-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SBUs2N5E1sNFpBZf3Qkk1l1yjN3AX+tizaA//sh4uVOW6LL1CTX/+pwp3pwXw5Uo eArLvhZB2xzTfMmWrMWvHg== 0000914039-96-000028.txt : 19960308 0000914039-96-000028.hdr.sgml : 19960308 ACCESSION NUMBER: 0000914039-96-000028 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960307 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEXTER CORP CENTRAL INDEX KEY: 0000028582 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, MATERIALS, SYNTH RESINS & NONVULCAN ELASTOMERS [2821] IRS NUMBER: 060321410 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05542 FILM NUMBER: 96531950 BUSINESS ADDRESS: STREET 1: ONE ELM ST CITY: WINDSOR LOCKS STATE: CT ZIP: 06096 BUSINESS PHONE: 2036279051 MAIL ADDRESS: STREET 1: ONE ELM ST CITY: WINDSOR LOCKS STATE: CT ZIP: 06096 10-K 1 FORM 10-K 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) 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
Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED - --------------------------- ------------------------ COMMON STOCK, PAR VALUE $1 NEW YORK STOCK EXCHANGE
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). - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
PAGE ITEM NUMBER ---- ------ 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
This Form 10-K is printed on recycled paper. 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 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 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 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:
OTHER BUSINESS EXPERIENCE NAME TITLE SINCE 1/1/91 AGE - ------------------------- ------------------------------- ------------------------------- --- 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
4 7
OTHER BUSINESS EXPERIENCE NAME TITLE SINCE 1/1/91 AGE - ------------------------- ------------------------------- ------------------------------- --- 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.
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 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 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 10 PART IV ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (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.
8 11 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.
9 12 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.
10 13 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.
(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 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:
NAME CAPACITY DATE - ----------------------------------- ----------------------------------- ------------------ /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
12 15 INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
PAGE ----------- 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
------------------------------------------ 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 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 17 SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (IN THOUSANDS)
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 - ------------------------------------------ ---------- ---------- ---------- ---------- ---------- 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 ----- ----- ----- ----- -----
- --------------- (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 18 EXHIBIT 13 THE DEXTER CORPORATION'S 1995 ANNUAL REPORT TO SHAREHOLDERS EX-13 2 EX-13 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. K. Grahame Walker Kathleen Burdett George Collin Chairman and Chief Executive Officer Vice President and Controller Chief Financial Officer Chief Accounting Officer
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 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.
In thousands of dollars (except per share amounts) 1995 1994 1993 1992 - ---------------------------------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------------------------------------
18 3
THE DEXTER CORPORATION In thousands of dollars (except per share amounts) 1991 1990 1989 1988 - --------------------------------------------------------------------------------------------------------- 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. - --------------------------------------------------------------------------------------------------------- In thousands of dollars (except per share amounts) 1987 1986 1985 - ---------------------------------------------------------------------------------------- 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. - ----------------------------------------------------------------------------------------
19 4 STATEMENT OF INCOME THE DEXTER CORPORATION - -------------------
Years ended December 31 In thousands of dollars ------------------------------------- (except per share amounts) 1995 1994 1993 - ------------------------------------------------------------------------------------ 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.
20 5 STATEMENT OF CASH FLOWS THE DEXTER CORPORATION - -----------------------
Years ended December 31 ------------------------------------- In thousands of dollars 1995 1994 1993 - ------------------------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------------------------
See accompanying financial review. 21 6 STATEMENT OF FINANCIAL POSITION - -------------------------------
December 31 --------------------------------------- In thousands of dollars 1995 1994 1993 - --------------------------------------------------------------------------------------- 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 ======================================= =======================================================================================
See accompanying financial review. 22 7 THE DEXTER CORPORATION
December 31 ------------------------------------ In thousands of dollars 1995 1994 1993 - ------------------------------------------------------------------------------------ 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 ==================================== ====================================================================================
See accompanying financial review. 23 8 STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY THE DEXTER CORPORATION - --------------------------------------------
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 - --------------------------------------------------------------------------------------------------------------------------- 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 ======================================================================================== - ---------------------------------------------------------------------------------------------------------------------------
See accompanying financial review. QUARTERLY FINANCIAL INFORMATION (unaudited) - -------------------------------
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 - ---------------------------------------------------------------------------------------------------------------------------------- 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 ====================================================================================================
*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.
