Sigma-Aldrich 10-K 2010
Documents found in this filing:
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
For the fiscal year ended December 31, 2009
For the transition period from to
Commission file number 0-8135
(Exact name of Registrant as specified in its charter)
Registrants telephone number, including area code 314-771-5765
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
Aggregate market value of the voting stock held by non-affiliates of the registrant:
Number of shares of the Registrants common stock, $1.00 par value, outstanding as of January 31, 2010 was 121,772,581.
The following documents are incorporated by reference in the Parts of Form 10-K indicated below:
The Index to Exhibits is located on page F-2 of this Report.
This Annual Report on Form 10-K (the Report) may be deemed to include or incorporate 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, plans, 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 Companys expectations, goals, beliefs, intentions and the like regarding future sales, earnings, return on equity, cost savings, process improvements, free cash flow, share repurchases, capital expenditures, acquisitions and other matters. These statements are based on assumptions regarding the Company operations, investments, acquisitions and conditions in the markets the Company serves.
The Company believes these assumptions are reasonable and well founded. The statements in this Report 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 the Report, due to, but not limited to, such factors as:
A further discussion of the Companys risk factors can be found in Item 1A of Part I on page 9 of this Report. The Company does not undertake any obligation to update these forward-looking statements.
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Sigma-Aldrich Corporation (the Company) was incorporated under the laws of the State of Delaware in May 1975. Effective July 31, 1975 (Reorganization), the Company succeeded, as a reporting company, Sigma International, Ltd., the predecessor of Sigma Chemical Company (Sigma), and Aldrich Chemical Company, Inc. (Aldrich), both of which had operated continuously for more than 20 years prior to the Reorganization. The Companys principal executive offices are located at 3050 Spruce Street, St. Louis, Missouri, 63103.
The Company operates in one segment. Information concerning sales for the Companys business units is provided in Note 13Company Operations by Business Unitto the Companys consolidated financial statements on page 42 of the 2009 Annual Report, which is incorporated herein by reference.
The Company is a leading Life Science and High Technology company. The Company develops, manufactures, purchases and distributes the broadest range of high quality chemicals, biochemicals and equipment available 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 Company operates in 38 countries, manufacturing approximately 48,000 of the 130,000 chemical products it offers. The Company also offers approximately 40,000 equipment products. The Company sells into over 160 countries, servicing over 92,000 accounts representing over one million individual customers.
The Company provides products that focus on:
To best serve these customers, the Company is organized into a customer-centric structure featuring the Research units of Essentials, Specialties and Biotech and a Fine Chemicals unit, SAFC.
The Research Essentials unit sells biological buffers, cell culture reagents, biochemicals, chemicals, solvents, and other reagents and kits. These products are typically sold in higher volumes to economic research buyers.
The Research Specialties unit sells organic chemicals, biochemicals, analytical reagents, chromatography and other laboratory consumables, reference materials and high-purity products which are generally sold in smaller volumes to the lab scientist customer.
The Research Biotech unit supplies immunochemical, molecular biology, cell biology, proteomic, genomic, transgenic and other life science products to academic, government, industrial, biotechnology and pharmaceutical research customers.
The SAFC (Fine Chemicals) unit is a top 10 supplier of large-scale organic chemicals and biochemicals used in development and production by pharmaceutical, biotechnology, industrial, diagnostic and electronics companies.
Sales and Distribution
During 2009, products were sold to over 92,000 accounts representing over one million individual customers, including universities, pharmaceutical companies, commercial laboratories, industrial companies, non-profit organizations, governmental institutions, biotechnology, diagnostic, chemical and electronics companies and hospitals. Orders in laboratory quantities averaging over $400 accounted for 72%, 72% and 71% of the Companys net sales in 2009, 2008 and 2007, respectively. The Company also makes its chemical products available in larger-scale quantities for use in manufacturing. Sales of these products accounted for 28%, 28% and 29% of net sales in 2009, 2008 and 2007, respectively.
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Customers and potential customers, wherever located, are encouraged to contact the Company by telephone (collect or on toll-free WATS lines) or via its homepage on the World Wide Web (sigma-aldrich.com) for technical staff consultation or for placing orders. Information on the website does not constitute a part of this Report. Shipments are made at least five days a week from all locations. The Company strives to ship its products to customers on the same day an order is received and carries inventory levels which it believes to be appropriate to maintain this policy.
Production and Purchasing
The Company has chemical production facilities in Madison, Milwaukee and Sheboygan, Wisconsin; St. Louis, Missouri; Lenexa, Kansas; Houston, Texas; Bellefonte and Denver, Pennsylvania; Haverhill and Natick, Massachusetts; Caseyville and Urbana, Illinois; Miamisburg, Ohio; Mulberry, Florida; Carlsbad and Selma, California; Australia; Canada; France; Germany; India; Ireland; Israel; Japan; Singapore; Switzerland; Taiwan and the United Kingdom. Biochemicals are primarily produced by extraction and purification from yeast, bacteria and other naturally occurring animal and plant sources. Organic and inorganic chemicals are primarily produced by synthesis. Chromatography media and columns are produced using proprietary chemical synthesis and proprietary preparation processes. Similar processes are used for filtration and sample collection processes.
There are approximately 130,000 chemical and 40,000 equipment products listed in the Sigma, Aldrich, Fluka and Supelco catalogs. The Company produces approximately 48,000 of the chemical products, which represented approximately 65% of sales in 2009. Products not manufactured by the Company are purchased from many sources either under contract or in the open market.
None of the Companys 10,000 suppliers accounted for more than 5% of the Companys chemical or equipment purchases in 2009. The Company has generally been able to obtain adequate supplies of products and materials to meet its needs. No assurance can be given that shortages will not occur in the future.
Whether a product is produced by the Company or purchased from outside suppliers, it is subjected to quality control procedures, including the verification of purity, prior to final packaging. Quality control is performed by a staff of chemists and lab technicians utilizing highly calibrated equipment.
Patents, Trademarks and Licenses
The Company holds approximately 510 issued or pending patents, over 520 licenses and has approximately 850 registered trademarks and trademark applications worldwide. The Companys significant trademarks are the brand names: Sigma-Aldrich, Sigma, Aldrich, Fluka, Riedel-de Haën, Supelco, SAFC, SAFC Biosciences, SAFC Supply Solutions, SAFC Pharma, SAFC Hitech, Genosys, Proligo and Pharmorphix. The brands are marketed through business units called Research Essentials, Research Specialties, Research Biotech, and SAFC (Fine Chemicals). Their related registered logos and the significant trademarks are expected to be maintained indefinitely.
