1
EXHIBIT 99a
DEXTER CORPORATION
CONDENSED STATEMENT OF INCOME
- -----------------------------------------------------------------------------------------------------------------------
Three Months Ended June 30 Six Months Ended June 30
In thousands of dollars ---------------------------- -------------------------------
(except per share amounts) 1999 1998 Change 1999 1998 Change
- -----------------------------------------------------------------------------------------------------------------------
REVENUES
Net sales $256,062 $302,613 -15% $535,989 $592,528 - 10%
Other income 2,396 2,384 + 1% 4,523 4,670 - 3%
--------- --------- --------- ---------
258,458 304,997 -15% 540,512 597,198 - 9%
EXPENSES
Cost of sales 153,794 191,813 -20% 329,943 376,377 - 12%
Marketing and administrative 62,207 61,889 + 1% 126,395 123,933 + 2%
Research and development 12,293 14,390 -15% 26,179 28,466 - 8%
Interest 4,700 4,371 + 8% 11,086 8,679 + 28%
Gain on divestiture of product lines (91,361)
--------- --------- --------- ---------
INCOME BEFORE TAXES 25,464 32,534 -22% 138,270 59,743 +131%
Income taxes 8,697 11,387 -24% 49,308 20,910 +136%
--------- --------- --------- ---------
INCOME BEFORE MINORITY INTERESTS 16,767 21,147 -21% 88,962 38,833 +129%
Minority interests 3,022 4,730 -36% 6,383 8,186 - 22%
--------- --------- --------- ---------
NET INCOME $ 13,745 $ 16,417 -16% $ 82,579 $ 30,647 +169%
========= ========= ========= =========
NET INCOME PER SHARE - BASIC $0.60 $0.71 -15% $3.61 $1.33 +171%
NET INCOME PER SHARE - DILUTED $0.60 $0.70 -14% $3.58 $1.31 +173%
DIVIDENDS DECLARED PER SHARE $0.26 $0.26 $0.52 $0.50 + 4%
AVERAGE SHARES OUTSTANDING (000) - BASIC 22,769 23,012 - 1% 22,884 22,979
AVERAGE SHARES OUTSTANDING (000) - DILUTED 22,946 23,258 - 1% 23,030 23,231 -1%
- -----------------------------------------------------------------------------------------------------------------------
See accompanying notes to the condensed consolidated financial statements.
Amounts are unaudited.
2
EXHIBIT 99b
DEXTER CORPORATION
CONDENSED STATEMENT OF FINANCIAL POSITION
- ----------------------------------------------------------------------------------------------------------------------
In thousands of dollars June 30 December 31 June 30
(except per share amounts) 1999 1998 1998
- -------------------------- ----------- ------------ -----------
ASSETS
Cash and short-term securities $ 87,849 $ 111,049 $ 70,256
Accounts receivable, net 176,207 203,872 212,129
Inventories
Materials and supplies 53,397 65,180 64,160
In process and finished 125,666 129,175 121,223
LIFO reserve (15,258) (17,388) (18,329)
----------- ----------- -----------
163,805 176,967 167,054
Prepaid and deferred expenses 24,224 25,642 28,231
----------- ----------- -----------
Total current assets 452,085 517,530 477,670
Property, plant and equipment, at cost, net 331,870 360,456 356,332
Excess of cost over net assets of businesses acquired 122,753 156,989 93,818
Patents, technology, trademarks, and covenants 117,312 118,152 28,229
Other assets 54,596 55,241 46,161
----------- ----------- -----------
$ 1,078,616 $ 1,208,368 $ 1,002,210
=========== =========== ===========
LIABILITIES & SHAREHOLDERS' EQUITY
Short-term debt $ 35,943 $ 39,810 $ 34,189
Accounts payable 69,266 91,718 98,374
Dividends payable 5,926 5,989 5,989
Accrued liabilities and taxes 116,728 95,427 93,120
Current installments of long-term debt 17,319 17,230 12,914
----------- ----------- -----------
Total current liabilities 245,182 250,174 244,586
Long-term debt 199,784 382,163 179,764
Deferred items 40,675 36,160 33,504
Long-term deferred income taxes 45,484 53,481 22,186
Long-term environmental reserves 12,834 13,501 13,609
Minority interests 86,748 84,340 114,758
Shareholders' equity
Common stock and paid-in capital 40,125 40,255 37,699
Retained earnings 488,750 418,074 428,994
Treasury stock (59,167) (51,512) (49,629)
Accumulated other comprehensive income (21,799) (18,268) (23,261)
----------- ----------- -----------
Total shareholders' equity 447,909 388,549 393,803
----------- ----------- -----------
$ 1,078,616 $ 1,208,368 $ 1,002,210
=========== =========== ===========
EQUITY PER SHARE $ 19.65 $ 16.86 $ 17.10
- ----------------------------------------------------------------------------------------------------------------------
See accompanying notes to the condensed consolidated financial statements.