The fourth quarter included a $0.4 million charge for restructuring businesses at majority-owned Life Technologies, Inc. - ---------------------------------------------------------------------------------------------------------------------------------- 1994 First $ 233.5 $155.4 $ 9.3 $ .38 $.22 $25-7/8 $23-1/8 Second 247.1 165.4 11.0 .45 .22 25-3/8 22-3/4 Third 243.3 165.6 8.4 .35 .22 26 22-1/2 Fourth 250.8 171.8 9.2 .38 .22 23-1/2 19-7/8 -------------------------------------------------------------------- Year $ 974.7 $658.2 $37.9 $1.56 $.88 Close $21-3/4 ===================================================================================================== - ---------------------------------------------------------------------------------------------------------------------------------- 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 ===================================================================================================== - ----------------------------------------------------------------------------------------------------------------------------------
24 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 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 - --------------------------------------------------------------------------------
December 31, 1995 ------------------------------------------------------------------------------- Dexter Captive Reclasses Operating Insurance D & S and Dexter In thousands of dollars Companies Companies LTI Plastics Eliminations Consolidated - ----------------------------------------------------------------------------------------------------------------- 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 - -----------------------------------------------------------------------------------------------------------------
26 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 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:
1995 1994 1993 ------------------------ 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% ======================== - --------------------------------------------------------------------------------
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 13
- ------------------------------------------------------------- TAXES, OTHER THAN SALES TAXES In thousands of dollars 1995 1994 1993 - ------------------------------------------------------------- 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 ================================
- ------------------------------------------------------------------------------- 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:
In thousands of dollars 1995 1994 1993 - -------------------------------------------------------------------- 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 ==================================
- ------------------------------------------------------------------------------- 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:
In thousands of dollars 1995 1994 1993 - --------------------------------------------------------------------- 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 ==================================
- ------------------------------------------------------------------------------ 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 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 15
MARKET SEGMENT DATA - ------------------- In thousands of dollars 1995 1994 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------------------- 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. - ----------------------------------------------------------------------------------------------------------------------------
31 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 17 GEOGRAPHIC DATA
In thousands of dollars 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------------- 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. - -----------------------------------------------------------------------------------------------------------------------------------
33 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.
- -------------------------------------------------------------------------------- CONTRIBUTION OF LTI TO DEXTER NET INCOME Years ended December 31 In thousands of dollars ----------------------- (except per share amounts) 1995 1994 - -------------------------------------------------------------------------------- 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 =========================
- -------------------------------------------------------------------------------- 34 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.
- -------------------------------------------------------------------------------- CONDENSED STATEMENT OF INCOME Years ended December 31 ----------------------- In thousands of dollars 1995 1994 - -------------------------------------------------------------------------------- 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
- -------------------------------------------------------------------------------- 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
Business Change in Acquisitions Currency Consolidated Cash and Accounting Translation Account In thousands of dollars Changes Accruals Effects Balances - ------------------------------------------------------------------------------------------------------------ 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 ======================================================= - ---------------------------------------------------------------------------------------------------------
35 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:
In thousands of dollars 1995 1994 1993 - --------------------------------------------------------------------------- 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 ======================================== - ---------------------------------------------------------------------------
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.