The Company is aware of the desirability for patent and trademark protection for its products. The Company believes that other than its brand names, no single patent, license, trademark (or related group of patents, licenses, or trademarks) is material in relation to its business as a whole.
In addition to patents, the Company relies on trade secrets and proprietary know-how. The Company seeks protection of these trade secrets and proprietary know-how, in part, through confidentiality and proprietary information agreements. The Company makes efforts to require its employees, directors, consultants and advisors, outside scientific collaborators and sponsored researchers, other advisors and other individuals and entities to execute confidentiality agreements upon the start of employment, consulting or other contractual relationships with the Company. These agreements provide that all confidential information developed or made known to the individual or entity during the course of the relationship is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees and some other parties, the agreements provide that all inventions conceived by the individual will be the Companys exclusive property. These agreements may not provide meaningful protection for or adequate remedies to protect the Companys technology in the event of unauthorized use or disclosure of information. Furthermore, the Companys trade secrets may otherwise become known to, or be independently developed by, its competitors.
Dependence on a Single Customer or Product
During the year ended December 31, 2009, no single customer accounted for more than 3%, and no single product accounted for more than 2% of the Companys net sales.
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The majority of customer orders are shipped from inventory on the day ordered, resulting in limited backlog. Individual items may occasionally be out-of-stock. These items are shipped as soon as they become available. Some orders for larger scale quantities specify a future delivery date, which we exclude from our backlog calculation. At December 31, 2009, the backlog of firm orders was not significant, at less than 2% of sales. The Company anticipates that substantially all of the December 31, 2009 backlog will be shipped during 2010.
Substantial competition exists in all of the Companys marketing and production areas. The Company believes it is a major supplier of biochemical and organic chemical products and kits used in scientific research, including genomic and proteomic research, biotechnology, pharmaceutical development and as key components in pharmaceutical, diagnostic and other high technology manufacturing. While the Company offers approximately 170,000 chemical and equipment items and stocks and analyzes many of these products, some of the Companys products are unique with limited demand. There are many competitors that offer a narrower range of chemicals.
In all product areas, the Company competes primarily on the basis of customer service, product availability, quality and price. The Companys main marketing vehicles include its website, sigma-aldrich.com, plus printed catalogs in the marketplace for the Sigma, Aldrich, Fluka and Supelco brands. These catalogs are supplemented with advertisements in chemical and other scientific journals, the mailing of special product brochures, the electronic distribution of various advertisements and product data, news releases related to new product offerings and by personal visits by management, sales and technical representatives with customers.
Compliance With Regulations
The Company believes that it is in compliance in all material respects with federal, state and local regulations relating to the manufacture, sale and distribution of its products. The following are brief summaries of some of the federal laws and regulations which may have an impact on the Companys business. These summaries are only illustrative of some of the extensive regulatory requirements of the federal, state and local and foreign governments and are not intended to provide the specific details of all applicable laws or regulations.
The Chemical Safety Information, Site Security and Fuels Regulatory Relief Act of 1999, and the regulations promulgated thereunder, regulate the handling and storage of certain flammable fuels and require an associated risk management program.
The Clean Air Act (CAA), as amended, and the regulations promulgated thereunder, regulate the emission of harmful pollutants to the air outside of the work environment. Federal or state regulatory agencies may require companies to acquire permits, perform monitoring and install control equipment for certain pollutants.
The Chemical Facility Anti-Terrorism Standard and the regulations promulgated thereunder, regulate facilities that manufacture, use, store or distribute certain chemicals above a listed Screening Threshold Quantity. A company with such a regulated facility had to complete and submit a Chemical Security Assessment Tool (Top-Screen) by January 19, 2008 or within 60 calendar days of coming into possession of the listed chemicals at or above the listed Chemical Safety Information. If required by the United States (U.S.) Department of Homeland Security (DHS), the facility must complete and submit to the DHS a Security Vulnerability Assessment and Site Security Plan. All Sigma-Aldrich sites subject to this standard filed the required information within the defined timeframes.
The Clean Water Act (CWA), as amended, and the regulations promulgated thereunder, regulate the discharge of harmful pollutants into the waters of the United States. Federal or state regulatory agencies may require companies to acquire permits, perform monitoring and to treat wastewater before discharge to the waters of the United States or a Publicly Owned Treatment Works (POTW).
The Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) and the Superfund Amendments and Reauthorization Act of 1986 (SARA), and the regulations promulgated thereunder, require notification of certain chemical spills and notification to state and local emergency response groups of the availability of Material Safety Data Sheets (MSDSs) and the quantities of hazardous materials in the Companys possession. SARA, and the regulations promulgated thereunder, also stresses the importance of permanent remedies and innovative treatment technologies to clean up hazardous waste sites.
The Emergency Planning & Community Right-To-Know Act of 1986 (EPCRA), as amended, and the regulations promulgated thereunder, regulate MSDSs, chemical inventories and chemical release reporting. EPCRA also requires coordinated emergency planning with state and local agencies.
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The Occupational Safety and Health Act of 1970 (OSHA), including the Hazard Communication Standard (Right to Know), and the regulations promulgated thereunder, require the labeling of hazardous substance containers, the supplying of MSDSs on hazardous products to customers and hazardous substances to which an employee may be exposed in the workplace, the training of employees in the handling of hazardous substances and the use of the MSDSs, along with other health and safety programs.
The Pollution Prevention Act of 1990 (PPA), as amended, and the regulations promulgated thereunder, focus on reducing the amount of pollution through cost-effective changes in production and raw materials usage. Pollution prevention also includes other practices that increase efficiency in the use of energy, water or other natural resources, and protect our resource base through conservation.
The Resource Conservation and Recovery Act of 1976 (RCRA), as amended, and the regulations promulgated thereunder, require certain procedures regarding the treatment, storage and disposal of hazardous waste.
The Toxic Substances Control Act of 1976 (TSCA), and the regulations promulgated thereunder, require reporting, testing and pre-manufacture notification procedures for certain chemicals. Exemptions are provided from some of these requirements with respect to chemicals manufactured in small quantities solely for research and development use.
