Sigma Aldrich (SIAL) 10-Q 2010 Q3 Quarterly report

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                                 September 30, 2010                                                 

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  X    No    

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer X	Accelerated filer
Non-accelerated filer     (Do not check if a smaller reporting company)	Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes      No   X  

There were 121,298,893 shares of the Company’s $1.00 par value common stock outstanding on September 30, 2010.

Part 1- FINANCIAL INFORMATION

Item 1.   Financial Statements

Sigma-Aldrich Corporation

Consolidated Statements of Income (Unaudited)

(in millions, except per share data)

	Three Months Ended September 30,					Nine Months Ended September 30,
		2010		2009			2010		2009
Net sales			$       563		$       534			$    1,689		$    1,575
Cost of products sold			265		269			794		772
Gross profit			298		265			895		803
Selling, general and administrative expenses			139		127			405		384
Research and development expenses Restructuring costs			16 4		16 0			49 13		47 0
Impairment cost			7		0			7		0
Operating income			132		122			421		372
Interest, net			1		2			5		8
Income before income taxes			131		120			416		364
Provision for income taxes			38		34			126		110
Net income			$       93		$         86			$       290		$       254
Net income per share – Basic			$      0.77		$      0.71			$      2.40		$      2.08
Net income per share – Diluted			$      0.76		$      0.70			$      2.36		$      2.06
Weighted average number of shares outstanding – Basic			121		122			121		122
Weighted average number of shares outstanding – Diluted			123		124			123		124
Dividends per share			$    0.160		$    0.145			$    0.480		$    0.435

See accompanying notes to consolidated financial statements (unaudited).

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Sigma-Aldrich Corporation

Consolidated Balance Sheets

(in millions, except per share data)

	September 30, 2010			December 31, 2009
Assets		(Unaudited)
Current assets:
Cash and cash equivalents		$       500			$       373
Accounts receivable, less allowance for doubtful accounts of $6 and $7, respectively		315			285
Inventories		605			609
Other		125			117
Total current assets		1,545			1,384
Property, plant and equipment, net of accumulated depreciation of $1,000 and $943, respectively		712			709
Goodwill, net		399			401
Intangibles, net		124			129
Other		89			91
Total assets		$    2,869			$    2,714
Liabilities and Stockholders’ Equity
Current liabilities:
Notes payable and current maturities of long-term debt		$       378			$       477
Accounts payable		117			112
Other		192			153
Total current liabilities		687			742
Long-term debt		100			100
Pension and post-retirement benefits		96			94
Deferred taxes		27			23
Other		71			69
Total liabilities		981			1,028
Stockholders’ equity:
Common stock, $1.00 par value; 300 shares authorized; 202 shares issued; 121 and 122 shares outstanding at September 30, 2010 and December 31, 2009, respectively		202			202
Capital in excess of par value		175			153
Common stock in treasury, at cost, 80 and 80 shares at September 30, 2010 and December 31, 2009, respectively		(2,042	)		(1,983	)
Retained earnings		3,462			3,230
Accumulated other comprehensive income		91			84
Total stockholders’ equity		1,888			1,686
Total liabilities and stockholders’ equity		$    2,869			$    2,714

See accompanying notes to consolidated financial statements (unaudited).

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Sigma-Aldrich Corporation

Consolidated Statements of Cash Flows (Unaudited)

(in millions)

	Nine Months Ended September 30,
		2010			2009
Cash flows from operating activities:
Net income		$	290		$	254
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			69			68
Deferred income taxes			5			0
Stock-based compensation expense			15			13
Restructuring costs, net of payments			6			0
Impairment cost			7			0
Other			(4	)		(2	)
Changes in operating assets and liabilities:
Accounts receivable			(29	)		(18	)
Inventories			1			39
Accounts payable			4			(10	)
Income taxes			(3	)		(12	)
Other, net			36			30
Net cash provided by operating activities			397			362
Cash flows from investing activities:
Capital expenditures			(65	)		(88	)
Purchases of short-term investments			(27	)		(15	)
Proceeds from sales of short-term investments			25			4
Acquisitions of businesses, net of cash acquired			(5	)		(6	)
Other, net			(2	)		1
Net cash used in investing activities			(74	)		(104	)
Cash flows from financing activities:
Net issuance/(repayment) of short-term debt			1			(142	)
Repayment of long-term debt			(100	)		(7	)
Payment of dividends			(58	)		(53	)
Treasury stock purchases			(76	)		(46	)
Proceeds from exercise of stock options			24			13
Excess tax benefits from stock-based payments			5			2
Net cash used in financing activities			(204	)		(233	)
Effect of exchange rate changes on cash			8			15
Net change in cash and cash equivalents			127			40
Cash and cash equivalents at January 1			373			252
Cash and cash equivalents at September 30		$	500		$	292
Supplemental disclosures of cash flow information:
Income taxes paid		$	119		$	117
Interest paid, net of capitalized interest			7			10

  See accompanying notes to consolidated financial statements (unaudited).

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Sigma-Aldrich Corporation

Notes to Consolidated Financial Statements (Unaudited)

(in millions, except per share data)

(1)  Basis of Presentation

Sigma-Aldrich Corporation (the “Company”), headquartered in St. Louis, Missouri, develops, manufacturers, purchases and distributes a broad range of high quality biochemicals and organic chemicals throughout the world. These chemical products and kits are used in scientific research, including genomic and proteomic research, biotechnology, pharmaceutical development and as key components in pharmaceutical, diagnostic and other high technology manufacturing.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) 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 U.S. GAAP for complete financial statements. For further information, refer to the notes to consolidated financial statements included in the Annual Report of the Company on Form 10-K for the year ended December 31, 2009. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included in these consolidated financial statements. Operating results for the nine months ended September 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.

(2)  Reclassifications

Certain reclassifications of prior year amounts have been made to conform to the current year presentation.

(3)  Income Taxes

On March 23, 2010, the Patient Protection and Affordable Care Act (the “PPACA”) was signed into law, and, on March 30, 2010, the Health Care and Education Reconciliation Act of 2010 (the “HCERA” and, together with PPACA, the “Acts”), which makes various amendments to certain aspects of the PPACA, was signed into law. The Acts effectively changed the tax treatment of federal subsidies paid to sponsors of retiree health benefit plans that provide prescription drug benefits that are at least actuarially equivalent to the corresponding benefits provided under Medicare Part D. Under the Acts, beginning in 2013 an employer’s income tax deduction for the costs of providing Medicare Part D-equivalent prescription drug benefits to retirees will be reduced by the amount of the federal subsidy. Under U.S. GAAP, any impact from a change in tax law must be recognized in earnings in the period enacted regardless of the effective date. The Acts did not have a significant impact on the consolidated financial statements of the Company.

There were no material changes in the unrecognized tax benefits of the Company during the three months and nine months ended September 30, 2010.

The Company believes it is reasonably possible that the liability for unrecognized tax benefits at September 30, 2010 may decrease by approximately $2 due to the expiration of statutes and the completion of examinations in several jurisdictions within twelve months of September 30, 2010.

