UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C., 20549-1004
Form 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1998.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED].
For the transition period from to
Commission file number 0-2413
MACDERMID, INCORPORATED
(Exact name of Registrant as specified in its Charter)
Connecticut 06-0435750
(State of incorporation) (I.R.S. Employer I.D. No.)
245 Freight Street, Waterbury, Connecticut 06702-0671
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code (203) 575-5700
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of Class - Common Stock Without Par Value
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. ( )
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 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 the filing requirements for the past 90 days. Yes (X) No ( )
<PAGE>
The aggregate market value of the voting stock held by nonaffiliates of
the Registrant as of May 31, 1998 (based on the closing price on such date
as reported on Nasdaq Stock Market) was $1,032,318,000.
The number of shares of Registrant's Common Stock outstanding as of May
31, 1998 was 25,178,492 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Corporation's 1998 Annual Report to Shareholders are
incorporated by reference into Parts I and II hereof and filed as Exhibit
13 to this Report. The Proxy Statement mailed on or about June 22, 1998 to
the Corporation's stockholders in connection with the annual meeting
scheduled for July 22, 1998 are incorporated herein by reference into Part
III hereof.
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PART I
Item 1(a) GENERAL DEVELOPMENT OF BUSINESS
Incorporated in Connecticut in 1922, MacDermid, Incorporated and its
subsidiaries (collectively, "MacDermid" or the "Corporation") develops,
produces and markets a broad line of specialty chemical products which are
used in the metal and plastic finishing, electronics and graphic arts
industries. MacDermid offers a line of horizontal processing equipment
used in the production of printed circuit boards and in chemical
machining, through its wholly-owned subsidiary, MacDermid Equipment, Inc.
MacDermid also markets chemical supplies and equipment produced by others.
In December 1995, MacDermid acquired the assets, subject to certain
liabilities of the Electronics and Printing Division of Hercules
Incorporated, forming a new wholly-owned subsidiary, MacDermid Imaging
Technology, Inc., for that purpose. Effective January 1, 1998, the
subsidiary was disolved and all accounts of the business were merged
in with MacDermid, Incorporated. The acquired business consists
principally of the manufacture and sale of proprietary products
including photoresists, used to imprint electrical patterns on circuit
boards, and photopolymer printing, which reproduces quality graphics
on package printing and in-store displays. The acquisition, accounted
for as a purchase transaction, was financed, at closing, through bank
borrowings and the issuance of preferred stock. On May 28, 1997 all
the preferred stock was redeemed by utilizing a portion of a revolving
credit facility.
The Corporation's common shares had traded on the NASDAQ stock market
since 1966. The Corporation's original listing application to the
New York Stock Exchange was accepted on February 26, 1998 and since
that date its common shares now trade on the N.Y.S.E.
On February 6, 1998 the Corporation's Board of Directors authorized a
three for one stock split. The shares were distributed on April 1, 1998
to common shareholders of record at the close of business on
March 16, 1998. In the previous fiscal year, on October 21, 1996,
the Board of Directors authorized a three for one stock split, as
well. The shares were distributed on November 15, 1996 to common
shareholders of record at the close of business on November 1, 1996.
For a description of the Corporation's business, see Item 1(c) on the
following page.
Item 1(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
MacDermid has one primary industry segment which is the manufacture
and sale of specialty chemicals used in finishing metals and
non metallic surfaces, printing and in the marketing of supplies and
equipment related to the use of these chemicals.
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Item 1(c) of this Report provides information concerning MacDermid's
classes of products and Item 1(d) of this report includes financial
information concerning operations by geographic area and on a
consolidated basis. Additional information with respect to the one
primary business is shown in the portions of MacDermid's 1998 Annual
Report to Shareholders, included as Exhibit 13 to this Form 10-K, and
is incorporated by reference.
Item 1(c) NARRATIVE DESCRIPTION OF BUSINESS
(i) MacDermid produces and markets over 1,000 proprietary chemical
compounds. The proprietary chemical compounds are used for the
following purposes: cleaning, activating and polishing, mechanical
plating, mechanical galvanizing, electro-plating and phosphatizing
metal surfaces, stripping of metal and final coating of metal
surfaces, filtering, anti-tarnishing and rust retarding and etching,
imaging, deposition of metal and other chemical processes. Research
in connection with proprietary products is conducted principally in
the United States, with additional research facilities in Japan.
In North America, MacDermid markets its entire line of products in
the United States through more than 130 sales and service personnel
employed by it and, in certain areas of the United States, through
distributors and manufacturing representatives. The Corporation
maintains chemical inventories at more than 20 distribution points
throughout the United States which typically are leased or rented.
In Vermont a wholly owned subsidiary manufactures and markets
equipment in support of the proprietary chemical business. In
Canada the Corporation both manufactures and markets certain
of its products through MacDermid Chemicals, Inc.
In Europe, the Corporation markets its proprietary products
through wholly owned subsidiaries. European sales are made from
inventory stock through more than 50 sales and service
representatives who are employed by the Corporation's subsidiaries
located in France, Germany, Great Britain, Italy, Holland,
Spain and Switzerland. MacDermid owns and operates subsidiary
manufacturing facilities in Spain and Great Britain.
In the Asia/Pacific area, the Corporation markets its proprietary
products through wholly owned subsidiaries in Australia, Hong Kong,
China, Japan, Korea, New Zealand, Singapore, and Taiwan, and sales
are made through more than 50 sales and service representatives
who are employed by local subsidiaries. In addition, sales are
made in India, Thailand, Malaysia and The Philippines directly
or through distributors. MacDermid owns and operates subsidiary
manufacturing facilities in Taiwan, Australia and New Zealand.
In certain other foreign markets, MacDermid manufactures and sells
certain of its proprietary chemicals and conducts research through
wholly or majority owned subsidiaries. In certain countries in
South America, Europe and Asia, MacDermid products are sold
through distributors or manufactured and sold through licensees.
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Chemicals, supplies and equipment manufactured by others and resold
by MacDermid consist of basic chemicals, automatic plating
conveyors, barrel plating and pollution control equipment,
rectifiers, pumps and filters. Resale items are marketed primarily
in conjunction with and as an aid to the sale of proprietary chemicals.
MacDermid's principal products fall into the three following classes:
(A) Chemical compounds produced by MacDermid, most of which are the
result of the Corporation's own research and development and,
therefore, are referred to as proprietary products;
(B) Resale chemicals and supplies; and
(C) Equipment, of which more than 66% is manufactured by the Corporation.
The following table sets forth the classes of MacDermid's products and
the respective percentage of total consolidated revenue for each of the
last three fiscal years:
Class of Products 1998 1997 1996
Proprietary Chemicals 88% 88% 88%
Resale Chemicals
and Supplies 5% 6% 6%
Equipment 7% 6% 6%
(ii) MacDermid made a public announcement of the commercialization of an
important new process technology, ViaTek. A press release, dated
May 18, 1998, is incorporated by reference.
(Iii) MacDermid uses in excess of 700 chemicals as raw materials in the
manufacture of its proprietary products. With few exceptions,
several domestic sources of supply are available for all such raw
materials and for resale chemicals, supplies and equipment.
During fiscal 1998, there were no significant difficulties in
obtaining raw materials essential to its business.
(Iv) During fiscal 1998, approximately 20% of MacDermid's proprietary
sales were derived from products covered by patents owned by the
Corporation or produced under patent license agreements. MacDermid
owns more than 70 unexpired U.S. Patents, for which corresponding
patents have been obtained or are pending in most industrialized
nations, and has more than 20 patent applications pending in the
U.S. The patents owned by Registrant are important to its
business and have varying remaining lives.
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Although certain of MacDermid's patents are increasingly more important to
its business, it believes that its ability to provide technical and testing
services to its customers and to meet the rapid delivery requirements of its
customers is equally, if not more, important. In addition, MacDermid has many
proprietary products which are not covered by patents and which make a large
contribution to its total sales. Further, the Corporation owns a number of
domestic and foreign trade names and trademarks which it considers to be of
value in identifying MacDermid and its products. MacDermid neither holds nor
has granted any franchises or concessions.
(v) No material portion of MacDermid's business is seasonal.
(Vi) It is necessary to maintain finished goods inventory at locations
throughout the United States and in the foreign countries in which
the Corporation operates so that it may meet the rapid delivery
requirements of its customers. This impacts working capital
requirements by requiring a considerable investment in
inventories to service its customers. Customer payment terms,
which vary by country, are generally in accord with local industry
practice.
(Vii) No major portion of MacDermid's business is dependent upon a
single customer or a few customers, the loss of whom would have
a materially adverse effect on its business.
(Viii) Since products are taken from inventory stock to ship against
current orders, there is essentially no backlog of orders for
MacDermid's proprietary chemical products. MacDermid does not
consider the absence of a backlog to be significant.
(Ix) No material portion of MacDermid's business is subject to
renegotiation of profits or termination of contracts or
subcontracts at the election of the Government.
(X) The Corporation provides a broad line of proprietary chemical
compounds and supporting services. MacDermid has many
competitors, estimated to be in excess of 100 in some
proprietary product areas. Some large competitors operate
globally, as does MacDermid, but most operate locally or
regionally. To the best of the Corporation's knowledge no
single competitor competes with all its proprietary products.
MacDermid maintains extensive supporting technical and testing
services for its customers, and is continuously developing new
products. Management believes that the Corporation's combined
abilities to manufacture, sell, service and develop new products
and applications enables it to compete successfully both locally
and world-wide.
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(Xi) MacDermid spent approximately $12,028,000, $10,850,000 and $10,042,000
during fiscal years 1998, 1997 and 1996, respectively, on research and
development activities. Substantially all research and development
activities were sponsored by the Corporation, the greater percentage of
which related to the development of new products.
(Xii) For many years, MacDermid has developed proprietary products designed
to reduce the discharge of pollutant materials into the environment and
eliminate the use of certain targeted raw materials while enhancing
the efficiency of customer chemical processes. For this reason,
efforts to comply with Federal, State and local provisions, which have
been enacted or adopted regulating the discharge of materials into the
environment, may have had a positive effect upon the Corporation's
competitive position. Capital expenditures of approximately $8.3
million were made in fiscal 1998 and an estimated $1 million will be
spent for environmental control facilities in fiscal 1999. Though
difficult to predict, future spending for this purpose is likely to
average more than 10% of the capital budget.
(Xiii) MacDermid employed 1,179 and 1,086 full time, regular employees as of
March 31, 1998 and 1997, respectively.
Item 1(d) FOREIGN AND DOMESTIC OPERATIONS
MacDermid's 1998 Annual Report to Shareholders, included as Exhibit 13 to this
Form 10-K and incorporated by reference, provides information with respect to
the Corporation's geographic segments including operating information and the
effect upon shareholder's equity of the translation of foreign currency
financial statements.
Item 2 PROPERTIES
In the United States, MacDermid owns the following properties:
In Waterbury, Connecticut, a 51,700 square foot building, principally used for
executive offices, marketing and corporate support, and a 62,000 square foot
research and customer service facility, both of which are located on a 5.8
acre tract. In addition, a 180,000 square foot wood brick and concrete
building complex is principally used for manufacturing and warehousing but
also includes some offices and laboratories. The complex is located on a 7.2
acre tract. Directly across a street from this property, a 31 acre tract of
land is held for possible future development.
In Middletown, Delaware, a concrete and steel building of 85,520 square feet
consisting of factory, laboratory, warehouse and office facilities located on
a 10.97 acre tract.
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In Wilmington, Delaware, a concrete and steel building of 26,000 square feet
used principally as a technical and administrative services center located on
a 3.8 acre tract. Also on this site is an 18,000 square foot concrete and
steel building which may be used for manufacturing expansion.
In Ferndale, Michigan, a steel frame and steel sided building of 75,000 square
feet consisting principally of factory, warehouse and office facilities,
located on a 6.25 acre tract.
In New Hudson, Michigan, a steel and brick single story building of 15,000
square feet consisting of research laboratories and offices located on a 7
acre tract.
The Corporation also owns property in Vernon, Connecticut, which is being
held for sale or lease but which could be used for manufacturing
should the need arise.
Outside the United States, the Corporation owns additional properties as
follows:
At Barcelona, Spain, a steel and brick building of 31,000 square feet of
factory, warehouse, laboratory and office space.
At Telford, England, two brick, concrete and steel buildings, connected by a
walkway, containing a total of 43,000 square feet of manufacturing
warehouse, laboratory and office space.
At Hsin Chu, Taiwan, Republic of China, two buildings of reinforced
concrete totaling 30,000 square feet, located on a 1.8 acre tract,
used for factory, warehouse and offices.
At Hong Kong, 30,000 square feet of office, laboratory and warehouse
space in a concrete block building.
In addition, MacDermid leases office, laboratory, warehouse and
manufacturing facilities as needed. During the year, such additional
facilities were leased in Vermont, Canada, Holland, Germany, Korea,
Australia, Japan, Singapore, China and several other foreign countries.
