For the transition period from | to |
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 offices) | (Zip Code) | |
(Registrant’s telephone number, including area code): | (314) 771-5765 | |
N/A |
Large accelerated filer X | Accelerated filer | |
Non-accelerated filer (Do not check if a smaller reporting company) | Smaller reporting company |
Page | ||
AOCI | Accumulated Other Comprehensive Income |
APAC | Asia Pacific Region |
Annual Report | Sigma-Aldrich Corporation Annual Report on Form 10-K for the period ended December 31, 2012 |
Applied | Applied Business Unit |
ASU | Accounting Standards Update |
BioReliance | BioReliance Holdings, Inc. |
Board | Sigma-Aldrich Corporation Board of Directors |
CEO | Sigma-Aldrich Corporation Chief Executive Officer |
CFO | Sigma-Aldrich Corporation Chief Financial Officer |
Company, we, us or our | Sigma-Aldrich Corporation |
EDI | Electronic Data Interchange |
Effective tax rate | Income tax expense expressed as a percentage of income before income taxes |
EMEA | Europe, Middle East and Asia |
EPS | Earnings Per Share |
Exchange Act | Securities Exchange Act of 1934 |
FASB | Financial Accounting Standards Board |
Gross profit margin | Gross profit as a percentage of sales |
LED | Light-Emitting Diode |
Operating income margin | Operating income as a percentage of sales |
OCI | Other Comprehensive Income |
R&D | Research and Development |
Report | Sigma-Aldrich Corporation Quarterly Report on Form 10-Q for the period ended March 31, 2013 |
Research | Research Business Unit |
Research Organics | Research Organics, Inc. |
SAFC Commercial | SAFC Commercial Business Unit |
SEC | U.S. Securities and Exchange Commission |
SG&A | Selling, General and Administrative Expense |
Total Americas | North America and South America |
U.S. GAAP | U.S. Generally Accepted Accounting Principles |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Net sales | $ | 675 | $ | 665 | |||
Cost of products and services sold | 331 | 310 | |||||
Gross profit | 344 | 355 | |||||
Selling, general and administrative expenses | 161 | 160 | |||||
Research and development expenses | 17 | 18 | |||||
Acquisition transaction costs | — | 5 | |||||
Operating income | 166 | 172 | |||||
Interest, net | 1 | 1 | |||||
Income before income taxes | 165 | 171 | |||||
Provision for income taxes | 43 | 54 | |||||
Net income | $ | 122 | $ | 117 | |||
Net income per share - Basic | $ | 1.02 | $ | 0.97 | |||
Net income per share - Diluted | $ | 1.01 | $ | 0.96 | |||
Weighted average number of shares outstanding - Basic | 120 | 121 | |||||
Weighted average number of shares outstanding - Diluted | 121 | 122 | |||||
Dividends per share | $ | 0.22 | $ | 0.20 |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Net income | $ | 122 | $ | 117 | |||
Other comprehensive income/(loss), net of tax: | |||||||
Foreign currency translation gain/(loss), net | (55 | ) | 20 | ||||
Pension and post retirement, net | 2 | 1 | |||||
Unrealized gain on securities, net | 2 | 2 | |||||
Unrealized gain on forward exchange contracts, net | 11 | — | |||||
Total other comprehensive income/(loss) | (40 | ) | 23 | ||||
Comprehensive income | $ | 82 | $ | 140 |
March 31, 2013 | December 31, 2012 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 471 | $ | 724 | |||
Accounts receivable, net | 398 | 356 | |||||
Inventories | 711 | 722 | |||||
Deferred taxes | 30 | 32 | |||||
Other | 90 | 95 | |||||
Total current assets | 1,700 | 1,929 | |||||
Property, plant and equipment: | |||||||
Property, plant and equipment | 2,001 | 2,011 | |||||
Less - accumulated depreciation | (1,190 | ) | (1,182 | ) | |||
Property, plant and equipment, net | 811 | 829 | |||||
Goodwill, net | 675 | 691 | |||||
Intangibles, net | 270 | 282 | |||||
Other | 125 | 89 | |||||
Total assets | $ | 3,581 | $ | 3,820 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Notes payable | $ | 89 | $ | 383 | |||
Accounts payable | 154 | 160 | |||||
Payroll | 52 | 55 | |||||
Income taxes | 45 | 26 | |||||
Other | 74 | 77 | |||||
Total current liabilities | 414 | 701 | |||||
Long-term debt | 300 | 300 | |||||
Pension and post-retirement benefits | 132 | 135 | |||||
Deferred taxes | 66 | 64 | |||||
Other | 72 | 74 | |||||
Total liabilities | 984 | 1,274 | |||||
Stockholders' equity: | |||||||
Common stock, $1.00 par value; 300 million shares authorized; 202 million shares issued at March 31, 2013 and December 31, 2012; 120 million shares outstanding at March 31, 2013 and December 31, 2012 | 202 | 202 | |||||
Capital in excess of par value | 294 | 276 | |||||
Common stock in treasury, at cost, 82 million shares at March 31, 2013 and December 31, 2012 | (2,294 | ) | (2,271 | ) | |||
Retained earnings | 4,366 | 4,270 | |||||
Accumulated other comprehensive income | 29 | 69 | |||||
Total stockholders' equity | 2,597 | 2,546 | |||||
Total liabilities and stockholders' equity | $ | 3,581 | $ | 3,820 |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 122 | $ | 117 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 35 | 32 | |||||
Deferred income taxes | 6 | 20 | |||||
Stock-based compensation expense | 8 | 6 | |||||
Other | (2 | ) | (3 | ) | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (51 | ) | (46 | ) | |||
Inventories | 4 | (16 | ) | ||||
Accounts payable | (4 | ) | 6 | ||||
Income taxes | 21 | 13 | |||||
Other, net | 15 | 15 | |||||
Net cash provided by operating activities | 154 | 144 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (25 | ) | (32 | ) | |||
Purchases of short-term investments | (51 | ) | (16 | ) | |||
Proceeds from sales of short-term investments | 20 | 21 | |||||
Acquisitions of businesses, net of cash acquired | — | (389 | ) | ||||
Other, net | (3 | ) | (3 | ) | |||
Net cash used in investing activities | (59 | ) | (419 | ) | |||
Cash flows from financing activities: | |||||||
Net issuance/(repayment) of short-term debt | (294 | ) | 193 | ||||
Dividends | (26 | ) | (24 | ) | |||
Share repurchases | (27 | ) | (25 | ) | |||
Proceeds from exercise of stock options | 10 | 14 | |||||
Excess tax benefits from stock-based payments | 3 | 7 | |||||
Net cash provided by/(used in) financing activities | (334 | ) | 165 | ||||
Effect of foreign currency exchange rate changes on cash | (14 | ) | 3 | ||||
