<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from
----------------- to -----------------
Commission file number 1-5542
- --------------------------------------------------------------------------------
THE DEXTER CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
CONNECTICUT 06-0321410
-------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
ONE ELM STREET
WINDSOR LOCKS, CONNECTICUT 06096
------------------------------------------ -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 860-292-7675
</TABLE>
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- --------------------------- ------------------------
COMMON STOCK, PAR VALUE $1 NEW YORK STOCK EXCHANGE
</TABLE>
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. [ ]
Aggregate market value of the registrant's common stock as of February 29, 1996,
held by nonaffiliates of the registrant. $566,413,309.
The number of shares of the registrant's common stock, $1 par value, outstanding
at February 29, 1996 was 24,102,694.
PORTIONS OF THE FOLLOWING DOCUMENTS ARE INCORPORATED BY REFERENCE:
The Dexter Corporation's 1995 Annual Report to Shareholders (Parts I, II and
IV).
Proxy Statement accompanying the notice, dated March 7, 1996, of the annual
meeting of The Dexter Corporation's shareholders to be held on April 25, 1996
(Parts I and III).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ITEM NUMBER
---- ------
<C> <S> <C>
PART I
1 . Business..................................................................... 1
2 . Properties................................................................... 2
3 . Legal Proceedings............................................................ 4
4 . Submission of Matters to a Vote of Security Holders.......................... 4
4 a. 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
</TABLE>
This Form 10-K is printed on recycled paper.
<PAGE> 3
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 "1995 Annual Report" shall mean the Company's 1995
Annual Report to Shareholders, and the term "Proxy Statement" shall mean the
Proxy Statement accompanying Dexter's notice, dated March 7, 1996, of the annual
meeting of Dexter's shareholders to be held on April 25, 1996. The 1995 Annual
Report is filed as an exhibit to this report. Portions of the 1995 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, The
Dexter Corporation is a specialty materials company serving growth segments of
defined strategic markets with products based on proprietary technologies and
superior service to each customer. The financial information in the hereinafter
mentioned pages and sections should be read in conjunction with the Financial
Statements contained on pages 20 through 24, Quarterly Financial Information on
page 24, Analysis of Financial Condition and Operations contained on pages 25
through 35, and Analysis of Financial Position contained on pages 35 through 43
of the 1995 Annual Report. For a description of the business of Dexter, see
pages 25 through 34 of the 1995 Annual Report which are incorporated herein by
reference, which include Acquisitions and Divestitures Information and Events,
Trends and Vulnerabilities on page 25, Segment Information on pages 30, 31 and
34, and International Operations Information on pages 32 and 33.
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 241 are directly engaged in field sales (see page 31 of the 1995
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 1995, 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 31 of the 1995 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.
1
<PAGE> 4
BACKLOG
Dexter continues to maintain a backlog of orders. Such backlog was
approximately $73 million at December 31, 1995 and $70 million at December 31,
1994 and typically represents less than two months sales for businesses where
backlog is applicable. The Company expects substantially all of the December 31,
1995 backlog to be shipped in 1996. Backlog was significant in all markets
except at Life Technologies, Inc. (LTI), 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. For further discussion of raw materials, see Events, Trends, and
Vulnerabilities on page 25 of the 1995 Annual Report which is incorporated
herein.
EMPLOYEES
Approximately 1,600 of the Company's 4,800 employees (see page 18 of the
1995 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,
results of operations or cash flows. Capital expenditures for environmental
control were $1.8 million for 1995 and are estimated to range from $2 - $3
million for 1996. For further discussion of other current environmental matters,
see Events, Trends, and Vulnerabilities on page 25 and Environmental Liabilities
on page 41 of the 1995 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 37 and "Division and Subsidiary Headquarters" on
the inside back cover of the 1995 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 1995 was approximately 76%.
During 1995, the Aerospace Materials division operated three principal
facilities owned by the Company totaling approximately 231,000 square feet.
These facilities are located in Pittsburg, California; Waukegan, Illinois; and
Bassano, Italy. During 1995, the Aerospace Materials division completed
construction of a 22,000
2
<PAGE> 5
square-foot expansion at the Waukegan, Illinois site. The expansion consolidated
Dexter's domestic aerospace coatings operations into a single facility by moving
its production out of a leased facility in Greenville, South Carolina into the
Waukegan, Illinois site. The Aerospace Materials division capacity utilization
percentage was approximately 62%.
During 1995, 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). The capacity utilization percentage for the Automotive Materials
division production facilities in 1995 was approximately 59%. During the fourth
quarter of 1995 the Company announced it would sell its acoustic materials
business located in Kansas City, Missouri and dissolve its Automotive Materials
division. The transaction is expected to be completed in 1996.
The Electronic Materials division, in 1995, 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. The Electronic Materials division capacity utilization
percentage in 1995 was approximately 72%.
During 1995, 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 1995 was approximately
72%.
During 1995, 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 84% in 1995.
The Nonwovens division, in 1995, 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 1995 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 55% in 1995. This facility is owned by the Company.
During 1995, Life Technologies, Inc. operated production facilities in
eight plants. Four are owned by Life Technologies, Inc. (approximately 262,000
square feet), and four are leased facilities (approximately 135,000 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
103,000 square feet and owns two distribution centers and warehouses which total
approximately 40,000
3
<PAGE> 6
square feet. Life Technologies, Inc. facilities in excess of 25,000 square feet
are located in Gaithersburg, Maryland; Frederick, Maryland; Grand Island, New
York; Auckland, New Zealand and Paisley, Scotland. The capacity utilization
percentage at Life Technologies, Inc. production facilities in 1995 was
approximately 85%.
Dexter and Solvay S.A., of Belgium, operate an equally owned international
joint venture. The joint venture operates an owned production and distribution
facility in Grand Prairie, Texas (approximately 90,000 square feet). The joint
venture also operates an owned production and laboratory facility in Mansfield,
Texas (approximately 140,000 square feet). Additionally, the joint venture
operates an owned Automotive Applications Development Center facility in Auburn
Hills, Michigan (approximately 47,000 square feet). During the fourth quarter of
1995 the Company announced it would sell its 50% interest in D & S Plastics
International. The transaction is expected to be completed in 1996.
ITEM 3 LEGAL PROCEEDINGS
The Company is not involved in any pending or threatened legal proceedings
other than ordinary routine litigation incidental to its business. The Company
believes that none of the legal proceedings will have a material adverse effect
on the Company's financial condition, results of operations or cash flows. 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 1995.
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, 1991, and their ages, are as follows:
<TABLE>
<CAPTION>
OTHER BUSINESS EXPERIENCE
NAME TITLE SINCE 1/1/91 AGE
- ------------------------- ------------------------------- ------------------------------- ---
<S> <C> <C> <C>
K. Grahame Walker Chairman, President and Chief President and Chief Executive 58
Executive Officer (since 1993) Officer
Bruce H. Beatt Vice President, General Counsel General Counsel and Secretary; 43
and Secretary (since 1992) Vice President, General Counsel
and Secretary, Jet Aviation
Holdings, Inc.
Ronald C. Benham Vice President; Senior Division President, Dexter Electronic 53
President, Dexter Electronic Materials Division
Materials Division (since 1992)
Kathleen Burdett Vice President and Chief Vice President and Controller 40
Financial Officer (since 1995)
T. Daniel Clark Vice President; Senior Division Vice President, Corporate 54
President, Dexter Packaging Development
Products Division (since 1994)
George Collin Controller (since 1995) Vice President-Administration, 46
Dexter Automotive Materials
Division; Vice President-
Operations, D & S Plastics,
International
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
OTHER BUSINESS EXPERIENCE
NAME TITLE SINCE 1/1/91 AGE
- ------------------------- ------------------------------- ------------------------------- ---
<S> <C> <C> <C>
R. Barry Gettins, Ph.D. Vice President; Senior Division President, Dexter Nonwovens 54
President, Dexter Nonwovens Division
Division (since 1992)
Lawrence D. McClure Vice President, Human Resources Vice President, Organization 47
(since 1995) Capabilities, Aetna Life &
Casualty Company; Vice
President, Human Resources,
Pratt & Whitney, a division of
United Technologies Corporation
John D. Thompson Senior Vice President, Vice President, Corporate 46
Strategic and Business Services; Vice President,
Development (since 1995) Financial Services; Vice
President and Treasurer; Senior
Vice President and General
Manager, U.S. Research Products
Division of Life Technologies,
Inc.
</TABLE>
The following changes in executive officers occurred during 1995:
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.
Effective in July 1995, Lawrence D. McClure joined the company as Vice
President, Human Resources.
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 25, 1996. No family relationships exist between any
of the executive officers of Dexter.
5
<PAGE> 8
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 18 and 19,
Statement of Financial Position on pages 22 and 23, Statement of Changes in
Shareholders' Equity on page 24, Shareholders' Equity footnote on page 41,
Preferred Stock and Stock Plan footnotes on page 42, discussion of Stock Option
Plans on page 43, and Shareholder/Investor Information on the inside back cover
of the 1995 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 18 and 19 of the 1995 Annual Report which is
incorporated herein by reference. For a discussion of this Financial Data, see
the Quarterly Financial Information on page 24, Analysis of Financial Condition
and Operations on pages 25 through 29, Market Segment Data on pages 30 and 31,
and Life Technologies, Inc. on page 34 of the 1995 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
17 and the Summary of Financial Data on pages 18 and 19 of the 1995 Annual
Report which are incorporated herein by reference. For information concerning
results of operations, see Analysis of Financial Condition and Operations on
pages 25 through 29, Market Segment Data on pages 30 and 31, Geographic Data on
pages 32 and 33, Life Technologies, Inc. on page 34, and D & S Plastics
International on page 35 of the 1995 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 pages 25 and 26, respectively, the Supplemental Statement of
Financial Position on page 26, the Working Capital discussion on page 35, the
Short-term Debt, the Property, Plant and Equipment, and the Long-term Debt
footnotes on pages 36, 37, and 40, respectively, of the 1995 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 26, the Short-term Debt, the Property, Plant and Equipment,
the Long-term Debt, and Shareholders' Equity footnotes on pages 36, 37, 40, and
41, respectively, of the 1995 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 37 of the
1995 Annual Report which is incorporated herein by reference. For information on
environmental matters, see the Environmental Liabilities footnote on page 41 of
the 1995 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, results of operations, or cash flows in the future.
6
<PAGE> 9
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Summary of Financial Data contained on pages 18
and 19, Financial Statements contained on pages 20 through 24, Quarterly
Financial Information on page 24, Analysis of Financial Condition and Operations
contained on pages 25 through 35, and Analysis of Financial Position contained
on pages 35 through 43 of the Company's 1995 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 7, 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 7 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 8 through 15, 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
7, 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 in 1994 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. During 1995, no borrowing
occurred.
D & S Plastics International, a equally owned subsidiary, borrowed up to
$4.7 million in 1995 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 $4.3 million was outstanding at December 31, 1995.
7
<PAGE> 10
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<S> <C> <C> <C>
(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 4B(2) -- Amendment No. 3 to the Rights Agreement, dated November 5,
1986, was filed as Exhibit 4 to Form 8-A/A which was filed with
the Securities and Exchange Commission on July 13, 1995, and is
hereby incorporated 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.
</TABLE>
8
<PAGE> 11
<TABLE>
<S> <C> <C> <C>
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.
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
seven 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, Lawrence D. McClure, Dale J.
Ribaudo, and John D. Thompson.
</TABLE>
9
<PAGE> 12
<TABLE>
<S> <C> <C> <C>
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.
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.
</TABLE>
10
<PAGE> 13
<TABLE>
<S> <C> <C> <C>
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 13 -- The Dexter Corporation's 1995 Annual Report to Shareholders.
Exhibit 21 -- Subsidiaries of the Registrant.
Exhibit 23 -- Consent of Certified Public Accountants.
Exhibit 27 -- Financial Data Schedule.
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.
