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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended DECEMBER 31, 1994
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)
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CONNECTICUT 06-0321410
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
ONE ELM STREET
WINDSOR LOCKS, CONNECTICUT 06096
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 203-627-9051
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Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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COMMON STOCK, PAR VALUE $1 NEW YORK STOCK EXCHANGE
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Securities registered pursuant to Section 12(g) of the Act: NONE
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (sec.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's 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]
Aggregate market value of the registrant's common stock as of February 28, 1995,
held by nonaffiliates of the registrant. $521,880,329.
The number of shares of the registrant's common stock, $1 par value, outstanding
at February 28, 1995 was 24,415,454.
PORTIONS OF THE FOLLOWING DOCUMENTS ARE INCORPORATED BY REFERENCE:
The Dexter Corporation's 1994 Annual Report to Shareholders (Parts I, II and
IV).
Proxy Statement accompanying the notice, dated March 9, 1995, of the annual
meeting of The Dexter Corporation's shareholders to be held on April 27, 1995
(Parts I and III).
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TABLE OF CONTENTS
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PAGE
ITEM NUMBER
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PART I
1. Business..................................................................... 1
2. Properties................................................................... 2
3. Legal Proceedings............................................................ 4
4. Submission of Matters to a Vote of Security Holders.......................... 4
4a. Executive Officers of the Registrant......................................... 4
PART II
5. Market for the Registrant's Common Equity and Related Stockholder Matters.... 6
6. Selected Financial Data...................................................... 6
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................. 6
8. Financial Statements and Supplementary Data.................................. 7
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure................................................................. 7
PART III
10. Directors and Executive Officers of the Registrant........................... 7
11. Executive Compensation....................................................... 7
12. Security Ownership of Certain Beneficial Owners and Management............... 7
13. Certain Relationships and Related Transactions............................... 7
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............. 8
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This Form 10-K is printed on recycled paper.
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PART I
As used herein, the term "Dexter" and the term "Company" shall mean The
Dexter Corporation and its consolidated subsidiaries unless the context
otherwise indicates, the term "1994 Annual Report" shall mean the Company's 1994
Annual Report to Shareholders, and the term "Proxy Statement" shall mean the
Proxy Statement accompanying Dexter's notice, dated March 9, 1995, of the annual
meeting of Dexter's shareholders to be held on April 27, 1995. The 1994 Annual
Report is filed as an exhibit to this report. Portions of the 1994 Annual Report
and Proxy Statement are incorporated herein by reference as hereinafter stated.
ITEM 1 BUSINESS
GENERAL
Founded in 1767 and incorporated in the state of Connecticut in 1914,
Dexter produces specialty materials for customers in five major strategic global
markets: aerospace, automotive, electronics, food packaging, and medical. The
financial information in the hereinafter mentioned pages and sections should be
read in conjunction with the Financial Statements contained on pages 24 through
28, Quarterly Financial Information on page 28, Analysis of Financial Condition
and Operations contained on pages 29 through 39, and Analysis of Financial
Position contained on pages 39 through 47 of the 1994 Annual Report. For a
description of the business of Dexter, see pages 29 through 38 of the 1994
Annual Report which are incorporated herein by reference, which include
acquisitions information and events, trends and vulnerabilities on page 29,
segment information on pages 34, 35 and 38, and international operations
information on pages 36 and 37.
CUSTOMERS AND MARKETING
Dexter's customers for most specialty material products are principally
industrial manufacturers who convert or incorporate Dexter's products into their
own final product. Biotechnology products are marketed directly to research
laboratories, pharmaceutical and biotechnology companies, and other customers.
Most of the Company's products are sold by its own sales force of which
approximately 229 are directly engaged in field sales (see page 35 of the 1994
Annual Report which is incorporated herein by reference), and the remainder are
sold through agents or distributors. In general, each of the Company's product
lines has its own sales force. In 1994, no single customer accounted for more
than 5 percent of consolidated revenues, and the ten largest customers accounted
for less than 20 percent. Dexter has no single customer contract for the sale of
its products which it deems to be material to its business as a whole.
Management believes that product research and development, close customer
relations and strong technical service are important factors in Dexter's growth
over the years.
RESEARCH AND DEVELOPMENT
Dexter engages in research and development with respect to new product
development and product applications primarily for its own use, with only minor
contract services provided for others.
The number of employees engaged in research and development and the
expenditures related thereto are set forth on page 35 of the 1994 Annual Report
which is incorporated herein by reference.
COMPETITION
No company is known to compete with Dexter in all of its major businesses,
but in each market, competition is offered by a number of companies, including
firms substantially larger and with greater financial resources than Dexter.
Dexter's management believes that Dexter is an important factor in each of
its markets. All market segments are diverse and highly competitive and
emphasize the quality of their products. The businesses of the Company are
characterized by technological innovation and the continued introduction of new
products and services.
Dexter continues to experience competition from imports in several of its
domestic markets.
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BACKLOG
Dexter continues to maintain a backlog of orders. Such backlog was
approximately $70 million at December 31, 1994 and $73 million at December 31,
1993 and typically represents less than two months sales for businesses where
backlog is applicable. The Company expects substantially all of the December 31,
1994 backlog to be shipped in 1995. Backlog was significant in all markets
except at Life Technologies, which is part of the medical market, where backlog
is not considered to be relevant to the business. Although backlog orders are
reasonably firm, they may be subject to cancellation or delay and amounts are
not necessarily indicative of future sales volume or profitability.
SUPPLIERS
Dexter buys materials for its products from many suppliers and is not
dependent on any one supplier or group of suppliers for any significant raw
materials purchased. There are, however, some specific raw materials which are
available from only one supplier. If there were to be an interruption with the
supply of these raw materials, future revenues could be diminished.
The materials bought include natural fibers such as hemp and wood;
synthetic fibers such as glass, rayon and polyester; basic chemical materials
(many of which are derived from petroleum products) for the manufacture of
synthetic resins; resins produced by others, including polypropylene; rubber,
solvents, additives and pigments; highly purified chemicals and products
collected from natural sources for Life Technologies' products; and magnetic
materials.
EMPLOYEES
Approximately 1,600 of the Company's 4,700 employees (see page 22 of the
1994 Annual Report which is incorporated herein by reference) are employed
outside the United States. There has not been a significant work stoppage in
recent years and management believes employee relations are good.
ENVIRONMENTAL REGULATION
The Company is subject to federal, state and legal requirements regulating
the discharge of materials into the environment, or otherwise relating to the
protection of the environment. The Company does not believe that the continuing
cost of complying with such regulations and other costs related to environmental
matters will have a material adverse effect on the Company's financial position
or results of operations. Capital expenditures for environmental control were $3
million for 1994 and are estimated to be $3-$4 million for 1995. For further
discussion of other current environmental matters, see Events, Trends, and
Vulnerabilities on page 29 and Environmental Liabilities on page 45 of the 1994
Annual Report which are incorporated herein, and refer to Item 3, Legal
Proceedings, on page 4 of this filing, and Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations, on page 6 of this
filing.
ITEM 2 PROPERTIES
For certain information on properties, see the sections entitled "Property,
Plant and Equipment" on page 41 and "Principal Locations" on the inside back
cover of the 1994 Annual Report, all of which are incorporated herein by
reference.
The executive office of Dexter, located in Windsor Locks, Connecticut, is
owned by the Company. In addition, the following general descriptions of
Dexter's properties, including the locations of principal facilities, are
presented by division. The capacity utilization percentage for Dexter's
production facilities in 1994 was approximately 73%.
During 1994, the Aerospace Materials division operated three principal
facilities, of which two are owned (approximately 150,000 square feet) and one
is leased (approximately 61,000 square feet). These facilities, which are in
excess of 25,000 square feet, are located in Pittsburg, California; Bassano,
Italy; and Greenville, South Carolina. During 1994, the Aerospace Materials
division continued construction of a 22,000 square-foot expansion at the
Waukegan, Illinois site. When completed in early 1995, the expansion will
consolidate
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Dexter's domestic aerospace coatings operations into a single facility. The
Aerospace Materials division capacity utilization percentage was approximately
65%.
During 1994, the Automotive Materials division operated five principal
production facilities, owned by the Company, totaling approximately 359,000
square feet, located in Kansas City, Missouri; Seabrook, New Hampshire;
Waukegan, Illinois; Birmingham, Alabama and Brownsville, Texas. It also operated
a leased distribution center in Kansas City, Missouri (approximately 60,000
square feet). During 1994, the Automotive Materials division moved its
production out of the leased facility in West Unity, Ohio to the Kansas City,
Missouri facility. The capacity utilization percentage for the Automotive
Materials division production facilities in 1994 was approximately 57%.
The Electronic Materials division, in 1994, operated six production
facilities and laboratories in the United States, Germany and Japan, of which
four are owned (approximately 447,000 square feet) and two are leased
(approximately 55,000 square feet). Facilities of the Electronic Materials
division in excess of 25,000 square feet are located in Olean, New York;
Industry, California; Londonderry, New Hampshire; Lowell, Massachusetts; and
Munich, Germany. During 1994, the Electronic Materials division completed
construction and started operations in a 63,000 square-foot production and
laboratories facility in Londonderry, New Hampshire and exited the facility it
previously had been leasing. The Electronic Materials division capacity
utilization percentage in 1994 was approximately 62%.
During 1994, the Magnetic Materials division operated four principal
facilities, of which two are owned (approximately 100,000 square feet) and two
are leased (approximately 90,000 square feet). These facilities, which are in
excess of 25,000 square feet, are located in Fremont, California; Richardson,
Texas; Elk Grove Village, Illinois and Hicksville, New York. The Magnetic
Materials division capacity utilization percentage in 1994 was approximately
66%.
During 1994, the Packaging Products division operated five principal
production facilities and laboratories located in Birmingham, Alabama; Hayward,
California; Tournus, France; Deeside, Wales and Gruningen, Switzerland totaling
approximately 375,000 square feet. All facilities are owned by the Company
except the Birmingham plant, which has been capitalized as a lease-purchase
financed by industrial development bonds. The Packaging Products division has
offices and a laboratory located in Waukegan, Illinois (approximately 31,000
square feet), which the Company owns. The Packaging Products division also
manages the operation of a multi-division production facility located in
Singapore of approximately 92,000 square feet. This production facility is owned
by the Company. The Packaging Products division had a capacity utilization
percentage of approximately 78% in 1994.
The Nonwovens division, in 1994, operated production facilities in Windsor
Locks, Connecticut (approximately 842,000 square feet); Chirnside, Scotland
(approximately 202,000 square feet) and Stalldalen, Sweden (approximately
452,000 square feet), which the Company owns. The Nonwovens division also leases
a production facility in Radcliffe, England totaling approximately 175,000
square feet. The Nonwovens division has a distribution facility located in
Windsor Locks, Connecticut of approximately 250,000 square feet which is leased.
The cogeneration facility located in Windsor Locks, Connecticut (approximately
42,000 square feet) is owned by the Company. The capacity utilization percentage
for the Nonwovens division production facilities in 1994 was approximately 81%.
Dexter S.A., located in Tournus, France operated a production facility of
approximately 162,000 square feet with a capacity utilization percentage of
approximately 60% in 1994. This facility is owned by the Company.
During 1994 Life Technologies, Inc. operated production facilities in ten
plants. Four are owned by Life Technologies, Inc. (approximately 223,000 square
feet), and six are leased facilities (approximately 163,000 square feet). Life
Technologies, Inc. has offices (approximately 45,000 square feet) and research
and development facilities (approximately 30,000 square feet) in Gaithersburg,
Maryland, which it leases. In addition, Life Technologies, Inc. leases twelve
distribution centers and warehouses which total approximately 99,000 square feet
and owns two distribution centers and warehouses which total approximately
40,000 square feet. Life Technologies, Inc. facilities in excess of 25,000
square feet are located in Gaithersburg, Maryland;
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Frederick, Maryland; Grand Island, New York; Auckland, New Zealand and Paisley,
Scotland. The capacity utilization percentage at Life Technologies, Inc.
production facilities in 1994 was approximately 84%.
Dexter and Solvay S.A., of Belgium, operate an equally owned international
joint venture. The joint venture operates two facilities for production and
distribution in Grand Prairie, Texas. These facilities total approximately
180,000 square feet, of which approximately 90,000 square feet is owned and
approximately 90,000 square feet is leased. Additionally, the joint venture
operates an owned Automotive Applications Development Center facility in Auburn
Hills, Michigan (approximately 47,000 square feet). During 1994, the joint
venture began construction of a 140,000 square-foot production and laboratories
facility in Mansfield, Texas. This facility will be completed in 1995.
ITEM 3 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 alleges 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 seeks $10 million in damages from the defendants. Dexter's insurance
carrier has been placed on notice and has agreed to provide the Company with a
defense pursuant to the terms and conditions of their policy. While the outcome
of this legal proceeding cannot be forecast with certainty, management believes
that a settlement will be reached during the first half of 1995 and that, in any
event, this legal proceeding will not have a material adverse effect on the
Company's financial condition or results of operations.
Dexter is also engaged in other legal proceedings, none of which is
expected to have a substantial effect on the earnings or financial condition of
the Company. (See Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations, of this Form 10-K, on page 6, for
information on administrative proceedings arising under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980.)
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the security holders during
the fourth quarter of fiscal year 1994.
ITEM 4A EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of The Dexter Corporation, together with the offices
in The Dexter Corporation presently held by them, their other business
experience since January 1, 1990, and their ages, are as follows:
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OTHER BUSINESS EXPERIENCE
NAME TITLE SINCE 1/1/90 AGE
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K. Grahame Walker Chairman, President and Chief President and Chief Executive 57
Executive Officer (since 1993) Officer
Robert E. McGill, III Executive Vice President, 63
Finance and Administration
(since 1989; retired December
1994)
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OTHER BUSINESS EXPERIENCE
NAME TITLE SINCE 1/1/90 AGE
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Bruce H. Beatt Vice President, General Counsel General Counsel and Secretary; 42
and Secretary (since 1992) Vice President, General Counsel
and Secretary, Jet Aviation
Holdings, Inc.
Ronald C. Benham Vice President; Senior Division President, Dexter Electronic 52
President, Dexter Electronic Materials Division
Materials Division (since 1992)
Kathleen Burdett Vice President and Chief Vice President and Controller 39
Financial Officer (effective
January 1995)
T. Daniel Clark Vice President; Senior Division Vice President, Corporate 53
President, Dexter Packaging Development; President, Dexter
Products Division (since 1994) Water Management Systems
Division
George Collin Controller (effective January Vice President-Administration, 45
1995) Dexter Automotive Materials
Division; Vice President-
Operations, D & S Plastics,
International; Vice President-
Finance, Dexter Plastics
Division
R. Barry Gettins, Ph.D. Vice President; Senior Division President, Dexter Nonwovens 53
President, Dexter Nonwovens Division
Division (since 1992)
John D. Thompson Senior Vice President, Vice President, Corporate 45
Strategic and Business Services; Vice President,
Development (effective January Financial Services; Vice
1995) President and Treasurer; Senior
Vice President and General
Manager, U.S. Research Products
Division of Life Technologies,
Inc.
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The following changes in executive officers occurred during 1994:
Effective in March 1994, Harold T. Crutcher retired as Vice President and
Senior Division President, Dexter Packaging Products Division. Effective in
April 1994, T. Daniel Clark was appointed Senior Division President, Dexter
Packaging Products Division and remained a Vice President of the Company.
Further, John D. Thompson was appointed Vice President, Corporate Services,
effective in April, 1994.
Effective in December 1994, Robert E. McGill, III, retired as Executive
Vice President, Finance and Administration. Effective in January 1995, the
following changes in executive officers occurred: Kathleen Burdett was appointed
Vice President and Chief Financial Officer, George Collin was appointed
Controller, and John D. Thompson was appointed Senior Vice President, Strategic
and Business Development.
Pursuant to the Bylaws of the Company, each officer holds his/her office
until death, resignation, removal from office or the election or appointment of
his/her successor. The Bylaws provide that the Board of Directors shall elect a
President and a Secretary each year at its first meeting following the annual
meeting of shareholders and may at that time elect other officers of the
Company, and it is expected that the Board of Directors will so act at its
meeting scheduled for April 27, 1995. No family relationships exist between any
of the executive officers of Dexter.
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PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
For information regarding the market for the registrant's common stock and
related stockholder matters, see Summary of Financial Data on pages 22 and 23,
Statement of Financial Position on pages 26 and 27, Statement of Changes in
Shareholders' Equity on page 28, Shareholders' Equity footnote on page 45,
Preferred Stock and Stock Plan footnotes on page 46, discussion of Stock Option
Plans on page 47, and Shareholder Information on the inside back cover of the
1994 Annual Report which are incorporated herein by reference.
ITEM 6 SELECTED FINANCIAL DATA
For information regarding selected financial data, see the Summary of
Financial Data on pages 22 and 23 of the 1994 Annual Report which is
incorporated herein by reference. For a discussion of this Financial Data, see
the Quarterly Financial Information on page 28, Analysis of Financial Condition
and Operations on pages 29 through 33, Market Segment Data on pages 34 and 35,
and Life Technologies, Inc. on page 38 of the 1994 Annual Report which are
incorporated herein by reference.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
For information required by this item, see the Management Statement on page
20 and the Summary of Financial Data on pages 22 and 23 of the 1994 Annual
Report which are incorporated herein by reference. For information concerning
results of operations, see Analysis of Financial Condition and Operations on
pages 29 through 33, Market Segment Data on pages 34 and 35, Geographic Data on
pages 36 and 37, Life Technologies, Inc. on page 38, and D & S Plastics
International on page 39 of the 1994 Annual Report which are incorporated herein
by reference. For information on liquidity, reference the Events, Trends, and
Vulnerabilities and Liquidity footnotes in Analysis of Financial Condition and
Operations on page 29, the Supplemental Statement of Financial Position on page
30, the Working Capital discussion on page 39, the Short-term Debt, the
Property, Plant and Equipment, and the Long-term Debt footnotes on pages 40, 41,
and 44, respectively, of the 1994 Annual Report which are incorporated herein by
reference. For information on capital resources, reference the liquidity
discussion in Analysis of Financial Condition and Operations on page 29, the
Short-term Debt, the Property, Plant and Equipment, the Long-term Debt, and
Shareholders' Equity footnotes on pages 40, 41, 44, and 45, respectively, of the
1994 Annual Report which are incorporated herein by reference. For the
discussion of legal proceedings pertaining to the Company, see Item 3, Legal
Proceedings on page 4 of this Form 10-K, and page 45 of the 1994 Annual Report
which is incorporated herein by reference. For information on environmental
matters, see the Environmental Liabilities footnote on page 45 of the 1994
Annual Report which is incorporated herein by reference.
Pursuant to authority granted under the "Comprehensive Environmental
Response, Compensation and Liability Act of 1980" (CERCLA), the U.S.
Environmental Protection Agency (USEPA) has issued a National Priority List of
sites at which action is to be taken to mitigate the risk of release of
hazardous substances into the environment. The Company is engaged in continuing
negotiations with the USEPA and state authorities with regard to 14 of the over
twelve hundred sites on the National Priority List. Due to the uncertainty of
the remedial measures to be adopted at various sites and the fact that
imposition of joint and several liability is possible under CERCLA, the
liability of the Company with respect to any site at which remedial measures
have not been completed cannot be established with certainty. Nevertheless,
based upon the information available at this time, the Company believes it has
properly provided for its best estimate of the liabilities and that the outcome
of these matters will not have a material adverse effect upon its financial
condition or results of operations in the future.
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ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Summary of Financial Data contained on pages 22
and 23, Financial Statements contained on pages 24 through 28, Quarterly
Financial Information on page 28, Analysis of Financial Condition and Operations
contained on pages 29 through 39, and Analysis of Financial Position contained
on pages 39 through 47 of the Company's 1994 Annual Report which are
incorporated herein by reference.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Within 24 months prior to the date of the most recent financial statements
referred to above in Item 8, no Form 8-K under the Securities Exchange Act of
1934, as amended, reporting a change in accountants, has been required to be
filed.
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information regarding directors of the Company, see the section
entitled "Election of Directors" on pages 3 through 6, inclusive, of the Proxy
Statement, which is incorporated herein by reference. Information regarding
executive officers of the Company is included as Item 4a of Part I as required
by Instruction 3 of Item 401(b) of Regulation S-K. For information required by
Item 405 of Regulation S-K, see the section entitled "Certain Transactions and
Legal Matters" on page 6 of the Proxy Statement, which is incorporated herein by
reference.
ITEM 11 EXECUTIVE COMPENSATION
For information required by this item, see the section entitled
"Compensation of Executive Officers" on pages 7 through 16, inclusive, of the
Proxy Statement, which is incorporated herein by reference.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
For information regarding the beneficial ownership of shares of Common
Stock of the Company by certain persons, see the section entitled "Share
Ownership" on pages 1 and 2 of the Proxy Statement, which is incorporated herein
by reference.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information regarding certain relationships and related transactions of
directors, see the section entitled "Election of Directors" on pages 3 through
6, inclusive, of the Proxy Statement, which is incorporated herein by reference.
No other member of executive management or other individual as outlined in
Item 404 of Regulation S-K was otherwise directly or indirectly involved in
relationships or related transactions with the registrant in which the executive
officer or other individual had a material interest.
Life Technologies, Inc., a majority-owned subsidiary, borrowed up to $3.1
million and $4.5 million in 1994 and 1993, respectively, from the Company under
a revolving line of credit to finance short-term working capital needs. The line
of credit was at current market interest rates and was repaid at December 31,
1994 and 1993.
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PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
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(a) 1. Financial Statements:
The response to this item is set forth commencing on page F-1 of this report.
