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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to_________________________
Commission file number 1-5542
THE DEXTER CORPORATION
(Exact name of registrant as specified in its charter)
CONNECTICUT 06-0321410
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE ELM STREET, WINDSOR LOCKS, CONNECTICUT 06096
(Address of principal executive offices) (Zip Code)
(860) 292-7675
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes..X..... No.......
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS Outstanding at July 31, 1996
COMMON STOCK, PAR VALUE $1 23,746,655 SHARES
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PART I
FINANCIAL INFORMATION
Item 1 - Financial Statements
Reference is made to the following consolidated financial
statements which are incorporated herein by reference:
(a) Exhibit 99a - Condensed Statement of Income for the three
months and six months ended June 30, 1996 and 1995.
(b) Exhibit 99b - Condensed Statement of Financial Position as of
June 30, 1996, December 31, 1995, and June 30, 1995.
(c) Exhibit 99c - Condensed Statement of Cash Flows for the six
months ended June 30, 1996 and 1995.
(d) Exhibit 99d - Net Sales by Market for the three months and six
months ended June 30, 1996 and 1995.
(e) Exhibit 99e - Notes to Consolidated Financial Statements.
The unaudited financial data included herein as of June 30, 1996
and 1995, and for the three and six month periods then ended, have
been reviewed by the registrant's independent public accountants,
Coopers & Lybrand L.L.P., and their report is attached.
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
The Company reported that earnings for the second quarter of 1996,
excluding the effects from the disposal of product lines, were a
record $13.4 million, or $.57 per share, compared with $12.0
million, or $.49 per share, for the second quarter of 1995. The
$.57 per share from operations in 1996 represents a 16% increase in
earnings over the second quarter of 1995 on a 1% increase in sales.
The net effect of product line disposals was a gain of $.04 per
share in the second quarter of 1996. This gain was due to the
receipt, during the quarter, of proceeds from a note related to the
sale of Life Technologies' molecular diagnostic product line in
1990. The net effect of the sale of Dexter's acoustic materials
business and a small powder coatings business in the second quarter
had a slightly positive impact on earnings. Total net income for
the second quarter was $14.4 million, or $.61 per share.
Compared with the second quarter of 1995, the increase in earnings
includes selling price increases and lower raw material costs which
yielded a favorable impact of approximately $.15 per share. This
was somewhat offset by a less favorable sales mix of Dexter
products. Additionally, the unfavorable effect of currency exchange
rates, versus the second quarter of 1995, reduced earnings by $.02
per share in the second quarter of 1996.
Sales for the second quarter of 1996 were a record $285.7 million,
a 1% increase compared with sales of $283.0 million in the second
quarter of 1995. This sales increase includes a 2%
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Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations, continued
increase due to unit volume, an average selling price increase of
1%, and a decrease due to the effect of lower currency translation
rates on international sales of 2% in the second quarter of 1996.
Sales for the six months ended June 30, 1996, were $562.9 million,
a 2% increase compared with sales of $549.8 million for the same
period last year. This increase includes a 2% increase due to unit
volume, selling price increases averaging 1%, and a 1% decrease due
to the effects of lower currency translation rates on international
sales.
Earnings for the first six months of 1996, excluding the effects of
disposal of product lines, were $24.6 million, or $1.03 per share.
This represents a 10% increase in earnings and a 12% increase in
earnings per share, compared with results for the first half of
1995 of $22.4 million, or $.92 per share. This 12% increase in
earnings per share includes the favorable net effect of selling
price increases and lower raw material costs of approximately $.18
per share versus the same period last year. In addition, there was
a $.01 per share increase in earnings due to a reduction of the
effective tax rate for 1996 to 35.5% versus the rate of 36% used
for the first six months of 1995. These favorable items were
somewhat offset by the effect of unfavorable currency exchange
rates of $.03 per share due to the strengthening of the U.S. dollar
against international currencies and an unfavorable product mix.
Total earnings for the first six months, including the gain on
divested product lines, were $25.5 million, or $1.07 per share.
Products with strong sales in the second quarter and first six
months of 1996 include aerospace adhesives and products at Life
Technologies, Inc. Products with weaker performance in the second
quarter include electronic packaging products and food and beverage
can coatings serving the European and domestic markets.
Consolidated gross margin of 34.3% of net sales in the second
quarter of 1996 improved by 2.5 percentage points from 31.8% in the
second quarter of 1995. Slightly less than half of this improvement
was from Dexter operations, primarily resulting from the net effect
of selling price increases and lower raw material costs versus the
same period last year, with the remaining improvement attributable
to Life Technologies, Inc.
Marketing and administrative cost increased $4.4 million, or 9%,
for the second quarter and $10.3 million, or 10%, for the six-month
period, principally due to increased marketing and administrative
expense at Life Technologies, Inc., which included the
consolidation of results from the 1995 acquisition of a controlling
interest in their Japanese subsidiary.
Other income was $5.2 million for the first six months of 1996, a
decrease of $.7 million, or 12%, from the same period last year.
The decrease was primarily due to the expiration of certain
noncompete agreements. Higher net equity income from companies
owned 50% or less partially offset this decrease.
During the quarter, the company completed its previously announced
one million share repurchase of the company's stock. Short-term
debt associated with this repurchase program was repaid with the
proceeds from Dexter's second quarter divestitures.
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PART II
OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit 15 of Part 1 - Letter to Securities and Exchange Commission
re: Incorporation of Accountants' Reports
Exhibit 27 of Part 1 - Financial Data Schedule
Exhibit 99 of Part 1 - Second Quarter 1996 Financial Statements and
Notes
(b) No reports on Form 8-K were filed during the quarter for which this
report was filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE DEXTER CORPORATION
Date August 2, 1996 /s/ Kathleen Burdett
------------------------------
Kathleen Burdett
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date August 2, 1996 /s/ George Collin
------------------------------
George Collin
Controller
(Principal Accounting Officer)
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INDEX TO EXHIBITS
Exhibit No.
15 Letter to Securities and Exchange Commission re: Incorporation of
Accountants' Report
27 Financial Data Schedule
99 Second Quarter 1996 Financial Statements and Notes