All owned and leased facilities are in good condition and are of adequate
size for present business volume.
Item 3 Legal Proceedings
Legal proceedings are contained in MacDermid's 1998 Annual Report to
Shareholders included as Exhibit 13 to this form 10K and incorporated by
reference.
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Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the third quarter of fiscal 1998 there was a special shareholders
meeting, held on December 1, 1997, at which the Corporation's security
holders voted to ammend MacDermid's Restated Certificate of Incorporation
which is included as exhibit 3.1 to this form 10K and incorporated by
reference.
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Item 4A EXECUTIVE OFFICERS OF MACDERMID
The following is a list of the names, offices and ages (as of March 31, 1998)
of all the executive officers of MacDermid, each of whom has been employed in
his respective office(s) for more than five years, except as noted:
Name Age Office with Registrant
Harold Leever 83 Chairman since 1977
Daniel H. Leever 49 President and Chief Executive Officer
since 1990.
Arthur J. LoVetere, Jr. (1) 34 Vice President and Chief Financial Officer
since December 1995. Previously, was
Director of European Operations since 1993.
Gregory M. Bolingbroke 48 Corporate Controller since April 1995.
Previously, was Cost Accounting Manager
since 1993.
John L. Cordani 35 Corporate Secretary since April 1995.
Previously, was General Counsel since May
1993. Prior to that and since 1992, he was
Manager of Patents and Trademarks.
David A. Erdman 55 Vice President since November 1993.
Previously, and since 1988, was Director of
Quality of the Electronics Group of
E.I. Dupont de Nemours, Inc.
Patricia I. Janssen 47 Vice President/Electronics and Printing
since December 1995. Previously, and since
1978 she was with Hercules Incorporated,
serving as general manager of the
E&P Division since 1992.
Peter E. Kukanskis 51 Vice President/Technical since 1986
Gary B. Larson 58 Vice President/Research since 1981
Michael A. Pfaff 54 Vice President/Industrial Products since
1984
Sharon J. Stone (2) 48 Assistant Treasurer since February 1995.
Previously, she was for more than five
years, and continues to be, Manager of
General Accounting
Notes:
(1) Mr. LoVetere became President, ViaTek effective April 1, 1998.
(2) Ms. Stone retired effective April 1, 1998.
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PART II
Item 5 MARKET FOR MACDERMID'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
Information with respect to the market for MacDermid's Common Stock,
dividends paid and other related information is contained in its 1998
Annual Report to Shareholders included as Exhibit 13 to this form 10-K
and incorporated by reference.
Item 6 SELECTED FINANCIAL DATA
The selected financial data (Five-Year Summary) is contained in MacDermid's
1998 Annual Report to Shareholders included as Exhibit 13 to this form 10-K
and incorporated by reference.
Item 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations is contained in MacDermid's 1998 Annual Report to Shareholders
included as Exhibit 13 to this form 10-K and incorporated by reference.
Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, including the notes thereto, of the
Corporation are contained in MacDermid's 1998 Annual Report to Shareholders
included as Exhibit 13 to this form 10-K and incorporated by reference.
Additional financial information is contained in the Financial Data Schedule
appearing as Exhibit 27 to this report.
Item 9 DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10 DIRECTORS AND OFFICERS
The discussion of "Election of Directors" and a portion of the discussion in
the section, "Interest of Management and Others in Certain Transactions and
Family Relationships" contained in MacDermid's Proxy Statement dated June 22,
1998 are incorporated herein by reference thereto. Officers of the
Corporation are listed in Item 4A, above.
Item 11 EXECUTIVE COMPENSATION
The discussion of "Executive Compensation" contained in MacDermid's Proxy
Statement dated June 22, 1998 is incorporated herein by reference thereto.
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Item 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to the security ownership of certain beneficial
owners and management contained in MacDermid's Proxy Statement dated June 22,
1998 is incorporated herein by reference thereto.
Item 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND FAMILY
RELATIONSHIPS
The discussion of "Interest of Management and Others in Certain Transactions
and Family Relationships" contained in MacDermid's Proxy Statement dated June
22, 1998 is incorporated herein by reference thereto.
PART IV
Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
The consolidated financial statements and report thereon of KPMG Peat Marwick
LLP, dated May 14, 1998 are contained in MacDermid's 1998 Annual Report to
Shareholders included as Exhibit 13 to this form 10-K and incorporated herein
by reference. Additional financial information is contained in the Financial
Data Schedule included as Exhibit 27 to this report.
(2) Financial Statement Schedules
The following supplementary financial data should be read in conjunction with
the consolidated financial statements and comments thereto referred to above.
Schedules not included with this supplementary financial data have been
omitted because they are not applicable, are immaterial or the required
information is included in the consolidated financial statements or related
notes to consolidated financial statements.
Schedule II - Valuation and Qualifying Accounts and Reserves
Auditors' Report on Supporting Schedule
(3) Exhibits
An index to the exhibits filed or incorporated by reference immediately
precedes such exhibits.
(c) Reports on Form 8-K
The Corporation filed a report on Form 8-K, dated January 15,1998, during
the fourth quarter of fiscal 1998. This report relates to a three for one
stock split on February 6, 1998 and the third quarter earnings announcement
and is incorporated by reference.
(d) Schedules
The schedules listed above are filed as part of this Annual Report on
Form 10-K.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized.
MACDERMID, INCORPORATED
(Registrant)
Dated: June 22, 1998
By /s/ Harold Leever By /s/ Daniel H. Leever
Harold Leever Daniel H. Leever
Director, Chairman Director, President and
Chief Executive Officer
By /s/ Arthur J. LoVetere, Jr By /s/ Gregory M. Bolingbroke
Arthur J. LoVetere, Jr. Gregory M. Bolingbroke
Vice President and Controller and Principal
Chief Financial Officer Accounting Officer
Harold Leever, pursuant to powers of attorney which are being filed with this
Annual Report on Form 10-K, has signed below on June 22, 1998 as attorney-in-
fact for the following directors of the Registrant:
Donald G. Ogilvie Thomas W. Smith James C. Smith
/s/ Harold Leever
Harold Leever
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SCHEDULE II
<TABLE>
MACDERMID, INCORPORATED AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
Years ended March 31, 1998, 1997 and 1996
<CAPTION>
Balance at Additions Balance
beginning charged to Deductions at end
Description of period earnings of period
<S> <C> <C> <C> <C>
1998
Allowance for
doubtful
receivables $3,379,000 $ 817,000 $598,000 $3,598,000
========== ========== ======== ==========
1997
Allowance for
doubtful
receivables $4,829,000 $ 547,000 $ 1,997,000 $3,379,000
========== =========== =========== ==========
1996
Allowance for
doubtful
receivables $2,859,000 $ 1,793,000 $ (177,000) $4,829,000
========== =========== =========== ==========
Bad debts charged off less recoveries and translation adjustments.
</TABLE>
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REPORT OF INDEPENDENT AUDITORS
KPMG Peat Marwick LLP (Logo)
Certified Public Accountants
CityPlace II
Hartford, CT 06103-4103
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
MacDermid, Incorporated:
Under date of May 14, 1998, we reported on the consolidated balance sheets
of MacDermid, Incorporated and subsidiaries as of March 31, 1998 and 1997,
and the related consolidated statements of earnings and cash flows for each
of the years in the three-year period ended March 31, 1998, as contained in
the 1998 annual report to shareholders. These consolidated financial
statements and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year 1998. In connection with our
audits of the aforementioned consolidated financial statements, we also
audited the related financial statement schedule as listed in the
accompanying index under Item 14(a)(2). This financial statement schedule
is the responsibility of the Company's management. Our responsibility is
to express an opinion on this financial statement schedule based on
our audits.
In our opinion, such schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
KPMG Peat Marwick LLP
May 14, 1998
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EXHIBIT INDEX
1998 FORM 10-K ANNUAL REPORT
Exhibit
No.
3.1 Restated Certificate of Incorporation, MacDermid,
Incorporated,amended as of December 1, 1997. By reference
Exhibit 19 to September 30, 1991 Form 10-Q
Quarterly Report is incorporated by reference herein.
3.2 By-Laws, amended as of November, 1984. Exhibit 3b to 1985
Form 10-K Annual Report is incorporated by reference
herein. By reference
4.1 Credit Agreement, amended and restated, dated as of
April 15, 1998, among MacDermid, Incorporated, the
Banks signatory thereto and Chase Manhattan Bank,
N.A., as Agent, is incorporated by reference herein. By reference
10.1 MacDermid, Incorporated Special Stock Purchase Plan,
amended as of November 1, 1992. Exhibit 10 to
1993 Form 10-K Annual Report is incorporated by
reference herein. By reference
10.2 MacDermid, Incorporated 1995 Equity Incentive Plan
Exhibit 10.2 to 1995 Form 10-K Annual Report is
Incorporated by reference herein. By reference
13 Portions of MacDermid's 1998 Annual Report
to Stockholders as required by Item 8 Attached
21 Subsidiaries of MacDermid, Incorporated Attached
23 Independent Auditors' Consent Attached
24 Power of Attorney Attached
27 Financial Data Schedule Attached
EXHIBIT 13
PORTIONS OF MACDERMID'S 1998 ANNUAL REPORT TO STOCKHOLDERS.
Except for the pages and information expressly incorporated by
reference, the financial and other information included in this Exhibit
13 is provided solely for the information of the Securities and Exchange
Commission and is not deemed "filed."
MacDermid Corporate Philosophy
Our Business
MacDermid Incorporated is in the international business of researching,
developing, acquiring, manufacturing, marketing, and servicing, for optimum
profit to us and our customers, specialty chemicals and systems for the
chemical treatment, surface preparation and finishing of metals, plastics
and other materials in accordance with accepted ecological and social
considerations.
Our Customers
We will create an industry image that automatically causes people in
the industries we serve to think first of MacDermid.
We will justify their action by first thinking of the customers'
needs --- what's right for them makes it right for MacDermid --- by
supplying a total system including processes, know-how and services that
assist in meeting all their needs.
Our People
We continue to believe in the supreme worth of the individual and
the dignity of his or her work for the benefit of all. We will provide
the opportunity for our people to fulfill satisfactorily their own
personal objectives and ambitions and reward them in proportion to
their contribution toward achieving the Corporate objectives.
We will continue to be a place of opportunity where people "have
the guts to fail." We will encourage the entrepreneurs and innovators.
We will continually challenge the goals, objectives, organization and all
the operating and procedural aspects of our business and modify them when
needed.
Our progress and your progress, our Company's long-term advantage and
your long-term advantage, lie in our human resources. Other advantages
that come about from technological improvements, the opening of new markets,
lower costs, etc., all prove to be relatively short run. So, basically, it
is the initiative, the will and the motivation that people bring to their
work on which we rely for our survival and growth.
We will continue to try to attract new people who have creative and
probing minds; people who will at times be disturbing--questioning policy
and procedures. If we are wise, we will welcome it, resolve it, put it to
work or forget it.
We will continue to expand with the best possible talent available and
continue to train them, and ourselves, so that we each increase our ability
to contribute to the Company's progress.
<PAGE>
We will each strive to exemplify the MacDermid Spirit of teamwork and
cooperation throughout the organization which has been instrumental to our
past and present growth as a corporation.
What we can expect from you
First and foremost, we expect of you a fundamental honesty--honesty
with yourself, with your Company and with all those with whom you interact,
whether they be associates within our organization, our customers or society
in general. Character and strength have always been born of honesty and a
willingness to face up to the truth of each situation as it arises.
Second, we expect and insist on hard work. An easy life, marked by the
absence of difficulty, builds neither character nor happiness. We believe
that self-realization of the individual is founded on accomplishment, which
implies a willingness to make the sacrifices necessary to get the job done
the way it should be done.
Third, we expect you to accept responsibility. Every assignment you
will have carries with it a responsibility for accomplishment. Commit
yourself to achievement which you consider beyond the scope of your
talents and then program your effort to translate it into a reality.
Fourth, we expect of you a loyalty--loyalty to yourself, your family,
your associates, your organization and our customers. We have always worked
together as an organization and your own personal achievements will be
measured in terms of the contribution you make to our joint effort.
Fifth, we expect you to demonstrate good judgment. Judgment is
essentially an ability to appraise facts. Factual knowledge must come
before good judgment. This means you must continually educate yourself
on our Company, our products and our industry. In this way, you will
have the material on which a sound appraisal of good judgment is based.
This is what we expect of you, and being in an extremely competitive
environment, we have a real urgency in this expectancy.
What you can expect from us
One, you can expect from us the fairest treatment of which we are
capable--fair in respect to matters of compensation, fair in respect to
working conditions and fair in respect to personnel policies.
Two, you can expect from us, as a Company, complete honesty in whatever
we do. Your assignments will never compromise the principles of honesty and
common decency which we also expect you, as an individual, to uphold.
Three, you can expect that we will provide assignments which will
represent challenges to you--assignments which will enable you to grow
toward your professional and personal objectives.
