<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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 No.)
ONE ELM STREET, WINDSOR LOCKS, CONNECTICUT 06096
(Address of principal executive offices) (Zip Code)
</TABLE>
(860) 292-7675
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS Outstanding at April 30, 1997
- -------------------------- -----------------------------
<S> <C>
COMMON STOCK, PAR VALUE $1 23,032,526 SHARES
</TABLE>
<PAGE> 2
PART I
FINANCIAL INFORMATION
Item 1 - Financial Statements
Reference is made to the following consolidated financial
statements which are incorporated herein by reference:
(a) Exhibit 99a - Condensed Statement of Income for the three
months ended March 31, 1997 and 1996.
(b) Exhibit 99b - Condensed Statement of Financial Position as of
March 31, 1997, December 31, 1996, and March 31, 1996.
(c) Exhibit 99c - Condensed Statement of Cash Flows for the three
months ended March 31, 1997 and 1996.
(d) Exhibit 99d - Net Sales by Market for the three months ended
March 31, 1997 and 1996.
(e) Exhibit 99e - Notes to Consolidated Financial Statements.
The unaudited financial data included herein as of March 31, 1997
and 1996, and for the three-month periods then ended, have been
reviewed by the registrant's independent public accountants,
Coopers & Lybrand L.L.P., and their report is attached.
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
The Company reported record first quarter earnings of $12.9
million, or $.55 per share, compared with $11.1 million, or $.46
per share, for the first quarter of 1996. Net income increased 15%
while earnings per share improved 20% in the first quarter.
Sales for the first quarter of 1997 were $272.3 million, a 2%
decrease compared with sales of $277.2 million, in the first
quarter of 1996. A 3% gain in unit volume was more than offset by a
2% decrease due to net effect of acquisitions and divestitures, a
2% unfavorable effect of currency exchange rates, and price
decreases averaging 1%.
Products with strong performance in the first quarter include
aerospace adhesive materials, liquid encapsulant materials serving
the electronics market, medical nonwoven material, and sales of
products at Life Technologies, Inc. other than fetal bovine serum.
Products with weaker performance include magnetic materials,
beverage can coatings serving the international markets, and fetal
bovine serum.
Other income was $4.2 million for the first quarter of 1997, an
increase of $2.0 million over the first quarter of 1996. This
increase is primarily due to higher equity income from companies
owned 50% or less, principally D & S Plastics International in
addition to higher royalty income at Life Technologies, Inc.
<PAGE> 3
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations, continued
Consolidated gross margin of 35.6% of net sales in the first
quarter of 1997 improved by 1.4 percentage points from 34.2% in the
first quarter of 1996. This increase is primarily attributable to
higher gross margins at Life Technologies, Inc., and the net
favorable effect of lower raw material costs offset by lower
selling prices at wholly owned Dexter businesses.
Marketing and administrative costs and R&D expense increased in the
first quarter of 1997 due to increased cost at Life Technologies,
Inc.
Effective April 1, 1997, the Company completed the divestiture of
its 50% interest of D & S Plastics International, an equally owned
joint venture between The Dexter Corporation and the Solvay Group
to Solvay America, Inc. of Houston, Texas. D & S Plastics is the
largest North American supplier of elastomer modified thermoplastic
olefins (TPO) to the automotive industry and a recognized leader in
TPO applications engineering.
<PAGE> 4
PART II
OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
The annual meeting of the shareholders of the Company was held on
April 24, 1997, where the following actions were taken:
(a) The re-election to the Board of Directors of Mr. Charles H. Curl,
president of Curl & Associates; Peter G. Kelly, Esq., chairman of
Updike, Kelly & Spellacy, P.C.; and Mr. Jean-Francois Saglio,
president of the French National Institute for the Environment and
president of ERSO.