(4)  Inventories

The principal categories of inventories are:

	September 30, 2010	December 31, 2009
Finished goods	$    506	$    520
Work in process	31	26
Raw materials	68	63
Total	$    605	$    609

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(5)  Intangible Assets

The Company’s amortizable and unamortizable intangible assets at September 30, 2010 and December 31, 2009 are as follows:

	Cost		Accumulated Amortization
	September 30, 2010	December 31, 2009	September 30, 2010	December 31, 2009
Amortizable intangible assets:
Patents	$    14	$    13	$    7	$    6
Licenses	39	38	8	6
Customer relationships	98	97	34	30
Technical knowledge	22	22	9	8
Other	14	13	13	12
Total amortizable intangible assets	$  187	$  183	$  71	$  62
Unamortizable intangible assets:
Goodwill	$  425	$  427	$  26	$  26
Trademarks and trade names	16	16	8	8
Total unamortizable intangible assets	$  441	$  443	$  34	$  34

For the three months ended September 30, 2010 and 2009, the Company recorded amortization expense of $3 and $3, respectively, related to amortizable intangible assets. For the nine months ended September 30, 2010 and 2009, the Company recorded amortization expense of $10 and $8, respectively, related to amortizable intangible assets. The Company expects to record annual amortization expense for all existing intangible assets in a range from approximately $11 to $13 from 2010 through 2014.

The change in the net goodwill for the nine months ended September 30, 2010 is as follows:

Balance at December 31, 2009	$	401
Acquisitions		1
Impact of foreign currency exchange rates		(3)
Balance at September 30, 2010	$	399

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(6)  Debt

Notes payable and long-term debt consists of the following:

	September 30, 2010			December 31, 2009
	Outstanding	Weighted Average Rate		Outstanding		Weighted Average Rate
Notes payable
Commercial paper	$378	0.2	%	$ 377		0.2%
$200.0 European revolving credit facility, due March 13, 2014(1)	0	0		0		0
Sigma-Aldrich Korea limited credit facility, due June 11, 2009 (2)	0	0		0		0
Sigma-Aldrich Japan credit facility, due April 9, 2009 (2)	0	0		0		0
Other short-term credit facilities	0	0		0		0
Total notes payable	378	0.2	%	377		0.2%
Current maturities of long-term debt	0	0		100		7.7%
Total notes payable and current maturities of long-term debt	$378	0.2	%	$ 477		1.8
Long-term debt
Senior notes, due September 12, 2010(3)	$    0	0		$ 100		7.7%
Senior notes, due December 5, 2011(4)	100	5.1	%	100		5.1%
Total	100	5.1	%	200		6.4%
Less - current maturities	0	0		(100	)	7.7%
Total long-term debt	$100	5.1	%	$ 100		5.1%

(1) Facility contains financial covenants that require the maintenance of consolidated net worth of at least $750 and a ratio of consolidated debt to total capitalization of no more than 55.0%. The Company’s consolidated net worth and consolidated debt as a percentage of total capitalization were, as defined in the respective agreement, $1,741 and 22%, respectively, at September 30, 2010.

(2) The borrowings under these facilities were due and repaid on June 11, 2009 and April 9, 2009 respectively, the facilities are still available to the Company with total commitments of 20 billion Korean Won (converted into U.S. Dollars of $18) and 2 billion Japanese yen (converted into U.S. Dollars of $24) respectively at September 30, 2010. There were no outstanding borrowings under either facility at September 30, 2010.

(3) Notes and all related interest due were paid in full on September 2010.

(4) Note agreement contains financial covenants that require a ratio of consolidated debt to total capitalization of no more than 60.0% and an aggregate amount of all consolidated priority debt of no more than 30.0% of consolidated net worth. The Company’s consolidated debt as a percentage of total capitalization and consolidated priority debt as a percentage of total consolidated net worth were, as defined in the respective agreement, 20% and 0%, respectively, at September 30, 2010.

The Company has a $450 five-year revolving credit facility maturing December 11, 2012 with a syndicate of banks in the U.S. that supports the Company’s commercial paper program. At September 30, 2010 and December 31, 2009, the company did not have any borrowings outstanding under this facility.

The Company has provided guarantees to certain subsidiaries for any outstanding borrowings from the European revolving credit facility and the short-term credit facilities of the wholly-owned Korean and Japanese subsidiaries. There are no existing events of default that would require the Company to honor these guarantees.

Total interest expense incurred on short-term and long-term debt, net of amounts capitalized, was $2 and $3 for the three months ended September 30, 2010 and 2009, respectively. Total interest expense incurred on short-term and long-term debt, net of amounts capitalized, was $7 and $10 for the nine months ended September 30, 2010 and 2009, respectively.

The fair value of long-term debt, as calculated using the aggregate cash flows from principal and interest payments over the life of the debt, was approximately $103 and $206 at September 30, 2010 and December 31, 2009, respectively, based upon a discounted cash flow analysis using current market interest rates.

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(7)  Restructuring

In the fourth quarter of 2009 the Company committed to a restructuring plan that includes exit activities at five manufacturing sites in the U.S. and Europe. The Company expects to complete these activities over the next 6 to 12 months. These exit activities impact approximately 200 employees and are intended to reduce the Company’s fixed cost structure and better align its global manufacturing and distribution footprint.

Additionally, in 2009 the Company initiated a voluntary retirement program that was accepted by approximately 90 eligible U.S. employees as part of its cost reduction and long-term profit enhancement initiatives.

The Company expects to further reduce its workforce by approximately 130 people, approximately 110 of which occurred during the first nine months of 2010. The remaining reductions will take place over the remainder of 2010 and the first half of 2011.

The Company expects that the execution of these activities will result in additional pre-tax restructuring costs of approximately $14 to be recorded in the next 6 to 12 months.

The following provides a summary of restructuring costs by period indicated and total expected restructuring costs:

	Three Months Ended September 30, 2010	Nine Months Ended September 30, 2010	Cumulative Restructuring Costs For These Programs	Total Expected Restructuring Costs
Employee termination benefits	$    2	$      9	$    14	$    24
Other restructuring costs	2	4	8	12
Total restructuring costs	$    4	$    13	22	$    36

Employee termination benefits primarily include pension and post-retirement benefit plan charges related to the voluntary retirement program, as well as payments to employees impacted by facility exit and other cost reduction activities. Other restructuring costs relate mainly to changes in the expected useful life of the assets impacted by these restructuring activities.

The following is a rollforward of the liabilities since December 31, 2009. The liabilities are reported as a component of other current liabilities in the accompanying consolidated balance sheets.

	Employee Termination Benefits	Other Restructuring Costs	Total
Balance as of December 31, 2009	$    2	$    1	$    3
Charges	9	4	13
Payments and other adjustments	(7)	(4)	(11)
Balance as of September 30, 2010	$    4	$    1	$    5

During October, the Company met the recognition threshold for settlement accounting under Financial Accounting Standards Board 715 Compensation—Retirement Benefits and accordingly will record $7 of expense in the fourth quarter of 2010. This amount is reflected in the total expected restructuring costs above.