</TABLE>
(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 7, 1996
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 7, 1996:
<TABLE>
<CAPTION>
NAME CAPACITY DATE
- ----------------------------------- ----------------------------------- ------------------
<S> <C> <C>
/s/ K. Grahame Walker Chairman; Director March 7, 1996
- ----------------------------------- (principal executive officer)
K. Grahame Walker
/s/ Kathleen Burdett Vice President and March 7, 1996
- ----------------------------------- Chief Financial Officer
Kathleen Burdett (principal financial officer)
/s/ George Collin Controller March 7, 1996
- ----------------------------------- (principal accounting officer)
George Collin
/s/ Charles H. Curl Director March 7, 1996
- -----------------------------------
Charles H. Curl
/s/ Bernard M. Fox Director March 7, 1996
- -----------------------------------
Bernard M. Fox
/s/ Robert M. Furek Director March 7, 1996
- -----------------------------------
Robert M. Furek
/s/ Martha Clark Goss Director March 7, 1996
- -----------------------------------
Martha Clark Goss
/s/ Peter G. Kelly Director March 7, 1996
- -----------------------------------
Peter G. Kelly
/s/ Jean-Francois Saglio Director March 7, 1996
- -----------------------------------
Jean-Francois Saglio
/s/ Glen L. Urban Director March 7, 1996
- -----------------------------------
Glen L. Urban
/s/ George M. Whitesides Director March 7, 1996
- -----------------------------------
George M. Whitesides
</TABLE>
12
<PAGE> 15
INDEX TO
FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Report of Independent Accountants.............................................. F-2
1995 ANNUAL
FINANCIAL STATEMENTS REPORT PAGE
- ------------------------------------------------------------------------------- -----------
Summary of Financial Data.................................................... 18-19
Statement of Income.......................................................... 20
Statement of Cash Flows...................................................... 21
Statement of Financial Position.............................................. 22-23
Statement of Changes in Shareholders' Equity................................. 24
Analysis of Financial Condition and Operations............................... 25-35
Analysis of Financial Position............................................... 35-43
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 1995 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, 1995, 1994 and 1993, 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 1, 1996
F-2
<PAGE> 17
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN C
COLUMN B ADDITIONS COLUMN E
---------- ------------------------- ----------
COLUMN A BALANCE AT CHARGED TO CHARGED TO COLUMN D BALANCE AT
- ------------------------------------------ BEGINNING COSTS AND OTHER ---------- END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ------------------------------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1995
Environmental Reserve..................... $ 20,292 $ 3,152 $ 17,140
Restructuring Reserve..................... 6,294 4,503 1,791
Allowance for Doubtful Accounts........... 4,994 $ 1,819 962 5,851
----- ----- ----- ----- -----
$ 31,580 $ 1,819 $ -- $ 8,617 $ 24,782
----- ----- ----- ----- -----
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
----- ----- ----- ----- -----
</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.
F-3
<PAGE> 18
EXHIBIT 13
THE DEXTER CORPORATION'S
1995 ANNUAL REPORT
TO SHAREHOLDERS
<PAGE> 1
MANAGEMENT STATEMENT EXHIBIT-13
- --------------------
The management of The Dexter Corporation has prepared the financial statements
and review contained on pages 18 through 43 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 L.L.P.
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 L.L.P., 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 1, 1996
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, 1995, 1994 and 1993 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
18 through 43, present fairly, in all material respects, the consolidated
financial position of The Dexter Corporation as of December 31, 1995, 1994 and
1993 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 1, 1996
17
<PAGE> 2
SUMMARY OF FINANCIAL DATA
- -------------------------
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) 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING RESULTS
Net sales $1,088,905 $ 974,719 $887,112 $ 951,439
% increase (decrease) 12% 10% (7%) 1%
Gross profit 346,699 316,541 293,345 314,275
As % of sales 31.8% 32.5% 33.1% 33.0%
LIFO charge (credit)
included in cost of sales 1,881 2,231 (1,290) 1,626
Marketing and administrative expenses 206,708 188,272 175,141 188,263
As % of sales 19.0% 19.3% 19.7% 19.8%
Research and development expenses 49,375 46,644 43,803 42,216
As % of sales 4.5% 4.8% 4.9% 4.4%
Interest expense 20,931 20,509 18,756 18,799
Income before taxes 79,824 73,612 66,438 73,132
As % of sales 7.3% 7.6% 7.5% 7.7%
Tax rate 35.5% 36.0% 36.5% 37.7%
Income (loss) before minority interests 51,487 47,112 42,188 45,577
As % of sales 4.7% 4.8% 4.8% 4.8%
Income (loss) from continuing operations 40,578 37,898 34,053 38,203
As % of sales 3.7% 3.9% 3.8% 4.0%
Discontinued operations (loss) gain
Cumulative effect of change in
accounting principles (9,875)
Net income (loss) $ 40,578 $ 37,898 $ 24,178 $ 38,203
As % of sales 3.7% 3.9% 2.7% 4.0%
Return on
Average shareholders' equity* 11.1% 11.2% 10.7% 12.1%
Average total capital* 9.2% 9.0% 8.8% 10.0%
Average shareholders' equity 11.4% 11.5% 7.7% 12.1%
Average total capital 9.4% 9.2% 7.0% 10.0%
Income (loss) per share
Continuing operations $ 1.67 $ 1.56 $ 1.40 $ 1.58
Discontinued operations
Cumulative effect of change in
accounting principles $ (.41)
Total net income (loss) $ 1.67 $ 1.56 $ .99 $ 1.58
Cash dividends declared per share $ .88 $ .88 $ .88 $ .88
Rate of dividend payout* 53% 56% 63% 56%
* Before cumulative effect of 1993
change in accounting principles
- --------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Working capital $ 248,623 $ 209,024 $199,146 $ 207,146
Property, plant and equipment, net 325,203 328,935 309,954 298,869
Total assets 934,161 880,609 820,691 782,025
Long-term debt 215,839 225,402 227,307 179,024
Shareholders' equity $ 369,615 $ 343,633 $313,295 $ 315,614
Percent long-term debt to capital 36.9% 39.6% 42.0% 36.2%
Equity per share at year-end $ 15.26 $ 14.11 $ 12.87 $ 12.98
- --------------------------------------------------------------------------------------------------------------
OTHER DATA
Capital expenditures $ 28,969 $ 45,097 $ 44,784 $ 51,793
Depreciation and amortization $ 43,727 $ 40,923 $ 36,655 $ 35,672
Shares outstanding at year-end (000) 24,220 24,350 24,340 24,308
Average shares outstanding (000) 24,364 24,345 24,325 24,220
Market price per share -- high $ 26-7/8 $ 26 $ 28-7/8 $ 28-1/8
-- low $ 20-3/8 $ 19-7/8 $ 20-3/8 $ 20-7/8
-- close $ 23-5/8 $ 21-3/4 $ 23-1/2 $ 25-7/8
Price-earnings ratio range* 16-12 17-13 21-15 18-13
Number of shareholders at year-end 3,400 3,600 3,900 4,000
Number of employees at year-end** 4,800 4,700 4,700 4,800
% payroll and benefits to sales** 24% 25% 25% 25%
% raw material costs to sales** 44% 43% 41% 42%
* Before cumulative effect of 1993
change in accounting principles
** From continuing operations
- --------------------------------------------------------------------------------------------------------------
INFLATION ADJUSTED DATA
Net sales* $1,088,905 $1,002,087 $935,773 $1,033,261
% increase (decrease) 9% 7% (9%) (2%)
Cash dividends declared per share* $ .88 $ .90 $ .93 $ .96
Market price per share - year-end** $ 23-5/8 $ 22-1/4 $ 24-3/4 $ 28
* Stated in average 1995 dollars using the Consumer Price Index.
** Stated in year-end 1995 dollars using the Consumer Price Index.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 3
<TABLE>
<CAPTION>
THE DEXTER CORPORATION
In thousands of dollars
(except per share amounts) 1991 1990 1989 1988
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING RESULTS
Net sales $ 937,734 $ 907,946 $ 848,724 $ 827,266
% increase (decrease) 3% 7% 3% 9%
Gross profit 309,157 314,449 284,142 269,416
As % of sales 33.0% 34.6% 33.5% 32.6%
LIFO charge (credit)
included in cost of sales (173) 1,100 (4,063) 4,193
Marketing and administrative expenses 198,334 191,656 168,935 159,448
As % of sales 21.2% 21.1% 19.9% 19.3%
Research and development expenses 42,056 39,880 37,359 32,685
As % of sales 4.5% 4.4% 4.4% 4.0%
Interest expense 16,800 17,484 10,926 12,178
Income before taxes 11,192 77,407 77,643 71,923
As % of sales 1.2% 8.5% 9.1% 8.7%
Tax rate 109.5% 37.0% 38.0% 38.0%
Income (loss) before minority interests (1,059) 48,766 48,139 44,592
As % of sales (0.1%) 5.4% 5.7% 5.4%
Income (loss) from continuing operations (7,119) 42,150 42,977 39,889
As % of sales (0.8%) 4.6% 5.1% 4.8%
Discontinued operations (loss) gain (4,393)
Cumulative effect of change in
accounting principles
Net income (loss) $ (7,119) $ 42,150 $ 42,977 $ 35,496
As % of sales (0.8%) 4.6% 5.1% 4.3%
Return on
Average shareholders' equity* (2.2%) 12.6% 13.6% 11.8%
Average total capital* 0.7% 11.0% 11.6% 10.7%
Average shareholders' equity (2.2%) 12.6% 13.6% 11.8%
Average total capital 0.7% 11.0% 11.6% 10.7%
Income (loss) per share
Continuing operations $ (.29) $ 1.74 $ 1.73 $ 1.61
Discontinued operations $ (.18)
Cumulative effect of change in
accounting principles
Total net income (loss) $ (.29) $ 1.74 $ 1.73 $ 1.43
Cash dividends declared per share $ .88 $ .88 $ .82 $ .80
Rate of dividend payout* -- 51% 47% 56%
* Before cumulative effect of 1993
change in accounting principles
- ---------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Working capital $ 193,873 $ 215,410 $ 189,006 $ 182,284
Property, plant and equipment, net 299,342 274,147 252,895 186,894
Total assets 784,471 762,383 694,490 626,391
Long-term debt 188,702 160,478 130,834 92,830
Shareholders' equity $ 313,782 $ 343,698 $ 325,281 $ 307,226
Percent long-term debt to capital 37.6% 31.8% 28.7% 23.2%
Equity per share at year-end $ 12.99 $ 14.24 $ 13.14 $ 12.36
- ---------------------------------------------------------------------------------------------------------
OTHER DATA
Capital expenditures $ 61,749 $ 43,910 $ 33,119 $ 26,145
Depreciation and amortization $ 34,095 $ 30,272 $ 26,243 $ 24,349
Shares outstanding at year-end (000) 24,149 24,136 24,761 24,855
Average shares outstanding (000) 24,145 24,282 24,877 24,842
Market price per share -- high $ 26-1/8 $ 24-1/2 $ 34-3/4 $ 28-3/4
-- low $ 18-1/2 $ 18 $ 20-1/8 $ 20-1/4
-- close $ 21-5/8 $ 21 $ 21-7/8 $ 22-1/4
Price-earnings ratio range* -- 14-10 20-12 20-14
Number of shareholders at year-end 4,300 4,400 4,500 4,400
Number of employees at year-end** 5,600 5,500 5,400 5,400
% payroll and benefits to sales** 25% 24% 23% 23%
% raw material costs to sales** 41% 42% 46% 45%
* Before cumulative effect of 1993
change in accounting principles
** From continuing operations
- ---------------------------------------------------------------------------------------------------------
INFLATION ADJUSTED DATA
Net sales* $1,049,257 $1,058,965 $1,043,428 $1,065,878
% increase (decrease) (1%) 1% (2%) 5%
Cash dividends declared per share* $ .98 $ 1.03 $ 1.01 $ 1.03
Market price per share - year-end** $ 24-1/8 $ 24-1/8 $ 26-5/8 $ 28-3/8
* Stated in average 1995 dollars using the Consumer Price Index.
** Stated in year-end 1995 dollars using the Consumer Price Index.
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
In thousands of dollars
(except per share amounts) 1987 1986 1985
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING RESULTS
Net sales $ 757,710 $623,438 $ 598,150
% increase (decrease) 22% 4% (2%)
Gross profit 263,120 228,276 214,181
As % of sales 34.7% 36.6% 35.8%
LIFO charge (credit)
included in cost of sales 5,961 (809) (754)
Marketing and administrative expenses 152,357 136,052 133,999
As % of sales 20.1% 21.8% 22.4%
Research and development expenses 28,690 27,340 25,470
As % of sales 3.8% 4.4% 4.3%
Interest expense 14,127 12,351 11,513
Income before taxes 76,858 54,271 58,557
As % of sales 10.1% 8.7% 9.8%
Tax rate 38.0% 38.0% 35.3%
Income (loss) before minority interests 47,652 33,649 37,867
As % of sales 6.3% 5.4% 6.3%
Income (loss) from continuing operations 43,391 32,251 31,684
As % of sales 5.7% 5.2% 5.3%
Discontinued operations (loss) gain (606) 1,384 (3,102)
Cumulative effect of change in
accounting principles
Net income (loss) $ 42,785 $ 33,635 $ 28,582
As % of sales 5.6% 5.4% 4.8%
Return on
Average shareholders' equity* 15.5% 13.7% 13.0%
Average total capital* 13.3% 12.2% 12.1%
Average shareholders' equity 15.5% 13.7% 13.0%
Average total capital 13.3% 12.2% 12.1%
Income (loss) per share
Continuing operations $ 1.74 $ 1.30 $ 1.28
Discontinued operations $ (.02) $ .05 $ (.13)
Cumulative effect of change in
accounting principles
Total net income (loss) $ 1.72 $ 1.35 $ 1.15
Cash dividends declared per share $ .60 $.56-2/3 $.53-1/3
Rate of dividend payout* 35% 42% 46%
* Before cumulative effect of 1993
change in accounting principles
- ----------------------------------------------------------------------------------------
FINANCIAL POSITION
Working capital $ 181,106 $137,980 $129,605
Property, plant and equipment, net 183,972 174,644 160,345
Total assets 612,517 570,335 484,567
Long-term debt 106,338 112,553 65,310
Shareholders' equity $ 293,788 $258,843 $232,796
Percent long-term debt to capital 26.6% 30.3% 21.9%
Equity per share at year-end $ 11.84 $ 10.40 $ 9.39
- ----------------------------------------------------------------------------------------
OTHER DATA
Capital expenditures $ 23,619 $ 23,861 $ 26,456
Depreciation and amortization $ 22,775 $ 18,482 $ 18,541
Shares outstanding at year-end (000) 24,821 24,893 24,800
Average shares outstanding (000) 24,895 24,860 24,794
Market price per share -- high $ 32-3/8 $ 23-3/8 $ 17-7/8
-- low $ 17 $ 16-7/8 $ 12-3/8
-- close $ 23-3/8 $ 22-1/4 $ 17-1/4
Price-earnings ratio range* 19-10 17-13 16-11
Number of shareholders at year-end 4,500 4,500 4,900
Number of employees at year-end** 5,200 5,400 5,400
% payroll and benefits to sales** 23% 25% 26%
% raw material costs to sales** 43% 42% 43%
* Before cumulative effect of 1993
change in accounting principles
** From continuing operations
- ----------------------------------------------------------------------------------------
INFLATION ADJUSTED DATA
Net sales* $1,016,127 $866,561 $847,358
% increase (decrease) 17% 2% (6%)
Cash dividends declared per share* $ .80 $ .79 $ .76
Market price per share - year-end** $ 31-1/8 $ 30-7/8 $ 24-1/4
* Stated in average 1995 dollars using the Consumer Price Index.