Amounts as of June 30, 1999 and June 30, 1998 are unaudited.
3
EXHIBIT 99c
DEXTER CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
_______________________________________________________________________________
Six Months Ended June 30
In thousands of dollars 1999 1998
- ----------------------- ---- ----
OPERATIONS
Net income $ 82,579 $ 30,647
Noncash items
Depreciation and amortization 30,321 26,035
Gain on divestiture of product lines (91,361)
Income taxes not due 19,687 6,375
Minority interests 6,383 8,186
LIFO inventory credit (61) (470)
Equity in net income of affiliates (405) (1,336)
Other (732) 417
Operating working capital increase (40,745) (30,670)
--------- ---------
5,666 39,184
--------- ---------
INVESTMENTS
Property, plant and equipment (34,678) (34,247)
Acquisitions (13,481) (1,047)
Divestitures 228,916
Proceeds from exercise of LTI stock options 1,625 3,168
Other (723) 2,033
--------- ---------
181,659 (30,093)
--------- ---------
FINANCING
Long-term debt, net (182,576) 5,193
Short-term debt, net (3,915) (1,059)
Dividends paid (11,966) (11,013)
LTI dividends paid to minority interest shareholders (990) (1,136)
Purchase of treasury stock (10,126)
Other 1,565 1,117
--------- ---------
(208,008) (6,898)
--------- ---------
(DECREASE) INCREASE IN CASH AND SHORT-TERM SECURITIES $ (20,683) $ 2,193
========= =========
RECONCILIATION OF (DECREASE) INCREASE IN CASH AND
SHORT-TERM SECURITIES
Cash and short-term securities at beginning of period $ 111,049 $ 68,306
Cash and short-term securities at end of period 87,849 70,256
--------- ---------
(Decrease) Increase in cash and short-term securities
per Statement of Financial Position (23,200) 1,950
Currency translation effects 2,517 243
--------- ---------
$ (20,683) $ 2,193
========= =========
_________________________________________________________________________
See accompanying notes to the condensed consolidated financial statements.
Amounts are unaudited.
4
EXHIBIT 99d
DEXTER CORPORATION
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
______________________________________________________________________________________________________________________________
Three Months Ended June 30 Six Months Ended June 30
------------------------------------ ---------------------------------
In thousands of dollars 1999 1998 Change 1999 1998 Change
---- ---- ------ ---- ---- ------
______________________________________________________________________________________________________________________________
NET INCOME $13,745 $16,417 - 16% $82,579 $30,647 + 169%
-------- -------- -------- --------
OTHER COMPREHENSIVE INCOME (LOSS),
NET OF TAX
Currency translation effects (3,600) (389) (3,178) (142)
Unrealized losses on investments (168) (156) + 8% (353) (194) + 82%
-------- -------- -------- --------
OTHER COMPREHENSIVE INCOME (LOSS) (3,768) (545) (3,531) (336)
-------- -------- -------- --------
COMPREHENSIVE INCOME $ 9,977 $15,872 - 37% $79,048 $30,311 + 161%
======== ======== ======== ========
______________________________________________________________________________________________________________________________
See accompanying notes to the condensed consolidated financial statements.
Amounts are unaudited.
5
EXHIBIT 99e
DEXTER CORPORATION
NET SALES BY SEGMENT
_________________________________________________________________________________________________________________________________
Three Months Ended June 30 Six Months Ended June 30
------------------------------------- -----------------------------------
In thousands of dollars 1999 1998 Change 1999 1998 Change
_________________________________________________________________________________________________________________________________
LIFE SCIENCES (a) $ 99,814 $ 91,544 + 9% $199,351 $179,899 + 11%
NONWOVENS 74,106 72,889 + 2% 143,496 139,691 + 3%
SPECIALTY POLYMERS (b) 82,142 138,180 - 41% 193,142 272,938 - 29%
--------- --------- --------- ---------
CONSOLIDATED $256,062 $302,613 - 15% $535,989 $592,528 - 10%
========= ========= ========= =========
(a) The effect of businesses acquired increased net sales in the Life
Sciences segment by $.7 million, or 1% for the quarter.
(b) The effect of businesses divested decreased net sales in the Specialty
Polymers segment by $56.4 million, or 41%, for the quarter, and $74.6
million, or 27%, year-to-date.
