<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 September 30, 1998
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
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>
<S> <C>
CLASS Outstanding at October 31, 1998
COMMON STOCK, PAR VALUE $1 23,279,353 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 and
nine-month periods ended September 30, 1998 and 1997.
(b) Exhibit 99b - Condensed Statement of Financial Position as of
September 30, 1998, December 31, 1997, and September 30, 1997.
(c) Exhibit 99c - Condensed Statement of Cash Flows for the
nine-month periods ended September 30, 1998 and 1997.
(d) Exhibit 99d - Statement of Comprehensive Income for the three
and nine-month periods ended September 30, 1998 and 1997.
(e) Exhibit 99e - Net Sales by Market for the three and nine-month
periods ended September 30, 1998 and 1997.
(f) Exhibit 99f - Notes to Condensed Consolidated Financial
Statements.
The unaudited financial data included herein as of September 30, 1998
and 1997, and for the three and nine-month periods then ended, have
been reviewed by the registrant's independent public accountants,
PricewaterhouseCoopers LLP, and their report is attached.
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
ANALYSIS OF OPERATIONS
The Company reported third quarter 1998 net income of $14.2 million, or $.61 per
share on a diluted basis, which maintained the record level for third quarter
earnings set in 1997. An improvement in gross margin together with expense
controls supported this result.
Sales in the third quarter of 1998 were $283.4 million, a 1% decrease compared
with sales of $286.9 million in the third quarter last year. A 2% increase due
to acquisitions was offset by 1% decreases in unit volume, currency translation
effects, and average prices.
<PAGE> 3
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations, continued
ANALYSIS OF OPERATIONS, CONTINUED
Sales for the first nine months of 1998 were $875.9 million, a 3% increase
compared with sales of $852.4 million for the same period last year. A 3%
increase in unit volume and a 2% increase due to acquisitions were partially
offset by a 1% unfavorable effect of currency translation rates and price
decreases averaging 1%.
Earnings for the first nine months of 1998 were a record $44.8 million, or $1.92
per share on a diluted basis, a 4% increase compared with $43.1 million, or
$1.84 per share diluted, for the same period last year.
Products with stronger performance in the third quarter and first nine months of
1998 compared with the same periods last year include aerospace adhesives and
coatings, food and specialty can coatings serving international markets,
nonwoven wet wipes in the medical market, and products at Life Technologies,
Inc.
Sales of electronic encapsulation materials and printed wiring board products
serving the electronics market, and beer and beverage can coatings serving
international markets had weaker performance in both the third quarter and first
nine months of 1998 compared with the same periods last year. Sales were weaker
in the third quarter 1998 compared with the third quarter of 1997 for magnetic
materials, nonwoven materials serving the international food packaging market
and the "other" segment.
Consolidated gross margin of 36.8% in the third quarter of 1998, stated as a
percentage of sales, increased .5 percentage points compared with 36.3% in the
third quarter of 1997. Gross margin of 36.6% for the first nine months of 1998
increased .6 percentage points compared with 36% for the same period last year.
These improvements came from increased volume at Life Technologies, Inc. as well
as productivity and cost containment activities.
Marketing and administrative costs increased $8.2 million, or 5%, for the first
nine months of 1998 compared with the same period in 1997, principally due to
increased costs at Life Technologies, Inc. and marketing and administrative
costs associated with businesses acquired in the fourth quarter of 1997.
Other income of $7.2 million for the first nine months of 1998 decreased $2.1
million, or 22%, compared with $9.3 million for the first nine months of 1997
primarily due to lower equity income resulting from the divestiture of D & S
Plastics International, which was effective April 1, 1997. The negative impact
of the lower other income for the first nine months of 1998 was more than offset
by a decrease in interest expense of $2.4 million due to lower average long-term
borrowings in 1998. The effective tax rate was 35% in 1998 compared with 36% in
1997.
Minority interest expense increased $.5 million, or 13%, in the third quarter of
1998 and $1.4 million, or 13%, for the first nine months of 1998 compared with
the same periods last year, due to increased profits at Life Technologies, Inc.