** Stated in year-end 1995 dollars using the Consumer Price Index.
- ----------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 4
STATEMENT OF INCOME THE DEXTER CORPORATION
- -------------------
<TABLE>
<CAPTION>
Years ended December 31
In thousands of dollars -------------------------------------
(except per share amounts) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Net sales $1,088,905 $974,719 $887,112
Equity in net income of affiliates 1,348 3,836 2,369
Other income 8,791 8,660 8,796
-------------------------------------
1,099,044 987,215 898,277
EXPENSES
Cost of sales 742,206 658,178 593,767
Marketing and administrative 206,708 188,272 175,141
Research and development 49,375 46,644 43,803
Interest 20,931 20,509 18,756
Provision for environmental costs 1,000
Divestiture and restructuring activities
Gain on divestiture of product lines (13,016)
Charge for restructuring businesses, net 12,388
-------------------------------------
INCOME BEFORE TAXES 79,824 73,612 66,438
Income taxes 28,337 26,500 24,250
-------------------------------------
INCOME BEFORE MINORITY INTERESTS 51,487 47,112 42,188
Minority interests 10,909 9,214 8,135
-------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLES 40,578 37,898 34,053
Cumulative effect of change in
accounting principles (9,875)
-------------------------------------
NET INCOME $ 40,578 $ 37,898 $ 24,178
=====================================
INCOME (LOSS) PER SHARE
Income before cumulative effect
of change in accounting principles $ 1.67 $ 1.56 $ 1.40
Cumulative effect of change in
accounting principles (.41)
-------------------------------------
NET INCOME PER SHARE $ 1.67 $ 1.56 $ .99
=====================================
DIVIDENDS DECLARED PER SHARE $ .88 $ .88 $ .88
- ------------------------------------------------------------------------------------
See accompanying financial review.
</TABLE>
20
<PAGE> 5
STATEMENT OF CASH FLOWS THE DEXTER CORPORATION
- -----------------------
<TABLE>
<CAPTION>
Years ended December 31
-------------------------------------
In thousands of dollars 1995 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS
Net income $ 40,578 $ 37,898 $ 24,178
Noncash items
Depreciation 38,246 34,857 32,038
Amortization 5,481 6,066 4,617
Provision for environmental costs 1,000
Gain on divestiture of product lines (13,016)
Charge for restructuring businesses, net 12,388
Cumulative effect of change in accounting principles 9,875
Income taxes (paid)/not due (5,262) 9,508 4,981
Minority interests 10,909 9,214 8,135
LIFO inventory charge (credit) 1,881 2,231 (1,290)
Equity in net income of affiliates (1,348) (3,836) (2,369)
Other (1,547) (2,538) (136)
Operating working capital increase (31,512) (12,824) (24,437)
-------------------------------------
57,426 80,576 55,964
-------------------------------------
INVESTMENTS
Property, plant and equipment (30,235) (45,842) (46,993)
Acquisitions (525) (8,767) (32,114)
Joint ventures (3,133) 749 (7,370)
Divestitures 23,924
Notes receivable 3,150
Proceeds from sale of investments 1,048 5,658
Purchases of investments (771) (6,082)
Proceeds from exercise of LTI stock options 2,990 308 374
Other 850 (2,308) (2,513)
-------------------------------------
(26,626) (56,284) (64,692)
-------------------------------------
FINANCING
New long-term debt 108,452
Repayment of long-term debt (4,260) (4,063) (65,378)
Short-term debt, net 8,825 3,806
Dividends paid (21,441) (21,421) (21,393)
Funding of the accumulated postretirement
benefit obligation (23,700)
LTI dividends paid to minority interest shareholders (1,374) (1,360) (1,355)
Purchase of treasury stock (4,205)
Other 276 215 (120)
-------------------------------------
(22,179) (22,823) (3,494)
-------------------------------------
INCREASE (DECREASE) IN CASH AND
SHORT-TERM SECURITIES $ 8,621 $ 1,469 $(12,222)
=====================================
CHANGES IN MAJOR ELEMENTS WHICH INCREASE
(DECREASE) OPERATING WORKING CAPITAL
Accounts receivable, net $ 20,085 $ 16,260 $ 9,205
Inventories at FIFO 10,441 8,100 4,214
Prepaid and deferred expenses 1,343 (1,699) 10
Accounts payable (6,690) (15,259) 6,675
Accrued liabilities and expenses 6,333 5,422 4,333
-------------------------------------
$ 31,512 $ 12,824 $ 24,437
=====================================
RECONCILIATION OF INCREASE (DECREASE) IN
CASH AND SHORT-TERM SECURITIES
Cash and short-term securities at beginning of year $ 55,012 $ 52,746 $ 65,028
Cash and short-term securities at end of year 65,542 55,012 52,746
-------------------------------------
Increase (decrease) in cash and short-term
securities per Statement of Financial Position 10,530 2,266 (12,282)
Currency translation effects 225 (797) 60
Cash included from consolidation of a subsidiary
which became majority-owned in 1995 (2,134)
-------------------------------------
$ 8,621 $ 1,469 $(12,222)
=====================================
INTEREST PAID $ 19,113 $ 20,522 $ 18,645
TAXES PAID $ 33,599 $ 16,992 $ 19,269
- -------------------------------------------------------------------------------------------------
</TABLE>
See accompanying financial review.
21
<PAGE> 6
STATEMENT OF FINANCIAL POSITION
- -------------------------------
<TABLE>
<CAPTION>
December 31
---------------------------------------
In thousands of dollars 1995 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current assets
Cash $ 9,577 $ 10,854 $ 3,406
Short-term securities 55,965 44,158 49,340
Accounts receivable, net 201,389 168,957 141,726
Inventories
Materials and supplies 60,099 58,967 59,794
In process and finished goods 121,644 106,703 91,626
LIFO reserve (24,709) (22,828) (20,597)
---------------------------------------
157,034 142,842 130,823
Current deferred tax assets 20,890 16,122 20,382
Prepaid and deferred expenses 11,866 9,720 10,649
---------------------------------------
456,721 392,653 356,326
Property, plant and equipment
Land 19,307 18,581 17,776
Buildings and improvements 153,071 143,436 130,658
Machinery and equipment 457,611 429,416 395,547
Construction in progress 12,250 16,911 11,931
---------------------------------------
642,239 608,344 555,912
Less accumulated depreciation (317,036) (279,409) (245,958)
---------------------------------------
325,203 328,935 309,954
Investments of wholly owned captive
insurance companies 5,878 7,224 6,638
Investment in unconsolidated affiliates 47,982 49,390 46,452
Patents, technology, formulas and covenants 2,857 4,233 3,891
Excess of cost over net assets of
businesses acquired 74,102 74,034 69,301
Other assets 21,418 24,140 28,129
---------------------------------------
$ 934,161 $ 880,609 $ 820,691
=======================================
=======================================================================================
</TABLE>
See accompanying financial review.
22
<PAGE> 7
THE DEXTER CORPORATION
<TABLE>
<CAPTION>
December 31
------------------------------------
In thousands of dollars 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt $ 13,598 $ 3,806
Accounts payable 92,447 82,851 $ 64,677
Dividends payable 5,351 5,357 5,353
Accrued and deferred income taxes 26,622 24,259 19,566
Accrued liabilities and expenses 55,037 60,625 59,732
Current environmental liabilities 1,395 2,660 4,030
Current installments of long-term debt 13,648 4,071 3,822
------------------------------------
208,098 183,629 157,180
Long-term debt 215,839 225,402 227,307
Deferred items 23,693 22,316 30,150
Long-term deferred income taxes 21,486 21,517 17,151
Deferred tax credits 3,313 4,005 4,751
Long-term environmental liabilities 15,745 17,632 18,736
Minority interests - principally
Life Technologies, Inc. 76,372 62,475 52,121
Shareholders' equity
Common stock, par value $1 per share
(authorized 100,000,000 shares; issued
24,983,907 shares in 1995, 1994
and 1993) 24,984 24,984 24,984
Additional paid-in capital 12,316 11,979 11,966
Retained earnings 347,544 328,401 311,928
Currency translation effects 1,614 (7,364) (22,137)
Other equity items (2,184) (2,433)
Treasury stock, at cost
(763,782 shares in 1995, 634,403 shares
in 1994 and 643,578 shares in 1993) (14,659) (11,934) (13,446)
------------------------------------
Total shareholders' equity 369,615 343,633 313,295
------------------------------------
$934,161 $880,609 $820,691
====================================
====================================================================================
</TABLE>
See accompanying financial review.
23
<PAGE> 8
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY THE DEXTER CORPORATION
- --------------------------------------------
<TABLE>
<CAPTION>
Add'l Currency Other Total
In thousands of dollars Common Paid-in Retained Translation Equity Treasury Shareholders'
(except per share amounts) Stock Capital Earnings Effects Items Stock Equity
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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)
Currency effects (5,776) (5,776)
Stock options 24 459 170 653
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)
Currency effects 14,773 14,773
Unrealized loss on investments $(1,468) (1,468)
Stock options (11) 192 181
Restricted stock (8) (965) 1,320 347
Pooling tax benefits 32 32
----------------------------------------------------------------------------------------
DECEMBER 31, 1994 24,984 11,979 328,401 (7,364) (2,433) (11,934) 343,633
Net income 40,578 40,578
Dividends - $.88 per share (21,435) (21,435)
Currency effects 8,978 8,978
Stock purchases (4,205) (4,205)
Unrealized gain on
investments 1,340 1,340
Stock options (33) 854 821
Pension liability adjustment (473) (473)
Restricted stock 338 (618) 626 346
Pooling tax benefits 32 32
----------------------------------------------------------------------------------------
DECEMBER 31, 1995 $24,984 $12,316 $347,544 $ 1,614 $(2,184) $(14,659) $369,615
========================================================================================
- ---------------------------------------------------------------------------------------------------------------------------
</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>
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 pretax income in the second quarter was a $12
million charge for restructuring businesses and a provision for environmental
costs of $1 million.
<TABLE>
<CAPTION>
The fourth quarter included a $0.4 million charge for restructuring businesses at majority-owned Life Technologies, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
1994
<S> <C> <C> <C> <C> <C> <C> <C>
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
=====================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
1995
First $ 266.8 $181.1 $10.5 $ .43 $.22 $22-7/8 $20-3/8
Second 283.0 193.1 11.9 .49 .22 25-1/8 21-5/8
Third 268.5 183.9 9.4 .39 .22 25-7/8 23
Fourth 270.6 184.1 8.8 .36 .22 26-7/8 23-1/8
--------------------------------------------------------------------
Year $1,088.9 $742.2 $40.6 $1.67 $.88 Close $23-5/8
=====================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 9
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) (54% 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. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. Certain amounts for prior years have been
reclassified to conform to and be consistent with the 1995 presentation.
ACQUISITIONS AND DIVESTITURES In September 1995, Life Technologies, Inc.
acquired an additional 1% ownership in its Japanese subsidiary, which resulted
in a 51% controlling interest, and, therefore, the subsidiary's financial
results are consolidated as of the acquisition date.
In October 1995, the company announced that it would sell its 50% equity
interest in D & S Plastics International and also its acoustic materials
business. These transactions are expected to be completed during 1996.
In January 1996, Life Technologies, Inc. acquired the remaining 75% of Custom
Primers, Inc. located in California.
None of these businesses acquired or to be divested, either 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.
The most significant event of 1995 was the unprecedented increase in the cost of
commodity raw materials including wood pulp, solvents and polypropylene. As
expected, the heightened degree of competition throughout the world made it
difficult to obtain sufficient price increases from our customers to recover
these higher costs. Aggressive efforts continue in order to raise prices and
regain full value for our product offerings. Although the cost of raw materials
has moderated and in some cases has been reduced, it is not yet apparent that
the issue will not arise again in the short or medium term. Any substantial
increases in future demand for the materials we purchase, with no additional
capacity for production, will inevitably support higher levels of cost to
Dexter. Following the divestiture of the corporation's equity interest in D&S
Plastics International, the impact of changes in the price of polypropylene
will be negligible. 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
can be expected consequent to the development of substitute products for cell
culture which do not depend on traditional raw materials.