Four, you can expect that we will offer opportunities for advancement.
Our desire to grow from within.
Five, you can expect that we will be a demanding organization--demanding
of your time, your talents and the best which you as an individual have to
offer. In this way our company will grow and you will grow with it.
Perhaps all this can best be summarized in these words form an unknown
author:
"Create mental pictures of your goals, then work to make those pictures
become realities.
<PAGE>
Exercise you God-given power to choose your own direction and influence
your own destiny and try to decide wisely and well.
Have the daring to open doors to new experiences and to step boldly
forth to explore strange horizons.
Be unafraid of new ideas, new theories and new philosophies.
Have the curiosity to experiment...to test and try new ways of living
and thinking.
Recognize that the only ceiling life has is the one you give it and
come to realize that you are surrounded by infinite possibilities for
growth and achievement.
Keep your heart young and your expectations high and never allow your
dreams to die."
MacDermid Incorporated 1998 Annual Report
MacDermid: Corporate Profile
Founded in 1922 and headquartered in Waterbury, Connecticut, MacDermid,
Incorporated (NYSE:MRD) is a leading worldwide manufacturer of specialty
chemical processes for the metal and plastic finishing, electronics and
graphic arts industries with operating facilities in 19 countries. The
Corporation employs nearly 1,200 worldwide, many of whom are shareholders.
Our vision is to build one of the world's greatest industrial companies.
For additional information visit our World Wide Web site -
www.macdermid.com.
<TABLE>
(Three horizontal bar graphs are provided here, net sales, diluted earning
per common share and return on equity. Each graph depicts one facet of
results of operations for the fiscal years 1994 through 1998.)
GRAPH VALUES
(In thousands, except share and per share amounts)
<CAPTION>
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
Net Sales $150,026 $182,100 $235,891 $293,720 $314,058
Diluted Earnings
Per Common
Share <F1> $0.24 $0.39 $0.50 $0.85 $1.20
Return on
Equity <F1> 11.7% 18.3% 22.1% 30.2% 32.9%
<FN>
<F1> Refer to Five Year Selected Financial Data footnotes on page 4.
</TABLE>
<PAGE>
Message to Shareholders
<TABLE>
MacDermid, Incorporated Financial Highlights
<CAPTION>
(In thousands, except share and per share amounts.)
1998 1997 % Change
======================================
<S> <C> <C> <C>
Net Sales $314,058 $239,720 7
Net Earnings $ 30,488 $ 22,010 39
Return on Average Equity 32.9% 30.2% -
Average Shares Outstanding <F1> 25,483,844 25,912,677 (2)
Diluted Earnings Per Common Share<F1> $1.20 $0.85 41
Free Cash Flow $ 26,703 $ 29,641 (10)
<FN>
<F1>Net earnings per common share and average shares outstanding have been
restated to reflect the effects of a 3-for-1 stock split effective
February 6, 1998.
</TABLE>
Dear Shareholders,
Fiscal 1998 marked our seventh consecutive year of record performance.
Per share earnings, our primary focus, increased 41% to $1.20 from $0.85 in
1997. Net earnings increased 39% to $30 million, from $22 million. Sales
increased 7% to $314 million, from $294 million. Both Europe and Asia had a
record year in spite of well publicized negative currency comparisons and
macroeconomic problems. Sales to our printed circuit, printing and metal
finishing customers all increased.
Nineteen ninety-eight was an eventful year. After 60 years of
inspirational leadership Harold Leever, our Chairman, has chosen to become
Chairman Emeritus. He will continue as a Director. What a ride! In 1959
Harold, with a number of employees, bought out MacDermid's founder, Archie
MacDermid. In the early '60s, in what turned out to be a brilliant
strategic move, he led a tiny metal finishing cleaner company into the
electronic chemical business. This was a huge bet at the time, and we are
still enjoying its fruits today. Perhaps more importantly, Harold
established the MacDermid Philosophy. It is printed as usual on the
inside front cover of this report (before the numbers). Today the "Clan
MacDermid" with over a thousand members in 19 countries around the world
is as focused as ever on the Philosophy's core principles:
focus on the customer honesty and integrity
supreme worth of the individual challenging and demanding environment
entrepreneurship teamwork and cooperation
Harold has been our spiritual leader for 60 years and will continue to be
forever. I hope you can join us to celebrate this milestone with Harold
and Ruth Ann at our annual meeting on July 22.
Another important event in 1998 was a non-event which we believe
defines who we are as clearly as what did occur. We entertained acquiring
a fairly large company that would have immediately added to earnings per
share. But, given our optimism about our internal growth prospects, we felt
the acquisition would dilute per share results several years out and thus
turned it down. We are focused on building long-term shareholder value.
<PAGE>
While acquisitions can be and have been important, we will issue shares only
when we receive at least as much in business value as we give. Tomorrow
becomes today rather quickly. Not only is that our responsibility to you,
but it is in our own self interest. Your employees, through our investment
plans and options, own 35% of the company. Many, like myself, have the vast
majority of our net worth invested in the company.
In the early '90s when restructuring was our first priority, we under-
invested in product development. As a result, internal growth suffered. In
the mid '90s we reversed that trend. In 1998 our investment in R&D and
product development was at an all time high of nearly $14 million, up 18%
from the prior year. In addition, last year we reorganized our R&D effort
making it more responsive to the needs of the product lines. In 1998 we
began to see results with the introduction of several new products to our
customers in printing, metal finishing and printed circuits. We believe one
new product, ViaTek holds unusual potential. It is a process technology we
believe significantly reduces the cost for our customers to produce printed
circuit boards. We have never been more optimistic about our internal
growth prospects.
At last year's Annual Meeting we unveiled our vision of the future. We
want to build one of the world's greatest industrial enterprises which we
define as performance at the top one percent of all industrial companies:
i.e., per share earnings growth of 25% compounded over ten years and return
on equity of 25%. We know this is a stretch. Can we achieve these very high
standards? Is the success of the past few years repeatable? Predicting the
future is difficult if not impossible. Markets can change. Global recessions
happen. Competitors introduce new technologies. Nevertheless, that remains
our goal, our par. It is what everyone at MacDermid is working toward. We
know we cannot achieve this level of performance by following "the herd", as
the herd by its very nature produces average results. We also must fund
growth opportunities at the right time, not when it's necessarily convenient.
As a result, our annual performance may be uneven. We therefore may not be
an appropriate investment for typical short-term oriented shareholders. We
fit best with investors who think like we do, as partners in a business
focused on building long-term shareholder value. Our goal for 1998 was per
share earnings of $1.06. We earned $1.20. Our goal for fiscal 2002 remains
$2.74.
As fellow shareholders, you should know that the Clan MacDermid is having
fun, and we remain excited about and focused on building one of the world's
greatest industrial companies. Thank you.
Daniel H. Leever
Chief Executive Officer
Any questions? Go-on-line and get the latest MacDermid information
1998 is not only a financial milestone for MacDermid but also an important
milestone in the life of an individual who's visionary leadership helped make
this remarkable accomplishment possible. This year MacDermid, Incorporated
celebrates the 60th Anniversary of Harold Leever's association and guidance as
our Chairman and leader. Happy Anniversary Harold!
<PAGE>
A Message from Harold Leever
Sixty years ago I was hired as our first chemist. I've had a lot of fun.
Who could have dreamed the future could be so bright. I have decided to
retire as Chairman of the Board and accept the title of Chairman Emeritus.
I am proud of the way the Clan MacDermid has met the challenges over the
years and how they have increased the value of your shares. We had the
"guts to fail", to go where others feared, and we triumphed.
To all the many clan members who have touched me over the years, thanks for
the ride. To the new generation, I hope you have as much fun as I did. Who
knows what is possible, the future is even brighter for you than it was for
me 60 years ago.
I'm not saying good-bye as I will remain a Director and will maintain my
office in Waterbury. I invite anyone to stop by as I love to see old
friends. "Lang mae your lum reek" (Scottish toast, translation; Long
may your chimney smoke, or long life).
Harold Leever
Chairman Emeritus
<PAGE>
<TABLE>
FIVE YEAR SELECTED FINANCIAL DATA
(In thousands, except share and per share amounts)
<CAPTION>
OPERATING RESULTS 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $314,058 $293,720 $235,891 $182,100 $150,026
Net Earnings for
Common
Shareholders<F1> $ 30,488 $ 22,010 $ 13,195 $ 11,142 $ 7,771
Diluted Earnings Per
Common Share <F1><F2> $1.20 $0.85 $0.50 $0.39 $0.24
Return On Sales
(%)<F1> 9.7 7.5 5.6 6.1 5.2
Return On Average
Equity (%)<F1> 32.9 30.2 22.1 18.3 11.7
Cash Provided by
Operations 35,335 37,437 17,493 19,854 15,545
EBITA<F3> $ 66,451 $ 55,579 $ 38,758 $ 26,516 $ 19,117
FINANCIAL POSITION AT YEAR END
- -----------------------------------------------------------------------------
Working Capital $ 46,085 $ 46,883 $ 59,714 $ 34,711 $ 34,959
Current Ratio 1.5 1.7 2.0 1.7 2.0
Capital Expenditures $ 8,342 $ 6,914 $ 4,303 $ 3,990 $ 7,526
Total Assets $300,260 $260,978 $264,756 $123,305 $105,867
Long-term Debt
(Includes Short-
term Portion) $116,425 $ 82,981 $112,254 $ 22,642 $ 1,157
Percent of Total
Capitalization (excluding
preferred stock) 52.5 50.9 63.0 29.7 1.7
SHARE DATA
- -------------------------------------------------------------------------------
Shareholders' Equity $105,545 $ 80,058 $ 65,817 $ 53,654 $ 68,169
Per Common Share <F2> $4.21 $3.26 $2.62 $2.17 $2.12
Cash Dividends Per
Common Share <F2> $0.07 $0.0667 $0.0667 $0.0667 $0.0667
Common Shares
Outstanding <F2>
Average During Year 25,483,844 25,912,677 26,383,844 28,372,599 32,110,875
At Year End 25,095,906 25,561,459 25,148,079 24,682,797 32,110,938
Stock Price <F2>
High 37 13 8 1/32 4 15/16 3 7/16
Low 11 19/32 7 5/32 4 10/16 2 21/32 2 23/32
Year End 28 3/4 11 19/32 7 5/16 4 25/32 2 7/8
<FN>
<F1> Before cumulative effect of accounting change which resulted in one-
time after tax charges of $371 ($0.01/common share) in 1995 and $2,082
($0.06/common share) in 1994.
<F2> Share and per share data have been restated to reflect the effects of
3-for-1 stock splits effective, February 6, 1998 and November 15, 1996.
<F3> Represents earnings from operations before interest, taxes on
earnings, depreciation and amortizations. EBITDA is not intended to
represent cash flow from operations as defined by generally accepted
accounting principles. It should not be used as an alternative to net
income as an indicator of operating performance or to cash flows as a
measure of liquidity.
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS
(In thousands, except share and per share amounts)
NET SALES & OPERATING PROFITS
OVERVIEW
Fiscal 1998 was the fourth consecutive record year for net sales. MacDermid,
Incorporated (the Corporation) worldwide net sales were $314,058, a 7%
increase in fiscal 1998 over the previous year. This continued growth is
reflective of new business in every geographic region both in product
offerings and new accounts gained. It clearly demonstrates the Corporation's
continual commitment towards strengthening the competitive position of the
business in both technology and market share. Asian operations remain
fiscally strong due to our infrastructure and management team efforts.
Despite of the recent economic turmoil this region continued to contribute
proportionately to the overall business growth. Sales would have been up 16%
for the year without the negative effect of the stronger dollar on translated
sales.
After giving effect to preferred stock dividend requirements, fiscal
1998 net earnings of $30,488 or $1.20 per common share increased 41% as
compared to fiscal 1997 net earnings of $22,010 or $0.85 per common share.
Growth in net earnings per common share resulted from enhanced margins,
expenses increased at a lesser rate than sales growth and tax savings from
ongoing worldwide minimization strategies. Net earnings per common share
would have been $1.24 or 46% increased over last year without the negative
currency effect on translated earnings. Fiscal 1998 was the seventh
consecutive record year for earnings per share.
SALES
1998 vs 1997
In North America, net sales were up 7%, in fiscal 1998 over fiscal 1997,
principally due to increased business resulting from a strong economic
climate. Additionally, certain newer proprietary product lines, which are
more efficient and environmentally friendly, have experienced growing
acceptance. Overseas sales were also up 7%. Foreign currencies have
continued to devalue on the strength of the dollar which caused overseas
operations in local currencies (similar to the growth of previous
years, 17%) to be reduced to 7% in translated dollars for the year.
Both newer products and new accounts continue to fuel the European and
Asian growth, negating any "Asian crisis" impact to the Corporation.