Net change in cash and cash equivalents | (253 | ) | (107 | ) | |||
Cash and cash equivalents at January 1 | 724 | 665 | |||||
Cash and cash equivalents at March 31 | $ | 471 | $ | 558 | |||
Supplemental disclosures of cash flow information: | |||||||
Income taxes paid | $ | 12 | $ | 11 | |||
Interest paid, net of capitalized interest | $ | — | $ | — |
March 31, 2013 | December 31, 2012 | ||||||
Finished goods | $ | 569 | $ | 585 | |||
Work in process | 39 | 36 | |||||
Raw materials | 103 | 101 | |||||
Total | $ | 711 | $ | 722 |
Cost | Accumulated Amortization | ||||||||||||||
March 31, 2013 | December 31, 2012 | March 31, 2013 | December 31, 2012 | ||||||||||||
Amortizable intangible assets: | |||||||||||||||
Patents | $ | 14 | $ | 14 | $ | 8 | $ | 8 | |||||||
Licenses | 47 | 47 | 18 | 17 | |||||||||||
Customer relationships | 249 | 255 | 65 | 61 | |||||||||||
Technical knowledge | 48 | 48 | 16 | 15 | |||||||||||
Other | 29 | 29 | 22 | 22 | |||||||||||
Total amortizable intangible assets | $ | 387 | $ | 393 | $ | 129 | $ | 123 | |||||||
Unamortizable intangible assets: | |||||||||||||||
Goodwill | $ | 701 | $ | 717 | $ | 26 | $ | 26 | |||||||
Trademarks and trade names | 20 | 20 | 8 | 8 | |||||||||||
Total unamortizable intangible assets | $ | 721 | $ | 737 | $ | 34 | $ | 34 |
Balance at December 31, 2012 | $ | 691 | |
Acquisitions | (1 | ) | |
Impact of foreign currency exchange rates | (15 | ) | |
Balance at March 31, 2013 | $ | 675 |
March 31, 2013 | December 31, 2012 | ||||||||||||
Outstanding | Weighted Average Rate | Outstanding | Weighted Average Rate | ||||||||||
Notes payable | |||||||||||||
Commercial paper (1) | $ | 89 | 0.2 | % | $ | 381 | 0.2 | % | |||||
$200.0 European revolving credit facility, due March 13, 2014 (2) | — | — | — | — | |||||||||
Sigma-Aldrich Korea Limited credit facility, due June 30, 2013 (3) | — | — | — | — | |||||||||
Sigma-Aldrich Japan GK credit facilities (4) | — | — | — | — | |||||||||
Other short-term credit facilities (5) | — | — | 2 | 1.5 | % | ||||||||
Total notes payable | 89 | 0.2 | % | 383 | 0.2 | % | |||||||
Plus - current maturities of long-term debt | — | — | — | — | |||||||||
Total notes payable and current maturities of long-term debt | $ | 89 | 0.2 | % | $ | 383 | 0.2 | % | |||||
Long-term debt | |||||||||||||
Senior notes, due November 1, 2020 (6) | $ | 300 | 3.4 | % | $ | 300 | 3.4 | % | |||||
Total | 300 | 3.4 | % | 300 | 3.4 | % | |||||||
Less - current maturities | — | — | — | — | |||||||||
Total long-term debt | $ | 300 | 3.4 | % | $ | 300 | 3.4 | % |
(1) | The Company has a $600 five-year revolving credit facility with a syndicate of banks in the U.S. that supports the Company's commercial paper program that will mature on May 9, 2017. At March 31, 2013 and December 31, 2012, the Company did not have any borrowings outstanding under this facility. However, the amount available under the facility is reduced by the amount of commercial paper outstanding. The facility contains financial covenants that require the maintenance of a ratio of consolidated debt to total capitalization of no more than 65.0 percent and an aggregate amount of subsidiary debt plus consolidated secured debt of no more than 25.0 percent of total net worth. The Company’s total consolidated debt as a percentage of total capitalization and aggregate amount of subsidiary debt plus consolidated secured debt as a percentage of total net worth, as defined in the underlying credit agreement, was 13.4 percent and 0.0 percent, respectively, at March 31, 2013. |
(2) | This facility contains financial covenants that require the maintenance of consolidated net worth of at least $750, a ratio of consolidated debt to total capitalization of no more than 55.0 percent and an aggregate amount of subsidiary debt plus consolidated secured debt of no more than 25.0 percent of total net worth. The Company’s consolidated net worth, consolidated debt as a percentage of total capitalization and aggregate amount of subsidiary debt plus consolidated secured debt as a percentage of total net worth, as defined in the underlying credit agreement, were $2,511, 13.4 percent and 0.0 percent, respectively, at March 31, 2013. |
(3) | There were no outstanding borrowings under this facility, which had a total commitment of 20 billion Korean Won ($18), at March 31, 2013. |
(4) | Sigma-Aldrich Japan GK has two credit facilities having a total commitment of 2 billion Japanese Yen ($21), with one facility due April 30, 2014 and the other representing a line of credit with no expiration. There were no borrowings under the facilities at March 31, 2013. |
(5) | There were no borrowings under these facilities, which have total commitments in U.S. Dollar equivalents of $3, at March 31, 2013. |
(6) | The Company has $300 of 3.375 percent Senior Notes due November 1, 2020. Interest on the notes is payable May 1 and November 1 of each year. The notes may be redeemed, in whole or in part at the Company’s option, (i) at any time at specific redemption prices plus accrued interest or (ii) three months prior to the maturity date at a redemption price equal to 100 percent of the principal amount plus accrued interest. |
Item | Reporting Location | March 31, 2013 | December 31, 2012 | ||
Forward exchange contracts asset derivative | Other current assets | $11 | $6 | ||
Forward exchange contracts liability derivative | Other current liabilities | — | 3 | ||
Gain recognized in AOCI, net | AOCI | 14 | 3 |
Item | Reporting Location | March 31, 2013 | March 31, 2012 | ||
Gain recognized in OCI, net | OCI | $11 | — |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Research | $ | 361 | $ | 372 | |||
Applied | 159 | 153 | |||||
SAFC Commercial | 155 | 140 | |||||
Total | $ | 675 | $ | 665 |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Net sales to unaffiliated customers: | |||||||
United States | $ | 256 | $ | 240 | |||
Other countries | 419 | 425 | |||||
Total | $ | 675 | $ | 665 |
March 31, 2013 | December 31, 2012 | ||||||
Long-lived assets: | |||||||
United States | $ | 549 | $ | 549 | |||
Other countries | 371 | 351 | |||||
Total | $ | 920 | $ | 900 |
Pension Plans | Post-Retirement Medical Benefit Plans | ||||||||||||||||||||||