Unit volume growth of sales was strong in the first half of 1995 and slowed in
the second half, particularly in the fourth quarter. To the extent that this
slowdown continues into 1996 as a result of some weakness in domestic and
European economies, revenue and earnings growth may be negatively impacted. The
consequences of domestic interest rate changes, tax policy and the results of
the upcoming presidential and congressional elections, may influence total
demand in our served markets.
With over 60% 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. Geographical expansion will continue to provide
opportunities and challenges as we learn how to create profitable growth in
developing countries.
There will continue to be increasing costs necessary to respond to heightened
regulatory pressures. 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. Lower government
spending may adversely affect Life Technologies, Inc. by reducing the overall
availability of government funding for life science research. Additionally,
LTI may be subject to delayed or reduced research funding, especially in the
United States, as appropriations are suspended during budget negotiations.
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
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. Dexter's ability to hire and retain a qualified work force will be
fundamental to our growth and success. Increased training and developmental
needs will require additional resources to maintain and improve our overall
competencies.
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.
25
<PAGE> 10
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 2.2 to 1, and the quick ratio (cash,
short-term securities and accounts receivable divided by current liabilities) is
1.3 to 1. During 1995, 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 $57.4 million exceeded the sum of investments
of $26.6 million and financing activity of $22.2 million, thereby increasing
year-end cash and short-term securities by $8.6 million. Excluding LTI, cash
provided from operations exceeded cash needed for investments by $19.7 million.
Financing activities, excluding LTI, used funds of $20.8 million, resulting in a
net reduction of cash and short-term securities of $1.1 million. Financing
activities during 1995 included the company's purchase of 170,900 shares of its
outstanding common stock for $4.2 million.
The company plans to meet its future working capital, capital expenditure, and
share repurchase program needs with funds provided from operations, the
reduction of short-term securities, proceeds from the sale of its 50% equity
interest in D & S Plastics International and the sale of its automotive acoustic
materials business and, as needed, short-term and long-term borrowings.
SUPPLEMENTAL CONSOLIDATING STATEMENT OF FINANCIAL POSITION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1995
-------------------------------------------------------------------------------
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 $ 21,614 $ 20,727 $ 23,201 $ 1,396 $ (1,396) $ 65,542
Accounts receivable
and inventories 248,563 293 109,567 28,151 (28,151) 358,423
Prepaid and
deferred expenses 23,502 9,254 33 (33) 32,756
-------------------------------------------------------------------------------
Total current assets 293,679 21,020 142,022 29,580 (29,580) 456,721
-------------------------------------------------------------------------------
Property, plant and
equipment, net 273,342 51,861 32,317 (32,317) 325,203
Investments of
wholly owned captive
insurance companies 5,878 5,878
Other assets 92,789 14,861 35,868 2,841 146,359
-------------------------------------------------------------------------------
Total assets $ 659,810 $ 26,898 $ 208,744 $ 97,765 $ (59,056) $ 934,161
===============================================================================
Current liabilities
Short-term debt $ 12,631 $ 967 $ 13,598
Accounts payable and
accrued liabilities 117,092 $ 2,864 28,923 $ 20,346 $ (20,346) 148,879
Income taxes 12,977 13,645 26,622
Dividends payable 5,351 759 (759) 5,351
Current installments of
long-term debt 12,681 967 13,648
-------------------------------------------------------------------------------
Total current liabilities 160,732 2,864 45,261 20,346 (21,105) 208,098
-------------------------------------------------------------------------------
Long-term debt 214,388 1,451 215,839
Deferred items 45,132 13,350 5,755 64,237
Minority interests 2,455 2,352 71,565 76,372
Shareholders' equity 237,103 10,684 153,925 77,419 (109,516) 369,615
-------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $ 659,810 $ 26,898 $ 208,744 $ 97,765 $ (59,056) $ 934,161
===============================================================================
Current ratio 1.8 to 1 7.3 to 1 3.1 to 1 1.5 to 1 2.2 to 1
Quick ratio 1.1 to 1 7.3 to 1 1.6 to 1 0.7 to 1 1.3 to 1
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 11
ANALYSIS OF OPERATIONS
1995 COMPARED WITH 1994
Revenues: Net sales were a record $1.1 billion in 1995, an increase of $114
million, or 12%, over sales of $975 million for 1994. The 12% increase in sales
was due to unit volume increases of 7%, a 3% increase due to the effect of
higher translation rates on international sales, price increases averaging 1%,
and increased consolidated sales of 1% through acquisition of a controlling
interest in a Japanese subsidiary of Life Technologies, Inc. (LTI).
Equity in net income of affiliates decreased $2.5 million to $1.3 million in
1995. This decrease is due to a $3 million decrease in results of D & S Plastics
International partially offset by improved results at Akzo Dexter Aerospace
Finishes VoF of $0.5 million.
EXPENSES: Cost of sales increased as a percentage of sales in 1995 thereby
reducing consolidated gross margin by .7 percentage points to 31.8% of sales
from 32.5% in 1994. Substantially improved gross margin at LTI improved overall
gross margin by 1.3 percentage points. Gross margin, excluding LTI, decreased 2
percentage points and more than offset the favorable impact of LTI.
Unprecedented increases in the cost of commodity raw materials, principally wood
pulp, solvents, and polypropylene, more than accounted for the margin erosion,
excluding LTI. Somewhat offsetting these cost increases were the favorable
effects of overall selling price increase, productivity improvements and cost
containment.
Marketing and administrative expenses increased $18.4 million, or 10%, in 1995
compared with 1994 principally due to increased marketing efforts at LTI and the
third quarter consolidation of its subsidiary in Japan. Marketing and
administrative costs, excluding LTI, increased less than one-half of one percent
over 1994. Overall marketing and administrative costs continued to decrease as a
percentage of sales from 19.3% in 1994 to 19% in 1995. Research and development
expenses increased $2.7 million, or 6%, due to increases at LTI and in the can
coatings business.
Interest expense increased $0.4 million, or 2%, in 1995 compared with 1994
primarily due to higher average short-term borrowing throughout the year. 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 1995 or 1994.
Income Taxes: The effective tax rate was 35.5% in 1995 compared with 36% in
1994.
Minority Interests: Income attributed to minority interest shareholders
increased 18% from 1994 due primarily to increased profits at LTI.
Net Income: Net income for the year 1995 was $40.6 million, or $1.67 per share,
a 7% increase compared with $37.9 million, or $1.56 per share, in 1994. The 1995
net income includes a decrease due to the effect of higher raw material cost,
net of selling price increases, of approximately $.43 per share. Somewhat
offsetting this negative impact was a $.07 per share increase due to favorable
currency translation rates and a $.02 per share increase due to a reduction of
the effective income tax rate from 36% in 1994 to 35.5% in 1995.
1994 COMPARED WITH 1993
Revenues: Net sales were $974.7 million in 1994, an increase of $87.6 million,
or 10%, over sales of $887.1 million 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
margin 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.
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. 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
partially 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 Interests: 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 with 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.
27
<PAGE> 12
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.
- --------------------------------------------------------------------------------
TAXES The effective income tax rate was 35.5% in 1995, 36% in 1994 and 36.5% in
1993. The tax rate is currently expected to approximate 37% in 1996. The income
tax rate differs from the statutory U.S. federal income tax rate as shown below:
<TABLE>
<CAPTION>
1995 1994 1993
------------------------
<S> <C> <C> <C>
U.S. federal rate 35.0% 35.0% 35.0%
State taxes, net of federal benefit 1.7 1.8 2.1
Investment and R&E tax credits (1.0) (2.2) (2.1)
International taxation differences (0.7) (0.8) (0.4)
Nondeductible excess
acquisition costs 1.1 1.1 1.8
Other (0.6) 1.1 0.1
------------------------
Effective income tax rate 35.5% 36.0% 36.5%
========================
- --------------------------------------------------------------------------------
</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.
Pretax income from international operations amounted to $57.3 million in 1995,
$46.4 million in 1994 and $38.8 million in 1993. 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 $170 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.
28
<PAGE> 13
<TABLE>
<CAPTION>
- -------------------------------------------------------------
TAXES, OTHER THAN SALES TAXES
In thousands of dollars 1995 1994 1993
- -------------------------------------------------------------
<S> <C> <C> <C>
Income taxes
Current
United States $ 5,932 $ 3,012 $ 5,717
State 1,691 755 1,521
International 18,752 14,783 12,560
--------------------------------
26,375 18,550 19,798
--------------------------------
Deferred
United States 754 5,298 2,117
State 348 1,353 (22)
International 860 1,299 2,357
--------------------------------
1,962 7,950 4,452
--------------------------------
Total income taxes 28,337 26,500 24,250
Payroll taxes 20,201 18,195 16,851
Property taxes 4,082 3,576 3,759
Other taxes 624 454 363
--------------------------------
Total taxes $ 53,244 $ 48,725 $ 45,223
================================
</TABLE>
- -------------------------------------------------------------------------------
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, 1995, 1994 and 1993 are presented below:
<TABLE>
<CAPTION>
In thousands of dollars 1995 1994 1993
- --------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Postretirement health
benefits $ 11,210 $ 9,976 $ 8,727
Accrued expenses, not
currently deductible 7,301 8,721 6,515
Foreign loss carryforwards 6,234 5,617 4,147
Environmental reserves 6,061 4,972 4,374
Reserves for insurance 5,409 4,597 2,372
Inventory, principally
valuation reserves 5,039 4,466 3,350
Alternative minimum tax
credit carryforwards 3,820 961
Restructuring activities 1,048 2,174 6,756
Other 11,223 11,999 12,912
----------------------------------
Gross deferred tax assets $ 57,345 $ 53,483 $ 49,153
----------------------------------
Deferred tax liabilities:
Fixed assets, principally
depreciation $(49,828) $(54,182) $(40,011)
Other (5,333) (1,023) (2,498)
----------------------------------
Gross deferred tax
liabilities $(55,161) $(55,205) $(42,509)
----------------------------------
Net deferred tax asset
(liability) before valuation
allowance $ 2,184 $ (1,722) $ 6,644
Valuation allowance (3,585) (3,121) (2,452)
----------------------------------
Net deferred tax (liability)
asset after valuation
allowance $ (1,401) $ (4,843) $ 4,192
==================================
</TABLE>
- -------------------------------------------------------------------------------
On December 31, 1995, 1994 and 1993, valuation allowances of $3.6 million, $3.1
million and $2.5 million, respectively, 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 $0.5 million in the valuation allowance during 1995 was due
principally to the generation of additional foreign loss carryforwards.
The components of deferred taxes at December 31, 1995, 1994 and 1993 are as
follows:
<TABLE>
<CAPTION>
In thousands of dollars 1995 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Current deferred tax assets $ 20,890 $ 16,122 $ 20,382
Long-term tax asset 930 1,965 1,499
(included in other assets)
Current deferred tax liability (1,735) (1,413) (538)
(included in accrued
and deferred income taxes)
Long-term deferred income
taxes (21,486) (21,517) (17,151)
----------------------------------
Net deferred tax (liability)
asset $ (1,401) $ (4,843) $ 4,192
==================================
</TABLE>
- ------------------------------------------------------------------------------
NET INCOME PER SHARE Net income of $1.67 per share increased 7.1% over net
income of $1.56 per share in 1994. 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
1995 resulted from the exercise of stock options. This increase was partially
offset by Dexter's purchase of 170,900 shares of its outstanding common stock.
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.
29
<PAGE> 14
MARKET SEGMENT DATA
1995 COMPARED WITH 1994
Sales to the Aerospace market increased $0.6 million, or 1%. Increased sales of
aerospace adhesives were mostly offset by decreased sales of aerospace coatings
in 1995. Operating losses increased $0.7 million in 1995. Lower aerospace
coatings sales volume and increased costs in 1995 due to the consolidation of
the domestic aerospace coatings business and start-up of the new coatings
facility in Waukegan, Illinois, decreased operating results. Partially
offsetting this decrease was increased operating income from aerospace adhesives
principally due to higher sales volume.
Sales to the Automotive market increased $1.5 million, or 3%. Sales increased
primarily due to increased sales of acoustic materials and nonwoven headliner
materials. Partially offsetting these increases were decreased sales of
automotive coatings. Operating income decreased $3.4 million in 1995 principally
due to decreased gross margins in the acoustic materials business. This decrease
was primarily due to high start-up costs of a new product line in acoustic
materials, in addition to increased cost of raw materials compared with 1994.
Sales to the Electronics market increased $27.1 million, or 17%. Sales of all
products were strong in 1995. Operating income increased $3.8 million, or 25%,
in 1995 primarily due to increased gross margins from higher sales volume,
partially offset by increased raw material costs as well as higher marketing and
administrative costs associated with products in the Electronics market.
Sales to the Food Packaging market increased $22.8 million, or 9%. Sales
increased primarily due to strong sales of food and beverage can coatings
serving the European market, in addition to higher currency translation rates on
international sales. Operating income decreased $0.2 million in 1995. This
decrease was primarily due to higher raw material costs in both the domestic and
European nonwovens and food and beverage can coatings businesses. Increased
marketing and research and development costs in the food and beverage can
coatings business also had an unfavorable impact on operating income. Partially
offsetting these decreases were increased gross margins on European food and
beverage can coatings primarily due to sales volume increases and higher
currency translation rates on international results.