The votes for each director were as follows:
<TABLE>
<CAPTION>
Director For Withheld
-------- --- --------
<S> <C> <C>
Charles H. Curl 18,859,072 2,705,870
Peter G. Kelly 18,762,561 2,802,381
Jean-Francois Saglio 19,184,828 2,380,114
</TABLE>
In addition, the following directors continue in office for the
terms expiring as indicated: Mr. Robert M. Furek (1998), Mrs. Martha
Clark Goss (1998), Mr. Edgar G. Hotard (1998), Glen L. Urban, Ph.D.
(1998), Ms. Henrietta Holsman Fore (1999), Mr. Bernard M. Fox
(1999), Mr. K. Grahame Walker (1999), and George M. Whitesides,
Ph.D. (1999).
(b) The selection of Coopers & Lybrand L.L.P. as auditors of the Company
for the year 1997 was ratified.
The votes for selection of Coopers & Lybrand L.L.P. were as follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
21,502,368 22,429 40,145
</TABLE>
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit 15 of Part 1 - Letter to Securities and Exchange Commission
re: Incorporation of Accountants' Report
Exhibit 27 of Part 1 - Financial Data Schedule
Exhibit 99 of Part 1 - First Quarter 1997 Financial Statements and
Notes
(b) No reports on Form 8-K were filed during the quarter for which this
report was filed.
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE DEXTER CORPORATION
Date May 9, 1997 /s/ Kathleen Burdett
----------------------------- --------------------------------
Kathleen Burdett
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date May 9, 1997 /s/ George Collin
----------------------------- --------------------------------
George Collin
Controller
(Principal Accounting Officer)
<PAGE> 6
INDEX TO EXHIBITS
Exhibit No.
15 Letter to Securities and Exchange Commission re: Incorporation of
Accountants' Report
27 Financial Data Schedule
99 First Quarter 1997 Financial Statements and Notes
<PAGE> 1
Exhibit 15
Securities and Exchange Commission
450 5th Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
We are aware that our report dated April 10, 1997, on our review of the interim
financial information of The Dexter Corporation as of March 31, 1997 and 1996,
and for the three month periods then ended, and included in this Form 10-Q is
incorporated by reference in the company's registration statements on Form S-8,
Registration Nos. 2-63959, 33-27597, 33-53307, 33-53309, 333-02985, and
333-04081. Pursuant to Rule 436(c) under the Securities Act of 1933, this report
should not be considered a part of the registration statements prepared or
certified by us within the meaning of Sections 7 and 11 of that Act.
/s/ Coopers & Lybrand L.L.P.
- ----------------------------
COOPERS & LYBRAND L.L.P.
Springfield, Massachusetts
May 9, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED STATEMENT OF FINANCIAL POSITION AND CONDENSED STATEMENT OF INCOME AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 62,120
<SECURITIES> 0
<RECEIVABLES> 187,389
<ALLOWANCES> 5,652
<INVENTORY> 155,980
<CURRENT-ASSETS> 444,594
<PP&E> 675,255
<DEPRECIATION> 342,935
<TOTAL-ASSETS> 946,752
<CURRENT-LIABILITIES> 226,410
<BONDS> 208,339
0
0
<COMMON> 24,984
<OTHER-SE> 331,225
<TOTAL-LIABILITY-AND-EQUITY> 946,752
<SALES> 272,260
<TOTAL-REVENUES> 276,484
<CGS> 175,302
<TOTAL-COSTS> 175,302
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,809
<INCOME-PRETAX> 25,982
<INCOME-TAX> 9,353
<INCOME-CONTINUING> 12,872
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,872
<EPS-PRIMARY> .55
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99a
THE DEXTER CORPORATION
CONDENSED STATEMENT OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION> Three Months Ended March 31
In thousands of dollars --------------------------------------
(except per share amounts) 1997 1996 Change
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Net sales $272,260 $277,227 - 2%
Other income 4,224 2,175 +94%
-------- --------
276,484 279,402 - 1%
EXPENSES
Cost of sales 175,302 182,525 - 4%
Marketing and administrative 57,050 56,237 + 1%
Research and development 13,341 12,843 + 4%
Interest 4,809 5,366 -10%
-------- --------
INCOME BEFORE TAXES 25,982 22,431 +16%
Income taxes 9,353 7,963 +17%
-------- --------
INCOME BEFORE MINORITY INTERESTS 16,629 14,468 +15%
Minority interests 3,757 3,320 +13%
-------- --------
NET INCOME $ 12,872 $ 11,148 +15%
======== ========
NET INCOME PER SHARE $ 0.55 $ 0.46 +20%
DIVIDENDS DECLARED PER SHARE $ 0.24 $ 0.22 + 9%
AVERAGE SHARES OUTSTANDING (000) 23,275 23,999 - 3%
</TABLE>
- -------------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.