<PAGE> 4
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations, continued
ANALYSIS OF FINANCIAL CONDITION
Excess acquisition cost as of September 30, 1998 was $94.8 million, an increase
of $18.4 million, compared with $76.4 million as of September 30, 1997. This
increase was due to an increase of $25.8 million primarily related to the impact
of businesses acquired in the fourth quarter of 1997, which was partially offset
by $7.1 million of amortized costs.
Other assets as of September 30, 1998 were $74.5 million, an increase of $25.4
million, compared with $49.1 million as of September 30, 1997. This increase was
primarily due to an increase of $23.1 million for patents, technology, formulas,
and covenants related to businesses acquired in the fourth quarter of 1997.
Accrued liabilities and taxes as of September 30, 1998 were $95.7 million, a
decrease of $12.7 million, compared with $108.4 million as of September 30,
1997. This decrease was primarily due to a decrease in accrued taxes of $9.2
million.
IMPACT OF THE YEAR 2000
General
The year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. Any of the
Company's systems, equipment, or hardware that have date-sensitive software or
embedded chips may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
disruption of operations, including, among other things, a temporary inability
to manufacture products, to process transactions, send invoices, or engage in
similar normal business activities.
Based on its initial assessments, the Company determined that it would be
required to modify or replace portions of its equipment, hardware, and software
so that those systems will properly utilize dates beyond December 31, 1999. The
Company presently believes that, with modifications and replacement of existing
equipment, hardware and software, the year 2000 issue can be mitigated.
Project Plan
The Company's plan to resolve the year 2000 issue will be implemented by each of
the Company's businesses and involves five phases: inventory; risk assessment,
prioritization, and ownership assignment; compliance research; remediation; and
testing. The inventory, risk assessment, prioritization, ownership assignment,
and compliance research phases, which are being performed concurrently, are
expected to be substantially completed by the end of 1998. The remediation and
testing phases are expected to be substantially completed by June 30, 1999 and
September 30, 1999, respectively. Although the Company's year 2000 plan is being
completed on a business by business basis, it is estimated that, overall, the
inventory and risk assessment phases are currently substantially complete, the
compliance research phase is approximately 50% to 60% complete, the remediation
phase is approximately 30% to 40% complete, and the testing phase is
approximately 20% to 30% complete.
<PAGE> 5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations, continued
IMPACT OF THE YEAR 2000, CONTINUED
The Company's year 2000 inventory is segregated into four categories: business
applications (mainframe/LAN software and desktop hardware/software), tools and
platforms (mainframe/LAN hardware), intelligent devices (manufacturing,
laboratory, office, and facilities equipment), and external business partners
(suppliers, customers, and other service providers). Business applications and
tools and platforms are considered information technology ("IT") systems while
intelligent devices and external business partners are considered non-IT
systems.
Concerning IT systems, two of the Company's businesses will replace most of
their existing applications with a year 2000 compliant version of new enterprise
resource planning ("ERP") software. Legacy systems for these businesses that
will not be replaced by the ERP system will either be made year 2000 compliant
or replaced. One business is in the process of "repairing" (i.e., making it year
2000 compliant) its existing core business system and will replace some portions
of its software with year 2000 compliant software. The remaining businesses have
upgraded their core business applications to a year 2000 compliant software
version and are in the process of testing these applications for year 2000
compliancy.
Non-IT systems are significantly more difficult to address than IT systems. The
Company has dedicated resources to assisting our businesses with identifying
potentially affected intelligent devices and has contracted with an outside firm
that has a proprietary year 2000 compliance status database that will assist in
the compliance research for these devices. Determination of compliance status,
remediation, and testing of these devices will also be more difficult than IT
systems, as some of the manufacturers of potentially affected equipment may no
longer be in business.
The external business partners category primarily includes the process
of identifying and prioritizing critical suppliers and customers and
communicating with them about their plans and progress in addressing the year
2000 problem. The Company has established a questionnaire to be used by the
businesses for obtaining this information from key business partners. To date,
the Company is not aware of any problems that would materially impact results of
operations, liquidity, or capital resources. However, the Company has no means
of insuring that these parties will be year 2000 ready and the inability of
these parties to successfully complete their year 2000 compliance program could
impact the Company. For key business partners, the initial assessments will be
evaluated and, as deemed necessary, follow-up assessments will be made. We
expect this process to be ongoing throughout the remainder of 1998 and 1999.
