Sigma-Aldrich Corporation Q4 2010 Earnings Review & 2011 Outlook • Enabling Science to Improve the Quality of Life Exhibit 99.2 |
2 2 Cautionary Statements Our presentation today will include forward looking statements relating to the Company’s future performance, goals, strategic actions and initiatives and similar intentions and beliefs, including expectations, goals, beliefs, intentions and the like regarding future sales, earnings, free cash flow, share repurchases, acquisitions and other matters. These statements are based on assumptions regarding Company operations, investments and acquisitions and conditions in the markets the Company serves. We believe that these expectations are reasonable and well-founded. The forward-looking statements in this presentation 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 during this review or contained in other Company communications 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 our products, (3) fluctuations in foreign currency exchange rates, (4) changes in research funding and the success of research and development activities, (5) failure of planned sales initiatives in our Research and SAFC businesses, (6) dependence on uninterrupted manufacturing operations, (7) failure to achieve planned cost reductions in global supply chain initiatives and restructuring actions, (8) changes in the regulatory environment in which the Company operates, (9) changes in worldwide tax rates or tax benefits from domestic and international operations, including the matter described in Note 3–Income Taxes– to the Consolidated Financial Statements in the Company’s Form 10-Q report for the quarter ended September 30, 2010, (10) exposure to litigation, including product liability claims, (11) the ability to maintain adequate quality standards, (12) reliance on third party package delivery services, (13) an unanticipated increase in interest rates, (14) other changes in the business environment in which the Company operates, and (15) the outcome of the outstanding matters described in Note 14-Contingent Liabilities and Commitments to the Consolidated Financial Statements-in the Company’s Form 10-Q report for the quarter ended September 30, 2010. A further discussion of risk factors can be found in Item 1A of part 2 of the Company’s Form 10-K report for the year ended December 31, 2009 and the Company’s Form 8-K filed on October 25, 2010. The Company does not undertake any obligation to publicly update the matters covered in this presentation. 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 controllable, local currency performance. Organic sales growth data presented in this review is proforma data and excludes currency 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 historical currency impacts after the fact, we are unable to estimate changes that may occur later in 2011 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 adjusted net income and EPS, adjusted operating income and operating income margins (excluding restructuring and impairment costs) and free cash flow, non-GAAP measures, to judge its performance and ability to pursue opportunities that enhance shareholder value. Due to the uncertain timing of the future restructuring and other extraordinary special changes, we are unable to include a 2011 diluted GAAP EPS forecast or reconcile to our 2011 diluted adjusted EPS forecast or provide a reconciliation to corresponding GAAP measures . Management believes this non-GAAP information is useful to investors as well. Reconciliations of GAAP to non-GAAP information are included in the Company’s February 9, 2011 earnings release posted on its website, www.sigma-aldrich.com, and in the Appendix – Reconciliation of GAAP to non-GAAP Financial Measures beginning on Slide 17. |
3 Rakesh Sachdev President and CEO |