Sales to the Medical market increased $48.7 million, or 15%. The effect of the
consolidation of LTI's Japanese subsidiary increased net sales by $4.9 million.
Net of this impact, sales increased 14%. Both LTI and medical nonwoven product
sales were strong. Higher currency translation rates on international sales also
contributed to this increase. Operating income increased $5.8 million, or 16%,
in 1995. Operating income increased at LTI in 1995 primarily due to the
favorable impact of higher unit sales, a favorable product mix, and increased
selling prices. Partially offsetting this increase was lower operating income
from medical nonwovens, which decreased slightly in 1995 compared with 1994
despite strong sales as substantially higher raw material costs, particularly in
wood pulp were not offset by selling price increases.
Sales of the "Other" category increased $13.5 million, or 10%, primarily due to
stronger European nonwoven wallcover and vacuum bag sales in 1995 and higher
currency translation rates on international sales. Operating income decreased
$0.8 million in 1995. This decrease was primarily due to increases in raw
material costs.
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.
30
<PAGE> 15
<TABLE>
<CAPTION>
MARKET SEGMENT DATA
- -------------------
In thousands of dollars 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES
Aerospace $ 45,387 $ 44,769 $ 41,815 $ 45,998 $ 47,000
Automotive* 59,993 58,511 38,702 59,923 51,734
Electronics 188,461 161,353 145,359 137,622 118,232
Food Packaging 282,183 259,398 232,164 225,493 225,969
Medical 364,334 315,616 284,733 288,817 265,233
Other 148,547 135,072 144,339 193,586 229,566
------------------------------------------------------------------------
Consolidated $1,088,905 $974,719 $887,112 $951,439 $937,734
========================================================================
Unit Volume and Product Mix Change 7% 10% 1% 3% --
Field Sales Force 241 229 230 242 434
* Does not include sales of
D & S Plastics International $ 89,850 $ 81,105 $ 69,438 $ 49,392 $ 39,847
- ----------------------------------------------------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION
Aerospace $ 3,373 $ 3,479 $ 3,414 $ 3,524 $ 3,299
Automotive 3,049 2,943 2,265 2,289 2,300
Electronics 4,719 4,627 4,466 4,057 3,706
Food Packaging 9,563 9,114 7,160 6,030 5,304
Medical 13,449 11,606 10,588 9,389 8,186
Other 9,198 8,741 8,452 10,055 11,051
General Corporate 376 413 310 328 249
-------------------------------------------------------------------------
Consolidated $ 43,727 $ 40,923 $ 36,655 $ 35,672 $ 34,095
=========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
RESEARCH AND DEVELOPMENT
Aerospace $ 3,973 $ 3,742 $ 3,474 $ 3,480 $ 3,458
Automotive 2,929 2,656 2,161 2,695 3,951
Electronics 6,878 6,547 5,496 5,128 5,015
Food Packaging 12,478 10,967 9,898 8,026 7,587
Medical 17,147 17,109 17,052 16,511 14,930
Other 5,703 5,277 5,155 6,376 7,115
General Corporate 267 346 567
-------------------------------------------------------------------------
Consolidated $ 49,375 $ 46,644 $ 43,803 $ 42,216 $ 42,056
=========================================================================
Laboratory Staff 454 452 439 395 470
- ----------------------------------------------------------------------------------------------------------------------------
DIVESTITURE, RESTRUCTURING & ENVIRONMENTAL
(Charge)/Credit
Aerospace $ (5,170) $ (1,853) $ (899)
Automotive (278) (413) (2,078)
Electronics (1,864) (3,034) (476)
Food Packaging (2,234) (1,496) (11,146)
Medical (2,008) (1,686) (9,247)
Other 11,683 11,199 (22,594)
General Corporate (501) (712) (1,084)
-----------------------------------------
Consolidated $ (372) $ 2,005 $ (47,524)
=========================================
- ----------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED OPERATING INCOME (LOSS)
Aerospace $ (1,533) $ (844) $ (6,215) $ (1,469) $ 578
Automotive (444) 2,996 (872) (1,438) (5,957)
Electronics 19,038 15,248 10,295 8,699 5,188
Food Packaging 31,809 32,031 28,765 34,667 27,099
Medical 41,979 36,164 36,089 34,306 24,280
Other 15,637 16,411 25,655 29,849 (10,291)
-------------------------------------------------------------------------
Consolidated Operating Income 106,486 102,006 93,717 104,614 40,897
Other Income, net 9,993 9,386 8,586 3,351 3,453
Interest Expense (20,931) (20,509) (18,756) (18,799) (16,800)
General Corporate Expense (15,724) (17,271) (17,109) (16,034) (16,358)
-------------------------------------------------------------------------
Consolidated Income before Taxes $ 79,824 $ 73,612 $ 66,438 $ 73,132 $ 11,192
=========================================================================
- ----------------------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES
Aerospace $ 4,336 $ 8,397 $ 3,062 $ 1,315 $ 2,059
Automotive 1,017 2,062 1,590 4,778 12,232
Electronics 3,364 6,370 7,457 4,280 4,742
Food Packaging 3,986 6,239 6,771 13,512 15,868
Medical 12,643 16,536 19,081 22,138 14,204
Other 3,549 5,306 6,702 5,613 11,180
General Corporate 74 187 121 157 1,464
-------------------------------------------------------------------------
Consolidated $ 28,969 $ 45,097 $ 44,784 $ 51,793 $ 61,749
=========================================================================
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS AT YEAR-END
Aerospace $ 64,201 $ 60,753 $ 56,878 $ 50,613 $ 55,808
Automotive 42,769 43,034 38,920 43,979 60,574
Electronics 103,571 97,646 87,978 83,628 81,338
Food Packaging 191,107 179,927 158,884 107,669 119,207
Medical 258,084 235,191 218,129 194,197 178,719
Other 137,295 143,350 133,160 155,405 180,325
-------------------------------------------------------------------------
Consolidated Operating Assets 797,027 759,901 693,949 635,491 675,971
General Corporate* 137,134 120,708 126,742 146,534 108,500
-------------------------------------------------------------------------
Consolidated Assets 934,161 880,609 820,691 782,025 784,471
Consolidated Liabilities (564,546) (536,976) (507,396) (466,411) (470,689)
-------------------------------------------------------------------------
Net Assets $ 369,615 $ 343,633 $ 313,295 $ 315,614 $ 313,782
=========================================================================
* Corporate assets consist primarily of cash, securities and investments, which
include the investment in D & S Plastics International of $38,709 in 1995,
$39,435 in 1994, $37,110 in 1993, $35,496 in 1992 and $35,795 in 1991, and, in
addition, corporate assets of Life Technologies, Inc.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 16
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.
1995 COMPARED WITH 1994
Net sales increased in all geographic areas. In North America, net sales
increased $23.5 million, or 4%. Strong sales increases in North America in the
Medical and Electronic markets were partially offset by decreases in the
Aerospace, Automotive and Food Packaging markets, and in the "Other" category.
Sales outside of North America increased $90.7 million, or 23%. Higher currency
translation rates contributed $31 million, or approximately one-third of the
increase. Net sales increased in all markets in which we operate outside of
North America. Sales to the Food Packaging market and at LTI in the Medical
market were strong in Western Europe. The 34% increase in sales in the Pacific
area was primarily due to increases in the Electronics market and from the
acquisition of a controlling interest in a Japanese subsidiary by LTI in the
Medical market. Net sales outside of North America were 44% of consolidated net
sales in 1995 and 40% in 1994. Export sales increased $5 million to $73 million
and represent 7% of consolidated net sales in 1995.
Operating income increased in Western Europe and the Pacific area and decreased
in North America. In North America, operating income decreased in all markets
except the Electronics market. These decreases in operating income were mainly
due to lower sales volumes in all markets except the Medical market and the
unfavorable impact of higher raw material costs, net of selling price increases.
Operating income outside of North America increased $14.3 million, or 28%. The
increase in Western Europe was principally due to increases in food and beverage
can coatings in the Food Packaging market and at LTI in the Medical market.
Operating income increased in the Pacific area primarily due to increases in the
Electronics market and at LTI in the Medical market. The acquisition of a
controlling interest in a subsidiary by LTI contributed to LTI's increase in the
Pacific area. Operating income outside of North America was 61% of total
operating income in 1995 and 50% in 1994.
Total net assets increased 8%, or $26 million, in 1995. Net assets increased in
all geographic areas. Net assets increased 8% in North America, 5% in Western
Europe, and 23% in the Pacific area. The increase in assets in the Pacific area
was primarily due to the consolidation of LTI's Japanese subsidiary. Currency
translation rates increased assets outside of North America by $9 million. Net
assets outside of North America were 61% of total net assets in 1995 and 1994.
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.
32
<PAGE> 17
GEOGRAPHIC DATA
<TABLE>
<CAPTION>
In thousands of dollars 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES*
North America
Total Net Sales $ 672,386 $ 634,230 $ 586,868 $ 633,987 $ 638,100
Intercompany Sales 67,982 53,302 40,731 40,589 36,258
--------------------------------------------------------------------------
Net Sales $ 604,404 $ 580,928 $ 546,137 $ 593,398 $ 601,842
==========================================================================
Western Europe
Total Net Sales $ 392,267 $ 331,397 $ 290,814 $ 313,970 $ 290,118
Intercompany Sales 11,132 14,513 13,156 16,289 11,036
--------------------------------------------------------------------------
Net Sales $ 381,135 $ 316,884 $ 277,658 $ 297,681 $ 279,082
==========================================================================
Pacific Area
Total Net Sales $ 104,719 $ 76,907 $ 63,317 $ 60,360 $ 56,810
Intercompany Sales 1,353
--------------------------------------------------------------------------
Net Sales $ 103,366 $ 76,907 $ 63,317 $ 60,360 $ 56,810
==========================================================================
Consolidated
Total Net Sales $1,169,372 $1,042,534 $ 940,999 $1,008,317 $ 985,028
Intercompany Sales 80,467 67,815 53,887 56,878 47,294
--------------------------------------------------------------------------
Net Sales $1,088,905 $ 974,719 $ 887,112 $ 951,439 $ 937,734
==========================================================================
* 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.
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS)
North America $ 43,014 $ 51,555 $ 50,863 $ 57,422 $ (50)
Western Europe 54,576 45,155 40,298 44,831 39,081
Pacific Area 10,881 6,013 3,080 3,266 3,195
Consolidated, net of
eliminations $ 106,486 $ 102,006 $ 93,717 $ 104,614 $ 40,897
==========================================================================
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS AT YEAR-END
North America
Operating Assets $ 440,416 $ 450,478 $ 429,395 $ 423,419 $ 454,280
Corporate Assets* 103,813 97,579 116,041 135,293 97,337
Liabilities (400,622) (415,330) (411,988) (373,039) (372,894)
--------------------------------------------------------------------------
Net Assets $ 143,607 $ 132,727 $ 133,448 $ 185,673 $ 178,723
==========================================================================
Western Europe
Operating Assets $ 282,277 $ 257,288 $ 224,634 $ 174,177 $ 187,785
Corporate Assets* 30,236 22,476 10,541 10,202 11,086
Liabilities (115,634) (92,551) (74,915) (73,059) (81,806)
--------------------------------------------------------------------------
Net Assets $ 196,879 $ 187,213 $ 160,260 $ 111,320 $ 117,065
==========================================================================
Pacific Area
Operating Assets $ 74,334 $ 52,135 $ 39,920 $ 37,895 $ 33,906
Corporate Assets* 3,085 653 160 1,039 77
Liabilities (48,290) (29,095) (20,493) (20,313) (15,989)
--------------------------------------------------------------------------
Net Assets $ 29,129 $ 23,693 $ 19,587 $ 18,621 $ 17,994
==========================================================================
Consolidated
Operating Assets $ 797,027 $ 759,901 $ 693,949 $ 635,491 $ 675,971
Corporate Assets* 137,134 120,708 126,742 146,534 108,500
Liabilities (564,546) (536,976) (507,396) (466,411) (470,689)
--------------------------------------------------------------------------
Net Assets $ 369,615 $ 343,633 $ 313,295 $ 315,614 $ 313,782
==========================================================================
* Corporate assets consist primarily of cash, securities and investments, which
include the investment in D & S Plastics International of $38,709 in 1995,
$39,435 in 1994, $37,110 in 1993, $35,496 in 1992 and $35,795 in 1991, and, in
addition, corporate assets of Life Technologies, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 18
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, 1995 was owned 54% 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 54% 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 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.
On September 1, 1995, LTI acquired an additional 1% ownership in its Japanese
subsidiary, which resulted in a 51% controlling interest and the consolidation
of the subsidiary's financial results as of the acquisition date.
Net sales of LTI increased $37 million, or 16%, in 1995. This improvement was
due to a $28.5 million, or 15%, increase in sales of product lines other than
fetal bovine serum (FBS). Higher currency translation rates increased 1995 net
sales by $8.7 million compared with 1994.
Gross margins for 1995 were 50.1% of net sales compared with 47.3% in 1994.
Gross margins improved in 1995 as LTI consolidated the gross margins of its
Japanese subsidiary. LTI also reported higher gross margins in markets it served
directly in 1995 where these markets were served by distributors for a
substantial portion of 1994.