2. Financial Statement Schedules:
The response to this item is set forth commencing on page F-1 of this report.
3. Exhibits:
Exhibit 3A -- Restated Certificate of Incorporation of The Dexter Corporation,
filed with the Secretary of the State of Connecticut on June 26,
1990, was filed as Exhibit 3A-2 with the registrant's Quarterly
Report on Form 10-Q (File No. 1-5542) for the quarter ended June
30, 1990, and is hereby incorporated herein by reference.
Exhibit 3B -- Bylaws of The Dexter Corporation, as amended April 25, 1991,
were filed as Exhibit 3B with the registrant's report on Form
10-Q (File No. 1-5542) for the quarter ended March 31, 1991, and
is hereby incorporated herein by reference.
Exhibit 4A -- The Rights Agreement, dated November 5, 1986, between the
registrant and The Connecticut Bank and Trust Company, National
Association was filed as Exhibit 4 with the registrant's report
on Form 10-K (File No. 1-5542) for the fiscal year ended
December 31, 1986, and is hereby incorporated herein by
reference.
Exhibit 4B -- Amendment No. 1 to the Rights Agreement, dated November 5, 1986,
was filed with Amendment No. 1 to Form 8A which was filed with
the Securities and Exchange Commission on October 28, 1988, and
is hereby incorporated herein by reference.
Exhibit 4B(1) -- Amendment No. 2 to the Rights Agreement, dated November 5, 1986,
was filed with Amendment No. 2 to Form 8A which was filed with
the Securities and Exchange Commission on June 4, 1990, and is
hereby incorporated herein by reference.
Exhibit 4C -- Note Agreement, dated July 24, 1990, between the registrant and
The Prudential Insurance Company of America was filed as Exhibit
4C with the registrant's Quarterly Report on Form 10-Q (File No.
1-5542) for the quarter ended June 30, 1990, and is hereby
incorporated herein by reference.
Exhibit 4C(1) -- Amendment, dated November 14, 1991, to the Note Agreement, dated
July 24, 1990, was filed as Exhibit 4C(1) with the registrant's
report on Form 10-K (File No. 1-5542) for the fiscal year ended
December 31, 1991, and is hereby incorporated herein by
reference.
Exhibit 4C(2) -- Amendment, dated February 9, 1993, to the Note Agreement, dated
July 24, 1990, was filed as Exhibit 4C(2) with the registrant's
report on Form 10-K (File No. 1-5542) for the fiscal year ended
December 31, 1992, and is hereby incorporated herein by
reference.
Exhibit 4C(3) -- Amendment, dated September 30, 1993, to the Note Agreement,
dated July 24, 1990, was filed as Exhibit 4C(3) with the
registrant's report on Form 10-K (File No. 1-5542) for the
fiscal year ended December 31, 1993, and is hereby incorporated
herein by reference.
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Exhibit 4D -- Note Agreement, dated November 14, 1991, between the registrant
and The Prudential Insurance Company of America, was filed as
Exhibit 4D with the registrant's report on Form 10-K (File No.
1-5542) for the fiscal year ended December 31, 1993, and is
hereby incorporated herein by reference.
Exhibit 4D(1) -- Amendment, dated February 9, 1993, to the Note Agreement, dated
November 14, 1991, was filed as Exhibit 4C(2) with the
registrant's report on Form 10-K (File No. 1-5542) for the
fiscal year ended December 31, 1992, and is hereby incorporated
herein by reference.
Exhibit 4D(2) -- Amendment, dated September 30, 1993, to the Note Agreement,
dated November 14, 1991, was filed as Exhibit 4D(2) with the
registrant's report on Form 10-K (File No. 1-5542) for the
fiscal year ended December 31, 1993, and is hereby incorporated
herein by reference.
Exhibit 4E -- Master Shelf Agreement, dated September 30, 1993, between the
registrant and The Prudential Insurance Company of America, as
amended and restated on December 17, 1993, was filed as Exhibit
4E with the registrant's report on Form 10-K (File No. 1-5542)
for the fiscal year ended December 31, 1993, and is hereby
incorporated herein by reference.
Exhibit 10A -- The Dexter Corporation's 1979 Stock Option Plan, as amended, was
filed as Exhibit 4.3 to Post-Effective Amendment No. 4 to the
registrant's Registration Statement on Form S-8 (File No.
2-63959) dated March 29, 1983, and is hereby incorporated herein
by reference.
Exhibit 10B -- Agreement, dated December 15, 1989, between the registrant and
K. Grahame Walker was filed as Exhibit 10B with the registrant's
quarterly report on Form 10-Q (File No. 1-5542) for the quarter
ended March 31, 1991, and is hereby incorporated herein by
reference. Omitted pursuant to the Instruction to item
601(10)(iii) of Regulation S-K and Rule 12b-31 under the
Securities Exchange Act of 1934 are copies of six other
agreements between the registrant and the following named
officers, each of which agreements is substantially identical to
Exhibit 10B in all material respects except as to the individual
party thereto and the identification of his/her position with
the registrant: Bruce H. Beatt, Kathleen Burdett, George Collin,
Horst Geldmacher, Dale J. Ribaudo and John D. Thompson.
Exhibit 10C -- Agreement, dated December 20, 1991, between the registrant and
Ronald C. Benham was filed as Exhibit 10C with the registrant's
report on Form 10-K (File No. 1-5542) for the fiscal year ended
December 31, 1992, and is hereby incorporated herein by
reference. Omitted pursuant to the Instruction to Item
601(10)(iii) of Regulation S-K and Rule 12b-31 under the
Securities Exchange Act of 1934 are copies of eleven other
agreements between the registrant and the following officers and
key employees, each of which agreements is substantially
identical to Exhibit 10C in all material respects except as to
the individual party thereto and the identification of his
position with the registrant: John B. Blatz, Charles F. Call,
Jr., T. Daniel Clark, Dr. R. Barry Gettins, David G. Gordon,
Richard B. Hurley, John B. Lockwood, Jeffrey W. McClelland, T.
James Rudd, Edward J. Scannell and David Woodhead.
</TABLE>
9
<PAGE> 12
<TABLE>
<S> <C>
Exhibit 10D -- The Dexter Corporation's Executive Supplemental Retirement Plan,
as amended and restated and effective January 1, 1989, was filed
as Exhibit 10F(1) to the registrant's report on Form 10-K (File
No. 1-5542) for the fiscal year ended December 31, 1991, and is
hereby incorporated herein by reference.
Exhibit 10D(1) -- Amendment, dated October 22, 1993, to The Dexter Corporation's
Executive Supplemental Retirement Plan, was filed as Exhibit
10D(2) with the registrant's quarterly report on Form 10-Q (File
No. 1-5542) for the quarter ended September 30, 1993, and is
hereby incorporated herein by reference.
Exhibit 10E -- The Dexter Corporation's 1987 Interim Stock Option Plan, was
filed as Exhibit 28(a) to the registrant's Registration
Statement on Form S-8 (File No. 33-27597) dated March 17, 1989,
and is hereby incorporated herein by reference.
Exhibit 10F -- The Dexter Corporation's 1988 Stock Option Plan, was filed as
Exhibit 28(d) to the registrant's Registration Statement on Form
S-8 (File No. 33-27597) dated March 17, 1989, and is hereby
incorporated herein by reference.
Exhibit 10G -- The Dexter Corporation's 1986 Executive Deferred Compensation
Benefit Plan was filed as Exhibit 10I to the registrant's report
on Form 10-K (File No. 1-5542) for the fiscal year ended
December 31, 1991, and is hereby incorporated herein by
reference.
Exhibit 10H -- The Dexter Corporation's Amended and Restated Retirement
Equalization Plan was filed as Exhibit 10H with the registrant's
report on Form 10-K (File No. 1-5542) for the fiscal year ended
December 31, 1993, and is hereby incorporated herein by
reference.
Exhibit 10I -- The Dexter Corporation's Transferred Executives' Supplemental
Retirement Program, as amended and restated, was filed as
Exhibit 10J with the registrant's report on Form 10-K (File No.
1-5542) for the fiscal year ended December 31, 1993, and is
hereby incorporated herein by reference.
Exhibit 10J -- The Dexter Corporation's 1994 Long Term Incentive Plan was filed
as Exhibit 10K with the registrant's quarterly report on Form
10-Q (File No. 1-5542) for the quarter ended March 31, 1994, and
is hereby incorporated herein by reference.
Exhibit 10K -- The Dexter Corporation's 1994 Stock Plan for Outside Directors
was filed as Exhibit 10L with the registrant's quarterly report
on Form 10-Q (File No. 1-5542) for the quarter ended March 31,
1994, and is hereby incorporated herein by reference.
Exhibit 10L -- Agreement, dated July 29, 1994, between the registrant and
Robert E. McGill, III.
Exhibit 13 -- The Dexter Corporation's 1994 Annual Report to Shareholders.
Exhibit 21 -- Subsidiaries of the Registrant.
Exhibit 23 -- Consent of Certified Public Accountants.
Exhibit 27 -- Financial Data Schedule.
</TABLE>
10
<PAGE> 13
Long-term debt of the registrant or various of its subsidiaries is
outstanding under numerous instruments. No such instrument authorizes
an amount of securities thereunder in excess of 10% of the total
assets of the registrant and its subsidiaries on a consolidated basis.
The registrant agrees that it will furnish a copy of any such
instrument to the Securities and Exchange Commission upon its request.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
11
<PAGE> 14
SIGNATURES
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.
Dated March 9, 1995
THE DEXTER CORPORATION
(Registrant)
By: /s/ Kathleen Burdett
------------------------------------
Kathleen Burdett
Vice President and
Chief Financial Officer
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 indicated on March 9, 1995:
<TABLE>
<CAPTION>
NAME CAPACITY DATE
- ----------------------------------- ----------------------------------- ------------------
<S> <C> <C>
/s/ K. Grahame Walker Chairman; Director March 9, 1995
- ----------------------------------- (principal executive officer)
K. Grahame Walker
/s/ Kathleen Burdett Vice President and March 9, 1995
- ----------------------------------- Chief Financial Officer
Kathleen Burdett (principal financial officer)
/s/ George Collin Controller March 9, 1995
- ----------------------------------- (principal accounting officer)
George Collin
/s/ Charles H. Curl Director March 9, 1995
- -----------------------------------
Charles H. Curl
/s/ Bernard M. Fox Director March 9, 1995
- -----------------------------------
Bernard M. Fox
/s/ Robert M. Furek Director March 9, 1995
- -----------------------------------
Robert M. Furek
/s/ Martha Clark Goss Director March 9, 1995
- -----------------------------------
Martha Clark Goss
/s/ Peter G. Kelly Director March 9, 1995
- -----------------------------------
Peter G. Kelly
/s/ Robert E. McGill, III Director March 9, 1995
- -----------------------------------
Robert E. McGill, III
/s/ Jean-Francois Saglio Director March 9, 1995
- -----------------------------------
Jean-Francois Saglio
/s/ Glen L. Urban Director March 9, 1995
- -----------------------------------
Glen L. Urban
/s/ George M. Whitesides Director March 9, 1995
- -----------------------------------
George M. Whitesides
</TABLE>
12
<PAGE> 15
INDEX TO
FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Report of Independent Accountants.............................................. F-2
1994 ANNUAL
FINANCIAL STATEMENTS REPORT PAGE
- -------------------- -----------
Summary of Financial Data.................................................... 22-23
Statement of Income.......................................................... 24
Statement of Cash Flows...................................................... 25
Statement of Financial Position.............................................. 26-27
Statement of Changes in Shareholders' Equity................................. 28
Analysis of Financial Condition and Operations............................... 29-39
Analysis of Financial Position............................................... 39-47
FINANCIAL STATEMENTS' SCHEDULE
- ------------------------------
Schedule II Valuation and Qualifying Accounts............................... F-3
</TABLE>
------------------------------------------
Schedules other than those listed above are omitted for the reason
that the information required on such schedules is contained in
the Company's 1994 Annual Report to Shareholders, elsewhere in
Form 10-K or they are not required or are not applicable.
F-1
<PAGE> 16
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
The Dexter Corporation
We have audited the consolidated financial statements and the financial
statement schedule of The Dexter Corporation listed in the index on page F-1 of
this Form 10-K. These financial statements and financial statement schedule are
the responsibility of The Dexter Corporation's management. Our responsibility is
to express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The Dexter
Corporation as of December 31, 1994, 1993 and 1992, and the consolidated results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
In 1994, the Corporation, as more fully described in the accompanying
financial review, adopted Statement of Financial Accounting Standards (SFAS) No.
115, Accounting for Certain Investments in Debt and Equity Securities. In 1993,
the Corporation, as more fully described in the accompanying financial review,
adopted SFAS No. 106, Employers' Accounting for Postretirement Benefits Other
Than Pensions; SFAS No. 109, Accounting for Income Taxes; and SFAS No. 112,
Employers' Accounting for Postemployment Benefits.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Springfield, Massachusetts
February 2, 1995
F-2
<PAGE> 17
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN C
COLUMN A COLUMN B ADDITIONS COLUMN D COLUMN E
- ------------------------------------- ---------- ------------------------- ---------- ----------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1994
Environmental Reserve................ $ 22,766 $ 2,474 $ 20,292
Restructuring Reserve................ 10,735 4,441 6,294
Allowance for Doubtful Accounts...... 4,428 $ 1,482 916 4,994
-------- -------- ------ -------- --------
$ 37,929 $ 1,482 $ -- $ 7,831 $ 31,580
-------- -------- ------ -------- --------
1993
Environmental Reserve................ $ 17,200 $ 1,512 $5,577(a) $ 1,523 $ 22,766
Restructuring Reserve................ 12,798 9,235 11,298 10,735
Allowance for Doubtful Accounts...... 5,197 328 275(b) 1,372 4,428
-------- -------- ------ -------- --------
$ 35,195 $ 11,075 $5,852 $ 14,193 $ 37,929
-------- -------- ------ -------- --------
1992
Environmental Reserve................ $ 27,956 $ 3,689 $ 14,445(c) $ 17,200
Restructuring Reserve................ 6,933 15,848 9,983 12,798
Allowance for Doubtful Accounts...... 4,822 1,232 857 5,197
-------- -------- ------ -------- --------
$ 39,711 $ 20,769 $ -- $ 25,285 $ 35,195
-------- -------- ------ -------- --------
</TABLE>
- ---------------
(a) In accordance with the Securities and Exchange Commission's "Staff
Accounting Bulletin No. 92," an estimated $5.6 million of claims payable by
third-party insurance companies were included in the reserve at year-end
1993, and the related receivables from insurance companies of $5.6 million
were included as assets of the company.
(b) Due to acquisitions.
(c) Includes a payment of $13 million for fines and civil penalties as a part of
the settlement of the lawsuit involving the company's nonwovens facility in
Windsor Locks, Connecticut.
F-3
<PAGE> 1
EXHIBIT 10L
[THE DEXTER CORPORATION LETTERHEAD]
CONFIDENTIAL
MEMORANDUM 28 July 1994
TO: Bob McGill
FROM: Grahame Walker CC: Kevin Lake
RE: EARLY RETIREMENT
Further to our recent discussions, the terms of your mutually agreed early
retirement are summarized as follows:
1) You will retire from your current duties effective 12/31/94. For the
balance of 1994, you will continue to perform such duties as required
including the provision of advice and counsel for those areas for which you
have hitherto been responsible.
2) You shall continue to receive the equivalent of your present salary through
12/31/95, with no EIC payments for 1995. You may choose to receive up to
50% of 1995 salary as a lump sum, payable 12/31/94, with the remaining 50%
paid in 16 equal monthly installments commencing January 1995.
3) ESPRIT and Equalization Plan contributions would be applied to all earnings
during calendar year 1994 including the lump sum.
4) You shall retain full use of your company car through 12/31/95, with option
to purchase at that time or earlier.
5) All current stock options will become fully vested and exercisable on
01/02/95. No further stock options nor restricted stock will be granted. We
will request the C & O Committee to extend the exercise period for all of
your options to 12/31/97.
6) We will request the C & O Committee to accept your early retirement and to
approve that your length of service be regarded as 20 years for purposes of
determining post retirement benefits.
7) We will request Coopers & Lybrand to estimate the level of all your work
related retirement benefits and use these to determine entitlement to a
S.R.P. benefit, commencing January, 1995.
These early retirement terms are predicated on three conditions: 1) you agree
to continue to be bound by existing secrecy agreements, 2) you agree that you
will not work for, or consult to, any company which competes with Dexter for the
period of this agreement, and 3) you sign and be bound by the attached general
release, given that the company will continue its Directors and Officers
indemnity on your behalf.
If this summary accurately reflects your understanding, please accept these
terms by signing and returning a copy of this letter and the general release.
/s/ Robert E. McGill, III
- -------------------------
Signature
July 29, 1994
- -------------------------
Date
<PAGE> 1
EXHIBIT 13
THE DEXTER CORPORATION'S
1994 ANNUAL REPORT
TO SHAREHOLDERS
<PAGE> 2
MANAGEMENT STATEMENT
The management of The Dexter Corporation has prepared the financial statements
and review contained on pages 22 through 47 in conformity with generally
accepted accounting principles. Dexter's management is responsible for the
integrity and objectivity of this annual report, including the financial
statements, charts, tables and other supplementary information. The financial
statements and review are presented on the accrual basis of accounting and,
accordingly, include some amounts based on judgment. Information included on
these pages is an integral part of the statement of financial position and
related statements of income, cash flows and changes in shareholders' equity
which have been audited by Coopers & Lybrand.
Dexter has a clearly stated business ethics policy and code of conduct which
require employees to maintain high standards in their conduct of company
affairs. The company's accounting and control systems are designed to provide
reasonable assurance that financial records accurately reflect the transactions
of The Dexter Corporation and that the company's assets are protected from
unauthorized use, in accordance with established policies and procedures, as
implemented by qualified personnel. We modify and improve our systems in
response to changes in business conditions and operations, the advice of
independent certified public accountants, and the recommendations of our own
internal auditors and other independent experts on procedures and controls.
There are no known significant accounting control weaknesses.
Coopers & Lybrand, independent certified public accountants, are engaged to
perform quarterly reviews and annual audits. Their audits are conducted in
accordance with generally accepted auditing standards which include
consideration of the company's internal control structure. The Audit Committee
of the Board of Directors, made up entirely of outside directors, meets
regularly both separately and jointly with the independent certified public
accountants, internal auditors and management to review accounting policies,
adequacy of controls, quality of financial reporting, and the scope and results
of audits. Both the internal auditors and the independent accountants have free
and direct access to the Audit Committee without the presence of management.
A company with a good reputation is not only a good supplier, customer and
citizen but a good employer. Dexter has enjoyed a reputation based on integrity
for over two centuries. We are all the guardians of that reputation, and that
responsibility requires vigilance.
<TABLE>
<S> <C> <C>
K. Grahame Walker Kathleen Burdett George Collin
Chairman and Chief Executive Officer Vice President and Controller
Chief Financial Officer Chief Accounting Officer
</TABLE>
February 2, 1995
20
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of The Dexter Corporation:
We have audited the accompanying consolidated statement of financial position of
The Dexter Corporation as of December 31, 1994, 1993 and 1992 and the related
consolidated statements of income, cash flows and changes in shareholders'
equity for the years then ended. These financial statements are the
responsibility of The Dexter Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, contained on pages
22 through 47, present fairly, in all material respects, the consolidated
financial position of The Dexter Corporation as of December 31, 1994, 1993 and
1992 and the consolidated results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
In 1994, the Corporation, as more fully described in the accompanying financial
review, adopted Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities. In 1993, the
Corporation, as more fully described in the accompanying financial review,
adopted SFAS No. 106, Employers' Accounting for Postretirement Benefits Other
Than Pensions; SFAS No. 109, Accounting for Income Taxes; and SFAS No. 112,
Employers' Accounting for Postemployment Benefits.
/s/ Coopers & Lybrand L.L.P.
Springfield, Massachusetts
February 2,1995
21
<PAGE> 4
SUMMARY OF FINANCIAL DATA THE DEXTER CORPORATION
All share and per share amounts throughout the Financial Statements and Review
have been adjusted for a 3-for-2 stock split in 1986.