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(8)  Earnings per Share

Basic earnings per share is calculated using the weighted average number of shares outstanding during each period. The diluted earnings per share calculation includes the impact of dilutive common stock options.

Earnings per share have been calculated using the following share information:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
Weighted average shares
Basic shares		121		122		121		122
Effect of dilutive securities		2		2		2		2
Diluted shares		123		124		123		124

Potentially dilutive common shares totaling 1 million were excluded from the calculation of weighted average shares for the three months ended September 30, 2009 because their effect was considered to be antidilutive. There were no potentially dilutive common shares impacting the calculation for the three months ended September 30, 2010. Potentially dilutive common shares totaling 1 million were excluded from the calculation of weighted average shares for both the nine months ended September 30, 2010 and 2009 because their effect was considered to be antidilutive.

(9)  Comprehensive Income

Comprehensive income refers to net income adjusted by gains and losses that in conformity with U.S. GAAP are excluded from net income. Other comprehensive items are amounts that are included in stockholders’ equity in the consolidated balance sheets, including cumulative translation adjustments, unrealized gains and losses, net of tax, on securities and pension and post-retirement benefit liability adjustments. For the Company, the difference between net income and comprehensive income is primarily adjustments arising from the translation of assets and liabilities for foreign operating units from their local currency to the reporting currency.

For the three months ended September 30, 2010 and 2009, comprehensive income was $212 and $130, respectively. For the nine months ended September 30, 2010 and 2009, comprehensive income was $297 and $328, respectively.

Impairment cost of $7 was recorded for the three and nine months ended September 30, 2010 to reflect an other-than-temporary impairment of a long-term investment, of which $4 was reclassified from Accumulated other comprehensive income, net of tax of $3.

(10)  Company Operations by Business Unit

The Company is organized into four business units featuring the Research units of Essentials, Specialties and Biotech and the Fine Chemicals unit, SAFC, to align the Company with the customers it serves. The business unit structure is the Company’s approach to serving customers and reporting sales rather than any internal division used to allocate resources. Net sales for the Company’s business units are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
Research Essentials		$  105		$  104		$     324		$     317
Research Specialties		207		198		631		588
Research Biotech		84		83		258		245
Research Chemicals		396		385		1,213		1,150
SAFC		167		149		476		425
Total		$  563		$  534		$  1,689		$  1,575

The Company’s Chief Operating Decision Maker and Board of Directors review profit and loss information on a consolidated basis to assess performance, make overall operating decisions and make resource allocations. The Company’s business units are closely interrelated in their activities and share services such as order entry, billing, technical services, E-Commerce, procurement and supply chain and inventory control and share production and distribution facilities. Additionally, these units are supported by centralized functional areas such as finance, human

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resources, quality, safety and compliance and information technology. Further, the Company’s Chief Operating Decision Maker, Chief Financial Officer and Business Unit Presidents participate in compensation programs which reward performance based upon consolidated Company results for sales growth, operating income, free cash flow and return on equity. Business Unit Presidents also have a component of their compensation program based on their respective business unit sales growth, in addition to consolidated sales growth. Based on these factors, the Company concludes that it operates in one segment. Sales are attributed to countries based upon the location of product shipped. Geographic financial information is as follows:

	Three Months     Ended September 30,		Nine Months     Ended September 30,
	2010	2009	2010	2009
Net sales to unaffiliated customers:
United States	$    214	$    196	$     623	$    585
Germany	56	60	170	167
International	293	278	896	823
Total	$    563	$    534	$  1,689	$  1575

	September 30,     2010	December 31,     2009
Long-lived assets:
United States	$    474	$    472
International	288	284
Total	$    762	$    756

(11)  Share Repurchases

At September 30, 2010 and December 31, 2009, the Company had repurchased a total of 95 and 94 million shares, respectively, of an authorized repurchase of 100 million shares. The Company has 5 million remaining shares authorized for purchase, but, the timing and number of shares purchased, if any, depends upon market conditions and other factors. There were 121 million shares outstanding as of September 30, 2010.

(12)  Pension and Post-retirement Benefits

The components of the net periodic benefit costs for the three months ended September 30, 2010 and 2009 are as follows:

	Pension Plans				Post-Retirement
	United States		International		Medical Benefit Plans
	2010	2009	2010	2009	2010	2009
Service cost	$  2	$  2	$  2	$  2	$  0	$  0
Interest cost	2	2	3	2	1	1
Expected return on plan assets	(2)	(2)	(3)	(1)	0	0
Amortization	1	1	0	0	0	0
Net periodic benefit cost	$  3	$  3	$  2	$  3	$  1	$  1

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The components of the net periodic benefit costs for the nine months ended September 30, 2010 and 2009 are as follows:

	Pension Plans				Post-Retirement
	United States		International		Medical Benefit Plans
	2010	2009	2010	2009	2010	2009
Service cost	$  5	$  5	$�� 5	$  5	$  1	$  1
Interest cost	6	5	7	6	2	2
Expected return on plan assets	(7)	(5)	(7)	(5)	0	0
Amortization	4	3	1	2	(1)	(1)
Net periodic benefit cost	$  8	$  8	$  6	$  8	$  2	$  2

Pension and post-retirement benefit liabilities consisted of the following:

	September 30,	December 31,
	2010	2009
Retiree medical liability	$  44	$  43
Pension liability	55	54
Subtotal	99	97
Less: current portion (included in other current liabilities)	(3)	(3)
Pension and post-retirement benefit liabilities	$  96	$  94

The Company contributed $5 to its U.S. pension plan and $4 to its international pension plans in the nine months ended September 30, 2010. In total, the Company expects to contribute approximately $10 to its defined benefit pension plans in 2010.

The Company’s 401(k) retirement savings plan provides retirement benefits to eligible U.S. employees in addition to those provided by the pension plan. The plan permits participants to voluntarily defer a portion of their compensation, subject to Internal Revenue Code limitations. The Company also contributes a fixed amount per year to the account of each eligible employee plus a percentage of the employee’s salary deferral. The cost for this plan was $2 for the three months ended September 30, 2010 and 2009, respectively, and $7 for the nine months ended September 30, 2010 and 2009, respectively.

