SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission file number 0-8135
SIGMA-ALDRICH CORPORATION
(Exact name of registrant as specified in its ch!rter)
Delaware
(State or other jurisdiction of incorporation or organization)
43-1050617
(I.R.S. Employer Identification No.)
3050 Spruce Street, St. Louis, Missouri 63103
(Address of principal executive office)
(Registrant's telephone number, including area code) 314 771-5765
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
There were 49,829,779 shares of the Company's $1.00 par value
common stock outstanding on July 29, 1994.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
Sigma-Aldrich Corporation and Subsidiaries
Consolidated Statements of Income (unaudited)
(in thousands except per share amounts)
<CAPTION> Three Months Six Months
Ended June 30, Ended June 30,
----------------------- ----------------------
1994 1993 1994 1993
----------------------- ----------------------
<S> <C> <C> <C> <C>
Net Sales $212,453 $183,832 $420,911 $363,845
Cost of products sold 101,682 83,506 196,990 165,145
-------- -------- -------- --------
Gross profit 110,771 100,326 223,921 198,700
Selling, general and administrative expenses 69,079 58,825 136,282 115,582
-------- -------- -------- --------
Income before income taxes and cumulative effect
of accounting changes 41,692 41,501 87,639 83,118
Provision for income taxes 14,717 14,609 30,936 29,258
-------- -------- -------- --------
Income before cumulative effect of accounting
changes 26,975 26,892 56,703 53,860
Cumulative effect of accounting changes - - - (10,806)
-------- -------- -------- --------
Net income $ 26,975 $ 26,892 $56,703 $43,054
======== ======== ======== ========
Income per share before cumulative effect
of accounting changes $ 0.54 $ 0.54 $ 1.14 $ 1.08
Cumulative effect of accounting changes - - - (0.22)
-------- -------- -------- --------
Net income per share $ 0.54 $ 0.54 $ 1.14 $ 0.86
======== ======== ======== ========
Weighted average number of shares outstanding 49,829 49,802 49,827 49,800
======== ======== ======== ========
Dividends per share $ 0.0825 $ 0.0725 $ 0.1650 $ 0.1450
======== ======== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Sigma-Aldrich Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands)
<CAPTION> June 30, December 31,
Assets 1994 1993
------------- ------------
<S> <C> <C>
Current assets: (unaudited)
Cash and temporary cash investments $ 13,152 $ 10,252
Accounts receivable, net of allowance for doubtful
accounts 144,547 113,439
Inventories 332,034 305,487
Other current assets 22,806 21,629
------- -------
Total current assets 512,539 450,807
------- -------
Property, plant and equipment:
Land 27,912 24,658
Buildings and improvements 180,555 166,319
Machinery and equipment 211,081 203,127
Construction in progress 53,998 31,432
Less-Accumulated depreciation (189,171) (168,214)
--------- ----------
Net property, plant and equipment 284,375 257,322
--------- ----------
Other assets 46,155 45,302
--------- ----------
$843,069 $753,431
========= ==========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 61,038 $ 36,747
Current maturities of long-term debt 520 955
Accounts payable 47,046 43,967
Accrued payroll and other expenses 32,605 25,479
Accrued income taxes 121 4,209
------- -------
Total current liabilities 141,330 111,357
------- -------
Long-term debt 15,971 17,266
------- -------
Deferred postretirement benefits 25,991 24,559
------- -------
Deferred compensation 6,569 9,109
------- -------
Stockholders' equity:
Common stock, $1.00 par value, 100,000 shares authorized,
49,829 and 49,805 shares outstanding, respectively 49,829 49,805
Capital in excess of par value 9,975 8,883
Retained earnings 586,593 538,111
Cumulative translation adjustments 6,811 (5,659)
-------- --------
Total stockholders' equity 653,208 591,140
-------- --------
$843,069 $753,431
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Sigma-Aldrich Corporation and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
<CAPTION> Six Months
Ended June 30,
---------------------------
1994 1993
Cash flows from operating activities: ---------------------------
<S> <C> <C>
Net income $ 56,703 $ 43,054
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of accounting changes --- 10,806
Depreciation and amortization 19,587 16,994
Deferred postretirement benefits expense 1,684 1,302
Deferred tax provision (129) (837)
Deferred compensation expense (959) 2,398
Deferred compensation payments (656) (543)
Increase in accounts receivable (27,737) (29,534)
