<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549 - 1004
FORM 8-K /A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
DATE OF REPORT (Date of earliest event reported) December 2, 1998
----------------
COMMISSION FILE NUMBER 0-2413
------
MacDermid, Incorporated
-----------------------
(Exact name of registrant as specified in its charter)
Connecticut 06-0435750
----------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
245 Freight Street, Waterbury, Connecticut 06702
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 575-5700
--------------
None
--------------------------------
Former name, former address and former fiscal year, if changed
since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities and Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
------ ------
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS:
7 (a) Financial Statements of Business Acquired, W. Canning plc. as follows:
i. Group Balance Sheets as of December 31, 1997 and 1996
ii. Group Profit and Loss Account and Group Statement of Total
Recognised Gains and Losses for each of the three years in
the period ended December 31, 1997
iii. Group Cash Flow Statement and Reconciliation of Net Cash
Flow to Movement in Net Funds for each of the three years in
the period ended December 31, 1997
iv. Reconciliation of Movements in Consolidated Shareholders'
Funds for each of the three years in the period ended
December 31, 1997
v. Statement of Accounting Policies and Notes to the Accounts
vi. Report of Independent Accountants
vii. Unaudited Interim - Consolidated Summary Balance Sheets as of
June 30, 1998 and 1997
viii. Unaudited Interim - Consolidated Summary Profit and Loss
Account for the six months ended June 30, 1998 and
June 30, 1997
ix. Unaudited Interim - Consolidated Summary Cash Flow for the
six months ended June 30, 1998 and June 30, 1997
7 (b) Pro Forma Financial Information, Reflecting the Acquisition of W.
Canning plc.
i. Unaudited Pro Forma Condensed Combined Balance Sheet as of
March 31, 1998
ii. Unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended March 31, 1998
iii. Unaudited Pro Forma Condensed Combined Statement of
Operations for the six months ended September 30, 1998
iv. Notes to Unaudited Pro Forma Condensed Combined Financial
Statements and associated Adjustments for Acquisition
7 (c) Exhibits.
23 Consent of Price Waterhouse Chartered Accountants and
Registered Auditors
27.1 Financial Data Schedule based upon Audited Financial
Statements of W. Canning plc as of December 31, 1997.
27.2 Financial Data Schedule based upon Interim Unaudited
Financial Statements of W. Canning plc as of June 30, 1998.
<PAGE>
<TABLE>
W. Canning plc
Group Balance Sheets
(Amounts in Thousands of Pounds Sterling)
<CAPTION>
At December 31,
Note 1997 1996
---- Pounds---- Pounds ----
<S> <C> <C> <C>
Fixed Assets
Tangible Assets 8 13,412 13,321
Investments 9 827 109
------ ------
14,239 13,430
------ ------
Current Assets
Stocks 10 5,910 6,151
Debtors 11 20,749 20,744
Cash at Bank and In Hand 17,551 16,504
------ ------
44,210 43,399
------ ------
Creditors: due within
one year Short Term
Borrowings 12 (7,236) (4,344)
Other Creditors 13 (17,971) (18,465)
-------- --------
(25,207) (22,809)
-------- --------
Net Current Assets 19,003 20,590
-------- --------
Tangible Assets Less
Current Liabilities 33,242 34,020
Creditors: due after
more than one year 14 (5,106) (8,264)
Provisions for
Liabilities and Charges 15 (1,345) (1,651)
------- -------
Net Assets Pounds 26,791 Pounds 24,105
------- -------
Equity Capital and Reserves
Called Up Share Capital 16 Pounds 7,299 Pounds 7,212
Share Premium 17 19,484 18,994
Revaluation Reserve 17 2,009 2,045
Merger Reserve 17 4,280 6,631
Goodwill Reserve 17 (12,403) (11,402)
Profit and Loss Account 17 5,940 444
-------- --------
Shareholders' Funds 18 26,609 23,924
Minority Equity Interest 182 181
------ ------
Pounds 26,791 Pounds 24,105
------ ------
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
W.Canning plc
Group Profit and Loss Account
(Amounts in Thousands of Pounds Sterling)
<CAPTION>
Year Ended December 31,
Note Pounds 1997 Pounds 1996 Pounds 1995
<S> <C> <C> <C> <C>
Turnover 1 74,003 77,719 74,527
Operating Charges 2 (65,235) (68,876) (67,297)
-------- -------- --------