(13)  Other Assets and Liabilities

Other current assets

Other current assets are summarized as follows:

	September 30,	December 31,
	2010	2009
Other receivables	$    17	$    15
Prepaid expenses	27	32
Certificates of deposit	16	14
Deferred taxes	65	56
Total other current assets	$  125	$  117

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Other assets

Other assets are summarized as follows:

	September 30,		December 31,
	2010		2009
Other investments		$    12		$    13
Cash value of life insurance policies		22		18
Deferred taxes		39		44
Other non-current assets		16		16
Total other assets		$    89		$    91

Other current liabilities

Other current liabilities are summarized as follows:

	September 30,		December 31,
	2010		2009
Payroll		$      74		$      51
Income taxes		40		42
Other accrued expenses		78		60
Total other current liabilities		$    192		$    153

Other liabilities

Other liabilities are summarized as follows:

	September 30,		December 31,
	2010		2009
Deferred compensation		$    36		$    30
Non-current income taxes		27		30
Other non-current liabilities		8		9
Total other non-current liabilities		$    71		$    69

(14) Contingent Liabilities and Commitments

The Company is involved in legal proceedings generally incidental to its business, as described below:

Insurance and Other Contingent Liabilities and Commitments

The Company is a defendant in several lawsuits and claims related to the normal conduct of its business, including lawsuits and claims related to product liability and personal injury matters. The Company accrues for such liabilities when it is probable that future costs (including legal fees and expenses) will be incurred and such costs can be reasonably estimated. The Company has self-insured retention limits and has obtained insurance to provide coverage above the self-insured limits for product liability and personal injury claims, subject to certain limitations and exclusions. Reserves have been provided to cover expected payments for these self-insured amounts at September 30, 2010.

In one group of lawsuits and claims, the Company provided a product for use in research activities in developing various vaccines at pharmaceutical companies. The Company, together with other manufacturers and distributors offering the same product and several pharmaceutical companies, has been named as a defendant and served in 294 lawsuits, of which 134 lawsuits have been dismissed or stayed to date. Several of the outstanding suits have been stayed by various state and federal courts pending a decision on coverage available under a U.S. federal government relief program. No definite date has been set for this decision. In all cases, the Company believes its products in question were restricted to research use and that proper information for safe use of the products was provided to the customer.

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A class action complaint was filed against a subsidiary of the Company in the Montgomery County, Ohio Court of Common Pleas related to a 2003 explosion in a column at the Company’s Isotec facility in Miamisburg, Ohio. The case was separated into the following four phases: phase one – existence of liability, phase two – quantification of any compensatory damages, phase three – existence of any punitive damages and phase four – quantification of any punitive damages. Class certification was granted to phases one, three and four, but denied to phase two. Compensatory damages for all plaintiffs must be established before the case can proceed to the punitive damages phases. The Company has accepted responsibility for phase one, existence of liability. The case is currently in the compensatory damages phase, where, because no class status exists, each plaintiff must individually establish actual damages. The initial phase two, compensatory damages trial, for 31 plaintiffs was completed on April 27, 2007 with a jury verdict establishing actual damages of approximately two hundred dollars per plaintiff. The plaintiffs filed an appeal staying further action on the case until the appeal has been resolved. The Ohio Court of Appeals reversed the jury’s verdict on compensatory damages. In a decision dated June 9, 2010 the Ohio Supreme Court reversed the Ohio Court of Appeals and reinstated the trial court jury instructions and thereby the verdict rendered by the jury. The Company expects to try additional phase two compensatory damage trials in 2011. The Company continues to believe it has substantial legal defenses to the allegations, which it will vigorously assert.

The Company believes its reserves and insurance are sufficient to provide for claims outstanding at September 30, 2010. While the outcome of the current claims cannot be predicted with certainty, the possible outcome of the claims is reviewed quarterly and reserves adjusted as deemed appropriate based on these reviews. Based on current information available, the Company believes that the ultimate resolution of these matters will not have a material adverse effect on its consolidated financial condition, results of operations or liquidity. Future claims related to products sold by the Company may not be covered in full by the Company’s insurance program.

At September 30, 2010, there were no other known contingent liabilities that management believes could have a material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity and there were no material commitments outside of the normal course of business. Material commitments in the normal course of business include notes payable, long-term debt, lease commitments and pension and other post-retirement benefit obligations which are disclosed in Notes 5, 6, 8 and 14, respectively, to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, as updated in Notes 6 and 12 of this Quarterly Report on Form 10-Q.

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Sigma-Aldrich Corporation

Management’s Discussion and Analysis

(in millions, except per share data)

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis and other sections of this Quarterly Report on Form 10-Q (the “Report”) should be read in conjunction with the consolidated financial statements and notes thereto. Except for historical information, the statements in this discussion 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, as well as statements that are preceded by, followed by, or that include the words “believes,” “expects,” “anticipates,” “should” or similar expressions, and other statements contained herein regarding matters that are not historical facts. Additionally, the Report contains forward-looking statements relating to future performance, goals, strategic actions and initiatives and similar intentions and beliefs, including without limitation, statements regarding the Company’s expectations, goals, beliefs, intentions and the like regarding future sales, earnings, restructuring charges, cost savings, process improvements, share repurchases, capital expenditures, acquisitions and other matters. These statements involve assumptions regarding the Company’s operations, investments, 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 Report, due to, but not limited to, such factors as: (1) global economic conditions, (2) changes in pricing and the competitive environment and the global demand for its products, (3) fluctuations in foreign currency exchange rates, (4) changes in research funding and the success of research and development activities, (5) dependence on uninterrupted manufacturing operations, (6) changes in the regulatory environment in which the Company operates, (7) changes in worldwide tax rates or tax benefits from domestic and international operations, including the matters described in Note 3 of this Quarterly Report on Form 10-Q and in Note 10 to the Consolidated Financial Statements in the Company’s Form 10-K for the year ended December 31, 2009, (8) exposure to litigation, including product liability claims, (9) the ability to maintain adequate quality standards, (10) reliance on third party package delivery services, (11) failure to achieve planned cost reductions in global supply chain initiatives and restructuring actions, (12) an unanticipated increase in interest rates, (13) failure of planned sales initiatives in our Research and SAFC businesses, (14) other changes in the business environment in which the Company operates, and (15) the outcome of the outstanding matters described in “Other Matters” below. A further discussion of the Company’s risk factors can be found in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. The Company does not undertake any obligation to update these forward-looking statements.

Non-GAAP Financial Measures

The Company supplements its disclosures made in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) with certain non-GAAP financial measures to supplement its GAAP disclosures. The Company does not, and does not suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, U.S. GAAP financial information. These non-GAAP measures may not be consistent with the presentation by similar companies in the Company’s industry. Whenever the Company uses such non-GAAP measures, it provides a reconciliation of such measures to the most closely applicable GAAP measure.

With over 60% of sales denominated in currencies other than the U.S. dollar, management uses currency adjusted growth, and believes it is useful to investors, to judge the Company’s local currency performance. Organic sales growth data presented herein excludes currency impacts, and where indicated, acquisition impacts. The Company calculates the impact of changes in foreign currency exchange rates by multiplying current period activity by the difference between current period exchange rates and prior period exchange rates, the result is the defined impact of changes in foreign currency exchange rates. While we are able to report currency impacts after the fact, we are unable to estimate changes that may occur in 2010 to applicable exchange rates. Any significant changes in currency exchange rates would likely have a significant impact on our reported growth rates due to the volume of our sales denominated in foreign currencies.

Management also uses free cash flow, a non-GAAP measure, to judge its performance and ability to pursue opportunities that enhance shareholder value. Free cash flow is defined as cash flows from operating activities less capital expenditures. Management believes this non-GAAP information is useful to investors as well.