<TABLE>
<CAPTION>
In thousands of dollars
(except per share amounts) 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales $974,719 $887,112 $ 951,439 $ 937,734 $ 907,946
% increase (decrease) 10% (7%) 1% 3% 7%
Gross profit 316,541 293,345 314,275 309,157 314,449
As % of sales 32.5% 33.1% 33.0% 33.0% 34.6%
LIFO charge (credit)
included in cost of sales 2,231 (1,290) 1,626 (173) 1,100
Marketing and administrative expenses 188,272 175,141 188,263 198,334 191,656
As % of sales 19.3% 19.7% 19.8% 21.2% 21.1%
Research and development expenses 46,644 43,803 42,216 42,056 39,880
As % of sales 4.8% 4.9% 4.4% 4.5% 4.4%
Interest expense 20,509 18,756 18,799 16,800 17,484
Income before taxes 73,612 66,438 73,132 11,192 77,407
As % of sales 7.6% 7.5% 7.7% 1.2% 8.5%
Tax rate 36.0% 36.5% 37.7% 109.5% 37.0%
Income (loss) before minority interests 47,112 42,188 45,577 (1,059) 48,766
As % of sales 4.8% 4.8% 4.8% (0.1%) 5.4%
Income (loss) from continuing operations 37,898 34,053 38,203 (7,119) 42,150
As % of sales 3.9% 3.8% 4.0% (0.8%) 4.6%
Discontinued operations (loss) gain
Cumulative effect of change in
accounting principles (9,875)
Net income (loss) $ 37,898 $ 24,178 $ 38,203 $ (7,119) $ 42,150
As % of sales 3.9% 2.7% 4.0% (0.8%) 4.6%
Return on
Average shareholders' equity* 11.2% 10.7% 12.1% (2.2%) 12.6%
Average total capital* 9.0% 8.8% 10.0% 0.7% 11.0%
Average shareholders' equity 11.5% 7.7% 12.1% (2.2%) 12.6%
Average total capital 9.2% 7.0% 10.0% 0.7% 11.0%
Income (loss) per share
Continuing operations $ 1.56 $ 1.40 $ 1.58 $ (.29) $ 1.74
Discontinued operations
Cumulative effect of change in
accounting principles $ (.41)
Total net income (loss) $ 1.56 $ .99 $ 1.58 $ (.29) $ 1.74
Cash dividends declared per share $ .88 $ .88 $ .88 $ .88 $ .88
Rate of dividend payout* 56% 63% 56% -- 51%
* Before cumulative effect of 1993 change in accounting principles
- ---------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Working capital $209,024 $199,146 $ 207,146 $ 193,873 $ 215,410
Property, plant and equipment, net 328,935 309,954 298,869 299,342 274,147
Total assets 880,609 820,691 782,025 784,471 762,383
Long-term debt 225,402 227,307 179,024 188,702 160,478
Shareholders' equity $343,633 $313,295 $ 315,614 $ 313,782 $ 343,698
Percent long-term debt to capital 39.6% 42.0% 36.2% 37.6% 31.8%
Equity per share at year-end $ 14.11 $ 12.87 $12.98 $ 12.99 $ 14.24
- ---------------------------------------------------------------------------------------------------------------------------------
OTHER DATA
Capital expenditures $ 45,097 $ 44,784 $ 51,793 $ 61,749 $ 43,910
Depreciation and amortization $ 40,923 $ 36,655 $ 35,672 $ 34,095 $ 30,272
Shares outstanding at year-end (000) 24,350 24,340 24,308 24,149 24,136
Average shares outstanding (000) 24,345 24,325 24,220 24,145 24,282
Market price per share-- high $ 26 $ 28-7/8 $ 28-1/8 $ 26-1/8 $ 24-1/2
-- low $ 19-7/8 $ 20-3/8 $ 20-7/8 $ 18-1/2 $ 18
-- close $ 21-3/4 $ 23-1/2 $ 25-7/8 $ 21-5/8 $ 21
Price-earnings ratio range* 17-13 21-15 18-13 -- 14-10
Number of shareholders at year-end 3,600 3,900 4,000 4,300 4,400
Number of employees at year-end** 4,700 4,700 4,800 5,600 5,500
% payroll and benefits to sales** 25% 25% 25% 25% 24%
% raw material costs to sales** 43% 41% 42% 41% 42%
* Before cumulative effect of 1993 change in accounting principles
** From continuing operations
- ---------------------------------------------------------------------------------------------------------------------------------
INFLATION ADJUSTED DATA
Net sales* $974,719 $910,216 $1,005,041 $1,020,600 $1,030,043
% increase (decrease) 7% (9%) (2%) (1%) 1%
Cash dividends declared per share* $ .88 $ .90 $ .93 $ .96 $ 1.00
Market price per share - year-end** $ 21-3/4 $ 24-1/8 $ 27-1/4 $ 23-1/2 $ 23-1/2
* Stated in average 1994 dollars using the Consumer Price Index.
** Stated in year-end 1994 dollars using the Consumer Price Index.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 5
SUMMARY OF FINANCIAL DATA THE DEXTER CORPORATION
<TABLE>
<CAPTION>
In thousands of dollars
(except per share amounts) 1989 1988 1987 1986 1985 1984
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales $ 848,724 $ 827,266 $757,710 $623,438 $598,150 $612,762
% increase (decrease) 3% 9% 22% 4% (2%) 15%
Gross profit 284,142 269,416 263,120 228,276 214,181 225,694
As % of sales 33.5% 32.6% 34.7% 36.6% 35.8% 36.8%
LIFO charge (credit)
included in cost of sales (4,063) 4,193 5,961 (809) (754) 2,604
Marketing and administrative expenses 168,935 159,448 152,357 136,052 133,999 139,182
As % of sales 19.9% 19.3% 20.1% 21.8% 22.4% 22.7%
Research and development expenses 37,359 32,685 28,690 27,340 25,470 23,621
As % of sales 4.4% 4.0% 3.8% 4.4% 4.3% 3.9%
Interest expense 10,926 12,178 14,127 12,351 11,513 11,313
Income before taxes 77,643 71,923 76,858 54,271 58,557 51,931
As % of sales 9.1% 8.7% 10.1% 8.7% 9.8% 8.5%
Tax rate 38.0% 38.0% 38.0% 38.0% 35.3% 32.3%
Income (loss) before minority interests 48,139 44,592 47,652 33,649 37,867 35,136
As % of sales 5.7% 5.4% 6.3% 5.4% 6.3% 5.7%
Income (loss) from continuing operations 42,977 39,889 43,391 32,251 31,684 33,546
As % of sales 5.1% 4.8% 5.7% 5.2% 5.3% 5.5%
Discontinued operations (loss) gain (4,393) (606) 1,384 (3,102) (716)
Cumulative effect of change in
accounting principles
Net income (loss) $ 42,977 $ 35,496 $ 42,785 $ 33,635 $ 28,582 $ 32,830
As % of sales 5.1% 4.3% 5.6% 5.4% 4.8% 5.4%
Return on
Average shareholders' equity* 13.6% 11.8% 15.5% 13.7% 13.0% 16.4%
Average total capital* 11.6% 10.7% 13.3% 12.2% 12.1% 14.6%
Average shareholders' equity 13.6% 11.8% 15.5% 13.7% 13.0% 16.4%
Average total capital 11.6% 10.7% 13.3% 12.2% 12.1% 14.6%
Income (loss) per share
Continuing operations $ 1.73 $ 1.61 $ 1.74 $ 1.30 $ 1.28 $ 1.35
Discontinued operations $ (.18) $ (.02) $ .05 $ (.13) $ (.02)
Cumulative effect of change in
accounting principles
Total net income (loss) $ 1.73 $ 1.43 $ 1.72 $ 1.35 $ 1.15 $ 1.33
Cash dividends declared per share $ .82 $ .80 $ .60 $.56-2/3 $.53-1/3 $.50-2/3
Rate of dividend payout* 47% 56% 35% 42% 46% 39%
* Before cumulative effect of 1993 change in
accounting principles
- -------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Working capital $ 189,006 $ 182,284 $181,106 $137,980 $129,605 $115,819
Property, plant and equipment, net 252,895 186,894 183,972 174,644 160,345 161,144
Total assets 694,490 626,391 612,517 570,335 484,567 441,120
Long-term debt 130,834 92,830 106,338 112,553 65,310 78,513
Shareholders' equity $ 325,281 $ 307,226 $293,788 $258,843 $232,796 $207,048
Percent long-term debt to capital 28.7% 23.2% 26.6% 30.3% 21.9% 27.5%
Equity per share at year-end $ 13.14 $ 12.36 $ 11.84 $ 10.40 $ 9.39 $ 8.35
- --------------------------------------------------------------------------------------------------------------------------
OTHER DATA
Capital expenditures $ 33,119 $ 26,145 $ 23,619 $ 23,861 $ 26,456 $ 18,628
Depreciation and amortization $ 26,243 $ 24,349 $ 22,775 $ 18,482 $ 18,541 $ 17,216
Shares outstanding at year-end (000) 24,761 24,855 24,821 24,893 24,800 24,785
Average shares outstanding (000) 24,877 24,842 24,895 24,860 24,794 24,774
Market price per share-- high $ 34-3/4 $ 28-3/4 $ 32-3/8 $ 23-3/8 $ 17-7/8 $ 16-3/4
-- low $ 20-1/8 $ 20-1/4 $ 17 $ 16-7/8 $ 12-3/8 $ 11-7/8
-- close $ 21-7/8 $ 22-1/4 $ 23-3/8 $ 22-1/4 $ 17-1/4 $ 12-5/8
Price-earnings ratio range* 20-12 20-14 19-10 17-13 16-11 13-9
Number of shareholders at year-end 4,500 4,400 4,500 4,500 4,900 4,400
Number of employees at year-end** 5,400 5,400 5,200 5,400 5,400 5,900
% payroll and benefits to sales** 23% 23% 23% 25% 26% 26%
% raw material costs to sales** 46% 45% 43% 42% 43% 41%
* Before cumulative effect of 1993 change in
accounting principles
** From continuing operations
- -------------------------------------------------------------------------------------------------------------------------
INFLATION ADJUSTED DATA
Net sales* $1,014,930 $1,036,768 $988,375 $842,894 $824,215 $874,446
% increase (decrease) (2%) 5% 17% 2% (6%) 10%
Cash dividends declared per share* $ .98 $ 1.00 $ .78 $ .77 $ .74 $ .72
Market price per share - year-end** $ 26 $ 27-5/8 $ 30-3/8 $ 30-1/8 $ 23-5/8 $ 18
* Stated in average 1994 dollars using the
Consumer Price Index.
** Stated in year-end 1994 dollars using the
Consumer Price Index.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 6
STATEMENT OF INCOME THE DEXTER CORPORATION
<TABLE>
<CAPTION>
In thousands of dollars
(except per share amounts)
Years ended December 31
----------------------------------
1994 1993 1992
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Net sales $974,719 $887,112 $951,439
Equity in net income (loss) of affiliates 3,836 2,369 (1,742)
Other income 8,660 8,796 7,872
----------------------------------
987,215 898,277 957,569
EXPENSES
Cost of sales 658,178 593,767 637,164
Marketing and administrative 188,272 175,141 188,263
Research and development 46,644 43,803 42,216
Interest 20,509 18,756 18,799
Provision for environmental costs 1,000
Divestiture and restructuring activities
Gain on divestiture of product lines (13,016) (16,173)
Charge for restructuring businesses, net 12,388 14,168
----------------------------------
INCOME BEFORE TAXES 73,612 66,438 73,132
Income taxes 26,500 24,250 27,555
----------------------------------
INCOME BEFORE MINORITY INTERESTS 47,112 42,188 45,577
Minority interests 9,214 8,135 7,374
----------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLES 37,898 34,053 38,203
Cumulative effect of change in
accounting principles (9,875)
----------------------------------
NET INCOME $ 37,898 $ 24,178 $ 38,203
==================================
INCOME (LOSS) PER SHARE
Income before cumulative effect
of change in accounting principles $ 1.56 $ 1.40 $ 1.58
Cumulative effect of change in
accounting principles (.41)
----------------------------------
NET INCOME PER SHARE $ 1.56 $ .99 $ 1.58
==================================
DIVIDENDS DECLARED PER SHARE $ .88 $ .88 $ .88
</TABLE>
- --------------------------------------------------------------------------------
See accompanying financial review.
24
<PAGE> 7
STATEMENT OF CASH FLOWS THE DEXTER CORPORATION
<TABLE>
<CAPTION>
Years ended December 31
-----------------------------------
In thousands of dollars 1994 1993 1992
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS
Net income $ 37,898 $ 24,178 $ 38,203
Noncash items
Depreciation 34,857 32,038 31,456
Amortization 6,066 4,617 4,216
Provision for environmental costs 1,000
Gain on divestiture of product lines (13,016) (16,173)
Charge for restructuring businesses, net 12,388 14,168
Cumulative effect of change in accounting principles 9,875
Income taxes not due 9,508 4,981 10,375
Minority interests 9,214 8,135 7,374
LIFO inventory charge (credit) 2,231 (1,290) 1,626
Equity in net (income) loss of affiliates (3,836) (2,369) 1,742
Other (2,538) (136) (2,970)
Operating working capital increase (12,824) (24,437) (32,104)
----------------------------------
80,576 55,964 57,913
----------------------------------
INVESTMENTS
Property, plant and equipment (45,842) (46,993) (52,051)
Acquisitions (9,267) (32,114) (1,258)
Joint ventures (7,425) (1,530)
Divestitures 23,924 49,688
Proceeds from sale of investments 5,658
Purchases of investments (6,082)
Proceeds from exercise of LTI stock options 308 374 817
Other (1,059) (2,458) 3,022
----------------------------------
(56,284) (64,692) (1,312)
----------------------------------
FINANCING
New long-term debt 108,452
Repayment of long-term debt (4,063) (65,378) (9,404)
Short-term debt, net 3,806
Dividends paid (21,421) (21,393) (21,298)
Funding of the accumulated postretirement
benefit obligation (23,700)
LTI dividends paid to minority interest shareholders (1,360) (1,355) (1,344)
Other 215 (120) 2,070
----------------------------------
(22,823) (3,494) (29,976)
----------------------------------
INCREASE (DECREASE) IN CASH AND
SHORT-TERM SECURITIES $ 1,469 $(12,222) $ 26,625
==================================
CHANGES IN MAJOR ELEMENTS WHICH INCREASE
(DECREASE) OPERATING WORKING CAPITAL
Accounts receivable, net $ 16,260 $ 9,205 $ 2,803
Inventories at FIFO 8,100 4,214 2,008
Prepaid and deferred expenses (1,699) 10 (1,335)
Accounts payable (15,259) 6,675 3,166
Accrued liabilities and expenses 5,422 4,333 25,462
----------------------------------
$ 12,824 $ 24,437 $ 32,104
==================================
RECONCILIATION OF INCREASE (DECREASE) IN
CASH AND SHORT-TERM SECURITIES
Cash and short-term securities at beginning of year $ 52,746 $ 65,028 $ 39,734
Cash and short-term securities at end of year 55,012 52,746 65,028
----------------------------------
Increase (decrease) in cash and short-term
securities per Statement of Financial Position 2,266 (12,282) 25,294
Currency translation effects (797) 60 1,331
----------------------------------
$ 1,469 $(12,222) $ 26,625
==================================
INTEREST PAID $ 20,522 $ 18,645 $ 18,784
TAXES PAID $ 16,992 $ 19,269 $ 17,180
</TABLE>
- --------------------------------------------------------------------------------
See accompanying financial review.
25
<PAGE> 8
STATEMENT OF FINANCIAL POSITION THE DEXTER CORPORATION
<TABLE>
<CAPTION>
December 31
--------------------------------------
In thousands of dollars 1994 1993 1992
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current assets
Cash $ 10,854 $ 3,406 $ 7,822
Short-term securities 44,158 49,340 57,206
Accounts receivable, net 168,957 141,726 131,818
Inventories
Materials and supplies 58,967 59,794 54,693
In process and finished goods 106,703 91,626 94,065
LIFO reserve (22,828) (20,597) (24,151)
-------------------------------------
142,842 130,823 124,607
Current deferred tax assets 16,122 20,382 25,714
Prepaid and deferred expenses 9,720 10,649 14,300
-------------------------------------
392,653 356,326 361,467
Property, plant and equipment
Land 18,581 17,776 14,589
Buildings and improvements 143,436 130,658 112,022
Machinery and equipment 429,416 395,547 362,504
Construction in progress 16,911 11,931 27,523
-------------------------------------
608,344 555,912 516,638
Less accumulated depreciation (279,409) (245,958) (217,769)
-------------------------------------
328,935 309,954 298,869
Investments of wholly owned captive
insurance companies 7,224 6,638 9,082
Investment in unconsolidated affiliates 49,390 46,452 35,894
Patents, technology, formulas and covenants 4,233 3,891 6,094
Excess of cost over net assets of
businesses acquired 74,034 69,301 49,683
Other assets 24,140 28,129 20,936
-------------------------------------
$ 880,609 $ 820,691 $ 782,025
=====================================
- --------------------------------------------------------------------------------------
</TABLE>
See accompanying financial review.
26
<PAGE> 9
STATEMENT OF FINANCIAL POSITION THE DEXTER CORPORATION
<TABLE>
<CAPTION>
December 31
-------------------------------------
In thousands of dollars 1994 1993 1992
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt $ 3,806
Accounts payable 82,851 $ 64,677 $ 70,954
Dividends payable 5,357 5,353 5,339
Accrued and deferred income taxes 24,259 19,566 13,235
Accrued liabilities and expenses 60,625 59,732 58,870
Current environmental liabilities 2,660 4,030 3,155
Current installments of long-term debt 4,071 3,822 2,768
------------------------------------
183,629 157,180 154,321
Long-term debt 225,402 227,307 179,024
Deferred items 22,316 30,150 29,312
Long-term deferred income taxes 21,517 17,151 37,351
Deferred tax credits 4,005 4,751 5,539
Long-term environmental liabilities 17,632 18,736 14,045
Minority interests - principally
Life Technologies, Inc. 62,475 52,121 46,819
Shareholders' equity
Common stock, par value $1 per share
(authorized 100,000,000 shares; issued
24,983,907 shares in 1994 and 1993,
and 24,960,241 shares in 1992) 24,984 24,984 24,960
Additional paid-in capital 11,979 11,966 11,474
Retained earnings 328,401 311,928 309,157
Currency translation effects (7,364) (22,137) (16,361)
Unrealized loss on investments (1,468)
Unearned compensation on restricted stock (965)
Treasury stock, at cost
(634,403 shares in 1994, 643,578 shares
in 1993 and 651,828 shares in 1992) (11,934) (13,446) (13,616)
------------------------------------
Total shareholders' equity 343,633 313,295 315,614
------------------------------------
$880,609 $820,691 $782,025
====================================
- ----------------------------------------------------------------------------------------------
</TABLE>
See accompanying financial review.
27
<PAGE> 10
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY THE DEXTER CORPORATION
<TABLE>
<CAPTION>
Add'l Currency Loss on Unearned Total
In thousands of dollars Common Paid-in Retained Translation Invest- Compen- Treasury Shareholders'
(except per share amounts) Stock Capital Earnings Effects ments sation Stock Equity
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1991 $24,809 $ 8,511 $292,278 $ 1,845 $(13,661) $313,782
Net income 38,203 38,203
Dividends - $.88 per share (21,324) (21,324)
Stock options 151 2,926 45 3,122
Currency effects (18,206) (18,206)
Pooling tax benefits 37 37
----------------------------------------------------------------------------------------------------
DECEMBER 31, 1992 24,960 11,474 309,157 (16,361) (13,616) 315,614
Net income 24,178 24,178
Dividends - $.88 per share (21,407) (21,407)
Stock options 24 459 170 653
Currency effects (5,776) (5,776)
Pooling tax benefits 33 33
----------------------------------------------------------------------------------------------------
DECEMBER 31, 1993 24,984 11,966 311,928 (22,137) (13,446) 313,295
Net income 37,898 37,898
Dividends - $.88 per share (21,425) (21,425)
Stock options (11) 192 181
Restricted stock (8) $(965) 1,320 347
Unrealized loss on
investments $(1,468) (1,468)
Currency effects 14,773 14,773
Pooling tax benefits 32 32
----------------------------------------------------------------------------------------------------
DECEMBER 31, 1994 $24,984 $11,979 $328,401 $ (7,364) $(1,468) $(965) $(11,934) $343,633
====================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
See accompanying financial review.
QUARTERLY FINANCIAL INFORMATION (unaudited)
<TABLE>
<CAPTION>
In millions of dollars Market Price
----------------------------------- -----------------------
Net Net Income
Net Cost Income (Loss) per Dividends
Quarter Sales of Sales (Loss) Share per Share High Low
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1992*
First $243.1 $160.6 $ 8.9 $ .37 $.22 $24 $20-7/8
Second 252.7 168.3 11.6 .48 .22 26-3/4 22-1/8
Third 231.0 156.7 9.0 .37 .22 28-1/8 24-3/4
Fourth 224.6 151.6 8.7 .36 .22 27-1/8 23-1/4
------------------------------------------------------------------
Year $951.4 $637.2 $ 38.2 $1.58 $.88 Close $25-7/8
==================================================================================================
</TABLE>
* Second quarter pretax income included an $11.5 million gain related to the
sale of the company's North American water management systems business and a
$9.6 million charge for restructuring businesses.
The fourth quarter included a $4.7 million gain related to the sale of the
company's plastisols business and a $4.6 million charge for restructuring
businesses.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993**
First $217.2 $144.3 $ (2.2) $ (.09) $.22 $28-7/8 $23-7/8
Second 228.6 152.1 9.8 .40 .22 26 21
Third 220.1 148.6 8.3 .34 .22 23-1/2 20-3/8
Fourth 221.2 148.8 8.3 .34 .22 24-1/2 22-1/4
------------------------------------------------------------------
Year $887.1 $593.8 $ 24.2 $ .99 $.88 Close $23-1/2
==================================================================================================
</TABLE>
** The first quarter net income included a $9.9 million, or $.41 per share,
charge for the cumulative effect of change in accounting principles.
Second quarter pretax income included a $9.5 million gain on the sale of the
company's coil coatings business and $3.5 million of income related to the
sale of the company's pultrusions business resulting from the proceeds of the
sale being in excess of the book value of the business which had been written
down at year-end 1991. Also reducing income in the second quarter was a $12
million charge for restructuring businesses and a provision for environmental
costs of $1 million.
The fourth quarter included a $0.4 million charge for restructuring
businesses at majority-owned Life Technologies, Inc.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994
First $233.5 $155.4 $ 9.3 $ .38 $.22 $25-7/8 $23-1/8
Second 247.1 165.4 11.0 .45 .22 25-3/8 22-3/4
Third 243.3 165.6 8.4 .35 .22 26 22-1/2
Fourth 250.8 171.8 9.2 .38 .22 23-1/2 19-7/8
------------------------------------------------------------------
Year $974.7 $658.2 $ 37.9 $1.56 $.88 Close $21-3/4
===================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
28
<PAGE> 11
ANALYSIS OF FINANCIAL CONDITION AND OPERATIONS
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of all majority-owned subsidiaries. All consolidated subsidiaries are
wholly owned except Life Technologies, Inc. (LTI) (55% owned) and a few other
subsidiaries, primarily outside the United States, in which aggregate minority
interests are not significant. Intercompany accounts, transactions and profits
have been eliminated in the consolidated financial statements. Companies owned
20% to 50% are accounted for by the equity method. Certain amounts for prior
years have been reclassified to conform to and be consistent with the 1994
presentation.
