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 December 31, 1994
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 - 2,728,533 shares as of January 31, 1995.
<PAGE>
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INDEX
PART I Financial Information
Item 1. Financial Statements
Page No.
Consolidated Condensed Balance Sheets
December 31, 1994 and March 31, 1994 3-4
Consolidated Condensed Statements of Earnings
and Retained Earnings - Nine Months and Three
Months Ended December 31, 1994 and 1993 5-6
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended December 31, 1994 and 1993 7
Notes to Consolidated Condensed Financial Statements 8-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-11
PART II Other Information 12
Signatures 13
<PAGE>
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<TABLE>
PART I. - FINANCIAL INFORMATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollar amounts in thousands of dollars)
<CAPTION>
December 31 March 31
1994 1994
----------- ---------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 5,261 $ 6,484
Accounts and Notes Receivable
(Net of Allowance for Doubtful
Accounts of $3,162 and $2,317) 45,656 39,738
Inventories
Finished Goods 15,232 13,091
Raw Materials 6,397 4,653
-------- --------
21,629 17,744
Prepaid Expenses and Other Current Assets 1,944 1,380
Deferred Income Tax Asset 2,930 3,069
-------- --------
Total Current Assets 77,420 68,415
Property, Plant and Equipment (Net of Accumulated
Depreciation of $35,562 and $32,690) 26,774 27,789
Other Assets 14,151 9,663
-------- --------
Total Assets $118,345 $105,867
======== ========
<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
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<TABLE>
<CAPTION>
December 31 March 31
1994 1994
----------- ---------
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term Borrowings, Current Portion
of Long-term Debt and Capital Lease
Obligations $ 10,665 $ 8,038
Accounts and Dividends Payable 18,204 13,496
Accrued Expenses 11,821 9,251
Income Taxes 3,368 2,671
-------- --------
Total Current Liabilities 44,058 33,456
Long-term Debt and Capital Lease Obligations (note 5) 19,291 922
Accrued Postretirement Benefits 4,019 3,214
Deferred Income Taxes 73 -
Minority Interest in Subsidiaries 103 106
Shareholders' Equity
Common Stock Without Par Value 4,133 4,099
Additional Paid-In Capital 1,561 834
Retained Earnings 81,788 75,039
Equity Adjustment From Foreign Currency
Translation 1,071 (203)
Less Cost of 1,393,547 and 530,648 Common
Shares in Treasury (note 5) (37,752) (11,600)
-------- --------
Total Shareholders' Equity 50,801 68,169
-------- --------
$118,345 $105,867
======== ========
<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
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<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(Unaudited)
(Amounts in Thousands Except Per Share Amounts)
<CAPTION>
Nine Months Ended Three Months Ended
December 31 December 31
------------------ ------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $133,632 $112,419 $44,547 $34,814
Costs and expenses
Cost of Sales 68,907 58,134 22,863 18,008
Selling, technical and
administrative expenses 49,065 44,157 16,341 14,283
Interest income (96) (203) (35) (71)
Interest expense 1,408 1,142 648 343
Foreign exchange (55) 453 (18) 77
Other (income) expense - net 667 250 133 (231)
-------- -------- ------- -------
119,896 103,933 39,932 32,409
-------- -------- ------- -------
Earnings before income taxes
and cumulative effect of
accounting change 13,736 8,486 4,615 2,405
Income taxes 5,261 3,251 1,977 928
-------- -------- ------- -------
Earnings before cumulative
effect of accounting changes 8,475 5,235 2,637 1,477
Cumulative effect of accounting
changes (note 4) (372) (2,082) - -
-------- -------- ------- -------
Net earnings $ 8,103 $ 3,153 $ 2,637 $ 1,477
Retained earnings, beginning of
period 75,039 71,491 79,559 72,097
Cash dividends declared (1,354) (1,606) (408) (536)
-------- -------- ------- -------
Retained earnings, end of period $ 81,788 $ 73,038 $81,788 $73,038
======== ======== ======= =======
Weighted average shares
Outstanding (note 3):
Primary 3,222,625 3,567,873 2,876,569 3,567,882
========= ========= ========= =========
Fully Diluted 3,242,283 2,875,603
========= =========
<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
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<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
December 31 December 31
----------------- ------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings per share (note 3)
Primary
Before cumulative effect of
accounting changes $2.63 $1.47 $ .92 $ .41
Cumulative effect of accounting
changes (note 4) (.12) (.59) - -
----- ----- ----- -----
$2.51 $0.88 $ .92 $ .41
===== ===== ===== =====
Fully diluted
Before cumulative effect of
accounting change $2.62 $ .92
Cumulative effect of accounting
change (note 4) (.12) -
----- -----
$2.50 $ .92
===== =====
Cash dividends per share $ .45 $ .45 $ .15 $ .15
===== ===== ===== =====
<FN>
See accompanying notes to consolidated condensed financial statements.
