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 June 30, 1997
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 - 8,396,933 shares as of August 1, 1997.
<PAGE>
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MACDERMID, INCORPORATED
INDEX
PART I. Financial Information
Item 1. Financial Statements
Page No.
Consolidated Condensed Balance Sheets
June 30, 1997 and March 31, 1997 3-4
Consolidated Condensed Statements of Earnings
and Retained Earnings - Three Months
Ended June 30, 1997 and 1996 5
Consolidated Condensed Statements of Cash Flows -
Three Months Ended June 30, 1997 and 1996 6
Notes to Consolidated Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II. Other Information 9
Signatures 10
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<TABLE>
PART I. - FINANCIAL INFORMATION
MACDERMID, INCORPOROATED
CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in thousands of dollars except share amounts)
<CAPTION>
June 30, March 31,
1997 1997
----------- ---------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 6,414 $ 6,530
Accounts and Notes Receivable
(Net of Allowance for Doubtful
Receivables of $3,383 and $3,379) 65,015 61,419
Inventories
Finished Goods 25,567 23,125
Raw Materials 16,265 17,623
-------- --------
41,832 40,748
Prepaid Expenses 2,231 2,207
Deferred Income Tax Asset 4,803 4,808
-------- --------
Total Current Assets 120,295 115,712
Property, Plant and Equipment (Net of Accumulated
Depreciation of $42,672 and $41,424) 40,532 41,544
Goodwill, net 75,345 76,346
Other Assets 26,964 27,376
-------- --------
Total Assets $263,136 $260,978
======== ========
<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
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<TABLE>
<CAPTION>
June 30, March 31,
1997 1997
----------- ---------
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes Payable $ 5,801 $ 9,059
Current Installments of Long-term Obligations 9,380 7,816
Accounts and Dividends Payable 24,595 22,181
Accrued Expenses 20,496 23,015
Income Taxes 7,645 6,758
-------- --------
Total Current Liabilities 67,917 68,829
Long-term Obligations 102,187 75,165
Accrued Postretirement and Postemployment Benefits 4,191 4,157
Deferred Income Taxes 276 245
Minority Interest in Subsidiaries 91 88
Preferred Stock--6% Redeemable Series A (no par) - 32,436
Shareholders' Equity
Common Stock Stated Value $1 per Share 12,890 12,800
Additional Paid-In Capital 2,580 959
Retained Earnings 120,470 113,632
Equity Adjustment From Foreign Currency
Translation (59) 74
Less Cost of 4,613,186 Common
Shares in Treasury (Note 2) (47,407) (47,407)
-------- --------
Total Shareholders' Equity 88,474 80,058
-------- --------
$263,136 $260,978
======== ========
<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
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<TABLE>
MACDERMID, INCORPORATED
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(Unaudited)
(Amounts in Thousands Except Share and Per Share Amounts)
<CAPTION>
Three Months Ended
June 30,
------------------
1997 1996
---- ----
<S> <C> <C>
Net Sales $ 74,720 $ 72,655
Costs and Expenses
Cost of Sales 35,243 36,315
Selling, Technical and
Administrative Expenses 25,833 25,817
Interest Income (144) (183)
Interest Expense 1,568 2,086
Other Expense - Net 312 404
-------- -------
62,812 64,439
-------- -------
Earnings Before Income Taxes 11,908 8,216
Income Taxes 4,347 3,287
-------- -------
Net Earnings 7,561 4,929
Preferred Dividends (309) (459)
-------- -------
Net Earnings Available for
Common Shareholders 7,252 4,470
Retained Earnings, Beginning of
Period 113,632 95,564
Cash Dividends Declared (414) (414)
-------- -------
Retained Earnings, End of Period $120,470 $99,620
======== =======
Net Earnings Per Common Share -
Primary and Fully Diluted (Note 3,4) $0.86 $0.51
===== =====
Cash Dividends Per Common Share $0.05 $0.05
===== =====
Weighted Average Common Shares
Outstanding :
Primary 8,433,026 8,788,134
========= =========
Fully Diluted 8,435,782 8,791,005
========= =========
<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
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<TABLE>
MACDERMID, INCORPORATED
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
Three Months Ended
June 30,
--------------------
1997 1996
---- ----
<S> <C> <C>
Net Cash Flows from Operating Activities $ 7,664 $ 8,195
Cash Flows from Investing Activities:
Capital Expenditures (959) (1,592)
Proceeds from Disposition of Fixed Assets 346 37
------ -------
Net Cash Flows Used in Investing Activities (613) (1,555)
------- -------
Cash Flows from Financing Activities:
Short-Term (Repayments)/Borrowings (3,497) 9,186
Long-Term Borrowings 31,120 -
Long-Term Repayments (2,000) (14,320)
Preferred Stock Redemption (32,745) -
Exercise of Stock Options 482 543
Purchase of Treasury Shares - (5,190)
Dividends Paid (414) (414)
------- -------
Net Cash Flows Used in Financing Activities (7,054) (10,195)
Effect of Exchange Rate Changes on Cash (113) (111)
amd Cash Equivalents ------- -------
Net Decrease in Cash and Cash Equivalents (116) (3,666)
Cash and Cash Equivalents at Beginning of Year 6,530 8,833
------- -------
Cash and Cash Equivalents at End of Period $ 6,414 $ 5,167
======= =======
Cash Paid for Interest $ 1,526 $ 1,968
======= =======
Cash Paid for Income Taxes $ 3,210 $ 2,611
======= =======
<FN>
See accompanying notes to consolidated condensed financial statements.
