UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549-1004
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 30, 1995
COMMISSION FILE NUMBER 0-2413
MACDERMID, INCORPORATED
(Exact name of registrant as specified in its charter)
Connecticut 06-0435750
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
245 Freight Street, Waterbury, Connecticut 06702
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 575-5700
NONE
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 and 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.
Common Stock, no par value - 2,795,794 shares as of October 31, 1995.
<PAGE>
-2-
INDEX
PART I Financial Information
Item 1. Financial Statements
Page No.
Consolidated Condensed Balance Sheets
September 30, 1995 and March 31, 1995 3-4
Consolidated Condensed Statements of Earnings and
Retained Earnings - Six Months and Three Months
Ended September 30, 1995 and 1994 5-6
Consolidated Condensed Statements of Cash Flows -
Six Months Ended September 30, 1995 and 1994 7
Notes to Consolidated Condensed Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-11
PART II Other Information
Item 5. Other Information 11
Signatures 12
<PAGE>
-3-
<TABLE>
PART I. - FINANCIAL INFORMATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in thousands of dollars except share amounts)
<CAPTION>
September 30, March 31,
1995 1995
----------- ---------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 7,947 $ 7,630
Accounts and notes receivable
(Net of allowance for doubtful
receivables of $4,002 and $2,859) 50,965 45,559
Inventories
Finished goods 15,494 16,074
Raw materials 9,974 6,727
-------- --------
25,468 22,801
Prepaid expenses 3,057 2,052
Deferred income taxes 3,152 3,155
-------- --------
Total Current Assets 90,589 81,197
Property, plant and equipment (Net of
accumulated depreciation and amortization
of $37,469 and $35,721) 26,849 27,035
Other assets 12,728 15,073
-------- --------
$130,166 $123,305
======== ========
<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
-4-
<TABLE>
<CAPTION>
September 30, March 31,
1995 1995
----------- ---------
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 4,410 $ 4,720
Current installments of long-term obligations 4,370 4,413
Accounts and dividends payable 18,827 18,475
Accrued expenses 12,854 13,347
Income taxes 5,190 5,531
-------- --------
Total current liabilities 45,651 46,486
Long-term obligations 19,320 18,229
Accrued postretirement and postemployment
benefits 3,922 3,899
Deferred income taxes 942 960
Minority interest in subsidiary 81 77
Shareholders' Equity
Common stock, stated value $1 per share 4,194 4,136
Additional paid-in capital 3,171 1,676
Retained earnings 89,232 84,043
Equity adjustment from foreign currency
translation 1,616 1,551
Less cost of 1,398,547 and 1,393,547 common
shares in treasury (37,963) (37,752)
-------- --------
Total shareholders' equity 60,250 53,654
-------- --------
$130,166 $123,305
======== ========
<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
-5-
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(Unaudited)
(Amounts in Thousands Except Share and Per Share Amounts)
<CAPTION>
Six Months Ended Three Months Ended
September 30, September 30,
----------------- ------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $102,325 $89,085 $53,359 $46,498
Costs and expenses
Cost of Sales 51,089 46,044 27,327 24,719
Selling, technical and
administrative expenses 38,434 32,724 19,472 16,137
Interest income (158) (60) (102) (21)
Interest expense 1,122 760 612 510
Foreign exchange (62) (38) (57) (12)
Other expense - net 1,859 533 917 885
-------- ------- ------- -------
92,284 79,963 48,169 42,218
-------- ------- ------- -------
Earnings before income taxes
and cumulative effect of
accounting change 10,041 9,122 5,190 4,280
Income taxes 4,017 3,284 2,076 1,613
-------- ------- ------- -------
Earnings before cumulative
effect of accounting change 6,024 5,838 3,114 2,667
Cumulative effect of accounting
change - (372) - -
-------- ------- ------- -------
Net earnings 6,024 5,466 3,114 2,667
Retained earnings, beginning of
period 84,043 75,039 86,537 77,302
Cash dividends declared (835) (946) (420) (410)
-------- ------- ------- -------
Retained earnings, end of period $ 89,232 $79,559 $89,231 $79,559
======== ======= ======= =======
Weighted average shares
Outstanding (note 3):
Primary 2,915,147 3,401,705 2,924,260 3,150,302
========= ========= ========= =========
Fully diluted 2,919,487 3,429,830 2,926,343 3,163,473
========== ========= ========= =========
<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
-6-
<TABLE>
EARNINGS AND CASH DIVIDENDS PER SHARE
<CAPTION>
Six Months Ended Three Months Ended
September 30, September 30,
------------------ ------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings per share (note 3)
Primary:
Before cumulative effect of
accounting change $2.07 $1.72 $1.07 $0.85
Cumulative effect of accounting
change - (0.11) - -
----- ----- ----- -----
Net earnings per share $2.07 $1.61 $1.07 $0.85
===== ===== ===== =====
Fully diluted:
Before cumulative effect of
accounting change $2.06 $1.70 $1.06 $0.84
Cumulative effect of acounting
change - (0.11) - -
----- ----- ----- -----
Net earnings per share $2.06 $1.59 $1.06 $0.84
===== ===== ===== =====
Cash dividends per share $0.30 $0.30 $0.15 $0.15
===== ===== ===== ======
<FN>
See accompanying notes to consolidated condensed financial statements.