Operating Profit 1 8,768 8,843 7,230
Income from Interests
in Associated
Undertakings 40 38 --
Net Interest 4 297 73 (212)
-------- -------- --------
Profit on Ordinary
Activities Before
Taxation 9,105 8,954 7,018
Taxation on Profit
on Ordinary Activities 5 (3,005) (3,134) (2,620)
-------- -------- --------
Profit on Ordinary
Activities after
Taxation 6,100 5,820 4,398
Minority Equity
Interests (21) (34) (10)
-------- -------- --------
Profit for the
Financial Year 6,079 5,786 4,388
Dividends 6 (2,674) (2,450) (2,291)
-------- -------- --------
Retained Profit 17 Pounds 3,405 Pounds 3,336 Pounds 2,097
-------- -------- --------
pence pence pence
Earnings Per Share 7 20.9 20.2 15.4
---- ---- ----
<FN>
The above results are all attributable to continuing operations
A statement of movements in shareholders' funds can be found in note 18
Historical cost profit is not materially different from the reported profit
</TABLE>
<PAGE>
<TABLE>
W.Canning plc
Group Statement of Total Recognised Gains and Losses
(Amounts in Thousands of Pounds Sterling)
<CAPTION>
Year Ended December 31,
Pounds 1997 Pounds 1996 Pounds 1995
<S> <C> <C> <C>
Profit for the financial year 6,079 5,786 4,388
Currency translation differences
on foreign currency net
investments (296) (170) (39)
Property revaluation adjustments -- -- (680)
------ ----- ------
Total recognised gains and losses
for the year 5,783 5,616 3,669
----- ----- ------
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
W.Canning plc
Group Cash Flow Statement
(Amounts in Thousands of Pounds Sterling)
<CAPTION>
Year Ended December 31,
Note Pounds 1997 Pounds 1996 Pounds 1995
<S> <C> <C> <C> <C>
Net Cash Inflow from
Operating Activities 19 8,442 10,230 8,111
Returns on Investment and
Servicing of Finance 20 372 34 (114)
Taxation (2,227) (2,300) (1,892)
Capital Expenditure 20 (2,397) (3,055) (2,349)
Acquisitions 20 (1,719) (3,169) (46)
Equity Dividends Paid (2,568) (2,354) (2,207)
Net Cash Outflow Before Use ------- ------- -------
of Liquid Resources
and Financing (97) (614) 1,503
Management of Liquid
Resources 20 21 (1,100) (691) (1,404)
Financing 20 1,389 2,647 707
------- ------- -------
Increase in Cash 21 Pounds 192 Pounds 1,342 Pounds 806
------- ------- -------
</TABLE>
<PAGE>
<TABLE>
W.Canning plc
Reconciliation of Net Cash Flow to Movement in Net Funds
(Amounts in Thousands of Pounds Sterling)
<CAPTION>
Year Ended December 31,
Pounds 1997 Pounds 1996 Pounds 1995
<S> <C> <C> <C>
Increase in Cash 192 1,342 806
Cash Outflow From Decrease in
Liquid Resources 1,100 691 1,404
Cash Inflow From Increase in Debt (812) (2,124) (440)
Change in Net Cash Resulting ------ ------- ------
From Cash Flows 480 (91) 1,770
Loans Acquired with Subsidiary -- (93) --
Currency Translation Differences 815 1,706 (1,104)
Movements in Net Funds in ----- ------ -------
the Period 1,295 1,522 666
Net Funds at Start of Year 4,083 2,561 1,895
------- ------- -------
Net Funds at End of Year Pounds 5,378 Pounds 4,083 Pounds 2,561
------- ------- -------
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
W.Canning plc
Reconciliation of Movements in Consolidated Shareholders' Funds
(Amounts in Thousands of Pounds Sterling)
<CAPTION>
Year Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Profit for the Financial Year
Attributable to Shareholders Pounds 6,079 Pounds 5,786 Pounds 4,388
Other Recognised Gains and
Losses Relating to the Year (296) (170) (719)
------- ------- -------
5,783 5,616 3,669
Dividends (2,674) (2,450) (2,291)
New Share Capital Subscribed 577 523 267
Goodwill Arising on Purchase of
Minority Interests -- -- (18)
Goodwill Arising on
Acquisition of Business (1,001) (2,907) --
------- ------- -------
Net Change in Shareholders'
Funds 2,685 782 1,627
Shareholders' Funds at
1st January 23,924 23,142 21,515
Shareholders' Funds ------- ------- -------
at 31st December Pounds 26,609 Pounds 23,924 Pounds 23,142
------ ------ -------
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
W. Canning plc
Statement of Accounting Policies
Basis of preparation
These accounts have been prepared in accordance with applicable accounting
standards and under the historical cost convention adjusted by the revaluation
of certain of the group's land and buildings, to reflect open market value.
