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 September 30, 1997
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 charter)
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 100,331,297 shares of the Company's $1.00 par value
common stock outstanding on October 31, 1997.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
Sigma-Aldrich Corporation
Consolidated Statements of Income (unaudited)
(in thousands except per share amounts)
<CAPTION> Three Months Nine Months
Ended September 30, Ended September 30,
----------------------- ----------------------
1997 1996 1997 1996
----------------------- ----------------------
<S> <C> <C> <C> <C>
Net sales $286,046 $255,837 $843,681 $777,068
Cost of products sold 134,662 118,678 390,124 360,271
-------- -------- -------- --------
Gross profit 151,384 137,159 453,557 416,797
Selling, general and administrative expenses 87,745 79,789 264,984 245,177
-------- -------- -------- --------
Income before income taxes 63,639 57,370 188,573 171,620
Provision for income taxes 21,828 20,366 64,681 60,925
-------- -------- -------- --------
Net income $ 41,811 $ 37,004 $123,892 $110,695
======== ======== ======== ========
Net income per share $ 0.42 $ 0.37 $ 1.24 $ 1.11
======== ======== ======== ========
Weighted average number of shares outstanding 100,262 99,942 100,165 99,904
======== ======== ======== ========
Dividends per share $ 0.0625 $ 0.0550 $ 0.1875 $ 0.1650
======== ======== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Sigma-Aldrich Corporation
Consolidated Balance Sheets
(in thousands)
<CAPTION> September 30, December 31,
Assets 1997 1996
------------- -------------
<S> <C> <C>
Current assets: (unaudited)
Cash and temporary cash investments $ 44,772 $ 103,685
Accounts receivable, net of allowance for doubtful
accounts 215,160 165,511
Inventories 402,140 362,784
Other current assets 33,713 34,657
----------- -----------
Total current assets 695,785 666,637
----------- -----------
Property, plant and equipment:
Land 30,826 32,276
Buildings and improvements 239,023 233,684
Machinery and equipment 349,844 338,531
Construction in progress 102,664 54,927
Less-Accumulated depreciation (308,835) (280,323)
----------- -----------
Net property, plant and equipment 413,522 379,095
----------- -----------
Other assets 99,999 54,226
----------- -----------
$1,209,306 $1,099,958
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 7,391 $ 2,615
Current maturities of long-term debt 2,700 9,454
Accounts payable 56,872 60,881
Accrued payroll and other expenses 40,153 28,260
Accrued income taxes 7,573 9,107
----------- -----------
Total current liabilities 114,689 110,317
----------- -----------
Long-term debt 551 3,787
----------- -----------
Deferred postretirement benefits 36,179 32,918
----------- -----------
Deferred compensation 11,517 10,662
----------- -----------
Other liabilities 12,838 --
----------- -----------
Stockholders' equity:
Common stock, $1.00 par value, 200,000 shares authorized,
100,303 and 100,044 shares outstanding, respectively 100,303 100,044
Capital in excess of par value 22,632 17,002
Retained earnings 924,896 819,467
Cumulative translation adjustments (14,299) 5,761
----------- -----------
Total stockholders' equity 1,033,532 942,274
----------- -----------
$1,209,306 $1,099,958
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Sigma-Aldrich Corporation
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
<CAPTION> Nine Months
Ended September 30,
-----------------------------
1997 1996
Cash flows from operating activities: -----------------------------
<S> <C> <C>
Net income $123,892 $110,695
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 37,028 34,689
Postretirement benefits expense 2,804 1,924
Deferred tax provision 683 1,133
Deferred compensation expense 2,138 1,977
Deferred compensation payments (576) (368)
Increase in accounts receivable (48,041) (30,700)
Increase in inventories (41,082) (9,966)
(Increase) decrease in other current assets (680) 1,691
Decrease in accounts payable (2,702) (8,473)
Increase in accrued payroll and other expenses 17,288 5,903
Decrease in accrued income taxes (1,750) (5,066)
--------- --------
Net cash provided by operating activities 89,002 103,439
--------- --------
Cash flows from investing activities:
Property, plant and equipment additions (71,439) (55,678)
Acquisition of businesses, net of cash acquired (51,083) (13,629)
Other, net -- (1,500)
--------- --------
Net cash used by investing activities (122,522) (70,807)
--------- --------
Cash flows from financing activities:
Issuance (payment) of notes payable 463 (4,556)
Payment of long-term debt (9,156) (805)
Payment of dividends (18,783) (16,485)
Exercise of employee stock options 5,184 3,616
--------- ---------
Net cash used in financing activities (22,292) (18,230)
--------- ---------
Effect of exchange rate changes on cash (3,101) (1,889)
--------- ---------
Net change in cash and cash equivalents (58,913) 12,513
Cash and cash equivalents at January 1 103,685 83,969
--------- ---------
Cash and cash equivalents at September 30 $ 44,772 $ 96,482
========= =========
Supplemental disclosures of cash flow information:
Income taxes paid $ 66,333 $ 60,341
Interest paid, net of capitalized interest $ 443 $ 978
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Sigma-Aldrich Corporation
Notes to Consolidated Financial Statements
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, 1996.
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 nine
months ended September 30, 1997 are not necessarily indicative of
the results that may be expected for the year ending December 31,
1997.
Net Income per Share
Net income per share is based on the weighted average number of
shares outstanding during each period. All share and per share data
for 1996 has been restated to reflect the December 1996 stock split.