</FN>
</TABLE>
<PAGE>
-7-
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
Six Months Ended
September 30,
--------------------
1995 1994
---- ----
<S> <C> <C>
Net cash flows from operating activities $ 2,890 $ 6,335
Cash flows from investing activities:
Capital expenditures (1,606) (1,817)
Proceeds from disposition of fixed assets 219 3,243
Acquisition of business (1,600) (9,141)
Other investments - (64)
------- -------
Net cash flows used in investing activities (2,987) (7,779)
------- -------
Cash flows from financing activities:
Long-term and short-term borrowings 6,683 29,644
Long-term and short-term repayments (6,012) (3,244)
Exercise of Stock Options 659 600
Purchase of treasury shares (211) (25,742)
Dividends paid (836) (946)
------- -------
Net cash flows from financing activities 283 312
Effect of exchange rate changes on cash and
cash equivalents 131 168
------- -------
Net increase (decrease) in cash and
cash equivalents 317 (964)
Cash and cash equivalents at beginning of year 7,630 6,484
------- -------
Cash and cash equivalents at end of period $ 7,947 $ 5,520
======= =======
Cash paid for interest $ 1,426 $ 474
======= =======
Cash paid for income taxes $ 3,892 $ 2,453
======= =======
<FN>
See accompanying notes to consolidated condensed financial statements.
</FN>
</TABLE>
<PAGE>
-8-
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
The March 31, 1995 condensed consolidated balance sheet amounts
have been derived from the previously audited consolidated balance
sheets of MacDermid, Incorporated. The condensed financial information
reflects all adjustments which are, in the opinion of management,
necessary for a fair presentation of the financial position, results of
operations and cash flows for the interim periods presented and are of
a normal recurring nature unless otherwise disclosed in this report.
The statements should be read in conjunction with the notes to the
consolidated financial statements included in MacDermid's 1995 Annual
Report.
Note 2. Trends of Results of Operations
The results of operations for the three and six month periods ended
September 30, 1995 and 1994 are not necessarily indicative of trends or
of the results to be expected for the full year.
Note 3. Earnings Per Common Share
The computation of primary earnings per share is based upon the
weighted average number of outstanding shares plus (in periods in which
they have a dilutive effect) the effect of common shares contingently
issuable from stock options. The fully diluted per share computations
may also reflect additional dilution related to stock options due to
the use of the market price at the end of the period, when higher than
the average price for the period.
Note 4. Reclassification
Certain amounts in the 1994 Consolidated Condensed Statements of
Cash Flows have been reclassified to conform with the 1995 presentation.
<PAGE>
-9-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Following is a discussion that compares the results of operations for
the three and six month periods which ended September 30, 1995 to the
same periods in 1994 and the changes in financial condition during the
six months then ended.
CONSOLIDATED OVERVIEW:
SALES
Net proprietary chemical sales for the current quarter increased 12%
from the same period last year as business conditions continued to
strengthen in Europe and in the Asia-Pacific markets and currency
exchange rates moved favorably. Overall sales, which were 15% over
the same quarter last year, benefited from additional equipment
business domestically. For the six month period, total net sales
also increased 15%.
COSTS AND EXPENSES
Gross profits are 19% over last year for both the three and six month
periods. Gross profit, as a percentage of sales, is much improved,
primarily a result of overhead efficiencies realized through
integration of business acquired from Allied-Kelite last year and an
improvement in the mix of products sold. Selling, technical and
administrative expenses increased principally in support of the higher
sales levels. Operating profits for the three and six month periods
were 16% and 24%, respectively, over last year's corresponding periods.
PROVISION FOR INCOME TAXES
The effective income tax rate was approximately 40% for the current
six months period, up from approximately 36% for the same period in 1994.
This increase reflects the effects of changes in taxable earnings among
operating units which are taxable at differing rates.
NET EARNINGS
Net earnings, before the cumulative effect of an accounting change in
last year's first quarter, were 17% and 3%, respectively, over last
year's corresponding three and six month periods. Last year's first
quarter included a one-time nontaxable profit on the sale of property
in Asia.
