<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1995
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
------------- --------------
Commission file number 1-5542
------
THE DEXTER CORPORATION
(Exact name of registrant as specified in its charter)
CONNECTICUT 06-0321410
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE ELM STREET, WINDSOR LOCKS, CONNECTICUT 06096
(Address of principal executive offices) (Zip Code)
(860) 292-7675
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report.)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS Outstanding at October 31, 1995
COMMON STOCK, PAR VALUE $1 24,517,280 SHARES
<PAGE> 2
PART I
FINANCIAL INFORMATION
Item 1 - Financial Statements
Reference is made to the following consolidated financial statements
which are incorporated herein by reference:
(a) Exhibit 99a - Condensed Statement of Income for the three months
and nine months ended September 30, 1995 and 1994.
(b) Exhibit 99b - Condensed Statement of Financial Position as of
September 30, 1995, December 31, 1994, and September 30, 1994.
(c) Exhibit 99c - Condensed Statement of Cash Flows for the nine
months ended September 30, 1995 and 1994.
(d) Exhibit 99d - Net Sales by Market for the three months and nine
months ended September 30, 1995 and 1994.
(e) Exhibit 99e - Notes to Consolidated Financial Statements.
The unaudited financial data included herein as of September 30, 1995
and 1994, and for the three and nine-month periods then ended,
have been reviewed by the registrant's independent public
accountants, Coopers & Lybrand L.L.P., and their report is attached.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
The company reported that net income for the third quarter increased
11% to $9.4 million, or $.39 per share, compared with $8.4 million,
or $.35 per share, for the third quarter of last year despite
unprecedented raw material cost increases. Net of selling price
increases, the unfavorable impact of higher raw material costs was
approximately $.10 per share compared with the third quarter of 1994.
This was partially offset by the favorable effect of changes in
currency exchange rates versus the third quarter of 1994, which
enhanced earnings by $.01 per share, and a $.01 per share increase
due to the reduction of the effective tax rate in the third quarter
of 1995.
Sales for the third quarter of 1995 were $268.5 million, a $25.2
million, or 10% increase compared with sales of $243.3 million in the
third quarter of 1994. This 10% increase included a 6% increase due to
volume, a 2% increase due to the effect of higher currency translation
rates on international sales, and price increases averaging 2%.
Sales for the nine-month period ended September 30, 1995, were $818.3
million, a $94.4 million, or 13% increase compared with sales of $723.9
million for the same period last year. This 13% increase included an 8%
increase due to volume, a 4% increase due to favorable translation
rates, and price increases averaging 1%.
<PAGE> 3
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations, continued
Earnings for the nine-month period of 1995 were $31.8 million, or $1.31
per share, an 11% increase compared with the $1.18 per share for the
first nine months of 1994. This 11% increase included an unfavorable
impact of approximately $.33 per share due to the effect of raw
material cost increases, net of selling price increases. Partially
offsetting this negative effect was a $.07 per share increase due to
the favorable currency exchange rates and a $.01 per share increase due
to the reduction of the effective tax rate from 36% in 1994 to 35.5% in
1995.
Products with strong sales performance in the third quarter and first
nine months of 1995 include electronic encapsulation materials,
magnetic materials, food and beverage can coatings serving the European
market, medical nonwoven products, and products at Life Technologies,
Inc. Products with weaker performance in the third quarter and first
nine months compared with 1994 included coatings for the aerospace and
automotive markets.
Consolidated gross margin of 31.5% for the third quarter of 1995,
stated as a percentage of sales, decreased from 31.9% in the same
period last year. Gross margin for the first nine months of 1995 was
31.8%, down from 32.8% for the nine-month period last year. Continued
increases in the cost of commodity raw materials more than accounted
for the decrease in gross margin. Partially offsetting these cost
increases were the favorable effects of overall selling price
increases, productivity improvements, cost containment, and at Life
Technologies, Inc., higher gross margin.
Other income was $2.3 million for the third quarter of 1995, a decrease
of $.6 million, or 20% from the third quarter last year. Other income
for the first nine months of 1995 was $8.2 million compared with $9.1
million last year. The decrease in each period was primarily due to
lower net equity income from companies owned 50% or less.