United States | International | ||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||||
Service cost | $ | — | $ | 2 | $ | 3 | $ | 2 | $ | — | $ | — | |||||||||||
Interest cost | 2 | 2 | 2 | 2 | — | 1 | |||||||||||||||||
Expected return on plan assets | (3 | ) | (3 | ) | (3 | ) | (2 | ) | — | — | |||||||||||||
Amortization | 1 | 1 | 1 | 1 | — | — | |||||||||||||||||
Net periodic benefit cost | $ | — | $ | 2 | $ | 3 | $ | 3 | $ | — | $ | 1 |
March 31, 2013 | December 31, 2012 | ||||||
Retiree medical liability | $ | 47 | $ | 47 | |||
Pension liability | 88 | 91 | |||||
Subtotal | 135 | 138 | |||||
Less: current portion (included in other current liabilities) | (3 | ) | (3 | ) | |||
Pension and post-retirement benefits liabilities | $ | 132 | $ | 135 |
March 31, 2013 | December 31, 2012 | ||||||
Other receivables | $ | 38 | $ | 36 | |||
Prepaid expenses | 24 | 29 | |||||
Certificates of deposit | 25 | 27 | |||||
Other current assets | 3 | 3 | |||||
Total other current assets | $ | 90 | $ | 95 |
March 31, 2013 | December 31, 2012 | ||||||
Other investments | $ | 21 | $ | 16 | |||
Cash value of life insurance policies | 31 | 29 | |||||
Deferred taxes | 15 | 17 | |||||
Long term certificates of deposit | 31 | — | |||||
Other non-current assets | 27 | 27 | |||||
Total other assets | $ | 125 | $ | 89 |
March 31, 2013 | December 31, 2012 | ||||||
Legal and professional | $ | 6 | $ | 6 | |||
Pension and post-retirement | 3 | 3 | |||||
Freight | 8 | 7 | |||||
Other accrued expenses | 57 | 61 | |||||
Total other current liabilities | $ | 74 | $ | 77 |
March 31, 2013 | December 31, 2012 | ||||||
Deferred compensation | $ | 28 | $ | 31 | |||
Non-current income taxes | 34 | 33 | |||||
Other non-current liabilities | 10 | 10 | |||||
Total other non-current liabilities | $ | 72 | $ | 74 |
Three Months Ended March 31, | |||||
2013 | 2012 | ||||
Weighted average shares | |||||
Basic shares | 120 | 121 | |||
Effect of dilutive securities | 1 | 1 | |||
Diluted shares | 121 | 122 |
Foreign Currency Translation Adjustment Income (Loss), Net | Pension and Post-Retirement Benefit Plans Income (Loss), Net | Unrealized Gain on Securities, Net | Unrealized Gain on Cash Flow Hedges, Net | Total | ||||||||||||||||
Beginning balance | $ | 141 | $ | (78 | ) | $ | 3 | $ | 3 | $ | 69 | |||||||||
Other comprehensive income (loss) before reclassification | (55 | ) | — | 3 | 11 | (41 | ) | |||||||||||||
Less: Amounts reclassified from accumulated other comprehensive income | — | (2 | ) | 1 | — | (1 | ) | |||||||||||||
Net current-period other comprehensive income (loss) | (55 | ) | 2 | 2 | 11 | (40 | ) | |||||||||||||
Ending balance | $ | 86 | $ | (76 | ) | $ | 5 | $ | 14 | $ | 29 |
Foreign Currency Translation Adjustment Income, Net | Pension and Post-Retirement Benefit Plans Income (Loss), Net | Unrealized Gain (Loss) on Securities, Net | Total | |||||||||||||
Beginning balance | $ | 119 | $ | (88 | ) | $ | (1 | ) | $ | 30 | ||||||
Other comprehensive income (loss) before reclassification | 20 | — | 2 | 22 | ||||||||||||
Less: Amounts reclassified from accumulated other comprehensive income | — | (1 | ) | — | (1 | ) | ||||||||||
Net current-period other comprehensive income (loss) | 20 | 1 | 2 | 23 | ||||||||||||
Ending balance | $ | 139 | $ | (87 | ) | $ | 1 | $ | 53 |
(1) | global economic conditions, particularly the uncertainties in the Eurozone and other factors affecting the creditworthiness of our Eurozone customers; |
(2) | changes in pricing and the competitive environment and the global demand for the Company’s products; |
(3) | changes in foreign currency exchange rates; |
(4) | changes in research funding and the success of R&D activities; |
(5) | failure of planned sales initiatives in our Research, Applied and SAFC Commercial business units; |
(6) | dependence on uninterrupted manufacturing operations and global supply chain; |
(7) | changes in the regulatory environment in which the Company operates; |
(8) | changes in worldwide tax rates or tax benefits from domestic and international operations, including the matters described in Note 4 – Income Taxes to the Company's consolidated financial statements included in Item I, Part 1 of this Report and in Note 11 – Income Taxes to the Company's consolidated financial statements included in Item 8, Part II of the Annual Report; |
(9) | exposure to litigation including product liability claims; |
(10) | the ability to maintain adequate quality standards; |
(11) | reliance on third party package delivery services; |
(12) | an unanticipated increase in interest rates; |
(13) | other changes in the business environment in which the Company operates; |
(14) | acquisitions or divestitures of businesses; and |
(15) | the outcome of the outstanding matters described in "Other Matters" below and in Note 12 – Contingent Liabilities and Commitments to the Company's consolidated financial statements included in Item 8, Part II of the Annual Report. |
• | Improving Customer Intimacy: We constantly strive to exceed our customers' expectations through offering the right selection of high quality products and services, providing superior customer service and support as well as consistently delivering products that meet published or agreed specifications when and where our customers need them. The continued enhancement of a world-class e-commerce platform is a significant part of this approach. |
• | Expanding Products and Services: Increasing our geographic coverage, particularly in APAC and Brazil, pursuing new and innovative technologies and expanding our product and service offerings organically and through strategic acquisitions, should enable us to drive continued sales and earnings growth. |
• | Accelerating Operational Excellence: Through the optimization of our worldwide footprint, strategic sourcing of our products and materials and driving efficiencies in our distribution networks and operating expenses, we aim to continually enhance our operating margins. |
• | Macroeconomic Concerns Impacting Funding: Uncertainties in the United States and Europe around the macroeconomic environment have impacted overall research funding. |