Over the next several months, the Company will be developing detailed
contingency and business continuation plans for each business to address
potential year 2000 exposures.
<PAGE> 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations, continued
IMPACT OF THE YEAR 2000, CONTINUED
Costs
The Company utilizes both internal and external resources to repair or replace,
test, and implement the software and operating equipment for year 2000
modifications. The total cost of the year 2000 project is estimated at between
$6.5 and $7.5 million and is being funded through operating cash flows. To date,
the Company has incurred approximately $2.1 million (approximately 50% expensed
and 50% capitalized) related to all phases of the year 2000 project. The
remaining project costs are attributable to either repair or replacement of
equipment, hardware, and software and will be expensed as incurred or
capitalized, as appropriate.
Risks
The failure to remediate a material year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially or adversely affect the Company's
results of operations, liquidity, and financial condition. Due to the general
uncertainty inherent in the year 2000 problem, the Company is unable to
determine with certainty at this time whether the consequences of year 2000
failures will have a material impact on the Company. The Company's year 2000
plan is expected to significantly reduce the Company's level of uncertainty
about the year 2000 problem. The Company believes that, with the execution of
its year 2000 plan in a timely manner, the possibility of significant
interruptions of normal operations should be reduced.
The Company plans to complete the year 2000 project are based on management's
best estimates, which were derived utilizing numerous assumptions of future
events including, but not limited to, the continued availability of certain
resources and other factors. Estimates on the status of completion and the
expected completion dates are based on tasks completed to date compared to all
required tasks. However, there can be no guarantee that expected completion
dates will be met, and actual results could differ materially from those
forecasted. Specific factors that might cause such material differences include,
but are not limited to, the availability and cost of personnel trained in
certain areas, the ability to locate and correct all relevant equipment, devices
and computer codes, and similar uncertainties.
IMPACT OF THE EURO CONVERSION
Within Europe, the European Economic and Monetary Union (the "EMU") will
introduce a new currency, the Euro, on January 1, 1999. The new currency is in
response to the EMU's policy of economic convergence to harmonize trade policy,
eliminate business costs associated with currency exchange, and to promote the
free flow of capital, goods, and services.
On January 1, 1999, the participating countries are scheduled to adopt the Euro
as their local currency, initially available for currency trading on currency
exchanges and non cash (banking) transactions. The existing local currencies, or
legacy currencies, will remain legal tender through January 1, 2002. Beginning
on January 1, 2002, Euro-denominated bills and coins will
<PAGE> 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations, continued
IMPACT OF THE EURO CONVERSION, CONTINUED
be issued for cash transactions. For a period of six months thereafter, both
legacy currencies and the Euro will be legal tender. On or before July 1, 2002,
the participating countries will withdraw all legacy currency and use the Euro
exclusively.
The Company has considered the effects of the Euro conversion on each of its
businesses and their systems and has determined that each business will be
capable of processing the necessary transactions in both Euro and legacy
currencies during this transition period. The Company has further determined
that its primary businesses operate in countries which are not deemed to be
"participating countries" at January 1, 1999, and therefore operations are not
expected to be materially affected by this conversion. The overall costs
associated with implementation of this conversion are not expected to be
material to the financial position, results of operations, and cash flows of the
Company as a whole.
FORWARD LOOKING STATEMENTS
Statements made in this report which are not historical are forward-looking
statements, and as such, are subject to a number of risks. These risks,
including those pertaining to the year 2000 issue, and other risks and
uncertainties, are detailed in Dexter's Form 10-K, for the year ended December
31, 1997.
<PAGE> 8
PART II
OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit 15 of Part 1 - Letter to Securities and Exchange Commission
re: Incorporation of Accountants' Report
Exhibit 27 of Part 1 - Financial Data Schedule
Exhibit 99 of Part 1 - Third Quarter 1998 Financial Statements and
Notes
(b) No reports on Form 8-K were filed during the quarter for which this
report was filed.
<PAGE> 9
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.
DEXTER CORPORATION
(Registrant)
November 13, 1998 /s/ Kathleen Burdett
Date........................... ...................................
