ST. LOUIS, Feb. 7, 2013 /PRNewswire/ --
HIGHLIGHTS:Q4 2012 Results (all percentages are to comparable periods in 2011)
Full-year 2012 Results (all percentages are to comparable periods in 2011)
2013 Outlook (all percentages are to comparable periods in 2012)
CEO's STATEMENT: Commenting on 2012 performance, President and CEO Rakesh Sachdev said, "Our overall performance for 2012 resulted in another record year for Sigma-Aldrich in sales and EPS. I am pleased that for the 38th consecutive year we delivered EPS growth.
We saw strong growth in sales of our analytical products to research labs in 2012. Our custom manufactured products for the pharma industry grew double digits and we saw solid growth in our industrial cell culture media for production of biological drugs. We successfully offset soft demand from research customers in academia and pharma, as well as SAFC Hitech pricing headwinds and generated 3% organic sales growth for the full year. We continued to deliver enhanced productivity in our business through our ongoing focus on operational excellence and process improvement, and we delivered record annual EPS despite the impact of significant unfavorable foreign exchange rates in 2012.
We expect to drive improved growth in 2013 through our enhanced focus on our customers and faster growing geographies enabled by our recent organizational realignment into three business units – Research, Applied, and SAFC Commercial – which should continue to gain momentum as the year progresses. We are also likely to see more favorable growth comparisons in our Research Pharma and SAFC Commercial Electronics businesses in the second half of 2013.
While we are cautiously optimistic about our overall business, we believe it is prudent to be prepared for another year of soft academic spending, as issues such as possible sequestration in the U.S. remain unresolved. Considering the current macro-economic environment, we expect to grow this year's overall sales organically in the low-to-mid single digit range.
We will continue to make investments in 2013 for our long-term growth, while modestly expanding operating margins. Our adjusted diluted EPS is expected to increase to a range of $4.10 to $4.20. We expect to generate free cash flow in excess of $430 million in 2013 and to continue to deploy our capital for organic growth, acquisitions, dividends and share repurchases."
Q4 2012 RESULTS:Reported sales for the fourth quarter of 2012 were $655 million, which was a 7% increase from the fourth quarter of 2011. Organic sales growth in the quarter was 3%. Acquisitions completed in 2012 increased sales by 6%, and changes in foreign currency exchange rates caused sales to decline by 2%. Research had organic sales growth of 2%, and SAFC had organic sales growth of 5%.Excluding restructuring costs, the adjusted operating income margin in the fourth quarter of 2012 was 25.2%, a modest improvement over the third quarter of 2012. Compared with the same period last year, adjusted operating income margin declined by 100 basis points, primarily due to unfavorable changes in foreign currency exchange rates and the impact of recent acquisitions. Excluding these impacts, the adjusted operating income margin would have been 26.8%, an improvement of 60 basis points from the same period last year. A reconciliation of reported to adjusted operating income margin is provided on page 11.
The effective tax rate for the fourth quarter of 2012 was 29% compared to 32% in the same period last year. The year-over-year improvement was due to a favorable mix of profits in lower tax jurisdictions and lower tax contingencies for certain international locations. This more than offset the failed extension of the U.S. R&D tax credit previously expected in the quarter.
Free cash flow for full year 2012 was $453 million compared to $391 million last year. Lower uses of cash for working capital contributed a majority of the year-over-year improvement.
Other fourth quarter 2012 highlights include:
Cash Flow and Debt: Net cash provided by operating activities for full year 2012 was $567 million compared to $495 million for full year 2011. Capital expenditures were $114 million in 2012 compared to $104 million in 2011. Free cash flow of $453 million and net debt issuances of $161 million were used to return $221 million to shareholders through share repurchases and dividends and fund acquisitions of $391 million. The Company's debt to capital ratio was 21% at December 31, 2012 and 19% at December 31, 2011.
