1
EXHIBIT 99a
DEXTER CORPORATION
CONDENSED STATEMENT OF INCOME
- --------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
In thousands of dollars ---------------------------- ----------------------------
(except per share amounts) 1999 1998 Change 1999 1998 Change
- --------------------------------------------------------------------------------------------------------
Revenues
Net Sales $250,291 $283,357 - 12% $786,280 $875,885 - 10%
Other income 2,179 2,528 - 14% 6,702 7,198 - 7%
-------- -------- -------- --------
252,470 285,885 - 12% 792,982 883,083 - 10%
Expenses
Cost of sales 150,949 179,220 - 16% 480,892 555,597 - 13%
Marketing and administrative 61,470 60,015 + 2% 187,865 183,948 + 2%
Research and development 11,576 13,808 - 16% 37,755 42,274 - 11%
Interest 4,864 4,534 + 7% 15,950 13,213 + 21%
Provision for contract settlement 3,870 3,870
Charge for restructuring businesses 2,430 2,430
Gain on divestiture of product lines (91,361)
-------- -------- -------- --------
Income before Taxes 17,311 28,308 - 39% 155,581 88,051 + 77%
Income taxes 3,365 9,908 - 66% 52,673 30,818 + 71%
-------- -------- -------- --------
Income before Minority Interests 13,946 18,400 - 24% 102,908 57,233 + 80%
Minority interests 2,960 4,222 - 30% 9,343 12,408 - 25%
-------- -------- -------- --------
Net income $ 10,986 $14,178 - 23% $93,565 $44,825 + 109%
======== ======== ======== ========
Net Income per Share - basic $0.48 $0.62 - 23% $4.09 $1.95 + 110%
Net Income per Share - diluted $0.48 $0.61 - 21% $4.06 $1.92 + 111%
Dividends Declared per Share $0.26 $0.26 $0.78 $0.76 + 3%
Average Shares Outstanding (000) - basic 22,800 23,034 - 1% 22,856 22,998 - 1%
Average Shares Outstanding (000) - diluted 22,983 23,130 - 1% 23,014 23,204 - 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 SEPTEMBER 30 December 31 September 30
---------------------------------------------------
(except per share amounts) 1999 1998 1998
- -------------------------- ----------- ----------- -----------
ASSETS
Cash and short-term securities $ 81,734 $ 111,049 $ 89,066
Accounts receivable, net 184,013 203,872 205,515
Inventories
Materials and supplies 54,622 65,180 66,367
In process and finished 126,179 129,175 127,917
LIFO reserve (15,572) (17,388) (17,625)
----------- ----------- -----------
165,229 176,967 176,659
Prepaid and deferred expenses 23,582 25,642 29,428
----------- ----------- -----------
Total current assets 454,558 517,530 500,668
Property, plant and equipment, at cost, net 336,607 360,456 360,536
Excess of cost over net assets of
businesses acquired 121,408 156,989 94,766
Patents, technology, trademarks, and covenants 115,844 118,152 27,707
Other assets 54,768 55,241 46,759
----------- ----------- -----------
$ 1,083,185 $ 1,208,368 $ 1,030,436
=========== =========== ===========
LIABILITIES & SHAREHOLDERS' EQUITY
Short-term debt $ 42,405 $ 39,810 $ 37,804
Accounts payable 64,620 91,718 94,385
Dividends payable 5,928 5,989 5,989
Accrued liabilities and taxes 97,101 95,427 97,426
Current installments of long-term debt 18,013 17,230 12,805
----------- ----------- -----------
Total current liabilities 228,067 250,174 248,409
Long-term debt 211,949 382,163 182,519
Deferred items 39,654 36,160 34,511
Long-term deferred income taxes 44,634 53,481 22,081
Long-term environmental reserves 12,773 13,501 13,649
Minority interests 89,782 84,340 121,357
Shareholders' equity
Common stock and paid-in capital 40,410 40,255 37,686
Retained earnings 493,807 418,074 437,183
Treasury stock (59,076) (51,512) (49,749)
Accumulated other comprehensive income (18,815) (18,268) (17,210)
----------- ----------- -----------
Total shareholders' equity 456,326 388,549 407,910
----------- ----------- -----------
$ 1,083,185 $ 1,208,368 $ 1,030,436
=========== =========== ===========
EQUITY PER SHARE $ 20.01 $ 16.86 $ 17.71
See accompanying notes to the condensed consolidated financial statements.
Amounts as of September 30, 1999 and September 30, 1998 are unaudited.