Kathleen Burdett
Vice President and
Chief Financial Officer
(Principal Financial Officer)
November 13, 1998 /s/ Glenn E. Tynan
Date........................... ...................................
Glenn E. Tynan
Controller
(Principal Accounting Officer)
<PAGE> 10
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C>
15 Letter to Securities and Exchange Commission re: Incorporation
of Accountants' Report
27 Financial Data Schedule
99 Third Quarter 1998 Financial Statements and Notes
</TABLE>
<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 October 13, 1998 on our review of the interim
financial information of Dexter Corporation as of September 30, 1998 and 1997
and for the three and nine-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,
333-04081, and 333-42663. 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/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Springfield, Massachusetts
November 13, 1998
<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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 89,066
<SECURITIES> 0
<RECEIVABLES> 200,308
<ALLOWANCES> 6,988
<INVENTORY> 176,659
<CURRENT-ASSETS> 500,668
<PP&E> 755,743
<DEPRECIATION> 395,207
<TOTAL-ASSETS> 1,030,436
<CURRENT-LIABILITIES> 248,409
<BONDS> 182,519
0
0
<COMMON> 24,984
<OTHER-SE> 382,926
<TOTAL-LIABILITY-AND-EQUITY> 1,030,436
<SALES> 875,885
<TOTAL-REVENUES> 883,083
<CGS> 555,597
<TOTAL-COSTS> 555,597
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,213
<INCOME-PRETAX> 88,051
<INCOME-TAX> 30,818
<INCOME-CONTINUING> 44,825
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,825
<EPS-PRIMARY> 1.95
<EPS-DILUTED> 1.92
</TABLE>
<PAGE> 1
<TABLE>
<CAPTION>
Exhibit 99a
Dexter Corporation
Condensed Statement of Income
- -----------------------------------------------------------------------------------------------------------------------------------
In thousands of dollars Three Months Ended September 30 Nine Months Ended September 30
(except per share amounts) ----------------------------------------- -----------------------------------------
1998 1997 Change 1998 1997 Change
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Net sales $ 283,357 $ 286,928 - 1% $ 875,885 $ 852,413 + 3%
Other income 2,528 2,349 + 8% 7,198 9,275 - 22%
------------ ------------ ------------ -----------
285,885 289,277 - 1% 883,083 861,688 + 2%
Expenses
Cost of sales 179,220 182,758 - 2% 555,597 545,300 + 2%
Marketing and administrative 60,015 59,698 + 1% 183,948 175,747 + 5%
Research and development 13,808 13,442 + 3% 42,274 40,499 + 4%
Interest 4,534 5,287 - 14% 13,213 15,585 - 15%
------------ ------------ ------------ -----------
Income before Taxes 28,308 28,092 + 1% 88,051 84,557 + 4%
Income taxes 9,908 10,113 - 2% 30,818 30,441 + 1%
------------ ------------ ------------ -----------
Income before Minority Interests 18,400 17,979 + 2% 57,233 54,116 + 6%
Minority interests 4,222 3,736 + 13% 12,408 11,004 + 13%
------------ ------------ ------------ -----------
Net Income $ 14,178 $ 14,243 $ 44,825 $ 43,112 + 4%
============ ============ ============ ===========
Net Income per Share - basic $0.62 $0.62 $1.95 $1.87 + 4%
Net Income per Share - diluted $0.61 $0.61 $1.92 $1.84 + 4%
Dividends Declared per Share $0.26 $0.24 + 8% $0.76 $0.72 + 6%
Average Shares Outstanding (000) - basic 23,034 22,914 + 1% 22,998 23,037
Average Shares Outstanding (000) - diluted 23,130 23,184 23,204 23,228
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
Amounts are unaudited.
