UNITED STATES
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, 2004
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 | 43-1050617 | |
| (State or other jurisdiction of incorporation or organization) |
(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 ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No ¨
There were 69,103,422 shares of the Company’s $1.00 par value common stock outstanding on June 30, 2004.
Part 1- FINANCIAL INFORMATION
Item 1. Financial Statements
Sigma-Aldrich Corporation
Consolidated Statements of Income (Unaudited)
(in millions except per share amounts)
| Three Months Ended June 30, |
Six Months Ended June 30, | |||||||||||
| 2004 |
2003 |
2004 |
2003 | |||||||||
| Net sales |
$ | 348.6 | $ | 327.0 | $ | 716.7 | $ | 661.7 | ||||
| Cost of products sold |
163.3 | 160.4 | 334.8 | 324.1 | ||||||||
| Gross profit |
185.3 | 166.6 | 381.9 | 337.6 | ||||||||
| Selling, general and administrative expenses |
92.3 | 84.8 | 191.9 | 172.1 | ||||||||
| Research and development expenses |
10.2 | 10.5 | 20.9 | 21.3 | ||||||||
| Interest, net |
2.2 | 2.6 | 4.4 | 5.4 | ||||||||
| Income from continuing operations before income taxes |
80.6 | 68.7 | 164.7 | 138.8 | ||||||||
| Provision for income taxes |
21.0 | 20.7 | 42.8 | 41.9 | ||||||||
| Net income from continuing operations |
59.6 | 48.0 | 121.9 | 96.9 | ||||||||
| Discontinued operations: |
||||||||||||
| Net income from operations of discontinued business, net of taxes |
— | — | — | 1.1 | ||||||||
| Reduction of loss on disposition of discontinued operations, net of taxes |
— | 0.1 | — | 1.6 | ||||||||
| Net income |
$ | 59.6 | $ | 48.1 | $ | 121.9 | $ | 99.6 | ||||
| Net income per share – Basic |
||||||||||||
| Net income from continuing operations |
$ | 0.86 | $ | 0.68 | $ | 1.76 | $ | 1.36 | ||||
| Net income from operations of discontinued business, net of taxes |
— | — | — | 0.02 | ||||||||
| Reduction of loss on disposition of discontinued operations, net of taxes |
— | — | — | 0.02 | ||||||||
| Net income |
$ | 0.86 | $ | 0.68 | $ | 1.76 | $ | 1.40 | ||||
| Net income per share – Diluted |
||||||||||||
| Net income from continuing operations |
$ | 0.85 | $ | 0.67 | $ | 1.75 | $ | 1.35 | ||||
| Net income from operations of discontinued business, net of taxes |
— | — | — | 0.02 | ||||||||
| Reduction of loss on disposition of discontinued operations, net of taxes |
— | — | — | 0.02 | ||||||||
| Net income |
$ | 0.85 | $ | 0.67 | $ | 1.75 | $ | 1.39 | ||||
| Weighted average number of shares outstanding – Basic |
69.1 | 70.9 | 69.1 | 71.0 | ||||||||
| Weighted average number of shares outstanding – Diluted |
69.8 | 71.5 | 69.8 | 71.6 | ||||||||
| Dividends per share |
$ | 0.17 | $ | 0.09 | $ | 0.34 | $ | 0.18 | ||||
See accompanying notes to consolidated financial statements.
2
Sigma-Aldrich Corporation
Consolidated Balance Sheets
(in millions, except per share data)
| June 30, 2004 (Unaudited) |
December 31, 2003 |
|||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 138.7 | $ | 127.6 | ||||
| Accounts receivable, less allowance for doubtful accounts |
206.9 | 178.2 | ||||||
| Inventories |
409.0 | 426.6 | ||||||
| Other current assets |
87.1 | 82.6 | ||||||
| Total current assets |
841.7 | 815.0 | ||||||
| Property, plant and equipment: |
||||||||
| Land |
40.4 | 40.6 | ||||||
| Buildings and improvements |
483.0 | 468.0 | ||||||
| Machinery and equipment |
548.6 | 535.7 | ||||||
| Construction in progress |
51.2 | 42.4 | ||||||
| Less – accumulated depreciation |
(575.5 | ) | (539.3 | ) | ||||
| Property, plant and equipment, net |
547.7 | 547.4 | ||||||
| Goodwill, net |
178.9 | 113.0 | ||||||
| Other assets |
67.3 | 72.8 | ||||||
| Total assets |
$ | 1,635.6 | $ | 1,548.2 | ||||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Notes payable and current maturities of long-term debt |
$ | 50.6 | $ | 66.6 | ||||
| Accounts payable |
77.1 | 73.4 | ||||||
| Accrued payroll and payroll taxes |
36.1 | 39.7 | ||||||
| Accrued income taxes |
32.6 | 32.0 | ||||||
| Other accrued expenses |
56.0 | 45.7 | ||||||
| Total current liabilities |
252.4 | 257.4 | ||||||
| Long-term debt |
179.0 | 176.3 | ||||||
| Deferred post-retirement benefits |
54.2 | 52.8 | ||||||
| Other liabilities |
67.8 | 62.4 | ||||||
| Total liabilities |
553.4 | 548.9 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock, $1.00 par value per share 300.0 and 200.0 shares authorized at June 30, 2004 and December 31, 2003, respectively; 100.9 and 101.0 shares issued at June 30, 2004 and December 31, 2003, respectively; 69.1 shares outstanding at June 30, 2004 and December 31, 2003 |
100.9 | 101.0 | ||||||
| Capital in excess of par value |
50.2 | 47.2 | ||||||
| Common stock in treasury, at cost, 31.8 and 31.9 shares at June 30, 2004 and December 31, 2003, respectively |
(1,136.6 | ) | (1,126.6 | ) | ||||
| Retained earnings |
2,009.9 | 1,911.6 | ||||||
| Accumulated other comprehensive income |
57.8 | 66.1 | ||||||
| Total stockholders’ equity |
1,082.2 | 999.3 | ||||||
| Total liabilities and stockholders’ equity |
$ | 1,635.6 | $ | 1,548.2 | ||||
See accompanying notes to consolidated financial statements.
