecting the creditworthiness of our Eurozone customers, (2) changes in pricing and the competitive environment and the global demand for the Company's products, (3) changes 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, Applied and SAFC Commercial business units, (6) dependence on uninterrupted manufacturing operations, global supply chain and security of our information systems, (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 11 – Income Taxes, to the Company's consolidated financial statements included in Item 8, Part II of the Company's Annual Report on Form 10-K for the year ended December 31, 2012 (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) acquisitions or divestitures of businesses, and (15) the outcome of the outstanding matters described in Note 12 – Contingent Liabilities and Commitments, to the Company's consolidated financial statements included in Item 8, Part II of the 10-K. 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 and 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 37 countries and has approximately 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 the 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 (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 other companies inside or outside of 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 2013 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&
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