<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 June 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
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THE DEXTER CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
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)
</TABLE>
(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 July 31, 1995
- -------------------------- ----------------------------
COMMON STOCK, PAR VALUE $1 24,514,980 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
and six months ended June 30, 1995 and 1994.
(b) Exhibit 99b - Condensed Statement of Financial Position as of June
30, 1995, December 31, 1994, and June 30, 1994.
(c) Exhibit 99c - Condensed Statement of Cash Flows for the six months
ended June 30, 1995 and 1994.
(d) Exhibit 99d - Net Sales by Market for the three months and six
months ended June 30, 1995 and 1994.
(e) Exhibit 99e - Notes to Consolidated Financial Statements.
The unaudited financial data included herein as of June 30, 1995 and
1994, and for the three- and six-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 second quarter of 1995
increased 9% to $12.0 million, or $.49 per share, compared with $11.0
million, or $.45 per share for the second quarter last year. This 9%
increase was due to continued strong sales growth which reached 15%
compared with the same period last year. Earnings growth was restricted
by raw material cost increases which, net of selling price increases,
reduced earnings by approximately $.14 per share compared with the
second quarter of 1994. This reduction was somewhat offset by the
favorable effect of changes in currency exchange rates versus the
second quarter of 1994 which increased earnings by $.04 per share.
Sales for the second quarter of 1995 were a record $283.0 million, a
15% increase over sales of $247.1 million in the second quarter of
1994. This 15% increase includes a 9% increase due to unit volume, a 5%
increase due to the effect of higher currency translation rates on
international sales, and price increases averaging 1%.
Sales for the six months ended June 30, 1995, were $549.8 million, a
14% increase compared with sales of $480.6 million for the same period
last year. Earnings for the first six months of 1995 were $22.4
million, or $.92 per share, an 11% increase compared with results for
the first half of 1994 of $.83 per share. This 11% increase includes a
reduction of approximately
<PAGE> 3
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations, continued
$.23 per share due to the effect of raw material cost increases, net of
selling price increases, and a $.06 per share increase due to the
effect of changes in currency exchange rates.
Products with strong sales performance in the second quarter and first
half of 1995 include electronic encapsulation materials, magnetic
materials, food and beverage can coatings serving international
markets, food and medical nonwoven products, and sales of products at
Life Technologies, Inc.
Consolidated gross margin of 31.8% for the second quarter of 1995,
stated as a percentage of sales, decreased 1.3 percentage points from
33.1% in the second quarter of 1994. Gross margin for the first six
months of 1995 was 31.9% down from 33.3% for the same 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 and cost containment, and at Life
Technologies, Inc., higher gross margin.
Other income was $2.9 million for the second quarter of 1995, a
decrease of $.5 million, or 14% from the second quarter last year.
Other income for the first six months of 1995 was $5.9 million compared
with $6.2 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 cost increased $4.6 million, or 10% for
the second quarter of 1995, and $9.0 million, or 10% year-to-date. Both
period increases are principally due to increased marketing efforts at
Life Technologies, Inc. Marketing and administrative cost for the
second quarter and the first six months of 1995 decreased as a
percentage of sales compared with last year.
In July 1995, the Board of Directors adopted an amendment to the
company's shareholder rights plan. This amendment reduces the plan's
"flip-in" trigger from 30 percent to 20 percent. As amended, the rights
plan provides that if anyone becomes the beneficial owner of 20 percent
or more of the outstanding common stock of the company, every other
holder of a right will then be entitled to receive, upon exercise,
shares of the company's common stock having a value of two times the
exercise price of the right.
<PAGE> 4
PART II
OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
<TABLE>
<S> <C>
(a) Exhibit 4B(2) - Amendment No. 3 to the registrant's Rights Agreement, dated November 5, 1986, was filed as
Exhibit 4 to Form 8-A/A, which was filed with the Securities and Exchange Commission on July 13,
1995, and is hereby incorporated by reference.