Basis of consolidation
The group accounts consolidate the accounts of W.Canning plc and all its
subsidiary undertakings. The acquisition method of accounting has been
adopted. Under this method, the results of subsidiary undertakings acquired or
disposed of in the year are included in the consolidated profit and loss
account from the date of acquisition or up to the date of disposal. Goodwill
arising on consolidation (representing the excess of the fair value of the
consideration given over the fair value of the separable net assets acquired)
is transferred to goodwill reserve at the time of acquisition. On the
subsequent disposal or termination of a previously acquired business, the
profit or loss on disposal or termination is calculated after charging the
gross amount of any related goodwill previously deducted from reserves. The
consolidated accounts are based on accounts of subsidiary undertakings which
are coterminous with those of the parent company. In appropriate
circumstances, relief is taken under section 131 of the Companies Act 1985 not
to reflect the share premium on shares issued in exchange for shares of an
acquired subsidiary. The cost of investment is stated at its fair value and
any surplus over the nominal value of the shares issued is reflected as a
merger reserve. Associated undertakings are accounted for under the equity
method of accounting. For associated undertakings, the group includes its
share of profits and losses in the consolidated profit and loss account and
its share of post acquisition retained profits or accumulated deficits in the
consolidated balance sheet. Goodwill on acquisition of investments in
associated undertakings is transferred to goodwill reserve at the time of
acquisition.
Tangible fixed assets
No depreciation is provided on freehold land. For all other tangible fixed
assets depreciation is provided by equal annual installments in order to write
off their purchase cost or valuation over the term of their expected useful
economic life. The useful life assumed for plant and equipment varies between
5 and 14 years and for motor vehicles is 4 to 5 years. The useful life assumed
for buildings is based on independent professional advice, and varies between
20 and 50 years.
<PAGE>
Leased assets
The rental costs of assets held on operating leases are charged against
profits on a straight line basis.
Stocks
Stocks and work in progress are valued at the lower of cost and net realisable
value. Cost comprises materials, labour and appropriate overhead expenses.
Provisions are made as necessary for slow moving and obsolete stock.
Turnover
All turnover figures relate to sales outside the group and exclude VAT, and
other sales taxes.
Foreign currencies
Assets and liabilities of overseas subsidiary and associated undertakings are
translated into sterling at the rates of exchange ruling at the balance sheet
date, and their results and cash flows are translated at the average rates of
exchange applicable during the year. Exchange differences arising from the
retranslation of opening assets and liabilities and of the profit and loss
account to closing rate are taken to reserves. Exchange gains and losses
relating to trading transactions are included in trading profit. Exchange
gains and losses arising on foreign currency borrowings used to hedge or
finance the group's overseas investments are taken to reserves in accordance
with SSAP20.
Research and development
All expenditure is written off as it is incurred except for expenditure on
fixed assets.