3
EXHIBIT 99c
DEXTER CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
- -----------------------------------------------------------------------------------------
Nine Months Ended September 30
------------------------------
In thousands of dollars 1999 1998
- -----------------------------------------------------------------------------------------
OPERATIONS
Net income $ 93,565 $ 44,825
Noncash items
Depreciation 27,603 29,850
Amortization 15,777 8,781
Gain on divestiture of product lines (91,361)
Charge for restructuring businesses 2,430
Income taxes (paid) / not due (1,087) 7,480
Minority interests 9,343 12,408
LIFO inventory charge / (credit) 253 (1,174)
Equity in net income of affiliates (394) (2,156)
Other (1,131) 1,423
Operating working capital increase (45,680) (32,885)
--------- ---------
9,318 68,552
--------- ---------
INVESTMENTS
Property, plant and equipment (46,734) (44,056)
Acquisitions (13,880) (1,781)
Divestitures 226,353
Proceeds from exercise of LTI stock options 1,638 5,230
Other (8,107) 2,024
--------- ---------
159,270 (38,583)
--------- ---------
FINANCING
Long-term debt, net (170,437) 4,992
Short-term debt, net 2,398 2,512
Dividends paid (17,893) (17,002)
LTI dividends paid to minority interest shareholders (1,346) (1,703)
Purchase of treasury stock (10,126)
Other 1,621 984
--------- ---------
(195,783) (10,217)
--------- ---------
(DECREASE) INCREASE IN CASH AND SHORT-TERM $ (27,195) $ 19,752
SECURITIES ========= =========
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 81,734 89,066
(Decrease) Increase in cash and short-term securities --------- ---------
per Statement of Financial Position (29,315) 20,760
Currency translation effects 2,120 (1,008)
--------- ---------
$ (27,195) $ 19,752
========= =========
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 September 30 Nine Months Ended September 30
------------------------------- ------------------------------
In thousands of dollars 1999 1998 Change 1999 1998 Change
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 10,986 $ 14,178 - 23% $ 93,565 $44,825 + 109%
-------- -------- -------- -------
OTHER COMPREHENSIVE INCOME (LOSS),
NET OF TAX
Currency translation effects 3,035 5,946 - 49% (143) 5,804
Unrealized (losses) gains on investments (51) 105 (404) (89)
-------- -------- -------- -------
OTHER COMPREHENSIVE INCOME (LOSS) 2,984 6,051 - 51% (547) 5,715
-------- -------- -------- -------
COMPREHENSIVE INCOME $ 13,970 $ 20,229 - 31% $ 93,018 $50,540 + 84%
======== ========= ======== =======
See accompanying notes to the condensed consolidated financial statements.
Amounts are unaudited.
5
Exhibit 99e
Dexter Corporation
Net Sales by Segment
Three Months Ended September 30 Nine Months Ended September 30
-------------------------------------- ------------------------------
In thousands of dollars 1999 1998 Change 1999 1998 Change
- --------------------------------------------------------------------------------------------------------------
Life Sciences (a) $ 101,797 $ 89,084 + 14% $ 301,148 $ 268,983 +12%
Nonwovens 69,037 65,628 + 5% 212,533 205,319 + 4%
Specialty Polymers (b) 79,457 128,645 - 38% 272,599 401,583 -32%
------ ------- ------- -------
Consolidated $ 250,291 $283,357 - 12% $ 786,280 $ 875,885 -10%
========= ======== ========= =========
(a) The effect of businesses acquired increased net sales in the Life Sciences
segment by $1.3 million, or 1% for the quarter, and $2.1 million, or 1%,
year-to-date.
(b) The effect of businesses divested decreased net sales in the Specialty
Polymers segment by $54.5 million, or 42%, for the quarter, and $129.1 million,
or 32%, year-to-date.
Operating Income by Segment
Three Months Ended September 30 Nine Months Ended September 30
------------------------------- ------------------------------
In thousands of dollars 1999 1998 Change 1999 1998 Change
- -----------------------------------------------------------------------------------------------------------------------------
Life Sciences (a) $ 9,639 $ 13,319 - 28% $ 36,357 $ 41,483 - 12%
Nonwovens (b) 8,225 8,995 - 9% 26,466 29,458 - 10%
Specialty Polymers (c) 6,604 11,952 - 45% 117,575 37,101 + 217%
--------- --------- -------- ---------
Consolidated Operating Income 24,468 34,266 - 29% 180,398 108,042 + 67%
Other Income, net 2,080 1,717 + 21% 5,241 4,352 + 20%
Interest Expense (4,864) (4,534) + 7% (15,950) (13,213) + 21%
General Corporate Expense (4,373) (3,141) + 39% (14,108) (11,130) + 27%
--------- --------- -------- ---------
Consolidated Income before Taxes $ 17,311 $ 28,308 - 39% $155,581 $ 88,051 + 77%
========= ========= ======== =========
(a) Life Sciences operating income includes $1.3 million of amortization charges
for the quarter, and $6.8 million, year-to-date associated with Dexter's
increased ownership in LTI. Life Sciences operating income includes a $3.9
million charge for the quarter and year-to-date related to the provision for
contract settlement at LTI.