<PAGE> 2
Exhibit 99b
Dexter Corporation
Condensed Statement of Financial Position
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
In thousands of dollars September 30 December 31 September 30
(except per share amounts) ---------------------------------------------
1998 1997 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Cash and short-term securities $ 89,066 $ 68,306 $ 86,501
Accounts receivable, net 205,515 185,257 203,265
Inventories:
Materials and supplies 66,367 61,233 59,860
In process and finished 127,917 117,467 119,622
LIFO reserve (17,625) (18,799) (18,631)
------------ ------------ ----------
176,659 159,901 160,851
Prepaid and deferred expenses 29,428 26,988 32,628
------------ ------------ ----------
Total current assets 500,668 440,452 483,245
Property, plant and equipment, at cost, net 360,536 348,172 343,301
Excess of cost over net assets of
businesses acquired 94,766 97,507 76,373
Other assets 74,466 75,645 49,118
------------ ------------ ----------
$ 1,030,436 $ 961,776 $ 952,037
============ ============ ==========
Liabilities & Shareholders' Equity
Short-term debt $ 37,804 $ 35,361 $ 3,705
Current installments of long-term debt 12,805 13,340 31,553
Accounts payable 94,385 91,155 98,045
Accrued liabilities and taxes 95,680 89,076 108,381
Current environmental reserves 1,746 2,099 2,223
Dividends payable 5,989 5,505 5,502
------------ ------------ ----------
Total current liabilities 248,409 236,536 249,409
Long-term debt 182,519 180,030 168,459
Deferred items 56,592 54,197 51,394
Long-term environmental reserves 13,649 13,726 14,154
Minority interests 121,357 104,426 100,985
Shareholders' equity:
Common stock and paid-in capital 37,686 38,158 37,524
Retained earnings 437,183 409,844 402,034
Treasury stock (49,749) (52,216) (52,524)
Accumulated other comprehensive
income (17,210) (22,925) (19,398)
------------ ------------ ----------
Total shareholders' equity 407,910 372,861 367,636
------------ ------------ ----------
$ 1,030,436 $ 961,776 $ 952,037
============ ============ ==========
Equity per Share $ 17.71 $ 16.26 $ 16.04
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
Amounts as of September 30, 1998 and September 30, 1997 are unaudited.
<PAGE> 3
<TABLE>
<CAPTION>
EXHIBIT 99c
DEXTER CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
- ---------------------------------------------------------------------------------------------------------------------
Nine Months Ended September 30
----------------------------------------------------
In thousands of dollars 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net income $ 44,825 $ 43,112
Noncash items:
Depreciation and amortization 38,631 33,955
Income taxes not due 7,480 1,453
Minority interests 12,408 11,004
LIFO inventory credit (1,174) (1,205)
Equity in net income of affiliates (2,156) (3,520)
Other 1,423 674
Operating working capital increase (32,885) (27,508)
-------------- ----------------------
68,552 57,965
-------------- ----------------------
INVESTMENTS
Property, plant and equipment (44,056) (45,092)
Acquisitions (1,781) (20,661)
Divestitures 41,539
Joint ventures 2,707 2,102
Proceeds from exercise of LTI stock options 5,230 3,164
Other (683) 3,258
-------------- ----------------------
(38,583) (15,690)
-------------- ----------------------
FINANCING
Long-term debt, net 4,992 (21,197)
Short-term debt, net 2,512 (1,256)
Dividends paid (17,002) (16,226)
LTI dividends paid to minority interest shareholders (1,703) (1,307)
Purchase of treasury stock (20,517)
Other 984 3,069
-------------- ----------------------
(10,217) (57,434)
-------------- ----------------------
INCREASE (DECREASE) IN CASH AND SHORT-TERM SECURITIES $ 19,752 $ (15,159)
============== ======================
RECONCILIATION OF INCREASE (DECREASE) IN CASH AND
SHORT-TERM SECURITIES
Cash and short-term securities at beginning of period $ 68,306 $ 103,420
Cash and short-term securities at end of period 89,066 86,501
-------------- ----------------------
Increase (Decrease) in cash and short-term securities
per Statement of Financial Position 20,760 (16,919)
Currency translation effects (1,008) 1,760
============== ======================
$ 19,752 $ (15,159)
============== ======================
</TABLE>
Property, plant and equipment for the nine months ended September 30, 1998
includes $4,635 related to the exercise of an option to purchase land under a
capital lease by Life Technologies, Inc.
- --------------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.
Amounts are unaudited.
