<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 March 31, 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)
(203) 627-9051
(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 April 28, 1995
- -------------------------- -----------------------------
COMMON STOCK, PAR VALUE $1 24,437,980 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
ended March 31, 1995 and 1994.
(b) Exhibit 99b - Condensed Statement of Financial Position as of March
31, 1995, December 31, 1994, and March 31, 1994.
(c) Exhibit 99c - Condensed Statement of Cash Flows for the three
months ended March 31, 1995 and 1994.
(d) Exhibit 99d - Net Sales by Market for the three months ended March
31, 1995 and 1994.
(e) Exhibit 99e - Notes to Consolidated Financial Statements.
The unaudited financial data included herein as of March 31, 1995 and
1994, and the three-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 first quarter of
1995 was $10.5 million, or $.43 per share, compared with $9.3
million, or $.38 per share for the first quarter of 1994.
Earnings increased 13% in the first quarter of 1995 despite an
average raw material cost increase of over 5% from the first
quarter last year, which was partially offset by selling price
increases. The effect of changes in currency exchange rates,
versus the first quarter of 1994, increased earnings by $.02 per
share.
Sales for the first quarter of 1995 were a record $266.8 million,
a 14% increase over sales of $233.5 million in the first quarter
of 1994. This 14% increase includes a 9% increase due to unit
volume, a 4% increase due to the effect of higher currency
translation rates on international sales, and price increases
averaging 1%.
Products with strong sales performance in the first quarter of 1995
include acoustic materials serving the automotive market,
electronic encapsulation materials, magnetic materials, food and
beverage can coatings, nonwoven products serving the international
markets, and sales of products at Life Technologies, Inc.
Consolidated gross margin of 32.1% for the first quarter of 1995,
stated as a percentage of sales, decreased by 1.4 percentage points
from 33.5% in the first quarter of 1994. Significant increases in
the cost of commodity raw materials more than accounted for the
decrease in gross
<PAGE> 3
Item 2 -Management's Discussion and Analysis of Financial
Condition and Results of Operations, continued
margin. Partially offsetting these cost increases were the favorable
effects of selling price increases, improvement in manufacturing
productivity, and higher gross margins at Life Technologies, Inc. The
first quarter 1995 gross margin of 32.1% was up .6 percentage points
from the fourth quarter of last year. This improvement was mainly due to
a rebound in margin at Life Technologies, Inc. whose deterioration of
margin in 1994 was the principal cause of last year's decline in
consolidated gross margin.
Marketing and administrative cost decreased to 18.9% of sales in the
first quarter compared with 19.7% of sales in the same period last year.
This percent of sales decrease still yielded a $4.3 million, or 9%,
increase in spending which reflects increased marketing efforts at Life
Technologies, Inc.
<PAGE> 4
PART II
OTHER INFORMATION
Item 1-Legal Proceedings
On September 16, 1987, employees of American National Can Company were
allegedly exposed to an emission of ethyl acrylate from the Packaging
Products division's adjacent plant in Birmingham, Alabama. The alleged
incident is believed to involve only episodic exposure to a low level and
concentration of the chemical, resulting in minor respiratory irritation.
To date, approximately $38,000 in medical expenses is believed to have
been incurred by the injured American National Can employees, as well as
some lost production time. In July of 1989, an action was commenced in
the Circuit Court for the Judicial District of Jefferson County, Alabama,
by thirty-three employees of American National Can against the Company,
Rohm and Haas Company, Liberty Mutual Insurance Company and certain other
defendants, including certain employees of the Company's Packaging
Products division. The suit alleged that the plaintiffs were exposed to
an emission of ethyl acrylate from the Company's Packaging Products
division's plant in Birmingham, Alabama, and suffered injury as a
consequence thereof. The complaint sought $10 million in damages from the
defendants. Dexter's insurance carrier was placed on notice and agreed to
provide the Company with a defense pursuant to the terms and conditions
of their policy. The litigation was settled in February 1995 and all
claims against the Company have been dismissed. The litigation and
settlement did not have a material adverse effect on the Company's
financial condition or results of operations.
Item 4-Submission of Matters to a Vote of Security Holders
The annual meeting of the shareholders of the company was held on April
27, 1995, where the following actions were taken:
(a) The re-election to the Board of Directors of Mr. Robert M. Furek,
President and Chief Executive Officer of Heublein, Inc.; Ms. Martha Clark
Goss, Senior Vice President, Enterprise Integrated Control of The
Prudential Insurance Company of America; and Glen L. Urban, Ph.D., Dean
of Alfred P. Sloan School of Management at the Massachusetts Institute of
Technology.
