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, 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 100,253,135 shares of the Company's $1.00 par value
common stock outstanding on July 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 Six Months
Ended June 30, Ended June 30,
----------------------- ----------------------
1997 1996 1997 1996
----------------------- ----------------------
<S> <C> <C> <C> <C>
Net sales $278,575 $258,832 $557,635 $521,231
Cost of products sold 126,865 120,598 255,462 241,593
-------- -------- -------- --------
Gross profit 151,710 138,234 302,173 279,638
Selling, general and administrative expenses 89,722 80,925 177,239 165,388
-------- -------- -------- --------
Income before income taxes 61,988 57,309 124,934 114,250
Provision for income taxes 21,263 20,345 42,853 40,559
-------- -------- -------- --------
Net income $ 40,725 $ 36,964 $ 82,081 $ 73,691
======== ======== ======== ========
Net income per share $ 0.41 $ 0.37 $ 0.82 $ 0.74
======== ======== ======== ========
Weighted average number of shares outstanding 100,142 99,906 100,116 99,884
======== ======== ======== ========
Dividends per share $ 0.0625 $ 0.0550 $ 0.1250 $ 0.1100
======== ======== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Sigma-Aldrich Corporation
Consolidated Balance Sheets
(in thousands)
<CAPTION> June 30, December 31,
Assets 1997 1996
------------- -------------
<S> <C> <C>
Current assets: (unaudited)
Cash and temporary cash investments $ 37,154 $ 103,685
Accounts receivable, net of allowance for doubtful
accounts 199,410 165,511
Inventories 386,106 362,784
Other current assets 35,179 34,657
----------- -----------
Total current assets 657,849 666,637
----------- -----------
Property, plant and equipment:
Land 30,854 32,276
Buildings and improvements 237,804 233,684
Machinery and equipment 344,085 338,531
Construction in progress 85,868 54,927
Less-Accumulated depreciation (298,078) (280,323)
----------- -----------
Net property, plant and equipment 400,533 379,095
----------- -----------
Other assets 95,227 54,226
----------- -----------
$1,153,609 $1,099,958
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 3,504 $ 2,615
Current maturities of long-term debt 3 9,454
Accounts payable 50,622 60,881
Accrued payroll and other expenses 38,496 28,260
Accrued income taxes 4,478 9,107
----------- -----------
Total current liabilities 97,103 110,317
----------- -----------
Long-term debt 3,458 3,787
----------- -----------
Deferred postretirement benefits 35,360 32,918
----------- -----------
Deferred compensation 11,047 10,662
----------- -----------
Other liabilities 10,468 --
----------- -----------
Stockholders' equity:
Common stock, $1.00 par value, 200,000 shares authorized,
100,208 and 100,044 shares outstanding, respectively 100,208 100,044
Capital in excess of par value 20,530 17,002
Retained earnings 889,032 819,467
Cumulative translation adjustments (13,597) 5,761
----------- -----------
Total stockholders' equity 996,173 942,274
----------- -----------
$1,153,609 $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> Six Months
Ended June 30,
-----------------------------
1997 1996
Cash flows from operating activities: -----------------------------
<S> <C> <C>
Net income $ 82,081 $ 73,691
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 25,168 23,174
Postretirement benefits expense 1,870 1,843
Deferred income taxes 704 1,281
Deferred compensation expense 1,630 1,918
Deferred compensation payments (538) (331)
Increase in accounts receivable (40,213) (27,181)
Increase in inventories (21,848) (1,059)
Increase in other current assets (1,348) (3,171)
Decrease in accounts payable (8,956) (14,647)
Increase in accrued payroll and other expenses 14,572 10,093
Decrease in accrued income taxes (5,103) (3,589)
--------- --------
Net cash provided by operating activities 48,019 62,022
--------- --------
Cash flows from investing activities:
Property, plant and equipment additions (47,229) (30,467)
Acquisition of businesses (46,589) (13,629)
Other, net -- (1,500)
--------- --------
Net cash used in investing activities (93,818) (45,596)
--------- --------
Cash flows from financing activities:
Repayment of notes payable (9,061) (4,627)
Issuance of long-term debt 469 57
Payment of dividends (12,516) (10,989)
Exercise of employee stock options 2,987 3,058
--------- ---------
Net cash used in financing activities (18,121) (12,501)
--------- ---------
Effect of exchange rate changes on cash (2,611) (1,566)
--------- ---------
Net change in cash and cash equivalents (66,531) 2,359
Cash and cash equivalents at January 1 103,685 83,969
--------- ---------
Cash and cash equivalents at June 30 $ 37,154 $ 86,328
========= =========
Supplemental disclosures of cash flow information:
Income taxes paid $ 47,742 $ 38,214
Interest paid, net of capitalized interest $ 434 $ 531
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 six
months ended June 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:
June 30, December 31,
1997 1996
-------- --------
Finished goods $306,529 $288,293
Work in process 24,195 22,132
Raw materials 55,382 52,359
-------- --------
$386,106 $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 statments 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 currnecy
exchange rates.