<PAGE> 4
<TABLE>
<CAPTION>
EXHIBIT 99d
DEXTER CORPORATION
STATEMENT OF COMPREHENSIVE INCOME
- ---------------------------------------------------------------------------------------------------------------
Three Months Ended September 30 Nine Months Ended September 30
------------------------------- ------------------------------
In thousands of dollars 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INCOME $ 14,178 $ 14,243 $ 44,825 $ 43,112
-------- -------- -------- --------
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Currency translation effects 5,946 (3,355) 5,804 (16,580)
Unrealized gains (losses) on investments 105 (51) (89) (252)
-------- -------- -------- --------
OTHER COMPREHENSIVE INCOME (LOSS) 6,051 (3,406) 5,715 (16,832)
-------- -------- -------- --------
COMPREHENSIVE INCOME $ 20,229 $ 10,837 $ 50,540 $ 26,280
======== ======== ======== ========
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the financial statements.
Amounts are unaudited.
<PAGE> 5
<TABLE>
<CAPTION>
EXHIBIT 99e
NET SALES BY MARKET Dexter Corporation
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended September 30 Nine Months Ended September 30
------------------------------------------ -----------------------------------------
In thousands of dollars 1998 1997 Change 1998 1997 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AEROSPACE $ 17,934 $ 15,906 +13% $ 53,314 $ 45,090 +18%
ELECTRONICS (1) 45,566 55,577 -18% 151,271 159,426 -5%
FOOD PACKAGING (2) 69,962 70,522 -1% 210,458 207,800 +1%
MEDICAL 114,956 106,881 +8% 346,011 322,106 +7%
OTHER 34,939 38,042 -8% 114,831 117,991 -3%
-------- -------- -------- --------
CONSOLIDATED $283,357 $286,928 -1% $875,885 $852,413 +3%
======== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The effect of businesses acquired increased net sales to the Electronics
market by $1.8 million, or 3%, for the quarter, and $5.7 million, or 4%,
year-to-date.
(2) The effect of businesses acquired increased net sales to the Food Packaging
market by $3.5 million, or 5%, for the quarter, and $13.4 million or 6%,
year-to-date.
Amounts are unaudited.
<PAGE> 6
Exhibit 99f
Dexter Corporation
Notes to Condensed Consolidated Financial Statements
Note 1 - In the opinion of the Company's management, the unaudited
financial statements reflect adjustments of a normal recurring nature
which are necessary to present fairly the results for the interim
periods. The notes to the condensed consolidated financial statements,
including management's discussion in Part 1, Item 2 of this Form 10-Q,
are incorporated as part of these condensed consolidated financial
statements. The year-end condensed balance sheet data was derived from
the audited financial statements.
Note 2 - Presented below is the reconciliation between basic earnings
per share and diluted earnings per share for the three and nine-month
periods ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months ended Nine Months ended
September 30 September 30
Amounts in thousands ------------------------- -------------------------
(except per share data) 1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EARNINGS PER SHARE - BASIC:
Net income $ 14,178 $ 14,243 $ 44,825 $ 43,112
Weighted average shares
outstanding 23,034 22,914 22,998 23,037
Earnings per share - basic $ .62 $ .62 $ 1.95 $ 1.87
EARNINGS PER SHARE - DILUTED:
Net income $ 14,178 $ 14,243 $ 44,825 $ 43,112
Effect of subsidiary dilutive
options on net income (102) (137) (320) (462)
-------- -------- -------- --------
$ 14,076 $ 14,106 $ 44,505 $ 42,650
======== ======== ======== ========
Weighted average shares
outstanding 23,034 22,914 22,998 23,037
Weighted average effect of
common stock equivalents 96 270 206 191
-------- -------- -------- --------
23,130 23,184 23,204 23,228
======== ======== ======== ========
Earnings per share - diluted $ .61 $ .61 $ 1.92 $ 1.84
</TABLE>
<PAGE> 7
Exhibit 99f
Dexter Corporation
Notes to Condensed Consolidated Financial Statements (continued)
Note 3 - In February 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 132,
Employers' Disclosures About Pensions and Other Postretirement
Benefits, which becomes effective for financial statements for fiscal
years beginning after December 15, 1997. The Company is currently
evaluating the impact of SFAS No. 132 on its financial reporting
practices.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities. The statement is
effective for all fiscal quarters of fiscal years beginning after June
15, 1999. The Company is currently evaluating the impact of SFAS No.