The votes for each director were as follows:
<TABLE>
<CAPTION>
Director For Withheld
-------- --- ---------
<S> <C> <C>
Mr. Robert M. Furek 20,548,288 1,679,961
Ms. Martha Clark Goss 22,119,921 108,328
Glen L. Urban, Ph.D. 20,548,987 1,679,262
</TABLE>
In addition, the following directors continue in office for the terms
expiring as indicated: Mr. Charles H. Curl (1997), Mr. Peter G. Kelly
(1997), Mr. Jean-Francois Saglio (1997), Mr. Bernard M. Fox (1996), Mr.
K. Grahame Walker (1996), and George M. Whitesides, Ph.D. (1996).
<PAGE> 5
Item 4-Submission of Matters to a Vote of Security Holders, continued
(b) The selection of Coopers & Lybrand L.L.P. as auditors of the company
for the year 1995 was ratified.
The votes for selection of Coopers & Lybrand L.L.P. were as follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
22,144,260 54,811 29,178
</TABLE>
(c) The shareholder proposal that the Board of Directors adopt
a policy concerning severance agreements with officers and directors of
the company was rejected. The Board of Directors had recommended that
this proposal be rejected.
The votes for this shareholder proposal were as follows:
<TABLE>
<CAPTION>
For Against Abstain Broker Nonvotes
--- ------- ------- ---------------
<S> <C> <C> <C>
8,184,096 12,265,460 523,848 1,254,845
</TABLE>
Item 5-Other Information
(a) Mr. Robert E. McGill, III, whose term as director expired on April 27,
1995, did not stand for re-election. Mr. McGill served the company for
nearly 20 years, most recently as Executive Vice President, Finance and
Administration from 1989 to December 1994, when he retired.
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 - First 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> 6
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 May 11, 1995 /s/ Kathleen Burdett
------------------ ------------------------------
Kathleen Burdett
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date May 11, 1995 /s/ George Collin
------------------ ------------------------------
George Collin
Controller
(Principal Accounting Officer)
<PAGE> 7
INDEX TO EXHIBITS
Exhibit No.
15 Letter to Securities and Exchange Commission re: Incorporation of
Accountants' Report.
27 Financial Data Schedule.
99 First 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 April 12, 1995 on our review of the interim
financial information of The Dexter Corporation as of March 31, 1995 and 1994,
and for the three-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
May 4, 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> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 46,320
<SECURITIES> 0
<RECEIVABLES> 178,706
<ALLOWANCES> 5,043
<INVENTORY> 155,362
<CURRENT-ASSETS> 419,688
<PP&E> 623,126
<DEPRECIATION> 291,373
<TOTAL-ASSETS> 912,669
<CURRENT-LIABILITIES> 196,338
<BONDS> 226,925
<COMMON> 24,984
0
0
<OTHER-SE> 333,236
<TOTAL-LIABILITY-AND-EQUITY> 912,669
<SALES> 266,793
<TOTAL-REVENUES> 269,832
<CGS> 181,129
<TOTAL-COSTS> 181,129
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,163
<INCOME-PRETAX> 20,592
<INCOME-TAX> 7,413
<INCOME-CONTINUING> 10,462
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,462
<EPS-PRIMARY> .43
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99A
THE DEXTER CORPORATION
CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
In thousands of dollars Three Months Ended March 31
(except per share amounts) ----------------------------------------------
1995 1994 Change
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Net sales $ 266,793 $ 233,517 +14%
Other income 3,039 2,852 + 7%
------------ -----------
269,832 236,369 +14%
EXPENSES
Cost of sales 181,129 155,346 +17%
Marketing and administrative 50,418 46,081 + 9%
Research and development 12,530 11,615 + 8%
Interest 5,163 5,078 + 2%
------------ -----------
INCOME BEFORE TAXES 20,592 18,249 +13%
Income taxes 7,413 6,570 +13%
------------ -----------
INCOME BEFORE MINORITY INTERESTS 13,179 11,679 +13%
Minority interests 2,717 2,381 +14%
------------ -----------
NET INCOME $ 10,462 $ 9,298 +13%
============ ===========
NET INCOME PER SHARE $ .43 $ .38 +13%
============ ===========
DIVIDENDS DECLARED PER SHARE $ .22 $ .22
AVERAGE SHARES OUTSTANDING (000) 24,352 24,341
- -----------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE> 2
EXHIBIT 99B
THE DEXTER CORPORATION
CONDENSED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
In thousands of dollars March 31 December 31 March 31
(except per share amounts) -------- ----------- --------
1995 1994 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and short-term securities $ 46,320 $ 55,012 $ 38,686
Accounts receivable, net 189,276 168,957 167,157
Inventories
Materials and supplies 60,971 58,967 61,859
In process and finished 117,505 106,703 99,005
LIFO reserve (23,114) (22,828) (20,554)
------------ ----------- -----------
155,362 142,842 140,310
Prepaid and deferred expenses 28,730 25,842 32,614
------------ ----------- -----------