• | Industry Consolidation: Our industry remains fragmented with few companies possessing a significant share in any particular market, which allows some participants to continue consolidating specialty, regional and niche players in the industry. The Company plans to continue to enhance sales growth and increase its market presence through strategic acquisitions. |
• | Foreign Currency Exchange Rate Fluctuations: Since we are a multinational corporation that sells and sources products in many different countries, changes in exchange rates have in the past, and could in the future, adversely affect our cash flows and results of operations. Due to the number of currencies involved, the variability of currency exposures and the potential volatility of currency exchange rates, we cannot predict the effect of exchange rate fluctuations on future sales and operating results. |
• | Emerging Market Growth: With emerging markets in APAC and Brazil growing at faster rates, we continue to focus our sales efforts on these areas. In 2012, the Company further expanded its footprint in this area with the opening of a new manufacturing facility in Kaohsiung, Taiwan that serves the fast growing LED market, an expanded distribution center and new packaging facility in Bangalore, India, and a new packaging and quality control facility in Wuxi, China. |
• | Growth of Internet: The internet continues to change the markets we serve in terms of access and exposure to existing and potential customers. Ensuring a strong presence in this channel is critical to our long term success. Worldwide sales of Research and Applied products through the Company's e-commerce channels, including both web-based and EDI platforms, have grown to 47 percent of the Company's total sales of Research and Applied products during the first quarter of 2013 as compared to 46 percent during the same period in 2012. |
• | Pharmaceutical Outsourcing: We continue to take advantage of the expanded market opportunities brought about by the outsourcing trend and shift towards biologic drug development throughout the biotechnology and pharmaceutical industries, with an increased focus on enhancing outsourcing partnerships with our customers. |
• | Regulations: Our industry is experiencing opportunities resulting from regulations that are directed at improving the quality of life, with significant focus in the areas of renewable energy and reduced energy consumption. The Company's Hitech business, part of the SAFC Commercial business unit, is poised to take advantage of these opportunities by supplying certain raw materials to manufacturers of LED products. |
• | Net sales were $675, an increase of 2 percent compared to the same period last year. Excluding the sales from acquisitions, which increased sales growth by 2 percent, and changes in foreign currency exchange rates, which lowered sales by 1 percent, sales increased organically by 1 percent compared to the first quarter of 2012. |
• | Operating income margin was 24.6 percent, compared to 25.9 percent in the same period in 2012. |
• | Diluted net income per share was $1.01 compared to $0.96 in 2012. This increase was primarily driven by a lower tax rate, which increased reported diluted net income per share by $0.07. |
• | Net cash provided by operating activities was $154 for the three months ended March 31, 2013, an $10 increase compared to the first three months of 2012. |
• | Total debt was $389 at March 31, 2013. Debt decreased $294 since December 31, 2012 due to decreased borrowings of commercial paper. |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Net sales | $ | 675 | $ | 665 | |||
Cost of products and services sold | 331 | 310 | |||||
Gross profit | 344 | 355 | |||||
Selling, general and administrative expenses | 161 | 160 | |||||
Research and development expenses | 17 | 18 | |||||
Acquisition transaction costs | — | 5 | |||||
Operating income | 166 | 172 | |||||
Interest, net | 1 | 1 | |||||
Income before income taxes | 165 | 171 | |||||
Provision for income taxes | 43 | 54 | |||||
Net income | $ | 122 | $ | 117 | |||
Net income per share - Diluted | $ | 1.01 | $ | 0.96 |
Three Months Ended March 31, | ||||||||||||||||||||||||||
2013 | 2012 | Change | Impact of Changes in FX | Increase due to Acquisitions | Organic Growth | Organic Growth % | ||||||||||||||||||||
Research | $ | 361 | $ | 372 | $ | (11 | ) | $ | (6 | ) | $ | — | $ | (5 | ) | (1 | )% | |||||||||
Applied | 159 | 153 | 6 | (1 | ) | 3 | 4 | 3 | % | |||||||||||||||||
SAFC Commercial | 155 | 140 | 15 | (1 | ) | 12 | 4 | 3 | % | |||||||||||||||||
Total | $ | 675 | $ | 665 | $ | 10 | $ | (8 | ) | $ | 15 | $ | 3 | 1 | % |
Three Months Ended March 31, | |||||
2013 | 2012 | ||||
Gross profit margin | 51.0 | % | 53.4 | % | |
Selling, general and administrative expenses | 23.9 | % | 24.1 | % | |
Research and development expenses | 2.5 | % | 2.7 | % | |
Acquisition transaction costs | — | % | 0.7 | % | |
Operating income | 24.6 | % | 25.9 | % | |
Effective tax rate | 26.1 | % | 31.6 | % |
Three Months Ended March 31, | ||
Gross profit margin – 2012 | 53.4 | % |
Decreases to gross profit margin: | ||
Changes in foreign currency exchange rates | (0.2 | )% |
Sales volume/Product mix/Pricing/Other | (1.8 | )% |
Acquisitions | (0.4 | )% |
Gross profit margin – 2013 | 51.0 | % |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Selling, general and administrative expenses | $ | 161 | $ | 160 | |||
Percentage of sales | 23.9 | % | 24.1 | % |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Research and development expenses | $ | 17 | $ | 18 | |||
Percentage of sales | 2.5 | % | 2.7 | % |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Acquisition transaction costs | $ | — | $ | 5 | |||
Percentage of sales | — | % | 0.7 | % |
Three Months Ended March 31, 2013 | |||||||
2013 | 2012 | ||||||
Net cash provided by (used in): | |||||||
Operating activities | $ | 154 | $ | 144 | |||
Investing activities | (59 | ) | (419 | ) | |||
Financing activities | (334 | ) | 165 |
Issuer Purchases of Equity Securities (share amounts in millions) | |||||||||
Total Number | Maximum | ||||||||
of Shares | Number of | ||||||||
Purchased as | Shares that | ||||||||
Part of | May Yet Be | ||||||||
Total | Publicly | Purchased | |||||||