133 on its financial reporting practices.
Note 4 - The following are included as components of Common Stock and
Paid-in Capital:
<TABLE>
<CAPTION>
COMMON STOCK & PAID-IN CAPITAL SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
(IN THOUSANDS OF DOLLARS) 1998 1997 1997
- ------------------------------ -------- -------- --------
<S> <C> <C> <C>
Common stock $ 24,984 $ 24,984 $ 24,984
Paid-in capital 15,228 17,482 17,111
Unearned compensation on
restricted stock (2,526) (4,308) (4,571)
-------- -------- --------
$ 37,686 $ 38,158 $ 37,524
======== ======== ========
</TABLE>
Note 5 - The following are included as components of Accumulated Other
Comprehensive Income:
<TABLE>
<CAPTION>
ACCUMULATED OTHER COMPREHENSIVE SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
INCOME (IN THOUSANDS OF DOLLARS) 1998 1997 1997
- -------------------------------- -------- -------- --------
<S> <C> <C> <C>
Currency translation effects ($16,671) ($22,475) ($18,767)
Unrealized losses on investments (515) (426) (427)
Pension liability adjustment (24) (24) (204)
-------- -------- --------
($17,210) ($22,925) ($19,398)
======== ======== ========
</TABLE>
<PAGE> 8
Exhibit 99f
Dexter Corporation
Notes to Condensed Consolidated Financial Statements (continued)
Note 6 - On July 7, 1998, the Company announced plans to acquire the
remaining 48% equity in Life Technologies, Inc., a 52% Dexter-owned
subsidiary and the divestiture of its Packaging Coatings business
including Dexter S.A.S., its French industrial coatings subsidiary.
On July 7, 1998 the Company proposed to the Life Technologies' Board of
Directors that it acquire the approximately 11.3 million shares of Life
Technologies it does not currently own at a price of $37 per share in
cash, or approximately $420 million, net, excluding payment for
exercisable stock options. On October 27, 1998, a special committee of
independent directors of the Life Technologies Board that had been
considering the Company's proposal advised the Company that it would
not recommend approval of its offer. On November 2, 1998, the Company
commenced a tender offer for $37 per share in cash, for all outstanding
shares of common stock of Life Technologies, Inc. that it does not
currently own. Consummation of the tender offer is conditioned (subject
to waiver) upon the Company receiving sufficient shares to own at least
80% of all outstanding Life Technologies shares, but is not conditioned
upon financing or any approval of the Life Technologies Board of
Directors or any committee thereof. The offer is scheduled to expire on
Tuesday, December 1, 1998, at midnight New York City time, unless
extended. The acquisition of the publicly owned shares of Life
Technologies offers its shareholders a 19.4% premium over the closing
price immediately prior to the July 7 announcement. The offer will be
financed through Dexter's available cash and a committed credit
facility arranged by First Chicago Capital Markets, Inc. On November 5,
1998, the Company announced that it had received copies of letters from
Frank E. Samuel, Jr. and Iain C. Wylie (former members of the special
committee) resigning as directors of Life Technologies, Inc.
In August 1998, the Company announced it had signed a definitive
agreement to sell its Packaging Coatings business, including Dexter
S.A.S., to The Valspar Corporation. The transaction is expected to
close by year-end. Dexter's Packaging Coatings, a business that has a
range of products serving the beer, beverage and food can, aerosol and
tube markets, and Dexter S.A.S. had combined 1997 sales of $208
million.
<PAGE> 9
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Dexter Corporation
We have reviewed the accompanying condensed statement of financial position of
Dexter Corporation as of September 30, 1998 and 1997, and the related condensed
statements of income and comprehensive income for the three and nine-month
periods then ended and the condensed statement of cash flows for the nine-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 Dexter
Corporation as of December 31, 1997 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 3, 1998, we expressed
an unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed statement of
financial position as of December 31, 1997 is fairly stated, in all material
respects, in relation to the consolidated statement of financial position from
which it has been derived.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Springfield, Massachusetts
October 13, 1998
