<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to_________________________
Commission file number 1-5542
THE DEXTER CORPORATION
(Exact name of registrant as specified in its charter)
CONNECTICUT 06-0321410
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE ELM STREET, WINDSOR LOCKS, CONNECTICUT 06096
(Address of principal executive offices) (Zip Code)
(860) 292-7675
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes..X..... No.......
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS Outstanding at July 31, 1996
COMMON STOCK, PAR VALUE $1 23,746,655 SHARES
<PAGE> 2
PART I
FINANCIAL INFORMATION
Item 1 - Financial Statements
Reference is made to the following consolidated financial
statements which are incorporated herein by reference:
(a) Exhibit 99a - Condensed Statement of Income for the three
months and six months ended June 30, 1996 and 1995.
(b) Exhibit 99b - Condensed Statement of Financial Position as of
June 30, 1996, December 31, 1995, and June 30, 1995.
(c) Exhibit 99c - Condensed Statement of Cash Flows for the six
months ended June 30, 1996 and 1995.
(d) Exhibit 99d - Net Sales by Market for the three months and six
months ended June 30, 1996 and 1995.
(e) Exhibit 99e - Notes to Consolidated Financial Statements.
The unaudited financial data included herein as of June 30, 1996
and 1995, and for the three and six month periods then ended, have
been reviewed by the registrant's independent public accountants,
Coopers & Lybrand L.L.P., and their report is attached.
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
The Company reported that earnings for the second quarter of 1996,
excluding the effects from the disposal of product lines, were a
record $13.4 million, or $.57 per share, compared with $12.0
million, or $.49 per share, for the second quarter of 1995. The
$.57 per share from operations in 1996 represents a 16% increase in
earnings over the second quarter of 1995 on a 1% increase in sales.
The net effect of product line disposals was a gain of $.04 per
share in the second quarter of 1996. This gain was due to the
receipt, during the quarter, of proceeds from a note related to the
sale of Life Technologies' molecular diagnostic product line in
1990. The net effect of the sale of Dexter's acoustic materials
business and a small powder coatings business in the second quarter
had a slightly positive impact on earnings. Total net income for
the second quarter was $14.4 million, or $.61 per share.
Compared with the second quarter of 1995, the increase in earnings
includes selling price increases and lower raw material costs which
yielded a favorable impact of approximately $.15 per share. This
was somewhat offset by a less favorable sales mix of Dexter
products. Additionally, the unfavorable effect of currency exchange
rates, versus the second quarter of 1995, reduced earnings by $.02
per share in the second quarter of 1996.
Sales for the second quarter of 1996 were a record $285.7 million,
a 1% increase compared with sales of $283.0 million in the second
quarter of 1995. This sales increase includes a 2%
<PAGE> 3
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations, continued
increase due to unit volume, an average selling price increase of
1%, and a decrease due to the effect of lower currency translation
rates on international sales of 2% in the second quarter of 1996.
Sales for the six months ended June 30, 1996, were $562.9 million,
a 2% increase compared with sales of $549.8 million for the same
period last year. This increase includes a 2% increase due to unit
volume, selling price increases averaging 1%, and a 1% decrease due
to the effects of lower currency translation rates on international
sales.
Earnings for the first six months of 1996, excluding the effects of
disposal of product lines, were $24.6 million, or $1.03 per share.
This represents a 10% increase in earnings and a 12% increase in
earnings per share, compared with results for the first half of
1995 of $22.4 million, or $.92 per share. This 12% increase in
earnings per share includes the favorable net effect of selling
price increases and lower raw material costs of approximately $.18
per share versus the same period last year. In addition, there was
a $.01 per share increase in earnings due to a reduction of the
effective tax rate for 1996 to 35.5% versus the rate of 36% used
for the first six months of 1995. These favorable items were
somewhat offset by the effect of unfavorable currency exchange
rates of $.03 per share due to the strengthening of the U.S. dollar
against international currencies and an unfavorable product mix.
Total earnings for the first six months, including the gain on
divested product lines, were $25.5 million, or $1.07 per share.
Products with strong sales in the second quarter and first six
months of 1996 include aerospace adhesives and products at Life
Technologies, Inc. Products with weaker performance in the second
quarter include electronic packaging products and food and beverage
can coatings serving the European and domestic markets.
Consolidated gross margin of 34.3% of net sales in the second
quarter of 1996 improved by 2.5 percentage points from 31.8% in the
second quarter of 1995. Slightly less than half of this improvement
was from Dexter operations, primarily resulting from the net effect
of selling price increases and lower raw material costs versus the
same period last year, with the remaining improvement attributable
to Life Technologies, Inc.