Number of | Average Price | Announced | Under the | ||||||
Shares | Paid | Plans or | Plans or | ||||||
Period | Purchased | per Share | Programs | Programs | |||||
Jan 1, 2013 - Jan 31, 2013 | — | — | 99.4 | 10.6 | |||||
Feb 1, 2013 - Feb 28, 2013 | 0.2 | $ | 76.06 | 99.6 | 10.4 | ||||
Mar 1, 2013 - Mar 31, 2013 | 0.1 | 78.01 | 99.7 | 10.3 | |||||
Total | 0.3 | $ | 77.01 | 99.7 | 10.3 |
SIGMA-ALDRICH CORPORATION (Registrant) | |||
April 25, 2013 | /s/ Michael F. Kanan | ||
Date | Michael F. Kanan, Vice President and Corporate Controller (on behalf of the Company and as Principal Accounting Officer) |
Incorporated by Reference | |||||||
Exhibit Number | Exhibit Description | Filed Herewith | Form | Period Ending | Exhibit | Filing Date | |
10.1 | Form of Restricted Stock Unit Agreement (annual grant), issued under the Sigma-Aldrich Corporation 2003 Long-Term Incentive Plan* | X | 10.1 | ||||
10.2 | Form of Performance Share Award Agreement (revised to replace ROE with ROIC as performance metric), issued under the Sigma-Aldrich Corporation 2003 Long-Term Incentive Plan* | X | 10.2 | ||||
31.1 | Certification of Chief Executive Officer required by Rule 13a-15(e) and 15d-15(e) under the Exchange Act | X | 31.1 | ||||
31.2 | Certification of Chief Financial Officer required by Rule 13a-15(e) and 15d-15(e) under the Exchange Act | X | 31.2 | ||||
32.1 | CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | 32.1 | ||||
32.2 | CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | 32.2 | ||||
101.INS | XBRL Instance Document | X | |||||
101.SCH | XBRL Taxonomy Extension Schema Document | X | |||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | X | |||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | X | |||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | X | |||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | X | |||||
* | Represents management contract or compensatory plan or arrangement. |
A. | The Board of Directors of the Company (the “Board”) has adopted, and the Company’s shareholders have approved, the Plan, pursuant to which performance share awards may be granted to employees of the Company and its affiliates and certain other individuals. |
B. | The Company desires to grant to the Awardee (as defined herein) a performance share award under the terms of the Plan and this Agreement. |
1. | Grant of Award. Pursuant to action of the Committee (as defined herein), the Company has granted to the person (the “Awardee”) identified in the Awardee’s Performance Share Award Compensation Statement (the “Compensation Statement”), the number of performance shares (the “Performance Shares”) set forth in the Compensation Statement (the “Award”), subject to the terms, conditions and adjustments set forth in this Agreement and Exhibit A attached hereto, the Plan and the Compensation Statement. The Performance Shares granted under the Compensation Statement are referred to in this Agreement as the “Target Grant.” Notwithstanding anything herein or in Exhibit A, the Plan or the Compensation Statement to the contrary, the Award is subject to the Company’s Financial Restatement Policy as amended from time to time. This Agreement completely supersedes and replaces any prior form of terms, conditions and agreements with respect to performance shares granted under the Plan on and after January 1, 2013. |
2. | Award Subject to Plan. The Award is granted under, and is expressly subject to, all of the terms and provisions of the Plan, as amended from time to time, which terms are incorporated herein by reference, this Agreement and the Compensation Statement. The Committee described in Section 3 of the Plan (the “Committee”) has been appointed by the Board, and designated by it, as the Committee to make awards. |
3. | Performance Period. The performance period for the Award begins January 1, 2013, and ends December 31, 2015 (the “Performance Period”). |
4. | Payment. Subject to early termination of this Agreement below or as otherwise specifically provided herein, on January 1 following the end of the Performance Period or such later date as the Company may determine but no later than March 15 of the calendar year following the end of the Performance Period, the Company will deliver to the Awardee one share of Stock for each then-outstanding Performance Share under the Compensation Statement and subject to this Agreement; except that, the Committee shall take such action as may be necessary in the opinion of the Company to satisfy all obligations for withholding of such taxes as provided in Section 7 below. No fractional Shares shall be issued, and any fractional Shares shall be rounded down to the nearest whole Share. |
5. | Performance Criteria and Adjustments. Forty percent (40%) of the Performance Shares in the Target Grant will increase or decrease based upon the Company’s three-year average “Adjusted Sales Growth”, forty percent (40%) of the Performance Shares in the Target Grant will increase or decrease based upon the Company’s “Return on Invested Capital” (ROIC) in each year of the three-year Performance Period and twenty percent (20%) of the Performance Shares in the Target Grant will increase or decrease based upon the Company’s three-year average relative “Total Shareholder Return” (TSR) during the Performance Period, as described more fully in Exhibit A hereto (collectively, the “Performance Criteria”). |
6. | Termination of Award. |
(a) | This Agreement and the Compensation Statement will terminate and be of no further force or effect on the date the Awardee is no longer actively employed by the Company or any of its affiliates, whether due to voluntary or involuntary termination other than on account of death, Disability, Retirement (as defined herein) or involuntary termination by the Company other than for Cause to the extent specifically provided herein, prior to the date on which the Performance Period ends. The Awardee will, however, be entitled to receive any Stock payable under Section 4 of this Agreement if the Awardee’s employment terminates after the Performance Period but before the Awardee’s receipt of such Stock. The Award shall not be affected by any change in employment responsibilities after the Award is granted, including any change in employment position with the Company that is otherwise deemed to be ineligible for the grant of an award under the Plan, so long as the Awardee continues to be actively employed by the Company or any of its affiliates. |