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Results of Operations

OVERVIEW

Sigma-Aldrich is a leading Life Science and High Technology company. The Company’s biochemical and organic chemical products and kits are used in scientific research, including genomic and proteomic research, biotechnology, pharmaceutical development, and as key components in pharmaceutical, diagnostic 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 40 countries and has 7,600 employees providing customer focused service worldwide.

Highlights of our consolidated results for the three months ended September 30, 2010, are as follows:

• Sales were $563, an increase of 5.4% compared to the same period last year. Excluding the impact of foreign currency exchange rates, which decreased sales by 1.9%, sales increased by 7.3% year over year.

• Operating income margin was 23.4%, up from 22.8% a year ago.

• Diluted net income per share was $0.76, compared to $0.70, representing a 8.6% increase over the same period last year.

• Net cash provided by operating activities for the nine months ended September 30, 2010 was $397, an increase of $35 when compared to the same period last year. Capital expenditures were $65, a decrease of $23 when compared to the same period last year. Free cash flow (defined as cash flows from operating activities less capital expenditures) was $332, a $58 increase over the prior year.

COMPANY OUTLOOK

Significant factors that could affect our results and cash flows in fiscal year 2010 include:

• Our performance may be affected by the economic conditions in the U.S. and in other nations where we do business;

• We face significant competition which could impact our sales volumes and realized pricing;

• Our sales and results of operations are dependent on the research and development spending patterns at pharmaceutical, biotechnology and diagnostic companies and universities;

• Changes in foreign currency exchange rates;

• Due to heavy reliance on manufacturing and related operations to produce, package and distribute the products we sell, our business could be adversely affected by disruptions of these operations;

• Changes in worldwide tax rates or tax benefits;

• Our failure to protect our intellectual property may significantly harm our results of operations;

• Our failure to achieve planned cost reductions in global supply chain initiatives; and

• The impact of restructuring costs.

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Results of Operations

The following is a summary of our financial results (in millions, expect per share amounts):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
Net sales	$	563	$	534	$	1,689	$	1,575
Cost of products sold		265		269		794		772
Gross profit		298		265		895		803
Selling, general and administrative expenses		139		127		405		384
Research and development expenses		16		16		49		47
Restructuring costs		4		0		13		0
Impairment cost		7		0		7		0
Operating income		132		122		421		372
Interest, net		1		2		5		8
Income before income taxes		131		120		416		364
Provision for income taxes		38		34		126		110
Net income	$	93	$	86	$	290	$	254
Net income per share - Diluted	$	0.76	$	0.70	$	2.36	$	2.06

Sales

Sales were $563 in the third quarter of 2010, up 5.4 percent from the third quarter of 2009. The effect of changes in foreign currency exchange rates decreased sales by $10. Excluding the effects of changes in foreign currency exchange rates, sales increased organically by $39 or 7.3 percent. Factors contributing to the organic growth included volume which added 6.6 percent and pricing which added 0.7 percent.

Sales were $1,689 in the nine months ended September 30, 2010, up 7.2 percent from the prior year. The effect of changes in foreign currency exchange rates increased sales by $18. Excluding the effects of changes in foreign currency exchange rates, sales increased organically by $96 or 6.1 percent. Factors contributing to the organic growth included volume which added 5.6 percent and pricing which added 0.5 percent.

The Company is organized in four business units featuring the Research units of Essentials, Specialties and Biotech and the Fine Chemicals unit, SAFC, to align the Company with the customers it serves. The changes in net sales for the Company’s business units are as follows:

	Three Months Ended September  30,
	2010		2009		Change		Impact of   Changes in FX		Organic     Growth		Organic     Growth %
Research Essentials		$    105		$    104		$      1		$      (2)		$      3	2.9 %
Research Specialties		207		198		9		(4)		13	6.5 %
Research Biotech		84		83		1		(1)		2	2.4 %
Total Research		396		385		11		(7)		18	4.7 %
SAFC		167		149		18		(3)		21	14.1 %
Total		$    563		$    534		$    29		$    (10)		$    39	7.3%

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	Nine Months Ended September 30,
	2010	2009	Change	Impact of   Changes in FX	Organic   Growth	Organic   Growth %
Research Essentials	$     324	$     317	$      7	$    4	$    3	0.9 %
Research Specialties	631	588	43	8	35	5.9 %
Research Biotech	258	245	13	4	9	3.7 %
Total Research	1,213	1,150	63	16	47	4.1 %
SAFC	476	425	51	2	49	11.5 %
Total	$  1,689	$  1,575	$  114	$  18	$  96	6.1 %

Research Essentials total sales were $105 for the third quarter of 2010 compared to $104 during the same period last year. Organic sales increased by $3 or 2.9 percent. Research Essentials total sales were $324 for the nine months ended September 30, 2010 compared to $317 during the same period last year. Organic sales increased $3 or 0.9 percent. The primary driver for the organic sales increase were higher volumes in the lab essentials product group outside of the U.S. for both the third quarter and the nine months ended September 30, 2010 compared to the prior year.

Research Specialties total sales were $207 for the third quarter of 2010 compared to $198 during the same period last year. Organic sales increased by $13 or 6.5 percent. The increase was largely driven by higher demand for our analytical products amounting to $6 of the organic increase and higher demand in our chemistry and biochemistry products increasing by $3 and $2, respectively. Research Specialties total sales were $631 for the nine months ended September 30, 2010 compared to $588 during the same period last year. Excluding the effects of changes in foreign currency exchange rates, sales increased by $35 or 5.9 percent. The increase was largely driven by higher demand for our analytical products amounting to $15 of the organic increase and higher demand in our chemistry and biochemistry products increasing by $11 and $6, respectively.

Research Biotech total sales were $84 for the third quarter of 2010 compared to $83 during the same period last year. Organic sales increased by $2 or 2.4 percent. This increase was largely driven by higher demand for our biomolecule products amounting to $2 of the organic increase. Research Biotech total sales were $258 for the nine months ended September 30, 2010 compared to $245 during the same period last year. Excluding the effects of changes in foreign currency exchange rates, sales increased by $9 or 3.7 percent. This increase was largely driven by higher demand for our biomolecule products amounting to $5 of the organic increase and higher demand in the transgenics product group contributing $2. All geographic regions experienced improved demand over the prior year.

SAFC total sales were $167 for the third quarter of 2010 compared to $149 during the same period last year. Excluding the effects of changes in foreign currency exchange rates, sales increased by $21 or 14.1 percent. The primary drivers for this increase were increased demand for our hitech, supply solutions and biopharmaceutical products. Hitech improved by $9, supply solution products added $7 and biopharmaceutical products added $6 as compared to the third quarter of 2009. SAFC total sales were $476 for the nine months ended September 30, 2010 compared to $425 during the same period last year. Excluding the effects of changes in foreign currency exchange rates sales increased by $49 or 11.5 percent. The primary drivers for this sales expansion were increased demand for our hitech, supply solutions and biopharmaceutical products. This increase was largely driven by our hitech products amounting to $23 of the organic increase as the markets for metal organics associated with the semiconductor and LED lighting industries continue to grow. Supply solutions products added $14 and biopharmaceutical products added $13 as compared to the nine months ended September 30, 2009.