</FN>
</TABLE>
<PAGE>
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<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
Nine Months Ended
December 31
--------------------
1994 1993
---- ----
<S> <C> <C>
Net cash flows from operating activities $13,793 $ 5,162
Cash flows from investing activities:
Capital expenditures (2,725) (3,610)
Proceeds from disposition of fixed assets 3,285 576
Acquisition of business (9,141) -
Other investments 671 383
------- -------
Net cash flows used in investing activities (7,910) (2,651)
------- -------
Cash flows from financing activities:
Long-term and short-term borrowings 25,452 2,146
Long-term and short-term repayments (4,989) (2,482)
Acquisition of treasury stock (note 5) (26,152) -
Dividends paid (1,543) (1,606)
------- -------
Net cash flows used in financing activities (7,232) (1,942)
Effect of exchange rate changes on cash 126 (68)
------- -------
Net increase (decrease) in cash and
cash equivalents (1,222) 501
Cash and cash equivalents at beginning of year 6,484 5,831
------- -------
Cash and cash equivalents at end of period $ 5,261 $ 6,332
======= =======
Cash paid for interest $ 928 $ 953
======= =======
Cash paid for income taxes $ 3,730 $ 2,860
======= =======
<FN>
See accompanying notes to consolidated condensed financial statements.
</FN>
</TABLE>
<PAGE>
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
The March 31, 1994 condensed consolidated balance sheet amounts have
been derived from the previously audited consolidated balance sheet of
MacDermid, Incorporated. The balance of 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 1994
Annual Report.
Note 2. Trends of Results of Operations
The results of operations for the three and nine month periods ended
December 31, 1994 and 1993 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
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. Fiscal year 1995 is the first year this effect is
large enough to report.
Note 4. Accounting Change
MacDermid, Incorporated sponsors a defined benefit postemployment
compensation continuation plan that covers all of its full time domestic
employees. Employees are eligible to receive a benefit under the plan
who have completed at least six months of service, become permanently
disabled and are unable to return to return to work. The benefit may
range from one week to a maximum of six months of compensation.
During the first quarter of fiscal year 1995, the Corporation adopted
the provisions of Statement of Financial Accounting Standards No. 112
("SFAS 112"), Employers' Accounting for Postemployment Benefits. SFAS 112
requires accrual accounting rather than the previously used cash basis
accounting for recognition of the postemployment cost of salary
continuation. A one-time charge against earnings for the transition
obligation for past services of $372,000 (net of a $247,000 deferred
income tax benefit) was recorded on April 1, 1994. The estimated
ongoing additional after-tax annual cost of this plan is not material.
The Corporation's postemployment salary continuation plan is
unfunded; therefore, the Accumulated Postemployment Benefit Obligation,
Unfunded Accumulated Benefit obligation in Excess of Plan Assets and
the Accrued Postemployment Benefit Cost are equal to $619,000. Plan
assets for the plan at April 1, 1994 are $0.