(b) | If the Awardee’s employment terminates before the end of the Performance Period on account of Retirement or involuntary termination of employment by the Company without Cause, any portion of the Award which has not yet vested shall vest at such time, but only to the extent the Performance Criteria are achieved, without regard to such termination of employment, and any payment under Section 4 hereof shall be prorated based on the number of months in the portion of the Performance Period during which the Awardee was employed by the Company. For purposes of determining such prorated amount under this subsection, the Awardee shall be deemed to be employed for an entire month if the Awardee terminates during such month while employed during the Performance Period. Without limiting the foregoing, in the event the Awardee’s employment terminates before the end of the Performance Period on account of Retirement or involuntary termination of employment by the Company without Cause, any portion of the Award which vests in accordance with the foregoing sentence shall be payable at the time and in the manner set forth in Section 4 after the end of the Performance Period, and such payment which would otherwise be received hereunder had the Awardee remained employed shall be reduced in the same proportion as the period in the Performance Period during which the Awardee was not employed due to such termination. For example, if the Awardee’s employment terminates on account of Retirement on December 31, 2013, and if the Performance Criteria are achieved at the target level at the end of the Performance Period, the Awardee shall be entitled to receive one-third of the Target Grant, payable on January 1 following the end of the Performance Period or such later date as the Company may determine but no later than March 15 of the calendar year following the end of the Performance Period, subject to all terms and conditions provided herein. |
(c) | If the Awardee’s employment terminates before the end of the Performance Period on account of death or Disability, the Award shall vest at the Target Grant as though one hundred percent (100%) of the Performance Criteria were achieved, and any portion of the Award which vests in accordance with the foregoing shall be prorated based on the number of months in the portion of the Performance Period during which the Awardee was employed by the Company. For purposes of determining such prorated amount under this subsection, the Awardee shall be deemed to be employed for an entire month if the Awardee terminates during such month while employed during the Performance Period. Such amount shall be payable in the month following such termination on account of death or Disability; provided, in the case of Disability, such Disability also meets the requirements for a disability as defined under Section 409A of the Code (“Section 409A”). To the extent such Disability does not meet the requirements for a disability as defined under Section 409A, such amount shall be payable at the time and in the manner set forth in Section 4 above after the end of the Performance Period. |
(d) | Each outstanding Performance Share hereunder shall immediately and fully vest at the Target Grant as though one hundred percent (100%) of the Performance Criteria were achieved, and any restrictions shall lapse, upon the occurrence of a Change in Control that occurs while the Awardee is employed with the Company or any of its affiliates and before the end of the Performance Period. Any portion of the Award which vests in accordance with the foregoing shall be payable on the earlier of (i) in the month following such Change in Control provided such Change in Control also meets the requirements for a change in control event as defined under Section 409A or (ii) the time set forth in Section 4 above after the end of the Performance Period. |
7. | Tax Withholding. The Company shall withhold from any payment hereunder a number of Shares sufficient to cover any required withholding taxes to the extent required by minimum statutory withholding requirements. |
8. | Non‑Transferability. Neither the Award nor any rights under this Agreement or the Compensation Statement may be assigned, transferred or in any manner encumbered except by will or the laws of descent and distribution, and any attempted assignment, transfer, mortgage, pledge or encumbrance except as herein authorized, will be void and of no effect. |
9. | Definitions: Application of Plan. To the extent not specifically defined in this Agreement or the Compensation Statement, all capitalized terms used in this Agreement and the Compensation Statement will have the same meanings ascribed to them in the Plan. The Performance Shares are granted to the Awardee subject to all terms and conditions of the Plan. The terms set forth in this Agreement are an integral part of the Compensation Statement and should be read in conjunction therewith. |
10. | Choice of Law. To the extent not preempted by Federal law, this Agreement and the Compensation Statement and all determinations and actions taken hereunder and thereunder shall be governed by the laws of the State of Missouri, without giving effect to principles of conflicts or choice of law rules or principles, and construed accordingly, except for those matters subject to the General Corporation Law of Delaware, which shall be governed by such Law, without giving effect to principles of conflicts laws, and construed accordingly. |
11. | Adjustment. Appropriate adjustments in outstanding Performance Shares and payments with respect to such outstanding Performance Shares shall be made by the Committee to give effect to adjustments made in the number or type of Shares through a reclassification, stock dividend, stock split, stock combination or similar event in accordance with the terms of the Plan. |
