Sigma-Aldrich (NASDAQ: SIAL) Reports Diluted EPS of $0.89, a 17% Increase, and 5% Sales Growth for Q4 2011. Full Year 2011 Diluted EPS Increased 14%. 2012 Diluted EPS Expected to Increase to $3.90 to $4.05

ST. LOUIS, Feb. 9, 2012 /PRNewswire/ --

HIGHLIGHTS:

2011 Results (all percentages are to comparable periods in 2010)

Q4 Results

  • Reported sales increased 5% to $610 million.  Sales grew organically by 3% with Research and Fine Chemicals ("SAFC") sales growing organically by 1% and 7%, respectively.  Acquisitions contributed 2% to sales growth.
  • Net income was $108 million, up 15% from Q4 2010.
  • Reported diluted EPS was $0.89, up 17% from Q4 2010.  Excluding a one-time tax item in 2011 adjusted EPS was $0.91 in Q4 2011.

Full Year 2011 Results

  • Sales grew 10% to $2.5 billion.  Sales grew organically by 5% with Research and SAFC contributing 3% and 9% respectively to organic growth.
  • Net income was $457 million, up 19% from 2010.  
  • Reported diluted EPS was $3.72, up 19% from 2010.  Excluding restructuring, diluted adjusted EPS was $3.76, up 14% over the prior year.
  • 2011 net cash provided by operating activities and free cash flow were $495 million and $391 million, respectively.

2012 Outlook (all percentages are compared to full year 2011 results)

  • Organic sales growth for the full year is expected to be in the mid single digit range assuming market conditions similar to late 2011, with lower sales growth in the first half of 2012 and higher sales growth later in the year. The recently completed acquisition of BioReliance Holdings, Inc. ("BioReliance") is expected to increase 2012 sales growth by about 5%. At current exchange rates, currency rate changes are expected to reduce otherwise reportable sales growth for the full year by approximately 2%.
  • Diluted adjusted EPS forecast for 2012 (excluding any restructuring, one time transaction costs associated with the BioReliance acquisition or any other special charges) is $3.90 to $4.05. At current exchange rates, foreign currency rate changes are expected to reduce otherwise reportable diluted EPS by approximately $0.15 which is included in the outlook.  This outlook also includes $0.10 of higher income tax provision resulting from a higher effective tax rate of 30 - 31% compared to 29% in 2011 offset by a $0.05 - $0.07 benefit from the acquisition of BioReliance.    See 2012 Outlook below.
  • Net cash provided by operating activities and free cash flow are expected to be in excess of $525 million and $400 million, respectively, for 2012.

CEO's STATEMENT:

Commenting on 2011 performance, President and CEO Rakesh Sachdev said: "Our overall performance for 2011 resulted in another record year for Sigma-Aldrich in sales and earnings per share ("EPS") as we delivered EPS growth for our 37th consecutive year.  The Research business in the U.S. was impacted by challenging market conditions and funding uncertainties in the early weeks of the fourth quarter.  These conditions reduced our Q4 growth rates in Research in the U.S. below those realized in the first three quarters of the year.  We continued to invest a substantial amount of capital to drive growth in our focus markets of China, India and Brazil where we achieved organic sales growth of 17%.  Including our acquisition of Vetec, the sales growth was 29% in these countries.  We invested over $73 million in these countries in 2011.

SAFC had its strongest quarter of the year in Q4 with sales of $185 million, a 7% organic gain.  We are pleased with SAFC's strong results with full year organic sales growth of 9% in 2011 compared to 2010.  We continued to see strong growth from the Hitech business which performed well throughout the year.  The custom pharmaceutical business had low double digit growth in Q4 to end the year stronger than it has for several years.  The industrial media business sales for the quarter were equal to Q4 2010 and reflected the impact of timing of customer purchases.  

We recently announced the completion of the acquisition of BioReliance, a global leader in the pharmaceutical and biopharmaceutical quality assurance and quality control testing market.    This is a strong business with excellent growth prospects which we feel we can enhance given the unique position we have as a highly regarded global supplier to the same customer base as BioReliance.  I am pleased to welcome the more than 650 BioReliance employees to the Sigma-Aldrich family.

For 2012, we expect to grow sales organically in the mid single digit range consistent with our 2011 performance.  In addition, the acquisition of BioReliance will add roughly 5% to Sigma-Aldrich's sales growth in 2012.  And, our acquisition pipeline remains robust.  Our long-term objective remains to achieve above market rate organic sales growth and enhance that through contributions from technology platforms and strategic acquisitions.  Our diluted EPS is expected to increase to a range of $3.90 to $4.05 despite a less favorable currency environment and a higher tax rate. We will approach 2012 with the same passion and energy that drove success in the past.  Our plan to continue prudent control on costs without sacrificing commitment to longer term growth initiatives should help in mitigating market uncertainties."