(b) Nonwovens operating income for the quarter and year-to-date includes a $0.8
million restructuring charge.
(c) The gain on the divestiture of product lines increased operating income in
the Specialty Polymers segment by $91.4 million year-to-date. The effect of
businesses divested decreased operating income in the Specialty Polymers segment
by $4.2 million for the quarter and $8.1 million, year-to-date. Specialty
Polymers operating income for the quarter and year-to-date includes a $1.6
million restructuring charge.
- --------------------------------------------------------------------------------
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
nine-month periods ended September 30, 1999 and 1998:
Three Months ended Nine Months ended
Amounts in thousands September 30 September 30
(except per share data) 1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------
EARNINGS PER SHARE - BASIC:
Net income $ 10,986 $ 14,178 $ 93,565 $ 44,825
Weighted average shares
outstanding 22,800 23,034 22,856 22,998
Earnings per share - basic $ .48 $ .62 $ 4.09 $ 1.95
EARNINGS PER SHARE - DILUTED:
Net income $ 10,986 $ 14,178 $ 93,565 $ 44,825
Effect of subsidiary dilutive
options on net income (25) (102) (64) (320)
-------- -------- -------- --------
$ 10,961 $ 14,076 $ 93,501 $ 44,505
======== ======== ======== ========
Weighted average shares
outstanding 22,800 23,034 22,856 22,998
Weighted average effect of
common stock equivalents 183 96 158 206
-------- -------- -------- --------
22,983 23,130 23,014 23,204
======== ======== ======== ========
Earnings per share - diluted $ .48 $ .61 $ 4.06 $ 1.92
7
Exhibit 99f
Dexter Corporation
Notes to Condensed Consolidated Financial Statements (continued)
Note 3 - In September 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 SEPTEMBER 30, December 31, September 30,
(in thousands of dollars) 1999 1998 1998
- ------------------------- -------- -------- --------
Common stock $ 24,984 $ 24,984 $ 24,984
Paid-in capital 18,358 17,689 15,228
Unearned compensation on
restricted stock (2,932) (2,418) (2,526)
-------- -------- --------
$ 40,410 $ 40,255 $ 37,686
======== ======== ========
Note 5 - The following are included as components of Accumulated Other
Comprehensive Income:
ACCUMULATED OTHER COMPREHENSIVE SEPTEMBER 30, December 31, September 30,
INCOME (in thousands of dollars) 1999 1998 1998
- ------------------------------------ -------- -------- --------
Currency translation effects ($18,000) ($17,857) ($16,671)
Unrealized losses on investments (794) (390) (515)
Minimum pension liability adjustment (21) (21) (24)
-------- -------- --------
($18,815) ($18,268) ($17,210)
======== ======== ========
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 NINE MONTHS ENDED
(in thousands of dollars) SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
- ------------------------- -------------------- -------------------
Currency translation effects $ 3,035 $ (8,717)
Plus: Reclassification adjustments
for losses included in net
income due to divestitures 8,574
-------- ------------
Net currency translation effects $ 3,035 $ (143)
======== ============
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 $221.9 million.
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 Nine Months Ended
(except per share amounts) September 30, 1998 September 30, 1998
-------------------------- ------------------ ------------------
Net Sales $ 283,357 $ 875,885
Net Income $ 12,797 $ 38,859
Net Income Per Share - diluted $ .55 $ 1.67
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 September 30, 1999
were $262.1 million, a decrease of $155.9 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 September 30, 1999 were
$347.1 million, an increase of $49.6 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 September 30, 1999, $0.4 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.
In September 1999, LTI submitted a report in connection with a
voluntary disclosure to the Department of Veteran Affairs ("VA")
regarding matters involving the management of LTI's Federal
Supply Schedule contract with the VA that has been in effect
since April 1992. As part of the disclosure LTI has offered to
provide a refund to the government in the amount of $3.9 million.
LTI has recorded this amount in September 1999. There can be no
assurance that the government will agree with LTI's assessment of
this matter or accept LTI's offered refund amount. Consequently,
it is possible the final resolution of this matter could
materially differ from LTI's offer and could have a material
adverse effect on the Company's financial position, operating
results or cash flows when resolved in a future reporting period.
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 September 30, 1999 and 1998, and the related condensed
statements of income and comprehensive income for each of the three-month and
nine-month periods then ended, and the condensed statement of cash flows for the
nine-month periods then ended. These financial statements are the responsibility
of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed interim 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
October 13, 1999