GEOGRAPHIC SEGMENT RESULTS
NORTH AMERICAN OPERATIONS
Overall sales increases during the current periods were related
principally to a business acquisition during the first quarter of last
<PAGE>
-10-
fiscal year and to the inclusion in consolidated sales, during the
second quarter this year, of the operating results of a wholly-owned
equipment manufacturing subsidiary which formerly was a 50% owned
joint venture. Despite increased direct expenses related to new
business and performance incentives and sharply increased interest
cost related to last year's stock tender offer, net earnings were
above last year's levels.
EUROPEAN OPERATIONS
In Europe, proprietary sales, as recorded in local currencies, increased
in most countries as the European economy has continued to recover from
the recent severe recession. Currency rate adjustments also contributed
to the total sales increase which was in excess of 28% for both the three
and six month periods as compared to last year. Improved margins more
than offset a 25% rise in direct expenses to support sales growth
throughout the region. Despite acceleration of goodwill amortization
relative to a 1992 acquisition, net earnings showed substantial
improvement for the second consecutive year.
ASIA/PACIFIC
The Asia-Pacific markets produced overall sales growth of 14% and 24%
for the second quarter and six months as compared to the like periods
last year. Operating profits increased substantially for both the
three and six month periods leading to a net earnings increase for the
second quarter. Net earnings for the six month period are lower than
last year because a one-time nontaxable profit from a property sale
realized in the first quarter last year was not available this year.
FINANCIAL CONDITION
Operating activities during the six months ending September 30, 1995
resulted in a net inflow of cash amounting to $2.9 million. The cash
generated was used to pay for capital improvements and dividends to
shareholders. Modest additional borrowings were used to finance the
purchase of a partner's interest in an equipment joint venture.
Working capital at September 30, 1995 was $45 million as compared to
$35 million at March 31, 1995.
Capital expenditures are expected to increase in line with total
planned expenditures of about $5.0 million for the fiscal year.
MacDermid has a credit arrangement under which a long-term balance of
$15.6 million remains outstanding at September 30, 1995 under a six-
year term loan and which permits borrowings of up to $10 million under
a three-year revolving credit facility. MacDermid's other credit
facilities, which presently total approximately $38 million, together
with the $10 million revolving credit facility, are adequate to fund
current operating needs and expected capital expenditures.
<PAGE>
-11-
On September 28, 1995, MacDermid signed a letter of intent to acquire
the Electronics and Printing Division of Hercules, Incorporated for a
purchase price of $100 million cash and $30 million in preferred stock,
subject to completion of due diligence. The acquisition, which is
expected to be completed by the end of the year, would add approximately
$70 million annually to sales -- complementing and strengthening the
Corporation's position in Imaging Systems. The transaction would
require additional financing which Management is confident of obtaining
at favorable terms. Following the purchase, the Division's operations
are expected to remain at their present location in Delaware.
PART II.
OTHER INFORMATION
Item 5 - Other Information
On June 29, 1995, MacDermid acquired the remaining 50% share of its
Hollmuller America joint venture for equipment manufacture from
Hollmuller GmbH. The former joint venture company, which was renamed,
MacDermid Equipment, Inc. ("MEI"), is now a wholly-owned subsidiary of
MacDermid. The accounts of MEI were included in the consolidated
balance sheets as of June 30, 1995 and results of operations have
been included in consolidated results beginning July 1, 1995.
Item 6 - Exhibits and Reports on Form 8-K
None
<PAGE>
-12-
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.
MacDermid, Incorporated
(Registrant)
Date: November 10, 1995 Daniel H. Leever
Daniel H. Leever
President and Chief
Executive Officer
Date: November 10, 1995 Arthur J. LoVetere, Jr.
Arthur J. LoVetere, Jr.
Vice President and
Chief Financial Officer
Date: November 10, 1995 Gregory M. Bolingbroke
Gregory M. Bolingbroke
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<FISCAL-YEAR-END> Mar-31-1996
<PERIOD-START> Apr-01-1995
<PERIOD-END> Sep-30-1995
<PERIOD-TYPE> 6-MOS
<CASH> 7947
<SECURITIES> 0
<RECEIVABLES> 50965
<ALLOWANCES> 4002
<INVENTORY> 25468
<CURRENT-ASSETS> 90589
<PP&E> 64318
<DEPRECIATION> 37469
<TOTAL-ASSETS> 130166
<CURRENT-LIABILITIES> 45651
<BONDS> 19320
0
0
<COMMON> 4194
<OTHER-SE> 56056
<TOTAL-LIABILITY-AND-EQUITY> 130166
<SALES> 102325
<TOTAL-REVENUES> 102325
<CGS> 51089
<TOTAL-COSTS> 92284
<OTHER-EXPENSES> 41195
<LOSS-PROVISION> 767
<INTEREST-EXPENSE> 1122
<INCOME-PRETAX> 10041
<INCOME-TAX> 4017
<INCOME-CONTINUING> 6024
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6024
<EPS-PRIMARY> 2.07
<EPS-DILUTED> 2.06
</TABLE>