<PAGE>
1997 vs 1996
In North America, net sales were up in fiscal 1997 over fiscal 1996,
principally the result of the third quarter fiscal 1996 acquisition of
MacDermid Imaging Technology Inc. This business enhances the Corporation's
position as a supplier to the electronics industry and provides new market
opportunities in the printing industry. Overseas sales were up 17%,
due to continued success with the acceptance of newer proprietary products
which are more efficient and environmentally friendly, in both the European
and Asian/Pacific segments. Although certain foreign currencies have been
devalued on the strength of the dollar there was practically no impact
overall on overseas sales for the year.
COSTS AND EXPENSES
1998 vs 1997
Costs of sales decreased as a percentage of sales for the third
consecutive year. Steady improvement has been experienced as past
acquisitions have continued to enhance margins, ongoing cost awareness
programs and related overhead efficiencies and proprietary growth of the
newer products which are more efficient and environmentally friendly
continue to make an impact.
Selling, technical and administrative expenses declined as a percentage
of sales. Actual costs only increased 3% as a result of the Corporation's
ongoing cost awareness philosophy which allows for additional costs necessary
to support sales growth and for research programs (which was 11% more than
last year). Interest expense increased 7% over 1997 while the preferred
dividend requirement has been eliminated resulting in a net positive impact on
earnings.
1997 vs 1996
Costs of sales as a percentage of sales improved in fiscal 1997. A primary
factor was the recognition in fiscal 1996 of an acquisition related
accounting charge of approximately $1,700 associated with purchased
inventories (in accordance with purchase accounting requirements).
Other influences on costs of sales include: higher margin incremental
sales from the acquisition, continuing growth of the newer proprietary
products and related overhead efficiencies and cost reduction programs.
Selling, technical and administrative expenses declined as a
percentage of sales because of ongoing cost control programs and an
improved account collection experience. Actual costs
increased to support additional business activity, product development
and additional goodwill amortization from the imaging technologies business
acquisition. Accelerated debt reduction during 1997 helped to
mitigate the additional eight months interest from the acquisition
leaving interest expense 64% increased over 1996.
<PAGE>
INCOME TAXES
The overall effective income tax rate decreased to 36.0% in fiscal
1998 from 38.4% in fiscal 1997 and 41.6% in fiscal 1996.
The decrease in the effective rate for 1998 is a result of the implementation
of tax minimization strategies on a worldwide basis. The 1997 decrease from
1996 was principally attributable to higher earnings by foreign subsidiaries
in low tax jurisdictions and a dividend payment strategy which optimized the
Corporation's foreign tax credit position.
ACQUISITIONS
During fiscal 1998 there were several minor acquisitions which collectively
are not material to the financial position or results of operations of the
Corporation. The most significant were: the Board Fabrication Division of
National Starch and Chemical Company resulting in Electronics expansion in
North America and the Twin Lock business resulting in Printing expansion in
Europe. Combined the acquisitions were less than 10% of the Corporation's
consolidated total assets and pretax earnings before the acquisitions. The
acquisitions are being accounted for under the purchased method of accounting.
On April 28, 1998 a subsidiary of the Corporation acquired a 30% equity
interest in an Italian specialty chemical company. The Corporation intends
to acquire the remaining interest within two years.
In December of fiscal 1996 MacDermid acquired the assets, subject to
certain liabilities, of the Electronics and Printing Division of Hercules
Incorporated through a wholly-owned subsidiary, MacDermid Imaging Technology
Inc. (MIT), which has since been merged with MacDermid, Incorporated. The
purchase price of $134,500, excluding closing costs, was funded as follows:
$100,000 cash and $30,000 redeemable preferred stock paid at closing. During
fiscal 1998, $4,500 was paid to effect an early buy-out of a contingent
payment which provided for an additional $15,000 to be payable in fiscal 2004
in the event that the Corporation's consolidated cumulative earnings before
interest, taxes on earnings, depreciation and amortization exceed $250,000
for the first four full fiscal years following December 5, 1995. The
acquisition brought new technology in commercial printing and enhanced the
Corporation's product offerings to the printed circuit market. The
acquisition has been accounted for under the purchase method of accounting
and included approximately $82,000 in goodwill, which is being amortized
over 25 years. MIT activity has been included in the consolidated results
of operations beginning December 1, 1995. Additionally, during fiscal 1996
MacDermid acquired the remaining 50% share in its joint venture for
equipment manufacture. This investment had been accounted for on the
equity method and, as of July 1, 1995, was consolidated.
<PAGE>
LIQUIDITY & CAPITAL RESOURCES
Cash flows from operations are used to fund dividend payments
($0.07 per common share for fiscal 1998)
to shareholders, other working capital requirements of the
Corporation and most capital projects. MacDermid has paid cash
dividends continuously since 1948. From time to time the Corporation
utilizes additional outside sources to fund overall
needs, including major capital projects for new and upgraded
research and technical, manufacturing and administrative
facilities and for business acquisitions.
During the past year cash flows provided by operations, $35,335, were
slightly below last year, principally resulting from increased inventory
requirements of an equipment supply program with a leading interconnect
manufacturer.
In certain years, MacDermid has embarked on programs
which have required significant amounts of funds in excess of those
available from cash flows from operations. During the third quarter
of fiscal 1996, MacDermid purchased the assets, subject to certain
liabilities, of the Electronics and Printing Division of Hercules
Incorporated for a purchase price of $134,500. This purchase is presently
financed through bank borrowing under a seven-year term loan and a revolving
credit agreement. During fiscal 1998 the revolving credit facility was
utilized to effect the redemption ahead of schedule of all of the shares of
preferred stock, including dividends in kind, issued as part of the
acquisition. In addition, the revolving credit facility was utilized to
exercise an early buy-out of the performance premium relating to the same
acquisition.
New opportunities for business acquisitions, which become available from
time to time, are evaluated individually as they arise based upon MacDermid's
criteria for technological improvement and innovation, potential for earnings
growth and compatibility with existing distribution channels. Management
intends to pursue those opportunities which have strong potential to enhance
shareholder value.
New capital spending during fiscal 1998 of approximately
$8,342 as compared with $6,914 in fiscal 1997 and $4,303 in
fiscal 1996, included new, as well as upgraded, manufacturing facilities
worldwide and replacement of technical equipment. For fiscal 1999,
planned new capital projects total approximately $8,000.
<PAGE>
The Board of Directors has, from time to time, authorized the
purchase of issued and outstanding shares of the Corporation's
common stock for its treasury. The directors authorized the
purchase of up to an additional 100,000 shares of MacDermid's
common stock on July 23, 1997. Pursuant to this, and previous
authorizations, MacDermid acquired 330,024 shares during fiscal
1998 and 1,186,035 shares during fiscal 1997 in privately negotiated
purchases. Treasury shares may be used for transfer or sale to employee
benefit plans, business acquisitions or for other Corporate purposes.
The outstanding authorization to purchase up to 82,354 shares,
if exercised at the NYSE closing price on March 31, 1998,
would cost approximately $2,368.
<TABLE>
The principal sources and uses of cash in fiscal years 1998, 1997
and 1996 were as follows:
<CAPTION>
1998 1997 1996
------------------------------------------
<S> <C> <C> <C>
Cash provided by:
Operations $ 35,335 $ 37,437 $ 17,493
Proceeds from dispositions of
fixed assets and certain
business 665 1,508 630
Option exercises 1,690 958 659
Net increase in borrowings 2,258 - 93,268
-----------------------------------------
$ 39,948 $ 39,903 $112,050
=========================================
Cash used for:
Capital expenditures $ 8,342 $ 6,914 $ 4,303
Business acquisitions 25,130 - 104,100
Purchase of treasury shares 7,196 8,970 685
Dividend payments 1,752 1,641 1,674
Net decrease in borrowings - 24,316 -
Other - net 509 365 85
-----------------------------------------
$ 42,929 $ 42,206 $110,847
-----------------------------------------
Net decrease (increase)
in cash balances $ 2,981 $ 2,303 $ (1,203)
=========================================
</TABLE>
<PAGE>
MacDermid's financial position is strong and, other than
satisfaction of debt obligations, there are no long-range commitments
which would have a significant impact upon results of operations, financial
condition or liquidity. At March 31, 1998 the Corporation had domestic and
foreign short-term uncommitted credit lines with banks approximating $33,000
in addition to a domestic $65,000 committed revolving credit line (against
which $43,660 was borrowed at March 31, 1998) and an additional $100,000
acquisition credit facility. Management believes that additional borrowing
could be obtained if needed.
ACCOUNTING CHANGE
The FASB recently issued: Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income, Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
and Statement of Financial Accounting Standards No. 132, Employers'
Disclosures about Pensions and Other Postretirement Benefits. The Corporation
is currently evaluating the impact of these standards which are not expected
to have a material affect to the financial position or results of operations.
The disclosure requirements are effective beginning with fiscal 1999.
YEAR 2000 ISSUE
There is a growing concern, frequently referred to as the "Year 2000 Issue",
that certain computer systems will be unable to properly process data as the
year 2000 approaches. Since data files sensitive to dates that are based on
two digits rather than a full four digits could cause financial and
operational systems to fail, there is the possibility for a disruption to
some businesses.
The Corporation has (since 1997) performed an analysis of
its computer and other operating systems and developed a plan to identify and
address significant aspects of the "Year 2000 Issue" that could potentially
affect it. As a result, system upgrading is in process and upgrades will
continue to be implemented. The task is being conducted primarily using
internal resources with key suppliers and customers having been included
throughout the process to determine the extent of their related actions.
The Corporation currently believes this approach, with the resulting actions
that have been initiated, or are planned to be undertaken, will be sufficient
to properly address the "Year 2000 Issue". Related costs are charged to
expenses as incurred. The Corporation does not currently expect that the
amounts expensed, through 1999, will have a material effect on its financial
position or results of operations. However, it should be noted that the
Corporation could be adversely impacted by the "Year 2000 Issue",
particularly if suppliers, customers or other business partners do not
address this issue successfully.
ENVIRONMENTAL ACTIVITIES
MacDermid continues its commitment to an active program of
environmental responsibility through its Environmental Initiative
2000 program, research and development of alternative,
environmentally safer products and installation of equipment to
reduce or eliminate emissions.
<PAGE>
The Corporation sponsors community clean-up programs and
promotes community awareness of environmental issues. The terms of
a State of Connecticut permit require MacDermid to have periodic
environmental compliance and environmental management audits
performed at its Waterbury, Connecticut facility. These audits take
place over a five-year period which commenced in 1993. An
environmental consultant retained by MacDermid conducts the audits
and submits appropriate recommendations.
MacDermid continuously conducts research to formulate products
which are environmentally friendly and which provide superior
operating characteristics in customer applications. Many companies
have come to MacDermid for assistance in meeting their environmental
needs. Environmental expenditures that relate to current operations
are expensed; long-term betterments are capitalized. The
expenditure by MacDermid for these various programs is estimated to
be approximately a million dollars per year.
MacDermid has been named as a potentially responsible party (PRP)
by the Environmental Protection Agency in connection with
two waste sites. There are many other companies involved at
each of these sites and MacDermid's participation is minor.
The Corporation has recorded its best estimate of liabilities in
connection with site clean-up based upon the extent of its
involvement, the number of PRPs and estimates of
the total costs of the site clean-up. Though it is difficult to
predict the final costs of site remediation, management believes
that the recorded liabilities are reasonable estimates of probable
liability and that future cash outlays are unlikely to be material
to financial condition, results of operations or cash flows.
On January 30, 1997, the Corporation was served with a subpoena from
a federal grand jury in Connecticut requesting certain documents.
The Corporation was subsequently informed that it is a subject of the grand
jury's investigation. The subpoena requested information relating
to an accidental spill from the Corporation's Huntingdon Avenue,
Waterbury, Connecticut facility that occurred in November of 1994,
together with other information related to operations and
compliance at the Huntingdon Avenue facility. The Corporation has
retained outside law firms to assist the Corporation in complying
with the subpoena. The Corporation is cooperating with the government's
investigation. Since this matter is currently in very early
stages, it is impossible to determine what the ultimate outcome will be
and difficult to quantify the extent of an exposure to liability, if any.
As such, no assurance can be given that the Corporation will not be found
to have liability. It is the Corporation's policy to accrue
probable liabilities to the extent that such liabilities can be reasonably
quantified.
<PAGE>
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. Readers 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 various times in various markets.