Marketing and administrative cost increased $4.4 million, or 9%,
for the second quarter and $10.3 million, or 10%, for the six-month
period, principally due to increased marketing and administrative
expense at Life Technologies, Inc., which included the
consolidation of results from the 1995 acquisition of a controlling
interest in their Japanese subsidiary.
Other income was $5.2 million for the first six months of 1996, a
decrease of $.7 million, or 12%, from the same period last year.
The decrease was primarily due to the expiration of certain
noncompete agreements. Higher net equity income from companies
owned 50% or less partially offset this decrease.
During the quarter, the company completed its previously announced
one million share repurchase of the company's stock. Short-term
debt associated with this repurchase program was repaid with the
proceeds from Dexter's second quarter divestitures.
<PAGE> 4
PART II
OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit 15 of Part 1 - Letter to Securities and Exchange Commission
re: Incorporation of Accountants' Reports
Exhibit 27 of Part 1 - Financial Data Schedule
Exhibit 99 of Part 1 - Second Quarter 1996 Financial Statements and
Notes
(b) No reports on Form 8-K were filed during the quarter for which this
report was filed.
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE DEXTER CORPORATION
Date August 2, 1996 /s/ Kathleen Burdett
------------------------------
Kathleen Burdett
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date August 2, 1996 /s/ George Collin
------------------------------
George Collin
Controller
(Principal Accounting Officer)
<PAGE> 6
INDEX TO EXHIBITS
Exhibit No.
15 Letter to Securities and Exchange Commission re: Incorporation of
Accountants' Report
27 Financial Data Schedule
99 Second Quarter 1996 Financial Statements and Notes
<PAGE> 1
Exhibit 15
Securities and Exchange Commission
450 5th Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
We are aware that our report dated July 16, 1996, on our review of the interim
financial information of The Dexter Corporation as of June 30, 1996 and 1995,
and for the three and six month periods then ended, and included in this Form
10-Q is incorporated by reference in the company's registration statements on
Form S-8, Registration Nos. 2-63959, 33-27597, 33-53307, 33-53309, 333-02985,
and 333-04081. Pursuant to Rule 436(c) under the Securities Act of 1933, this
report should not be considered a part of the registration statements prepared
or certified by us within the meaning of Sections 7 and 11 of that Act.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Springfield, Massachusetts
August 1, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED STATEMENT OF FINANCIAL POSITION AND CONDENSED STATEMENT OF INCOME AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 75,058
<SECURITIES> 0
<RECEIVABLES> 187,050
<ALLOWANCES> 5,811
<INVENTORY> 147,899
<CURRENT-ASSETS> 458,578
<PP&E> 635,561
<DEPRECIATION> 323,683
<TOTAL-ASSETS> 926,305
<CURRENT-LIABILITIES> 211,072
<BONDS> 208,660
0
0
<COMMON> 24,984
<OTHER-SE> 334,941
<TOTAL-LIABILITY-AND-EQUITY> 926,305
<SALES> 562,928
<TOTAL-REVENUES> 568,125
<CGS> 370,281
<TOTAL-COSTS> 370,281
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,742
<INCOME-PRETAX> 51,409
<INCOME-TAX> 18,250
<INCOME-CONTINUING> 25,541
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,541
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99a
THE DEXTER CORPORATION
CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
In thousands of dollars Three Months Ended June 30
-----------------------------------------------------------------------
(except per share amounts) 1996 1995 Change
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Net sales $ 285,701 $ 282,991 + 1%
Other income 3,022 2,899 + 4%
--------------------- -------------------
288,723 285,890 + 1%
EXPENSES
Cost of sales 187,756 193,100 - 3%
Marketing and administrative 56,157 51,719 + 9%
Research and development 13,175 12,825 + 3%
Interest 5,376 5,196 + 3%
Gain on divestiture of product lines (2,719)
--------------------- -------------------
INCOME BEFORE TAXES 28,978 23,050 +26%
Income taxes 10,287 8,298 +24%
--------------------- -------------------
INCOME BEFORE MINORITY INTERESTS 18,691 14,752 +27%
Minority interests 4,298 2,794 +54%
--------------------- -------------------
NET INCOME $ 14,393 $ 11,958 +20%
===================== ===================
NET INCOME PER SHARE $0.61 $0.49 +24%
DIVIDENDS DECLARED PER SHARE $0.22 $0.22
AVERAGE SHARES OUTSTANDING (000) 23,657 24,376 - 3%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