Marketing and administrative costs increased $4.5 million, or 9% for
the third quarter of 1995, and $13.4 million, or 10% year-to-date. Both
period increases are principally due to increased marketing efforts at
Life Technologies, Inc. Marketing and administrative costs for the
third quarter and the first nine months of 1995 decreased as a
percentage of sales compared with last year.
On September 1, 1995, Life Technologies, Inc. acquired an additional 1%
ownership in its Japanese subsidiary, which resulted in a 51%
controlling interest, and therefore, the subsidiary's financial results
are consolidated as of the acquisition date.
In October 1995, the company announced that it would sell its 50%
equity interest in D & S Plastics International and also its acoustic
materials business. The planned divestitures follow the company's
decision to reduce its future strategic emphasis on the automotive
market.
The company also announced in October 1995 that it will purchase up
to one million shares of its common stock from time to time in the
open market.
<PAGE> 4
PART II
OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) Exhibit 15 of Part 1 - Letter to Securities and Exchange Commission
re: Incorporation of Accountants' Report
Exhibit 27 of Part 1 - Financial Data Schedule
Exhibit 99 of Part 1 - Third Quarter 1995 Financial Statements and
Notes
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE DEXTER CORPORATION
Date November 9, 1995 /s/ Kathleen Burdett
----------------------------- -----------------------------
Kathleen Burdett
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date November 9, 1995 /s/ George Collin
----------------------------- -----------------------------
George Collin
Controller
(Principal Accounting Officer)
<PAGE> 6
INDEX TO EXHIBITS
Exhibit No.
- -----------
15 Letter to Securities and Exchange Commission re: Incorporation
of Accountants' Report.
27 Financial Data Schedule.
99 Third Quarter 1995 Financial Statements and Notes.
<PAGE> 1
Exhibit 15
Securities and Exchange Commission
450 5th Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
We are aware that our report dated October 12, 1995, on our review of the
interim financial information of The Dexter Corporation as of September 30, 1995
and 1994, and for the three and nine-month periods then ended, and included in
this Form 10-Q is incorporated by reference in the company's registration
statements on Form S-8, Registration Nos. 2-63959, 33-27597, 33-53307, and
33-53309. Pursuant to Rule 436(c) under the Securities Act of 1933, this report
should not be considered a part of the registration statements prepared or
certified by us within the meaning of Sections 7 and 11 of that Act.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Springfield, Massachusetts
November 9, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Statement of Financial Position and Condensed Statement of Income
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 61,551
<SECURITIES> 0
<RECEIVABLES> 192,177
<ALLOWANCES> 4,728
<INVENTORY> 157,509
<CURRENT-ASSETS> 455,808
<PP&E> 633,404
<DEPRECIATION> 308,653
<TOTAL-ASSETS> 933,925
<CURRENT-LIABILITIES> 202,427
<BONDS> 224,017
<COMMON> 24,984
0
0
<OTHER-SE> 345,252
<TOTAL-LIABILITY-AND-EQUITY> 933,925
<SALES> 818,251
<TOTAL-REVENUES> 826,461
<CGS> 558,139
<TOTAL-COSTS> 558,139
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,562
<INCOME-PRETAX> 61,387
<INCOME-TAX> 21,792
<INCOME-CONTINUING> 31,819
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,819
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99A
THE DEXTER CORPORATION
<TABLE>
<CAPTION>
CONDENSED STATEMENT OF INCOME
- --------------------------------------------------------------------------------------------------------------------------------
In thousands of dollars Three Months Ended September 30 Nine Months Ended September 30
(except per share amounts) -------------------------------------- -----------------------------------------
1995 1994 Change 1995 1994 Change
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Net sales $ 268,467 $ 243,253 + 10% $ 818,251 $ 723,876 + 13%
Other income 2,272 2,835 - 20% 8,210 9,055 - 9%
----------- ---------- ---------- ----------
270,739 246,088 + 10% 826,461 732,931 + 13%
EXPENSES
Cost of sales 183,910 165,620 + 11% 558,139 486,362 + 15%
Marketing and administrative 51,950 47,491 + 9% 154,087 140,665 + 10%
Research and development 11,931 11,463 + 4% 37,286 34,971 + 7%