3
Sigma-Aldrich Corporation
Consolidated Statements of Cash Flows (Unaudited)
(in millions)
| Six Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 121.9 | $ | 99.6 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Net income from operations of discontinued business |
— | (1.1 | ) | |||||
| Reduction of loss on disposition of discontinued operations |
— | (1.6 | ) | |||||
| Depreciation and amortization |
34.9 | 34.2 | ||||||
| Other |
5.4 | 6.4 | ||||||
| Changes in assets and liabilities: |
||||||||
| Increase in accounts receivable |
(28.4 | ) | (13.2 | ) | ||||
| Decrease in inventories |
16.7 | 23.3 | ||||||
| Increase (decrease) in accrued income taxes |
3.2 | (4.3 | ) | |||||
| Other |
10.2 | (5.2 | ) | |||||
| Net cash provided by operating activities |
163.9 | 138.1 | ||||||
| Cash flows from investing activities: |
||||||||
| Property, plant and equipment additions |
(29.4 | ) | (25.5 | ) | ||||
| Sale of equipment |
0.7 | 1.9 | ||||||
| Acquisitions, net of cash acquired |
(74.3 | ) | — | |||||
| Other, net |
0.3 | 0.4 | ||||||
| Net cash used in investing activities |
(102.7 | ) | (23.2 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Repayment of short-term debt |
(16.0 | ) | (74.0 | ) | ||||
| Repayment of long-term debt |
— | (0.3 | ) | |||||
| Payment of dividends |
(23.6 | ) | (12.7 | ) | ||||
| Treasury stock purchases |
(23.0 | ) | (36.6 | ) | ||||
| Exercise of stock options |
13.2 | 10.5 | ||||||
| Net cash used in financing activities |
(49.4 | ) | (113.1 | ) | ||||
| Effect of exchange rate changes on cash |
(0.7 | ) | (0.7 | ) | ||||
| Net change in cash and cash equivalents |
11.1 | 1.1 | ||||||
| Cash and cash equivalents at January 1 |
127.6 | 52.4 | ||||||
| Cash and cash equivalents at June 30 |
$ | 138.7 | $ | 53.5 | ||||
| Supplemental disclosures of cash flow information: |
||||||||
| Income taxes paid |
$ | 37.5 | $ | 40.9 | ||||
| Interest paid, net of capitalized interest |
5.5 | 6.3 | ||||||
See accompanying notes to consolidated financial statements.
4
Sigma-Aldrich Corporation
Notes to Consolidated Financial Statements (Unaudited)
($ in millions, except per share data)
(1) 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, 2003. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included in these financial statements. Operating results for the three and six months ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.
(2) Reclassifications
The accompanying consolidated financial statements for the prior year contain certain reclassifications to conform to the presentation used in 2004.
(3) Effect of New Accounting Standards
In May 2004, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) FAS 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act (“the Act”) of 2003” which supersedes FSP FAS 106-1 of the same title. The FASB Staff Position clarifies the accounting for the benefits attributable to new government subsidies for companies that provide prescription drug benefits to retirees. The new accounting requirements are not effective until the third quarter of 2004. In accordance with FSP FAS 106-1, the Company elected to defer accounting for the economic effects of the new Medicare Act. Accordingly, any measures of the accumulated postretirement benefit obligation or net periodic postretirement benefit cost in the consolidated financial statements or accompanying notes do not reflect the effect of the subsidy because the Company has not concluded whether the benefits provided by the Company’s plan are actuarially equivalent to Medicare Part D under the Act.
(4) Common Stock
In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — an amendment of FASB No. 123” (SFAS 148). SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (SFAS 123) to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company adopted the disclosure provisions of SFAS 148.
5
The Company can grant incentive and non-qualified stock options as well as stock appreciation rights, performance shares, restricted stock and other stock-based awards under the 2003 Long-Term Incentive Plan. To determine the pro-forma effects on ne