ACQUISITIONS In January 1994, Dexter purchased the automotive coatings
businesses of both Service Coatings, Inc. and Potter Paint Company. These
businesses now operate as part of the Dexter Automotive Materials Division.
In August 1994, Life Technologies, Inc. acquired certain assets of Lab Design of
Sweden, a distributor of life science research products.
None of the businesses acquired during the period, individually or in the
aggregate, constitute a significant subsidiary of The Dexter Corporation.
EVENTS, TRENDS, AND VULNERABILITIES Dexter is subject to a multitude of events
and trends which influence its business prospects, profitability and liquidity.
Many of these events and trends are outside the control of the company. However,
the consequent effects need to be managed as part of the ongoing business
environment.
Of immediate concern are cost increases in commodity-based raw materials
including woodpulp, polypropylene, and solvents. Although aggressive efforts are
underway to increase selling prices to offset this impact, the heightened degree
of competition throughout the world will continue to make price increases to our
customers difficult to obtain. Furthermore, it is not apparent that we have seen
the last of these cost increases as, at least for the short term, demand seems
to be supporting higher levels of costs. In addition, the company's Life
Technologies, Inc. subsidiary is subject to volatility in the cost of fetal
bovine serum which stems from a fundamental limit to supply. Further, for less
critical applications, additional competition consequent to the development of
substitute products for cell culture which do not depend on traditional raw
materials can be expected.
What turned out to be a fairly strong economy in 1994 may react negatively to
continued increases in interest rates in the United States. Build rates in the
U.S. automotive market may slow in 1995 and the expected recovery in the
aerospace market in 1996 may be slow to develop. Geographical expansion will
continue to provide opportunities and challenges as we learn how to create
profitable growth in developing countries such as China and India.
With over 50% of Dexter's profits derived from products sold outside the United
States, weakening international currencies against the U.S. dollar could have a
significant negative effect on the company's results. Revenues and profits in
the food packaging, electronics and medical markets are the most sensitive to
currency rate fluctuations.
There will continue to be increasing costs necessary to respond to heightened
regulatory pressures throughout the whole spectrum of industrial life. Although
we expect such increased costs might be moderate in areas of corporate
governance and securities regulation, such increases may continue to be
significant in areas of environmental, health, social and administrative
regulation. Heightened worldwide environmental concerns have led to greater
capital requirements and increased operating expenses. While the company, based
on known facts and circumstances, has provided substantial environmental
reserves as shown at year end in the "Statement of Financial Position" and
discussed below, the ultimate cost of compliance and remediation cannot be
ascertained and, therefore, there is no assurance that such reserves will prove
to be adequate over time.
Substantial national and local deficits in several parts of the world may
dictate the need for greater tax receipts or significant reductions in
government spending. Future increases in taxes by countries, states and
localities may be the ultimate outcome of this imbalance. Life Technologies may
be affected by the availability of government funding for life science research.
Other areas which will no doubt have an important impact on the future of the
company will be the increasing rate of technological change, a continued
universal move toward higher quality products, shortened product life cycles and
the further globalization of our customers and competitors. Technology is the
lifeblood of the corporation. In order to remain competitive, we must
successfully introduce new products that not only replace our current products
but also those of our competitors, otherwise, we are potentially exposed to
reduced margins and loss of business.
The general aging of the U.S. population will create challenges with respect to
the availability of employees as well as amplifying trends in increased health
care costs. By funding the accumulated liability for medical benefits of
retirees in 1993, Dexter has reduced the ongoing charge for these costs by
application of the expected long-term return of the funds invested.
The complexities of ever-changing worldwide events and trends including the
international political environment, the emergence of the global marketplace,
and the advancement of technology generate numerous vulnerabilities and
challenges. The company believes that it will face these challenges with
continued innovation and increased productivity.
LIQUIDITY The company's liquidity is strong and ample lines of credit are
available to the company and its subsidiaries. The current ratio (current assets
divided by current liabilities) is 2.1 to 1, and the quick ratio (cash,
short-term securities and accounts receivable divided by current liabilities) is
1.2 to 1. During 1994, the company's financing and investment needs were met
through funds provided from operations. As shown in the Statement of Cash Flows,
cash provided from operations of $80.6 million exceeded the sum of investments
of $56.3 million and financing activity of $22.8 million, thereby increasing
year-end cash and short-term securities by $1.5 million. Excluding LTI, cash
provided from operations exceeded cash needed for investments by $16.4 million.
Financing activities, excluding LTI, used funds of $21.4 million, resulting in a
net reduction of cash and short-term securities of $5 million.
The company plans to meet its future working capital and capital expenditure
needs with funds provided from operations, the reduction of short-term
securities and, as needed, short-term and long-term borrowings.
29
<PAGE> 12
SUPPLEMENTAL CONSOLIDATING
STATEMENT OF FINANCIAL POSITION
December 31, 1994
<TABLE>
<CAPTION>
Dexter Captive Reclasses
Operating Insurance D & S and Dexter
In thousands of dollars Companies Companies LTI Plastics Eliminations Consolidated
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Current assets
Cash and short-
term securities $ 24,799 $16,967 $ 13,246 $ 1,987 $ (1,987) $ 55,012
Accounts receivable
and inventories 222,416 510 88,873 25,713 (25,713) 311,799
Prepaid and
deferred expenses 20,389 4 5,449 75 (75) 25,842
-----------------------------------------------------------------------------------------------
Total current assets 267,604 17,481 107,568 27,775 (27,775) 392,653
-----------------------------------------------------------------------------------------------
Property, plant and
equipment, net 280,892 48,043 27,391 (27,391) 328,935
Investments of
wholly owned captive
insurance companies 7,224 7,224
Other assets 96,226 16,136 37,243 2,192 151,797
-----------------------------------------------------------------------------------------------
Total assets $644,722 $24,705 $171,747 $92,409 $(52,974) $880,609
===============================================================================================
Current liabilities
Short-term debt $ 3,806 $ 3,806
Accounts payable and
accrued liabilities 117,375 $ 3,234 $ 25,527 $13,533 $(13,533) 146,136
Income taxes 12,509 11,750 24,259
Dividends payable 5,357 749 (749) 5,357
Current installments of
long-term debt 4,071 4,071
-----------------------------------------------------------------------------------------------
Total current liabilities 143,118 3,234 38,026 13,533 (14,282) 183,629
-----------------------------------------------------------------------------------------------
Long-term debt 225,402 225,402
Deferred items 47,976 14,443 3,051 5 (5) 65,470
Minority interests 2,383 541 59,551 62,475
Shareholders' equity 225,843 7,028 130,129 78,871 (98,238) 343,633
-----------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $644,722 $24,705 $171,747 $92,409 $(52,974) $880,609
===============================================================================================
Current ratio 1.9 to 1 5.4 to 1 2.8 to 1 2.1 to 1 2.1 to 1
Quick ratio 1.1 to 1 5.4 to 1 1.3 to 1 1.0 to 1 1.2 to 1
</TABLE>
- --------------------------------------------------------------------------------
ANALYSIS OF OPERATIONS
1994 COMPARED WITH 1993
Revenues: Net sales were a record $974.7 million in 1994, an increase of $87.6
million, or 10%, over sales of $887.1 for 1993. The 10% increase in sales was
due to unit volume increases. A 1% increase due to the effect of higher currency
translation rates on international sales was offset by selling price decreases
averaging 1%. Acquisitions and divestitures accounted for a net increase in
sales of $1 million.
Equity in net income of affiliates increased $1.4 million to $3.8 million in
1994. This increase is due to a $0.7 million increase in the results of D & S
Plastics International and a full year of earnings from Akzo Dexter Aerospace
Finishes VoF representing a $0.7 million increase in earnings.
Expenses: Cost of sales increased as a percent of sales in 1994 thereby reducing
consolidated gross margin by .6 percentage points to 32.5% of sales from 33.1%
in 1993. Excluding Life Technologies, Inc., gross margin remained relatively
constant at 27.8% for 1994 compared with 27.9% for 1993. Two-thirds of the total
.6 percentage point decrease is due to the unfavorable impact of a LIFO charge
of $2.2 million in 1994 compared to $1.3 million of LIFO income in 1993. Gross
margins declined in 1994 at LTI due to lower fetal bovine serum (FBS) unit
selling prices and increased unit costs combined with higher royalty expense.
Excluding LTI, productivity improvements, reductions in fixed manufacturing
costs as a percent of sales and the benefit of lower gas costs for our
cogeneration facility almost fully offset the negative impact of selling price
reductions on gross margin.
30
<PAGE> 13
Marketing and administrative expenses increased $13.1 million, or 7%, in 1994
compared with 1993 due primarily to increased marketing efforts at Life
Technologies, Inc. and cost associated with 1994 Dexter acquisitions. Marketing
and administrative costs decreased as a percentage of sales from 19.7% in 1993
to 19.3% in 1994. Research and development expenses increased $2.8 million, or
6%, due to increases in the food packaging and electronics markets and at LTI.
Interest expense increased $1.8 million, or 9%, in 1994 compared with 1993
primarily due to higher long-term borrowings beginning in the fourth quarter of
1993. The company does not capitalize interest on facilities under construction.
If interest had been capitalized, there would have been no impact on earnings
per share in 1994 and earnings per share would have increased by $.02 in 1993.
In 1993, there was a gain on divestiture of product lines of $13 million which
was offset by a $12.4 million charge for restructuring businesses and a $1
million provision for estimated environmental costs.
Income Taxes: The effective tax rate was 36% in 1994 compared with 36.5% in
1993.
Minority Interest: Income attributed to minority interest shareholders increased
13% from 1993 due primarily to increased profits at LTI.
Net Income: The year 1994 resulted in net income of $37.9 million, or $1.56 per
share, compared with $34.1 million, or $1.40 per share, in 1993 before deducting
the $9.9 million, or $.41 per share cumulative effect of accounting principle
changes in 1993. The 1994 net income includes a $.04 per share decrease due to
the net effect of acquisitions and divestitures, a $.02 per share increase from
the effect of changes in currency translation rates, a $.01 per share increase
due to the reduction of the effective income tax rate from 36.5% to 36% for the
year, and an unfavorable comparison of $.08 per share resulting from a LIFO
charge of $.05 per share in 1994 compared to LIFO income of $.03 per share in
1993. Also included in earnings for 1993 was a charge of $.03 per share due to
environmental costs and a net favorable impact to earnings from divestitures net
of restructuring charges of $.02 per share.
1993 COMPARED WITH 1992
Revenues: Net sales were $887.1 million, a decrease of $64.3 million, or 7%,
compared with sales of $951.4 million for 1992. Volume increases of 1% were more
than offset by a 4% decrease due to the effect of lower currency translation
rates on international sales and a 4% decrease due to the net effect of
acquisitions and divestitures. Average selling prices remained largely
unchanged.
Equity in net income (loss) of affiliates improved $4.1 million, from a loss in
1992 of $1.7 million to earnings of $2.4 million in 1993. This was primarily due
to the results of D & S Plastics International. Other income increased $0.9
million principally due to increased income from non-compete agreements.
Expenses: Cost of sales decreased slightly as a percent of sales in 1993,
thereby increasing consolidated gross margin to 33.1% of sales versus 33% for
1992. This almost flat comparison actually represents a gross margin increase of
.9% due to increased productivity and cost containment programs in ongoing
businesses, offset by an .8% decrease due to the divestiture of the high-margin
water management business in mid-1992.
Marketing and administrative expenses decreased $13.1 million, or 7%, in 1993
compared with 1992 due primarily to the divestiture of the water management
business which had significantly higher marketing costs stated as a percent of
sales. Research and development expenses increased $1.6 million, or 4%, due to
increases at ongoing businesses.
Interest expense remained constant at $18.8 million in both 1993 and 1992
despite additional higher average long-term borrowings in 1993 as the company
took advantage of reductions in interest rates. If interest had been
capitalized, earnings per share would have increased by $.02 in 1993 and $.04 in
1992.
In 1993, there was a $1 million provision for the estimated environmental costs
related to the assessment, monitoring, and remediation of the Industry,
California location and possible participation in such potential costs with
respect to the surrounding San Gabriel Valley.
In 1993, there was a $13 million gain on the divestiture of product lines
compared to a $16.2 million gain on divestitures in 1992. The 1993 gain of $13
million includes a gain of $9.5 million on the sale of the coil coatings
business. In addition, there was $3.5 million of income related to the sale of
the pultrusions business resulting from the proceeds of the sale being in excess
of the book value of the business as written down at year-end 1991. Also in
1993, there was a $12.4 million charge for restructuring businesses compared
with a $14.2 million charge in 1992. For 1993, approximately one-half of this
charge was for the consolidation, relocation and integration of the domestic
aerospace coatings business, with the remainder divided equally between
severance programs and asset write-down resulting from the realignment of our
businesses.
Income Taxes: The effective income tax rate for 1993 was 36.5%. For 1992, an
effective income tax rate of 37% was applied to results other than the 1992 gain
on divestitures, which was subject to higher state tax rates, yielding a
consolidated effective tax rate in 1992 of 37.7%.
Minority Interests: Income attributed to minority interest shareholders
increased 10% from 1992 due primarily to increased profits at LTI.
Net Income: Net income for the year 1993, before deducting the $9.9 million, or
$.41 per share cumulative effect of accounting principle changes, was $34.1
million, or $1.40 per share, compared with $38.2 million, or $1.58 per share in
1992. Increased earnings of $.13 per share from ongoing operations, and a $.01
per share increase due to the reduction of the effective income tax rate on
earnings from ongoing operations were more than offset by a $.15 per share
decrease from the effect of changes in currency translation rates and a $.13 per
share decrease due to the effect of divestitures net of acquisitions. In
addition, 1993 included a provision of $1 million, or $.03 per share, for
estimated environmental costs and a $.02 per share gain from divestitures net of
restructuring charges in 1993. There was a favorable net impact from divestiture
and restructuring activities of $.03 per share in 1992.
1992 COMPARED WITH 1991
Revenues: Net sales were $951.4 million, an increase of $13.7 million, or 1%,
over 1991 despite a decrease in 1992 of $27.6 million due to the net effect of
acquisitions and divestitures. Apart from acquisitions and divestitures, sales
increased $41.3 million, or 4%, due to a 3% increase in unit volume and a 1%
increase due to the effect of higher currency translation rates on international
sales. There was no net increase in sales due to changes in average selling
prices.
Equity in net loss of affiliates improved $0.9 million during 1992 primarily due
to improved results at D & S Plastics International. Other income decreased $1.5
million, or 16%, in 1992 due to lower interest income of $1.1 million at LTI and
a decrease in royalty income of $0.4 million.
Expenses: Cost of sales as a percent of sales remained unchanged in 1992 thereby
maintaining gross margin at 33% of sales. This actually represents a gross
margin increase
31
<PAGE> 14
of 1% due to increased productivity and cost containment programs, offset by a
1% decrease due to the divestiture of the high-margin water management business
in mid-1992.
Marketing and administrative expenses decreased $10.1 million, or 5%, in 1992
compared with 1991 due primarily to the divestiture of the water management
business. Research and development expenses remained at 1991 levels.
Interest expense increased $2 million, or 12%, in 1992. The increase is due to a
higher level of long-term borrowings beginning in the fourth quarter of 1991. If
interest had been capitalized, earnings per share would have increased by $.04
in 1992 and $.02 in 1991.
Pretax income increased $61.9 million over 1991. The 1991 year included a $25.1
million provision for environmental settlement costs and related legal fees. In
1992, there was a $16.2 million gain on the divestiture of product lines
compared to a $12.6 million loss on divestitures in 1991 yielding a $28.8
million favorable increase in pretax income over 1991. The 1992 gain of $16.2
million on divestitures includes a gain of $11.5 million from the sale of the
North American water management business and a $4.7 million gain on the sale of
the plastisols business. In 1992, there was a $14.2 million charge for
restructuring businesses compared with a $9.8 million charge in 1991. For 1992,
approximately one-half of the $14.2 million charge is associated with severance
and early retirement programs in the United States and Europe with the remainder
related to the consolidation of facilities and asset write-down resulting from
the realignment of our businesses.
Income Taxes: An effective income tax rate of 37% was applied to results other
than the 1992 gain on divestitures, which was subject to higher state tax rates,
yielding a consolidated effective tax rate in 1992 of 37.7%. An effective rate
of 37% was applied to results other than the environmental and divestiture
provisions in 1991. A portion of the provision for environmental settlement
costs and the majority of the loss on divestitures were not tax deductible
thereby increasing the 1991 effective tax rate to 109.5%.
Minority Interests: Income attributed to minority interest shareholders
increased 22% from 1991 due primarily to increased profits at LTI.
Net Income (Loss): The year 1992 resulted in net income of $38.2 million, or
$1.58 per share, compared to a net loss of $7.1 million, or $.29 per share, in
1991. Excluding the divestiture gain of $.40 per share and restructuring
activity charge of $.37 per share, net income per share for 1992 would have been
$1.55 per share, a 22% increase over a comparable $1.27 per share in 1991 which
excludes the provision for environmental settlement costs of $.86 per share, the
anticipated loss on divestitures of $.46 per share and the restructuring
activity charge of $.24 per share.
- --------------------------------------------------------------------------------
TAXES The effective income tax rate was 36% in 1994, 36.5% in 1993 and 37.7% in
1992. The tax rate is currently expected to approximate 36% in 1995. The income
tax rate differs from the statutory U.S. federal income tax rate as shown below:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------
Liability Liability Deferred
Method Method Method
--------------------------------
<S> <C> <C> <C>
U.S. federal rate 35.0% 35.0% 34.0%
State taxes, net of federal benefit 1.8 2.1 2.2
Investment and R&E tax credits (2.2) (2.1) (1.2)
International taxation differences (0.8) (0.4) 2.2
Nondeductible excess
acquisition costs 1.1 1.8 1.0
Other 1.1 0.1 (0.5)
----------------------------
Effective income tax rate 36.0% 36.5% 37.7%
============================
</TABLE>
Investment tax credits are accounted for by the deferred method, which credits
the benefit to income over the productive lives of the related assets. Research
and experimentation (R&E) tax credits reduce income tax expense in the year
earned.
On January 1, 1993, the company adopted SFAS No. 109, Accounting for Income
Taxes, which requires the use of an asset and liability method of accounting for
income taxes. The cumulative effect of the adoption of SFAS No. 109 was a
one-time increase to earnings of $5.3 million, or $.22 per share, as of January
1, 1993. This increase in earnings was principally due to differences in the tax
rates in effect when the deferred taxes were originally recorded and the lower
rates in effect upon adoption and the recognition of previously unrecognized
deferred tax assets. Prior to 1993, income taxes were determined under the
deferred method in accordance with APB No. 11. As permitted under the new
standard, financial statements for prior years have not been restated to apply
the provisions of SFAS No. 109.
Pretax income from international operations amounted to $46.4 million in 1994,
$38.8 million in 1993 and $47.3 million in 1992. U.S. and international income
and withholding taxes have not been provided on temporary differences related to
investments in foreign subsidiaries. These differences principally include
unremitted earnings of approximately $149 million, differences between the
financial reporting amount and the tax basis of investments in foreign
subsidiaries and cumulative translation adjustments. The investment in these
subsidiaries is considered to be permanent in nature. It is impracticable to
estimate the total tax liability, if any, which these differences could cause
should such investments cease to be treated as permanently reinvested.
- --------------------------------------------------------------------------------
TAXES, OTHER THAN SALES TAXES
<TABLE>
<CAPTION>
In thousands of dollars 1994 1993 1992
- -------------------------------------------------------------
Liability Liability Deferred
Method Method Method
------------------------------
<S> <C> <C> <C>
Income taxes
Current
United States $ 3,012 $ 5,717 $ 9,020
State 755 1,521 2,504
International 14,783 12,560 17,503
---------------------------
18,550 19,798 29,027
---------------------------
Deferred
United States 5,298 2,117 (1,783)
State 1,353 (22) (89)
International 1,299 2,357 400
---------------------------
7,950 4,452 (1,472)
---------------------------
Total income taxes 26,500 24,250 27,555
Payroll taxes 18,195 16,851 17,505
Property taxes 3,576 3,759 4,062
Other taxes 454 363 1,078
---------------------------
Total taxes $48,725 $45,223 $50,200
===========================
</TABLE>
- --------------------------------------------------------------------------------
32
<PAGE> 15
DEFERRED INCOME TAXES The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax liabilities at
December 31, 1994 and 1993 are presented below:
<TABLE>
<CAPTION>
In thousands of dollars 1994 1993
- -------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Postretirement health benefits $ 9,976 $ 8,727
Accrued expenses, not
currently deductible 8,721 6,515
Foreign loss carryforwards 5,617 4,147
Environmental reserves 4,972 4,374
Reserves for insurance 4,597 2,372
Inventory, principally valuation
reserves 4,466 3,350
Restructuring activities 2,174 6,756
Other 12,960 12,912
------------------------
Gross deferred tax assets $ 53,483 $ 49,153
------------------------
Deferred tax liabilities
Fixed assets, principally depreciation $(54,182) $(40,011)
Other (1,023) (2,498)
------------------------
Gross deferred tax liabilities $(55,205) $(42,509)
------------------------
Net deferred tax (liability) asset
before valuation allowance $ (1,722) $ 6,644
Valuation allowance (3,121) (2,452)
------------------------
Net deferred tax (liability) asset
after valuation allowance $ (4,843) $ 4,192
========================
</TABLE>
- --------------------------------------------------------------------------------
On December 31, 1994 and 1993, valuation allowances of $3.1 million and $2.5
million reduced the deferred tax asset attributable to foreign loss
carryforwards to the amount that, based upon all available evidence, is more
likely than not to be realized. Reversal of the valuation allowance is
contingent upon the recognition of future taxable income and capital gains in
specific foreign countries or changes in circumstances which cause the
recognition of the benefits to become more likely than not. The increase of $0.6
million in the valuation allowance during the year was due principally to the
generation of additional foreign loss carryforwards.