Marketing and administrative expenses increased 26% to $86.8 million in 1995 and
represented 31.9% of net sales in 1995 compared with 29.2% of net sales in 1994.
This increase was principally attributable to higher expenses in 1995 as LTI
consolidated its Japanese subsidiary in 1995, a full year of expenses in 1995
for sales offices in Sweden, Taiwan and Australia opened during 1994, and
increased expenses in 1995 for its worldwide information systems implementation.
R&D expenses were $15.9 million in 1995, an increase of 6% over 1994.
Pretax income increased 22%. Income taxes were provided at a rate of 34.8% in
1995 compared with 36% in 1994. Net income increased 22% to $22.3 million in
1995 from $18.2 million in 1994.
LTI declared quarterly dividends totaling $.20 per share in both 1995 and 1994.
After the deduction of minority interests, LTI contributed $12.1 million to
Dexter's net income, or $.50 per share, in 1995, compared with $9.9 million, or
$.41 per share, in 1994. Dexter's portion of LTI shareholders' equity, per share
of Dexter, increased to $3.42 at December 31, 1995, up from $2.91 at year-end
1994.
At year-end 1995, LTI had $23.2 million in cash and short-term securities,
$118.8 million in other current assets and $45.3 million of current liabilities.
In 1995, LTI had capital expenditures of $12.3 million and was self funding.
Capital expenditures in 1996 are expected to range between $25 million and $30
million largely due to LTI's corporate R&D center and facilities modernization
program. It is expected that LTI will be self funding in 1996.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CONTRIBUTION OF LTI TO DEXTER NET INCOME
Years ended December 31
In thousands of dollars -----------------------
(except per share amounts) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Net income of LTI $ 22,277 $ 18,207
Portion attributable to minority interests 10,213 8,279
-------------------------
Dexter's portion of net income of LTI $ 12,064 $ 9,928
=========================
Net income per share of Dexter $ .50 $ .41
- --------------------------------------------------------------------------------
CONDENSED STATEMENT OF INCOME
Years ended December 31
-----------------------
In thousands of dollars 1995 1994
- --------------------------------------------------------------------------------
REVENUES
Net sales $ 272,232 $ 235,195
Net royalties 67 67
-------------------------
272,299 235,262
-------------------------
EXPENSES
Cost of sales 135,784 123,988
Marketing and administrative 86,821 68,768
Research and development 15,871 15,000
-------------------------
238,476 207,756
-------------------------
Other income, net 1,120 1,119
-------------------------
INCOME BEFORE INCOME TAXES 34,943 28,625
Income taxes 12,160 10,305
-------------------------
INCOME BEFORE MINORITY INTERESTS 22,783 18,320
Minority interests 506 113
-------------------------
NET INCOME $ 22,277 $ 18,207
=========================
- --------------------------------------------------------------------------------
CONDENSED STATEMENT OF FINANCIAL POSITION
December 31
-----------
In thousands of dollars 1995 1994
- --------------------------------------------------------------------------------
ASSETS
Cash and short-term securities $ 23,201 $ 13,246
Other current assets 118,821 94,322
Property, plant and equipment, net 51,861 48,043
Investments and other assets 8,671 9,796
Excess of cost over net assets of
businesses acquired 6,190 6,340
-------------------------
Total assets $ 208,744 $ 171,747
=========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 45,261 $ 36,313
Other liabilities 9,558 5,305
Shareholders' equity 153,925 130,129
-------------------------
Total liabilities and
shareholders' equity $ 208,744 $ 171,747
=========================
- --------------------------------------------------------------------------------
CONTRIBUTION OF LTI TO DEXTER BOOK VALUE
December 31
In thousands of dollars -----------
(except per share amounts) 1995 1994
- --------------------------------------------------------------------------------
LTI shareholders' equity $ 153,925 $ 130,129
Portion attributable to minority interests 71,214 59,210
-------------------------
Dexter's portion of LTI
shareholders' equity $ 82,711 $ 70,919
=========================
Book value per share of Dexter stock $ 3.42 $ 2.91
- --------------------------------------------------------------------------------
CONDENSED STATEMENT OF CASH FLOWS
Years ended December 31
-----------------------
In thousands of dollars 1995 1994
- --------------------------------------------------------------------------------
OPERATIONS
Net income $ 22,277 $ 18,207
Noncash items
Depreciation and amortization 7,728 6,508
Other (474) 1,646
Operating working capital increase (8,180) (5,008)
-------------------------
21,351 21,353
-------------------------
INVESTMENTS
Property, plant and equipment (12,279) (12,533)
Acquisitions and joint ventures (825) (1,287)
Other (28) 17
-------------------------
(13,132) (13,803)
-------------------------
FINANCING
Dividends paid (3,007) (2,993)
Exercise of stock options 2,990 308
-------------------------
(17) (2,685)
-------------------------
EFFECT OF TRANSLATION RATE CHANGES ON
CASH AND SHORT-TERM SECURITIES (381) 454
-------------------------
INCREASE IN CASH AND
SHORT-TERM SECURITIES 7,821 5,319
Cash included from consolidation
of a subsidiary which became
majority-owned in 1995 2,134
-------------------------
TOTAL INCREASE IN CASH AND
SHORT-TERM SECURITIES $ 9,955 $ 5,319
=========================
</TABLE>
- --------------------------------------------------------------------------------
34
<PAGE> 19
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 $81.1 million in 1994 to $89.9 million
in 1995, an increase of 11%. For the year ended December 31, 1995, D & S
Plastics reported a net loss of $1.5 million compared to net income of $4.5
million in 1994. The $6 million decrease in earnings was the result of
significantly higher raw material cost principally related to polypropylene
prices. 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 (loss) 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 26. During
1995, D & S Plastics had capital expenditures of $9.5 million principally
related to its new manufacturing facility in Texas.
In October 1995, the company announced its intention to sell its 50% equity
interest in D & S Plastics International.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CONDENSED STATEMENT OF INCOME
Years ended December 31
-----------------------
In thousands of dollars 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenues $ 89,850 $ 81,105
Net (loss) income $ (1,452) $ 4,544
Amount included in Dexter's
"Equity in net (loss) income of
affiliates" $ (726) $ 2,272
</TABLE>
- --------------------------------------------------------------------------------
ANALYSIS OF FINANCIAL POSITION
WORKING CAPITAL
Working capital, including cash and short-term securities, increased $39.6
million from 1994. Operating working capital increased $47.9 million to $246.1
million at year-end 1995. The current ratio at December 31, 1995 was 2.2 to 1.
The company's target is to have a current ratio of greater than 2 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, 1995. As
of year-end 1995, the company has 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 1995, $13.6 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 1995, the company has eight
multi-currency, revolving credit agreements aggregating $50 million. Nothing was
borrowed under these agreements at year-end 1995; however, the funds are
immediately available should the company so desire.
- --------------------------------------------------------------------------------
INCREASE/(DECREASE) IN OPERATING WORKING CAPITAL AND WORKING CAPITAL IN 1995
<TABLE>
<CAPTION>
Business Change in
Acquisitions Currency Consolidated
Cash and Accounting Translation Account
In thousands of dollars Changes Accruals Effects Balances
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accounts receivable, net $ 20,085 $ 8,574 $ 3,773 $ 32,432
Inventories at FIFO 10,441 3,322 2,310 16,073
Prepaid and deferred expenses 1,343 737 66 2,146
Accounts payable (6,690) (764) (2,142) (9,596)
Accrued liabilities and expenses 6,333 1,308 (788) 6,853
-------------------------------------------------------
Operating working capital 31,512 13,177 3,219 47,908
-------------------------------------------------------
Cash (3,480) 2,134 69 (1,277)
Short-term securities 12,101 (294) 11,807
LIFO reserve (1,881) (1,881)
Current deferred tax assets 4,768 4,768
Short-term debt (8,825) (1,228) 261 (9,792)
Other current liabilities and taxes (10,832) (953) (149) (11,934)
-------------------------------------------------------
Working capital $ 18,595 $ 17,898 $ 3,106 $ 39,599
=======================================================
- ---------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 20
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 maturities of less than 90 days when purchased and
represent cash awaiting use in the business, funds available for future
investment, and partial offsets of net nonlocal currency exposures relating to
current accounts payable and accounts receivable. 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, 1995, there were $56 million in short-term securities, of which
$35.6 million were directly available to Dexter and $20.4 million were
maintained separately by Life Technologies, Inc. due to its different
shareholder constituency. All of the short-term securities directly available to
Dexter were held outside the United States, including $20.7 million which was
held by Dexter's captive insurance companies. Of the $20.4 million maintained by
Life Technologies, Inc., $19.7 million was held outside the United States.
ACCOUNTS RECEIVABLE Gross accounts receivable of $208.9 million at December 31,
1995 are reduced by allowances of $7.5 million. Such allowances were $6.6
million at December 31, 1994 and $6.1 million at December 31, 1993. Currency
translation effects increased net accounts receivable by $3.8 million in 1995.
Included in accounts receivable are non-trade account receivables of $25.8
million in 1995 compared with $18.9 million in 1994 and $15 million in 1993.
These amounts principally comprise tax receivables and amounts due from
affiliates. The collection period for accounts receivable increased to
approximately 59 days at December 31, 1995 from approximately 54 days as of
December 31, 1994 and 50 days as of December 31, 1993. The collection period for
accounts receivable has increased as the company has expanded into new
geographies which have extended terms of credit.
INVENTORIES Inventories are valued at the lower of cost or market. Inventories
located in the United States represented 47% of total inventories. The LIFO
(last-in, first-out) method was used for determining the cost of 63% of U.S.
inventories in 1995 and 62% in 1994 and 1993. The FIFO (first-in, first-out)
method was used for determining the cost of remaining inventories in the United
States and the 53% of total inventories which were outside the United States.
The reduction in levels of LIFO valued inventories (LIFO liquidation) was not
significant in 1995, 1994 or 1993. Inventories at December 31 were:
<TABLE>
<CAPTION>
In thousands of dollars 1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Materials and supplies $ 60,099 $ 58,967 $ 59,794
Work-in-process 17,038 11,319 11,527
Finished goods 104,606 95,384 80,099
----------------------------------------
Total FIFO cost 181,743 165,670 151,420
LIFO reserve (24,709) (22,828) (20,597)
----------------------------------------
$ 157,034 $ 142,842 $ 130,823
========================================
- ---------------------------------------------------------------------------
</TABLE>
Before deducting the LIFO reserve, FIFO inventories increased $16.1 million in
1995 to $181.7 million. FIFO inventories at LTI increased $8.4 million including
$3.3 million from the consolidation of its Japanese subsidiary in 1995.
Inventory values at operations outside the U.S. increased approximately $2.3
million as a result of translating to a weakened U.S. dollar.
SHORT-TERM DEBT Short-term borrowings were denominated principally in U.S. and
Singapore dollars, Italian lira, Japanese yen, French francs, Deutsche marks,
and pound sterling 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 $13.6 million short-term borrowings outstanding
at year-end included $1 million of short-term debt of Life Technologies, Inc.
The company had outstanding letters of credit at December 31, 1995 totaling $8.8
million for liabilities already reflected in the Statement of Financial
Position.
<TABLE>
<CAPTION>
In millions of dollars 1995 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Average borrowings $ 8.4 $ 4.3 $ 4.5
Weighted average month-end
interest rate 6.0% 5.7% 3.8%
Maximum month-end borrowings $ 14.4 $ 6.3 $ 22.0
Year-end borrowings $ 13.6 $ 3.8 $ -0-
Year-end average interest rate 6.1% 5.3% -
- ---------------------------------------------------------------------
</TABLE>
The company has authorized up to $50 million of commercial paper, none of which
was issued during 1995 and all of which was available for issue at December 31,
1995. 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 1995 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Salaries, wages and benefits $17,106 $15,352 $13,892
Pension and profit sharing 9,082 11,192 10,255
Customer rebates and volume
discounts 3,551 3,110 1,659
Interest 3,280 1,462 1,475
Provision for claims and
warranties 3,194 3,872 3,570
Taxes, other than income taxes 1,975 1,795 2,059
Royalties 1,964 1,278 531
Restructuring accruals 1,791 6,294 10,735
Professional services 1,433 1,661 1,592
Deferred income 1,362 3,837 4,737
Other, principally accruals
for unbilled obligations 10,299 10,772 9,227
------------------------------
$55,037 $60,625 $59,732
==============================
</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>
<S> <C>
1996 $ 9,347
1997 5,695
1998 3,634
1999 2,620
2000 1,677
Later years 14,182
-------
$37,155
=======
</TABLE>
Total rent expense incurred under noncancellable leases, net of minor sublease
rentals, amounted to $11.1 million in 1995, $10.5 million in 1994 and $10.3
million in 1993.
The company has no contingent rentals. Obligations under capital leases were not
significant at December 31, 1995, 1994 or 1993.