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 - Second Quarter 1995 Financial Statements and Notes
</TABLE>
(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 August 4, 1995 /s/ Kathleen Burdett
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Kathleen Burdett
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date August 4, 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 Second 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 July 14, 1995 on our review of the interim
financial information of The Dexter Corporation as of June 30, 1995 and 1994,
and for the three- and six-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
August 3, 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
<CURRENCY>U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 49,491
<SECURITIES> 0
<RECEIVABLES> 186,464
<ALLOWANCES> 4,744
<INVENTORY> 156,468
<CURRENT-ASSETS> 438,658
<PP&E> 630,292
<DEPRECIATION> 301,357
<TOTAL-ASSETS> 928,227
<CURRENT-LIABILITIES> 201,178
<BONDS> 222,273
<COMMON> 24,984
0
0
<OTHER-SE> 343,950
<TOTAL-LIABILITY-AND-EQUITY> 928,227
<SALES> 549,784
<TOTAL-REVENUES> 555,722
<CGS> 374,229
<TOTAL-COSTS> 374,229
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,359
<INCOME-PRETAX> 43,642
<INCOME-TAX> 15,711
<INCOME-CONTINUING> 22,420
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,420
<EPS-PRIMARY> .92
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99a
The Dexter Corporation
Condensed Statement of Income
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
In thousands of dollars THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
-------------------------- ------------------------
(except per share amounts) 1995 1994 CHANGE 1995 1994 CHANGE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Net sales $282,991 $247,106 +15% $549,784 $480,623 +14%
Other income 2,899 3,368 -14% 5,938 6,220 - 5%
-------- -------- -------- --------
285,890 250,474 +14% 555,722 486,843 +14%
Expenses
Cost of sales 193,100 165,396 +17% 374,229 320,742 +17%
Marketing and administrative 51,719 47,093 +10% 102,137 93,174 +10%
Research and development 12,825 11,893 + 8% 25,355 23,508 + 8%
Interest 5,196 5,126 + 1% 10,359 10,204 + 2%
-------- -------- -------- --------
Income before Taxes 23,050 20,966 +10% 43,642 39,215 +11%
Income taxes 8,298 7,547 +10% 15,711 14,117 +11%
-------- -------- -------- --------
Income before Minority Interests 14,752 13,419 +10% 27,931 25,098 +11%
Minority interests 2,794 2,435 +15% 5,511 4,816 +14%
-------- -------- -------- --------
Net Income $ 11,958 $ 10,984 + 9% $ 22,420 $ 20,282 +11%
======== ======== ======== ========
Net Income per Share $ .49 $ .45 + 9% $ .92 $ .83 +11%
======== ======== ======== ========
Dividends Declared per Share $ .22 $ .22 $ .44 $ .44
Average Shares Outstanding (000) 24,376 24,345 24,364 24,343
- -------------------------------------------------------------------------------------------
</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 JUNE 30 DECEMBER 31 June 30
-----------------------------------------
(except per share amounts) 1995 1994 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and short-term securities $ 49,491 $ 55,012 $ 43,506
Accounts receivable, net 202,565 168,957 173,638
Inventories
Materials and supplies 64,165 58,967 60,825
In process and finished 115,935 106,703 100,862
LIFO reserve (23,632) (22,828) (21,415)
---------- ---------- ----------
156,468 142,842 140,272
Prepaid and deferred expenses 30,134 25,842 34,174
---------- ---------- ----------
Total current assets 438,658 392,653 391,590
Property, plant and equipment,
at cost, net 328,935 328,935 319,748
Excess of cost over net assets of
businesses acquired 75,652 74,034 73,979
Other assets 84,982 84,987 86,862
---------- ---------- ----------
$ 928,227 $ 880,609 $ 872,179
========== ========== ==========
LIABILITIES & SHAREHOLDERS' EQUITY
Short-term debt $ 4,788 $ 3,806 $ 4,346
Current installments of long-term debt 9,307 4,071 4,045
Accounts payable 91,989 82,851 76,096
Accrued liabilities and taxes 88,237 84,884 90,412
Current environmental reserves 1,494 2,660 2,779
Dividends payable 5,363 5,357 5,356
---------- ---------- ----------
Total current liabilities 201,178 183,629 183,034
Long-term debt 222,273 225,402 228,555
Deferred items 48,642 47,838 51,106
Long-term environmental reserves 17,932 17,632 18,416
Minority interests 69,268 62,475 57,734
Shareholders' equity
Common stock and paid-in capital 34,150 34,530 34,441
Retained earnings 340,101 328,401 321,498
Currency translation effects 4,585 (7,364) (10,589)
Treasury stock (9,902) (11,934) (12,016)
---------- ---------- ----------
Total shareholders' equity 368,934 343,633 333,334
---------- ---------- ----------
$ 928,227 $ 880,609 $ 872,179
========== ========== ==========
EQUITY PER SHARE $15.13 $14.11 $13.69
</TABLE>
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See accompanying notes to the consolidated financial statements.