2011 RESULTS:

Reported sales for the fourth quarter of 2011 of $610 million increased 5% over the fourth quarter of 2010.  Excluding acquisitions, which contributed 2% to sales growth, fourth quarter organic sales growth was 3%.  Throughout the fourth quarter, weakening foreign currencies reduced otherwise reportable sales in U.S. dollars.  Fourth quarter sales for the Company's Research business grew organically by 1%, driven primarily by growth in the Asia Pacific–Latin American region.  Fourth quarter sales for the SAFC business grew organically by 7% over the fourth quarter of 2010.   Sales in the focus markets of India, China and Brazil grew organically 17%.  A reconciliation of reported to adjusted (organic) sales can be found on page 10.

The adjusted operating income margin in the fourth quarter of 2011 was 26.2% of sales compared to 24.2% of sales, excluding restructuring charges, in the fourth quarter of 2010.  Operating income margins benefited from changes in foreign currency exchange rates and SG&A productivity initiatives.  A reconciliation of reported to adjusted operating income margin is provided on page 11.

The effective tax rate for the fourth quarter of 2011 was 32% compared to 27% in the fourth quarter of 2010.  The higher tax rate in the fourth quarter of 2011 is primarily attributable to a reduced R&D tax credit benefit and a one-time tax charge in 2011 of $0.02 per diluted EPS related to an ongoing tax audit in one of our international subsidiaries.

Free cash flow (defined on page 9) for 2011 was $391 million, compared to $424 million for 2010.  Higher net income was largely offset by a higher level of working capital, primarily due to planned inventory increases aimed at improving service levels to our customers and slightly higher capital expenditures to support planned strategic growth initiatives.  A reconciliation of net cash provided by operating activities to free cash flow is provided on page 11.

Other highlights include:

  • Worldwide sales of Research products through the Company's website hit an all-time high of $860 million in 2011, a 10% incremental increase compared to 2010 in constant currency dollars.
  • SAFC's booked orders for future delivery at December 31, 2011 increased by 4% from September 30, 2011 and by 8% from December 31, 2010.

2012 OUTLOOK:

  • Organic sales growth is expected to be in the mid single digit range for 2012.  Significant factors in our sales outlook include:
    • Research Business: Uncertainties in the U.S. and Europe around the macroeconomic environment and austerity measures are expected to maintain challenges for our Research business in 2012. We believe that the programs initiated, especially in the analytical chemistry, biology, traditional chemistry and materials science sectors, will enable us to achieve low to mid single digit organic sales growth for all of 2012.   We anticipate organic growth rates to be in the low single digits in the first half of the year improving to mid single digits in the second half of the year.  Research growth rates are expected to improve in the second half of 2012 led by stronger growth in the Asia Pacific-Latin American region.
    • SAFC Business:  We expect low to mid single digit growth in the first half of the year and low double digit growth in the second half of the year as additional capacity comes on line in China and Taiwan.
    • At current exchange rates, changes in foreign currency are expected to reduce otherwise reported sales growth by approximately 2% compared to the prior year.  
    • The recent acquisition of BioReliance is expected to increase sales by approximately 5%.  
  • Diluted adjusted EPS forecast for 2012 (excluding restructuring charges, transaction costs associated with the BioReliance acquisition and other one time charges) is expected to be $3.90 to $4.05.  
    • This outlook includes a $0.15 reduction in otherwise reportable diluted EPS when compared to 2011 due to changes in foreign currency exchange rates.  Also reflected in this outlook is a higher anticipated effective tax rate of 30% to 31% in 2012 which will reduce otherwise reportable diluted EPS by about $0.10 when compared to 2011.
    • The acquisition of BioReliance is expected to add approximately $0.05 to $0.07 to our diluted EPS in 2012.  This assumes a preliminary estimate of the amount of amortization associated with intangible assets created as part of the purchase price allocation.
    • We continue to evaluate our markets and macroeconomic factors, and will continue to evaluate ways to optimize our cost structure to deliver on our commitments.
  • Free cash flow for 2012 is expected to be in excess of $400 million.
    • Net cash provided by operating activities is expected to be approximately $525 million.
    • Capital expenditures are expected to be approximately $125 million.

OTHER INFORMATION:

Cash Flow and Debt:  Net cash provided by operating activities for year ended December 31, 2011 was $495 million compared to $523 million for the year ended December 31, 2010.  The cash flow contribution from higher net income in 2011 compared to the same period in 2010 was partially offset by increases in working capital due to planned higher inventory to enhance service levels and support the higher sales growth rates in the Asia Pacific-Latin American region.  Capital expenditures were $104 million in 2011 compared to $99 million in 2010.  Free cash flow of $391 million for 2011 was used primarily to pay $86 million in dividends, return $134 million to shareholders through share repurchases, repay $100 million of long-term debt and fund $75 million of acquisitions.  The Company's debt to capital ratio was 19% at December 31, 2011 and 21% at December 31, 2010.  