Taxation
The charge for taxation is based on the profit for the year and takes into
account taxation deferred because of timing differences between the treatment
of certain items for taxation and accounting purposes. Provision is made for
deferred tax to the extent that it is probable that an actual asset or
liability will result. Deferred taxation on pension balances and provisions
for post-retirement obligation is recognised in full.
<PAGE>
Pensions
Funds held in UK pension schemes are administered by trustees and are
independent of the group's finances. Prior to 6th April, 1997, the Group's
principal UK scheme was a defined benefit scheme, the Group's contributions to
which were calculated in accordance with recommendations of independent
actuaries and were charged against profits on a consistent basis over the
period during which employees worked with the Group. Liabilities in respect of
non-UK pension obligations were provided for on a similar basis. Since 6th
April, 1997, the Group's principal UK scheme has been a defined contribution
scheme, the Group's contributions to which are a fixed percentage of the
pensionable salary of active members and are charged against profits as
incurred. Liabilities in respect of non-UK pension obligations are calculated
in accordance with recommendations of independent actuaries and are charged
against profits on a consistent basis over the estimated remaining service
lives of the relevant employees.
Liquid resources
Cash deposits which are liquid and readily disposable in more than one day and
less than twelve months from maturity are included in liquid resources.
<PAGE>
W.Canning plc
Notes to the Financial Statements
1. Product Group analysis
<TABLE>
<CAPTION>
Net Operating
Turnover Operating Profit Assets
1997 1996 1997 1996 1997 1996
Pounds'000 '000 Pounds'000 '000 Pounds'000 '000
----------------- ----------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Surface finishing 27,756 26,882 4,090 4,346 8,173 7,340
Sealants and
adhesives 7,148 7,756 535 819 3,083 3,048
Synthetic lubricants
and fluids 16,079 14,619 4,497 3,877 4,660 4,264
Additives for
fuel, water
and waste treatment 23,020 28,462 (354) (199) 6,549 7,530
------ ------ ------ ------ ------ ------
74,003 77,719 8,768 8,843 22,465 22,182
------ ------ ------ ------ ------ ------
</TABLE>
In the current year the directors decided to disclose financial information by
product group and not by geography. The above analysis has been restated for
the comparatives in 1996 to reflect changes in the organisation structure
which came into effect in 1997. The analysis was not presented in a product
group format prior to 1997 and therefore no equivalent information is vailable
for the year ended 31st December, 1995. Net operating assets are defined as
tangible fixed assets plus current assets, less provisions for liabilities and
charges but excluding investments, net funds, tax and dividends payable. The
product group operating profits are stated after the allocation of central
costs and charges.
<TABLE>
<CAPTION>
Reconciliation of net assets 1997 1996
Pounds 000 Pounds 000
---------- ----------
<S> <C> <C>
Net operating assets as shown above 22,465 22,182
Investments 827 109
Net funds 5,378 4,083
Tax liabilities and dividend payable (3,345) (3,439)
Parent company and non operating assets 1,466 1,170
------- -------
Net assets per group balance sheet 26,791 24,105
------- -------
</TABLE>
<TABLE>
<CAPTION>
Turnover by geographic origin 1997 1996 1995
Pounds 000 Pounds 000 Pounds 000
--------- ---------- ----------
<S> <C> <C> <C>
UK 37,014 36,509 34,079
Continental Europe 31,007 35,216 35,919
Rest of World 5,982 5,994 4,529
------ ------ ------
74,003 77,719 74,527
------ ------ ------
</TABLE>
2. Operating charges
<TABLE>
<CAPTION>
1997 1996 1995
Note Pounds 000 Pounds 000 Pounds 000