36
<PAGE> 21
PROPERTY, PLANT AND EQUIPMENT Capital expenditures on the accrual basis were $29
million in 1995, $45.1 million in 1994 and $44.8 million in 1993. Capital
expenditures in 1996 are currently estimated to range between $45 million and
$50 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 $17 million in 1995, $15.3 million in
1994 and $14.9 million in 1993. 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 1995 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Land $ 19,307 $ 18,581 $ 17,776
Buildings and improvements 153,071 143,436 130,658
Machinery and equipment 457,611 429,416 395,547
Construction in progress 12,250 16,911 11,931
-----------------------------------------
Total cost 642,239 608,344 555,912
Less accumulated
depreciation (317,036) (279,409) (245,958)
-----------------------------------------
Property, plant and
equipment, net $ 325,203 $ 328,935 $ 309,954
=======================================
- ------------------------------------------------------------------------
</TABLE>
Changes in property, plant and equipment for the past three years were as
follows:
<TABLE>
<CAPTION>
In thousands of dollars 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
January 1 $ 328,935 $ 309,954 $ 298,869
Capital expenditures 28,969 45,097 44,784
Assets of businesses acquired 212 355 10,591
Write-down of asset values (359) (4,638)
Assets of businesses divested
or held for sale (3,488)
Depreciation (38,246) (34,857) (32,038)
Currency effects 5,333 8,745 (4,126)
----------------------------------------
December 31 $ 325,203 $ 328,935 $ 309,954
========================================
- ------------------------------------------------------------------------
</TABLE>
PATENTS, TECHNOLOGY, FORMULAS AND COVENANTS
Patents, technology, formulas and covenants not to compete are stated at cost
less accumulated amortization of $18.6 million, $17.2 million and $15 million at
December 31, 1995, 1994 and 1993, 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 was $74.1 million at year-end
1995 and $74 million at year-end 1994. Excess acquisition cost increased $3.2
million due to currency translation effects. This increase was offset by
amortization of excess acquisition cost. The excess of cost over the net asset
value of businesses acquired (goodwill) prior to 1991 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 $16.5 million, $12.9 million and $9.7
million at December 31, 1995, 1994 and 1993, 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 1995 or 1994. Impairment charges
were $0.6 million in 1993.
LEGAL PROCEEDINGS The company is involved in various environmental and other
lawsuits and claims, many of which are covered by insurance. At December 31,
1995, $0.3 million of current and $4.1 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, results of operations, or cash flows.
37
<PAGE> 22
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 6.5%, 8.5%, and 6.75% were used in 1995, 1994, and 1993, respectively.
The discount rates used in computing the year-end funded status for
international plans ranged from 4% to 9% in 1995, 5.5% to 9.75% in 1994, and
5.5% to 9% in 1993.
In 1995, there was a net periodic pension cost of $4.8 million for all plans
combined, including international plans. Net periodic pension cost was $6.3
million for 1994 and $3.9 million for 1993.
- -------------------------------------------------------------------------------
The funded status of the company's plans are as follows:
<TABLE>
<CAPTION>
In thousands of dollars December 31, 1995 December 31, 1994 December 31, 1993
- ------------------------------------------------------------------------------------------------------------------------------------
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 $ 63,864 $ 7,356 $ 41,589 $ 5,512 $ 47,291 $ 6,059
Accumulated benefit
obligation $ 66,497 $ 8,768 $ 42,972 $ 6,068 $ 49,682 $ 6,617
Projected benefit
obligation $ 99,947 $ 10,743 $ 67,489 $ 7,779 $ 80,359 $ 8,282
Plan assets at fair value,
primarily equity securities
and insurance contracts $ 83,110 $ 999 $ 69,521 $ 818 $ 69,107 $ 571
------------------------------------------------------------------------------------------------
Projected benefit obligation
(in excess of) less than
plan assets $(16,837) $ (9,744) $ 2,032 $ (6,961) $(11,252) $ (7,711)
Unrecognized net loss (gain) 14,811 2,194 (3,091) 836 14,590 69
Unrecognized prior
service cost 3,265 1,802 3,501 781 2,299 852
Unamortized net (asset)
obligation (635) 254 (705) 284 (1,356) 354
Adjustment required to
recognize minimum liability (2,732) (606) (995)
------------------------------------------------------------------------------------------------
Prepaid pension cost
(accrued pension liability) $ 604 $ (8,226) $ 1,737 $ (5,666) $ 4,281 $ (7,431)
================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Net periodic pension cost for 1995, 1994 and 1993 included the following
components:
<TABLE>
<CAPTION>
In thousands of dollars 1995 1994 1993
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 4,276 $ 5,806 $ 4,216
Interest cost 6,429 6,016 5,060
Actual return on assets (13,678) (152) (9,933)
Net amortization and deferral 7,725 (5,343) 4,509
-------------------------------------------
Net periodic pension cost $ 4,752 $ 6,327 $ 3,852
===========================================
- ---------------------------------------------------------------------------------
</TABLE>
Assumptions used in the accounting for pension cost in 1995, 1994, and 1993 for
domestic plans were:
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 8.5% 6.75% 7.5%
Average wage increase 6% 6% 6%
Expected long-term rate
of return on plan assets 9% 9% 9%
- ---------------------------------------------------------------------------------
</TABLE>
Assumptions used in the accounting for pension cost in 1995, 1994, and 1993 for
international plans were:
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 5.5 - 9.75% 5.5 - 9% 5.5 - 10.5%
Average wage increase 4.5 - 7% 4 - 7% 4 - 7%
Expected long-term rate
of return on plan assets 4 - 9% 4 - 9% 4 - 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 1995, 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 other countries.
38
<PAGE> 23
The average wage increase assumption will be reduced from the 6% used in 1995,
1994 and 1993 to 5% in 1996 for computing pension cost for domestic plans. Based
on the last several years and our current expectations, this rate is believed to
be the best estimate of future compensation increases. The average wage increase
to be used in the international plans ranges from 3% to 7% in 1996.
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 22%
in 1995, -0.5% in 1994, 15.4% in 1993 and averaged 12.8% over the past five-year
period. The 1995 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. Rates in other countries are based on expected long-term
rates of return attainable there.
The provisions of SFAS No. 87, Employers' Accounting for Pensions, require the
recognition of an additional minimum liability for each defined benefit plan for
which the accumulated benefit obligation exceeds plan assets. This amount has
been recorded as a long-term liability with an offsetting intangible asset.
Because the asset recognized may not exceed the amount of unrecognized prior
service cost and transition obligation on an individual plan basis, the balance,
net of tax benefits, is reported as a separate reduction of shareholders' equity
at December 31, 1995 for certain domestic nonqualified plans as follows:
<TABLE>
<CAPTION>
In thousands of dollars 1995
- --------------------------------------------------------------------------------
<S> <C>
Minimum liability adjustment $2,052
Intangible asset 1,318
------
734
Tax benefit 261
------
Pension liability adjustment to
shareholders' equity $ 473
======
- --------------------------------------------------------------------------------
</TABLE>
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 $6.6
million in 1995, $6.5 million in 1994 and $5.8 million in 1993.
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.
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 $29.1 million at
December 31, 1995, $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 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Indexed fund $12,031 $10,683 $10,483
Equity funds 10,492 5,496 2,558
Convertible preferred stocks 6,237 4,962 5,331
Preferred stock fund 1,814 5,056
Short-term liquid investment
funds 352 477 1,002
----------------------------
$29,112 $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, 1995, 1994 and 1993 are:
<TABLE>
<CAPTION>
In thousands of dollars 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 666 $ 878 $ 1,463
Interest cost 1,447 1,488 1,827
Actual return on assets (6,953) 566 (1,163)
Net amortization and deferral 4,005 (3,391) (615)
----------------------------
Net periodic postretirement
benefit (income) cost $ (835) $ (459) $ 1,512
============================
- --------------------------------------------------------------------------------
</TABLE>
The net periodic postretirement benefit income is expected to be $0.5 million in
1996.
The funded status of the plan at December 31, 1995, 1994 and 1993 is:
<TABLE>
<CAPTION>
In thousands of dollars 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Accumulated postretirement
benefit obligation
Retirees and dependents $ 8,103 $ 7,905 $ 5,909
Actives fully eligible 4,469 4,539 7,062
Actives not yet fully eligible 11,885 7,985 11,076
----------------------------------------
Total accumulated postretirement
benefit obligation 24,457 20,429 24,047
Plan assets at fair value 29,112 23,432 24,430
----------------------------------------
Accumulated postretirement
benefit obligation less than
plan assets 4,655 3,003 383
Unrecognized net (gain) loss (90) 1,111 3,688
Unrecognized prior service
effect from plan amendment (4,838) (5,375) (5,913)
----------------------------------------
Accrued postretirement benefit $ (273) $ (1,261) $ (1,842)
========================================
- --------------------------------------------------------------------------------
</TABLE>
The discount rates used in determining the accumulated postretirement benefit
obligation were 6.5% at December 31, 1995, 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 10.5% in 1995, declining
gradually to 5% in 2005 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, 1995 would be increased by $1 million,
while the aggregate of the service and interest cost components of the net
periodic postretirement benefit cost for 1995 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.
39
<PAGE> 24
LONG-TERM DEBT Long-term debt at December 31, 1995 consisted of
promissory notes, sinking fund debentures and industrial development bonds.
In 1995, LTI increased its ownership in its Japanese subsidiary to 51% and
therefore consolidated the subsidiary's financial statements, including its
long-term debt. LTI's long-term debt consists of two yen denominated promissory
notes totaling 250 million yen with interest rates ranging from 2.25% to 4.5%.
In 1996, 100 million yen is due, and 30 million yen per year is due from 1997
through 2001.
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 1996 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, 1995 there were no borrowings under the
revolving credit agreements.
Long-term debt represented 36.9% of total capital at December 31, 1995. The
weighted average interest rate of long-term debt outstanding at
December 31, 1995 was 8.45%.
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, 1995 was $370 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, 1995 there is approximately $169 million of
additional debt allowable under these terms.
Life Technologies, Inc. has guaranteed approximately $0.1 million of bank loans
to others.
At December 31, 1995 and 1994 the fair value of net long-term debt
was $231 million and $230 million, respectively, compared with the carrying
value of $216 million and $225 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 1995, the fair value of long-term debt exceeds the carrying value by $15
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 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Promissory notes $ 177,437 $ 176,773 $ 177,829
Sinking fund debentures 50,000 50,000 50,000
Industrial development bonds 2,050 2,700 3,300
---------------------------------------------
229,487 229,473 231,129
Less:
Payments due within one year (13,648) (4,071) (3,822)
---------------------------------------------
Net long-term debt $ 215,839 $ 225,402 $ 227,307
=============================================
</TABLE>
- --------------------------------------------------------------------------------
DEBT MATURITIES BY CURRENCY AND TYPE
Amounts in thousands
<TABLE>
<CAPTION>
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>
1996 $ 650 $ 6,756 SF 2,180 Y450,000 $ 12,998 $ 13,648 6.15%
1997 700 $ 2,500 6,753 2,180 30,000 8,933 12,133 8.03
1998 500 2,500 9,250 1,454 30,000 10,801 13,801 8.36
1999 200 2,500 9,250 1,454 30,000 10,801 13,501 8.42
2000 2,500 9,250 1,454 30,000 10,801 13,301 8.45
2001 2,500 10,250 1,454 30,000 11,801 14,301 8.49
2002 2,500 10,250 1,454 11,511 14,011 8.57
2003 2,500 10,250 1,454 11,511 14,011 8.57
2004 2,500 10,250 1,454 11,511 14,011 8.57
2005 2,500 10,250 727 10,880 13,380 8.75
2006-2016 27,500 64,000 2,181 65,889 93,389 8.76
---------------------------------------------------------------------------------------------
Total $2,050 $ 50,000 $ 156,509 SF 17,446 Y600,000 $ 177,437 $ 229,487 8.45%
===============================================================================================================
Rates of
Interest 5.70 - 6.50% 9.25% 6.21 - 9.72% 4.86% 2.25 - 4.50%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE> 25
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, 1995, with respect to 19 sites, were
$17.1 million, including current reserves of $1.4 million, which are expected to
be spent in 1996, and long-term reserves of $15.7 million. Such reserves, which
are not discounted, were decreased during 1995 by expenditures of $1.1 million.
Additionally, an estimated $2.7 million in 1995, $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 $2.7 million, $4.7 million, and $5.6 million were included as
assets of the company at year-end 1995, 1994, and 1993, respectively.
Environmental reserves at December 31, 1994 were $20.3 million and at year-end
1993 were $22.8 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. In
1995 this coverage period was expanded to extend through December 31, 1995.
MINORITY INTERESTS Minority interests increased by $13.9 million in 1995 to
$76.4 million. At year-end 1994, minority interests were $62.5 million, an
increase of $10.4 million from 1993. The increase in 1995 was due principally to
$10.2 million of net income attributable to the minority interest shareholders
of Life Technologies, Inc., Dexter's 54%-owned subsidiary, and a $2.7 million
increase due to the exercise of stock options at LTI. Minority interests
increased $1.9 million as a result of an additional investment in a Japanese
subsidiary made by LTI which increased their ownership by 1% to a 51%
controlling interest. Somewhat offsetting these increases were quarterly cash
dividends paid by LTI to minority interest shareholders of $1.4 million. The
increase in 1994 was principally due to $8.3 million of net income attributable
to the minority interest shareholders of LTI and currency translation effects of
$2.3 million. This increase in minority interests was somewhat offset by
quarterly cash dividends paid by LTI to minority interest shareholders of $1.4
million. Minority interest in LTI's equity represented $71.2 million and $59.2
million at December 31, 1995 and 1994, respectively.