12. | Section 409A. It is intended that this Agreement shall be administered in a manner that will comply with or meet an exception from Section 409A, and this Agreement shall be administered and interpreted in accordance with such intent. The Committee may adopt rules deemed necessary or appropriate to qualify for an exception from or to comply with the requirements of Section 409A. Notwithstanding anything in this Section 12 to the contrary, no amendment to or payment under this Agreement will be made unless permitted under Section 409A. If any amount shall be payable hereunder as a result of the Awardee’s “separation from service” at such time as the Awardee is a “specified employee” (as those terms are defined for purposes of Section 409A) and such amount is subject to the provisions of Section 409A, then no payment shall be made, except as permitted under Section 409A, prior to the first day of the seventh calendar month beginning after the Awardee’s separation from service, provided that, payment shall be made sooner upon the date of the Awardee’s earlier death following such separation from service. For the avoidance of doubt, the Awardee shall become entitled to payment at the earliest payment event, if any, described herein that occurs with respect to such Awardee, at the time and manner described herein and otherwise subject to all terms and conditions herein, and any rights hereunder shall terminate upon any payment with respect to such payment event. |
• | The Company calculates adjusted Sales Growth as follows: |
◦ | The Company defines sales growth in the same manner as for the Annual Bonus Plan except that acquisitions and divestitures are included in the annual growth rate |
◦ | The payout is calculated as by using the three-year average of year-over-year percentage changes in net sales (currency adjusted) |
• | Aside from currency adjustments, the Company does not anticipate any other adjustments to this criteria |
• | Goals for each year of the three-year Performance Period are set annually in February |
◦ | Acquisitions will be excluded from the results during the initial year |
• | The company calculates Return on Invested Capital as follows: |
◦ | The denominator uses a 13 month rolling average for Equity, Debt and Cash |
• | ROIC is computed for each year of the three-year Performance Period, with each year viewed as a separate goal, the attainment of which vests or forfeits one-third of the award subject to the ROIC Performance Criteria (subject to continued employment) |
• | Relative Total Shareholder Return compares the results of investing in SIAL vs other companies in our industry considering both the appreciation or depreciation in share price as well as the value of dividends distributed during the time period |
• | The calculation uses the following: |
◦ | Share price is calculated at the beginning and end of the period using the closing price averaged for each business day during the month of December (December 2012 and December 2015) |
◦ | The relative comparison is done with the same comparator group as used for executive compensation, using companies in the peer group both at the beginning and end of the Performance Period |
◦ | The Committee’s independent consultant will be used as the authority for this calculation |
/s/ Rakesh Sachdev | |
Rakesh Sachdev | |
President and Chief Executive Officer |
/s/ Jan A. Bertsch | |
Jan A. Bertsch | |
Executive Vice President, Chief Financial Officer and Treasurer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Rakesh Sachdev | |
Rakesh Sachdev | |
President and Chief Executive Officer | |
Sigma-Aldrich Corporation | |
April 25, 2013 |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Jan A. Bertsch | |
Jan A. Bertsch | |
Executive Vice President, Chief Financial Officer and Treasurer | |
Sigma-Aldrich Corporation | |
April 25, 2013 |
Derivative Financial Instruments and Cash Flow Hedging Strategy Schedule Of Gain Loss - Income Statement (Details) (Other Comprehensive Income (Loss) [Member], USD $)
In Millions, unless otherwise specified |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2013
|
Dec. 31, 2012
|
|
Other Comprehensive Income (Loss) [Member]
|
||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Derivative Instruments, Gain (Loss) Recognized in Other Comprehensive Income (Loss), Effective Portion, Net | $ 11 | $ 0 |
Other Assets And Liabilities (Other Assets) (Details) (USD $)
In Millions, unless otherwise specified |
Mar. 31, 2013
|
Dec. 31, 2012
|
---|---|---|
Other Assets And Liabilities [Abstract] | ||
Other investments | $ 21 | $ 16 |
Cash value of life insurance policies | 31 | 29 |
Deferred taxes | 15 | 17 |
Long Term Certificates of Deposit | 31 | 0 |
Other non-current assets | 27 | 27 |
Total other assets | $ 125 | $ 89 |
Pension And Post-Retirement Benefits (Pension And Post-Retirement Benefits And Liabilities) (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Dec. 31, 2012
|
|
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract] | ||
Defined Contribution Plan, Cost Recognized | $ 6 | $ 2 |
Retiree medical liability | 47 | 47 |
Pension liability | 88 | 91 |
Subtotal | 135 | 138 |
Less: current portion (included in other current liabilities) | (3) | (3) |
Pension and post-retirement benefits | $ 132 | $ 135 |
Derivative Financial Instruments and Cash Flow Hedging Strategy Financial Derivatives and Risk Management (Tables)
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
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Derivative Financial Instruments and Cash Flow Hedging Strategy [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block] | The following table summarizes the fair values of the forward foreign currency exchange contracts designated as cash flow hedges at March 31, 2013 and December 31, 2012:
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Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance [Table Text Block] | The following table summarizes the effect of the forward foreign currency exchange contracts designated as cash flow hedges on the Company's consolidated statements of comprehensive income during the three months ended March 31, 2013 and March 31, 2012, net of immaterial tax effects. Amounts reclassified from AOCI to net income during these same periods were immaterial.
