Sigma-Aldrich Reports 16.7% Gain in Second Quarter 2008 Diluted EPS

Q2 2008 Sales Rise 14.4%. 2008 Diluted EPS Forecast Raised $.05 to $2.62-$2.72

ST. LOUIS, July 22, 2008 -- Sigma-Aldrich (Nasdaq: SIAL) 2008 Q2 Highlights:
2008 Results (all percentage comparisons are to comparable periods in 2007):
• Q2 2008 Sales Set New Quarterly Record: Q2 2008 sales reached another new quarterly high of $580.7 million, an increase of 14.4%. All four business units reported double-digit growth for the third successive quarter. Organic sales growth of 7.1% confirmed earlier expectations regarding the roughly one percentage point impact of the Easter holidays from Q1 to Q2 sales growth. Currency added another 7.3 percentage points to growth. Quarterly comparisons and a reconciliation of reported to adjusted sales growth can be found in the Supplemental Financial Information, Sales Growth by Business Unit table.
• Operating And Pretax Margins Continued Strong as Pretax Income Growth Exceeds Sales Growth: Q2 2008 operating and pretax income margins were 23.1% and 22.6%, respectively, an improvement over the Q2 2007 level. Pretax income increased 19.4% in Q2 2008.
• Double-Digit EPS Growth Despite Higher Tax Rates: Q2 2008 diluted EPS increased 16.7% to $.70, including $.08 from favorable currency rates offset by $.03 from a higher tax rate. A previously communicated reduction in tax benefits resulted in an effective tax rate of 30.8% in Q2 2008 compared to 27.5% for Q2 2007. An explanation of the tax rate difference and a reconciliation of currency adjusted proforma to reported diluted EPS for the quarter can be found on in the Outlook section and the Supplemental Financial Information, Reconciliation of Proforma to Reported Net Income table.
• Significant Increase In Cash Flow From Operations: Cash flow from operations for the first six months of 2008 improved by 36.8% to $222.0 million.
Outlook:
• Sales for full year 2008 are expected to meet the Company's 7% organic growth goal. Currency benefits could add another 6% to growth if currency exchange rates remain at June 30, 2008 levels.
• Currency, lower interest rates, our supply chain initiative and other process improvements are expected to enhance pretax profit margins for full year 2008 from the 21.5% pretax margin achieved in full year 2007.
• Management has increased its estimate for full year 2008 diluted EPS by $.05 to a new range of $2.62 to $2.72, an increase of 12.0% to 16.2% over 2007, based on these sales expectations, both higher than expected margins in Q2 2008 and those forecast for the remaining quarters of 2008, currency rates remaining at June 30, 2008 levels, an effective tax rate ranging from 30% to 32% and other factors.
CEO's STATEMENT:
Commenting on second quarter performance and expectations for the full year of 2008, President and CEO Jai Nagarkatti said: "We are pleased with our strong second quarter performance as we continue to pursue and achieve above market growth from the five key initiatives driving our sales gains and returns. Our second quarter sales of $580.7 million, which included the best sales month in the Company's history in June, represent another new quarterly high, exceeding the record established just one quarter ago. And we were able to grow EPS faster than sales and improve operating margins as ongoing process improvement activities, lower interest costs and benefits from our supply chain initiative combined to more than offset other cost increases and the impact of a higher effective tax rate."
Nagarkatti continued, "We're in the final year of our 2006-2008 strategic plan, and are in the process of identifying the activities that are expected to drive growth at above market rates for the next three years. Results from our current initiatives are meeting, and in some cases, exceeding expectations. Second quarter achievements for our five key growth initiatives included:
• Improved growth for all three of our Research-based business units and a record sales amount for SAFC, our Fine Chemicals unit, as we continued to enhance our customer centric activities. Research Essentials and Research Specialties achieved sales growth in excess of long-term growth targets, and Research Biotech exceeded current year growth expectations, all after factoring out a modest benefit in the second quarter from holiday timing differences between 2008 and 2007. And SAFC had another increase in its booked orders for future delivery to again achieve a new record level;
• Increasing reported and adjusted sales in CAPLA (Canada, Asia Pacific and Latin America) markets by 19.3% and 11.3%, respectively, in Q2 2008, with a Q2 2008 revenue contribution from these markets at 20% of sales, a one percentage point improvement over results for the comparable quarter of 2007 and consistent with level achieved for all of 2007. Reported quarterly sales growth in our primary focus markets of India, Brazil and China ranged from 10% to 45% as we continued to increase our presence in each of these markets through new sales activities, completed and planned increases in production capacity, and inventory stocking initiatives;
• Increasing web-based sales through our award winning website by 21.9%. Overall web-based sales improved to 42% of worldwide Q2 2008 Research-based sales as e-commerce sales to international (Europe and CAPLA) customers rebounded in Q2 to increase by 32.4%. E-commerce sales to U.S. Research customers were 52% of total U.S. Research sales, a one percentage point improvement from the level achieved in Q1 2008;
• Continuing our commitment to process improvement savings, supporting an expectation of achieving at least $15 million in pretax benefits for 2008 by delivering $3.5 million of benefits during the second quarter of 2008, bringing the year-to-date benefit to $8.3 million. If the adverse impact of higher currency rates on operating costs outside the U.S. is excluded, the year-to-date results were even more robust at roughly $12 million. And our supply chain project is well under way and achieving desired results with a modest contribution to second quarter pretax profits as we seek to take process improvement to a higher level and boost both EPS growth and margins through 2012; and
• Adding new capabilities in our Research Biotech business unit by expanding our role with The Research Consortium and entering new collaborations with the University of California-San Francisco, Metahelix Life Sciences and Sunset Molecular Discovery to increase product offerings and available information in the areas of monoclonal antibodies, plant bioscience products and bioactive molecules."
Nagarkatti concluded, "We expect this momentum to carry through the final quarters of 2008, enabling us to meet our 7% organic sales growth goal, generate margin expansion and deliver our increased forecast for diluted EPS of $2.62 to $2.72 for the full year."