The Department of Transportation (DOT) has promulgated regulations pursuant to the Hazardous Materials Transportation Act, referred to as the Hazardous Material Regulations (HMR), which set forth the requirements for hazard labeling, classification, packaging of chemicals and shipment modes for products destined for shipment in interstate commerce.
The Hazardous Materials Transportation Act (HMTA), and the regulations promulgated thereunder, seeks to protect against risks to life, property and the environment that are inherent in the transportation of hazardous materials in intrastate, interstate and foreign commerce. The Act regulates the transportation of dangerous goods via air, highway, rail and water. The Company ships and receives materials subject to this Act.
Registration, Evaluation and Authorization of Chemicals (REACH) is an European Union Legislation covering the manufacturing and importation of chemicals. Many of the Companys substances were registered as required in 2008 and we are complying with subsequent registration requirements at various levels over the next 8 years. Additionally, the amount of products imported or manufactured are closely monitored and more information is passed along the supply chain as required by this legislation.
The Globally Harmonized System (GHS) will alter the rules for classification, labeling and to some extent the content of our MSDS. GHS is scheduled to be implemented sequentially starting with Europe (December 1, 2010), followed by Asia and the U.S. All defined hazardous products in Sigma-Aldrichs product portfolio will be included.
The United States Department of Agriculture (USDA), Animal and Plant Health Inspection Service (APHIS), Veterinary Services (VS), regulates the importation of animal-derived materials to ensure that exotic animal and poultry diseases are not introduced into the United States. The USDA has issued importation permits to several Company sites.
Approximately 3,400 products, for which sales are immaterial to the total sales of the Company, are subject to control by either the Drug Enforcement Administration (DEA) or the Nuclear Regulatory Commission (NRC). The DEA and NRC have issued licenses to several Company sites to permit importation, manufacture, research, analysis, distribution and export of certain products. The Company screens customer orders involving products regulated by the DEA and the NRC to verify that a license, if necessary, has been obtained.
Approximately 900 products, for which sales are immaterial to the total sales of the Company, are subject to licensing by the Department of Commerce (DOC). The DOC has promulgated the Export Administration Regulations pursuant to the Export Administration Act of 1979 (EAA), as amended, to regulate the export of certain products to specific destinations by requiring a special export license.
Approximately 60 products, for which sales are immaterial to the total sales of the Company, are regulated by the Centers for Disease Control (CDC). The U.S. Departments of Health and Human Services (HHS) and Agriculture (USDA) published final rules, which implement the provisions of the USA Patriot Act and Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (the Bioterrorism Act), setting forth the requirements for possession, use, and transfer of select agents and toxins. The CDC has issued one site license to the Company to permit the storage and transfer of these materials.
Approximately 850 products, for which sales are immaterial to the total sales of the Company, are sold as flavoring agents regulated by the Public Health Security and the Bioterrorism Act. The Bioterrorism Act requires that the U.S. Food and Drug Administration (FDA) receive prior notice of food items imported into the United States and register facilities handling such items. The Company has registered several sites under the Bioterrorism Act to enable the importation and handling of these items.
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The Company engages principally in the business of selling products that are not foods or food additives, drugs or cosmetics within the meaning of the Federal Food, Drug and Cosmetic Act, as amended (the FDC Act). However, a limited number of the Companys products are subject to labeling, manufacturing and other provisions of the FDC Act.
The Companys import declarations to U.S. Customs and Border Protection (CBP) represent approximately 8,500 entries and 80,000 individual transaction lines from over 80 different countries. Within the Companys U.S. operations, imports encompass approximately 2,700 unique harmonized tariff codes. These codes are largely represented in Chapters 28, 29 and 38, representing organic and inorganic chemicals and compounds and miscellaneous chemical products. These imports are subject to the Tariff Act of 1930 (as amended), The Customs Modernization Act of 1993, and Title 19 of the Code of Federal Regulations.
Research and Development
Research and development expenses were 2.9% of net sales in 2009, 2008 and 2007. The research and development expenses relate primarily to efforts to add new manufactured products and enhance manufacturing processes. All manufactured products accounted for approximately 65% of net sales in 2009.
Number of Persons Employed
The Company had 7,740 employees as of December 31, 2009. The total number employed in the United States was 3,920 with the remaining 3,820 employed by the Companys international subsidiaries. The Company employs approximately 2,400 people who have degrees in chemistry, biochemistry, engineering or other scientific disciplines, including approximately 410 with Ph.D. degrees.
Information concerning sales by geographic area and business unit for the years ended December 31, 2009, 2008 and 2007, is located in Note 13Company Operations by Business Unitto the Companys consolidated financial statements on page 42 of the 2009 Annual Report, which is incorporated herein by reference.
In the years ended December 31, 2009, 2008 and 2007, approximately 65%, 65% and 64%, respectively, of the Companys net sales were to customers located outside the United States. These sales were made directly by the Company, through distributors and by subsidiaries located in 37 other countries.
The Companys Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available on the Companys web site at sigma-aldrich.com as soon as reasonably practicable after being filed electronically with or furnished to the S.E.C. The information on the website does not constitute part of this Report.
Executive Officers of the Registrant
The Executive Officers of the Registrant are:
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There is no family relationship between any of the officers or directors. These officers serve at the pleasure of the Board of Directors subject to the terms of any employment or similar agreements.
Mr. Cottier has been President of the SAFC unit of the Company since January 2009. He served as President of the Research Essentials unit of the Company from July 2005 until January 2009. He served as the Vice President of Sales of the Company from 2003 to 2005.
Mr. Julien has been President of Global Supply Chain of the Company since January 2009. He served as President of the Research Specialties unit of the Company from July 2005 to January 2009. He served as President of the Biotechnology unit of the Company for more than five years until July 2005.
Mr. Kanan has been Vice President and Corporate Controller of the Company since April 2009. He served as Vice President Finance-Light Vehicle Systems of ArvinMeritor from October 2006 to April 2009. He served as Vice President and Assistant Corporate Controller of ArvinMeritor for five years prior to October 2006.
Mr. Miller has been Senior Vice President, General Counsel and Secretary of the Company since October 2009. He served as General Counsel of Novartis Services, Inc. from September 2008 to September 2009, and as General Counsel of Novartis Corporation from December 2005 to August 2008. Previously he served as Deputy General Counsel of Novartis AG in Switzerland from January 2000 to December 2005.