Inventories
(in thousands)
The principal categories of consolidated inventories were:
September 30, December 31,
1997 1996
-------- --------
Finished goods $320,392 $288,293
Work in process 23,665 22,132
Raw materials 58,083 52,359
-------- --------
$402,140 $362,784
======== ========
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto. This Quarterly Report on Form 10-Q
may be deemed to include forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 that involve risk and uncertainty, including financial,
business environment and projections. Although the Company believes its
expectations are based on reasonable assumptions, it can give no assurance
that its goals will be achieved. The important factors that could cause
actual results to differ materially from those in the forward looking
statements herein include, without limitation, reduced growth in research
funding, uncertainties surrounding possible government health care reform,
government regulation applicable to the Company's business, the highly
competitive environment in which the Company competes and the impact of
fluctuations in foreign currency exchange rates.
Results of Operations
For the quarter ended September 30, sales increased 11.8% to $286.0 million
from $255.8 million in 1996. Sales for the nine month period ended September
30 increased 8.6% to $843.7 million from $777.1 million in 1996. Chemical
sales increased 12.2% to $226.9 million in the third quarter and 7.6% to
$673.2 million for the first nine months. Changes in currency exchange rates
reduced the quarterly and year-to-date gains by 5.4% and 4.2%, respectively,
and may continue to moderate our chemical sales growth. The underlying
growth pace in Research sales continued to improve due to aggressive sales
and marketing programs in a competitive marketplace. Sales in the third
quarter also benefited from various small acquisitions and the June
partnership with AlliedSignal (75% Sigma-Aldrich, 25% AlliedSignal),
whereby Sigma-Aldrich is selling Riedel-de Haen laboratory chemicals
worldwide. Year-to-date Fine Chemical sales continued to grow worldwide,
in spite of competitive market pressures. Diagnostic sales reflect
above average gains from the expansion of our coagulation program into
Europe. Metal sales grew 10.3% to $59.1 million in the third quarter and
12.7% to $170.5 million for the first nine months, reflecting a continuing
strong demand for our electrical, mechanical and telecommunication
support products and enclosures.
Cost of sales was $390.1 million, representing 46.2% of sales, compared to
$360.3 million, or 46.4% of sales for the first nine months of 1996. For
the third quarter, cost of sales was 47.1% of sales compared to 46.4% in
1996. The increase in the cost of sales in the third quarter resulted from
sales mix changes in both the chemical and metal business. The cost of
chemical and metal products sold increased by 14.2% and 11.2%, respectively,
in the third quarter compared to sales increases of 12.2% and 10.3% for
chemical and metal products.
Selling, general and administrative expenses for the nine months ended
September 30, 1997, were $265.0 million, or 31.4% of sales compared to
$245.2 million, or 31.6% of sales in 1996. The slight decrease in selling,
general and administrative expenses as a percentage of sales occurred
as the Company's continuing process improvements and control of other
expenses offset the costs of opening new offices in Finland and
Russia.
Net income for the third quarter grew by 13.0% to $41.8 million from $37.0
million in 1996, while net income for the first nine months of 1997 grew
by 11.9% to $123.9 million from $110.7 million in 1996. Net income
grew at a greater rate than sales as the effect of currency exchange
rates were more than offset by productivity gains and an ongoing lower
effective tax rate.
Liquidity and Capital Resources
Cash balances declined $58.9 million in the nine months ended September 30,
1997 as presented in the Consolidated Statement of Cash Flows (unaudited).
The primary source of cash was net cash provided by operating activities
of $89.0 million, a decrease of $14.4 million from 1996. The decrease
resulted from higher net income being offset by changes in working capital
accounts, primarily increases in accounts receivable and inventories. The
major uses of cash were net property, plant and equipment additions of $71.4
million, acquisition of businesses for $51.1 million and payment of dividends
totaling $18.8 million. Although net cash flows vary from year to year, it
is anticipated that future increases should be in line with sales growth.
Financial Instruments
Derivatives
The Company uses forward exchange contracts to hedge certain receivables
and payables denominated in foreign currencies. Substantially all of the
contracts are single currency. Gains and losses on hedges of existing
assets and liabilities based on the difference in the contract rate and
the spot rate at the end of each month for all contracts still in force
are typically offset by transaction gains and losses, with net gains and
losses included in selling, general, and administrative expenses. While
contract terminations are infrequent, gains and losses on terminations are
recognized in the month of execution in the same manner.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(3) Certificate of Incorporation and By-Laws:
(a) Certificate of Incorporation and Amendments -
-------------------------------------------
Incorporated by reference to Exhibit 3(a) on Form
10-Q filed for the quarter ended September 30, 1996,
Commission File Number 0-8135.
(b) By-Laws as amended June 1996 -
--------------------------------
Incorporated by reference to Exhibit 3(b) on Form
10-K filed for the year ended December 31, 1996,
Commission File Number 0-8135.
(27) Financial Data Schedule
(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/ Peter A. Gleich November 13, 1997
- --------------------------------------------- -----------------
Peter A. Gleich, Vice President and Chief Financial Officer Date
(on behalf of the Company as Principal Financial Officer)
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<PERIOD-END> SEP-30-1997
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<INVENTORY> 402140
<CURRENT-ASSETS> 695785
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0
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<INCOME-PRETAX> 188573
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</TABLE>
