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 March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from TO
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) (Zip Code)
(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 100,562,715 shares of the Company's $1.00 par value common stock
outstanding on April 30, 1998.
<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
Ended March 31,
-----------------------
1998 1997
-----------------------
<S> <C> <C>
Net sales $ 306,199 $ 279,060
Cost of products sold 143,091 128,597
--------- ---------
Gross profit 163,108 150,463
Selling, general and administrative expenses 96,287 87,517
--------- ---------
Income before income taxes 66,821 62,946
Provision for income taxes 22,661 21,590
--------- ---------
Net income $ 44,160 $ 41,356
========= =========
Net income per share - Basic $0.44 $0.41
========= =========
Net income per share - Diluted $0.43 $0.40
========= =========
Weighted average number of shares outstanding - Basic 100,461 100,090
========= =========
Weighted average number of shares outstanding - Diluted 102,695 101,800
========= =========
Dividends per share $ 0.0700 $ 0.0625
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Sigma-Aldrich Corporation
Consolidated Balance Sheets
(in thousands)
<CAPTION> March 31, December 31,
1998 1997
------------ -----------
<S> <C> <C>
Assets (unaudited)
Current assets:
Cash and temporary cash investments $ 44,418 $ 46,228
Accounts receivable, net of allowance
for doubtful accounts 225,094 186,847
Inventories 427,154 420,809
Other current assets 47,938 52,790
----------- -----------
Total current assets 744,604 706,674
----------- -----------
Property, plant and equipment:
Land 31,249 31,594
Buildings and improvements 244,758 252,388
Machinery and equipment 373,405 381,771
Construction in progress 130,867 90,831
Less-Accumulated depreciation (328,321) (317,706)
----------- -----------
Net property, plant and equipment 451,958 438,878
----------- -----------
Other assets 96,819 98,270
----------- -----------
$ 1,293,381 $ 1,243,822
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable $ 7,260 $ 6,751
Current maturities of long-term debt 0 649
Accounts payable 55,444 53,257
Accrued payroll and other expenses 45,431 42,269
Accrued income taxes 27,226 16,553
----------- -----------
Total current liabilities 135,361 119,479
----------- -----------
Long-term debt 1,044 552
----------- -----------
Deferred postretirement benefits 36,365 35,475
----------- -----------
Deferred compensation 10,377 12,766
----------- -----------
Other liabilities 16,600 15,216
----------- -----------
Stockholders' equity:
Common stock, $1.00 par value, 200,000 shares
authorized, 100,503 and 100,377 shares
outstanding, respectively 100,503 100,377
Capital in excess of par value 27,272 24,168
Retained earnings 996,843 959,717
Cumulative translation adjustments (30,984) (23,928)
----------- -----------
Total stockholders' equity 1,093,634 1,060,334
----------- -----------
$ 1,293,381 $ 1,243,822
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Sigma-Aldrich Corporation
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
<CAPTION> Three Months
Ended March 31,
-------------------------
1998 1997
-------------------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 44,160 $ 41,356
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 14,313 12,512
Postretirement benefits expense 1,150 935
Deferred income taxes 164 1,470
Deferred compensation expense 100 1,066
Deferred compensation payments (965) (520)
(Increase) in accounts receivable (42,054) (36,576)
(Increase) decrease in inventories (8,766) 713
(Increase) decrease in other current assets 5,192 (5,125)
Increase (decrease) in accounts payable 2,622 (11,760)
Increase in accured payroll and other expenses 4,673 5,371
Increase in accrued income taxes 10,785 11,442
--------- ---------
Net cash provided by operating activities 31,374 20,884
--------- ---------
Cash flows from investing activities:
Property, plant and equipment additions (27,939) (17,329)
--------- ---------
Cash flows from financing activities:
Issuance (repayment) of notes payable 441 (5,414)
Issuance of long-term debt 99 123
Payment of dividends (7,034) (6,256)
Exercise of employee stock options 1,712 824
--------- ---------
Net cash used in financing activities (4,782) (10,723)
--------- ---------
Effect of exchange rate changes on cash (463) (2,251)
--------- ---------
Net change in cash and cash equivalents (1,810) (9,419)
Cash and cash equivalents at January 1 46,228 103,685
--------- ---------
Cash and cash equivalents at March 31 $ 44,418 $ 94,266
========= =========
Supplemental disclosures of cash flow information:
Income taxes paid $ 11,712 $ 8,671
Interest paid, net of capitalized interest $ 61 $ 406
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Sigma-Aldrich Corporation
Notes to Consolidated Financial Statements
(in thousands, except per share amounts)
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, 1997. 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 three
months ended March 31, 1998, are not necessarily indicative of the results
that may be expected for the year ending December 31, 1998.
Earnings per Share
Earnings per share is based on the weighted average number of shares
outstanding during each period for both Basic and Diluted.