The components of deferred taxes at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
In thousands of dollars 1994 1993
- ----------------------------------------------------------------------
<S> <C> <C>
Current deferred tax assets $ 16,122 $ 20,382
Long-term tax asset 1,965 1,499
(included in other assets)
Current deferred tax liability (1,413) (538)
(included in accrued and deferred
income taxes)
Long-term deferred income taxes (21,517) (17,151)
------------------------
Net deferred tax (liability) asset $ (4,843) $ 4,192
========================
</TABLE>
- --------------------------------------------------------------------------------
For the year ended December 31, 1992, deferred income tax benefit of $1.5
million resulted from timing differences in the recognition of income and
expense for income tax and financial reporting purposes. The sources and tax
effects of those timing differences are as follows:
<TABLE>
<CAPTION>
In thousands of dollars 1992
- -----------------------------------------------------------
<S> <C>
Tax attributable to
Accelerated tax depreciation $ 2,082
Restructuring activities (2,751)
Other 79
-------
(590)
Tax credits (882)
-------
Deferred income tax benefit $(1,472)
=======
</TABLE>
- --------------------------------------------------------------------------------
NET INCOME PER SHARE Net income of $1.56 per share increased 11.4% over income
of $1.40 per share in 1993 before last year's $.41 per share charge for the
cumulative effect of accounting principle changes which reduced 1993 net income
to $.99 per share. Net income per share is calculated by dividing net income by
the weighted average number of shares of common stock outstanding during the
year. The increase in the average number of shares in 1994 resulted from the
exercise of stock options. No effect has been given to common stock equivalents
related to stock options outstanding or restricted stock, as no material
dilutive effect would result from these items.
33
<PAGE> 16
MARKET SEGMENT DATA
1994 COMPARED WITH 1993
Sales to the Aerospace market increased $3 million, or 7%. Net of acquired
businesses, sales increased 2%. Operating losses decreased $5.4 million in 1994
principally due to the effect of restructuring charges of $5.2 million in 1993.
These 1993 charges were primarily for the consolidation, relocation and
integration of the domestic aerospace coatings business into a world-class
manufacturing facility on the Waukegan, Illinois site.
Sales to the Automotive market increased $19.8 million, or 51%. The effect of
acquired businesses increased sales by $9.4 million. Net of acquired businesses,
sales increased 27% principally due to increased sales of acoustic materials.
Operating income increased $3.9 million in 1994 primarily attributable to higher
sales volume and improved gross margins in the acoustic materials business.
Sales to the Electronics market increased $16 million, or 11%. Sales of
electronic encapsulation materials and magnetic materials were strong in 1994.
Operating income increased $5 million, or 48%, primarily due to increased gross
margins from higher sales volume of electronic encapsulation materials and
magnetic materials. Restructuring and environmental charges of $1.9 million
related to 1993 favorably impacted the comparison of operating income in 1994.
Partially offsetting these increases were higher research and development costs
associated with products in the Electronics market. Decreased gross margins from
printed wiring board products attributable to selling price decreases and raw
material cost increases also impacted operating income unfavorably in 1994.
Sales to the Food Packaging market increased $27.2 million, or 12%. Sales
increased due to strong sales of food and beverage can coatings and nonwoven
materials serving the international markets. Sales volume increases and higher
currency translation rates on international sales more than offset selling price
decreases. Operating income increased $3.3 million, or 11%, in 1994. The
operating income comparison was favorably impacted in 1994 due to restructuring
charges of $2.2 million in 1993. Increased gross margins on international food
and beverage can coatings due to volume increases and higher currency
translation rates favorably impacted operating income in 1994. These increases
were partially offset by selling price decreases and higher research and
development costs for food and beverage can coatings.
Sales to the Medical market increased $30.9 million, or 11%, primarily due to
strong unit sales at LTI. Operating income in 1994 increased $0.1 million.
Operating income increased at LTI in 1994 primarily due to the favorable impact
of higher unit sales. Offsetting this increase was a decrease in operating
income from medical nonwovens due principally to selling price decreases and raw
material cost increases in the United States. Operating income in 1993 was
reduced by $2 million related to restructuring activities.
Sales of the "Other" category decreased $9.3 million, or 6%. The effect of
divested businesses decreased sales by $11 million. Net of divested businesses,
sales increased 1%. Operating income decreased $9.2 million in 1994. Lower gas
cost for our cogeneration facility favorably impacted operating income in 1994.
However, in 1993 operating income included pretax gains of $13 million related
to the sales of our coil coatings and pultrusions businesses offset by
restructuring charges of $1.3 million.
1993 COMPARED WITH 1992
Sales to the Aerospace market decreased $4.2 million, or 9%. Net of acquired or
divested businesses, sales decreased 15%. Sales of both aerospace coatings and
adhesives were weak in 1993. Operating losses increased $4.7 million in 1993
primarily due to divestiture and restructuring charges of $5.2 million in 1993
compared with $1.9 million in 1992. These 1993 charges were primarily for the
consolidation, relocation and integration of the domestic aerospace coatings
business. Lower gross margin dollars due to lower aerospace coatings and
adhesives sales also unfavorably impacted operating income in 1993.
Sales to the Automotive market decreased $21.2 million, or 35%. Net of divested
businesses, sales decreased 10% primarily due to decreased sales of acoustic
materials. Operating losses decreased $0.6 million primarily due to increased
gross margins from higher sales volume and higher margin products in our
automotive interior coatings business. Partially offsetting this increase were
lower gross margin dollars primarily attributable to selling price decreases and
higher research and development costs in the acoustic materials business.
Sales to the Electronics market increased $7.7 million, or 6%. Net of divested
businesses, sales increased 7%. Sales of electronic encapsulation materials and
magnetic materials were strong in 1993. Operating income increased $1.6 million.
Divestiture, restructuring and environmental charges favorably impacted
operating income by $1.2 million over 1992. The cost of divestiture and
restructuring activities decreased operating income by $3 million in 1992
compared with $0.8 million in 1993. Also decreasing operating income in 1993 was
a $1 million provision for environmental costs. Increased gross margins due to
higher sales of magnetic materials favorably impacted operating income.
Partially offsetting this increase were higher research and development costs.
Sales to the Food Packaging market increased $6.7 million, or 3%. Net of
acquired or divested businesses, sales decreased 7% in 1993 principally due to
lower currency translation rates and lower sales of food and beverage can
coatings. Operating income decreased $5.9 million principally due to the effect
of lower currency translation rates. Decreased gross margins in European food
and beverage can coatings due to lower sales volume and decreased selling prices
also reduced operating income.
Sales to the Medical market decreased $4.1 million, or 1%. Sales increases due
to strong unit sales at LTI were more than offset by the effect of lower
currency translation rates on international sales of LTI and medical nonwovens.
Operating income increased $1.8 million principally due to a $1.1 million
increase in LTI's operating income.
Sales of the "Other" category decreased $49.2 million, or 25%. The effect of
divested businesses decreased sales by $40.2 million. Operating income decreased
$4.2 million in 1993 primarily due to the loss of earnings resulting from the
divestiture of our North American water management and plastisols businesses in
1992 and the divestiture of our U.S.-based coil coatings business in 1993.
Divestiture and restructuring activities included $11.7 million of income in
1993 as compared with $11.2 million in 1992. Included in 1993 were pretax gains
of $9.5 million from the sale of our coil coatings business and $3.5 million
related to the sale of our pultrusions business.
34
<PAGE> 17
MARKET SEGMENT DATA
<TABLE>
<CAPTION>
In thousands of dollars 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES
Aerospace $ 44,769 $ 41,815 $ 45,998 $ 47,000 $ 37,722
Automotive * 58,511 38,702 59,923 51,734 31,707
Electronics 161,353 145,359 137,622 118,232 120,315
Food Packaging 259,398 232,164 225,493 225,969 225,561
Medical 315,616 284,733 288,817 265,233 245,611
Other 135,072 144,339 193,586 229,566 247,030
------------------------------------------------------------------------------
Consolidated $ 974,719 $ 887,112 $ 951,439 $ 937,734 $ 907,946
==============================================================================
Unit Volume and Product Mix Change 10% 1% 3% -- 3%
Field Sales Force 229 230 242 434 458
* Does not include D & S Plastics International $81,105 $69,438 $49,392 $39,847 $31,426
- -------------------------------------------------------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION
Aerospace $ 3,479 $ 3,414 $ 3,524 $ 3,299 $ 2,350
Automotive 2,943 2,265 2,289 2,300 2,010
Electronics 4,627 4,466 4,057 3,706 3,338
Food Packaging 9,114 7,160 6,030 5,304 5,169
Medical 11,606 10,588 9,389 8,186 7,385
Other 8,741 8,452 10,055 11,051 9,862
General Corporate 413 310 328 249 158
------------------------------------------------------------------------------
Consolidated $ 40,923 $ 36,655 $ 35,672 $ 34,095 $ 30,272
==============================================================================
- -------------------------------------------------------------------------------------------------------------------------------
RESEARCH AND DEVELOPMENT
Aerospace $ 3,742 $ 3,474 $ 3,480 $ 3,458 $ 3,473
Automotive 2,656 2,161 2,695 3,951 3,189
Electronics 6,547 5,496 5,128 5,015 4,395
Food Packaging 10,967 9,898 8,026 7,587 6,632
Medical 17,109 17,052 16,511 14,930 14,457
Other 5,277 5,155 6,376 7,115 7,734
General Corporate 346 567 -- -- --
------------------------------------------------------------------------------
Consolidated $ 46,644 $ 43,803 $ 42,216 $ 42,056 $ 39,880
==============================================================================
Laboratory Staff 452 439 395 470 504
- -------------------------------------------------------------------------------------------------------------------------------
DIVESTITURE, RESTRUCTURING & ENVIRONMENTAL
(Charge)/Credit
Aerospace $ (5,170) $ (1,853) $ (899) $ (1,638)
Automotive (278) (413) (2,078) (2,204)
Electronics (1,864) (3,034) (476) 132
Food Packaging (2,234) (1,496) (11,146) (1,814)
Medical (2,008) (1,686) (9,247) (496)
Other 11,683 11,199 (22,594) 6,619
General Corporate (501) (712) (1,084) (828)
--------------------------------------------------------------
Consolidated $ (372) $ 2,005 $ (47,524) $ (229)
==============================================================
- -------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED OPERATING INCOME (LOSS)
Aerospace $ (844) $ (6,215) $ (1,469) $ 578 $ 141
Automotive 2,996 (872) (1,438) (5,957) (2,856)
Electronics 15,248 10,295 8,699 5,188 13,068
Food Packaging 32,031 28,765 34,667 27,099 33,986
Medical 36,164 36,089 34,306 24,280 33,886
Other 16,411 25,655 29,849 (10,291) 24,822
------------------------------------------------------------------------------
Consolidated Operating Income 102,006 93,717 104,614 40,897 103,047
Other Income, net 9,386 8,586 3,351 3,453 7,769
Interest Expense (20,509) (18,756) (18,799) (16,800) (17,484)
General Corporate Expense (17,271) (17,109) (16,034) (16,358) (15,925)
------------------------------------------------------------------------------
Consolidated Income before Taxes $ 73,612 $ 66,438 $ 73,132 $ 11,192 $ 77,407
==============================================================================
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES
Aerospace $ 8,397 $ 3,062 $ 1,315 $ 2,059 $ 1,208
Automotive 2,062 1,590 4,778 12,232 3,181
Electronics 6,370 7,457 4,280 4,742 5,907
Food Packaging 6,239 6,771 13,512 15,868 7,297
Medical 16,536 19,081 22,138 14,204 10,281
Other 5,306 6,702 5,613 11,180 15,946
General Corporate 187 121 157 1,464 90
------------------------------------------------------------------------------
Consolidated $ 45,097 $ 44,784 $ 51,793 $ 61,749 $ 43,910
==============================================================================
- -------------------------------------------------------------------------------------------------------------------------------
ASSETS AT YEAR-END
Aerospace $ 60,753 $ 56,878 $ 50,613 $ 55,808 $ 54,018
Automotive 43,034 38,920 43,979 60,574 57,239
Electronics 97,646 87,978 83,628 81,338 74,685
Food Packaging 179,927 158,884 107,669 119,207 104,155
Medical 235,191 218,129 194,197 178,719 160,261
Other 143,350 133,160 155,405 180,325 184,411
------------------------------------------------------------------------------
Consolidated Operating Assets 759,901 693,949 635,491 675,971 634,769
General Corporate* 120,708 126,742 146,534 108,500 127,614
------------------------------------------------------------------------------
Consolidated Assets 880,609 820,691 782,025 784,471 762,383
Consolidated Liabilities (536,976) (507,396) (466,411) (470,689) (418,685)
------------------------------------------------------------------------------
Net Assets $ 343,633 $ 313,295 $ 315,614 $ 313,782 $ 343,698
==============================================================================
</TABLE>
* Corporate assets consist primarily of cash, securities and investments, which
include the investment in D & S Plastics International of $39,435 in 1994,
$37,110 in 1993, $35,496 in 1992, $35,795 in 1991 and $34,347 in 1990, and, in
addition, corporate assets of Life Technologies, Inc.
------------------------------------------------------------------------------
35
<PAGE> 18
GEOGRAPHIC DATA
Operations outside the United States continue to be increasingly important to
Dexter giving geographic diversification to sales and earnings. Over the past
five years, profits attributable to operations in countries outside the United
States represented a disproportionately higher percent of the total than sales.
1994 COMPARED WITH 1993
Net sales increased in all geographic areas. In North America, net sales
increased $34.8 million, or 6%. Net sales increased in all markets in North
America but decreased in the "Other" category. The decrease in the "Other"
category was primarily due to divested businesses. The majority of the increase
in North America was due to increased sales in the Automotive, Electronics and
Medical markets. Sales to the Medical market increased principally due to LTI.
Sales outside of North America increased $52.8 million, or 15%. Higher currency
translation rates contributed $10 million to this increase. Net sales increased
in all markets in which we operate outside of North America. The majority of
this increase was due to sales in the Electronics and Food Packaging markets and
at LTI in the Medical market. Net sales outside of North America were 40% of
consolidated net sales in 1994 and 38% in 1993. Export sales increased $8
million to $68 million and represent 7% of consolidated net sales in 1994.
Operating income increased in all geographic areas. In North America, operating
income increased in all markets but decreased in the "Other" category. The
decrease in the "Other" category was primarily due to the effect of businesses
divested in 1993. Operating income outside of North America increased $7.8
million, or 18%, principally due to increases in the Electronics and Food
Packaging markets and higher currency translation rates. Operating income
outside of North America was 50% of total operating income in 1994 and 46% in
1993.
Total net assets increased 10%, or $30.3 million, in 1994. The net asset
decrease in North America was more than offset by increases in Western Europe
and the Pacific Area. Corporate assets decreased in North America and increased
in Western Europe principally due to cash and short-term securities. Net assets
increased 17% in Western Europe and 21% in the Pacific Area. Currency
translation rates increased net assets outside of North America by $14.8
million. Net assets outside of North America were 61% of total net assets in
1994 compared with 57% in 1993.
1993 COMPARED WITH 1992
Net sales increased in the Pacific Area but decreased in North America and
Western Europe. In North America, net sales increased in the Electronics, Food
Packaging and Medical markets but decreased in the Aerospace and Automotive
markets and in the "Other" category. The decrease in the "Other" category was
primarily due to divested businesses. Net of acquired or divested businesses,
sales decreased $34.4 million, or 12%, in Western Europe. This decrease occurred
in all markets except the Electronics market and was primarily due to lower
currency translation rates. In the Pacific Area, net sales increased in the
Electronics and Medical markets but decreased in the Food Packaging market and
in the "Other" category. Net sales outside of North America were 38% of
consolidated net sales in 1993 and 1992. Export sales increased by $3 million to
$60 million and represent 7% of consolidated net sales in 1993.
Operating income decreased in all geographic areas. In North America, operating
income increased in all markets other than in the Aerospace market and in the
"Other" category. Operating income in North America in 1993 includes pretax
gains of $13 million related to the sales of our coil coatings and pultrusions
businesses offset by a provision for environmental costs and restructuring
charges totaling $11.8 million. In 1992 operating income in North America
included pretax gains of $16.2 million from the sales of our water management
and plastisols businesses offset by restructuring charges of $11 million.
Operating income decreased 10% in Western Europe due to lower currency
translation rates. Operating income decreased 6% in the Pacific Area, primarily
due to decreases in the Food Packaging market. Operating income outside of North
America was 46% of total operating income in both 1993 and 1992.
Total net assets decreased 1%, or $2.3 million, in 1993. Corporate net assets
decreased in North America principally due to decreases in cash and short-term
securities and increases in long-term debt primarily to fund an acquisition and
a joint venture investment in Western Europe and to fund the SFAS No. 106
accumulated postretirement benefit obligation in the amount of $23.7 million.
Net assets increased 44% in Western Europe and 5% in the Pacific Area. The
increase in Western Europe was principally due to the acquisition of Vernicolor
and our investment in a joint venture for aerospace coatings. Currency
translation rates decreased net assets outside of North America by $5.8 million.
Net assets outside of North America were 57% of total net assets in 1993
compared with 41% in 1992.
36
<PAGE> 19
GEOGRAPHIC DATA
<TABLE>
<CAPTION>
In thousands of dollars 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES*
North America
Total Net Sales $ 634,230 $ 586,868 $ 633,987 $ 638,100 $ 632,165
Intercompany Sales 53,302 40,731 40,589 36,258 25,721
--------------------------------------------------------------------------------
Net Sales $ 580,928 $ 546,137 $ 593,398 $ 601,842 $ 606,444
================================================================================
Western Europe
Total Net Sales $ 331,397 $ 290,814 $ 313,970 $ 290,118 $ 256,548
Intercompany Sales 14,513 13,156 16,289 11,036 2,526
--------------------------------------------------------------------------------
Net Sales $ 316,884 $ 277,658 $ 297,681 $ 279,082 $ 254,022
================================================================================
Pacific Area
Net Sales $ 76,907 $ 63,317 $ 60,360 $ 56,810 $ 47,480
================================================================================
Consolidated
Total Net Sales $1,042,534 $ 940,999 $1,008,317 $ 985,028 $ 936,193
Intercompany Sales 67,815 53,887 56,878 47,294 28,247
--------------------------------------------------------------------------------
Net Sales $ 974,719 $ 887,112 $ 951,439 $ 937,734 $ 907,946
================================================================================
</TABLE>
* Intercompany sales between areas are based on estimated market prices or on
amounts computed to provide profits to each unit. Excluded from net sales is
Dexter's share of the sales of 50% or less owned joint ventures which are
accounted for under the equity or cost methods.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING INCOME (LOSS)
North America $ 51,555 $ 50,863 $ 57,422 $ (50) $ 60,565
Western Europe 45,155 40,298 44,831 39,081 40,347
Pacific Area 6,013 3,080 3,266 3,195 2,993
Consolidated, net of
eliminations $ 102,006 $ 93,717 $ 104,614 $ 40,897 $ 103,047
===============================================================================
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS AT YEAR-END
North America
Operating Assets $ 450,478 $ 429,395 $ 423,419 $ 454,280 $ 431,017
Corporate Assets* 97,579 116,041 135,293 97,337 113,369
Liabilities (415,330) (411,988) (373,039) (372,894) (334,403)
-------------------------------------------------------------------------------
Net Assets $ 132,727 $ 133,448 $ 185,673 $ 178,723 $ 209,983
===============================================================================
Western Europe
Operating Assets $ 257,288 $ 224,634 $ 174,177 $ 187,785 $ 173,813
Corporate Assets* 22,476 10,541 10,202 11,086 13,377
Liabilities (92,551) (74,915) (73,059) (81,806) (70,930)
-------------------------------------------------------------------------------
Net Assets $ 187,213 $ 160,260 $ 111,320 $ 117,065 $ 116,260
===============================================================================
Pacific Area
Operating Assets $ 52,135 $ 39,920 $ 37,895 $ 33,906 $ 29,939
Corporate Assets* 653 160 1,039 77 868
Liabilities (29,095) (20,493) (20,313) (15,989) (13,352)
-------------------------------------------------------------------------------
Net Assets $ 23,693 $ 19,587 $ 18,621 $ 17,994 $ 17,455
===============================================================================
Consolidated
Operating Assets $ 759,901 $ 693,949 $ 635,491 $ 675,971 $ 634,769
Corporate Assets* 120,708 126,742 146,534 108,500 127,614
Liabilities (536,976) (507,396) (466,411) (470,689) (418,685)
-------------------------------------------------------------------------------
Net Assets $ 343,633 $ 313,295 $ 315,614 $ 313,782 $ 343,698
===============================================================================
</TABLE>
* Corporate assets consist primarily of cash, securities and investments, which
include the investment in D & S Plastics International of $39,435 in 1994,
$37,110 in 1993, $35,496 in 1992, $35,795 in 1991 and $34,347 in 1990, and, in
addition, corporate assets of Life Technologies, Inc.