Results of Operations
For the quarter ended June 30, sales increased 7.6% to $278.6 million from
$258.8 million in 1996. Chemical sales increased 6.2% to $222.3 million
in the second quarter and 5.3% to $446.2 million for the first six months.
Changes in currency exchange rates reduced the quarterly and year-to-date
gains by 3.9% and 3.7%, respectively, and may continue to moderate our
chemical sales growth. The underlying growth pace in Research sales
increased due to aggressive sales and marketing programs in a competitive
marketplace. Sales in the second quarter benefitted from the April
acquistion of Research Biochemicals, Inc., a small but leading supplier
of neuroscience research products, and the June partnership with
AlliedSignal (75% Sigma-Aldrich, 25% AlliedSignal), whereby Sigma-Aldrich
will sell and market Riedel-de Haen laboratory chemicals. Riedel-de Haen,
located in Seelze, near Hannover, Germany, is a major European supplier
of laboratory products with sales of approximately $40 million annually.
These products will complement the Company's existing range of high
quality research products and are expected to strengthen its market position.
Year-to-date Fine Chemical sales continued to grow worldwide, in spite
of competitive market pressures. Diagnostic sales reflected above
average gains from the expansion of our coagulation program into Europe.
Metal sales grew 13.6% to $56.3 million in the second quarter and 14.1%
to $111.4 million for the first six months, reflecting a continuing
strong demand for our electrical, mechanical and telecommuication support
products and enclosures.
Cost of sales was $255.5 million, representing 45.8% of sales, compared to
$241.6 million, or 46.4% of sales for the first six months of 1996. For the
quarter, cost of sales was 45.5% of sales compared to 46.6% in 1996. Cost
of sales for the first quarter of both 1997 and 1996 was 46.1% of sales.
The change in cost of sales in the second quarter resulted from improved
productivity and sales mix changes in the chemical business which offset
the additional cost of a new plant and sales mix changes in the metal
business. The cost of chemical and metal products sold increased by 2.3%
and 14.8%, respectively, in the second quarter compared to sales increases
of 5.3% and 13.6% for chemical and metal products.
Selling, general and administrative expenses for the six months ended June
30, 1997, were $177.2 million, or 31.8% of sales compared to $165.4 million,
or 31.7% of sales in 1996. The slight increase in selling, general and
administrative expenses as a percentage of sales was attributable to the
Company's expansion of foreign operations with new offices opening in
Argentina, Ireland and Greece.
Net income for the second quarter grew by 10.2% to $40.7 million from
$37.0 million in 1996, while net income for the first half of 1997 grew
by 11.4% to $82.1 million from $73.7 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 $66.5 million in the six months ended June 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
$48.0 million, a decrease of $14.0 million from 1996. The decrease
resulted from higher net income of $8.4 million 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 $47.2 million, acquisition of businesses for $46.6 million
and payment of dividends totaling $12.5 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.
<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 6, 1997. The
matters for which a vote of security holders was held included election
of the Board of Directors and a shareholder proposal on executive
compensation.
Following are the results of the votes for the election of the Board of
Directors:
Votes Votes
Nominee For Withheld
- ----------------------- ------------- --------------
Carl T. Cori 77,066,729 6,700,285
Nina V. Fedoroff 82,991,461 775,553
David R. Harvey 83,043,990 723,024
David M. Kipnis 76,021,725 7,745,289
Andrew E. Newman 76,667,064 7,099,950
William C. O'Neil, Jr. 76,480,740 7,286,274
Jerome W. Sandweiss 75,908,010 7,859,004
D. Dean Spatz 83,040,408 726,606
Thomas N. Urban 75,518,638 8,248,376
Following are the results of the votes for the shareholder proposal on
executive compensation:
Votes Votes Broker
For Against Abstain Non-Votes
---------- ---------- ---------- ----------
10,358,748 63,739,636 1,347,615 8,321,015
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) of 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) of 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 August 14, 1997
--------------------------------------------- ---------------
Peter A. Gleich, Vice President and Chief Financial Officer Date
(on behalf of the Company as Principal Financial Officer)
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</TABLE>