</FN>
</TABLE>
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MACDERMID, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
The March 31, 1997 condensed consolidated balance sheet amounts
have been derived from the previously audited consolidated balance
sheets 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 results of
operations for the three month periods ended June 30, 1997 and
1996 are not necessarily indicative of trends or of the results
to be expected for the full year. The statements should be read
in conjunction with the notes to the consolidated financial
statements included in MacDermid's 1997 Annual Report.
Note 2. Stock Repurchase Authorization
The Board of Directors on August 28, 1996 authorized the
Corporation to purchase up to 100,000 shares of its common stock.
At June 30, 1997, there remained authorization to purchase
approximately 93,000 shares which may be acquired through
privately negotiated transactions or on the open market from time
to time. Any future repurchases by MacDermid will depend on
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 for various corporate
purposes without further shareholder action (except as required by
applicable law or the rules of any securities exchange on which the
shares are then listed).
Note 3. Common Stock Split
On October 21, 1996 the Board of Directors authorized a three-for-
one stock split that was distributed on November 15, 1996
to common shareholders of record at the close of business on
November 1, 1996. In the financial statements of this report all
per share amounts, dividends per common share and number of common
shares have been restated to give retroactive effect to the stock
split reflecting the increased number of common shares outstanding.
Note 4. Earnings Per Common Share
The computation of primary earnings per common share is based upon
the weighted average number of outstanding common 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 common 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. Earnings per common share are calculated based upon net
earnings available for common shareholders after deduction for
preferred dividends.
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ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion compares the results of operations for the three
month period which ended June 30, 1997 to the same period in 1996
and provides information with respect to changes in financial condition
during the three months then ended.
SALES
Total sales for the current quarter increased 3% from the same period last
year. Foreign currency translation had a negative effect on the reported
sales increase, which would have been 5% without any exchange rate influence.
Sales increased as proprietary business improved in all geographic regions,
while equipment business was soft in the current quarter. Net proprietary
chemical sales for the current quarter reached a record $66.6 million, an
increase of 6% from the same period last year.
COSTS AND EXPENSES
Gross profits are up 9%, arising from business growth and enhanced
margins realized from plant overhead savings. Ongoing costs awareness
programs and previous acquisitions have continued to strengthen margins which
increased as a percentage of sales for each of the last three quarters.
Selling, technical and administrative expenses were unchanged in total. Costs
to support growing markets overseas were neutralized by foreign currency
translations, while additional selling costs in domestic markets were offset
by cost savings realized by shared administrative functions. Operating
profits for the three month period increased 27% over the same period last
year, due to proprietary sales growth which did not require a proportionate
increase in support costs and further benefiting from the enhanced margins
mentioned above.
PROVISION FOR INCOME TAXES
Changes in taxable earnings among operating units which are taxable at
differing rates has not recently had a noticeable effect upon overall tax
rates. However ongoing tax minimization strategies has brought the effective
income tax rate to approximately 36.5% for the quarter ended June 30, 1997,
down from 40% for the same period in 1996.
NET EARNINGS
Net earnings available to common shareholders for the three month period
ending June 30, 1997 increased 62% over the same period last year. The
improved operating profit, as discussed above, enhanced by lower interest
expense due to accelerated debt reduction, led to these results.
<PAGE>
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FINANCIAL CONDITION
Operating activities during the three months ending June 30, 1997 resulted in
a net cash inflow of $7.7 million. The cash generated was primarily used for
a net $7.1 million reduction of debt. The balance of cash generated from
operations, together with a portion of cash already on hand, was used for
dividends to common shareholders and capital improvements. Working Capital at
June 30, 1997 was $52.4 million as compared to $46.9 million at March 31,
1997.
Capital expenditures were $1.0 million for the three months ended June 30,
1997 and are in line with total planned expenditures of about $7.6 million for
the fiscal year.
MacDermid has a long-term credit arrangement which consists of a seven-year
term loan which has a balance of $75.9 million outstanding at June 30, 1997, a
five-year revolving credit facility which permits borrowings of up to $65
million, of which $35.2 million is outstanding at June 30, 1997, and an
additional $100 million acquisition credit facility. The outstanding balance
on the five year revolving credit facility increased a net $28 million during
the quarter due to borrowings made to effect the redemption, ahead of
schedule, of all of the shares of preferred stock issued as part payment for a
1995 acquisition. MacDermid's other credit facilities, which presently total
approximately $33 million, and the $65 million revolving credit
facility and the Corporation's cash flows from operations, are adequate to
fund working capital and expected capital expenditures.
Outlook: Issues and Risks
This report and other Corporation reports and statements describe many of the
positive factors affecting the Corporation's future business prospects.
Investors should also be aware of factors which could have a negative impact
on those prospects. These include political, economic or other conditions
such as currency exchange rates, inflation rates, recessionary or expansive
trends, taxes and regulations and laws affecting the business; competitive
products, advertising, promotional and pricing activity; the degree of
acceptance of new product introductions in the marketplace; and the difficulty
of forecasting sales at certain times in certain markets.
PART II. OTHER INFORMATION
ITEM 2 : Changes in the Rights of Security Holders
None.
ITEM 5 : Other Information
None.
ITEM 6 : Exhibits and Reports on Form 8-K
None.
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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.
MacDermid, Incorporated
(Registrant)
Date: August 12, 1997 Daniel H. Leever
Daniel H. Leever
Chief Executive Officer
Date: August 12, 1997 Arthur J. LoVetere, Jr.
Arthur J. LoVetere, Jr.
Executive Vice President
Date: August 12, 1997 Gregory M. Bolingbroke
Gregory M. Bolingbroke
Corporate Controller
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