MacDermid operates throughout the world in areas generally
considered stable. Sales are mainly to companies whose outputs become
components in consumer and industrial products having wide
application and demand and no one customer accounts for a material
proportion of sales. Management believes that inflation,
generally, has had little overall impact upon the Corporation's
operations and reported earnings. While there may be temporary
disruptions of economic stability, management believes that their
long-term effects will not be significant to the Corporation.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands except share and
per share amounts) Year Ended March 31
------------------------------------
<CAPTION>
1998 1997 1996
------------------------------------
<S> <C> <C> <C>
Net sales $314,058 $293,720 $235,891
Cost of Sales 152,189 144,281 119,812
------------------------------------
Gross profit 161,869 149,439 116,079
Selling, technical and
administrative expenses 106,264 102,728 86,978
------------------------------------
Operating profit 55,605 46,711 29,101
Other income (expense):
Interest income 655 666 430
Interest expense (7,758) (7,277) (4,435)
Miscellaneous, net (396) (1,383) (1,475)
------------------------------------
(7,499) (7,994) (5,480)
------------------------------------
Earnings before income taxes 48,106 38,717 23,621
Income taxes (note 5) 17,309 14,871 9,826
------------------------------------
Net Earnings 30,797 23,846 13,795
Preferred dividends (309) (1,836) (600)
------------------------------------
Net earnings available for
common shareholders $ 30,488 $ 22,010 $ 13,195
====================================
Net earnings per common
share (note 1):
Basic $1.22 $0.89 $0.53
====================================
Diluted $1.20 $0.85 $0.50
====================================
Weighted average number of common
shares outstanding (note 1):
Basic 24,976,931 24,735,191 25,075,406
=====================================
Diluted 25,483,844 25,912,677 26,383,844
======================================
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands, except share and per March 31
share amounts) ---------------------
<CAPTION>
1998 1997
---------------------
<S> <C> <C>
Current assets:
Cash and equivalents $ 3,549 $ 6,530
Accounts receivable, less allowance for
doubtful receivables of $3,598 and $3,379 72,675 61,419
Inventories (note 2) 49,639 40,748
Prepaid expenses 2,255 2,207
Deferred income taxes (note 5) 3,970 4,808
---------------------
132,088 115,712
Total current assets ---------------------
Property, plant and equipment, at cost:
Land and improvements 3,798 3,847
Buildings and improvements 33,655 31,933
Machinery, equipment and fixtures 50,340 47,188
---------------------
87,793 82,968
Less accumulated depreciation and amortization 44,847 41,424
---------------------
Net property, plant and equipment 42,946 41,544
---------------------
Goodwill, net of accumulated amortization of
$9,495 and $5,538 87,856 76,346
Other assets, net 37,370 27,376
---------------------
$300,260 $260,978
=====================
</TABLE>
<PAGE>
<TABLE>
LIABILITIES & SHAREHOLDERS' EQUITY
(In thousands except share and
per share amounts) March 31
---------------------
<CAPTION>
1998 1997
---------------------
<S> <C> <C>
Current liabilities:
Notes payable (note 3) $ 9,962 $ 9,059
Current installments of long-term
obligations (note 7) 12,442 7,816
Accounts payable 24,603 21,772
Dividends payable 502 409
Accrued compensation 10,103 9,259
Accrued expenses, other 22,681 13,756
Income taxes (note 5) 5,710 6,758
---------------------
Total current liabilities 86,003 68,829
---------------------
Long-term obligations (note 7) 103,983 75,165
Accrued postretirement benefits,
Less Current Portion (note 4) 4,291 4,157
Deferred income taxes (note 5) 345 245
Minority interest in subsidiary 93 88
Preferred Stock - 6% redeemable
Series A (no par) (note 8) - 32,436
Shareholders' equity (note 9):
Common stock. Authorized 75,000,000 shares;
issued 39,265,488 shares in 1998 and 38,401,017
shares in 1997 at stated value of $1.00 per
share 39,265 12,800
Additional paid-in capital - 959
Retained earnings 124,043 113,632
Equity adjustment from foreign currency
translation (3,160) 74
Less cost of 14,169,582 and 13,839,558 common
shares in treasury (54,603) (47,407)
---------------------
Total shareholders' equity 105,545 80,058
---------------------
Contingencies and commitments (notes 1, 10 and 11)
$300,260 $260,978
=====================
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) Year Ended March 31
---------------------------
<CAPTION>
1998 1997 1996
---------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 30,488 $ 22,010 $ 13,195
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 5,832 5,463 4,525
Amortization of goodwill and other
intangible assets 5,410 4,787 3,307
Provision for bad debts 817 547 1,793
Deferred income taxes 2,004 (184) 226
Changes in assets and liabilities net of
effects from acquisitions and dispositions:
Decrease (increase) in receivables (11,689) 2,373 (3,792)
Decrease (increase) in inventories (8,434) (2,955) (654)
Decrease (increase) in prepaid expenses (85) 669 (789)
Increase (decrease) in accounts payable 4,071 1,624 (1,791)
Increase (decrease) in accrued expenses 10,442 4,563 5,059
Increase (decrease) in income tax
liabilities (690) 768 555
Other (2,831) (2,228) (4,141)
---------------------------
Net cash flows provided by operating
activities 35,335 37,437 17,493
---------------------------
Cash flows from investing activities:
Capital expenditures (8,342) (6,914) (4,303)
Proceeds from disposition of fixed assets 665 871 630
Acquisitions of businesses
(disposition in 1997) (25,130) 637 (104,100)
---------------------------
Net cash flows used in investing
activities (32,807) (5,406) (107,773)
---------------------------
Cash flows from financing activities:
Short-term borrowings (net) 1,443 4,459 4,458
Long-term borrowings 53,622 2,000 112,500
Long-term repayments (20,062) (30,775) (23,690)
Preferred stock redemption (32,745) - -
Exercise of stock options 1,690 958 659
Acquisition of treasury stock (note 9) (7,196) (8,970) (685)
Dividends paid (1,752) (1,641) (1,674)
---------------------------
Net cash flows provided by (used in)
financing activities (5,000) (33,969) 91,568
---------------------------
Effect of exchange rate changes on cash
and equivalents (509) (365) (85)
----------------------------
Net increase (decrease) in
cash and cash equivalents (2,981) (2,303) 1,203
Cash and cash equivalents at beginning of year 6,530 8,833 7,630
----------------------------
Cash and cash equivalents at end of year $ 3,549 $ 6,530 $ 8,833
============================
Cash paid for interest $ 7,551 $ 7,106 $ 4,534
============================
Cash paid for income taxes $ 11,552 $ 15,391 $ 7,198
============================
<FN>
Supplemental disclosure of non-cash financing activities:
During fiscal 1996 MacDermid Imaging Technology, Inc. issued
unregistered 6% redeemable Series A preferred stock for $30,000.
Preferred stock issued as dividends in kind valued at $309, $1,836 and
$600 were issued in 1998, 1997 and 1996, respectively. During fiscal
1998 MacDermid redeemed all of the shares of the Series A preferred stock
for $32,745.
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands, except share data)
Shareholders' Equity (note 9) Shares
---------------------------------
<CAPTION>
1998 1997 1996
---------------------------------
<S> <C> <C> <C>
Common Stock:
Balance - beginning of year 12,800,339 4,200,178 4,136,080
Shares issued - stock options 239,956 59,870 42,268
Shares issued - stock awards 48,201 7,787 21,830
Three-for-one stock split 26,176,992 8,532,504 -
----------------------------------
Balance - end of year 39,265,488 12,800,339 4,200,178
==================================
</TABLE>
<PAGE>
<TABLE>
Year Ended March 31
<CAPTION> -----------------------------------
1998 1997 1996
-----------------------------------
<S> <C> <C> <C>
Common Stock:
Balance - beginning of year $ 12,800 $ 4,200 $ 4,136
Shares issued - stock options 240 59 42
Shares issued - stock awards 48 8 22
Three-for-one stock split 26,177 8,533 -
-----------------------------------
Balance - end of year 39,265 12,800 4,200
-----------------------------------
Additional Paid In Capital:
Balance - beginning of year 959 3,456 1,676
Stock options 1,999 1,595 946
Stock awards 1,273 670 704
Tax benefit from stock
options exercised 3,621 444 130
Three-for-one stock split (7,852) (5,206) -
-----------------------------------
Balance - end of year - 959 3,456
-----------------------------------
Retained Earnings:
Balance - beginning of year 113,632 95,564 84,043
Net Earnings 30,488 22,010 13,195
Cash dividends (1998: $0.07 per share,
1997 and 1996: $0.0667 per share) (1,752) (1,641) (1,674)
Change in subsidiary fiscal year - 1,026 -
Three-for-one stock split (18,325) (3,327) -
-----------------------------------
Balance - end of year 124,043 113,632 95,564
-----------------------------------
Equity adjustment from foreign
currency translation:
Balance - beginning of year 74 1,034 1,551
Translation adjustment (3,234) (960) (517)
-----------------------------------
Balance - end of year (3,160) 74 1,034
-----------------------------------
Treasury stock:
Balance - beginning of year (47,407) (38,437) (37,752)
Shares acquired
(1998:330,024; 1997:1,186,035;
1996:111,600) (7,196) (8,970) (685)
-----------------------------------
Balance - end of year (54,603) (47,407) (38,437)
-----------------------------------
===================================
Total shareholder's equity $105,545 $ 80,058 $ 65,817
===================================
<PAGE>
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation. The accompanying consolidated
financial statements include accounts of the parent corporation and
all of its domestic and foreign subsidiaries. Certain foreign
subsidiaries were in previous years, for practical purposes, included
on a calendar year basis. For those subsidiaries the fiscal year end was
changed to coincide with the parent corporation, beginning with
fiscal year 1997. The results of the quarter ended March 31, 1996,
were credited directly to retained earnings to effect this changeover.
All significant intercompany accounts and transactions
have been eliminated in consolidation.
(b) Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(c) Cash and Cash Equivalents. For the purpose of the consolidated
statements of cash flows, the Corporation considers all highly liquid debt
instruments purchased with an initial maturity of three months or less to be
cash equivalents.
(d) Inventories. Inventories are stated at the lower of cost
(average moving cost) or replacement market.
(e) Property, Plant and Equipment. Property, plant and equipment
are stated at cost. Depreciation and amortization of property,
plant and equipment are provided over the estimated useful lives of
the respective assets, principally on the straight-line basis.
Expenditures for maintenance and repairs are charged directly to
expense; renewals and betterments, which significantly extend the
useful lives, in general are capitalized. Costs and accumulated
depreciation and amortization on assets retired or disposed of are
removed from the accounts and the gains or losses resulting
therefrom, if any, are credited or charged to earnings.
<PAGE>
(f) Intangible Assets. Goodwill is amortized over its estimated
period of benefit on a straight line basis; other intangible assets
are amortized on an appropriate basis over their estimated useful
lives. Accumulated amortization of goodwill was $9,495 and $5,538
at March 31, 1998 and 1997, respectively. No amortization period
currently exceeds 25 years. MacDermid
evaluates the carrying value of intangible assets at each balance
sheet date to determine if impairment exists based upon estimated
undiscounted future cash flows. The impairment, if any, is measured
by the difference between the carrying value and estimated fair value and
charged to expense in the period identified.
(g) Employee Benefits. The Corporation sponsors a variety of
employee benefit programs, most of which are non-contributory.
Retirement. Pension, profit sharing and other retirement plans
generally are non-contributory and cover substantially all employees.
Domestically, the Corporation funds a defined benefit pension plan.
The projected unit credit actuarial method is used for financial
reporting purposes. In addition, the Corporation contributes to profit
sharing and employee stock ownership plans which
provide retirement benefits based upon amounts credited to employee
accounts within the plans. The Corporation's funding policy for
qualified plans is consistent with federal or other regulations
and customarily equals the amount deducted for income tax purposes.
Foreign subsidiaries contribute to plans which may be administered
privately or by government agencies in accordance with local regulations.
Postretirement. The Corporation currently has accrued postretirement
health care benefits for most U.S. employees. The postretirement health
care plan is unfunded.
Postemployment. The Corporation currently accrues for postemployment
disability benefits to employees meeting specified service requirements.
The postemployment benefits plan is unfunded.
(h) Fair Value of Financial Instruments. Statement of Financial
Accounting Standards No. 107 requires that reporting entities provide,
to the extent practicable, the fair value of financial instruments,
both assets and liabilities. The carrying amounts for the Corporation's
current financial instruments approximate fair value because of the
short maturity of those instruments. The carrying amounts of other
financial instruments approximate fair value due to the interest rate
at year end approximating that for similar instruments.
Interest rate swap agreements are employed by the Corporation
to optimize borrowing costs by reducing exposure of
possible future changes in interest rates. Net receipts or payments on
the swap are accrued and recognized as adjustments to interest expense.
The estimated fair value of these financial instruments at March 31, 1998
is $315 based on the quoted market price from the bank holding the
instruments.
<PAGE>
(i) Foreign Operations. The balance sheet accounts of foreign
subsidiaries are translated into U.S. dollars at year-end rates of
exchange while revenue and expense accounts are translated at
weighted average rates in effect during the periods. Translation of
the balance sheets resulted in a decrease in equity of $3,234 in 1998,
$960 in 1997 and $517 in 1996. Gains and losses on foreign currency
transactions are included in the consolidated statements of earnings.
(j) Research and Development. Research and development costs, charged
to expenses as incurred, were $12,028 $10,850, and $10,042 in 1998, 1997
and 1996, respectively.