Increase in inventories (23,851) (13,428)
Increase in other current assets (710) (285)
Increase in accounts payable 1,640 741
Increase in accrued payroll and other expenses 6,796 3,145
Decrease in accrued income taxes (4,292) (846)
--------- --------
Net cash provided by operating activities 28,076 32,967
--------- --------
Cash flows from investing activities:
Property, plant and equipment additions (39,273) (22,739)
Sale of property, plant and equipment 199 139
Acquisition of businesses, net of cash acquired - (63,445)
Other, net (1,932) 1,955
--------- --------
Net cash used by investing activities (41,006) (84,090)
--------- --------
Cash flows from financing activities:
Issuance of notes payable 24,389 34,552
Repayment of long-term debt (2,049) (8,370)
Payment of dividends (8,221) (7,221)
Exercise of employee stock options 199 142
--------- ---------
Net cash provided by financing activities 14,318 19,103
--------- ---------
Effect of exchange rate changes on cash 1,512 599
--------- ---------
Net change in cash and cash equivalents 2,900 (31,421)
Cash and cash equivalents at January 1 10,252 44,932
--------- ---------
Cash and cash equivalents at June 30 $ 13,152 $ 13,511
========= =========
Supplemental disclosures of cash flow information:
Income taxes paid $ 35,352 $ 30,851
Interest paid, net of capitalized interest $ 1,761 $ 1,234
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
[TEXT]
Sigma-Aldrich Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except per share data)
Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X and,
accordingly, do not include all information and footnotes required
by generally accepted accounting principles for complete financial
statements. For further information, refer to the notes to
consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1993 (1993 10-K).
In the opinion of Management, all adjustments, consisting of
normal recurring accruals, considered necessary for a fair
presentation have been included. Operating results for the six
months ended June 30, 1994, are not necessarily indicative of
the results that may be expected for the year ending December 31,
1994.
Net Income per Share
Net income per share is based on the weighted average number of
shares outstanding during each period.
Inventories
The principal categories of consolidated inventories were:
June 30, December 31,
1994 1993
--------- ---------
Finished goods $252,155 $233,833
Work in process 21,140 19,457
Raw materials 58,739 52,197
-------- --------
$332,034 $305,487
======== ========
Accounting Changes
The Company adopted two new Financial Accounting Standards
effective January 1, 1993, and then recognized the prior years'
effect of adoption as the cumulative effect of a change in
accounting principle. Standard No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", which requires that
the expected cost of these benefits be expensed during the years
that the employees render service, resulted in an after-tax charge
of $13,806 ($21,306 pre-tax), or $.28 per share. Standard No. 109,
"Accounting for Income Taxes", increased net income by $3,000,
or $.06 per share. This adjustment was due to deferred income taxes
being recorded under prior accounting standards at the tax rate in effect
when the deferrals arose (generally 46% and 40%), whereas the
new accounting standard requires that deferred income taxes be
recorded at the rate that will be in effect when the income taxes are
expected to be paid (35% under current law).
Acquisitions
On May 6, 1993, the Company acquired the net assets and business of
Supelco, Inc. ("Supelco"), a worldwide supplier of chromatography
products used in chemical research and production, for $54,700 in
cash and, separately, on June 16, 1993, the Company acquired all of
the stock of Circle AW Products Company ("Circle AW"), a supplier
of electrical and electronic metal enclosures to industrial,
residential and commercial markets, for $10,800 in cash. The net
tangible assets of these businesses were recorded based upon fair market
values at the respective acquisition dates with the aggregate excess of
the purchase prices over these values of $30,500 being recorded as
intangible assets.
The following presents the pro forma consolidated results of operations
for the six months ended June 30, 1993, as if these acquisitions had
occurred at the beginning of 1993. The pro forma results do not purport
to be indicative of the actual results that would have been achieved
had these acquisitions occurred as of such date or of results which
may occur in the future.