Interest 5,203 5,136 + 1% 15,562 15,340 + 1%
----------- ---------- ---------- ----------
INCOME BEFORE TAXES 17,745 16,378 + 8% 61,387 55,593 + 10%
Income taxes 6,081 5,896 + 3% 21,792 20,013 + 9%
----------- ---------- ---------- ----------
INCOME BEFORE MINORITY INTERESTS 11,664 10,482 + 11% 39,595 35,580 + 11%
Minority interests 2,265 2,068 + 10% 7,776 6,884 + 13%
----------- ---------- ---------- ----------
NET INCOME $ 9,399 $ 8,414 + 12% $ 31,819 $ 28,696 + 11%
=========== ========== ========== ==========
NET INCOME PER SHARE $ .39 $ .35 + 11% $ 1.31 $ 1.18 + 11%
=========== ========== ========== ==========
DIVIDENDS DECLARED PER SHARE $ .22 $ .22 $ .66 $ .66
AVERAGE SHARES OUTSTANDING (000) 24,377 24,346 24,369 24,344
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE> 2
EXHIBIT 99B
THE DEXTER CORPORATION
<TABLE>
<CAPTION>
CONDENSED STATEMENT OF FINANCIAL POSITION
- ------------------------------------------------------------------------------------------------------------------------
IN thousands of dollars September 30 December 31 September 30
----------------------------------------------------------
(except per share amounts) 1995 1994 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and short-term securities $ 61,551 $ 55,012 $ 42,426
Accounts receivable, net 206,793 168,957 174,345
Inventories
Materials and supplies 61,722 58,967 61,739
In process and finished 120,456 106,703 104,853
LIFO reserve (24,669) (22,828) (21,873)
-------- -------- --------
157,509 142,842 144,719
Prepaid and deferred expenses 29,955 25,842 29,938
-------- -------- --------
Total current assets 455,808 392,653 391,428
Property, plant and equipment, at cost, net 324,751 328,935 324,450
Excess of cost over net assets of
businesses acquired 74,841 74,034 75,335
Other assets 78,525 84,987 87,278
-------- -------- --------
$933,925 $880,609 $878,491
======== ======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
Short-term debt $ 8,917 $ 3,806 $ 5,299
Current installments of long-term debt 9,298 4,071 4,102
Accounts payable 86,992 82,851 75,851
Accrued liabilities and taxes 90,203 84,884 88,395
Current environmental reserves 1,654 2,660 2,549
Dividends payable 5,363 5,357 5,356
-------- -------- --------
Total current liabilities 202,427 183,629 181,552
Long-term debt 224,017 225,402 229,159
Deferred items 48,261 47,838 48,317
Long-term environmental reserves 15,798 17,632 18,441
Minority interests 73,186 62,475 60,501
Shareholders' equity
Common stock and paid-in capital 34,635 34,530 34,549
Retained earnings 344,136 328,401 324,555
Currency translation effects 1,263 (7,364) (6,614)
Treasury stock (9,798) (11,934) (11,969)
-------- -------- --------
Total shareholders' equity 370,236 343,633 340,521
-------- -------- --------
$933,925 $880,609 $878,491
======== ======== ========
EQUITY PER SHARE $ 15.19 $ 14.11 $ 13.99
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE> 3
EXHIBIT 99c
THE DEXTER CORPORATION
<TABLE>
<CAPTION>
CONDENSED STATEMENT OF CASH FLOWS
- -------------------------------------------------------------------------------------
Nine Months Ended September 30
------------------------------
In thousands of dollars 1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net income $ 31,819 $ 28,696
Noncash items
Depreciation and amortization 33,123 31,143
Income taxes not due 3,594 9,566
Minority interests 7,776 6,884
LIFO inventory charge 1,841 1,276
Equity in net income of affiliates (1,541) (2,651)
Other (1,230) (1,357)
Operating working capital increase (39,507) (29,353)
-------- --------
35,875 44,204
-------- --------
INVESTMENTS
Property, plant and equipment (21,199) (33,614)
Acquisitions (424) (7,980)
Joint ventures (2,942) 429
Notes receivable 3,150
Proceeds from exercise of LTI stock options 2,299 290
Other 1,329 (2,272)
-------- --------
(17,787) (43,147)
-------- --------
FINANCING
Long-term debt (656) (675)
Short-term debt, net 4,116 5,192
Dividends paid (16,078) (16,066)
LTI dividends paid to minority interest shareholders (1,026) (1,020)
Other (178) 92
-------- --------
(13,822) (12,477)
-------- --------
INCREASE (DECREASE) IN CASH AND SHORT-TERM SECURITIES $ 4,266 $(11,420)
======== ========
RECONCILIATION OF INCREASE (DECREASE) IN CASH AND
SHORT-TERM SECURITIES
Cash and short-term securities at beginning of period $ 55,012 $ 52,746
Cash and short-term securities at end of period 61,551 42,426
-------- --------