The expected net periodic postemployment benefit cost for salary
continuation for fiscal 1995 includes approximately $2,000 for service
cost (benefits attributed to service during the period), $6,000 for
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interest cost and $619,000 for recognition of transition obligation
at April 1, 1994 for a total net periodic postemployment benefit cost
of $627,000.
The rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit
obligation was 4% and the weighted average settlement rate was 7.5%.
Note 5. Results of Self Tender Offer
Effective August 1, 1994, MacDermid purchased 851,899 shares of
its common stock at a price of $30 per share pursuant to a "Dutch
Auction" self tender offer that commenced on June 23, 1994 (the "Offer").
Under the terms of the Offer, the Corporation had sought to purchase up
to 1,000,000 shares at prices not greater than $30 nor less than $25 per
share, as specified by the tendering shareholders. The shares purchased
pursuant to the Offer represent approximately 23.8% of the shares
outstanding immediately prior to the commencement of the Offer. As of
the close of business on August 1, 1994, MacDermid had 2,731,483 shares
of common stock outstanding.
The total cost of the Offer, including all related fees and
expenses, was approximately $25.9 million. The Corporation funded the
purchase of the shares primarily by borrowing $25 million on an unsecured
basis under a six-year term loan. The term loan bears interest at a
variable rate, which initially was equal to the London inter bank market
rate ("LIBOR") plus 1.25 percentage points, or a total interest rate of
6.25% as of August 1, 1994. On August 30, 1994, the Corporation purchased
an interest rate cap which limits the interest payable on the outstanding
portions of the debt, except for the last $3.1 million. The maximum payable
LIBOR rates increase gradually from 5.81%, initially, to 8.97% when the cap
expires.
Separately, the Board of Directors authorized the Corporation to
purchase up to 148,000 shares of its common stock. Such shares may be
acquired through open market purchases or privately negotiated
transactions from time to time. Any future repurchases by MacDermid will
depend upon various factors, including the market price of the shares,
the Corporation's business and financial position and general economic
and market conditions. Additional shares acquired pursuant to such
authorization will be held in the Corporation's treasury and will be
available for the Corporation to issue without further shareholder
action (except as required by applicable law or the rules of any
securities exchange on which the shares are then listed). Such shares
may be used for various corporate purposes, including contributions
under existing or future employee benefit plans, the acquisition of
other businesses and the distribution of stock dividends. During the
third quarter of fiscal year 1995, 11,000 shares were repurchased at
$35 per share pursuant to this authorization.
<PAGE>
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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 nine month periods ended December 31, 1994 to those of the same
periods in 1993 and the changes in financial condition during the nine
months then ended.
CONSOLIDATED OVERVIEW:
Sales:
Overall sales of chemicals and equipment increased 28% for the current
quarter from the same period last year. This increase reflects continued
strengthening of business conditions generally and effects of the May
1994 acquisition of Allied-Kelite's metal finishing business. Sales of
proprietary chemical products for electronics and for metal and plastic
finishing industries increased in every geographic segment.
COSTS AND EXPENSES
Gross profits as a percentage of sales improved slightly despite the
recognition of transition and other accounting costs related to the
Allied-Kelite acquisition. Selling, technical and administrative expenses
increased 14% mainly due to addition of sales and research staff related
to the acquisition and to support new business overall. Nevertheless,
these expenses declined as a percentage of sales.
PROVISION FOR INCOME TAXES
The effective overall income tax rate for the year is a weighted average
composite of the tax rates for individual operations throughout the world.
For the nine months this year was the same as last year's 38%.
GEOGRAPHIC SEGMENT RESULTS
United States Operations:
Overall sales increased 32% for the December 1994 quarter, as compared to
the same period in the previous year, based upon generally improved
business conditions and benefit from the May 1994 acquisition. Both
electronic and metal finishing product lines contributed to the increase.
Gross margin percentages for the three and nine month periods were down
slightly, reflecting recognition of certain transition expenses from the
acquisition. Much improved joint venture equipment operations also
contributed to the earnings increase.