Share Repurchases: No shares were repurchased in the fourth quarter of 2011.  In 2011 the Company repurchased 2.1 million shares at an average price of $62.07.  There were 121 million shares outstanding at December 31, 2011.  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 such as "anticipate," "believe," "enhance," "estimate," "expect," "forecast," "plan," "will" and other similar statements, words or phrases regarding the Company's expectations, outlook, plans, 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 release due 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 10 – Income Taxes, to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 (the "10-K"), (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, (15) the outcome of the outstanding matters described in Note 11 – Contingent Liabilities and Commitments, to the Consolidated Financial Statements in the 10-K and (16) 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 currency impacts after the fact, 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 margin (reconciled on page 11); 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 a reconciliation to the corresponding GAAP measures.  Management believes this non-GAAP information is useful to investors as well.

SIGMA-ALDRICH CORPORATION

Consolidated Statements of Income (Unaudited)

(in millions except per share amounts)
















Three Months


Twelve Months





Ended December 31,


Ended December 31,





2011


2010


2011


2010

Net sales




$              610


$              582


$           2,505


$           2,271

Cost of products sold




286


281


1,181


1,075

Gross profit




324


301


1,324


1,196

Selling, general and administrative expenses


146


143


597


548

Research and development expenses


18


17


72


66

Restructuring costs




-


11


8


24

Impairment charge




-


-


-


7

Operating income




160


130


647


551

Interest, net




1


2


7


7

Income before income taxes




159


128


640


544

Provision for income taxes




51


34


183


160

Net income




$              108


$                94


$              457


$              384























Net income per share - Basic




$             0.89


$             0.78


$             3.78


$             3.17

Net income per share - Diluted




$             0.89


$             0.76


$             3.72


$             3.12























Weighted average number of shares outstanding - Basic

121


121


121


121

Weighted average number of shares outstanding - Diluted

122


123


123


123














SIGMA-ALDRICH CORPORATION

Consolidated Balance Sheets

(in millions)
















(Unaudited)









December 31,


December 31,







2011


2010

Assets









Current assets:









Cash and cash equivalents






$              665


$              569

Accounts receivable, net






319


287

Inventories






668


606

Deferred taxes






55


62

Other






86


77

Total current assets






1,793


1,601










Property, plant and equipment:









Land






$                51


$                50

Buildings and improvements






764


754

Machinery and equipment






888


867

Construction in progress






120


68

Less - accumulated depreciation





(1,060)


(1,006)

Property, plant and equipment, net




763


733










Goodwill, net






466


438

Intangibles, net






159


157

Other






100


98

Total assets






$           3,281


$           3,027










Liabilities and Stockholders' Equity







Current liabilities:









Notes payable and current maturities of long-term debt


$              221


$              239

Accounts payable






143


121

Payroll






67


71

Income taxes






34


31

Other






73


69

Total current liabilities






538


531










Long-term debt






300


300

Pension and post-retirement benefits




143


110

Deferred taxes






22


41

Other






79


69

Total liabilities






1,082


1,051










Stockholders' equity:









Common stock






202


202

Capital in excess of par value






225


194

Common stock in treasury






(2,165)


(2,051)

Retained earnings






3,907


3,536

Accumulated other comprehensive income




30


95

Total stockholders' equity






2,199


1,976










Total liabilities and stockholders' equity




$           3,281


$           3,027












SIGMA-ALDRICH CORPORATION

Consolidated Statements of Cash Flows (Unaudited)

(in millions)




















Twelve Months









Ended December 31,









2011


2010

Cash flows from operating activities:









Net income








$              457


$              384

Adjustments to reconcile net income to net cash provided by operating activities:





Depreciation and amortization






106


93

Deferred income taxes








6


(2)

Stock-based compensation expense






18


22

Restructuring costs, net of payments






-


15

Impairment charge








-


7

Other








(1)


(7)

Changes in assets and liabilities:









Accounts receivable








(35)


1

Inventories








(63)


8

Accounts payable








23


8

Income taxes








5


(12)

Other, net








(21)


6

Net cash provided by operating activities




495


523












Cash flows from investing activities:









Capital expenditures








(104)


(99)

Purchases of short-term investments






(65)


(43)

Proceeds from sales of short-term investments






55


41

Acquisitions of businesses, net of cash acquired





(75)


(80)

Other, net








(2)


(1)

Net cash used in investing activities






(191)


(182)












Cash flows from financing activities:









Net issuance (repayment) of short-term debt






81


(238)

Issuance of long-term debt








-


298

Repayment of long-term debt








(100)


(100)

Dividends








(86)


(78)

Share repurchases








(134)


(99)

Proceeds from exercise of stock options






34


45

Excess tax benefits from stock-based payments





5


11

Net cash used in financing activities






(200)


(161)












Effect of exchange rate changes on cash






(8)


16

Net change in cash and cash equivalents






96


196

Cash and cash equivalents at January 1






569


373

Cash and cash equivalents at December 31






$              665


$              569























Free cash flow(1)








$              391


$              424























(1) Net cash provided by operating activities less capital expenditures.






