Ms. Miller has been Senior Vice President-Strategy & Corporate Development of the Company since May 2009 and was previously Vice President-Strategy & Corporate Development of the Company from January 2009 through May 2009. She served as Controller of the Company for more than five years, until January 2009.
Dr. Nagarkatti has been Chairman of the Board of Directors since May 2009 and Chief Executive Officer of the Company since January 2006. He has been President of the Company since August 2004. He served as Chief Operating Officer of the Company from August 2004 until December 31, 2005. Previously he served as President of the Scientific Research unit of the Company from December 2002 to August 2004.
Mr. Rau has been Vice President Human Resources of the Company since October 2005. He served as Vice President Human Resources of Kellwood Company from 2002 to 2005.
Mr. Richter has been Vice President and Treasurer of the Company since May 2009, and was previously Treasurer of the Company for more than five years.
Mr. Sachdev has been Senior Vice President, Chief Financial Officer and Chief Administrative Officer of the Company since May 2009. In his Chief Administrative Officer capacity, Mr. Sachdev is responsible for the Information Systems and the Strategy and Corporate Development functions. Mr. Sachdev also assumed responsibility for the Companys operations in Asia Pacific and Latin America. Previously, he served as Vice President and Chief Financial Officer of the Company from November 2008 to May 2009. He served as Senior Vice President and President Asia Pacific of ArvinMeritor from March 2007 to July 2008. He served as Senior Vice President of Corporate Development and Strategy of ArvinMeritor from April 2005 through March 2007. He served as Interim Chief Financial Officer, Vice President and Controller of ArvinMeritor from August 2003 to March 2005.
Dr. Smoller has been President of the Research Biotech unit of the Company since July 2007. He served as Vice President Research & Development of the Company from June 2004 to June 2007. He served as Vice President of EMG Biosciences from August 2003 until June 2004.
Mr. Turza has been Chief Information Officer of the Company since April 2006. He served as Chief Operating Officer for Woodwind & Brasswind from 2004 to 2006. Previously, he was Vice President of e-Business for W.W. Grainger from 2000 to 2004.
Mr. van den Dool was named Vice President of Sales-U.S. & Canada of the Company in July 2007. He served as Vice President of Sales and Operations, Europe for the Company from 2003 to 2007. Previously, he served as Vice President of Sales, Europe for the Company from 1999 to 2003.
Mr. Walton has been Vice President-Environmental Health & Safety of the Company since August 2005. Previously, he served as Director of Corporate Health and Safety at ArvinMeritor from 2000 to 2005.
Dr. Wicks has been President of the Research Essentials and Specialties units of the Company since January 2009 and has also been Managing Director-U.S & Canada since January 2010. Previously, he served as President of the SAFC unit of the Company for more than five years.
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Our business is subject to certain risks and uncertainties, including, among others, certain economic, political and technological factors. You should carefully consider the risk factors below, together with other matters described in this Form 10-K or incorporated herein by reference, in evaluating our business and prospects. If any one or more of the following risks occurs, our business, financial condition or operating results could be adversely impacted and the trading price of our common stock could decline. Additional risks not presently known to us or that we currently deem immaterial may also adversely impact our business, financial condition and operating results. Certain statements in this Form 10-K (including certain of the following factors) constitute forward-looking statements relating to future performance, goals, strategic actions and initiatives and similar intentions and beliefs, including, without limitation, statements regarding the Companys expectations, goals, beliefs, intentions and the like regarding future sales, earnings, return on equity, cost savings, process improvements, free cash flow, share repurchases, capital expenditures, acquisitions and other matters. The Company does not undertake any obligation to update these forward-looking statements.
Risks Related to Our Sales and Operations
Our performance may be affected by the economic conditions in the U.S. and in other nations where we do business.
Declining economic conditions may have a negative impact on our consolidated results of operations, our financial condition and our cash flows. Overall demand for our products could be reduced as a result of a global economic recession, especially in such segments as the pharmaceutical, biotechnology, diagnostic, chemical and electronics industries.
We face significant competition, including changes in pricing.
The markets for our products and services are both competitive and price sensitive. Many of our competitors have significant financial, operations, sales and marketing resources and experience in research and development. Competitors could develop new technologies that compete with our products and services or even render our products obsolete. If a competitor develops superior technology or cost-effective alternatives to our products and services, our business could be seriously harmed.
The markets for some of our products are also subject to specific competitive risks because these markets are highly price competitive. Our competitors have competed in the past by lowering prices on certain products. If they do so again, we may be forced to respond by lowering our prices. This would reduce sales and possibly profits. Failure to anticipate and respond to price competition may also impact sales and profits.
We believe that customers in our markets display a significant amount of loyalty to their supplier of a particular product. To the extent we are not the first to develop, offer and/or supply new products, customers may buy from our competitors or make materials themselves, causing our competitive position to suffer.
Our sales and results of operations are dependent on the research and development spending patterns at pharmaceutical, biotechnology and diagnostic companies.
A number of factors impact the dollars spent on the purchase of research and development products by our customers. Our pharmaceutical customers experienced a softening over the past several years in all geographic areas. The Company does not have the ability to predict when this trend will reverse or the ultimate impact on demand for the Companys products. Activities within these pharmaceutical companies, which are impacting demand, include various programs to contain costs, shift from discovery to clinical research and tighter inventory management.
The credit crisis of the past 18 months has impacted the ability of small, emerging pharmaceutical, biotechnology and diagnostic companies to access funding. Venture capital funding has also slowed considerably. This venture capital funding also impacts discovery and clinical research spending. The extent to which demand from these customers will be impacted is unknown.
Approximately 35% of the Companys revenues for the year ended December 31, 2009 are from the pharmaceutical, biotechnology and diagnostic companies.
Our sales and results of operations depend on our customers research and development efforts and their ability to obtain funding for these efforts.
Our customers include researchers at companies in the pharmaceutical, biotechnology, diagnostic, chemical, electronics and related industries, academic institutions, government laboratories and private foundations. Fluctuations in the research and development budgets of these researchers and their organizations could have a significant effect on the demand for our products. Our customers determine their research and development budgets based on several factors, including the need to develop new products, the availability of governmental and other funding, competition and the general availability of resources. As we continue to expand our international operations, we expect research and development spending levels in markets outside of the U.S. will become increasingly important to us.
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Research and development budgets fluctuate due to changes in available resources, spending priorities, general economic conditions, institutional and governmental budgetary limitations and mergers of companies in the key industry sectors we serve. Our business could be seriously harmed by any significant decrease in life science and high technology research and development expenditures by our customers. By way of example, there have been significant reductions in research staff of U.S.-based pharmaceutical companies during the last two years.