|
Other Assets And Liabilities (Other Liabilities) (Details) (USD $)
In Millions, unless otherwise specified |
Mar. 31, 2013
|
Dec. 31, 2012
|
---|---|---|
Other Assets And Liabilities [Abstract] | ||
Deferred compensation | $ 28 | $ 31 |
Non-current income taxes | 34 | 33 |
Other non-current liabilities | 10 | 10 |
Total other non-current liabilities | $ 72 | $ 74 |
Company Operations By Business Unit (Geographic Financial Information - Net Sales To Unaffiliated Customers) (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
|
Segment Reporting Information [Line Items] | ||
Net sales to unaffiliated customers | $ 675 | $ 665 |
United States [Member]
|
||
Segment Reporting Information [Line Items] | ||
Net sales to unaffiliated customers | 256 | 240 |
Other Countries [Member]
|
||
Segment Reporting Information [Line Items] | ||
Net sales to unaffiliated customers | $ 419 | $ 425 |
Debt (Schedule Of Notes Payable And Long-Term Debt Additional Information) (Details)
In Millions, unless otherwise specified |
3 Months Ended | 3 Months Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
USD ($)
|
Mar. 31, 2012
USD ($)
|
Mar. 31, 2013
Five-Year Revolving Credit Facility Maturing May 9, 2017 [Member]
USD ($)
|
Mar. 31, 2013
$200.0 European Revolving Credit Facility, Due March 13, 2014 [Member]
USD ($)
|
Mar. 31, 2013
Sigma-Aldrich Korea Limited Credit Facility, Due June 30, 2013 [Member]
USD ($)
|
Mar. 31, 2013
Sigma-Aldrich Korea Limited Credit Facility, Due June 30, 2013 [Member]
KRW
|
Mar. 31, 2013
Sigma-Aldrich Japan Credit Facility [Member]
USD ($)
|
Mar. 31, 2013
Sigma-Aldrich Japan Credit Facility [Member]
JPY (¥)
|
Mar. 31, 2013
Other Short-Term Credit Facilities [Member]
USD ($)
|
Mar. 31, 2013
Senior Notes, Due November 1, 2020 [Member]
USD ($)
|
Mar. 31, 2013
Long-Term Debt [Member]
USD ($)
|
Dec. 31, 2012
Long-Term Debt [Member]
USD ($)
|
Mar. 31, 2013
Long-Term Debt [Member]
Senior Notes, Due November 1, 2020 [Member]
USD ($)
|
Dec. 31, 2012
Long-Term Debt [Member]
Senior Notes, Due November 1, 2020 [Member]
USD ($)
|
|
Debt Instrument [Line Items] | ||||||||||||||
Credit facility, maximum borrowing capacity | $ 600 | $ 18 | 20,000 | $ 21 | ¥ 2,000 | $ 3 | ||||||||
Line of Credit Facility, Term | 5 years | |||||||||||||
Debt instrument, maturity date | May 09, 2017 | Mar. 13, 2014 | Jun. 30, 2013 | Jun. 30, 2013 | Apr. 30, 2014 | Apr. 30, 2014 | Nov. 01, 2020 | |||||||
Debt instrument covenant ratio of consolidated debt to total capitalization, maximum | 65.00% | 55.00% | ||||||||||||
Debt Instrument, Covenant, Ratio of Consolidated Debt Plus Subsidiary Debt to Net Worth | 25.00% | |||||||||||||
Debt Instrument, Covenant, Ratio of Consolidated Debt to Total Net Worth | 25.00% | |||||||||||||
Consolidated debt as percentage of total capitalization | 13.40% | 13.40% | ||||||||||||
Subsidiary Debt Plus Consolidated Secured Debt, as a Percent of Total Net Worth | 0.00% | |||||||||||||
Debt Instrument, Covenant Ratio, Consolidated Debt Plus Subsidiary Debt as a Percentage of Total Net Worth | 0.00% | |||||||||||||
Debt instrument covenant consolidated net worth, minimum | 750 | |||||||||||||
Consolidated net worth | 2,511 | |||||||||||||
Debt instrument face amount | 200 | |||||||||||||
Outstanding | 89 | 300 | 300 | 300 | 300 | 300 | ||||||||
Stated interest rate | 3.375% | |||||||||||||
Interest Expense, Debt | $ 2 | $ 2 |
Share Repurchases (Details)
In Millions, unless otherwise specified |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2013
|
Dec. 31, 2012
|
|
Disclosure of Repurchase Agreements [Abstract] | ||
Authorized shares repurchase | 110 | 110 |
Treasury Stock, Shares, Acquired | 100 | 99 |
Shares outstanding | 120 | 120 |
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