(k) Income Taxes. The provision for income taxes includes Federal,
foreign, state and local income taxes currently payable and those
deferred because of temporary differences between the financial
statement and tax bases of assets and liabilities. No provision
for deferred income taxes is made with respect to equity adjustments
from foreign currency translation or to undistributed earnings of
subsidiaries which, in management's opinion, will be permanently
reinvested or repatriated at a minimal tax cost to the Corporation.
Foreign tax credits are recorded as a reduction of the provision for
Federal income taxes in the year realized.
(l) Stock-based Plans. Effective April 1, 1996 the Corporation
adopted the disclosure requirements of Statement of Financial
Accounting Standards No 123, Accounting for Stock Based
Compensation (SFAS123). Pro forma net income and
per share amounts are presented in the Employee Stock Incentive
Plans note as if the alternative fair value method of accounting
provided for under SFAS123 had been applied to options granted
after March 31, 1995.
(m) Common Share Data. Effective October 1, 1997 the Corporation adopted
Statement of Financial Accounting Standards No. 128, Earnings Per Share (SFAS
128). Under SFAS 128 the presentation of primary and fully diluted earnings
per share is replaced by basic and diluted earnings per share. Comparative
references to earnings per common share (EPS) and weighted average common
shares outstanding have been restated to reflect the adoption of SFAS 128.
EPS is calculated based upon net earnings available for common shareholders
after deduction for preferred dividends. The computation of basic EPS is
based upon the weighted average number of common shares outstanding during
the period. Diluted EPS is computed based upon the weighted average number
of common shares outstanding plus the effect of all dilutive contingently
issuable common shares from stock options and stock awards that were
outstanding during the period.
In addition, net earnings per common share, dividend amounts declared
and share market price have been restated to give retroactive effect to
three-for-one stock split as of February 6, 1998 and November 15, 1996.
<PAGE>
(n) Recent Accounting Standards. Effective October 1, 1997 the Corporation
adopted Statement of Financial Accounting Standards No. 129, Disclosure of
Information About Capital Structure (SFAS129). The information required by
SFAS129 can be found on the Consolidated Statements of Changes in
Shareholders' Equity and in notes to the Consolidated Financial
Statements #4, #8 and #9.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, Reporting Comprehensive Income (SFAS 130) and Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information (SFAS 131). In February, 1998, the FASB issued Statement
of Financial Accounting Standards No. 132, Employer's Disclosures About
Pensions and Other Postretirement Benefits (SFAS 132). The aforementioned
standards will require additional financial statement disclosure for all
periods presented, but will not impact reported financial position or results
of operations. The Corporation is currently evaluating the impact of these
standards which are effective beginning fiscal 1999 and are not expected to
have a material effect to the financial statements.
(o) Acquisitions. In fiscal 1998 there were several minor acquisitions, the
most significant were; The Board Fabrication Division of National Starch and
Chemical Company and Twin Lock B.V. of the Netherlands. Collectively, all
acquisitions were less than 10% of the Corporation's consolidated total assets
and pretax earnings before the acquisition and they are not material to the
financial position or results of operations of the Corporation. The acquired
business will primarily enhance sales to North American electronics and
European printing customers and have been included in the consolidated
operating results since October 1, 1997. The acquisitions are being
accounted for as purchase transactions including receivables, inventory,
fix assets, goodwill (being amortized over 5-25 year periods) and other
intangibles. On April 28, 1998 a subsidiary of the Corporation acquired
a 30% equity interest in an Italian specialty chemical company. The
Corporation intends to acquire the remaining interest within two years.
In fiscal 1996 the Corporation acquired the assets, subject to certain
liabilities, of the Electronics and Printing Division of Hercules
Incorporated. Consolidated operating results for fiscal 1996 include the
results of the MIT business from December 1, 1995. The acquired business
consists principally of the manufacture and sale of proprietary products
including photoresists, used to imprint electrical patterns on circuit
boards, and photopolymer printing, which reproduces quality graphics on
package printing and in-store displays. The total purchase price for the
acquisition, accounted for as a purchase transaction, was approximately
$134,500 including inventory, fixed assets, goodwill (being amortized over
25 years) and other intangibles. There was $15,000 contingently payable in
fiscal year 2004 in the event that the consolidated cumulative earnings,
before interest, taxes on earnings, depreciation and amortization exceed
$250,000 for the first four full fiscal years following December 5, 1995.
However, this further contingent payment was eliminated in fiscal 1998 with
a $4,500 payment to effect an early buy-out.
<PAGE>
2. INVENTORIES
<TABLE>
The major components of inventory at March 31 were as follows:
<CAPTION>
(In thousands) 1998 1997
----------------------
<S> <C> <C>
Finished goods $27,197 $23,125
Raw materials and supplies 22,442 17,623
----------------------
$49,639 $40,748
======================
</TABLE>
3. NOTES PAYABLE
Notes payable at March 31, 1998 consisted of $9,962 of outstanding
borrowings under available lines of credit aggregating approximately
$33,000. The terms of the lines of credit generally provide for
interest rates at or below the prime rate on the date of borrowing
domestically and, for foreign company borrowings, rates that vary
with base rates in each currency. The lines of credit can be
withdrawn at any time at the option of the banks. The weighted
average interest rates on short-term borrowings outstanding were
6.2% and 5.8% at the end of 1998 and 1997, respectively.
<PAGE>
4. EMPLOYEE RETIREMENT & WELFARE PLANS
The Corporation has defined benefit pension, defined contribution
profit sharing and employees' stock ownership plans for substantially
all its domestic employees. Aggregate amounts charged to earnings for
these plans were $1,684, $1,566 and $1,892 in 1998, 1997 and 1996,
respectively.
<TABLE>
The following table sets forth the components of the pension and
postretirement benefit plans for the years ended March 31:
<CAPTION>
PENSION
(In thousands) 1998 1997 1996
---------------------------------
<S> <C> <C> <C>
Service cost $ 1,287 $ 1,092 $ 678
Interest cost 1,959 1,741 1,421
Net amortization and deferrals 9,599 1,532 2,604
Actual return on investment (11,905) (3,502) (4,263)
----------------------------------
Net periodic pension cost $ 940 $ 863 $ 440
==================================
POSTRETIREMENT BENEFITS
(In thousands) 1998 1997 1996
----------------------------------
Service cost $ 64 $ 56 $ 61
Interest cost 292 302 305
Net amortization and deferrals - 11 2
Actual return on investment - - -
----------------------------------
Net periodic pension cost $ 356 $ 369 $ 368
==================================
</TABLE>
<PAGE>
<TABLE>
The following table sets forth the plans funded status, amount
recognized in the balance sheet, plan amounts and rate
assumptions of the pension and postretirement benefit plans
at March 31:
<CAPTION>
PENSION
(In thousands) 1998 1997
-----------------------
<S> <C> <C>
Accumulated benefit obligation $23,112 $19,049
=======================
Plan assets at fair value 36,210 $23,871
Projected benefit obligation 31,104 24,375
-----------------------
Plan assets greater (less) than
projected benefits obligation 5,106 (504)
Unrecognized portion of transition
asset (being amortized over 14 years) (453) (632)
Unrecognized net (gain) loss (4,709) 684
-----------------------
Prepaid (accrued) pension cost $ (56) $ (452)
=======================
Rate assumptions:
Discount rate 7.0% 7.5%
Rate on return on plan assets 9.0% 9.0%
Salary increases 5.0% 5.0%
Annual increase in costs
of medical benefits n/a n/a
POSTRETIREMENT BENEFITS
(In thousands) 1998 1997
-----------------------
Accumulated benefit obligation $ - $ -
=======================
Plan assets at fair value - -
Projected benefit obligation 4,218 4,300
-----------------------
Plan assets greater (less) than
projected benefits obligation (4,218) (4,300)
Unrecognized portion of transition
asset (being amortized over 14 years) - -
Unrecognized net (gain) loss 286 477
-----------------------
Accrued postretirement liability $ 3,932 $ 3,823
=======================
Rate assumptions:
Discount rate 7.0% 7.5%
Rate on return on plan assets n/a n/a
Salary increases n/a n/a
Annual increase in costs
of medical benefits 3.0% 3.0%
</TABLE>
<PAGE>
Note 4. Employee Retirement and Welfare Plans (continued)
Pension. The pension plan provides retirement benefits based
upon years of service and compensation levels. Plan assets at fair
value consist primarily of listed stocks, bonds and guaranteed
investment contracts, and included 393,255 shares of the
Corporation's common stock having a market value of $11,306 and
$4,555 at March 31, 1998 and 1997, respectively. Accumulated
benefits obligations included vested benefits of $21,392 and
$17,836 at March 31, 1998 and 1997, respectively.
Postretirement benefits. The Corporation sponsors a defined
benefit postretirement medical and dental plan (unfunded) that
covers all of its domestic full-time employees who retire after age 55
with at least 10 to 20 years of service (depending upon the date of
hire). Employees retiring after March 31, 1998 are required to contribute
toward the cost of the plan until they attain age 65. The Corporation's
subsidy level is subject to a cap which increases 3% each year. Retirees
will be required to contribute the plan cost in excess of the cap in
addition to other required contributions.
The projected benefit obligation for the postretirement plan at
March 31, 1998 comprised 28% retirees, 3% fully eligible active
participants and 69% other active participants. The annual
increase in cost is 3.0% for postretirement medical benefits (no
assumed rate increase for dental benefits since it is a scheduled
plan) since the Corporation's contributions are at the defined cap.
The medical cost trend rate assumption has no effect on the
amounts reported due to the cap on contributions paid by the
Corporation.
Postemployment benefits. The Corporation sponsors a defined
benefit postemployment compensation continuation plan that covers
all of its full time domestic employees. Employees who have
completed at least six months of service, become permanently
disabled and are unable to return to work are eligible to receive a
benefit under the plan. The benefit may range from one week to a
maximum of six months of compensation. The estimated ongoing additional
after-tax annual cost is not material.
EMPLOYEE STOCK INCENTIVE PLANS
1992 Plan: In 1993, the Corporation adopted a non-qualified
stock option plan, approved by shareholders in July 1992 (the
1992 plan), for the issuance of up to 2,700,000 shares under which
certain employees have been granted options totaling 2,533,500.
Options granted under the 1992 plan generally are exercisable
during a four-year period beginning with the grant date. The
options are exercisable into restricted shares of common stock
which cannot be sold or transferred, except back to the Corporation
at cost, during the four-year period commencing with the
exercise date.
<PAGE>
Compensation expense, which is equal to the difference between
the fair market value on the date of an option grant and the
exercise price of shares which may be purchased thereunder, is
amortized over a six-year period. During 1998, 1997, and 1996,
compensation expense relating to this plan was $526, $646 and
$330, respectively.
1995 Plan: In 1996, the Corporation adopted a non-qualified
equity incentive plan, approved by the shareholders in July 1995
(the 1995 plan), for the issuance of up to 450,000 shares under
which certain employees have been granted restricted shares
totaling 411,156, having market prices of $4 3/4 to $19 1/2 on the
dates of grant. All shares of restricted stock issued under the 1995
plan must be held and cannot be sold or transferred, except to
MacDermid for a period of four years from the date of the award.
During 1998, 1997 and 1996, compensation expense relating to this plan
was $1,273, $604 and $993, respectively.
Options issued under the Corporation's stock incentive plans and
outstanding at March 31, 1998 have exercise prices ranging from
$1.79 to $1.99, expiring periodically through fiscal 2002, summarized
in the following table as of March 31:
<TABLE>
<CAPTION>
Number Weighted-average
of Options Exercise Price
========== ================
<S> <C> <C>
Outstanding March 31, 1995 2,286,612 $ 1.83
1996 activity:
Granted 135,000 $ 3.47
Exercised (380,412) $ 1.73
Forfeited (184,500) $ 1.84
Outstanding at March 31, 1996 1,856,700 $ 1.97
Exercisable at March 31, 1996 1,856,700 $ 1.97
1997 activity:
Granted 0 -
Exercised (529,332) $ 1.81
Forfeited 0 -
Outstanding at March 31, 1997 1,327,368 $ 2.04
Exercisable at March 31, 1997 1,327,368 $ 2.04
1998 activity:
Granted 0 $ -
Exercised (787,368) $ 2.15
Forfeited 0 -
Outstanding at March 31, 1998 540,000 $ 1.89
Exercisable at March 31, 1998 540,000 $ 1.89
</TABLE>
<PAGE>
Had the Corporation used the fair value-based method of
accounting for its stock option plans (beginning in 1996) and
charged compensation cost against income, over the six year
period, based on the fair value at the date of grant consistent with
FAS 123, net earnings and net earnings per common share for
1998, 1997 and 1996 would have been reduced to the following pro
forma amounts:
<TABLE>
(In thousands, except per share amounts)
<CAPTION>
1998 1997 1996
==== ==== ====
<S> <C> <C> <C>
Net earnings
As reported $30,488 $22,010 $13,195
Pro forma $30,439 $21,967 $13,161
Net earnings per common share
Basic
As reported $1.22 $0.89 $0.53
Pro forma $1.22 $0.89 $0.53
Diluted
As reported $1.20 $0.85 $0.50
Pro forma $1.19 $0.85 $0.50
</TABLE>
The pro forma information above includes stock options granted
since April 1, 1995. Effects of applying FAS 123, using the fair
value-based method of accounting, is not representative of the pro
forma effect on earnings in future years because it does not take
into consideration pro forma compensation expense related to
stock options granted prior to 1996 and would increase in future
years if stock options were to be granted.