A small portion of our sales have been to researchers whose funding is dependent on grants from government agencies such as the U.S. National Institute of Health, the National Science Foundation, the National Cancer Institute and similar agencies or organizations. Government funding of research and development is subject to the political process, which is often unpredictable. Other programs, such as Homeland Security or defense, or general efforts to reduce the U.S. federal budget deficit could be viewed by the government as a higher priority. Any shift away from funding of life science and high technology research and development or delays surrounding the approval of governmental budget proposals may cause our customers to delay or forego purchases of our products and services, which could seriously damage our business.
Some of our customers receive funds from approved grants at a particular time of year, many times set by government budget cycles. In the past, such grants have been frozen for extended periods or have otherwise become unavailable to various institutions without advance notice. The timing of the receipt of grant funds may affect the timing of purchase decisions by our customers and, as a result, cause fluctuations in our sales and operating results.
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.
We rely upon our manufacturing operations to produce approximately 65% of our sales. Our quality control, packaging and distribution operations support all of our sales. Any significant disruption of those operations for any reason, such as labor unrest, power interruptions, fire, or other events beyond our control could adversely affect our sales and customer relationships and therefore adversely affect our business. While insurance coverage may reimburse us, in whole or in part, for profits lost from such disruptions, our ability to provide these products in the longer term may affect our sales growth expectations and results.
We have limited redundancies and back-up in our global distribution network. For example, our automated warehouse in Germany handles a significant amount of the distribution of our products outside of the U.S. The efficiency and effectiveness of our global distribution network would be significantly compromised if this warehouse were impacted by a natural disaster or other local disruption. If a disruption occurs, we may not be able to secure alternate distribution and replace the compromised inventory in a timely manner, causing deterioration in our current service levels. Failure to do so could have a material adverse effect on our business and results of operations.
If we experience a significant disruption in our information technology systems or if we fail to implement new systems and software successfully, our business could be adversely affected.
We depend on information systems throughout our Company to control our manufacturing processes, process orders, manage inventory, process and bill shipments to and collect cash from our customers, respond to customer inquiries, contribute to our overall internal control processes, maintain records of our property, plant and equipment, and record and pay amounts due vendors and other creditors. Additionally, in 2009 approximately 45% of the Companys research sales originated through e-commerce. If we were to experience a prolonged disruption in our information systems that involve interactions with customers and suppliers, it could result in the loss of sales and customers and/or increased costs, which could adversely affect our business.
We are subject to regulation by various federal, state and foreign agencies that require us to comply with a wide variety of regulations, including those regarding the manufacture of products, the distribution of our products and environmental matters.
Some of our operations are subject to regulation by various U.S. federal agencies and similar state and international agencies, including the U. S. Department of Commerce, U.S. Food and Drug Administration, the U.S. Department of Transportation, the U.S. Department of Agriculture and other comparable U.S., state and foreign governmental agencies. These regulations govern a wide variety of product activities, from design and development to labeling, manufacturing, handling, sales and distribution of products. If we fail to comply with any or all of these regulations, we may be subject to fines or penalties, have to recall products and/or cease their manufacture and distribution, which would increase our costs and reduce our sales.
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We are subject to regulations that govern the handling of hazardous substances.
We are subject to various federal, state, local and international laws and regulations that govern the handling, transportation, manufacture, use and sale of substances that are or could be classified as toxic or hazardous substances. Some risk of environmental damage is inherent in our operations and the products we manufacture, sell or distribute. Any failure by us to comply with the applicable government regulations could also result in product recalls or impositions of fines and restrictions on our ability to carry on with or expand in a portion or possibly all of our operations. If we fail to comply with any or all of these regulations, we may be subject to fines or penalties, have to recall products and/or cease their manufacture and distribution, which would increase our costs and reduce our sales.
Changes in worldwide tax rates or tax benefits will impact our tax expense and our profits.
We are subject to a variety of taxes in numerous local, regional, national and international jurisdictions. The laws regulating the taxes to which we are subject may change. We have no control over these changes and their impact, if any, on our results. Additionally, results of tax audit activity may also impact our tax provisions and our profits. We reflect changes in our actual or forecast income tax rates as relevant facts and circumstances are known to us. Variations to our forecast tax rates and forecast diluted EPS in the future are possible due in part to tax rate changes and changes in the status of tax uncertainties pursuant to Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Subtopic 740-10.
Litigation may harm our business.
Substantial, complex or extended litigation could cause us to incur significant costs and distract our management. For example, lawsuits by employees, stockholders, collaborators, distributors, customers, or competitors or others with protected intellectual property could be very costly and substantially disrupt our business. Disputes from time to time with such companies, organizations or individuals are not uncommon, and we cannot assure you that we will always be able to resolve such disputes or on terms favorable to us. For example, we are currently defending a class action complaint related to an explosion at one of our production facilities. Unexpected results could cause us to have financial exposure in these matters in excess of recorded reserves and insurance coverage, requiring us to provide additional reserves to address these liabilities, therefore impacting profits.
Potential product liability claims could affect our earnings and financial condition and harm our reputation.
We face potential liability claims based on our products and/or services. We carry product liability insurance coverage, generally available in the market, but which is limited in scope and amount. Our products are generally to be used by trained scientists and operators, however, there is no assurance that they will be used in accordance with our terms and conditions of sale. As a result, we could be forced to defend ourselves in connection with these products or services. For example, we are defending a large number of lawsuits relating to various vaccines manufactured by pharmaceutical companies, for which we provided a product for use in research activities in developing such vaccines.
Although we seek to reduce our potential liability through measures such as contractual indemnification provisions with customers and/or suppliers, we cannot assure you that such measures will be enforced or effective. We could be materially and adversely affected if we were required to pay damages or incur defense costs in connection with a claim that is outside the scope of the indemnification agreements, if the indemnity, although applicable, is not executed in accordance with its terms or if our liability exceeds the amount of applicable insurance or indemnification. There can be no assurance that our insurance coverage will be adequate or that insurance coverage will continue to be available on terms acceptable to us. Unexpected results could cause us to have financial exposure in these matters in excess of recorded reserves and insurance coverage, requiring us to provide additional reserves to address these liabilities, impacting profits.