4 Strategic Priorities • Enhance Growth in our Core Research and SAFC Business • Focus on higher growth markets of: – Analytical Chemistry – Biology – Chemistry/Materials Science • Capitalize on our unique manufacturing capabilities and cGMP facilities in SAFC • Drive Operational Excellence • Continue to build upon the success of our global supply chain initiatives • Streamline manufacturing and distribution footprint • Expand global sourcing • Leverage Strong Cash Flow • Actively pursue “bolt-on” acquisitions |
5 Fourth Quarter 2010 Financial Results ($ in millions, except per share amounts) 5 YEAR-OVER-YEAR Q4 performance reflects sales growth for both research and SAFC businesses *Includes currency impact: Net Income – $(2); Diluted EPS - $(0.02) As Reported* Q4 2010 Excluding Restructuring & Impairment Costs As Reported Excluding Restructuring & Impairment Costs Net Income $94 $102 1% 3% Diluted EPS $0.76 $0.83 1% 4% Free Cash Flow $92 25% Q4 2010 As Reported Excluding Currency Impact Sales $582 2% 3% YEAR-OVER-YEAR |
6 Full Year 2010 Financial Results ($ in millions, except per share amounts) 6 *Includes currency benefit: Net Income - $15; Diluted EPS - $0.12 YEAR-OVER-YEAR As Reported* YTD 2010 Excluding Restructuring & Impairment Costs As Reported Excluding Restructuring & Impairment Costs Net Income $384 $408 11% 16% Diluted EPS $3.12 $3.31 11% 16% Free Cash Flow $424 7% 2010 Year-to-Date As Reported Excluding Currency Impact Sales $2,271 6% 5% YEAR-OVER-YEAR Achieved new performance record in 2010 |
7 7 2010 Sales Growth RESEARCH 72% 28% SAFC Sales Mix (YTD) Total Company SAFC Research 3% 4% 3% 4% 9% 5% Full Year 2010/ Full Year 2009 Q4 2010/Q4 2009 Demand for research products continued to show growth. SAFC sales set new quarterly high |
8 2010 operating margins reflect impact of restructuring costs and impairment charge 8 Margin Analysis PERCENTAGE OF SALES 22.3% 1.4 0.2 (1.3) 22.3% 2010: Operating Margin S,G&A, R&D Expenses Price Volume/Mix/Productivity/Currency Impact YTD 23.3% 1.9 0.2 (0.2) 24.3% 2009: Operating Margin Q4 Restructuring Costs (0.3) (0.6) Impairment Charge - (0.3) |
9 9 Free Cash Flow (in millions) 2010 $ 384 93 17 29 523 (99) $ 424 Net Income Free Cash Flow Net Cash Provided by Operating Activities Less Capital Expenditures Other Changes in Performance Working Capital* Depreciation & Amortization 2009 $347 92 57 20 516 (120) $396 *Accounts Receivable + Inventory – Accounts Payable YEAR ENDED DECEMBER 31 Free cash flow remains strong |
10 10 Fourth Quarter 2010 Highlights Continued focus on long-term growth opportunities • End Markets – Improved Growth in Chemical Related Industrial Customers and Academic Customer Sectors partially offset by challenges in Pharmaceutical sector • Life Science – Partnered with Autism Speaks to create genetically engineered knockout rats to identify approaches for Autism treatment – Expanded availability of ZFN (Zinc Finger Nuclease) Technology based technology for biopharmceutical use – Successfully “Knocked-in” foreign genes in rats using ZFN Technology – Received silver medal from “The Scientist” for genetically modified cell lines – Added 1,700 new antibodies to increase offering to 40,000 • Hitech – Added Nanosys created silicon nanowires to research product offering – Expanded capability in better high purity metals, metal salts, alloys and ceramics for electronic applications Highlights |
11 11 Q4 & YTD Sales Performance Initiatives collectively on track with expectations *Varies for individual product lines See page 19 reconciling organic growth to reported growth Q4 YTD Innovation Organic Organic • Analytical, Biology, Materials Science Sales Growth (2)-6%* 2-10%* Geographic Growth • North America 4% 5% • Europe (3)% 1% • Asia Pacific/Latin America 16% 15% • Focus Markets – India, China, Brazil 23% 25% SAFC Sales • Build on momentum in key product segments 4% 9% eCommerce Sales % of Research Sales % of Research Sales • Research Sales via eCommerce channels 49% 48% |