Total current assets 419,688 392,653 378,767
Property, plant and equipment, at cost, net 331,753 328,935 314,399
Excess of cost over net assets of
businesses acquired 75,822 74,034 73,245
Other assets 85,406 84,987 85,968
------------ ----------- -----------
$ 912,669 $ 880,609 $ 852,379
============ =========== ===========
LIABILITIES & SHAREHOLDERS' EQUITY
Short-term debt $ 6,678 $ 3,806 $ 5,882
Current installments of long-term debt 4,266 4,071 3,944
Accounts payable 89,940 82,851 78,767
Accrued liabilities and taxes 87,742 84,884 81,587
Current environmental reserves 2,354 2,660 3,384
Dividends payable 5,358 5,357 5,355
------------ ----------- -----------
Total current liabilities 196,338 183,629 178,919
Long-term debt 226,925 225,402 227,709
Deferred items 48,013 47,838 51,036
Long-term environmental reserves 17,484 17,632 18,284
Minority interests 65,689 62,475 54,449
Shareholders' equity
Common stock and paid-in capital 35,239 34,530 36,946
Retained earnings 333,505 328,401 315,870
Currency translation effects 1,092 (7,364) (17,428)
Treasury stock (11,616) (11,934) (13,406)
------------ ----------- -----------
Total shareholders' equity 358,220 343,633 321,982
------------ ----------- -----------
$ 912,669 $ 880,609 $ 852,379
============ =========== ===========
EQUITY PER SHARE $ 14.70 $ 14.11 $ 13.23
- ---------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE> 3
EXHIBIT 99C
THE DEXTER CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Three Months Ended March 31
------------------------------------
In thousands of dollars 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net income $ 10,462 $ 9,298
Noncash items
Depreciation and amortization 11,065 10,329
Income taxes not due 4,288 2,992
Minority interests 2,717 2,381
LIFO inventory charge (credit) 286 (43)
Equity in net income of affiliates (764) (836)
Other 147 732
Operating working capital increase (27,454) (21,275)
------------ -----------
747 3,578
------------ -----------
INVESTMENTS
Property, plant and equipment (8,372) (10,257)
Acquisitions (7,983)
Joint ventures (1,597) 335
Notes receivable 3,000
Proceeds from exercise of LTI stock options 382 108
Other (48) 601
------------ -----------
(6,635) (17,196)
------------ -----------
FINANCING
Long-term debt (450) (468)
Short-term debt, net 2,872 5,873
Dividends paid (5,357) (5,354)
LTI dividends paid to minority interest shareholders (341) (339)
Other (371) (500)
------------ -----------
(3,647) (788)
------------ -----------
DECREASE IN CASH AND SHORT-TERM SECURITIES $ (9,535) $ (14,406)
============ ===========
RECONCILIATION OF 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 46,320 38,686
------------ -----------
Decrease in cash and short-term securities
per Statement of Financial Position (8,692) (14,060)
Currency translation effects (843) (346)
------------ -----------
$ (9,535) $ (14,406)
============ ===========
INTEREST PAID $ 3,980 $ 3,944
============ ===========
TAXES PAID $ 3,125 $ 3,578
============ ===========
- --------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE> 4
EXHIBIT 99D
THE DEXTER CORPORATION
NET SALES BY MARKET
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Three Months Ended March 31
-----------------------------------------------
In thousands of dollars 1995 1994 Change
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
AEROSPACE $ 11,904 $ 11,600 + 3%
AUTOMOTIVE (1) 16,953 13,375 +27%
ELECTRONICS 45,031 40,129 +12%
FOOD PACKAGING 69,866 57,849 +21%
MEDICAL 87,270 75,951 +15%
OTHER 35,769 34,613 + 3%
------------ -----------
CONSOLIDATED $ 266,793 $ 233,517 +14%
============ ===========
- --------------------------------------------------------------------------------------
</TABLE>
(1) Excludes unconsolidated joint venture D & S Plastics International,
which had sales of $23.1 million in 1995 and $19.6 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 MARCH 31, DECEMBER 31, MARCH 31,
(IN THOUSANDS OF DOLLARS) 1995 1994 1994
- ------------------------------ --------- ------------ ---------
<S> <C> <C> <C>
Common stock $24,984 $24,984 $24,984
Paid-in capital 11,709 11,979 11,962
Unrealized losses on
investments (SFAS No. 115) (558) (1,468)
Unearned compensation on
restricted stock (896) (965)
------- ------- -------
$35,239 $34,530 $36,946
======= ======= =======
</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 March 31, 1995 and 1994, and the related condensed
statements of income and cash flows for the three-month periods then ended.
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. We previously audited and
expressed our unqualified opinion on the financial statements for the year ended
December 31, 1994 (not presented herein). 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 statement of financial position from which it has been derived.
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.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Springfield, Massachusetts
April 12, 1995