If we fail to maintain adequate quality standards for our products and services, our business may be adversely affected and our reputation harmed.
Our life science and high technology customers are often subject to rigorous quality standards to obtain and maintain regulatory approval of their products and the manufacturing processes that generate them. A failure to maintain, or in some instances, upgrade our quality standards to meet our customers needs, could result in the loss of a customers regulatory license and potentially substantial sales losses to us.
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We heavily rely on third party air cargo carriers and other package delivery services, and a significant disruption in these services or significant increases in prices may disrupt our ability to ship products or import materials, increase our costs and lower our profitability and harm our reputation.
We emphasize our prompt service and shipment of products as a key element of our sales and marketing strategy. We ship a significant number of products to our customers through independent package delivery companies. In addition, we transport materials between our worldwide facilities and import raw materials from worldwide sources. Consequently, we heavily rely on air cargo carriers and other third party package delivery providers. If any of our key third party providers were to experience a significant disruption such that any of our products, components or raw materials could not be delivered in a timely fashion or we would incur additional costs that we could not pass on to our customers, our costs may increase and our relationships with certain customers may be adversely affected. In addition, if these third party providers increase prices, and we are not able to find comparable alternatives or make adjustments to our selling prices, our profitability could be adversely affected.
If we fail to attract and retain key personnel, our business could be adversely affected.
Most of our products and services are highly technical in nature. In general, only highly qualified and trained scientists have the necessary skills to develop and market our products and provide our services. In addition, some of our manufacturing, quality control, safety and compliance, information technology, sales, and e-commerce related positions are highly technical as well. Our success depends in large part upon our ability to identify, hire, retain and motivate highly skilled professionals. We face intense competition for these professionals from our competitors, customers, marketing partners and other companies throughout the industries in which we compete. Any failure on our part to hire, train, and retain a sufficient number of qualified professionals would seriously damage our business.
We depend heavily on the services of our senior management. We believe that our future success depends on the continued services of such management. Our business may be harmed by the loss of a significant number of our senior management members in a short period of time.
If the expected benefit of our supply chain initiative is not realized, our future profitability may be adversely affected.
During the third quarter of 2007, we implemented an initiative to improve how we procure goods and services, manage inventory and execute other supply chain activities that are key to our customer centric approach. The purpose of this initiative is to reduce our overall manufacturing and procurement costs and expand margins over a five year period following implementation. Due to the scope and complexity of this initiative there are certain risks associated with its implementation. If unexpected costs or delays are encountered, our margins may not benefit as much or as quickly as we had anticipated. The global economic slow down and the cost of energy could also impact the savings which will be achieved.
Our business may be adversely affected by a decrease in the availability of commercial paper.
We had $376.5 million of commercial paper outstanding at December 31, 2009. If the market for commercial paper becomes restricted or unavailable, our business could be adversely affected including our consolidated results of operations, our financial condition and our cash flows.
Our sales and operating results may vary from period to period.
Our sales and operating results may vary significantly from quarter to quarter and from year to year, depending on a variety of factors including:
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Our expense levels are based in part on our future sales expectations. Consequently, sales or profits may vary significantly from quarter to quarter or from year to year, and sales and profits in any interim period may not necessarily be indicative of results in subsequent periods.
Technology innovations in the markets that we serve may create alternatives to our products and result in reduced sales.
Technology innovations, which our current and potential customers might have access to, could reduce or eliminate their need for our products. A new, competing or other disruptive technology that reduces or eliminates the use of one or more of our products could negatively impact the sale of those products. Our customers also constantly attempt to reduce their manufacturing costs and improve product quality. We may be unable to respond on a timely basis to any or all of the changing needs of our customer base. Our failure to develop, introduce or enhance products able to compete with new technologies in a timely manner could have an adverse effect on our business, results of operations and financial condition.
Demand for our products and services is subject to the commercial success of our customers products, which may vary for reasons outside our control.
Even if we are successful in securing utilization of our products in a customers manufacturing process, sales of many of our products and services remain dependent on the timing and volume of the customers production, over which we have no control. The demand for our products depends on regulatory approvals and frequently depends on the commercial success of the customers supported product. Regulatory processes are complex, lengthy, expensive and can often take years to complete. Commercial success of a customers product, which would drive demand in their production and commensurate demand for our products and services, is dependent on many factors, some of which can change rapidly, despite early positive indications.
Rapid changes in the healthcare industry could directly or indirectly adversely affect our business.
The healthcare industry has undergone significant changes in an effort to control costs. These changes include:
We expect the healthcare industry to continue to change in the future. Some of these potential changes, such as a reduction in governmental support of healthcare services or adverse changes in legislation or regulations governing the ability to perform healthcare related research and the delivery or pricing of healthcare services or mandated benefits, may cause healthcare industry customers to purchase fewer of our products and services or to reduce the prices they are willing to pay for our products or services.
We may be unable to establish and to maintain collaborative development and marketing relationships with business partners, which could result in a decline in sales or slower than anticipated growth rates.
As a part of our business strategy, we have formed, and intend to continue to form, strategic alliances and distribution arrangements with partners relating to the development and commercialization of certain of our existing and potential products to increase our sales and to leverage our product and service offerings. Our success will depend, in part, on our ability to maintain these relationships and to cultivate additional, acceptable, strategic alliances with such companies.
In addition, we cannot ensure that parties with which we have established, or will establish, collaborative relationships will not, either directly or in collaboration with others, pursue alternative technologies or develop alternative products in addition to, or instead of, products offered as a result of these collaborations. Our business partners may also experience financial or other difficulties that lessen their value to us and to our customers. Our results of operations and opportunities for growth may be adversely affected by our failure to establish and maintain successful collaborative relationships.
Lack of early success with our pharmaceutical and biotechnology customers can shut us out of future business with those customers.
A number of the products we sell to pharmaceutical and biotechnology customers are incorporated into the customers drug manufacturing processes. In some cases, once a customer chooses a particular product for use in a drug manufacturing process, it is unlikely that the customer will later switch to a competing alternative. In many cases, the regulatory license for the product will specify the products qualified for use in the process. Obtaining the regulatory approvals needed for a change in the manufacturing process is time consuming, expensive and uncertain. Accordingly, if a pharmaceutical or biotechnology customer does not select our products early in its manufacturing design phase for any number of reasons, including, but not limited to, cost, ease of use, ability to supply large quantities or similar reasons, we may lose the opportunity to participate in the customers manufacturing of such product. Because we face competition in this market from other companies, we run the risk that our competitors could win significant early business with a customer making it difficult for us to recover that late stage commercialization opportunity.