Web-based sales through our award winning website as a percentage of total Research Chemical (Research Essentials, Research Specialties and Research Biotech) sales during the three and nine months ended September 30, 2010 increased by 3.0 percent over the same periods in 2009, respectively. Web-based sales were 49 percent and 48 percent of worldwide third quarter and first nine months of 2010 Research Chemical sales, respectively.

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Gross profit, selling, general and administrative expenses, research and development expenses and income before income taxes, all expressed as a percentage of sales, and the effective tax rate (income tax expense expressed as a percentage of income before income taxes) for the three and nine months ended September 30, 2010 and 2009 were as follows:

	Three Months Ended September 30,		Nine Months Ended September 30,
	2010	2009	2010	2009
Gross profit margin	52.9%	49.6%	53.0%	51.0%
Selling, general & administrative	24.7%	23.8%	24.0%	24.4%
Research and development expenses	2.8%	3.0%	2.9%	3.0%
Income before income taxes	23.3%	22.5%	24.6%	23.1%
Effective tax rate	29.0%	28.3%	30.3%	30.2%

Cost of sales and gross profit

Cost of sales primarily represents materials, labor, distribution and overhead costs associated with the Company’s products, services and facilities. Cost of sales for the three and nine months ended September 30, 2010 were $265 and $794 compared to $269 and $772 for the same periods in the prior year, respectively, and represented a decrease of 1.5 percent and an increase of 2.8 percent for the three and nine months ended September 30, 2010, respectively. For the three months ended September 30, 2010, when compared to the same period last year, changes in foreign currency exchange rates lowered cost of sales, but these decreases were partially offset by increases in higher manufacturing and distribution expenses resulting from higher sales volumes. For the nine months ended September 30, 2010, the increase in cost of sales was due primarily to higher manufacturing and distribution expenses resulting from higher sales volumes, partially offset by changes in foreign currency exchange rates. Total cost of sales were 47.1 percent of sales for the three months ended September 30, 2010 compared to 50.4 percent for the same three months of the prior year, producing a gross profit as a percentage of sales (“Gross Margin”) of 52.9 percent and 49.6 percent, respectively. Total cost of sales were 47.0 percent of sales for the nine months ended September 30, 2010 compared to 49.0 percent for the first nine months of the prior year, producing a Gross Margin of 53.0 percent and 51.0 percent, respectively. The following table reflects the significant contributing factors to the net change in gross profit margin for the three and nine months ended September 30, 2010 compared to the same period in 2009:

Contributing Factors	Three Months Ended September 30, 2010	Nine Months Ended     September 30, 2010
Gross Margin – three and nine months   ended September 30, 2009	49.6%	51.0%
Increases (decreases) to gross margin:
Sales volume/Product mix/Other	3.0%	1.8%
Pricing	0.3%	0.2%
Gross Margin – three and nine months   ended September 30, 2010	52.9%	53.0%

Selling, general and administrative (“SG&A”) expenses

	Three Months Ended September 30,				Nine Months Ended September  30,
	2010		2009		2010		2009
SG&A		$    139		$    127		$      405		$  384
Percentage of Sales		24.7%		23.8%		24.0%		24.4%

The increase in SG&A expenses of $12 during the third quarter of 2010 as compared to the third quarter of 2009 is due primarily to higher variable compensation costs of $11 compared to 2009. Travel and Entertainment activities returned to normal levels, increasing $1 from 2009, when there were significant

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curtailments in activity. Legal costs also increased by $2 due to an increase in global activity compared to 2009. These increases were partially offset by changes in foreign currency exchange rates which decreased SG&A by $2.

The increase in SG&A expenses of $21 during the nine months ended September 30, 2010 as compared to the same period in 2009 is due primarily to higher variable compensation costs of $18 compared to 2009. Travel and Entertainment activities returned to normal levels, increasing $2 from 2009 when there were significant curtailments in activity. Changes in foreign currency exchange rates increased SG&A by $1. These increases were partially offset by a reduction in bad debt expense of $3, primarily due to a non-recurring provision recorded in 2009 associated with a small European dealer.

Research and development (“R&D”) expenses

	Three Months Ended September 30,		Nine Months Ended September  30,
	2010	2009	2010	2009
R&D	$  16	$  16	$  49	$  47
Percentage of Sales	2.8%	3.0%	2.9%	3.0%

Research and development expenses during both the third quarter and first nine months ended September 30, 2010 as compared to the same periods in 2009 were largely unchanged. As a percentage of sales, research and development were also largely unchanged. Research and development expenses relate primarily to efforts to add new manufactured products. Manufactured products currently account for approximately 65% of total sales.

Restructuring costs

In the fourth quarter of 2009, the Company committed to a restructuring plan that includes exit activities at five manufacturing sites in the U.S. and Europe. The Company expects to complete these activities over the next 6 to 12 months. These exit activities impact approximately 200 employees and are intended to reduce the Company’s fixed cost structure and better align its global manufacturing and distribution footprint.

Additionally, in 2009 the Company initiated a voluntary retirement program that was accepted by approximately 90 eligible U.S. employees as part of its cost reduction and long-term profit enhancement initiatives.

The Company expects to further reduce its workforce by approximately 130 people, approximately 110 of which occurred during the first nine months of 2010. The remaining reductions will take place over the remainder of 2010 and the first half of 2011.

The Company expects that the execution of these activities will result in additional pre-tax restructuring costs of approximately $14 to be recorded in the next 6 to 12 months.

The following provides a summary of restructuring costs by period indicated and total expected restructuring costs:

	Three Months Ended September 30, 2010	Nine Months Ended September 30, 2010	Cumulative Restructuring Costs For These Programs	Total Expected Restructuring   Costs
Employee termination benefits	$  2	$   9	$  14	$  24
Other restructuring costs	2	4	8	12
Total restructuring costs	$  4	$  13	$  22	$  36

Employee termination benefits primarily include pension and post-retirement benefit plan charges related to the voluntary retirement program, as well as payments to employees impacted by facility exit and other cost reduction activities. Other restructuring costs relate mainly to changes in the expected useful life of the assets impacted by these restructuring activities.

During October, the Company met the recognition threshold for settlement accounting under Financial Accounting Standards Board 715Compensation—Retirement Benefits and accordingly will record $7 of expense in the fourth quarter of 2010. This amount is reflected in the total expected restructuring costs above.

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Impairment Costs

Impairment cost of $7 was recorded for the three and nine months ended September 30, 2010 to reflect an other-than-temporary impairment of long-term investment as a result of the net realizable value being less then the carrying cost. No impairment costs was reflected in 2009 for any period.