<PAGE> 3
Exhibit 99c
The Dexter Corporation
Condensed Statement of Cash Flows
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30
----------------------------------
In thousands of dollars 1995 1994
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<S> <C> <C>
OPERATIONS
Net income $ 22,420 $ 20,282
Noncash items
Depreciation and amortization 22,568 20,784
Income taxes not due 4,721 8,537
Minority interests 5,511 4,816
LIFO inventory charge 804 818
Equity in net income of affiliates (1,286) (1,867)
Other (135) 1,199
Operating working capital increase (39,005) (26,253)
----------- ----------
15,598 28,316
----------- ----------
INVESTMENTS
Property, plant and equipment (14,473) (21,463)
Acquisitions (7,980)
Joint ventures (2,156) 547
Notes receivable 3,000
Proceeds from exercise of LTI stock options 862 184
Other 1,714 (1,434)
----------- ----------
(11,053) (30,146)
----------- ----------
FINANCING
Long-term debt (650) (668)
Short-term debt, net 982 4,273
Dividends paid (10,714) (10,709)
LTI dividends paid to minority interest shareholders (683) (679)
Other (231) (389)
----------- ----------
(11,296) (8,172)
----------- ----------
DECREASE IN CASH AND SHORT-TERM SECURITIES $ (6,751) $ (10,002)
=========== ==========
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 49,491 43,506
----------- ----------
Decrease in cash and short-term securities
per Statement of Financial Position (5,521) (9,240)
Currency translation effects (1,230) (762)
----------- ----------
$ (6,751) $ (10,002)
=========== ==========
INTEREST PAID $ 10,357 $ 10,178
=========== ==========
TAXES PAID $ 10,990 $ 5,580
=========== ==========
</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 JUNE 30 SIX MONTHS ENDED JUNE 30
------------------------------------------ ----------------------------------------
In thousands of dollars 1995 1994 CHANGE 1995 1994 CHANGE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aerospace $ 11,403 $ 11,972 -5% $ 23,307 $ 23,572 -1%
Automotive (1) 15,630 15,284 +2% 32,583 28,659 +14%
Electronics 48,148 38,374 +25% 93,179 78,503 +19%
Food Packaging 74,958 64,919 +15% 144,824 122,768 +18%
Medical 94,318 81,693 +15% 181,588 157,644 +15%
Other 38,534 34,864 +11% 74,303 69,477 +7%
-------- -------- -- -------- -------- --
Consolidated $282,991 $247,106 +15% $549,784 $480,623 +14%
======== ======== == ======== ======== ==
</TABLE>
(1) Excludes unconsolidated joint venture D & S Plastics International, which
had second quarter sales of $20.7 million in 1995 and $21.8 million in 1994.
For the six-month period, D & S Plastics International had unconsolidated
sales of $43.7 million in 1995 and $41.4 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 JUNE 30, DECEMBER 31, JUNE 30,
(In thousands of dollars) 1995 1994 1994
- ------------------------------ -------- ------------ ---------
<S> <C> <C> <C>
Common stock $ 24,984 $ 24,984 $ 24,984
Paid-in capital 12,251 11,979 12,186
Unrealized losses on
investments (SFAS No. 115) (549) (1,468) (1,243)
Unearned compensation on
restricted stock (2,536) (965) (1,486)
-------- -------- --------
$ 34,150 $ 34,530 $ 34,441
======== ======== ========
</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 June 30, 1995 and 1994, and the related condensed
statement of income for the three and six-month periods ended June 30, 1995 and
1994 and the condensed statement of cash flows for the six-month periods ended
June 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 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
July 14, 1995