- --------------------------------------------------------------------------------
37
<PAGE> 20
LIFE TECHNOLOGIES, INC.
On September 1, 1983, Dexter's GIBCO subsidiary merged with Bethesda Research
Laboratories, Inc. (BRL). The resulting free-standing company was renamed Life
Technologies, Inc. (LTI) and at December 31, 1994 was owned 55% by Dexter, with
the remainder owned by the public. The common stock of LTI is publicly traded on
the over-the-counter market under the Nasdaq symbol LTEK. Since 1983, Dexter's
proportionate ownership of LTI has decreased from 64% in 1983 to 55% due
principally to the effect of the exercise of stock options and the conversion of
LTI subordinated debentures held by parties other than Dexter into LTI common
stock.
LTI is reported as part of the Medical market segment in accordance with SFAS
No.14 Financial Reporting for Segments of a Business Enterprise as applicable to
Dexter, although LTI, as a publicly owned company, issues its own annual report
including audited financial statements. These statements are shown on this page
in condensed form.
Net sales of LTI increased $30.2 million, or 15%, in 1994. This improvement was
due to a $25.1 million, or 15%, increase in sales of product lines other than
fetal bovine serum (FBS) and higher FBS sales of $5.1 million. Higher currency
translation rates increased 1994 net sales by $2 million when compared with
1993.
Gross margins for 1994 were 47.3% of sales compared with 50.3% in 1993. Gross
margins declined principally due to lower FBS gross margins and higher royalty
expense in 1994.
Marketing and administrative expenses increased 9% to $68.8 million in 1994 and
represented 29.2% of net sales in 1994 compared with 30.8% of net sales in 1993.
R&D expenses were $15 million in 1994, an increase of 4% over 1993. Results for
1993 were reduced by a $0.4 million charge related to restructuring.
Other income increased $0.9 million in 1994 principally due to increases in
investment and equity income and net currency gains realized on transactions.
Pretax income increased 11%. Income taxes were provided at a rate of 36% in 1994
and 1993. Net income increased 10% to $18.2 million in 1994 from $16.6 million
in 1993.
LTI declared quarterly dividends totaling $.20 per share in both 1994 and 1993.
After the deduction of minority interests, LTI contributed $9.9 million to
Dexter's net income, or $.41 per share, in 1994, compared with $9 million, or
$.37 per share, in 1993. Dexter's portion of LTI shareholders' equity, per share
of Dexter, increased to $2.91 at December 31, 1994, up from $2.47 at year-end
1993.
At year-end 1994, LTI had $13.2 million in cash and short-term securities, $94.3
million in other current assets and $38 million of current liabilities. During
1994, LTI had capital expenditures of $12.5 million and was self funding.
Capital expenditures in 1995 are expected to range between $15 million and $18
million largely due to LTI's facilities modernization program. It is expected
that LTI will be self funding in 1995.
- --------------------------------------------------------------------------------
CONTRIBUTION OF LTI TO DEXTER NET INCOME
<TABLE>
<CAPTION>
Years ended December 31
In thousands of dollars -----------------------
(except per share amounts) 1994 1993
- -------------------------------------------------------------
<S> <C> <C>
Net income of LTI $18,207 $16,560
Portion attributable to
minority interests 8,279 7,513
------------------------
Dexter's portion of
net income of LTI $ 9,928 $ 9,047
========================
Net income per share of Dexter $.41 $.37
- -------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Years ended December 31
-----------------------
In thousands of dollars 1994 1993
- ------------------------------------------------------------
<S> <C> <C>
REVENUES
Net sales $235,195 $204,949
Net royalties 67 667
---------------------
235,262 205,616
---------------------
EXPENSES
Cost of sales 123,988 101,874
Marketing and administrative 68,768 63,221
Research and development 15,000 14,463
Restructuring 420
---------------------
207,756 179,978
---------------------
Other income, net 1,119 237
---------------------
INCOME BEFORE INCOME TAXES 28,625 25,875
Income taxes 10,305 9,315
---------------------
INCOME BEFORE MINORITY INTERESTS 18,320 16,560
Minority interests 113
---------------------
NET INCOME $ 18,207 $ 16,560
=====================
</TABLE>
- --------------------------------------------------------------------------------
CONDENSED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31
---------------------
In thousands of dollars 1994 1993
- ------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and short-term securities $ 13,246 $ 7,927
Other current assets 94,322 83,706
Property, plant and equipment, net 48,043 40,394
Investments and other assets 9,796 8,475
Excess of cost over net assets of
businesses acquired 6,340 5,288
---------------------
Total assets $171,747 $145,790
=====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 38,026 $ 32,710
Other liabilities 3,592 3,080
Shareholders' equity 130,129 110,000
---------------------
Total liabilities and
shareholders' equity $171,747 $145,790
=====================
</TABLE>
- --------------------------------------------------------------------------------
CONTRIBUTION OF LTI TO DEXTER BOOK VALUE
<TABLE>
<CAPTION>
December 31
In thousands of dollars ---------------------
(except per share amounts) 1994 1993
- ------------------------------------------------------------
<S> <C> <C>
LTI shareholders' equity $130,129 $110,000
Portion attributable to
minority interests 59,210 49,933
---------------------
Dexter's portion of LTI
shareholders' equity $ 70,919 $ 60,067
=====================
Book value per share of Dexter stock $2.91 $2.47
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONDENSED STATEMENT OF CASH FLOWS
Years ended December 31
-----------------------
In thousands of dollars 1994 1993
- ------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net income $ 18,207 $ 16,560
Noncash items
Depreciation and amortization 6,508 5,823
Other 1,646 (558)
Operating working capital increase (5,008) (9,501)
---------------------
21,353 12,324
---------------------
INVESTMENTS
Property, plant and equipment (12,533) (8,085)
Acquisitions (1,287)
Other 17 (1,034)
---------------------
(13,803) (9,119)
---------------------
FINANCING
Dividends paid (2,993) (2,987)
Proceeds from exercise of
stock options 308 374
---------------------
(2,685) (2,613)
---------------------
EFFECT OF TRANSLATION RATE
CHANGES ON CASH AND
SHORT-TERM SECURITIES 454 (317)
---------------------
INCREASE IN CASH AND
SHORT-TERM SECURITIES $ 5,319 $ 275
=====================
- --------------------------------------------------------------------------------
</TABLE>
38
<PAGE> 21
D & S PLASTICS INTERNATIONAL
On March 31, 1990, Dexter and Solvay S.A., of Belgium, completed the formation
of D & S Plastics International, an equally owned joint venture based in Auburn
Hills, Michigan. D & S Plastics is the leading North American supplier of
automotive engineered polyolefin materials. These modified olefins are used for
front and rear bumper facias, ground-effects packages, air bag covers, and many
other exterior and interior automobile components.
D & S Plastics' sales have increased from $69.4 million in 1993 to $81.1 million
in 1994, an increase of 17%. For the year ended December 31, 1994, D & S
Plastics reported net income of $4.5 million compared with $3.2 million in 1993,
an increase of 41%. D & S Plastics' results are not consolidated in Dexter's
financial statements. Dexter accounts for the results of D & S Plastics under
the equity method. Included in Dexter's equity in net income of affiliates is
50% of D & S Plastics' results. A condensed statement of financial position for
D & S Plastics International is included in the supplementary table on page 30.
During 1994, D & S Plastics had capital expenditures of $9.2 million and was
self funding.
CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Years ended December 31
-----------------------
In thousands of dollars 1994 1993
- --------------------------------------------------------------
<S> <C> <C>
Revenues $81,105 $69,438
Net income $ 4,544 $ 3,229
Amount included in Dexter's
"Equity in net income of affiliates" $ 2,272 $ 1,615
- --------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
ANALYSIS OF FINANCIAL POSITION
WORKING CAPITAL
Working capital, including cash and short-term securities, increased $9.9
million from 1993. Operating working capital increased $22.9 million, or 13%, to
$198.2 million at year-end 1994. The current ratio at December 31, 1994, was 2.1
to 1. The company's target is to have a current ratio of greater than 2.0 to 1.
The company's liquidity is strong, and ample lines of credit are available to
the company and its subsidiaries. The sum of cash, short-term securities and
accounts receivable exceeded total current liabilities at December 31, 1994. As
of year-end 1994, the company has available short-term lines of credit in excess
of $100 million of which the Board has authorized borrowing only $50 million at
any one time. At year-end 1994, $3.8 million were borrowed against these lines
of credit. Additionally, there is authorized $50 million in medium-term notes,
which were all unissued at year-end. As of year-end 1994, the company has eight
multi-currency, revolving credit agreements aggregating $50 million. Nothing was
borrowed under these agreements at year-end 1994; however, the funds are
immediately available should the company so desire.
INCREASE/(DECREASE) IN OPERATING WORKING CAPITAL AND WORKING CAPITAL IN 1994
<TABLE>
<CAPTION>
Business Change in
Acquisitions Currency Consolidated
Cash and Account- Translation Account
In thousands of dollars Changes ing Accruals Effects Balances
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accounts receivable, net $ 16,260 $ 4,499 $ 6,472 $ 27,231
Inventories at FIFO 8,100 1,154 4,996 14,250
Prepaid and deferred expenses (1,699) 462 308 (929)
Accounts payable (15,259) (105) (2,810) (18,174)
Accrued liabilities and expenses 5,422 (3,714) (1,231) 477
----------------------------------------------------------------
Operating working capital 12,824 2,296 7,735 22,855
----------------------------------------------------------------
Cash 7,159 289 7,448
Short-term securities (5,690) 508 (5,182)
LIFO reserve (2,231) (2,231)
Current deferred tax assets (4,466) 206 (4,260)
Short-term debt (3,806) (3,806)
Other current liabilities and taxes (4,392) (30) (524) (4,946)
----------------------------------------------------------------
Working capital $ 6,095 $(4,431) $ 8,214 $ 9,878
================================================================
</TABLE>
- --------------------------------------------------------------------------------
39
<PAGE> 22
CASH AND SHORT-TERM SECURITIES Cash principally comprises in transit amounts and
uncollected funds in the United States and amounts in operating bank accounts in
other countries.
Short-term securities have initial maturities of less than 90 days and represent
cash awaiting use in the business and funds available for future investment.
Short-term securities are held in interest-bearing overnight securities, time
deposits, prime commercial paper and other fixed income investments. The
carrying value of short-term securities approximates fair value because of the
short maturity of these instruments. At December 31, 1994, there were $44.2
million in short-term securities, of which $32.7 million were directly available
to Dexter and $11.5 million were maintained separately by Life Technologies,
Inc. due to its different shareholder constituency. Of these amounts, $31.5
million for Dexter and $10 million for Life Technologies, Inc. were held outside
the United States. Of the $31.5 million for Dexter, $17 million was held by
Dexter's captive insurance companies.
ACCOUNTS RECEIVABLE Gross accounts receivable of $175.6 million at December 31,
1994 are reduced by allowances of $6.6 million. Such allowances were $6.1
million at December 31, 1993 and $7.6 million at December 31, 1992. Currency
translation effects increased net accounts receivable by $6.5 million in 1994.
The collection period for accounts receivable increased to approximately 54 days
at December 31, 1994 from approximately 50 days as of December 31, 1993 and
1992.
INVENTORIES Inventories are valued at the lower of cost or market. Inventories
located in the United States represented 54% of total inventories. The LIFO
(last-in, first-out) method was used for determining the cost of 62% of U.S.
inventories in 1994 and 1993 and 64% in 1992. The FIFO (first-in, first-out)
method was used for determining the cost of remaining inventories in the United
States and the 46% of total inventories which were outside the United States.
The reduction in levels of LIFO valued inventories (LIFO liquidation) was not
significant in 1994, 1993 or 1992.
Inventories at December 31 were:
<TABLE>
<CAPTION>
In thousands of dollars 1994 1993 1992
- ------------------------------------------------------------
<S> <C> <C> <C>
Materials and supplies $ 58,967 $ 59,794 $ 54,693
Work-in-process 11,319 11,527 9,689
Finished goods 95,384 80,099 84,376
------------------------------
Total FIFO cost 165,670 151,420 148,758
LIFO reserve (22,828) (20,597) (24,151)
------------------------------
$142,842 $130,823 $124,607
==============================
- ------------------------------------------------------------
</TABLE>
Before deducting the LIFO reserve, FIFO inventories increased $14.3 million in
1994 to $165.7 million. FIFO inventories at Life Technologies increased $5.9
million. Inventory values at operations outside the U.S. increased approximately
$5 million as a result of translating to a weakened U.S. dollar. Acquired
businesses increased inventory by $0.9 million.
SHORT-TERM DEBT Short-term borrowings were denominated principally in U.S. and
Singapore dollars, pound sterling, Deutsche marks, French francs and Japanese
yen and had maturities of three months or less. The company uses short-term
borrowings of less than three-month maturity to partially offset net nonlocal
currency exposures relating to current accounts receivable and accounts payable.
It can be expected that short-term borrowings will continue to be utilized for
this purpose. The company had outstanding letters of credit at December 31, 1994
totaling $9.9 million for liabilities already reflected in the Statement of
Financial Position.
<TABLE>
<CAPTION>
In millions of dollars 1994 1993 1992
- ----------------------------------------------------------
<S> <C> <C> <C>
Average borrowings $ 4.3 $ 4.5 $ 2.2
Weighted average month-end
interest rate 5.7% 3.8% 8.9%
Maximum month-end borrowings $ 6.3 $22.0 $ 9.3
Year-end borrowings $ 3.8 $ -0- $ -0-
Year-end average interest rate 5.3% - -
- ----------------------------------------------------------
</TABLE>
The company has authorized up to $50 million of commercial paper, none of which
was issued during 1994 and all of which was available for issue at December 31,
1994. Available short-term lines of bank credit are in excess of $100 million.
ACCRUED LIABILITIES AND EXPENSES Accrued liabilities and expenses at December 31
were:
<TABLE>
<CAPTION>
In thousands of dollars 1994 1993 1992
- ---------------------------------------------------------------
<S> <C> <C> <C>
Salaries, wages and benefits $15,709 $13,892 $13,058
Pension and profit sharing 11,192 10,255 11,486
Restructuring accruals 6,294 10,735 12,798
Provision for claims and warranties 3,872 3,570 1,339
Deferred income 3,837 4,737 3,571
Customer rebates and
volume discounts 2,800 1,659 1,187
Taxes, other than income taxes 1,795 2,059 1,956
Professional services 1,661 1,592 1,331
Interest 1,462 1,475 1,364
Royalties 1,278 531 760
Other, principally accruals for
unbilled obligations 10,725 9,227 10,020
--------------------------
$60,625 $59,732 $58,870
==========================
- ---------------------------------------------------------------
</TABLE>
40
<PAGE> 23
PROPERTY, PLANT AND EQUIPMENT Capital expenditures on the accrual basis were
$45.1 million in 1994, $44.8 million in 1993 and $51.8 million in 1992. Capital
expenditures in 1995 are currently estimated to range between $40 million and
$45 million.
For financial reporting purposes, the company uses the straight-line method of
computing depreciation on plant and equipment. This method charges the cost to
income evenly over the useful lives of the assets, principally 20 to 45 years
for buildings, 16 years for nonwovens related machinery and equipment, and 10 to
15 years for all other machinery and equipment. For tax purposes the company
uses shorter lives and accelerated depreciation methods. Capital investment
incentive grants are recorded as a reduction of the cost of assets, which
spreads the benefits over the lives of the related assets through reduced
depreciation. Management evaluates, on an ongoing basis, the carrying value of
property, plant and equipment and makes a specific provision against the asset
when impairment is identified. Property, plant and equipment is written down
when the asset has become redundant or the remaining book value exceeds its
anticipated future productive asset value. Maintenance and repairs are charged
to operations as incurred and amounted to $15.3 million in 1994, $14.9 million
in 1993 and $15.3 million in 1992. Betterments and major renewals are
capitalized. The cost of assets sold or retired and the related amounts of
accumulated depreciation are eliminated from the accounts, and the resulting
gains or losses are included in income.
The cost and accumulated depreciation of property, plant and equipment at
December 31, were as follows:
<TABLE>
<CAPTION>
In thousands of dollars 1994 1993 1992
- ----------------------------------------------------------------
<S> <C> <C> <C>
Land $ 18,581 $ 17,776 $ 14,589
Buildings and improvements 143,436 130,658 112,022
Machinery and equipment 429,416 395,547 362,504
Construction in progress 16,911 11,931 27,523
---------------------------------
Total cost 608,344 555,912 516,638
Less accumulated depreciation (279,409) (245,958) (217,769)
---------------------------------
Property, plant and
equipment, net $ 328,935 $ 309,954 $ 298,869
=================================
- ----------------------------------------------------------------
</TABLE>
Changes in property, plant and equipment for the past three years were as
follows:
<TABLE>
<CAPTION>
In thousands of dollars 1994 1993 1992
- ----------------------------------------------------------------
<S> <C> <C> <C>
January 1 $ 309,954 $ 298,869 $ 299,342
Capital expenditures 45,097 44,784 51,793
Assets of businesses acquired 355 10,591
Write-down of asset values (359) (4,638) (2,072)
Assets of businesses divested
or held for sale (3,488) (8,548)
Depreciation (34,857) (32,038) (31,456)
Currency effects 8,745 (4,126) (10,190)
---------------------------------
December 31 $ 328,935 $ 309,954 $ 298,869
=================================
- ----------------------------------------------------------------
</TABLE>
LEASES The company leases facilities, vehicles, computers and other equipment
under long-term operating leases with varying terms and expiration dates. Some
leases contain renewal provisions, purchase options and escalation clauses.
Aggregate future minimum lease payments under noncancellable operating leases
are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
<S> <C>
1995 $ 9,171
1996 7,470
1997 4,626
1998 2,795
1999 2,294
Later years 4,962
-------
$31,318
=======
</TABLE>
Total rent expense incurred under noncancellable leases, net of minor sublease
rentals, amounted to $10.5 million in 1994, $10.3 million in 1993 and $11.5
million in 1992.
The company has no contingent rentals. Obligations under capital leases were not
significant at December 31, 1994, 1993 or 1992.
PATENTS, TECHNOLOGY, FORMULAS AND COVENANTS
Patents, technology, formulas and covenants not to compete are stated at cost
less accumulated amortization of $17.2 million, $15 million and $13.4 million at
December 31, 1994, 1993 and 1992, respectively. Such items which have been
acquired by purchase or merger are capitalized and amortized on a straight-line
basis over periods ranging from 3 to 15 years. Research and development costs
and any costs associated with internally developed patents, formulas or other
proprietary technology are expensed in the year incurred.
EXCESS ACQUISITION COST Excess acquisition cost increased by $4.7 million in
1994 to $74 million. Excess acquisition cost increased $5 million due to
businesses acquired in 1994 and $2.7 million due to currency translation
effects. These increases were offset by amortization of excess acquisition cost.
The excess of cost over the net asset value of businesses acquired (goodwill) is
amortized on a straight-line basis over 25 to 40 years. Excess acquisition cost
of businesses acquired after 1990 is amortized over periods not exceeding 25
years. Accumulated amortization amounted to $12.9 million, $9.7 million and $7.2
million at December 31, 1994, 1993 and 1992, respectively. Management evaluates,
on an ongoing basis, the carrying value of excess acquisition cost and makes a
specific provision against the asset when impairment is identified. When a loss
is expected from the proposed sale of a business or product line, a diminution
in the value of the excess of cost over the net asset value of the business
acquired is identified. In the instance of an ongoing business, such a
diminution is recognized when there has been a history of the business'
inability to generate operating income after the amortization of goodwill and in
management's judgment, the business will not recover from this position in the
future. There were no impairment charges in 1994 or 1992. These impairment
charges were $0.6 million in 1993.
41
<PAGE> 24
POSTRETIREMENT BENEFITS The company has pension (defined benefit) or deferred
profit sharing (defined contribution) plans for substantially all U.S.
employees. Retirement benefits for most employees of international operations
are provided by government-sponsored or insured programs and, in certain
countries, by defined benefit plans.
With respect to its qualified defined benefit pension plans, the company's
policy is to fund amounts as are necessary on an actuarial basis to provide for
benefits in accordance with the requirements of ERISA for domestic plans and in
accordance with local laws and income tax regulations for international plans.
The plans covering domestic employees of the company's Aerospace Materials,
Automotive Materials, Electronic Materials and Packaging Products divisions and
Life Technologies, Inc. provide benefits that are generally based upon the
employee's highest average compensation in any consecutive five-year period in
the ten years before retirement. In addition to the above qualified plans, the
company sponsors an unfunded nonqualified executive supplemental plan for
certain key employees that provides an annual benefit equal to 55% of their
average compensation during the highest 60 consecutive calendar months of a
participant's last ten years, which benefit is then offset by other benefits
payable to the participant.
In computing the company's year-end funded status for domestic plans, discount
rates of 8.5%, 6.75%, and 7.5% were used in 1994, 1993, and 1992, respectively.
The discount rates used in computing the year-end funded status for
international plans were 5.5% - 9.75% in 1994, 5.5% - 9% in 1993, and 5.5% -
10.5% in 1992.