Share Repurchases: In the fourth quarter of 2012, the Company repurchased 0.4 million shares for $25 million. There were 120 million shares outstanding at December 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. Such statements are preceded by, followed by or that include the words "expect," "cautiously optimistic," "prudent," "will continue," "expanding," "maintain," "will," "exceed," 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 (Nasdaq: SIAL) 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 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). 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 Months EndedTwelve Months EndedDecember 31,December 31,2012201120122011Net sales$
2,505Cost of products and services sold3272861,2761,181Gross profit3283241,3471,324Selling, general and administrative expenses147146605597Research and development expenses16186972Restructuring costs1-98Acquisition transaction costs--5-Operating income164160659647Interest, net1147Income before income taxes163159655640Provision for income taxes4751195183Net income$$
457Net income per share - Basic$
3.78Net income per share - Diluted$
3.72Weighted average number of shares outstanding - Basic120121121121Weighted average number of shares outstanding - Diluted121122122123SIGMA-ALDRICH CORPORATIONConsolidated Balance Sheets (Unaudited)(in millions)(Unaudited)December 31,December 31,20122011ASSETSCurrent assets:Cash and cash equivalents$
5Accounts receivable, net356319Inventories722668Deferred taxes3255Other 9586Total current assets1,9291,793Property, plant and equipment:Land5751Buildings and improvements843764Machinery and equipment 1,050888Construction in progress61120Less - accumulated depreciation(1,182)(1,060)Property, plant and equipment, net829763Goodwill, net691466Intangibles, net282159Other89100Total assets$
3,281LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Notes payable and current maturities of long-term debt$
221Accounts payable160143Payroll 5567Income taxes 2634Other7773Total current liabilities701538Long-term debt300300Pension and post-retirement benefits135143Deferred taxes6422Other7479Total liabilities1,2741,082Stockholders' equity:Common stock202202Capital in excess of par value276225Common stock in treasury(2,271)(2,165)Retained earnings4,2703,907Accumulated other comprehensive income6930Total stockholders' equity2,5462,199Total liabilities and stockholders' equity$
3,281SIGMA-ALDRICH CORPORATIONConsolidated Statements of Cash Flows (Unaudited)(in millions)Twelve Months EndedDecember 31,20122011Cash flows from operating activities:Net income$
457Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization136106Deferred income taxes346Stock-based compensation expense1718Other(5)(1)Changes in operating assets and liabilities:Accounts receivable(15)(35)Inventories(44)(63)Accounts payable1023Income taxes(10)5Other, net(16)(21)Net cash provided by operating activities567495Cash flows from investing activities:Capital expenditures(114)(104)Purchases of short-term investments(97)(65)Proceeds from sales of short-term investments9755Acquisitions of businesses, net of cash acquired(391)(75)Other, net(6)(2)Net cash used in investing activities(511)(191)Cash flows from financing activities:Net issuance of short-term debt16181Repayment of long-term debt-(100)Dividends(97)(86)Share repurchases(124)(134)Proceeds from exercise of stock options4134Excess tax benefits from stock-based payments135Net cash used in financing activities(6)(200)Effect of exchange rate changes on cash9(8)Net change in cash and cash equivalents5996Cash and cash equivalents at January 1665569Cash and cash equivalents at December 31$
5Free cash flow(1)$
391(1) Net cash provided by operating activities less capital expenditures.SIGMA-ALDRICH CORPORATIONSupplemental Financial Information - (Unaudited)Sales Growth by Business UnitThree Months EndedDecember 31, 2012AcquisitionAdjustedReportedCurrencyBenefit(Organic)Research1 %(2)%1 %2 %SAFC21 %(1)%17 %5 %Total Customer Sales7 %(2)%6 %3 %Twelve Months EndedDecember 31, 2012AcquisitionAdjustedReportedCurrencyBenefit(Organic)Research(1)%(4)%1 %2 %SAFC17 %(3)%15 %5 %Total Customer Sales5 %(3)%5 %3 %Business Unit Sales(in millions)First
,768SAFC197223211224855Total Customer Sales$
,777SAFC180183180185728Total Customer Sales$
2,505Income Statement RatiosThree Months EndedTwelve Months EndedDecember 31,December 31,2012201120122011Gross profit50.1%53.1%51.4%52.9%S,G&A expenses22.4%23.9%23.1%23.8%Acquisition transaction costs- %- %0.2%- %Operating income25.0%26.2%25.1%25.8%Net income17.7%17.7%17.5%18.2%Effective tax rate28.8%32.1%29.8%28.6%SIGMA-ALDRICH CORPORATIONSupplemental Financial Information - (Unaudited)Reconciliation of Reported Net Income to Adjusted Net IncomeNet IncomeDiluted Earnings (in millions)Per ShareThree Months EndedThree Months EndedDecember 31,December 31,2012201120122011Reported net income$$
.89Extraordinary tax charge-2-0.02Adjusted net income$$$
.91Net IncomeDiluted Earnings (in millions)Per ShareTwelve Months EndedTwelve Months EndedDecember 31,December 31,2012201120122011Reported net income$
3.72Acquisition transaction costs4-0.03-Restructuring costs650.050.04Adjusted net income$
3.76Reconciliation of Reported Operating Income to Adjusted Operating Income(in millions)Three Months EndedTwelve Months EndedDecember 31,December 31,2012201120122011Reported operating income$
47Acquisition transaction costs--5-Restructuring costs1-98Adjusted operating income$
55Reconciliation of Reported Operating Income Margin to Adjusted Operating Income MarginThree Months EndedTwelve Months EndedDecember 31,December 31,2012201120122011Reported operating income margin25.0%26.2%25.1%25.8%Acquisition transaction costs- %- %0.2%- %Restructuring costs0.2%- %0.4%0.3%Adjusted operating income margin25.2%26.2%25.7%26.1%Currency1.2%n/a0.6%n/aIncremental amortization from recent acquisitions0.4%n/a0.5%n/aAdjusted operating income margin before currency and incremental amortization26.8%26.2%26.8%26.1%Reconciliation of Free Cash Flow(in millions)Twelve Months EndedDecember 31,20122011Net cash provided by operating activities$
495Less: Capital expenditures(114)(104)Free cash flow$
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