---- ---------- ---------- ----------
<S> <C> <S> <S> <S>
Changes in stocks of finished
goods and work in progress (287) (103) (104)
Other operating income (529) (499) (393)
Raw materials and consumables 31,938 34,461 33,929
Other external charges 2,452 2,854 3,281
Staff costs 3 18,942 19,750 19,605
Depreciation 8 1,700 1,626 1,525
Other operating costs 11,019 10,787 9,454
------ ------ -------
65,235 68,876 67,297
Other operating costs includes: ------ ------ ------
Leases and hire of plant and
equipment 268 327 312
Leases relating to property 54 102 141
Research and development
expenditure 1,719 1,651 1,552
Audit fees paid to firms
other than Price Waterhouse 9 35 22
Due diligence fees paid to
firms other than Price Waterhouse
(Rest of world) -- 42 --
Amounts payable to Price Waterhouse:
Audit fees -Company 28 25 25
-Group 78 80 70
Taxation -UK 31 68 18
Due diligence reviews - Rest of World 22 17 --
Total fees payable to Price ----- ----- -----
Waterhouse 159 190 113
----- ----- -----
</TABLE>
3. Staff costs and numbers
<TABLE>
<CAPTION>
1997 1996 1995
Pounds 000 Pounds 000 Pounds 000
<S> <C> <C> <C>
The aggregate payroll cost was:
Wages and salaries 15,186 15,632 15,465
Social security costs 3,222 3,587 3,540
Pension costs 534 531 600
------ ------ ------
18,942 19,750 19,605
------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
Number Number Number
<S> <C> <C> <C>
Average number of persons
employed by class of business
Surface finishing 208 193 <FN1>
Sealants and adhesives 86 88 <FN1>
Synthetic lubricants and fluids 102 96 <FN1>
Additives for fuel, water and waste treatment 344 343 <FN1>
--- --- -----
740 720 722
--- --- -----
<FN>
<FN1> for 1995, the equivalent detail by the current classification is not
available
</FN>
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
Pounds 000 Pounds 000 Pounds 000
<S> <C> <C> <C>
4. Net interest
On bank loans and overdrafts wholly
repayable within five years (764) (777) (1,115)
On bank loans wholly repayable after
five years (56) (33) --
Other interest (57) (82) (97)
------ ------ -------
Interest payable (877) (892) (1,212)
Interest receivable 1,174 965 1,000
------ ------ -------
297 73 (212)
------ ------ -------
5. Taxation
Based on the profit of the year:
UK corporation tax at 31.5%
(1996 and 1995: 33%) 2,028 2,226 2,118
Overseas taxes 1,200 457 491
Associated undertakings 13 - -
Deferred tax - 533 51
Prior year adjustments (236) (82) (40)
------ ----- ------
3,005 3,134 2,620
------ ------ ------
</TABLE>
The total tax charge for the group includes tax on overseas earnings which are
at rates higher than the rate applicable to UK profits.
No account has been taken of tax losses estimated at DM 21.9 million (1996: DM
22.9 million and 1995:DM 10.7 million) in the German sub-group which are
available to offset against its future taxable profits.
6. Dividends
<TABLE>
<CAPTION>
1997 1996 1995
Pounds 000 Pounds 000 Pounds 000
---------- ---------- ----------
<S> <C> <C> <C>
Interim dividend paid-3.70p per share
(1996: 3.40p and 1995:3.20p) 1,080 979 916
Final dividend proposed-5.40p per share
(1996: 5.10p and 1995:4.80p) 1,577 1,471 1,375
Total paid and proposed-9.10p per share ----- ----- -----
(1996: 8.50p and 1995:8.00p) 2,657 2,450 2,291
1996 final dividend on share options
exercised in 1997 17 - -
----- ----- -----
2,674 2,450 2,291
----- ----- -----
</TABLE>
7. Earnings per share
Basic earnings per share is calculated on earnings of Pounds 6,079,000 (1996:
Pounds 5,786,000 and 1995: Pounds 4,388,000) representing the group profit on
ordinary activities after taxation and minority interests. There was an
average of 29.05 million (1996: 28.68 million and 1995: 28.40 million) shares
in issue during the year. If the share options outstanding had been exercised
during 1997, the dilution of earnings per share would not have been material.