In millions of dollars 1995 1994 1993 - --------------------------------------------------------------------- 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% - - ---------------------------------------------------------------------
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:
In thousands of dollars 1995 1994 1993 - --------------------------------------------------------------------- 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 ==============================
- -------------------------------------------------------------------------------- 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): 1996 $ 9,347 1997 5,695 1998 3,634 1999 2,620 2000 1,677 Later years 14,182 ------- $37,155 =======
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 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:
In thousands of dollars 1995 1994 1993 - ------------------------------------------------------------------------- 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 ======================================= - ------------------------------------------------------------------------
Changes in property, plant and equipment for the past three years were as follows:
In thousands of dollars 1995 1994 1993 - ------------------------------------------------------------------------ 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 ======================================== - ------------------------------------------------------------------------
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 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:
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 - ------------------------------------------------------------------------------------------------------------------------------------ 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) ================================================================================================ - ------------------------------------------------------------------------------------------------------------------------------------
Net periodic pension cost for 1995, 1994 and 1993 included the following components:
In thousands of dollars 1995 1994 1993 - --------------------------------------------------------------------------------- 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 =========================================== - ---------------------------------------------------------------------------------
Assumptions used in the accounting for pension cost in 1995, 1994, and 1993 for domestic plans were:
1995 1994 1993 - --------------------------------------------------------------------------------- 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% - ---------------------------------------------------------------------------------
Assumptions used in the accounting for pension cost in 1995, 1994, and 1993 for international plans were:
1995 1994 1993 - --------------------------------------------------------------------------------- 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% - ---------------------------------------------------------------------------------
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 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:
In thousands of dollars 1995 - -------------------------------------------------------------------------------- Minimum liability adjustment $2,052 Intangible asset 1,318 ------ 734 Tax benefit 261 ------ Pension liability adjustment to shareholders' equity $ 473 ====== - --------------------------------------------------------------------------------
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:
In thousands of dollars 1995 1994 1993 - -------------------------------------------------------------------------------- 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 ============================ - --------------------------------------------------------------------------------
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:
In thousands of dollars 1995 1994 1993 - -------------------------------------------------------------------------------- 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 ============================ - --------------------------------------------------------------------------------
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:
In thousands of dollars 1995 1994 1993 - -------------------------------------------------------------------------------- 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) ======================================== - --------------------------------------------------------------------------------
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 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
December 31 --------------------------------------------- In thousands of dollars 1995 1994 1993 - -------------------------------------------------------------------------------- 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 =============================================
- -------------------------------------------------------------------------------- DEBT MATURITIES BY CURRENCY AND TYPE Amounts in thousands
Multi-currency Promissory Notes ------------------------------------------------------ Industrial Sinking Total Total Weighted Development Fund Swiss Japanese U.S. Dollar U.S. Dollar Average Bonds Debentures U.S. Dollar Franc Yen Equivalent Equivalent Interest Rate - -------------------------------------------------------------------------------------------------------------------------------- 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% - --------------------------------------------------------------------------------------------------------------------------------
40 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 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.
Net Asset Positions ---------------------------- Local U.S. Amounts in thousands Currency Dollars - --------------------------------------------------------------- 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 ======== - ---------------------------------------------------------------
PREFERRED STOCK The company has the following classes of preferred stock, without par value, as of December 31, 1995:
CLASS AUTHORIZED AND UNISSUED 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
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 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.
December 31 ------------------------------------------------------- 1995 1994 1993 ------------------------------------------------------- Number of Shares ------------------------------------------------------- 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 ------------------------------------------------------- Dollars per Share ------------------------------------------------------- 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 - -------------------------------------------------------------------------------------------------
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.
December 31 ------------------------------------------------------- 1995 1994 1993 ------------------------------------------------------- Number of Shares ------------------------------------------------------- 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 - -------------------------------------------------------------------------------------------------
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.
December 31 ------------------------------------------------------- 1995 1994 1993 ------------------------------------------------------- Number of Shares ------------------------------------------------------- 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 ------------------------------------------------------- Dollars per Share ------------------------------------------------------- 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 - -------------------------------------------------------------------------------------------------
43 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. EX-21 3 EX-21 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.
PERCENTAGE OF JURISDICTION IN WHICH NAME OWNERSHIP(A) INCORPORATED OR ORGANIZED - ------------------------------------------------ ------------- ---------------------------- 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
2 EXHIBIT 21 -- CONTINUED
PERCENTAGE OF JURISDICTION IN WHICH NAME OWNERSHIP(A) INCORPORATED OR ORGANIZED - ------------------------------------------------ ------------- ---------------------------- 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
- --------------- (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 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.
PERCENTAGE OF JURISDICTION IN WHICH NAME OWNERSHIP INCORPORATED OR ORGANIZED - ------------------------------------------------ ------------- ---------------------------- 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
- --------------- (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 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.
PERCENTAGE OF JURISDICTION IN WHICH NAME OWNERSHIP INCORPORATED OR ORGANIZED - ------------------------------------------------ ------------- ---------------------------- 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
- --------------- (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. EX-23 4 EX-23 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 EX-27 5 EX-27
5 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. 1,000 YEAR DEC-31-1995 DEC-31-1995 65,542 0 183,076 5,851 157,034 456,721 642,239 317,036 934,161 208,098 215,839 0 0 24,984 344,631 934,161 1,088,905 1,099,044 742,206 742,206 0 0 20,931 79,824 28,337 40,578 0 0 0 40,578 1.67 0
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