_________________________________________________________________________________________________________________________________
OPERATING INCOME BY SEGMENT
_________________________________________________________________________________________________________________________________
Three Months Ended June 30 Six Months Ended June 30
---------------------------- --------------------------
In thousands of dollars 1999 1998 Change 1999 1998 Change
_________________________________________________________________________________________________________________________________
LIFE SCIENCES (a) $12,893 $14,675 - 12% $ 26,718 $28,164 - 5%
NONWOVENS 9,536 10,915 - 13% 18,241 20,463 - 11%
SPECIALTY POLYMERS (b) 10,229 13,880 - 26% 110,971 25,149
-------- -------- --------- --------
CONSOLIDATED OPERATING INCOME 32,658 39,470 - 17% 155,930 73,776 + 111%
OTHER INCOME, NET 2,225 1,166 + 91% 3,161 2,635 + 20%
INTEREST EXPENSE (4,700) (4,371) + 8% (11,086) (8,679) + 28%
GENERAL CORPORATE EXPENSE (4,719) (3,731) + 26% (9,735) (7,989) + 22%
-------- -------- --------- --------
CONSOLIDATED INCOME BEFORE TAXES $25,464 $32,534 - 22% $138,270 $59,743 + 131%
======== ======== ========= ========
(a) Life Sciences operating income includes $2.0 million of amortization
charges for the quarter, and $5.5 million, year-to-date associated
with Dexter's increased ownership in LTI.
(b) The gain on the divestiture of product lines increased operating income
in the Specialty Polymers segment by $91.4 million year-to-date.
_________________________________________________________________________________________________________________________________
Amounts are unaudited.
6
Exhibit 99f
Dexter Corporation
Notes to Condensed Consolidated Financial Statements
Note 1 - In the opinion of the Company's management, the unaudited condensed
consolidated financial statements reflect adjustments of a normal
recurring nature which are necessary to present fairly the results for
the interim periods. The notes to the condensed consolidated financial
statements, including management's discussion in Part 1, Item 2 of this
Form 10-Q, are incorporated as part of these condensed consolidated
financial statements. The year-end condensed balance sheet data was
derived from the audited financial statements.
Note 2 - Presented below is the reconciliation between basic earnings per share
and diluted earnings per share for the three and six-month periods
ended June 30, 1999 and 1998:
Amounts in thousands Three Months ended June 30 Six Months ended June 30
(except per share data) 1999 1998 1999 1998
- -------------------------------------------------------------------------------
EARNINGS PER SHARE - BASIC:
Net income $13,745 $16,417 $82,579 $30,647
Weighted average shares
outstanding 22,769 23,012 22,884 22,979
Earnings per share - basic $.60 $.71 $3.61 $1.33
EARNINGS PER SHARE -
DILUTED:
Net income $13,745 $16,417 $82,579 $30,647
Effect of subsidiary
dilutive options on net
income (19) (111) (39) (220)
------- ------- ------- -------
$13,726 $16,306 $82,540 $30,427
======= ======= ======= =======
Weighted average shares
outstanding 22,769 23,012 22,884 22,979
Weighted average effect of
common stock equivalents 177 246 146 252
------- ------- ------- -------
22,946 23,258 23,030 23,231
======= ======= ======= =======
Earnings per share diluted $.60 $.70 $3.58 $1.31
- -------------------------------------------------------------------------------
7
Exhibit 99f
Dexter Corporation
Notes to Condensed Consolidated Financial Statements (continued)
Note 3 - In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities. As issued, this
statement is effective for all fiscal quarters of all fiscal years
beginning after June 15, 1999. In June 1999, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards
(SFAS) No. 137, Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No.
133. This statement amends Statement No. 133 to be effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000. The
Company is currently evaluating the impact of SFAS No. 133.