Interest, net

Net interest expense was $1 and $2 for the third quarter of 2010 and 2009, respectively, and was $5 and $8 for the first nine months of 2010 and 2009, respectively. The decrease in net interest expense is primarily attributable to reduced interest rates on short-term borrowings and lower average borrowing levels. The weighted average interest rate for short-term borrowings during the three months ended September 30, 2010 was 0.2% on average borrowings of $331 compared to a weighted average interest rate for short-term borrowings during the three months ended September 30, 2009 of 0.2% on weighted-average borrowings of $366. The weighted average interest rate for short-term borrowings during the first nine months of 2010 was 0.2% on average borrowings of $348 compared to a weighted average interest rate for short-term borrowings during the same period in 2009 of 0.4% on weighted-average borrowings of $419.

Effective tax rate

The effective tax rate for the third quarter of 2010 was 29.0% compared to 28.3% in the same period in 2009, and was 30.3% for the first nine months of 2010 compared to 30.2% for the same periods in 2009. The effective tax rate for all of 2010 is expected to be approximately 30% of pretax income.

Net Income and diluted net income per share

Net income for the third quarter of 2010 of $93, or $0.76 per diluted share, increased from $86, or $0.70 per diluted share when compared to the same period last year due to the items discussed above. Reported diluted net income per share for the third quarter of 2010 increased to $0.76 from $0.70 in the third quarter of 2009. The impact of foreign currency exchange rates increased diluted earnings per share by $0.04 when compared to the same period last year. The Company’s increased sales volumes and cost reduction programs provided the improvement of gross margin and net income level over the third quarter of 2009.

Net income for the first nine months of 2010 of $290, or $2.36 per diluted share, increased from $254, or $2.06 per diluted share compared to the same period last year due to the items discussed above. The impact of foreign currency exchange rates increased diluted earnings per share by $0.14 when compared to the same period last year. The Company’s increased sales volumes and cost reduction programs provided the improvement of gross profit margin and net income level over the first nine months of 2009.

Liquidity and Capital Resources

The Company’s cash flows from operating, investing and financing activities, as reflected in the Consolidated Statements of Cash Flows, are summarized in the following table:

	Nine Months Ended September 30,
	2010		2009
Net cash provided by (used in):
Operating activities		$    397		$    362
Investing activities		(74)		(104)
Financing activities		$  (204)		$  (233)

Operating Activities

Net cash provided by operating activities for the nine months ended September 30, 2010 was $397, an increase of $35 compared to the same period in 2009. The primary driver for the increase was higher net income, partially offset by increased cash used for working capital. The Company used cash of $27 for working capital during the nine months ended September 30, 2010 compared to a use of $1 during the nine months ended September 30, 2009. The Company generated $39 of cash from reductions in inventory during the first nine months of 2009 compared to $1 during the first nine months of 2010.

The Company had approximately 6.3 months of inventory on hand at September 30, 2010, a decrease from the 6.5 months at December 31, 2009. Accounts receivable days sales outstanding at September 30, 2010 were 50 days, a slight increase from 47 days at December 31, 2009.

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Investing Activities

Cash used in investing activities for the nine months ended September 30, 2010 decreased $30 compared to the same period in 2009. This decrease was primarily due to a decrease in capital expenditures of $23 during the first nine months of 2010 compared to the same period of 2009 as a result of the substantial completion of certain major plant expansions.

For 2010, capital spending is expected to be in a range from $105 to $115.

Financing Activities

During the nine months ended September 30, 2010, significant financing transactions included the repayment of $100 of Senior Notes which contractually came due in September 2010, payment of dividends amounting to $58 and $76 of cash used to repurchase 1.4 million of shares associated with the Company’s share buy back program. During the nine months ended September 30, 2009, significant financing transactions included the repayment of $142 of short-term debt, payment of dividends amounting to $53 and $46 of cash used for the repurchase of 1.0 million shares associated with the Company’s share buy back program.

Consolidated total debt as a percentage of total capitalization (defined as total debt plus equity) was 20.2% and 25.5% at September 30, 2010 and December 31, 2009, respectively. For a description of the Company’s material debt covenants, see Note 6 to the consolidated financial statements included in Part 1, Item 1 of this Report.

Share Repurchases

At September 30, 2010 and December 31, 2009 the Company had repurchased a total of 95 and 94 shares, respectively, of an authorized repurchase of 100 shares. The Company has 5 remaining shares authorized for purchase but, the timing and number of shares purchased, if any, depends upon market conditions and other factors. There were 121 shares outstanding as of September 30, 2010.

Liquidity and Risk Management

Liquidity risk refers to the risk that the Company might be unable to meet potential cash outflows promptly and cost effectively. Factors that could cause such risk to arise include disruption to the securities market, downgrades in the Company’s credit rating or the unavailability of funds. In addition to the Company’s cash flows from operations, the Company utilizes commercial paper, short-term multi-currency and long-term debt programs as funding sources. The Company maintains committed bank lines of credit to support its commercial paper borrowings and local bank lines of credit to support international operations. Downgrades in the Company’s credit rating or other limitations on the ability to access short-term financing, including the ability to refinance short-term debt as it becomes due, would increase interest costs and adversely affect profitability.

The Company has considered the potential impact of recent trends in the global economic environment on its liquidity and overall financial condition, particularly with respect to availability of and the Company’s access to short-term credit, including the market for commercial paper. Based on discussions held with the Company’s lenders, management does not believe that a significant risk exists of commercial paper or other credit becoming unavailable or existing debt being called within the next 12 months. Management believes that the Company’s financial condition is such that internal and external resources are sufficient and available to satisfy the Company’s requirements for debt service, capital expenditures, selective acquisitions, dividends, share repurchases, funding of pension and other post-retirement benefit plan obligations, and working capital presently and for the next 12 months.

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Contractual Obligations

At September 30, 2010, the Company had $377 of commercial paper and long-term borrowings of $100 outstanding, for a total decrease in all outstanding debt of $99 since December 31, 2009.

Other Matters

The Company is involved in legal proceedings generally incidental to its business, as described below:

Insurance and Other Contingent Liabilities and Commitments

The Company is a defendant in several lawsuits and claims related to the normal conduct of its business, including lawsuits and claims related to product liability and personal injury matters. The Company accrues for such liabilities when it is probable that future costs (including legal fees and expenses) will be incurred and such costs can be reasonably estimated. The Company has self-insured retention limits and has obtained insurance to provide coverage above the self-insured limits for product liability and personal injury claims, subject to certain limitations and exclusions. Reserves have been provided to cover expected payments for these self-insured amounts at September 30, 2010.

In one group of lawsuits and claims, the Company provided a product for use in research activities in developing various vaccines at pharmaceutical companies. The Company, together with other manufacturers and distributors offering the same product and several pharmaceutical companies, has been named as a defendant and served in 294 lawsuits, of which 134 lawsuits have been dismissed or stayed to date. Several of the outstanding suits have been stayed by various state and federal courts pending a decision on coverage available under a U.S. federal government relief program. No definite date has been set for this decision. In all cases, the Company believes its products in question were restricted to research use and that proper information for safe use of the products was provided to the customer.