12 0.64 0.58 0.52 0.46 0.42 0 0.1 0.2 0.3 0.4 0.5 0.6 2006 2007 2008 2009 2010 Profitable Growth • Demonstrated historical performance • Robust business model DILUTED EARNINGS PER SHARE ($) 3.12 2.80 2.65 2.34 2.05 0.5 1.5 2.5 3.5 2006 2007 2008 2009 2010 ANNUAL DIVIDEND PER SHARE ($) 2,271 2,148 2,201 2,039 1,798 0 500 1,000 1,500 2,000 2,500 2006 2007 2008 2009 2010 REPORTED SALES $ IN MILLIONS Continued a 36 year track record of annual increases in EPS and dividends |
13 OPERATING CASH FLOW ($M) 523 516 404 417 330 0 100 200 300 400 500 600 2006 2007 2008 2009 2010 CAPITAL EXPENDITURES ($M) 99 120 90 78 75 0 50 100 150 2006 2007 2008 2009 2010 7% CAGR Strong Cash Flow Able to fund short and long term growth FREE CASH FLOW ($M) 424 396 314 339 255 0 100 200 300 400 500 600 2006 2007 2008 2009 2010 Free cash flow is defined as cash flow from operating activities less capital expenditures |
14 14 2011 Guidance Organic Revenue Growth Diluted Adjusted EPS* Free Cash Flow Mid-single digits $3.45 to $3.60 >$375M *Excludes any restructuring and other extraordinary special charges |
15 2011 Outlook – Highlights • Sales • Research Products • Expanded Analytical Chemistry Portfolio (Cerilliant and Research Technology Corporation) • More Biomolecules (Antibodies, Proteins and Peptides) • Broader Zinc Finger offering • Expanded offering of genetically modified cell lines • New capacity – India – Packaging and distribution – China – Quality Control and packaging • SAFC • New marketing campaign • Continued strength in Hitech sales • New Hitech manufacturing capacity in Taiwan • Improved sales to pharmaceutical customers • Performance • Stable operating margins • Strong free cash flow • Increased dividend |
16 16 QUESTIONS? Sigma-Aldrich Corporation Q4 2010 Earnings Review |
17 Appendix Reconciliation of GAAP to Non-GAAP Financial Measures |
18 Reconciliation of Reported Net Income to Adjusted Net Income 2010 2009 2010 2009 Reported net income 94 $ 93 $ 0.76 $ 0.75 $ Restructuring costs 8 6 0.07 0.05 Impairment charge - - - - Adjusted net income 102 $ 99 $ 0.83 $ 0.80 $ 2010 2009 2010 2009 Reported net income 384 $ 347 $ 3.12 $ 2.80 $ Restructuring costs 17 6 0.14 0.05 Impairment charge 7 - 0.05 - Adjusted net income 408 $ 353 $ 3.31 $ 2.85 $ Net Income Diluted Earnings December 31, December 31, (in millions) Per Share Three Months Ended Three Months Ended Net Income Diluted Earnings (in millions) Per Share Twelve Months Ended Twelve Months Ended December 31, December 31, |
19 Reconciliation of Reported Sales Growth to Adjusted (Organic) Sales Goal Three Months Ended December 31, 2010 Reported FX Impact Organic • Analytical, Biology, Materials Science Sales Growth (2)-6%* (1)-0%* (1)-6%* Geographic Growth • North America 4% – 4% • Europe (9%) (6%) (3%) • Asia Pacific/Latin America 21% 5% 16% • Focus Markets – India, China, Brazil 27% 4% 23% Twelve Months Ended December 31, 2010 Reported FX Impact Organic • Analytical, Biology, Materials Science Sales Growth 2-12%* 0–2%* 2-10%* Geographic Growth • North America 6% 1% 5% • Europe (2)% (3%) 1% • Asia Pacific/Latin America 23% 8% 15% • Focus Markets – India, China, Brazil 31% 6% 25% *Varies for individual product areas |
20 Reconciliation of Reported Sales Growth to Adjusted (Organic) Sales Growth Currency Adjusted Reported Impact (Organic) Research Essentials 2% (2%) 4% Research Specialties 3% (2%) 5% Research Biotech (2%) - (2%) Research Chemicals 2% (1%) 3% SAFC 2% (2%) 4% Total Customer Sales 2% (1%) 3% Currency Adjusted Reported Impact (Organic) Research Essentials 2% - 2% Research Specialties 6% - 6% Research Biotech 3% 1% 2% Research Chemicals 4% - 4% SAFC 9% - 9% Total Customer Sales 6% 1% 5% Three Months Ended December 31, 2010 Twelve Months Ended December 31, 2010 |
21 Reconciliation of Operating Cash Flow to Free Cash Flow 2010 2009 2010 2009 2008 2007 2006 Net cash provided by operating activities 126 $ 154 $ 523 $ 516 $ 404 $ 417 $ 330 $ Less: Capital expenditures (34) (32) (99) (120) (90) (78) (75) Free cash flow 92 $ 122 $ 424 $ 396 $ 314 $ 339 $ 255 $ December 31, Twelve Months Ended Three Months Ended December 31, In millions |