Increase (Decrease) in cash and short-term securities
per Statement of Financial Position 6,539 (10,320)
Currency translation effects (139) (1,100)
Cash included from consolidation of a subsidiary
which became majority-owned in 1995 (2,134)
-------- --------
$ 4,266 $(11,420)
======== ========
INTEREST PAID $ 12,568 $ 14,138
======== ========
TAXES PAID $ 18,198 $ 10,447
======== ========
- -------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE> 4
EXHIBIT 99d
THE DEXTER CORPORATION
<TABLE>
<CAPTION>
NET SALES BY MARKET
- -----------------------------------------------------------------------------------------------------------------------
Three Months Ended September 30 Nine Months Ended September 30
------------------------------------- -------------------------------------
In thousands of dollars 1995 1994 Change 1995 1994 Change
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aerospace $ 10,776 $ 10,750 $ 34,083 $ 34,322 - 1%
Automotive(1) 13,263 13,859 - 4% 45,846 42,518 + 8%
Electronics 47,905 42,059 +14% 141,084 120,562 +17%
Food Packaging 69,898 67,239 + 4% 214,722 190,007 +13%
Medical 90,516 78,194 +16% 272,104 235,838 +15%
Other 36,109 31,152 +16% 110,412 100,629 +10%
-------- -------- -------- --------
Consolidated $268,467 $243,253 +10% $818,251 $723,876 +13%
======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes unconsolidated joint venture D & S Plastics International,
which had third quarter sales of $22.8 million in 1995 and $19.8
million in 1994. For the nine-month period, D & S Plastics
International had unconsolidated sales of $66.5 million in 1995 and
$61.2 million in 1994.
<PAGE> 5
Exhibit 99e
The Dexter Corporation
Notes to Consolidated Financial Statements
Note 1 - In the opinion of company's management, the unaudited
financial statements reflect adjustments of a normal recurring nature
which are necessary to present a fair statement of the results for the
interim periods. The notes to the consolidated financial statements
including management's discussion in Part 1, Item 2 of this Form 10-Q
are incorporated as part of these consolidated financial statements.
The year-end condensed balance sheet data was derived from audited
financial statements.
Note 2 - Net income per share figures in the consolidated
Condensed Statement of Income are based on the weighted average number
of shares outstanding as indicated for each period. No effect has been
given to stock options or restricted stock awards outstanding as no
dilutive effect would result from the inclusion of these items.
Note 3 - The following are included as components of Common Stock and Paid-in
Capital.
<TABLE>
<CAPTION>
COMMON STOCK & PAID-IN CAPITAL SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
(IN THOUSANDS OF DOLLARS) 1995 1994 1994
- ------------------------------ ------------- ------------ -------------
<S> <C> <C> <C>
Common stock $24,984 $24,984 $24,984
Paid-in capital 12,443 11,979 12,186
Unrealized losses on
investments (SFAS No. 115) (247) (1,468) (1,226)
Unearned compensation on
restricted stock (2,545) (965) (1,395)
------- ------- -------
$34,635 $34,530 $34,549
======= ======= =======
</TABLE>
<PAGE> 6
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
The Dexter Corporation
We have reviewed the accompanying condensed statement of financial position of
The Dexter Corporation as of September 30, 1995 and 1994, and the related
condensed statement of income for the three and nine-month periods ended
September 30, 1995 and 1994 and the condensed statement of cash flows for the
nine-month periods ended September 30, 1995 and 1994. These financial statements
are the responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of financial position of The Dexter
Corporation as of December 31,1994, and the related consolidated statements of
income, cash flows, and changes in shareholders' equity for the year then
ended (not presented herein); and in our report dated February 2, 1995, we
expressed an opinion which included an explanatory paragraph regarding the
adoption of SFAS No. 115, Accounting for Certain Investments in Debt and
Equity Securities, on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed statement of financial
position as of December 31, 1994,is fairly stated, in all material respects,
in relation to the consolidated statement of financial position from which it
has been derived.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Springfield, Massachusetts
October 12, 1995