<PAGE> 2
EXHIBIT 99b
THE DEXTER CORPORATION
CONDENSED STATEMENT OF FINANCIAL POSITION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
In thousands of dollars MARCH 31 December 31 March 31
(except per share amounts) 1997 1996 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and short-term securities $ 62,120 $ 103,420 $ 57,222
Accounts receivable, net 192,099 178,093 209,415
Inventories
Materials and supplies 58,662 58,290 58,057
In process and finished 116,721 110,457 128,152
LIFO reserve (19,403) (19,836) (23,886)
--------- --------- --------
155,980 148,911 162,323
Prepaid and deferred expenses 34,395 29,987 35,045
--------- --------- --------
Total current assets 444,594 460,411 464,005
Property, plant and equipment, at cost, net 332,320 334,266 324,478
Excess of cost over net assets of
businesses acquired 80,366 71,906 79,744
Other assets 89,472 87,221 76,753
--------- --------- --------
$ 946,752 $ 953,804 $944,980
========= ========= ========
LIABILITIES & SHAREHOLDERS' EQUITY
Short-term debt $ 5,500 $ 5,111 $ 25,119
Current installments of long-term debt 11,914 12,297 13,053
Accounts payable 97,904 91,855 90,792
Accrued liabilities and taxes 103,416 101,691 89,850
Current environmental reserves 2,117 1,358 1,364
Dividends payable 5,559 5,170 5,256
--------- --------- --------
Total current liabilities 226,410 217,482 225,434
Long-term debt 208,339 209,952 214,874
Deferred items 49,900 46,874 48,184
Long-term environmental reserves 14,278 14,978 15,480
Minority interests 91,616 90,403 79,204
Shareholders' equity
Common stock and paid-in capital 36,925 36,495 35,172
Retained earnings 382,788 375,480 353,436
Currency translation effects (16,791) (2,187) (2,222)
Treasury stock (46,713) (35,673) (24,582)
--------- --------- --------
Total shareholders' equity 356,209 374,115 361,804
--------- --------- --------
$ 946,752 $ 953,804 $944,980
========= ========= ========
EQUITY PER SHARE $ 15.41 $ 15.94 $ 15.19
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.
<PAGE> 3
EXHIBIT 99c
THE DEXTER CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31
----------------------------
In thousands of dollars 1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net income $ 12,872 $ 11,148
Noncash items
Depreciation and amortization 10,993 11,438
Income taxes not due 5,379 7,620
Minority interests 3,757 3,320
LIFO inventory credit (433) (823)
Equity in net income of affiliates (2,351) (638)
Other 402 1,344
Operating working capital increase (26,756) (18,849)
--------- --------
3,863 14,560
--------- --------
INVESTMENTS
Property, plant and equipment (11,629) (10,116)
Acquisitions (17,002) (7,203)
Joint ventures (449) 227
Proceeds from exercise of LTI stock options 615 679
Other 2,066 (503)
--------- --------
(26,399) (16,916)
--------- --------
FINANCING
Long-term debt (705) (914)
Short-term debt, net 605 11,546
Dividends paid (5,175) (5,351)
LTI dividends paid to minority interest shareholders (428) (351)
Purchase of treasury stock (11,317) (10,279)
Other 13 (256)
--------- --------
(17,007) (5,605)
--------- --------
DECREASE IN CASH AND SHORT-TERM SECURITIES $ (39,543) $ (7,961)
========= ========
RECONCILIATION OF DECREASE IN
CASH AND SHORT-TERM SECURITIES
Cash and short-term securities at beginning of period $ 103,420 $ 65,542
Cash and short-term securities at end of period 62,120 57,222
--------- --------
Decrease in cash and short-term securities
per Statement of Financial Position (41,300) (8,320)
Currency translation effects 1,757 359
--------- --------
$ (39,543) $ (7,961)
========= ========
INTEREST PAID $ 3,715 $ 4,216
TAXES PAID $ 3,974 $ 343
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.