The weighted-average grant-date fair value of options, $3.52
for those granted in 1996, was determined by utilizing the
Black-Scholes option-pricing model and the following key assumptions:
Risk-free interest rate 5.68%
Expected option life 6 years
Expected volatility 28.8%
Dividend yield 1.1%
<PAGE>
5. INCOME TAXES
Earnings before income taxes included foreign earnings of
$22,103, $20,312 and $15,035 for 1998, 1997 and 1996, respectively.
Income tax expense attributable to income from operations for the
years ended March 31 consisted of:
<TABLE>
<CAPTION>
(In thousands) Current Deferred Total
---------------------------------
1998
----
<S> <C> <C> <C>
U.S. Federal $ 7,189 $ 1,070 $ 8,259
State and local 1,504 475 1,979
Foreign 6,612 459 7,071
---------------------------------
Totals $15,305 $ 2,004 $17,309
=================================
1997
----
U.S. Federal $ 7,738 $ (775) $ 6,963
State and local 1,519 (176) 1,343
Foreign 5,798 767 6,565
---------------------------------
Totals $15,055 $ (184) $14,871
=================================
1996
----
U.S. Federal $ 7,108 $(3,259) $ 3,849
State and local 1,681 (999) 682
Foreign 811 4,484 5,295
---------------------------------
Totals $ 9,600 $ 226 $ 9,826
=================================
</TABLE>
<PAGE>
<TABLE>
Income tax expense for the years ended March 31, 1998, 1997 and
1996 differed from the amounts computed by applying the U.S. Federal
statutory tax rates to pretax income from operations as a result of
the following:
<CAPTION>
(In thousands) 1998 1997 1996
---------------------------------
<S> <C> <C> <C>
U.S. Federal statutory tax rate 35% 35% 35%
=================================
Taxes computed at U.S.
statutory rate $16,837 $13,551 $8,267
State income taxes, net of
Federal benefit 1,286 873 474
Adjustments of prior years
tax accruals - - 193
Foreign tax rate differential (1,029) (1,251) 741
No tax benefit for (gain) loss
of unconsolidated corporate
joint venture - - (14)
No tax benefit for loss on
disposition of subsidiary - 438 -
Other, net 215 1,260 165
---------------------------------
Actual income taxes $17,309 $14,871 $9,826
=================================
Effective tax rate 36.0% 38.4% 41.6%
=================================
</TABLE>
<PAGE>
<TABLE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities at
March 31 are:
<CAPTION>
(In thousands) 1998 1997
------------------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, primarily due to
allowance for doubtful accounts $ 660 $ 945
Inventories 1,241 1,369
Accrued liabilities 826 983
Foreign net operating losses - 376
Employee benefits 4,249 3,739
Other 1,372 1,786
------------------
Total gross deferred tax assets 8,348 9,198
Deferred tax liabilities:
Plant and equipment, primarily due to
depreciation 1,870 1,625
Other 2,676 1,767
------------------
Total gross deferred tax liabilities 4,546 3,392
------------------
Net deferred asset $3,802 $5,806
==================
</TABLE>
The Corporation has not recognized a deferred tax liability for
the undistributed earnings of foreign subsidiaries that arose in 1998 and
prior years because the Corporation does not expect to repatriate those
earnings in the foreseeable future. A deferred tax liability will be
recognized when the Corporation expects that it will recover those
earnings in a taxable transaction, such as through receipt
of dividends, net of foreign tax credits, or sale of the
investment. At March, 1998, the undistributed earnings of those
subsidiaries were approximately $35,496. A determination of the deferred
tax liability relating to the undistributed earnings of foreign subsidiaries
is not practicable.
No valuation allowance has been recorded since the Corporation believes
that it is more likely than not that it will be able to realize the benefit
of the deferred tax assets. This determination has been made based upon the
historical earnings of the Corporation.
During fiscal 1998, 1997 and 1996 the lapse of restrictions upon
stock exercised under the stock option and award plans resulted
in a tax benefit of $3,621, $444 and $130, respectively, which were
recorded as increases in additional paid-in capital.
<PAGE>
6. SEGMENT REPORTING
The Corporation is engaged in the business of developing,
manufacturing and marketing industrial chemicals, supplies and
related equipment. The following table is a summary of the Corporation's
operations by geographic area:
<TABLE>
<CAPTION>
North Asian
America European Pacific Consolidated
--------------------------------------------
(In thousands) 1998
--------------------------------------------
<S> <C> <C> <C> <C>
Net sales to unaffiliated
customers $183,569 $57,562 $72,927 $314,058
Operating profit 34,836 9,017 11,752 55,605
Identifiable assets 221,562 40,137 38,561 300,260
1997
--------------------------------------------
Net sales to unaffiliated
customers $171,782 $55,969 $65,969 $293,720
Operating profit 27,359 8,482 10,870 46,711
Identifiable Assets 192,983 30,122 37,873 260,978
1996
--------------------------------------------
Net sales to unaffiliated
customers $131,404 $49,461 $55,026 $235,891
Operating profit 10,945 7,069 11,087 29,101
Identifiable Assets 205,035 25,716 34,005 264,756
</TABLE>
<PAGE>
7. LONG-TERM OBLIGATIONS
<TABLE>
Long-term obligations at March 31 consisted of the following:
<CAPTION>
(In thousands) 1998 1997
-----------------------
<S> <C> <C>
Term loan, unsecured, variable interest
(6.125% at March 31, 1998) due in
quarterly installments to 2003 $ 69,821 $ 75,893
Revolving loan, unsecured, variable
interest due in 2001
6.19% at March 31, 1998 41,500 3,300
3.94% at March 31, 1998 2,160 3,343
Installment loan, unsecured, variable
interest (6.19% at March 31, 1998)
due annually to 2005 2,400 -
Debenture, 3.5% interest due in
annual installments to 1999 80 198
Other, due in varying amounts
to 2003 464 247
-------------------------
Total long-term obligations 116,425 82,981
Less current portion 12,442 7,816
-------------------------
Long-term portion $103,983 $ 75,165
=========================
</TABLE>
Minimum future principal payments on long-term obligations
subsequent to March 31, 1998 are as follows:
(In thousands)
1999 $ 12,442
2000 12,256
2001 59,389
2002 18,738
2003 12,643
Thereafter 957
--------
Total $116,425
========
<PAGE>
The term loan bears interest at a variable rate which is based
on a ratio of the Corporation's debt to earnings before certain
expenses and which presently falls within a range of 0.375% to
1.0% above the March 27, 1998 London interbank market rate
(LIBOR) which was 5.625%. At March 31, 1998 the effective
interest rate was 6.125%. Under the term loan, the most
restrictive covenants provide that: earnings before interest and
taxes as a ratio to interest expense must be greater than 2.5 to 1;
consolidated net worth must be at least $84,981 and the total
debt must not exceed 350% of net worth.
The revolving loan represents amounts outstanding under a
$65,000 committed revolving credit line which expires in 2001.
Commitment fees under the revolving and $100,000 acquisition
credit lines are variable, ranging from 12.5 to 25.0 basis points.
The Corporation has entered into interest rate swap agreements
with a bank for the purpose of reducing its exposure to possible
future changes in interest rates applicable to the term and
revolving loans. Pursuant to the terms of the agreements, the
notional amounts of $69,821 and $3,079 are reduced in
accordance with applicable schedules until the expiration dates,
December 31, 2002 and December 31, 1998, respectively.
Applicable fixed rates of 5.63% and 5.39%, respectively, are
compared to the U.S. dollar LIBOR rates every three months as a
basis for payment or receipt of the rate differential as applied to
the then covered notional amount.
8. REDEEMABLE PREFERRED STOCK
On December 5, 1995, MacDermid Imaging Technology, Inc. a
wholly-owned subsidiary of the Corporation, issued 30,000 shares
of unregistered 6% redeemable Series A preferred stock of
75,000 authorized shares to Hercules Incorporated in part
payment for the purchase of its Electronics and Printing Division.
Dividends in kind were payable on March 31 each year by the
issuance of additional Series A preferred stock at the rate of one
share per $1 of dividends. In accordance with the terms of the
preferred stock agreement, on May 28, 1997, MacDermid exercised its
option to make early payment to Hercules Incorporated, in the amount
of $32,745 to fully satisfy the amounts owed for the preferred
stock and dividends in kind.
9. SHAREHOLDER'S EQUITY
At a special shareholders' meeting held on December 1, 1997 at Corporate
headquarters, shareholders voted to adopt an amendment to MacDermid's
Restated Certificate of Incorporation, increasing the number of authorized
common shares from 20 million to 75 million. Also, at the special meeting
shareholders approved a provision to MacDermid's Restated Certificate of
Incorporation providing for written shareholder action by less than unanimous
consent.
<PAGE>
On February 6, 1998 the Board of Directors authorized a three-for-one
stock split. The shares were distributed on April 1, 1998 to common
shareholders of record at the close of business on March 16, 1998. The
stated value remained unchanged at $1.00 per share. As a result, $7,852
was first transferred from additional paid in capital with an excess of
$18,325 transferred from retained earnings to the common stock account.
Amounts per share and number of common shares have been restated to give
retroactive effect to the stock split.
During fiscal 1997 there was also a three-for-one stock split distributed
on November 15, 1996. As a result, $5,206 and $3,327 were transferred from
additional paid in capital and retained earnings, respectively to the common
stock account last year.
Common stock repurchases of 330,024 shares in 1998, at
prices ranging from $15 29/32 to $28 3/4 per share, and 1,186,035
shares in 1997, at prices ranging from $7 9/32 to $11 7/32 per
share, were completed pursuant to board authorizations. An
additional purchase of up to 100,000 shares of the Corporation's
common stock was authorized by the Board of Directors on
July 23, 1997, to be acquired through open market purchases
or privately negotiated transactions from time to time. Any future
repurchases under this authorization 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 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 emp-
loyee benefit plans, the acquisition of other businesses and the
distribution of stock dividends. At March 31, 1998, there was a
balance of such outstanding authorizations totaling 82,354 shares.
<PAGE>
10. LEASE COMMITMENTS
The Corporation leases certain warehouse space, transportation,
computer and other equipment. Contingent rentals are paid for
warehouse space on the basis of the monthly quantities of
materials stored and for transportation and other equipment on
the basis of mileage or usage. Total rental expense amounted to
$6,030, $5,710 and $6,750 in 1998, 1997 and 1996, respectively,
of which $1,169, $1,159 and $1,522, respectively, were
contingent rentals. Minimum lease commitments under operating
leases for the fiscal years subsequent to March 31, 1998 are
as follows:
(In thousands)
1999 $2,676
2000 1,102
2001 670
2002 426
2003 238
Thereafter 520
------
Total $5,632
======
11. CONTINGENCIES
The Corporation has been named as a potentially responsible
party (PRP) by the Environmental Protection Agency in connection
with two waste sites. There are many other companies involved at
each of these sites and the Corporation's participation is minor. The
Corporation has recorded its best estimate of liabilities in connection
with site clean-up based upon the extent of its involvement, the
number of PRP's and estimates of the total costs of the site clean-up.
Though it is difficult to predict the final costs of site remediation,
management believes that the recorded liabilities are reasonable
estimates of probable liability and that future cash outlays are
unlikely to be material to its consolidated financial position, results
of operations or cash flows.
On January 30, 1997, the Corporation was served with a subpoena
from a federal grand jury in Connecticut requesting certain
documents. The Corporation was subsequently informed that it is a
subject of the grand jury's investigation. The subpoena requested
information relating to an accidental spill from the Corporation's
Huntingdon Avenue, Waterbury, Connecticut facility that occurred
in November of 1994, together with other information related to
operations and compliance at the Huntingdon Avenue facility. The
Corporation has retained outside law firms to assist in complying
with the subpoena. The Corporation is cooperating with the government's
investigation.
<PAGE>
Since this matter is currently in very early stages, it is impossible to
determine what the ultimate outcome will be and difficult to quantify the
extent of an exposure to liability, if any. As such, no assurance can be
given that the Corporation will not be found to have liability.
The Corporation is a party to a number of lawsuits and claims
in addition to those discussed above arising out of the ordinary
conduct of business. While the ultimate results of the proceed-
ings against the Corporation cannot be predicted with certainty,
management does not expect that resolution of these matters will
have a material adverse effect upon its consolidated financial
position, results of operations or cash flows. It is the Corporation's
policy to accrue probable liabilities to the extent that such
liabilities can reasonably be quantified.