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We have significant inventories on hand.
We maintain significant inventories and have an allowance for slow-moving and obsolete inventory. Any significant unanticipated changes in future product demand or market conditions, including the current uncertainty in the global market, could also have an impact on the value of inventory and adversely impact our results of operations. Additionally, if it would become necessary to rework product to make it saleable, this additional effort would impact the cost and impact our operating results.
Fluctuation in the price and supply of raw fetal bovine serum could affect our business.
The supply of raw fetal bovine serum (FBS) is sometimes limited because serum collections tend to be cyclical. In addition, any discovery of bovine spongiform encephalopathy (popularly referred to as mad cow disease), particularly in Australia, may cause an interruption to our primary supply of FBS. These factors can cause the price of raw FBS to fluctuate. The profit margins we achieve on finished FBS have been unstable in the past because of the fluctuations in the price of raw FBS, and any increase in the price could adversely affect those profit margins in the short-term. In addition, if we are unable to obtain an adequate supply of FBS, or if we are unable to meet demand for FBS from our suppliers, we may lose market share.
We expect to continue to implement various process improvement initiatives that may not achieve the desired results.
We have implemented a number of changes designed to improve operating efficiencies and reduce costs. We expect to continue to identify opportunities for operational efficiencies and cost reduction and implement changes to achieve these efficiencies. Such improvements may lead to, among other things, the consolidation and integration of products, brands, facilities, functions, systems and processes, any or all of which might present significant management challenges. There can be no assurance that such actions will be accomplished as rapidly as anticipated or that the full extent of expected cost reductions will be achieved.
We may not realize the expected benefits from our restructuring activities, and our efforts may lead to additional unintended consequences.
As part of its long-term profit enhancement and cost-reduction initiatives, the Company has commenced certain actions, including closures and consolidations of facilities and initiating a voluntary retirement plan. These actions are intended to reduce the Companys fixed cost structure and better align its global manufacturing and distribution footprint. These restructuring activities could yield unintended consequences, including:
There can also be no assurance that such actions will be accomplished as rapidly as anticipated or that the full extent of expected cost reductions will be achieved.
Risks Related to Growth of Our Business
Acquisitions are an important part of our growth strategy.
We have acquired or invested in several businesses and technologies and routinely review additional opportunities. Certain risks exist including the potential for:
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None of these difficulties have been historically significant, but if they were to be in the future, we may be unable to achieve expectations from our acquisition strategy. In addition, we compete with other companies for suitable acquisition targets and may not be able to acquire certain targets that we seek. Also, certain businesses we have acquired or invested in may not generate the cash flow and/or earnings or other benefits that we anticipated at the time of their acquisition. If we are unable to successfully complete and integrate acquisitions in a timely manner, acquisitions may adversely affect our profitability. In addition, if we are unable to hire and retain key management personnel, we may not be able to execute our acquisition strategy.
We must continually offer new products and technologies.
Our success depends in large part on continuous and timely development and introduction of new products that address evolving customer needs and changes in the market. We also believe that because of the initial time investment required by our customers to reach a purchasing decision for a new product, it may be difficult to regain that customer once the customer purchases a product from a competitor.
These facts have led us to focus significant efforts and resources on the development and identification of new technologies and products. As a result, we have a very broad product line and are continually seeking to develop, license or acquire new technologies and products to further broaden our offering. If we fail in these efforts, our customers likely will purchase products from our competitors, significantly harming our business. Once we develop or obtain a technology, to the extent that we fail to timely introduce new and innovative products that are accepted by our markets, we could fail to obtain an adequate return on our research and development, licensing and acquisition investments and could lose market share to our competitors, which would be difficult or impossible to regain and could seriously damage our business. Some of the factors affecting market acceptance of our products include:
Risks Related to International Operations
Foreign currency exchange rate fluctuations may adversely affect our business.
Since we are a multinational corporation that sells and sources products in many different countries, changes in exchange rates have in the past, and could in the future, adversely affect our cash flows and results of operations. For example, the effect of translating foreign currency sales into U.S. dollars decreased 2009 sales by 4.1%, but increased the 2008 and 2007 sales growth by 2.7% and 4.8%, respectively. Furthermore, reported sales and purchases made and expenses incurred in non-U.S. currencies by our international businesses, when translated into U.S. dollars for financial reporting purposes, fluctuate due to exchange rate movement. Due to the number of currencies involved, the variability of currency exposures and the potential volatility of currency exchange rates, we cannot predict the effect of exchange rate fluctuations on future sales and operating results.
We are subject to economic, political and other risks associated with our significant international business, which could adversely affect our financial results.
We operate internationally primarily through wholly-owned subsidiaries located in North and South America, Europe, Asia, the Middle East, Australia and Africa. Sales outside the United States were in excess of 60% of total sales in 2009. We expect that sales from international operations will continue to represent a growing portion of our sales. During 2009, approximately 10% of the Companys United States operations chemical and equipment purchases were from international suppliers. In addition, many of our manufacturing facilities, employees and suppliers to our international operations are located outside the United States. Our sales and earnings could be adversely affected by a variety of factors resulting from our international operations, including:
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If any of these risks materialize, we could face the loss of sales, and/or substantial increases in costs, which could adversely affect our results of operations.
Risks Related to Intellectual Property
We may become involved in disputes regarding our intellectual property rights, which could result in prohibition of the use of certain technology in current or planned products, exposure of the business to significant liability and diversion of managements focus.
We and our major competitors spend substantial time and resources developing and patenting new and improved products and technologies. Many of our products are based on complex, rapidly developing technologies. Further, while we strive to respect others intellectual property, we may not have identified each and every instance where our products may infringe or utilize intellectual property rights held by others. Thus, we cannot provide assurance that others will not claim that we are infringing their intellectual property rights or that we do not in fact infringe those rights.
We have been and may in the future be sued by third parties alleging that we are infringing upon their intellectual property rights. Any claims, with or without merit, could:
If we are unable to obtain a royalty agreement or license on acceptable terms, or are unable to redesign to avoid conflicts with any third party patent, we may be unable to offer some of our products, which could result in reduced sales.
Our failure to protect our intellectual property may significantly harm our results of operations.