Net sales $389,929
========
Net income* $ 52,644
========
Net income per share* $ 1.06
========
*Before cumulative effect of accounting changes
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(in thousands, except per share data)
Results of Operations
Sales for the six month period ended June 30 increased 15.7% to $420,911 in
1994 from $363,845 in 1993. Chemical sales increased 11% for both the second
quarter and the first six months. Excluding sales from Supelco, Inc.,
acquired in May 1993, the growth was 8% in the second quarter, slightly better
than in the first quarter. Growth rates continue to be affected by slowdowns
in several markets and the adverse impact of currency exchange rates, which
reduced the gain by one percent in both periods. In research chemicals,
volume growth is small reflecting the tighter budgets of academic and
industrial customers in the U.S. Diagnostics and bulk chemical sales growth
has also slowed as customers in the healthcare and pharmaceutical fields
respond to additional competitive pressures. Metal sales increases exceeded
40%, due equally to the acquisition of Circle AW Products in June 1993 and
stronger construction demand.
Cost of sales was $196,990, representing 46.8% of sales, compared
to $165,145, or 45.4% of sales, for the first six months of 1993.
For the quarter, cost of sales was 47.9% of sales compared to 45.4%
in 1993. The gross profit percentage decreased due to higher product
cost levels for the acquired businesses and, particularly in the second
quarter, a change in the chemical sales mix to products with lower margins
and higher metal costs which were not fully recovered through price increases.
Selling, general and administrative expenses for the six months
ended June 30, 1994, were $136,282, or 32.4% of sales compared
to $115,582, or 31.8% of sales in 1993. Higher advertising and marketing
costs, additional expenses for new facilities that are not yet fully utilized
and amortization attributable to the acquisitions, partially offset by a
decrease in deferred compensation expense, were the main factors causing
the increase.
Net income for the second quarter was $26,975 compared to $26,892 in 1993,
while net income for the first half of 1994 increased 5.3% to $56,703 from
$53,860 in 1993 before the cumulative effect of accounting changes. Overall
sales growth exceeded overall profit growth in both periods due to the sales
and cost factors described above, as well as the higher growth in metal sales
rather than chemical sales, since metal sales provide lower margins than
chemical sales. Net income for the six months ended June 30, 1993, was
$43,054 after a one-time, after-tax charge of $10,806 for the cumulative
effect of accounting changes, as further described in Notes to Consolidated
Financial Statements in Item 1 above.
Liquidity and Capital Resources
Cash and temporary cash investments increased $2,900 in the first
half of 1994. Cash provided by operating activities was $28,076,
a decrease of $4,891 from 1993, due to working capital requirements exceeding
the increase in cash generated from income before accounting
changes and other noncash expenses. The increase in inventories is due to
stocking new products, the initial stocking at several new distribution
sites to enhance customer service levels and a build-up to support increased
sales growth. Property, plant and equipment expenditures of $39,273 in
the first six months were funded by the cash provided by operations and
additional short-term borrowings of $24,389. These expenditures include
the purchase of a distribution facility in Allentown, Pennsylvania, which
is currently being renovated for occupation in late 1994 and the continuing
expansion of a production facility in Sheboygan, Wisconsin.
Although net cash flows from operating activities vary from period
to period, it is anticipated that future increases should be in
line with sales growth and should be sufficient to meet capital and
debt service requirements.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on May 3, 1994. The
election of the Board of Directors was the only matter on which a vote
of security holders was held. Following are the results of such vote:
Votes Votes
Nominee For Withheld
- - ------------------ ---------- ---------
Carl T. Cori 38,463,029 3,029,135
David R. Harvey 41,263,952 228,212
Robert J. Hurst 41,256,452 235,712
David M. Kipnis 38,469,729 3,022,435
Andrew E. Newman 38,469,929 3,022,235
William C. O'Neil, Jr. 38,471,029 3,021,135
Jerome W. Sandweiss 38,450,928 3,041,236
D. Dean Spatz 41,255,252 236,912
Thomas N. Urban 38,471,229 3,020,935
Item 6. Exhibits and Reports on Form 8-K
(a) No exhibits are required to be filed herewith.
(b) No reports were filed on Form 8-K during the period for
which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
SIGMA-ALDRICH CORPORATION
(Registrant)
By: /s/ Kirk A. Richter
------------------------
Date: August 12, 1994
Kirk A. Richter, Controller
(on behalf of the Company as Controller and as
Principal Accounting Officer)