<PAGE> 4
EXHIBIT 99d
THE DEXTER CORPORATION
NET SALES BY MARKET
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Three Months Ended March 31
-----------------------------------------
In thousands of dollars 1997 1996 Change
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
AEROSPACE $ 13,471 $ 12,027 +12%
ELECTRONICS 49,831 49,456 + 1%
FOOD PACKAGING (1) 64,824 67,381 - 4%
MEDICAL 105,403 98,750 + 7%
OTHER (2) 38,731 49,613 -22%
-------- --------
CONSOLIDATED $272,260 $277,227 - 2%
======== ========
</TABLE>
- --------------------------------------------------------------------------------
(1) The effect of businesses acquired increased net sales to the Food
Packaging market by $2.6 million, or 4%.
(2) The effect of businesses divested decreased net sales in the "Other"
category by $9.1 million, or 18%.
<PAGE> 5
Exhibit 99e
The Dexter Corporation
Notes to Consolidated Financial Statements
Note 1 - In the opinion of company's management, the unaudited financial
statements reflect adjustments of a normal recurring nature which
are necessary to present a fair statement of the results for the
interim periods. The notes to the consolidated financial
statements including management's discussion in Part 1, Item 2 of
this Form 10-Q are incorporated as part of these consolidated
financial statements. The year-end condensed balance sheet data
was derived from audited financial statements.
Note 2 - Net income per share figures in the consolidated Condensed
Statement of Income are based on the weighted average number of
shares outstanding as indicated for each period. No effect has
been given to stock options or restricted stock awards
outstanding as no material dilutive effect would result from the
inclusion of these items.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings per
Share (the "Statement"), which is required to be adopted on
December 31, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share
and to restate all prior periods. The impact is not expected to
change the earnings per share for the first quarter ended March
31, 1997 and March 31, 1996. The impact of the Statement on the
calculation of diluted earnings per share for these quarters is
not expected to be material.
Note 3 - The following are included as components of Common Stock and
Paid-in Capital.
<TABLE>
<CAPTION>
COMMON STOCK & PAID-IN CAPITAL MARCH 31, DECEMBER 31, MARCH 31,
(IN THOUSANDS OF DOLLARS) 1997 1996 1996
- ------------------------------ --------- ------------ ---------
<S> <C> <C> <C>
Common stock $24,984 $24,984 $24,984
Paid-in capital 14,714 14,669 12,510
Unrealized losses on
investments (174) (174) (300)
Unearned compensation on
restricted stock (2,395) (2,780) (1,549)
Pension liability adjustment (204) (204) (473)
------- ------- -------
$36,925 $36,495 $35,172
======= ======= =======
</TABLE>
<PAGE> 6
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
The Dexter Corporation
We have reviewed the accompanying condensed statement of financial position of
The Dexter Corporation as of March 31, 1997 and 1996, and the related condensed
statements of income and cash flows for the three month periods then ended.
These financial statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of financial position of The Dexter
Corporation as of December 31, 1996, and the related consolidated statements of
income, cash flows, and changes in shareholders' equity for the year then ended
(not presented herein); and in our report dated February 4, 1997, we expressed
an opinion which included an explanatory paragraph regarding the adoption of
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" and SFAS No. 123, "Accounting for
Stock-Based Compensation" on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed statement of
financial position as of December 31, 1996, is fairly stated, in all material
respects, in relation to the consolidated statement of financial position from
which it has been derived.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Springfield, Massachusetts
April 10, 1997