In thousands of dollars Six Months Ended June 30
---------------------------------------------------------------------
(except per share amounts) 1996 1995 Change
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Net sales $ 562,928 $ 549,784 + 2%
Other income 5,197 5,938 - 12%
------------------- -----------------
568,125 555,722 + 2%
EXPENSES
Cost of sales 370,281 374,229 - 1%
Marketing and administrative 112,394 102,137 + 10%
Research and development 26,018 25,355 + 3%
Interest 10,742 10,359 + 4%
Gain on divestiture of product lines (2,719)
------------------- -----------------
INCOME BEFORE TAXES 51,409 43,642 +18%
Income taxes 18,250 15,711 +16%
------------------- -----------------
INCOME BEFORE MINORITY INTERESTS 33,159 27,931 +19%
Minority interests 7,618 5,511 +38%
------------------- -----------------
NET INCOME $ 25,541 $ 22,420 +14%
=================== =================
NET INCOME PER SHARE $1.07 $0.92 +16%
DIVIDENDS DECLARED PER SHARE $0.44 $0.44
AVERAGE SHARES OUTSTANDING (000) 23,828 24,364 - 2%
------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE> 2
EXHIBIT 99b
THE DEXTER CORPORATION
CONDENSED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
In thousands of dollars June 30 December 31 June 30
(except per share amounts) 1996 1995 1995
---------- ----------- -----------
<S> <C> <C> <C>
Assets
Cash and short-term securities $ 75,058 $ 65,542 $ 49,491
Accounts receivable, net 202,586 201,389 202,565
Inventories
Materials and supplies 58,761 60,099 64,165
In process and finished 111,640 121,644 115,935
LIFO reserve (22,502) (24,709) (23,632)
---------- --------- -----------
147,899 157,034 156,468
Prepaid and deferred expenses 33,035 32,756 30,134
---------- --------- -----------
Total current assets 458,578 456,721 438,658
Property, plant and equipment, at cost, net 311,878 325,203 328,935
Excess of cost over net assets of
businesses acquired 73,433 74,102 75,652
Other assets 82,416 78,135 84,982
---------- --------- -----------
$ 926,305 $ 934,161 $ 928,227
========== ========= ===========
Liabilities & Shareholders' Equity
Short-term debt $ 3,979 $ 13,598 $ 4,788
Current installments of long-term debt 17,903 13,648 9,307
Accounts payable 83,376 92,447 91,989
Accrued liabilities and taxes 99,371 81,659 88,237
Current environmental reserves 1,268 1,395 1,494
Dividends payable 5,175 5,351 5,363
---------- --------- -----------
Total current liabilities 211,072 208,098 201,178
Long-term debt 208,660 215,839 222,273
Deferred items 47,876 48,492 48,642
Long-term environmental reserves 15,361 15,745 17,932
Minority interests 83,411 76,372 69,268
Shareholders' equity
Common stock and paid-in capital 34,169 35,116 34,150
Retained earnings 362,654 347,544 340,101
Currency translation effects (5,206) 1,614 4,585
Treasury stock (31,692) (14,659) (9,902)
---------- --------- -----------
Total shareholders' equity 359,925 369,615 368,934
---------- --------- -----------
$ 926,305 $ 934,161 $ 928,227
========== ========= ===========
Equity per Share $15.30 $15.26 $15.13
- ------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE> 3
EXHIBIT 99c
THE DEXTER CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Six Months Ended June 30
--------------------------
In thousands of dollars 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net income $ 25,541 $ 22,420
Noncash items
Depreciation and amortization 22,903 22,568
Gain on divestiture of product lines (2,719)
Income taxes not due 10,250 4,721
Minority interests 7,618 5,511
LIFO inventory (credit) charge (2,207) 804
Equity in net income of affiliates (2,076) (1,286)
Other 3,367 (135)
Operating working capital increase (12,182) (39,005)
-------- --------
50,495 15,598
-------- --------
INVESTMENTS
Property, plant and equipment (22,942) (14,473)
Acquisitions (12,332)
Divestitures 34,913
Joint ventures 3,246 (2,156)
Notes receivable 3,000
Proceeds from exercise of LTI stock options 1,250 862
Other (3,656) 1,714
-------- --------
479 (11,053)
-------- --------
FINANCING
Long-term debt (1,344) (650)
Short-term debt, net (9,570) 982
Dividends paid (10,607) (10,714)
LTI dividends paid to minority interest shareholders (709) (683)
Purchase of treasury stock (21,434)
Other 2,645 (231)
-------- --------
(41,019) (11,296)
-------- --------
INCREASE (DECREASE) IN CASH AND SHORT-TERM SECURITIES $ 9,955 $ (6,751)
======== ========
RECONCILIATION OF INCREASE (DECREASE) IN
CASH AND SHORT-TERM SECURITIES
Cash and short-term securities at beginning of period $ 65,542 $ 55,012
Cash and short-term securities at end of period 75,058 49,491
-------- --------
Increase (Decrease) in cash and short-term securities
per Statement of Financial Position 9,516 (5,521)