Our success and ability to compete is dependent in part on our ability to protect and maintain proprietary rights to our intellectual property, particularly trade secrets and proprietary know-how. We generally enter into confidentiality and proprietary information agreements with our employees, consultants and advisors. These agreements may not provide meaningful protection for or adequate remedies to protect the Companys technology in the event of unauthorized use or disclosure of information. Efforts to address any infringement of our proprietary rights could result in significant litigation costs, and any failure to adequately protect our proprietary rights could result in our competitors offering similar services, potentially resulting in the loss of one or more competitive advantages and decreased sales.
Despite efforts to protect our proprietary rights, existing trade secret, copyright, patent and trademark laws afford us only limited protection. Others may attempt to copy or reengineer aspects of our products or obtain and use information that we regard as proprietary. Accordingly, we may not be able to prevent misappropriation of our products or to deter others from developing similar products. Further, monitoring the unauthorized use of our products and other proprietary rights is difficult. Litigation may be necessary to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Litigation of this type could result in substantial costs and diversion of resources and could significantly harm our results of operations and reputation.
We may incur impairment charges on our goodwill and other intangible assets with indefinite lives that would reduce our earnings.
We are subject to FASB ASC Topic 350 which requires that goodwill and other intangible assets that have an indefinite life be tested at least annually for impairment. Goodwill and other intangible assets with indefinite lives must also be tested for impairment between the annual tests if a triggering event occurs that would likely reduce the fair value of the asset below its carrying amount. As of December 31, 2009, goodwill and other intangible assets with indefinite lives represented approximately 15% of our total assets. If we determine that there has been an impairment, our financial results for the relevant period would be reduced by the amount of the impairment, net of tax effects, if any.
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The following table shows the location, land area, building area and function of the properties the Company owns or leases at December 31, 2009.
The Company considers the properties to be well maintained, in sound condition and repair, and adequate for its present needs. These properties generally have sufficient capacity for the Companys existing needs and near-term growth. The Company expects to continue to expand its production, warehousing and distribution capabilities in selected markets and to make capital investments in plants to support specific business opportunities.
The information contained in Note 11 - Contingent Liabilities and Commitments - on page 39 of the 2009 Annual Report is
incorporated herein by reference.
No matters were submitted by the Company to the stockholders for a vote during the fourth quarter of 2009.
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Information concerning the market price of the Companys Common Stock and related shareholder information for the years ended December 31, 2009 and 2008 is located on page 21 of the 2009 Annual Report under the caption Common Stock Data, which is incorporated herein by reference.
See Item 12 for information concerning securities authorized for issuance under equity compensation plans.
The following table presents share repurchases by the Company and any affiliated purchasers for the year ended December 31, 2009 (in millions except per share amounts):
Issuer Purchases of Equity Securities
On October 20, 2008 the Board of Directors authorized the repurchase of an additional 10.0 shares under the existing repurchase program, bringing the total authorization to 100.0 shares. The timing and number of shares purchased, if any, will depend on market conditions and other factors. This authorization is effective through October 20, 2011.
Items 6 through 8. Selected Financial Data, Managements Discussion and Analysis of Financial Condition and Results of Operations, Quantitative and Qualitative Disclosures about Market Risk and Financial Statements and Supplementary Data
The information required by Items 6 through 8 is incorporated herein by reference to pages 2148 of the 2009 Annual Report. See Index to Financial Statements on page F-1 of this Report. Those pages of the Companys 2009 Annual Report listed in the Index or referred to in Items 1 through 4 are incorporated herein by reference.
Controls and Procedures
The Companys management, under the supervision and with the participation of the Companys Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Companys disclosure controls and procedures as of December 31, 2009. Based upon their evaluation, the Companys Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures (as defined in Exchange Act Rule 13a-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 Companys 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 Companys internal controls over financial reporting during the quarter ended December 31, 2009 that has materially affected or is reasonably likely to materially affect the Companys internal control over financial reporting.
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Managements Report on Internal Control over Financial Reporting and Report of Independent Registered Public Accounting Firm
The information contained in Managements Report on Internal Control over Financial Reporting and Report of Independent Registered Public Accounting Firm on page 48 of the 2009 Annual Report is incorporated herein by reference.
Information under the captions Nominees for Board of Directors and Section 16(a) Beneficial Ownership Reporting Compliance of the 2010 Proxy Statement, which will be filed within 120 days after December 31, 2009, is incorporated herein by reference.
Audit Committee Financial Expert
Information under the caption Audit Committee of the 2010 Proxy Statement, which will be filed within 120 days after December 31, 2009, is incorporated herein by reference.
Code of Ethics
The Company has a Code of Ethics applicable to the principal executive officer, principal financial officer and principal accounting officer of the Company. A copy of the Code of Ethics is available on our website at sigma-aldrich.com or may be obtained without charge by writing to the Secretary, Sigma-Aldrich Corporation, P.O. Box 14508, St. Louis, Missouri 63178. The content on our website does not constitute part of this Report.
Information under the captions Director Compensation and Transactions and Information Concerning Executive Compensation of the 2010 Proxy Statement, which will be filed within 120 days after December 31, 2009, is incorporated herein by reference.
Information under the captions Security Ownership of Directors, Executive Officers and Principal Beneficial Owners, Information Concerning Executive Compensation and Equity Compensation Plan Information of the 2010 Proxy Statement, which will be filed within 120 days after December 31, 2009, is incorporated herein by reference.
Information, if any, under the captions Director Compensation and Transactions, Principal Beneficial Owners and Transactions and Related Party Disclosure of the 2010 Proxy Statement, which will be filed within 120 days after December 31, 2009, is incorporated herein by reference.
Information under the caption Audit Firm Fee Summary of the 2010 Proxy Statement, which will be filed within 120 days after December 31, 2009, is incorporated herein by reference.
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See Index to Financial Statements on page F-1 of this Report. Those pages of the Companys 2009 Annual Report listed in such Index are hereby incorporated by reference.
All schedules are omitted as they are not applicable, not required or the information is included in the consolidated financial statements or related notes to the consolidated financial statements.
See Index to Exhibits on page F-2 of this Report.
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Pursuant to the requirements of Section 13 or 15(d) 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.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
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INDEX TO FINANCIAL STATEMENTS AND RELATED INFORMATION
F - 1
INDEX TO EXHIBITS
These Exhibits are numbered in accordance with the Exhibit Table of Item 601 of Regulation S-K:
F - 2
F - 3
F - 4