SHAREHOLDERS' EQUITY Shareholders' equity increased by $26 million in 1995 to
$369.6 million representing a book value of $15.26 per share. Net income of
$40.6 million and a currency translation impact of $9 million resulting from the
weakening of the U.S. dollar increased shareholders' equity in 1995. The
exercise of stock options along with the impact of restricted stock awards added
$1.2 million to shareholders' equity in 1995. Shareholders' equity also
increased due to the reduction of $1.3 million in unrealized losses from the
company's available-for-sale securities during the period ended December 31,
1995. Offsetting these increases was a reduction due to dividends declared of
$21.4 million. Included in shareholders' equity at December 31, 1995 is a $0.5
million reduction related to recognition of prior service cost for certain of
the company's nonqualified plans.
In 1990, the Board of Directors authorized a repurchase of up to 1,000,000
shares of the company's outstanding common stock. In 1995, shareholders' equity
was reduced $4.2 million as the company purchased 170,900 shares of its
outstanding common stock at an average cost of $24.56 per share. There were no
purchases under the 1990 authorization during 1994 and 1993. At the end of 1995,
there were 763,782 shares held in treasury compared with 634,403 shares at the
end of 1994 and 643,578 shares at the end of 1993.
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 $9 million
including $9.3 million of translation effects less a $0.3 million related tax
effect. This net increase was the result of the U.S. dollar weakening against
currencies of countries in which the company operates. Currency translation
effects increased shareholders' equity by $14.8 million in 1994, of which $14.2
million was from translation effects and $0.6 million was from a related tax
effect. 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.
The company utilizes forward exchange contracts to hedge nonlocal currency
transactions and commitments. Gains and losses on forward exchange contracts
that hedge specific commitments are deferred and recognized in income in the
same period as the hedged transaction. Such deferred unrealized gains and losses
at December 31, 1995, 1994 and 1993 were not significant. Gains and losses on
forward contracts that do not hedge an identifiable commitment are included in
income as the gain or loss arises. Forward exchange contracts outstanding at
year-end 1995 were short-term in nature and related to nonlocal currency
transactions of the company's European and Asian operations. The market risk
associated with forward exchange contracts is caused
41
<PAGE> 26
by fluctuations in exchange rates subsequent to entering into the forward
exchange contracts. At December 31, 1995, 1994 and 1993, 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, Deutsche marks and Spanish peseta. The equivalent U.S. dollar
purchase amount was $0.1 million as of December 31, 1993. There were no purchase
amounts outstanding as of December 31, 1995 and 1994. The equivalent U.S. dollar
sale amounts were $7.4 million, $4.6 million and $2.2 million as of December 31,
1995, 1994 and 1993, respectively. 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, pound
sterling, Japanese yen and French francs. The equivalent U.S. dollar purchase
amounts were $10.3 million and $2.1 million as of December 31, 1995 and 1994.
There were no purchase amounts outstanding as of December 31, 1993. The
equivalent U.S. dollar sale amounts were $12.9 million and $2.1 million as of
December 31, 1995 and 1993, respectively. There were no sale amounts outstanding
as of December 31, 1994.
The company had short-term borrowings at December 31, 1995 in the amount of $4.8
million relating to nonlocal currency transaction exposure management. Currency
gains and losses realized on transactions were not significant in 1995, 1994 or
1993.
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, 1995, the company's net asset
positions exposed to currency fluctuations, as adjusted by long-term borrowings
and forward exchange contracts and expressed in local currencies and U.S. dollar
equivalents, are shown in the following table. At year-end 1995, the equivalent
of $196 million was exposed to currency fluctuations compared with $189 million
at the end of 1994.
<TABLE>
<CAPTION>
Net Asset Positions
----------------------------
Local U.S.
Amounts in thousands Currency Dollars
- ---------------------------------------------------------------
<S> <C> <C>
Pound sterling 39,220 $ 60,909
French franc 144,246 29,412
Swiss franc 31,601 27,398
Swedish krona 167,137 25,071
Deutsche mark 15,080 10,496
Japanese yen 849,796 8,217
Dutch guilder 12,802 7,963
Singapore dollar 10,809 7,653
New Zealand dollar 10,011 6,537
Hong Kong dollar 26,545 3,424
Belgian franc 63,349 2,154
Italian lira 3,013,701 1,899
Mexican peso 11,438 1,487
Canadian dollar 1,987 1,456
Danish krona 3,797 685
Taiwanese dollar 16,648 609
Venezuelan bolivar 103,548 311
Austrian schilling 375 37
--------
Total $195,718
========
- ---------------------------------------------------------------
</TABLE>
PREFERRED STOCK The company has the following classes of preferred stock,
without par value, as of December 31, 1995:
<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 20% 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. During 1995 and 1994 the company
awarded 76,500 shares and 64,250 shares of restricted stock, respectively.
During 1995, 1,863 awards were earned and distributed and 700 awards were
cancelled. At December 31, 1995, total restricted stock awards of 138,187 were
outstanding. Participants are 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 forfeiture provisions including the
lapse of time and achievement of certain performance targets and have
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 1995 and 1994.
SFAS No. 123, Accounting for Stock-Based Compensation, was issued in October
1995 and is effective for 1996. The company is currently evaluating the
provisions contained in SFAS No. 123 and will adopt the standard in 1996.
42
<PAGE> 27
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
-------------------------------------------------------
1995 1994 1993
-------------------------------------------------------
Number of Shares
-------------------------------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year 81,150 88,266 108,412
Exercised (20,975) (7,116) (20,146)
Expired or cancelled (600)
-------------------------------------------------------
Outstanding at end of year 59,575 81,150 88,266
Exercisable options 59,575 81,150 88,266
<CAPTION>
-------------------------------------------------------
Dollars per Share
-------------------------------------------------------
<S> <C> <C> <C>
Option price ranges:
Beginning of year $14.25 - $23.75 $14.25 - $23.75 $14.25 - $23.75
Exercised $14.25 - $23.75 $14.25 - $14.83 $14.83 - $20.83
Expired or cancelled $23.75
End of year $20.83 - $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
-------------------------------------------------------
1995 1994 1993
-------------------------------------------------------
Number of Shares
-------------------------------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year 16,000 16,000 17,010
Exercised (1,450) (280)
Expired or cancelled (1,200) (730)
-------------------------------------------------------
Outstanding at end of year 13,350 16,000 16,000
Exercisable options 13,350 16,000 16,000
- -------------------------------------------------------------------------------------------------
</TABLE>
1988 STOCK OPTION PLAN AND DATA The 1988 Stock Option Plan provides for
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
-------------------------------------------------------
1995 1994 1993
-------------------------------------------------------
Number of Shares
-------------------------------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year 738,500 630,144 514,846
Granted 31,500 157,095 146,500
Exercised (19,566) (1,718) (12,165)
Expired or cancelled (59,912) (47,021) (19,037)
-------------------------------------------------------
Outstanding at end of year 690,522 738,500 630,144
Exercisable options 535,584 466,820 359,932
Shares available for future grant 214,774 186,362 296,436
<CAPTION>
-------------------------------------------------------
Dollars per Share
-------------------------------------------------------
<S> <C> <C> <C>
Option price ranges:
Beginning of year $20.88 - $29.06 $20.88 - $29.06 $20.88 - $29.06
Granted $22.63 - $23.88 $24.13 - $25.50 $24.75
Exercised $20.88 - $25.94 $20.88 - $21.63 $20.88 - $21.63
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>
43
<PAGE> 28
DIVISION AND SUBSIDIARY HEADQUARTERS
DEXTER AEROSPACE MATERIALS
2850 Willow Pass Road
Pittsburg, CA 94565-3299
(510) 458-8000
Jeffrey W. McClelland
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
(860) 654-8300
R. Barry Gettins, Ph.D.
Senior Division President
DEXTER PACKAGING PRODUCTS
East Water Street
Waukegan, IL 60085-5652
(847) 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
SHAREHOLDER/INVESTOR INFORMATION
THE DEXTER CORPORATION
One Elm Street
Windsor Locks, CT 06096-2334
(860) 292-7675
(860) 292-7673 Facsimile
STOCK EXCHANGE
Listing: New York Stock Exchange
Stock Symbol: DEX
REGISTRAR
Chemical Mellon Shareholder
Services L.L.C.
Ridgefield Park, New Jersey
TRANSFER AGENT
Chemical Mellon Shareholder
Services L.L.C.
Ridgefield Park, New Jersey and
New York, New York
INVESTOR RELATIONS
Kathleen Burdett
Vice President and
Chief Financial Officer
(860) 292-7620
(860) 292-7669 Facsimile
John D. Thompson
Senior Vice President,
Strategic and
Business Development
(860) 292-7640
(860) 292-7669 Facsimile
CORPORATE COMMUNICATIONS/
MEDIA CONTACT
Ellen C. Miles
Corporate Communications Manager
(860) 292-7686
(860) 292-7627 Facsimile
NOTICE OF ANNUAL MEETING
You are cordially invited to attend the annual meeting of shareholders beginning
at 10:00 a.m., Thursday, April 25, 1996, at the Old State House, 800 Main
Street, Hartford, Connecticut.
NOTICE OF FORM 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., are available without charge after March 31 of each year to
shareholders and prospective investors. Please contact the Corporate
Communications Department in Windsor Locks, Connecticut at (860) 292-7615.
SHAREHOLDERS' STOCK SAVINGS PLAN/INQUIRIES
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.
Also, if you have any questions concerning your account as a shareholder, such
as name and address changes, inquiries regarding dividend checks, stock
certificates, or if you need tax information regarding your account, please
contact:
Chemical Mellon Shareholder Services L.L.C.
85 Challenger Road
Ridgefield Park, NJ 07660
(800) 288-9541
TDD SERVICE AVAILABLE
Dexter shareholders with hearing or speech disabilities can get information
about their accounts through TDD services offered by Chemical Mellon Shareholder
Services L.L.C. at (800) 231-5469.
The 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)(B) 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 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. ........................ 54% 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 54% 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%(B)(G) England
Biomed Benelux B.V.............................. 100%(E)(G) Netherlands
Canadian Life Technologies, Inc. ............... 100% Ontario
GIBCO/Bio-Cult Diagnostics, Ltd. ............... 100%(F)(G) Scotland
GIBCO Leasing Ltd. ............................. 100%(B)(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%(C) Switzerland
Life Technologies A.S. ......................... 100% Denmark
Life Technologies Asia Pacific, Inc. ........... 100% Delaware
Life Technologies B.V. ......................... 100%(C) Netherlands
Life Technologies (Europe) Ltd. ................ 100%(B)(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%(C) Germany
Life Technologies Holdings, Unlimited........... 100% Scotland
Life Technologies Investment Holdings, Inc. .... 100% Delaware
Life Technologies Italia S.r.l. ................ 100% Italy
Life Technologies Ltd. ......................... 100%(B) Scotland
Life Technologies Ltd. ......................... 100% New Zealand
Life Technologies Oriental K.K. ................ 51% Japan
Life Technologies Overseas Ltd. ................ 100%(B) Scotland
Life Technologies (Pacific) Ltd. ............... 100% Hong Kong
Life Technologies Pty. Ltd. .................... 100% Australia
Life Technologies S.A. ......................... 100% Spain
Life Technologies S.A.R.L. ..................... 100%(C) France
Life Technologies Sweden AB..................... 100% Sweden
N.V. Life Technologies S.A. .................... 100%(C) Belgium
Phoenix Chemicals Ltd. ......................... 100%(D)(G) New Zealand
Prespak Plastics (1988) Ltd. ................... 100%(A)(G) New Zealand
Serum Technologies Holdings, Inc. .............. 100% Delaware
</TABLE>
- ---------------
(A) owned by Laboratory Services Ltd.
(B) owned by Life Technologies Holdings, Unlimited
(C) owned by Life Technologies Overseas Ltd.
(D) owned by Life Technologies Ltd. (New Zealand)
(E) owned by Life Technologies B.V.
(F) owned by Life Technologies Ltd. (Scotland)
(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.l. .................................. 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 75.7% by Research Polymers International Corporation and 12.2% 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.
<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 1, 1996, on our audits of the
consolidated financial statements and financial statement schedule of The Dexter
Corporation as of December 31, 1995, 1994, and 1993, 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, 1995.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Springfield, Massachusetts
March 5, 1996
<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-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 65,542
<SECURITIES> 0
<RECEIVABLES> 183,076
<ALLOWANCES> 5,851
<INVENTORY> 157,034
<CURRENT-ASSETS> 456,721
<PP&E> 642,239
<DEPRECIATION> 317,036
<TOTAL-ASSETS> 934,161
<CURRENT-LIABILITIES> 208,098
<BONDS> 215,839
0
0
<COMMON> 24,984
<OTHER-SE> 344,631
<TOTAL-LIABILITY-AND-EQUITY> 934,161
<SALES> 1,088,905
<TOTAL-REVENUES> 1,099,044
<CGS> 742,206
<TOTAL-COSTS> 742,206
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,931
<INCOME-PRETAX> 79,824
<INCOME-TAX> 28,337
<INCOME-CONTINUING> 40,578
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,578
<EPS-PRIMARY> 1.67
<EPS-DILUTED> 0
</TABLE>