Reconciliation of Earnings and Shares
Per Share
For the Quarter Ended March 31, 1998 Earnings Shares Amount
- ------------------------------------ -------- ------- ---------
Basic Earnings per Share
Earnings available to
common shareholders $44,160 100,461 $0.44
Options Issued -- 2,234
-------- -------
Diluted Earnings per Share
Earnings available to
common shareholders $44,160 102,695 $0.43
------- -------
For the Quarter Ended March 31, 1997
Basic Earnings per Share
Earnings available to
common shareholders $41,356 100,090 $0.41
Options Issued -- 1,710
------- -------
Diluted Earnings per Share
Earnings available to
common shareholders $41,356 101,800 $0.40
------- -------
Effect on Previously Reported EPS
Per share amounts 1997
----------------- ----
Primary EPS as reported $0.41
Effect of SFAS No. 128 --
-----
Basic EPS as restated $0.41
=====
Fully diluted EPS as reported $0.41
Effect of SFAS No. 128 (0.01)
-----
Diluted EPS as restated $0.40
=====
Inventories
The principal categories of consolidated inventories were:
March 31, December 31,
1998 1997
------------ ------------
Finished goods $ 339,500 $ 336,295
Work in process 25,341 24,269
Raw materials 62,313 60,245
------------ ------------
$ 427,154 $ 420,809
============ ============
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.
Comprehensive Income
On January 1, 1998, the Company adopted Financial Accounting Standards No. 130,
"Reporting Comprehensive Income", which is the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources; it includes all changes in equity during a period
except those resulting from investments by owners and distributions to owners.
Comprehensive income is the total of all components of comprehensive income and
other comprehensive income, including net income. Other comprehensive income
refers to revenues, expenses, gains and losses that under GAAP are excluded
from new income. For the Company, the only element of other comprehensive
income is cumulative translation adjustments, arising from the translation of
certain balance sheet accounts from local currency to functional currency.
For quarters ended March 31, 1998 and 1997, comprehensive income was $37.1
million and $25.5 million, respectively.
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 statments 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, as well as any statements prededed by,
followed by, or that include the words "believes," "expects," "anticipates" or
similar expressions, and other statements contained herein regarding matters
that are not historical facts. 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. All subsequent written and
oral forward-looking statements attributable to the Company or persons acting
on its behalf are expressly qualified in their entirety by such cautionary
statements. The Company does not undertake any obligation to release publicly
any revisions to such forward-looking statements to reflect events or
uncertainties after the date hereof or to reflect the occurrence of
unanticipated events.
Results of Operations
For the three months ended March 31, 1998, sales increased 9.7% to $306.2
million from $279.1 million in 1997. Chemical sales for the quarter increased
11.6% to $249.9 million, with the impact of the strong dollar reducing the gain
by 4.2%. Both domestic and international sales volume exceeded levels achieved
in 1997. International sales grew faster than domestic sales due in part to
the addition of the Riedel-de Haen product line. Our Research and Fine
Chemicals divisions both contributed to the sales growth by introducing new
products along with aggressive sales and marketing efforts. Diagnostic
sales declined as a result of competitive market pressures. Metal sales
for the quarter grew 2.0% to $56.3 million, with the slower pace reflecting
the impact of inclement weather and delivery delays requested by several
telecommunication customers.
Cost of sales for the 1998 quarter totaled $143.1 million, compared to $128.6
million for the first three months of 1997, representing 46.7% and 46.1% of
sales, respectively, with the gross profit margin decreasing slightly from
53.9% to 53.3%. Sales mix changes in the chemical business together with
the additional costs of new plants were only partially offset by improved
gross margins in the metal business.
Selling, general and administrative expenses for the three months ended
March 31, 1998, were $96.3 million, or 31.5% of sales, compared to $87.5
million, or 31.4% of sales in 1997. The increase in selling, general and
administrative expenses as a percentage of sales are attributable to the
Company's continued managing of staffing levels and control of other expenses,
offset by investments in new systems and new offices in Finland, Greece,
Ireland, Malaysia, Russia and Singapore.
Net income for the quarter grew by 6.8% to $44.2 million from $41.4 million in
1997. Net income grew at a slower rate than sales due to incremental expenses
of additional facilities, accelerated product development in the Molecular
Biology area and new information systems expenditures exceeding short-term
productivity gains realized.
Liquidity and Capital Resources
Cash balances declined $1.8 million in the three months ended March 31, 1998 as
presented in the Consolidated Statements of Cash Flows (unaudited). The
decrease resulted from increased net income, depreciation and amortization,
and accounts payable, offset by changes in working capital accounts. The
primary source of cash was net cash provided by operating activities of
$31.4 million, an increase of $10.5 million from 1997. The major uses of cash
were property, plant and equipment additions of $27.9 million and payment of
dividends totaling $7.0 million. Although net cash flows vary from
year to year, it is anticipated that future increases should be in line with
sales growth.
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) of Form 10-K filed for the year ended
December 31, 1991, Commission File Number 0-8135.
(b) By-Laws as amended May 1997 - Incorporated by reference to
Exhibit 4(b) of Form 10-K filed for the year ended
December 31, 1997, 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 May 14, 1998
------------------------- --------------
Peter A. Gleich, Vice President and Chief Financial Officer Date
(on behalf of the Company as Principal Financial Officer)
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</TABLE>