The Corporation's business operations, consist principally of
manufacture and sale of specialty chemicals, supplies and related
equipment to customers throughout much of the world. Approximately
60% of the business is concentrated with manufacturers of
printed circuit boards which are used in a wide variety of end-use
applications, including computers, communications and control
equipment, appliances, automobiles and entertainment products.
As is usual for this business, the Corporation generally does not
require collateral or other security as a condition of sale,
choosing, rather, to control credit risk of trade account financial
instruments by credit approval, balance limitation and monitoring
procedures. Management believes that reserves for losses, which
are established based upon review of account balances and
historical experience, are adequate.
<PAGE>
MANAGEMENT'S STATEMENT OF FINANCIAL RESPONSIBILITY
MacDermid, Incorporated (Logo)
245 Freight Street
Waterbury, CT 06702
To The Shareholders
MacDermid, Incorporated
The financial information in this report, including the audited
consolidated financial statements, has been prepared by
management. Preparation of consolidated financial
statements and related data involves the use of judgment.
Accounting principles used in preparing consolidated
financial statements are those that are generally accepted
in the United States.
To safeguard Corporate assets, it is important to have
a sound but dynamic system of internal controls and
procedures that balances benefits and costs. The
Corporation employs professional financial managers
whose responsibilities include implementing and overseeing
the financial control system, reporting on management's
stewardship of assets entrusted to it by share owners and
performing accurate and proper maintenance of the accounts.
Management has long recognized its responsibility for
conducting the affairs of the Corporation and its affiliates
in an ethical and socially responsible manner. MacDermid,
Incorporated is dedicated to the highest standards of integrity.
Integrity is not an occasional requirement, but a continuing commitment.
KPMG Peat Marwick LLP conducts an objective, independent
review of management's fulfillment of its obligations relating to
the fairness of reported operating results and financial condition.
Their report for 1998 appears below this statement.
The Audit Committee of the Board of Directors, consisting
solely of Directors independent of MacDermid, maintains an
ongoing appraisal on behalf of the share owners of the
effectiveness of the independent auditors and the Corporation's
staff of financial and operating management with respect to the
financial and internal controls.
/s/Daniel H. Leever
Daniel H. Leever
Chief Executive Officer
<PAGE>
INDEPENDENT AUDITORS' REPORT
KPMG Peat Marwick LLP (Logo)
Certified Public Accountants City Place II
Hartford, CT 06103-4103
The Board of Directors and Shareholders
MacDermid, Incorporated
We have audited the accompanying consolidated balance sheets
of MacDermid, Incorporated and subsidiaries as of March 31, 1998
and 1997, and the related consolidated statements of earnings,
cash flows and changes in shareholders' equity for each of the
years in the three-year period ended March 31, 1998. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
MacDermid, Incorporated and subsidiaries at March 31, 1998 and 1997
and the results of their operations and their cash flows for each of the
years in the three-year period ended March 31, 1998 in conformity with
generally accepted accounting principles.
/s/KPMG Peat Marwick LLP
May 14, 1998
<PAGE>
<TABLE>
SELECTED QUARTERLY FINANCIAL DATA
(UNAUDITED)
(In thousands, except share and per share amounts)
SELECTED QUARTERLY RESULTS
<CAPTION>
1998 by Quarters
----------------------------------------------
June September December March Total
----------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $74,720 $75,003 $83,808 $80,527 $314,058
Gross profit 39,376 39,025 41,354 42,114 161,869
Net earnings 7,252 7,351 7,640 8,245 30,488
Earnings
per common share $0.29 $0.29 $0.30 $0.32 $1.20
1997 by Quarters
----------------------------------------------
June September December March Total
----------------------------------------------
Net sales $72,655 $74,038 $74,367 $72,660 $293,720
Gross profit 36,215 36,696 38,365 38,163 149,439
Net earnings 4,470 5,047 5,423 7,070 22,010
Earnings
per common share* $0.17 $0.20 $0.21 $0.27 $0.85
<FN>
</TABLE>
<PAGE>
<TABLE>
MARKET RANGE TRADING RECORD
<CAPTION>
Fiscal 1998 Fiscal 1997 <F1>
------------------ ------------------
High Low High Low
QUARTER ------------------ ------------------
<S> <C> <C> <C> <C>
June 15 19/32 11 19/32 7 29/32 7 5/32
September 34 15 11/32 7 31/32 7 7/16
December 29 31/32 20 11/16 13 1/16 7 7/16
March 37 23 21/64 13 9 3/16
Closing price March 31 28 3/4 11 19/32
<FN>
</TABLE>
<TABLE>
DIVIDEND RECORD
<CAPTION>
Fiscal 1998 Fiscal 1997 <F1>
--------------------------- ---------------------------
Record Payable Amount Record Payable Amount
QUARTER Date Date Declared Date Date Declared
--------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
June 6/13/97 7/1/97 $0.0167 6/14/96 7/1/96 $0.0167
September 9/15/97 10/1/97 $0.0167 9/16/96 10/1/96 $0.0167
December 12/15/97 1/2/98 $0.0167 12/16/96 1/2/97 $0.0167
March 3/16/98 4/1/98 $0.02 3/14/97 4/1/97 $0.0167
<FN>
<F1> Restated to reflect the effects of a 3-for-1 stock split
effective February 6, 1998.
</TABLE>
<PAGE>
CORPORATE INFORMATION
DIRECTORS:
Harold Leever, Chairman of the Board
Daniel H. Leever, Chief Executive Officer
Donald G. Ogilvie, Executive Vice President,
American Bankers Association
James C. Smith, Chairman of the Board and Chief Executive
Officer, Webster Financial Corporation
Thomas W. Smith, General Partner of Prescott Investors
CORPORATE OFFICERS:
Daniel H. Leever, Chief Executive Officer
Gregory M. Bolingbroke, Controller
John L. Cordani, Secretary
EXECUTIVE MANAGEMENT:
Michael P. D'Angelo, President, Electronics
Patricia I. Janssen, President, Graphic Arts
Arthur J. LoVetere, Jr., President, ViaTek
Michael A. Pfaff, President, Industrial Products
OTHER OFFICERS:
Vice Presidents
David A. Erdman
Peter E. Kukanskis
Gary B. Larson
Thomas M. Leever
Division Vice Presidents
Clifford J. Nye
David Rosenberg
Michael J. Siegmund
CORPORATE HEADQUARTERS:
245 Freight Street
Waterbury, Connecticut 06702
(203) 575-5700
AUDITORS:
KPMG Peat Marwick LLP
<PAGE>
REGISTRAR OF STOCK AND TRANSFER AGENT:
Harris Trust Company of New York
SEC FORM 10-K:
The Annual Report and the SEC Form 10-K report are
available without charge by written request to:
Corporate Secretary
MacDermid, Incorporated
245 Freight Street
Waterbury, CT 06702
DIVIDEND REINVESTMENT PLAN:
A systematic investment service is available to all MacDermid
shareholders. The service permits investment of MacDermid,
Incorporated dividends and voluntary cash payments in additional
shares of MacDermid stock.
Please direct any inquiries to:
Harris Trust Company of New York
c/o Harris Trust and Saving Bank
Dividend Reinvestment Department
P.O. Box A3309
Chicago, IL 60690
SHAREHOLDERS' QUESTIONS:
Shareholders with questions concerning non-receipt of dividend
checks, transfer requirements, registration and address changes,
or who need a duplicate 1099 statement, should write to:
Harris Trust Company of New York
c/o Harris Trust and Savings Bank
111 West Monroe, P.O. Box 755
Chicago, IL 60690
MARKET & DIVIDEND INFORMATION:
The common shares of MacDermid, Incorporated are traded on
the New York Stock Exchange (Symbol: MRD). Price and shares
traded are listed in principal daily newspapers and are
supplied by NYSE. Approximate number of Holders as of
May 31, 1998 - 800. CUSIP-554273 102.
<PAGE>
ANNUAL MEETING:
The Annual Meeting of Shareholders will be held on Wednesday,
July 22, 1998 at 3:00 p.m., at Naugatuck Valley Community College,
Fine Arts Center, 750 Chase Parkway, Waterbury, CT.
MacDermid Locations in the Americas
United States:
CORPORATE H.Q.: Waterbury, CT
Ferndale & New Hudson, MI; Middletown & Wilmington, DE; Springfield, VT
EXHIBIT 21
SUBSIDIARIES OF MACDERMID, INCORPORATED
MacDermid's principal subsidiaries, primarily wholly-owned, are as follows:
State of
Incorporation
MacDermid Asia, Ltd Hong Kong
MacDermid Benelux BV Holland
MacDermid Chemicals, Inc. Canada
MacDermid Equipment, Inc. Vermont
MacDermid Equipment GmbH Germany
MacDermid Espanola, S.A. Spain
MacDermid Europe, Incorporated Delaware
MacDermid France, S.A. France
MacDermid G.B., Ltd. United Kingdom
MacDermid GmbH Germany
MacDermid Hong Kong, Ltd. Hong Kong
MacDermid Imaging Technology Belgium NV Belgium
MacDermid Imaging Technology Europe BV Holland
MacDermid Italiana SRL Italy
MacDermid Korea, Ltd. Hong Kong
MacDermid New Zealand, Ltd. New Zealand
MacDermid Overseas, Asia, Incorporated Delaware
MacDermid S.A. (Pty.) Ltd. South Africa
MacDermid Singapore, Pte. Ltd. Singapore
MacDermid Suisse, S.A. Switzerland
MacDermid Taiwan, Ltd. Taiwan
Nippon MacDermid Co., Inc. Japan
In addition, the Corporation has several non operating subsidiaries which,
in the aggregate, are not significant.
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
KPMG Peat Marwick LLP (Logo)
Certified Public Accountants
CityPlace II
Hartford, CT 06103-4103
Independent Auditors' Consent
The Board of Directors
MacDermid, Incorporated:
We consent to incorporation by reference in the Registration Statements
(Nos. 2-66987 and 2-68181) on Form S-8 of MacDermid, Incorporated of our
reports dated May 14, 1998, relating to the consolidated balance sheets of
MacDermid, Incorporated and subsidiaries as of March 31, 1998 and 1997,
and the related consolidated statements of earnings and cash flows and
related schedules for each of the years in the three-year period ended
March 31, 1998, which reports appear or are incorporated by reference in
the March 31, 1998 annual report on Form 10-K of MacDermid, Incorporated.
/s/ KPMG Peat Marwick LLP
June 22, 1998
EXHIBIT 24
POWER OF ATTORNEY
Each of the non employee Directors of MacDermid, Incorporated signed
identical powers of attorney in the following form:
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, a director of
MacDermid, Incorporated, hereby constitutes and appoints Harold Leever
and Daniel H. Leever, and each of them acting alone, the true and
lawful agents and attorneys-in-fact of the undersigned, with full
power and authority in said agents and attorneys-in-fact to delegate
the power herein conferred to any person or persons said agents and
attorneys-in-fact shall select, to sign in the place of the undersigned
in his capacity as a director of the Corporation, the Form 10-K for the
fiscal year ended March 31, 1998, of the Corporation to be filed
with the Securities and Exchange Commission, Washington, D.C.,
under the Securities Exchange Act of 1934, as amended, and sign any
amendment or amendments to such Form 10-K; hereby ratifying and
confirming all acts taken by such agents and attorneys-in-fact or
any one of them, as herein authorized.
(Signature)*
May 14, 1998
* The Directors who signed the powers of attorney were:
Donald G. Ogilvie
James C. Smith
Thomas W. Smith
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted
from the consolidated balance sheet as of March 31, 1998 and the consolidated
statement of earnings for the fiscal year ended March 31, 1998 included in
Exhibit 13 to the 1998 Form 10-K Annual Report of MacDermid, Incorporated and
is qualified in its entirety to such statements.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Mar-31-1998
<PERIOD-START> Apr-01-1997
<PERIOD-END> Mar-31-1998
<CASH> 3549
<SECURITIES> 0
<RECEIVABLES> 76273
<ALLOWANCES> 3598
<INVENTORY> 49639
<CURRENT-ASSETS> 132088
<PP&E> 87793
<DEPRECIATION> 44847
<TOTAL-ASSETS> 300260
<CURRENT-LIABILITIES> 86003
<BONDS> 103983
0
0
<COMMON> 39265
<OTHER-SE> 66280
<TOTAL-LIABILITY-AND-EQUITY> 300260
<SALES> 314058
<TOTAL-REVENUES> 314058
<CGS> 152189
<TOTAL-COSTS> 265952
<OTHER-EXPENSES> 113763
<LOSS-PROVISION> 817
<INTEREST-EXPENSE> 7758
<INCOME-PRETAX> 48106
<INCOME-TAX> 17309
<INCOME-CONTINUING> 30488
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30488
<EPS-PRIMARY> 1.22
<EPS-DILUTED> 1.20
</TABLE>