- --------------------------------------------------------------------------------
The funded status of the company's plans are as follows:
<TABLE>
<CAPTION>
In thousands of dollars DECEMBER 31, 1994 December 31, 1993 December 31, 1992
- ----------------------------------------------------------------------------------------------------------------------------------
Plans Where Plans Where Plans Where Plans Where Plans Where Plans Where
Assets Exceed Accumulated Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits Accumulated Benefits
Benefits Exceed Assets Benefits Exceed Assets Benefits Exceed Assets
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value
of benefit obligations
Vested benefit obligation $41,589 $ 5,512 $ 47,291 $ 6,059 $33,689 $ 5,818
Accumulated benefit
obligation $42,972 $ 6,068 $ 49,682 $ 6,617 $35,256 $ 6,111
Projected benefit
obligation $67,489 $ 7,779 $ 80,359 $ 8,282 $55,759 $ 7,934
Plan assets at fair value,
primarily equity securities
and insurance contracts $69,521 $ 818 $ 69,107 $ 571 $59,076 $ 388
----------------------------------------------------------------------------------------------
Projected benefit obligation
less than (in excess of)
plan assets $ 2,032 $(6,961) $(11,252) $(7,711) $ 3,317 $(7,546)
Unrecognized net (gain) loss (3,091) 836 14,590 69 2,127 (427)
Unrecognized prior
service cost 3,501 781 2,299 852 1,701 364
Unamortized net (asset)
obligation (705) 284 (1,356) 354 (2,080) 440
Adjustment required to
recognize minimum liability (606) (995) (509)
----------------------------------------------------------------------------------------------
Prepaid pension cost
(accrued pension liability) $ 1,737 $(5,666) $ 4,281 $(7,431) $ 5,065 $(7,678)
==============================================================================================
</TABLE>
- --------------------------------------------------------------------------------
In 1994, there was a net periodic pension cost of $6.3 million for all plans
combined, including international plans. Net periodic pension cost was $3.9
million for 1993 and $2.3 million for 1992.
Net periodic pension cost for 1994, 1993, and 1992 included the following
components:
<TABLE>
<CAPTION>
In thousands of dollars 1994 1993 1992
- --------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 5,806 $ 4,216 $ 4,075
Interest cost 6,016 5,060 4,655
Actual return on assets (152) (9,933) (2,028)
Net amortization and deferral (5,343) 4,509 (4,429)
----------------------------
Net periodic pension cost $ 6,327 $ 3,852 $ 2,273
============================
</TABLE>
- --------------------------------------------------------------------------------
Assumptions used in the accounting for pension cost in 1994, 1993, and 1992 for
domestic plans were:
<TABLE>
<CAPTION>
1994 1993 1992
- --------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 6.75% 7.5% 7.5%
Average wage increase 6% 6% 6%
Expected long-term rate
of return on plan assets 9% 9% 10%
</TABLE>
- --------------------------------------------------------------------------------
Assumptions used in the accounting for pension cost in 1994, 1993, and 1992 for
international plans were:
<TABLE>
<CAPTION>
1994 1993 1992
- ----------------------------------------------------------
<S> <C> <C> <C>
Discount rate 5.5-9% 5.5-10.5% 5.5-10.5%
Average wage increase 4-7% 4-7% 3.5-8%
Expected long-term rate
of return on plan assets 4-9% 4-9% 4.25-9%
</TABLE>
- --------------------------------------------------------------------------------
The discount rate is the estimated rate at which the obligation for pension
benefits could effectively be settled. The method used to develop the estimate
for year-end rates in 1994 and 1993 in the U.S. was to estimate the rate at
which AA grade industrial and utility bonds would sell over U.S. government
obligations of a duration similar to that of domestic pension plans. Similar
methods were used in countries where the information was obtainable and
alternative methods in other countries were used to achieve the same end.
42
<PAGE> 25
The average wage increase assumption reflects the historical increase over a
long time period in the compensation levels of the individual employees covered
by the plans. Such rates are still thought to be the best estimate of future
compensation increases. In recent years, however, compensation increases have
been lower than 6% in the U.S. Should a reduced rate of increase appear to
remain for a long time period in the future, the company will consider reducing
the wage increase assumption.
The expected long-term rate of return on plan assets reflects the average rate
of earnings that the company estimates will be generated on the assets of the
plan over the long term. The rate of return on plan assets in the U.S. was -0.5%
in 1994, 15.4% in 1993, 5.0% in 1992 and averaged 8.9% over the past five-year
period. The 1994 rate of return is not considered indicative of future long-term
returns and, therefore, a long-term rate adjustment was not made. We continue to
believe 9% is appropriate for a 60% equity and 40% debt securities asset mix
over the long term. Nevertheless, asset returns will be carefully watched and
adjusted if circumstances indicate. Rates in other countries are based on
expected long-term rates of return obtainable there.
The company sponsors deferred profit sharing plans for substantially all
domestic employees not covered under pension plans. Contributions and cost are
determined based on a percentage of each covered employee's pay and totaled $6.5
million in 1994, $5.8 million in 1993 and $6.7 million in 1992.
In addition to providing pension benefits, certain businesses of Dexter provide
some health care and life insurance benefits for retired employees. Such
benefits and similar benefits for active employees have been either paid
directly or are provided through insurance companies whose premiums are based on
the benefits paid during the year. Prior to 1993 the company recognized the cost
of providing those benefits as they were incurred. The cost for retirees was not
separately tracked from the cost of active employees but was estimated to be
less than $1 million per year. Total costs for plans which included retirees was
$7.3 million in 1992 for U.S. operations.
The provisions of SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions were implemented using the immediate recognition
transition option, effective as of January 1, 1993. SFAS No. 106 requires
recognition, during employees' service with the company, of the cost of their
retiree health and life insurance benefits. Upon adoption, the accumulated
postretirement benefit obligation of $24.7 million was charged against earnings
resulting in an after-tax charge of $15.2 million, or $.63 per share. Of the
$24.7 million accumulated benefit, $23.7 million was funded on March 31, 1993
into trusts for the ultimate benefit of retired employees whose medical costs
are covered by those plans. The assets in the trusts established for
postretirement benefits other than pensions amounted to $23.4 million at
December 31, 1994 and $24.4 million at December 31, 1993 and were invested as
follows:
<TABLE>
<CAPTION>
In thousands of dollars 1994 1993
- -----------------------------------------------------------------------
<S> <C> <C>
Indexed fund $10,683 $10,483
Equity funds 5,496 2,558
Convertible preferred stocks 4,962 5,331
Preferred stock fund 1,814 5,056
Short-term liquid investment funds 477 1,002
----------------------
$23,432 $24,430
======================
</TABLE>
- --------------------------------------------------------------------------------
The investment objective of the indexed fund is to track the Standard & Poor's
500 and is long-term in nature. The remaining funds, with the exception of the
short-term liquid investment funds, are also long-term in nature. The combined
results of these funds, which are managed for the company by independent money
managers, are expected to achieve returns in excess of 10% over the long term.
The components of net periodic postretirement benefit (income) cost for the
years ended December 31, 1994 and 1993 are:
<TABLE>
<CAPTION>
In thousands of dollars 1994 1993
- ----------------------------------------------------------
<S> <C> <C>
Service cost $ 878 $ 1,463
Interest cost 1,488 1,827
Actual return on assets 566 (1,163)
Net amortization and deferral (3,391) (615)
------------------------
Net periodic postretirement
benefit (income) cost $ (459) $ 1,512
========================
</TABLE>
- --------------------------------------------------------------------------------
The net periodic postretirement benefit income is expected to be $0.6 million in
1995.
The funded status of the plan at December 31, 1994 and 1993 is:
<TABLE>
<CAPTION>
In thousands of dollars 1994 1993
- ---------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligation
Retirees and dependents $ 7,905 $ 5,909
Actives fully eligible 4,539 7,062
Actives not yet fully eligible 7,985 11,076
-----------------------
Total accumulated postretirement
benefit obligation 20,429 24,047
Plan assets at fair value 23,432 24,430
-----------------------
Accumulated postretirement benefit
obligation less than plan assets 3,003 383
Unrecognized net loss 1,111 3,688
Unrecognized prior service effect from
plan amendment (5,375) (5,913)
-----------------------
Accrued postretirement benefit $ (1,261) $ (1,842)
=======================
</TABLE>
- --------------------------------------------------------------------------------
The discount rates used in determining the accumulated postretirement benefit
obligation were 8.5% at December 31, 1994 and 6.75% at December 31, 1993. The
assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 11% in 1994, declining gradually to 6% in
2004 and remaining level thereafter. If the health care cost trend rate
assumptions were increased by 1%, the accumulated postretirement benefit
obligation as of December 31, 1994 would be increased by $1.1 million, while the
aggregate of the service and interest cost components of the net periodic
postretirement benefit cost for 1994 would be increased by $0.1 million. As with
pension benefits, the assumptions utilized in these calculations are
periodically reviewed and adjusted if deemed appropriate.
The company adopted SFAS No. 112, Employers' Accounting for Postemployment
Benefits, as of January 1, 1993. There was no material impact on the financial
results of the company.
43
<PAGE> 26
LONG-TERM DEBT Long-term debt at December 31, 1994 consisted of promissory
notes, sinking fund debentures and industrial development bonds.
In November 1993, Dexter privately placed with The Prudential Insurance Company
of America, $35 million, 20-year senior unsecured notes at a rate of 6.21% due
in 2013. Required prepayments began in 1994 and are scheduled to continue with
installments of $1.75 million per year through the year 2013. In December 1993,
Dexter privately placed with The Prudential Insurance Company of America, the
equivalent of $15 million, 15-year senior unsecured notes denominated in Swiss
francs at a rate of 4.86% due in 2008. Required prepayments began in 1994 and
are scheduled to continue with installments of Swiss franc 2.2 million per year
through the year 1997. The installments decrease to Swiss franc 1.5 million from
1998 through the year 2004 and decrease further to Swiss franc 0.8 million from
2005 through the year 2008. Also in 1993, the company refinanced 250 million yen
debt and borrowed an additional 100 million yen at an all-in-rate of 2.665%. The
borrowing of 350 million yen (equivalent to approximately $3.5 million) is
scheduled to mature in 1996.
In November 1991, Dexter privately placed with The Prudential Insurance Company
of America $50 million, 20-year senior unsecured notes at a rate of 8.96% due in
2011. Required prepayments are scheduled to begin in 1998 in installments of
$2.5 million per year through the year 2000. The installments increase to $3.5
million per year from 2001-2010, with a final lump sum payment of $7.5 million
due at maturity.
In July 1990, Dexter privately placed with The Prudential Insurance Company of
America $75 million, 20-year senior unsecured notes at a rate of 9.72% due in
2010. The notes carry a sinking fund beginning in the sixth year to retire the
issue in equal installments of $5 million per year.
In December 1986, the company sold publicly $50 million, 9.25% sinking fund
debentures due in 2016. The sinking fund payments commence in 1997 and are
designed to retire 95% of the debt prior to maturity.
The company has $50 million of authorized and unissued medium-term notes.
Multi-currency, revolving credit agreements maintained with eight banks
aggregate another $50 million. This revolving credit is for a three-year
evergreen term and carries a commitment fee of 0.125% per annum on the
unborrowed portion. At December 31, 1994 there were no borrowings under the
revolving credit agreements.
Long-term debt represented 39.6% of total capital at December 31, 1994. The
weighted average interest rate of long-term debt outstanding at December 31,
1994 was 8.48%.
Certain long-term debt agreements include provisions that restrict the amount of
dividend increases if consolidated equity falls below $175 million. Consolidated
equity at December 31, 1994 was $344 million. There are also provisions placing
limits on the amount of additional debt the company may incur without amendment
of the agreements. At December 31, 1994 there is approximately $133 million of
additional debt allowable under these terms.
Dexter and Life Technologies, Inc. have guaranteed approximately $0.1 million
and $0.3 million, respectively, of bank loans to others.
At December 31, 1994 and 1993 the fair value of net long-term debt was $230
million and $256 million, respectively, compared with the carrying value of $225
million and $227 million, respectively. The fair value of long-term debt is
based on quoted market prices for similar issues or on the current rates offered
to the company for debt of the same remaining maturities. In 1994, the fair
value of long-term debt exceeds the carrying value by $5 million due to the net
reduction in interest rates subsequent to the issuance of the long-term debt and
the consequent increase in fair value. The company is only obligated to repay
the amounts reflected in the carrying value of this debt.
- --------------------------------------------------------------------------------
DEBT OUTSTANDING
<TABLE>
<CAPTION>
December 31
------------------------------
In thousands of dollars 1994 1993 1992
- --------------------------------------------------------------
<S> <C> <C> <C>
Promissory notes $176,773 $177,829 $127,562
Sinking fund debentures 50,000 50,000 50,000
Industrial development bonds 2,700 3,300 4,230
------------------------------
229,473 231,129 181,792
Less:
Payments due within one yar (4,071) (3,822) (2,768)
------------------------------
Net long-term debt $225,402 $227,307 $179,024
==============================
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DEBT MATURITIES BY CURRENCY AND TYPE
Amounts in thousands
Multi-currency Promissory Notes
----------------------------------------------------
Industrial Sinking Total Total Weighted
Development Fund Swiss Japanese U.S. Dollar U.S. Dollar Average
Bonds Debentures U.S. Dollar Franc Yen Equivalent Equivalent Interest Rate
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $ 650 $ 1,755 SF 2,180 $ 3,421 $ 4,071 5.64%
1996 650 6,759 2,180 Y350,000 11,937 12,587 6.44
1997 700 $ 2,500 6,750 2,180 8,416 11,616 8.18
1998 500 2,500 9,250 1,454 10,361 13,361 8.49
1999 200 2,500 9,250 1,454 10,361 13,061 8.55
2000 2,500 9,250 1,454 10,361 12,861 8.58
2001 2,500 10,250 1,454 11,361 13,861 8.61
2002 2,500 10,250 1,454 11,361 13,861 8.61
2003 2,500 10,250 1,454 11,361 13,861 8.61
2004 2,500 10,250 1,454 11,361 13,861 8.61
2005-2017 30,000 74,250 2,907 76,472 106,472 8.76
---------------------------------------------------------------------------------------------
Total $2,700 $50,000 $158,264 SF19,625 Y350,000 $176,773 $229,473 8.48%
============================================================================================================
Rates of
Interest 5.70-6.50% 9.25% 6.21-9.72% 4.86% 2.665%
</TABLE>
- --------------------------------------------------------------------------------
44
<PAGE> 27
ENVIRONMENTAL LIABILITIES Environmental expenditures attributed to ongoing
operations of the company are expensed or capitalized as appropriate.
Environmental expenditures attributed to previously owned properties and third
party off-site facilities are expensed. Liabilities for expenses related to
environmental assessments, site remediation and other response activities are
expensed and recorded when incurrence of the liability is probable and the costs
can be reasonably estimated. Generally, the incurrence of such liability is
deemed probable when an environmental condition for which the company is likely
to be legally responsible is determined to exist. Probable expenses are
estimated on an ongoing basis, as facts become available which indicate the
scope of the condition to be addressed and the likely response measures for
addressing it. Due to such factors as the wide discretion of regulatory
authorities regarding cleanup levels and uncertain allocation of liability at
multiple party sites, estimates made prior to approval of a formal plan of
action represent management's best judgment as to estimates of reasonably
foreseeable expenses based upon comparison to similar activities at other sites.
Environmental reserves at December 31, 1994 with respect to 21 sites were $20.3
million, including current reserves of $2.7 million, which are expected to be
spent in 1995, and long-term reserves of $17.6 million. Such reserves, which are
not discounted, were decreased during 1994 by expenditures of $1.7 million.
Additionally, in accordance with the Securities and Exchange Commission's Staff
Accounting Bulletin No. 92, an estimated $4.7 million in 1994, and $5.6 million
in 1993, of claims payable by third-party insurance companies were included in
the reserve at year-end. The related receivables from insurance companies of
$4.7 million and $5.6 million were included as assets of the company at year-end
1994 and 1993, respectively. In years prior to 1993, claims for environmental
conditions which were insured by third parties were shown net of related
receivables from insurance companies. Environmental reserves at December 31,
1993 were $22.8 million and at year-end 1992 were $17.2 million.
Dexter Environmental Assurance, Ltd. (DEAL), a wholly owned Bermuda company was
established in 1993. In December 1993, a portfolio of environmental reserves
totaling $5.9 million was transferred into DEAL to insure all wholly owned
domestic operations of Dexter, other than exposures at Windsor Locks,
Connecticut, against environmental liabilities arising from occurrences prior to
January 1, 1994. In November 1994, a second portfolio of environmental reserves
totaling $5 million was transferred into DEAL. With the second transfer, the
coverage period was expanded to include occurrences after December 31, 1993 and
prior to January 1, 1995 for all wholly owned domestic operations of Dexter.
LEGAL PROCEEDINGS The company is involved in various environmental and other
lawsuits and claims, many of which are covered by insurance. At December 31,
1994, $1 million of current and $5.5 million of long-term receivables from
third-party insurance companies are included as assets of the company. Equal and
offsetting payables to third parties are included as liabilities of the company.
Estimated amounts for claims which are probable and are not covered by
third-party insurance are properly reflected as liabilities of the company.
While the outcome of these lawsuits and claims cannot be forecast with
certainty, management believes that such matters should not result in any
liability which would have a material adverse effect on the company's financial
position or results of operations.
MINORITY INTERESTS Minority interests increased by $10.4 million in 1994 to
$62.5 million. At year-end 1993 minority interests were $52.1 million, an
increase of $5.3 million from 1992. The increase in 1994 was due principally to
$8.3 million of net income attributable to the minority interest shareholders of
Life Technologies, Inc., Dexter's 55%-owned subsidiary. Currency translation
effects of $2.3 million also increased minority interests in 1994. Somewhat
offsetting these increases were quarterly cash dividends paid by LTI to minority
interest shareholders of $1.4 million. The increase in 1993 was due principally
to $7.5 million of net income attributable to the minority interest shareholders
of LTI. This increase in minority interests was partially offset by quarterly
cash dividends paid by LTI to minority interest shareholders of $1.4 million.
Also offsetting the increase in minority interests in 1993 was a reduction of
$0.9 million resulting from the purchase by Dexter of the remaining 25% interest
in Evodex. Minority interests in LTI's equity represented $59.2 million and
$49.9 million at December 31, 1994 and 1993, respectively.
SHAREHOLDERS' EQUITY Shareholders' equity increased by $30.3 million in 1994 to
$343.6 million representing a book value of $14.11 per share. Net income of
$37.9 million and a currency translation impact of $14.8 million resulting from
the weakening of the U.S. dollar increased shareholders' equity in 1994. The
establishment of the 1994 Long-term Incentive Plan along with the exercise of
existing stock options also increased shareholders' equity by $0.5 million.
Offsetting these increases were reductions due to dividends declared of $21.4
million and the adoption of SFAS No. 115 which resulted in the recording of $1.5
million in unrealized losses for the period ended December 31, 1994. By adopting
SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities
in 1994, Dexter has investments that are classified as available-for-sale
securities which are reported at fair market value, with unrealized gains and
losses excluded from earnings and reported in shareholders' equity.
In 1990, the Board of Directors authorized a repurchase of up to 1,000,000
shares of the company's outstanding common stock. There were no purchases under
the 1990 authorization during 1994. At the end of 1994, there were 634,403
shares held in treasury compared with 643,578 at the end of 1993 and 651,828 at
the end of 1992. The reduction in shares held in 1994 and 1993 was due to the
exercising of stock options.
CURRENCY EXCHANGE EFFECTS Assets and liabilities of those operations whose
functional currency is other than the U.S. dollar are translated at end of
period currency exchange rates and fluctuations due to changes in exchange rates
are accounted for as a separate component of shareholders' equity, "Currency
translation effects". Results of operations are translated at average currency
exchange rates during the period.
Currency translation effects increased shareholders' equity by $14.8 million, of
which $14.2 million was from translation effects and $0.6 million was from a
related tax effect. This net increase was the result of the U.S. dollar
weakening against currencies of countries in which we operate. Currency
translation effects decreased shareholders' equity by $5.8 million in 1993, of
which $5.7 million was from translation effects and $0.1 million was from a
related tax effect. In 1992, currency translation effects decreased
shareholders' equity by $18.2 million including $17.7 million of translation
effects and a $0.5 million related tax effect.
45
<PAGE> 28
The company utilizes forward exchange contracts to hedge nonlocal currency
transactions and commitments. Gains and losses on forward exchange contracts
that hedge specific currency commitments are deferred and recognized in income
in the same period as the hedged transaction. Gains and losses on forward
contracts that do not hedge an identifiable currency commitment are included in
income as the gain or loss arises. Forward exchange contracts outstanding at
year-end 1994 were short-term in nature and related to nonlocal currency
transactions of the company's European operations. The market risk associated
with forward exchange contracts is caused by fluctuations in exchange rates
subsequent to entering into the forward exchange contracts. At December 31,
1994, 1993, and 1992, the company, excluding Life Technologies, Inc., had
forward exchange contracts outstanding for the purchase and sale of U.S.
dollars, Japanese yen, French francs, pound sterling, Italian lira, and Deutsche
marks. The equivalent U.S. dollar purchase amounts were $0.1 million and $11.1
million as of December 31, 1993 and 1992, respectively. There were no purchase
amounts outstanding as of December 31, 1994. The equivalent U.S. dollar sale
amounts were $4.6 million, $2.2 million, and $5.6 million as of December 31,
1994, 1993, and 1992, respectively. Deferred unrealized gains and losses at
December 31, 1994 and 1993 related to these contracts were not significant. The
net deferred unrealized gain on these contracts was $2.2 million as of December
31, 1992. In addition, Life Technologies, Inc. had forward exchange contracts
outstanding for the purchase and sale of U.S. dollars, Dutch guilders, Belgian
francs, Swiss francs, Deutsche marks and French francs. The equivalent U.S.
dollars purchase amounts were $2.1 million, as of December 31, 1994. There were
no purchase amounts outstanding as of December 31, 1993 and 1992. The equivalent
U.S. dollar sale amounts were $2.1 million and $5.8 million as of December 31,
1993, and 1992, respectively. There were no sale amounts outstanding as of
December 31, 1994. Deferred unrealized gains and losses at December 31, 1994,
1993, and 1992 were not significant.