SIGMA-ALDRICH CORPORATION

Supplemental Financial Information - (Unaudited)











Sales Growth by Business Unit




Three Months



Ended December 31, 2011





Currency


Acquisition


Adjusted



Reported


Benefit


Benefit


(Organic)










  Research Essentials


3%


-


3%


-

  Research Specialties


3%


-


2%


1%

  Research Biotech


5%


-


-


5%

  Research Chemicals


3%


-


2%


1%

  SAFC


8%


-


1%


7%

  Total Customer Sales


5%


-


2%


3%












Twelve Months



Ended December 31, 2011





Currency


Acquisition


Adjusted



Reported


Benefit


Benefit


(Organic)










  Research Essentials


10%


4%


2%


4%

  Research Specialties


9%


4%


3%


2%

  Research Biotech


9%


4%


-


5%

  Research Chemicals


9%


4%


2%


3%

  SAFC


13%


3%


1%


9%

  Total Customer Sales


10%


4%


1%


5%












Business Unit Sales













(in millions)

















First
Quarter 2011


Second
Quarter 2011


Third
Quarter 2011


Fourth
Quarter 2011


Total
2011














  Research Essentials




$                  120


$              124


$              121


$              113


$              478

  Research Specialties




236


236


231


221


924

  Research Biotech




96


94


94


91


375

  Research Chemicals




452


454


446


425


1,777

  SAFC




180


183


180


185


728

  Total Customer Sales




$                  632


$              637


$              626


$              610


$           2,505































First
Quarter 2010


Second
Quarter 2010


Third
Quarter 2010


Fourth
Quarter 2010


Total
2010














  Research Essentials




$                  112


$              107


$              105


$              110


$              434

  Research Specialties




217


207


207


214


845

  Research Biotech




91


83


84


87


345

  Research Chemicals




420


397


396


411


1,624

  SAFC




152


157


167


171


647

  Total Customer Sales




$                  572


$              554


$              563


$              582


$           2,271
















SIGMA-ALDRICH CORPORATION

Supplemental Financial Information - (Unaudited)



























Reconciliation of Reported net income to Adjusted net income















Net Income


Diluted Earnings







(in millions)


Per Share







Three Months Ended


Three Months Ended







December 31,


December 31,







2011


2010


2011


2010



























Reported net income






$              108


$                94


$             0.89


$             0.76

Restructuring costs






-


8


-


               0.07

Extraordinary tax charge






2


-


0.02


                   -  

Adjusted net income






$              110


$              102


$             0.91


$             0.83




















Net Income


Diluted Earnings







(in millions)


Per Share







Twelve Months Ended


Twelve Months Ended







December 31,


December 31,







2011


2010


2011


2010



























Reported net income






$              457


$              384


$             3.72


$             3.12

Restructuring costs






5


17


0.04


               0.14

Impairment costs






-


7


-


               0.05

Adjusted net income






$              462


$              408


$             3.76


$             3.31



























Income Statement Ratios



















Three Months Ended


Twelve Months Ended







December 31,


December 31,







2011


2010


2011


2010














Gross profit






53.1%


51.7%


52.9%


52.7%

S,G&A expenses






23.9%


24.6%


23.8%


24.1%

Operating income






26.2%


22.3%


25.8%


24.3%

Net income






17.7%


16.2%


18.2%


16.9%














Effective tax rate






32.1%


26.6%


28.6%


29.4%








































Reconciliation of Reported Operating Income Margin to Adjusted Operating Income Margin
























Three Months Ended


Twelve Months Ended







December 31,


December 31,







2011


2010


2011


2010














Reported operating income margin




26.2%


22.3%


25.8%


            24.3%

Restructuring costs






-


1.9%


0.3%


              1.0%

Impairment costs






-


-


-


              0.3%

Adjusted operating income margin






26.2%


24.2%


26.1%


            25.6%








































Reconciliation of Free Cash Flow











(in millions)



















Twelve Months Ended









December 31,









2011


2010


















Net cash provided by operating activities




$              495


$              523





Less: Capital expenditures






(104)


(99)





Free cash flow






$              391


$              424







SOURCE Sigma-Aldrich



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http://www.sigma-aldrich.com

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