Currency translation effects 439 (1,230)
-------- --------
$ 9,955 $ (6,751)
======== ========
INTEREST PAID $ 10,741 $ 10,357
======== ========
TAXES PAID $ 8,000 $ 10,990
======== ========
- -------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE> 4
EXHIBIT 99d
THE DEXTER CORPORATION
NET SALES BY MARKET
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Three Months Ended June 30
--------------------------------------------------------------------
In thousands of dollars 1996 1995 Change
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AEROSPACE $ 12,506 $ 11,403 +10%
ELECTRONICS 48,022 48,148
FOOD PACKAGING (1) 70,124 74,958 - 6%
MEDICAL (2) 102,535 94,318 + 9%
OTHER (3) (4) 52,514 54,164 - 3%
------------------- ------------------
CONSOLIDATED $ 285,701 $ 282,991 + 1%
=================== ==================
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Six Months Ended June 30
-----------------------------------------------------------------------
In thousands of dollars 1996 1995 Change
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AEROSPACE $ 24,533 $ 23,307 + 5%
ELECTRONICS 97,478 93,179 + 5%
FOOD PACKAGING (1) 137,505 144,824 - 5%
MEDICAL (2) 201,285 181,588 +11%
OTHER (3) (4) 102,127 106,886 - 4%
-------------------- ------------------
CONSOLIDATED $ 562,928 $ 549,784 + 2%
==================== ==================
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The effect of businesses acquired increased net sales to the Food
Packaging market by $0.7 million, or 1%, for the quarter.
(2) The effect of businesses acquired increased net sales to the
Medical market by $3.8 million, or 4%, for the quarter, and $7.5
million, or 4%, year-to-date.
(3) The effect of businesses divested decreased net sales in the
"Other" category by $3.5 million, or 7%, for the quarter, and $6.5
million, or 6%, year-to-date.
(4) Sales previously classified in the Automotive market are now
included in the "Other" category.
<PAGE> 5
Exhibit 99e
The Dexter Corporation
Notes to Consolidated Financial Statements
Note 1 - In the opinion of company's management, the unaudited
financial statements reflect adjustments of a normal recurring
nature which are necessary to present a fair statement of the
results for the interim periods. The notes to the consolidated
financial statements including management's discussion in Part 1,
Item 2 of this Form 10-Q are incorporated as part of these
consolidated financial statements. The year-end condensed balance
sheet data was derived from audited financial statements.
Note 2 - Net income per share figures in the consolidated Condensed
Statement of Income are based on the weighted average number of
shares outstanding as indicated for each period. No effect has
been given to stock options or restricted stock awards
outstanding as no dilutive effect would result from the inclusion
of these items.
Note 3 - The following are included as components of Common Stock and
Paid-in Capital.
<TABLE>
<CAPTION>
COMMON STOCK & PAID-IN CAPITAL JUNE 30, DECEMBER 31, JUNE 30,
(IN THOUSANDS OF DOLLARS) 1996 1995 1995
- ------------------------------ --------- ------------ --------
<S> <C> <C> <C>
Common stock $ 24,984 $ 24,984 $ 24,984
Paid-in capital 13,761 12,316 12,251
Unrealized losses on
investments (490) (128) (549)
Unearned compensation on
restricted stock (3,613) (1,583) (2,536)
Pension liability adjustment (473) (473)
-------- -------- --------
$ 34,169 $ 35,116 $ 34,150
======== ======== ========
</TABLE>
<PAGE> 6
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
The Dexter Corporation
We have reviewed the accompanying condensed statement of financial position of
The Dexter Corporation as of June 30, 1996 and 1995, and the related condensed
statement of income for the three and six month periods ended June 30, 1996 and
1995, and the condensed statement of cash flows for the six month periods then
ended. These financial statements are the responsibility of the company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of financial position of The Dexter
Corporation as of December 31, 1995, and the related consolidated statements of
income, cash flows, and changes in shareholders' equity for the year then ended
(not presented herein); and in our report dated February 1, 1996, we expressed
an unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed statement of
financial position as of December 31, 1995, is fairly stated, in all material
respects, in relation to the consolidated statement of financial position from
which it has been derived.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Springfield, Massachusetts
July 16, 1996