A class action complaint was filed against a subsidiary of the Company in the Montgomery County, Ohio Court of Common Pleas related to a 2003 explosion in a column at the Company’s Isotec facility in Miamisburg, Ohio. The case was separated into the following four phases: phase one – existence of liability, phase two – quantification of any compensatory damages, phase three – existence of any punitive damages and phase four – quantification of any punitive damages. Class certification was granted to phases one, three and four, but denied to phase two. Compensatory damages for all plaintiffs must be established before the case can proceed to the punitive damages phases. The Company has accepted responsibility for phase one, existence of liability. The case is currently in the compensatory damages phase, where, because no class status exists, each plaintiff must individually establish actual damages. The initial phase two, compensatory damages trial, for 31 plaintiffs was completed on April 27, 2007 with a jury verdict establishing actual damages of approximately two hundred dollars per plaintiff. The plaintiffs filed an appeal staying further action on the case until the appeal has been resolved. The Ohio Court of Appeals reversed the jury’s verdict on compensatory damages. In a decision dated June 9, 2010 the Ohio Supreme Court reversed the Ohio Court of Appeals and reinstated the trial court jury instructions and thereby the verdict rendered by the jury. The Company expects to try additional phase two compensatory damage trials in 2011. The Company continues to believe it has substantial legal defenses to the allegations, which it will vigorously assert.

The Company believes its reserves and insurance are sufficient to provide for claims outstanding at September 30, 2010. While the outcome of the current claims cannot be predicted with certainty, the possible outcome of the claims is reviewed quarterly and reserves adjusted as deemed appropriate based on these reviews. Based on current information available, the Company believes that the ultimate resolution of these matters will not have a material adverse effect on its consolidated financial condition, results of operations or liquidity. Future claims related to products sold by the Company may not be covered in full by the Company’s insurance program.

At September 30, 2010, there were no other known contingent liabilities that management believes could have a material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity and there were no material commitments outside of the normal course of business. Material commitments in the normal course of business include notes payable, long-term debt, lease commitments and pension and other post-retirement benefit obligations which are disclosed in Notes 5, 6, 8 and 14, respectively, to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, as updated in Notes 6 and 12 of this Quarterly Report on Form 10-Q.

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Item 3.  Quantitative and Qualitative Disclosures about Market Risk

The market risk inherent in the Company’s financial instruments and positions represents the potential loss arising from adverse changes in interest rates and foreign currency exchange rates.

Interest Rates

At September 30, 2010, the Company’s outstanding debt represented 20.2% of total capitalization. Approximately 21% of the Company’s outstanding debt at September 30, 2010 was at a fixed rate. Cash flows from operations and available credit facilities are sufficient to meet the working capital requirements of the Company. It is management’s view that market risk or variable interest rate risk will not significantly impact the Company’s results of operations.

Foreign Currency Exchange Rates

The functional currency of the Company’s international subsidiaries is generally the currency in the respective country of residence of the subsidiary. The translation from the functional currencies to the U.S. dollar for revenues and expenses is based on the average exchange rate during the period. Changes in foreign currency exchange rates have affected and may continue to affect the Company’s revenues, expenses, net income, cash flows and stockholders’ equity.

The Company transacts business in many parts of the world and is subject to risks associated with changing foreign currency exchange rates. The Company’s objective is to minimize the impact of foreign currency exchange rate changes during the period of time between the original transaction date and its cash settlement.

Accordingly, the Company uses forward exchange contracts to hedge the value of certain receivables and payables denominated in foreign currencies. Gains and losses on these contracts, 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 either partially or completely by transaction gains and losses, with any net gains and losses included in selling, general and administrative expenses. The market risk of these forward exchange contracts represents the potential loss in fair value of net currency positions at period end due to an adverse change in foreign currency exchange rates. The Company does not enter into foreign currency contracts for speculative trading purposes. The Company’s policy is to manage the risks associated with existing receivables, payables, and commitments.

The Company continues to assess the potential impact of recent trends in the global economic environment on the availability of and its access to these forward currency exchange contracts in the open market, as well as the ability of the counterparties to meet their obligations. Given that a majority of the forward exchange contracts are in currencies such as the Euro, British pound and Swiss franc, management does not believe that a significant risk exists of these forward contracts becoming unavailable in the global marketplace within the next 12 months.

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Item 4.  Controls and Procedures

The Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of September 30, 2010. Based upon their evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) are effective as of that date to provide reasonable assurance that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. They have also determined in their evaluation that there was no change in the Company’s internal controls over financial reporting during the quarter ended September 30, 2010 that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1.  Legal Proceedings

The information contained in Note 14 - Contingent Liabilities and Commitments - to the Company’s consolidated financial statements included in this Quarterly Report on Form 10-Q is incorporated by reference herein.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents the information about share repurchases for the nine months ended September 30, 2010:

Issuer Purchases of Equity Securities (share amounts in millions)

Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of  Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
Jan 1, 2010 – Jan 31, 2010	-	-	93.7	6.3
Feb 1, 2010 – Feb 28, 2010	0.5	$ 47.97	94.2	5.8
Mar 1, 2010 – Mar 31, 2010	0.2	$ 50.30	94.4	5.6
Apr 1, 2010 – Apr 30, 2010	0.2	$ 59.24	94.6	5.4
May 1, 2010 – May 31, 2010	0.2	$ 58.78	94.8	5.2
Jun 1, 2010 – Jun 30, 2010	-	-	94.8	5.2
Jul 1, 2010 – Jul 31, 2010	0.2	$ 56.77	95.0	5.0
Aug 1, 2010 – Aug 31, 2010	0.1	$ 57.42	95.1	4.9
Sep 1, 2010 – Sep 30, 2010	-	-	95.1	4.9
Total	1.4	$ 53.29	95.1	4.9

On October 20, 2008 the Board of Directors authorized the repurchase of an additional 10 shares under the existing repurchase program, bringing the total authorization to 100 shares. The timing and number of shares purchased, if any, will depend on market conditions and other factors.

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Item 6.  Exhibits

(a) Exhibits

3 (a) Certificate of Incorporation, as Amended – Incorporated by reference to Exhibit 3(a) of Form 10-Q filed for the period ended June 30, 2004, Commission File number 0-8135.

   (b)By-Laws, as amended - Incorporated by reference to Exhibit 3(b) of Form 10-K for the year ended December 31, 2006, Commission File number 0-8135.

31.1   CEO Certification pursuant to Exchange Act Rule 13a-14(a).

31.2   CFO Certification pursuant to Exchange Act Rule 13a-14(a).

32.1   CEO Certification pursuant to 18 U.S.C. Section 1350 and Exchange Act Rule 13a-14(b).

32.2   CFO Certification pursuant to 18 U.S.C. Section 1350 and Exchange Act Rule 13a-14(b).

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

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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/  Michael F. Kanan	October 21, 2010
Michael F. Kanan, Vice President and Corporate Controller	Date
(on behalf of the Company and as Principal Accounting Officer)

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