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HIGHLIGHTS:
Sales and EPS Results:
Q4 2005 reported sales grew 16.7%,
including increases of 11.5% from the addition of JRH Biosciences' industrial
cell culture business and 9.3% from organic growth, reduced by a 4.1% impact
from currency.
Q4 2005 diluted EPS increased 6.3% to $.84. A tax charge of $.06 per share related to the cash repatriation of $120 million of accumulated foreign earnings, a $.05 per share non-cash inventory purchase accounting charge from 2005 acquisitions and a $.01 per share impact from currency reduced otherwise reportable results.
Financial Condition:
Return on equity at December 31,
2005 exceeded our long-term goal at 21.1%.
Cash repatriation and debt reduction in Q4 2005 reduced the Company's debt to capital ratio to 28.9% as of December 31, 2005.
Outlook:
Management expects 2006 sales to
achieve the Company's 7% organic growth goal and anticipates an approximate 1%
carryover benefit from the February 2005 acquisition of JRH's industrial cell
culture business to be largely offset by an equivalent adverse currency
impact. Ongoing efforts to pursue desirable acquisition candidates are
expected to enhance this internal growth.
A diluted EPS forecast for full year 2006 of $3.80 to $3.90 includes an estimated impact of $.14 to $.16 per share for stock-based compensation expense under Statement of Financial Accounting Standards No. 123 (R) [SFAS 123(R)]. Diluted EPS of $3.76 for 2005 does not include a $.14 per share impact that would have reduced the reported EPS had the provisions of SFAS 123(R) been applied to that year's diluted EPS.
OVERALL RESULTS:
Reported sales increased 16.7% in
the fourth quarter of 2005 compared to the same quarter in 2004, bringing full
year 2005 sales growth to 18.3%. The addition of JRH's industrial cell culture
business contributed 11.5 and 9.4 percentage points of the fourth quarter and
annual increases, respectively. Organic growth in core businesses, including
integrated acquisitions, was strong, providing 9.3 and 8.2 percentage points
of fourth quarter and annual growth, respectively. The integration of JRH's
research based business and Proligo (acquired April 2005) boosted growth in
both periods, while the fully integrated Q2 2004 additions of Ultrafine and
Tetrionics also contributed to year-to-date growth. Currency impacts reduced
the otherwise reportable fourth quarter growth by 4.1%, but contributed 0.7%
of benefit to the total annual sales increase. Sales gains for both the fourth
quarter and full year of 2005 benefited from organic growth in all three major
geographic areas (U.S., Europe and other international markets).
Reported operating and pretax
income margins in the fourth quarter of 2005 were 21.3% and 19.8% of sales,
respectively. Operating and pretax margins for the full year 2005 were 21.7%
and 20.6% of sales, respectively. While Q4 2005 operating margins improved
from Q4 2004 levels, operating and pretax margins for the full year 2005 were
reduced from full year 2004 levels. The impact of non-cash inventory purchase
accounting charges from 2005 acquisitions, lower average gross margins
associated with JRH's acquired industrial cell culture business and higher
interest cost, were only partially offset by lower S,G&A expenses as a percent
of sales applicable to JRH's industrial cell culture business. Continued cost
reductions from process improvement activities offset the cost of other growth
initiatives.
Reported diluted net income per
share for the fourth quarter of 2005 increased 6.3% to $.84 from $.79 in the
fourth quarter of 2004. This reported gain includes the adverse impacts of a
$.06 per share fourth quarter tax charge for the cash repatriation of $120
million of accumulated foreign earnings under the provisions of the American
Jobs Creation Act of 2004, a non-cash inventory purchase accounting charge of
$.05 per share and a currency impact of $.01 per share. Full year reported
diluted EPS increased 12.6% to $3.76 in 2005 from $3.34 in 2004, including net
tax and currency benefits in 2005 of $.10 and $.15 per share, respectively,
partially offset by a non-cash inventory purchase accounting charge of $.16 in
2005.