European Operations:
A rebounding business environment provided the basis for an 18% proprietary
chemical product sales increase for the third quarter for the European
<PAGE>
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business segment. Most of the companies in this group contributed to this
increase with the most dramatic improvement in France, Italy and Germany.
Additional impetus from equipment sales brought the overall increase to 25%
over the same period last year. Gross profit percentages improved during
the third quarter and, despite a small increase in selling, technical and
administrative expenses, net earnings were greatly improved from last year's
near break-even levels.
Far East Operations:
Led by companies in Japan, Hong Kong and Taiwan, the Far East group
continues to post healthy sales gains over last year with overall
increases of 25% for the December quarter and 17% for the nine months.
Gross profits as a percentage of sales were up as were operating profits.
Period costs were increased, particularly in Japan, to support research and
sales efforts. Income realized from a property sale in Hong Kong in the
first quarter was partially offset by losses in a Hong Kong joint venture.
Independent Group Operations:
The Independent group, with operations in Canada, Israel, South Africa,
Australia and New Zealand, posted overall sales increases of 18% and 11%
for the three and nine month periods this year despite the absence of sales
from Brazilian operations which were sold in last year's third quarter.
The group's net earnings were up significantly from last year's three and
nine month periods.
FINANCIAL CONDITION
As a result of the repurchase of 851,899 shares of MacDermid's common
stock at $30 per share under a "Dutch Auction" self tender offer,
outstanding shares were reduced 23.8% as of the close of business on
August 1, 1994. During December 1994, MacDermid purchased an additional
11,000 shares of its stock at $35 per share under a separate authorization
by the Board of Directors. The total cost of these shares was $26.1 million.
New borrowings of $29.6 million were obtained to fund the stock tender offer
and the Allied-Kelite acquisition. Working capital was down slightly from
$35 million at March 31 to $33.3 million at December 31, 1994. Capital
expenditures, $2.7 million to date, are expected to increase during
the fourth (March) quarter as projects begun earlier in the year are
brought to completion - in line with planned expenditures of about $5.3
million for the fiscal year.
Cash generated from operations, together with a net increase in long and
short-term borrowings of $21 million, proceeds from disposition of certain
fixed assets of $3.2 million and a modest decrease in cash balances, were
used to pay for capital improvements, dividends to shareholders, purchase
of the Allied-Kelite business and the stock purchased under the tender
offer. Unused credit lines currently total approximately $33 million and
long-term debt approximates $19 million.
<PAGE>
PART II.
OTHER INFORMATION
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
None
<PAGE>
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: February 6, 1995 Daniel H. Leever
Daniel H. Leever
President and Chief
Executive Officer
Date: February 6, 1995 C. Rice
Charles D. Rice
Vice President, Chief
Financial Officer and
Treasurer
Date: February 6, 1995 Gerald F. Renner
Gerald F. Renner
Corporate Secretary and
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<FISCAL-YEAR-END> Mar-31-1995
<PERIOD-START> Apr-01-1994
<PERIOD-END> Dec-31-1994
<PERIOD-TYPE> 9-MOS
<CASH> 5261
<SECURITIES> 0
<RECEIVABLES> 48818
<ALLOWANCES> 3162
<INVENTORY> 21629
<CURRENT-ASSETS> 77420
<PP&E> 62336
<DEPRECIATION> 35562
<TOTAL-ASSETS> 118345
<CURRENT-LIABILITIES> 44058
<BONDS> 19291
0
0
<COMMON> 4133
<OTHER-SE> 46668
<TOTAL-LIABILITY-AND-EQUITY> 118345
<SALES> 133632
<TOTAL-REVENUES> 133632
<CGS> 68907
<TOTAL-COSTS> 119896
<OTHER-EXPENSES> 50989
<LOSS-PROVISION> 881
<INTEREST-EXPENSE> 1408
<INCOME-PRETAX> 13736
<INCOME-TAX> 5261
<INCOME-CONTINUING> 8475
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 372
<NET-INCOME> 8103
<EPS-PRIMARY> 2.51
<EPS-DILUTED> 2.50
</TABLE>