During 1993, the company expanded the function of its Treasury Center in
Brussels to include the centralized management of transaction exposures of
nonlocal currency accounts receivable and accounts payable of the company's
operating units, other than Life Technologies. The net exposures are calculated
at least weekly, and if in excess of limits determined by the company, the
exposures are offset by short-term borrowings, cash balances, or are otherwise
hedged as circumstances indicate. The company had short-term borrowings at
December 31, 1994 in the amount of $3.8 million relating to nonlocal currency
transaction exposure management. Currency gains and losses realized on
transactions were not significant in 1994, 1993 or 1992.
In December 1993, the company issued Swiss franc 15-year long-term notes for
approximately Swiss franc 22 million and Japanese yen three-year notes in the
amount of Japanese yen 350 million, in each case reducing net asset exposures in
those currencies. At December 31, 1994, the company's net asset positions
exposed to currency fluctuations, as reduced by long-term borrowings and
expressed in local currencies and U.S. dollar equivalents, are shown in the
following table. At year-end 1994, the equivalent of $189 million was exposed to
currency fluctuations compared with $160 million at the end of 1993.
<TABLE>
<CAPTION>
Net Asset Positions
------------------------------
Local U.S.
Amounts in thousands Currency Dollars
- ---------------------------------------------------------------
<S> <C> <C>
Pound sterling 34,581 $ 54,119
French franc 161,859 30,268
Swiss franc 33,027 25,233
Swedish krona 162,464 21,933
Deutsche mark 23,787 15,343
Japanese yen 926,501 9,302
Dutch guilder 13,781 7,938
Singapore dollar 9,972 6,841
New Zealand dollar 9,854 6,307
Belgian franc 95,292 2,992
Hong Kong dollar 20,572 2,654
Italian lira 3,772,281 2,324
Mexican peso 8,909 1,804
Canadian dollar 1,693 1,207
Danish krone 4,446 729
Austrian schilling 2,359 217
Venezuelan bolivar 31,037 186
Australian dollar 127 98
--------
Total $189,495
========
</TABLE>
- --------------------------------------------------------------------------------
PREFERRED STOCK The company has the following classes of preferred stock,
without par value, as of December 31, 1994:
<TABLE>
<CAPTION>
CLASS AUTHORIZED AND UNISSUED
<S> <C>
Preferred Stock 150,000 shares
Preferred Stock, Class I 500,000 shares
Preferred Stock, Class II 500,000 shares
Preferred Stock, Series A 250,000 shares
</TABLE>
PREFERRED STOCK, SERIES A - PURCHASE RIGHTS In October 1986, the company issued
one preferred stock purchase right for each share of common stock outstanding at
November 17, 1986.
The preferred stock purchase right is designed to assure that all shareholders
receive fair and equal treatment and full value in the event of a takeover
attempt which is not approved by the Board of Directors. Each right will entitle
the holder to acquire one two-hundredth of a share of newly created Series A
Preferred Stock at an exercise price of $60 per purchase right. The rights will
trade with the common stock and will not be exercisable or transferable apart
from the common stock until 10 days after someone acquires or makes a tender
offer for 20% or more of the common stock. The rights plan also provides that if
anyone becomes the beneficial owner of 30% or more of Dexter's outstanding
common stock, every other holder of a right will then be entitled to receive,
upon exercise, shares of Dexter common stock having a value of two times the
exercise price.
The rights, which do not have any voting privileges, expire on November 17, 1996
and are redeemable by the company at $.05 per right under certain circumstances.
The company has authorized 250,000 shares of Series A Preferred Stock for
issuance upon exercise of the rights.
STOCK PLAN
1994 LONG-TERM INCENTIVE PLAN In 1994, Dexter established a long-term incentive
plan for certain key management personnel of the company. The aggregate number
of shares of the company's common stock that may be awarded under the 1994
Long-term Incentive Plan is 1,200,000 shares. In May 1994, the company issued
64,250 restricted stock awards at a market price of $23.81. Participants were
granted restricted stock awards at no cost to the employee. As of the grant
date, participants have the rights of shareholders, including the right to
receive any cash dividends and the right to vote the shares. These stock awards
are subject to certain forfeiture provisions and restrictions limiting the sale
or transfer of shares during the restriction periods defined in the plan. The
expense relating to this plan is amortized over the restriction period. This
expense was $0.4 million in 1994.
46
<PAGE> 29
STOCK OPTION PLANS
1979 STOCK OPTION PLAN AND DATA
The Dexter Corporation 1979 Stock Option Plan permitted the granting of options
to purchase a total of 999,999 shares (adjusted for stock splits) of common
stock at prices not less than the fair market value of the shares on the date of
grant. Such options may be accompanied by stock appreciation rights, which are
also issued at fair market value, for up to half the number of shares under
option. Options and stock appreciation rights generally become exercisable at
the rate of 20% of the shares each year starting two years after the date of
grant. The exercise price may be satisfied by surrendering company stock with a
like market value. The plan, as amended, permits no future granting of options
under the 1979 Stock Option Plan.
<TABLE>
<CAPTION>
December 31
---------------------------------------------------------------
1994 1993 1992
---------------------------------------------------------------
Number of Shares
---------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year 88,266 108,412 241,011
Exercised (7,116) (20,146) (131,399)
Expired or cancelled (1,200)
------------------------------------------------------
Outstanding at end of year 81,150 88,266 108,412
Exercisable options 81,150 88,266 102,412
---------------------------------------------------------------
Dollars per Share
---------------------------------------------------------------
Option price ranges:
Beginning of year $14.25 - $23.75 $14.25-$23.75 $10.10-$23.75
Exercised $14.25 - $14.83 $14.83-$20.83 $10.10-$23.75
Expired or cancelled $23.75
End of year $14.25 - $23.75 $14.25-$23.75 $14.25-$23.75
</TABLE>
- --------------------------------------------------------------------------------
1987 INTERIM STOCK OPTION PLAN AND DATA
The 1987 Interim Stock Option Plan is intended to be a continuation and
extension of The Dexter Corporation 1979 Stock Option Plan with similar terms
and conditions, and, as such, stock appreciation rights may accompany the
options as in the 1979 plan. The aggregate number of shares of common stock
permitted to be issued under the plan was 75,000. The 1987 Stock Option Plan
consists of one grant which was issued in 1987 at a price of $23.75. The plan,
as amended, permits no future granting of options under the 1987 Interim Stock
Option Plan.
<TABLE>
<CAPTION>
December 31
------------------------------------------------------
1994 1993 1992
------------------------------------------------------
Number of Shares
------------------------------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year 16,000 17,010 19,600
Exercised (280) (840)
Expired or cancelled (730) (1,750)
------------------------------------------------------
Outstanding at end of year 16,000 16,000 17,010
Exercisable options 16,000 16,000 13,790
</TABLE>
- --------------------------------------------------------------------------------
1988 STOCK OPTION PLAN AND DATA
The 1988 Stock Option Plan provides for the granting of incentive and
nonqualified stock options to purchase up to 1,000,000 shares of common stock.
No stock appreciation rights may be granted. The option price shall not be less
than 100% of the fair market value on the date of grant for incentive stock
options and not less than 80% of the market value on the date of grant for
nonqualified options. Options generally become exercisable at the rate of
33-1/3% of the shares each year starting one year after the date of grant.
There have been no nonqualified options issued under the plan to date,
therefore, no charges against income have been made.
<TABLE>
<CAPTION>
December 31
---------------------------------------------------------------
1994 1993 1992
---------------------------------------------------------------
Number of Shares
---------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year 630,144 514,846 488,500
Granted 157,095 146,500 142,000
Exercised (1,718) (12,165) (58,422)
Expired or cancelled (47,021) (19,037) (57,232)
---------------------------------------------------------------
Outstanding at end of year 738,500 630,144 514,846
Exercisable options 466,820 359,932 263,782
Shares available for future grant 186,362 299,269 426,732
---------------------------------------------------------------
Dollars per Share
---------------------------------------------------------------
Option price ranges:
Beginning of year $20.88 - $29.06 $20.88-$29.06 $20.88-$29.06
Granted $24.13 - $25.50 $24.75 $24.13
Exercised $20.88 - $21.63 $20.88-$21.63 $20.88-$25.94
Expired or cancelled $20.88 - $29.06 $20.88-$29.06 $20.88-$29.06
End of year $20.88 - $29.06 $20.88-$29.06 $20.88-$29.06
</TABLE>
- --------------------------------------------------------------------------------
47
<PAGE> 30
SHAREHOLDER INFORMATION
THE DEXTER CORPORATION
One Elm Street
Windsor Locks, Connecticut 06096-2334
(203) 627-9051
(203) 627-9713 Facsimile
STOCK EXCHANGE
New York Stock Exchange - DEX
REGISTRAR
Mellon Securities Trust Company
East Hartford, Connecticut
TRANSFER AGENT
Mellon Securities Trust Company
East Hartford, Connecticut
Mellon Securities Transfer Services
New York, New York
INVESTOR RELATIONS
John D. Thompson
Senior Vice President,
Strategic and Business Development
CORPORATE COMMUNICATIONS
Ellen Cook Miles
Corporate Communications Manager
NOTICE OF ANNUAL MEETING
You are cordially invited to attend the annual meeting of shareholders beginning
at 10:00 a.m., Thursday, April 27, 1995, at The Hartford Club, 46 Prospect
Street, Hartford, Connecticut.
NOTICE OF 10-K ANNUAL REPORT
The Form 10-K Annual Report of The Dexter Corporation filed with the Securities
and Exchange Commission, as well as the Form 10-K Annual Report of Life
Technologies, Inc., is available without charge after March 31 of each year to
shareholders and prospective investors who write to us.
SHAREHOLDERS' STOCK SAVINGS PLAN
Dexter shareholders can reinvest their dividends automatically in additional
shares of Dexter common stock at the market price. Participants can also invest
up to an additional $3,000 in Dexter shares each quarter through this service.
To participate or to obtain additional information, write to: Mellon Securities
Trust Company, 111 Founders Plaza, Suite 1100, East Hartford, Connecticut 06108.
TDD SERVICE AVAILABLE
Dexter shareholders with hearing or speech disabilities can get information
about their accounts through TDD services offered by Mellon Securities Transfer
Services at (800) 231-5469.
PRINCIPAL LOCATIONS
DEXTER AEROSPACE MATERIALS
2850 Willow Pass Road
Pittsburg, CA 94565-3299
(510) 458-8000
Jeffrey W. McClelland
Division President
DEXTER AUTOMOTIVE MATERIALS
One Dexter Drive
Seabrook, NH 03874-4018
(603) 474-5541
Charles F. Call, Jr.
Division President
DEXTER ELECTRONIC MATERIALS
15051 East Don Julian Road
Industry, CA 91746-3398
(818) 968-6511
Ronald C. Benham
Senior Division President
DEXTER MAGNETIC MATERIALS
48460 Kato Road
Fremont, CA 94538-7337
(510) 656-5700
David Woodhead
Division President
DEXTER NONWOVENS
Two Elm Street
Windsor Locks, CT 06096-2335
(203) 623-9801
R. Barry Gettins, Ph.D.
Senior Division President
DEXTER PACKAGING PRODUCTS
East Water Street
Waukegan, IL 60085-5652
(708) 623-4200
T. Daniel Clark
Senior Division President
DEXTER S.A.
B.P. 51
14 rue Chanay
71700 Tournus, France
33-85-404545
Gerard R. Mazure
Directeur General
LIFE TECHNOLOGIES, INC.
(majority owned)
8717 Grovemont Circle
P.O. Box 6009
Gaithersburg, MD 20884-9980
(301) 840-8000
J. Stark Thompson, Ph.D.
President and
Chief Executive Officer
D & S PLASTICS
INTERNATIONAL
(equally-owned joint
venture with Solvay S.A.)
1200 Harmon Road
Auburn Hills, MI 48326-1550
(810) 391-9500
David G. Gordon
President
This entire annual report is printed on recycled paper.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The following table sets forth subsidiaries of The Dexter Corporation which
are included in the consolidated financial statements.
<TABLE>
<CAPTION>
PERCENTAGE OF JURISDICTION IN WHICH
NAME OWNERSHIP (A) INCORPORATED OR ORGANIZED
---- ------------- -------------------------
<S> <C> <C>
C. H. Dexter Ltd......................................... 100%(C)(B) England
Crown Metro Aerospace Coatings, Inc...................... 100% South Carolina
DDL Sales Limited........................................ 80%(D) Scotland
Dexter Asia Pacific Limited.............................. 100%(C) Hong Kong
Dexter Automotive Materials GmbH......................... 100%(E)(B) Germany
Dexter ADAF Holdings, Inc................................ 100%(F) Delaware
Dexter Electronic Materials Canada, Inc.................. 100%(B) Ontario
Dexter Environmental Assurance Ltd....................... 100% Bermuda
Dexter Europe S.A........................................ 100% Belgium
Dexter Holdings.......................................... 100% England
Dexter Hysol Aerospace, Inc.............................. 100% Delaware
Dexter Hysol Ltd......................................... 100%(C)(B) England
Dexter Hysol (Malaysia) Sdn. Bhd......................... 100%(G) Malaysia
Dexter International Corporation......................... 100% Connecticut
Dexter Leasing Limited................................... 100%(C)(B) England
Dexter Magnetic Materials GmbH........................... 100%(E) Germany
Dexter Mexicana S.A. de C.V.............................. 100% Mexico
Dexter Midland Coatings Limited.......................... 100%(C)(B) England
Dexter Midland Company Limited........................... 70% Japan
Dexter Miki, Inc......................................... 70%(G)(B) Japan
Dexter Nonwovens A.B..................................... 100% Sweden
Dexter Overseas Limited.................................. 100%(C)(B) England
Dexter Pacific, Inc...................................... 100% Japan
Dexter Powders, Inc...................................... 100% Delaware
Dexter Products Limited.................................. 100%(C)(B) England
Dexter (RPI), Inc........................................ 100% Delaware
Dexter S.A............................................... 97% France
Dexter S.p.A............................................. 100%(F) Italy
Dexter Specialty Materials Hong Kong Limited............. 100%(G)(B) Hong Kong
Dexter Speciality Chemicals Limited...................... 100%(C)(B) England
Dexter Speciality Materials Limited...................... 100%(C) Scotland
Dexter U.K. Limited...................................... 100%(H) England
Hysol Limited............................................ 100% Japan
Kettlebrook Insurance Company, Ltd....................... 100%(I) Bermuda
Life Technologies, Inc................................... 55% Delaware
</TABLE>
<PAGE> 2
EXHIBIT 21 -- CONTINUED
<TABLE>
<CAPTION>
PERCENTAGE OF JURISDICTION IN WHICH
NAME OWNERSHIP (A) INCORPORATED OR ORGANIZED
---- ------------- -------------------------
<S> <C> <C>
Permag Corp.............................................. 100% New York
Potter Paint Company of Texas, Inc....................... 100% Texas
The Dexter GmbH.......................................... 100%(C) Germany
The Mogul Corporation (U.K.) Ltd......................... 100%(C)(B) England
Vernicolor A.G........................................... 100% Switzerland
Windsor Locks Canal Company.............................. 100% Connecticut
</TABLE>
- ---------------
(A) including directors' qualifying shares
(B) inactive
(C) owned by Dexter U.K. Limited
(D) owned by Dexter Speciality Materials Limited
(E) owned by The Dexter GmbH
(F) owned by Crown Metro Aerospace Coatings, Inc.
(G) owned by Dexter Asia Pacific Limited
(H) owned by Dexter Holdings
(I) owned 67% by The Dexter Corporation and 33% by Dexter U.K. Limited
<PAGE> 3
EXHIBIT 21 -- CONTINUED
The following table sets forth subsidiaries of Life Technologies, Inc.
(owned 55% by The Dexter Corporation) which are included in the consolidated
financial statements.
<TABLE>
<CAPTION>
PERCENTAGE
OF JURISDICTION IN WHICH
NAME OWNERSHIP INCORPORATED OR ORGANIZED
---- ----------- -------------------------
<S> <C> <C>
Bethesda Research Labs (U.K.) Ltd.................. 100%(A)(G) England
Biomed Benelux B.V................................. 100%(B)(G) Netherlands
Canadian Life Technologies, Inc.................... 100% Ontario
GIBCO/Bio-Cult Diagnostics, Ltd.................... 100%(C)(G) Scotland
GIBCO Leasing Ltd.................................. 100%(A)(G) Scotland
GIBCO New Zealand (1989) Ltd....................... 100%(D)(G) New Zealand
Laboratory Services Ltd............................ 100% New Zealand
Labserum Distributors (1980) Ltd................... 100%(D)(G) New Zealand
Life Technologies A.G.............................. 100%(E) Switzerland
Life Technologies A.S.............................. 100% Denmark
Life Technologies Asia Pacific, Inc................ 100% Delaware
Life Technologies B.V.............................. 100%(E) Netherlands
Life Technologies (Europe) Ltd..................... 100%(A)(G) Scotland
Life Technologies Foreign Sales Corporation........ 100% U.S. Virgin Islands
Life Technologies GIBCO BRL Co., Ltd............... 51% Republic of China (Taiwan)
Life Technologies GmbH............................. 100%(E) Germany
Life Technologies Holdings, Unlimited.............. 100% Scotland
Life Technologies Investment Holdings, Inc......... 100% Delaware
Life Technologies Italia S.r.1..................... 100% Italy
Life Technologies Ltd.............................. 100%(A) Scotland
Life Technologies Ltd.............................. 100% New Zealand
Life Technologies Overseas Ltd..................... 100%(A) Scotland
Life Technologies (Pacific) Ltd.................... 100% Hong Kong
Life Technologies Pty. Ltd......................... 100% Australia
Life Technologies S.A.R.L.......................... 100%(E) France
Life Technologies Sweden AB........................ 100% Sweden
N.V. Life Technologies S.A......................... 100%(E) Belgium
Phoenix Chemicals Ltd.............................. 100%(D)(G) New Zealand
Prespak Plastics (1988) Ltd........................ 100%(F)(G) New Zealand
Serum Technologies Holdings, Inc................... 100% Delaware
</TABLE>
- ---------------
(A) owned by Life Technologies Holdings, Unlimited
(B) owned by Life Technologies B.V.
(C) owned by Life Technologies Ltd. (Scotland)
(D) owned by Life Technologies Ltd. (New Zealand)
(E) owned by Life Technologies Overseas Ltd.
(F) owned by Laboratory Services Ltd.
(G) inactive
<PAGE> 4
EXHIBIT 21 -- CONTINUED
The following unconsolidated companies owned in part by The Dexter
Corporation are accounted for by the equity method. Financial statements of
these companies are not required because when considered in the aggregate as a
single subsidiary, they would not constitute a significant subsidiary.
<TABLE>
<CAPTION>
PERCENTAGE OF JURISDICTION IN WHICH
NAME OWNERSHIP INCORPORATED OR ORGANIZED
---- ------------- -------------------------
<S> <C> <C>
Akzo Dexter Aerospace Finishes VoF........................ 40%(A) Netherlands
D & S Plastics International.............................. 50%(B) Delaware
Hysol Indael de Mexico S.A................................ 49%(C) Mexico
Lexter S.r.1.............................................. 49%(C) Italy
Midland-Dexter de Venezuela, S.A.......................... 49%(D) Venezuela
Research Polymers International Corporation............... 50%(E) Texas
</TABLE>
- ---------------
(A) owned by Dexter ADAF Holdings, Inc.
(B) owned 74.2% by Research Polymers International Corporation and 12.9% by
Dexter (RPI), Inc.
(C) owned by The Dexter Corporation
(D) owned 13.9% by Dexter U.K. Ltd. and 35.1% by The Dexter Corporation
(E) owned by Dexter (RPI), Inc.
The following unconsolidated company, owned in part by Life Technologies,
Inc. (owned 55% by The Dexter Corporation), is accounted for by the equity
method. Financial statements of this company have been omitted because it would
not constitute a significant subsidiary.
<TABLE>
<CAPTION>
PERCENTAGE OF JURISDICTION IN WHICH
NAME OWNERSHIP INCORPORATED OR ORGANIZED
---- ------------- -------------------------
<S> <C> <C>
Life Technologies Oriental K.K............................ 50%(A) Japan
</TABLE>
- ---------------
(A) owned by Life Technologies, Inc.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of The Dexter Corporation on Form S-8 (File Nos. 2-63959, 33-27597, 33-53307 and
33-53309) of our report dated February 2, 1995, on our audits of the
consolidated financial statements and financial statement schedule of The Dexter
Corporation as of December 31, 1994, 1993, and 1992, and for the years then
ended, appearing on page F-2 of The Dexter Corporation's Annual Report on Form
10-K for the year ended December 31, 1994.
/s/ Coopers & Lybrand L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.
Springfield, Massachusetts
March 7, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF FINANCIAL POSITION AND STATEMENT OF INCOME AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 55,012
<SECURITIES> 0
<RECEIVABLES> 156,719
<ALLOWANCES> 4,994
<INVENTORY> 142,842
<CURRENT-ASSETS> 392,653
<PP&E> 608,344
<DEPRECIATION> 279,409
<TOTAL-ASSETS> 880,609
<CURRENT-LIABILITIES> 183,629
<BONDS> 225,402
<COMMON> 24,984
0
0
<OTHER-SE> 318,649
<TOTAL-LIABILITY-AND-EQUITY> 880,609
<SALES> 974,719
<TOTAL-REVENUES> 987,215
<CGS> 658,178
<TOTAL-COSTS> 658,178
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,509
<INCOME-PRETAX> 73,612
<INCOME-TAX> 26,500
<INCOME-CONTINUING> 37,898
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,898
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 0
</TABLE>