CEO's STATEMENT:
Commenting on 2005 performance and
expectations for 2006, newly elected CEO Jai Nagarkatti said: "On behalf of
all of our employees worldwide, I thank David Harvey for leading our Company
as its CEO these past six years. Under his leadership, sales and EPS grew at
9% and 17%, respectively, and our stock price more than doubled, resulting in
a compound annual return to shareholders of 13.7%, outperforming the major
indices."
Nagarkatti continued, "We are
pleased with our results in 2005 as well as with the continued improvement in
our markets. Growth last year was achieved by improving our market position
through new initiatives and successful acquisitions, including JRH
Biosciences, the largest in the history of our Company. The 6,800 plus
employees of Sigma-Aldrich are committed to build on our strong foundation and
our leadership position in life science and high technology. Towards that end,
we launched a new plan in the middle of 2005. Through the five key initiatives
of this evolutionary plan-(1) organizing into four customer centric business
units, (2) building on our Internet superiority, (3) expanding in faster
growing world economies, (4) leveraging operational excellence by expanding
our successful process improvement approach, and (5) making strategic
acquisitions-we will sharpen our focus to become an even more customer centric
company. Our new plan redoubles our organization's commitment to the success
of our customers. I am confident that we can achieve our top line, organic
growth target of 7% and reported EPS of $3.80 to $3.90 in 2006 as we continue
to build shareholder value."
About Sigma-Aldrich:
Sigma-Aldrich is a leading
Life Science and High Technology company. Our biochemical and organic chemical
products and kits are used in scientific and genomic research, biotechnology,
pharmaceutical development, the diagnosis of disease and as key components in
pharmaceutical and other high technology manufacturing. We have customers in
life science companies, university and government institutions, hospitals and
in industry. Over one million scientists and technologists use our products.
Sigma-Aldrich operates in 35 countries and has over 6,800 employees providing
excellent service worldwide. We are committed to accelerating our Customers'
success through leadership in Life Science, High Technology and Service. For
more information about Sigma-Aldrich, please visit our award-winning web site
at
http://www.sigma-aldrich.com .
Cautionary Statement:
This release contains
forward-looking statements relating to future performance, goals, strategic
actions and initiatives and similar intentions and beliefs, including without
limitation the "Highlights", "Sales Results", "Income Analysis", "Outlook", "CEO's
Statement" and "Other Information-Share Repurchase" sections contained above
and other statements regarding the Company's expectations, goals, beliefs,
intentions and the like regarding future sales, earnings, share repurchases,
acquisitions and other matters. These statements involve assumptions regarding
Company operations, investments and acquisitions and conditions in the markets
the Company serves. Although the Company believes its expectations are based
on reasonable assumptions, such statements are subject to risks and
uncertainties, including, among others, certain economic, political and
technological factors. Actual results could differ materially from those
stated or implied in this news release, due to, but not limited to, such
factors as (1) changes in pricing and the competitive environment, (2)
fluctuations in foreign currency exchange rates, (3) the impact of
acquisitions and success in integrating and obtaining projected results from
the acquisitions, (4) other changes in the business environment in which the
Company operates, (5) changes in research funding, (6) uncertainties
surrounding government healthcare reform, (7) government regulations
applicable to the business, (8) the impact of fluctuations in interest rates,
(9) the effectiveness of the Company's further implementation of its global
software systems, (10) the ability to retain customers, suppliers and
employees, (11) the success of research and development activities, (12)
changes in worldwide tax rates or tax benefits from domestic and international
operations, and (13) the outcome of the matters described in Note 15-
Contingent Liabilities and Commitments-in the Company's Form 10-Q report for
the period ended September 30, 2005. The Company does not undertake any
obligation to update these forward-looking statements.
At Sigma-Aldrich:
Kirk A. Richter, Treasurer,
+1-314-286-8004
Media enquiries
to Northbank Communications:
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