Note 4 - The following are included as components of Common Stock and Paid-in
Capital:
COMMON STOCK & PAID-IN CAPITAL JUNE 30, DECEMBER 31, JUNE 30,
(IN THOUSANDS OF DOLLARS) 1999 1998 1998
- --------------------------------- -------- ------------ --------
Common stock $24,984 $24,984 $24,984
Paid-in capital 18,634 17,689 16,570
Unearned compensation on
restricted stock (3,493) (2,418) (3,855)
------- ------- -------
$40,125 $40,255 $37,699
======= ======= =======
Note 5 - The following are included as components of Accumulated Other
Comprehensive Income:
ACCUMULATED OTHER COMPREHENSIVE JUNE 30, DECEMBER 31, JUNE 30,
INCOME (IN THOUSANDS OF DOLLARS) 1999 1998 1998
- --------------------------------- -------- ------------ --------
Currency translation effects ($21,035) ($17,857) ($22,617)
Unrealized losses on investments (743) (390) (620)
Minimum pension liability adjustment (21) (21) (24)
--------- ------- --------
($21,799) ($18,268) ($23,261)
========= ======== ========
Note 6 - Presented below is a reconciliation of currency translation effects,
included in the Statement of Comprehensive Income, for reclassification
adjustments due to divestitures:
THREE MONTHS ENDED SIX MONTHS ENDED
(IN THOUSANDS OF DOLLARS) JUNE 30, 1999 JUNE 30, 1999
- ------------------------- ------------------ ----------------
Currency translation effects ($3,600) ($11,752)
Plus: Reclassification adjustments
for losses included in net
income due to divestitures 8,574
------- --------
Net currency translation effects ($3,600) ($3,178)
======= ========
8
Exhibit 99f
Dexter Corporation
Notes to Condensed Consolidated Financial Statements (continued)
Note 7- In August 1998, the Company entered into a purchase and sale agreement
to sell certain assets and stock of its Packaging Coatings business and
Dexter SAS to The Valspar Corporation. The sale of these businesses was
subject to regulatory approval and customary closing conditions. This
transaction was completed in February 1999 with total proceeds of $225
million subject to post-closure adjustments.
In January 1999, the Company divested its 40% interest in Akzo Dexter
Aerospace Finishes VoF, a joint venture between the Company and Akzo
Nobel NV, to Akzo Nobel NV for approximately book value.
Note 8- In December 1998, Dexter acquired an additional 22% ownership of LTI.
As a result of the acquisition, Dexter owns an aggregate of
approximately 71% of the total number of issued and outstanding shares
of LTI.
The following unaudited pro forma information presents the results of
operations of the Company as if the acquisition had taken place on
January 1, 1998.
In Thousands of Dollars Three Months Ended Six Months Ended
(except per share amounts) June 30, 1998 June 30, 1998
-------------------------- ------------------ ----------------
Net Sales $302,613 $592,528
Net Income $ 14,680 $ 26,062
Net Income Per Share-diluted $.63 $1.12
These unaudited pro forma results have been prepared for comparative
purposes only and include certain adjustments, such as the charges for
acquired-in-process research and development and transaction costs,
additional amortization expense, and increased interest expense on
acquisition debt. They do not purport to be indicative of the results
of operations which actually would have resulted had the acquisition
occurred on the date indicated, or which may result in the future.
Note 9- Assets in the Specialty Polymers segment at June 30, 1999 were $261.3
million, a decrease of $156.7 million, compared with $418 million at
December 31, 1998. This decrease was primarily due to the divestiture
of the Packaging Coatings business, including Dexter SAS, in February
1999.
Assets in the Life Sciences segment at June 30, 1999 were $333.3
million, an increase of $35.8 million, compared with $297.5 million at
December 31, 1998. This increase was primarily due to the acquisition
by LTI of a process chromatography and research products business in
May 1999, and capital expenditures, net of depreciation.
9
Exhibit 99f
Dexter Corporation
Notes to Condensed Consolidated Financial Statements (continued)
Note 10 - The Company and its subsidiaries are subject to potential liability
under government regulations, contractual and other matters, and
various claims and legal actions which are pending or may be asserted.
These matters arise in the ordinary course and conduct of the business
of the Company and its subsidiaries and some are expected to be
covered, at least in part, by insurance. At June 30, 1999, $0.3
million of current and $5 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. It is reasonably possible that some of the potential
claims and legal actions that may be asserted against LTI could be
decided unfavorably to LTI and, if so, this could have a material
adverse effect on the Company's operating results or cash flows in
future reporting periods. While the outcome of all of the pending and
potential claims and legal actions against the Company and its
subsidiaries cannot be forecast with certainty, management believes
that, with the possible exception of the potential liability of LTI
described above, 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.
10
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Dexter Corporation
We have reviewed the accompanying condensed statement of financial position of
Dexter Corporation as of June 30, 1999 and 1998, and the related condensed
statements of income and comprehensive income for the three and six month
periods then ended, and the condensed statement of cash flows for the six month
periods then ended. These financial statements are the responsibility of the
company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of financial position of Dexter
Corporation as of December 31, 1998, and the related consolidated statements of
income, cash flows, and changes in shareholders' equity for the year then ended
(not presented herein); and in our report dated February 9, 1999, we expressed
an unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed statement of
financial position as of December 31, 1998 is fairly stated, in all material
respects, in relation to the consolidated statement of financial position from
which it has been derived.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Springfield, Massachusetts
July 14, 1999