8. Tangible assets
<TABLE>
<CAPTION>
Plant,
Freehold Leasehold machinery
properties properties & equipment Total
Pounds 000 Pounds 000 Pounds 000 Pounds 000
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1997
- ----
Cost or valuation:
At 1st January 1997 9,771 392 14,358 24,521
Exchange adjustments (438) - (664) (1,102)
Capital expenditure 596 - 1,832 2,428
Disposals (3) - (516) (519)
------- ----- ------- -------
At 31st December 1997 9,926 392 15,010 25,328
Accumulated depreciation:
At 1st January 1997 1,421 118 9,661 11,200
Exchange adjustments (83) - (450) (533)
Charge for year 302 13 1,385 1,700
Disposals (2) - (449) (451)
------- ----- ------- -------
At 31st December 1997 1,638 131 10,147 11,916
Net book value as at ------- ----- ------- -------
31st December 1997 8,288 261 4,863 13,412
Net book value as at ------- ----- ------- -------
31st December 1996 8,350 274 4,697 13,321
------- ----- ------- -------
1996
- ----
Cost or valuation:
At 1st January 1996 9,827 392 13,411 23,630
Exchange adjustments (660) - (965) (1,625)
Acquisition of subsidiary
undertakings - - 246 246
Capital expenditure 648 - 2,389 3,037
Disposals (44) - (723) (767)
------- ----- ------- -------
At 31st December 1996 9,771 392 14,358 24,521
Accumulated depreciation:
At 1st January 1996 1,258 105 9,528 10,891
Exchange adjustments (127) - (719) (846)
Acquisition of subsidiary
undertakings - - 148 148
Charge for year 319 13 1,294 1,626
Disposals (29) - (590) (619)
------- ----- ------- -------
At 31st December 1996 1,421 118 9,661 11,200
Net book value as at ------- ----- ------- -------
31st December 1996 8,350 274 4,697 13,321
Net book value as at ------- ----- ------- -------
31st December 1995 8,569 287 3,883 12,739
------- ----- ------- -------
</TABLE>
The costs of tangible fixed assets at 31st December 1997 included Pounds
1,593,000 (1996: Pounds 977,000) in respect of assets in the course of
construction.
<TABLE>
<CAPTION>
1997 1996
Pounds 000 Pounds 000
---------- ----------
<S> <C> <C>
Net book value of land and buildings comprises:
Freehold properties:
Land (not depreciated) 2,118 2,132
Buildings (depreciated) 6,170 6,218
------ ------
8,288 8,350
------ ------
Long leasehold properties (more than 50 years unexpired) 257 263
Short leasehold properties 4 11
------ ------
261 274
Cost or valuation of land and buildings comprises:
Cost 4,870 4,805
Valuation 5,448 5,358
------ ------
10,318 10,163
------ ------
</TABLE>
Certain of the group's properties were revalued in 1995 on the basis of open
market value for existing use as at 31st December 1994 by members of the Royal
Institution of Chartered Surveyors.
<TABLE>
<CAPTION>
1997 1996
Pounds 000 Pounds 000
---------- ----------
<S> <C> <C>
On the historical costs basis, the book value
of land and buildings would be as follows:
Cost:
Freehold land and buildings 8,961 8,960
Leasehold properties 392 392
Accumulated depreciation (2,939) (2,778)
------- -------
Net book value 6,414 6,574
------- -------
9. Investments
1997 1996
Cost Cost
Pounds 000 Pounds 000
------- -------
Investment in associated undertakings:
At 1st January 109 -
Exchange (3) (17)
Investment in joint venture 154 -
Investment in associated undertaking 540 88
Share of current year income 27 38
----- -----
At 31st December 827 109
----- -----
</TABLE>
Details of principle subsidiary undertakings are given in note 27.
The investment in associated undertakings represents the group's:
(i) holding of the ordinary shares of Canning Japan KK, the other 52% being
held by local management. The company operates and is incorporated in Japan,
where it distributes Canning products and third party materials. The
company's capital and reserves were Pounds 332,000 at 31st December 1997 with
a profit of Pounds 129,000. Canning Japan KK has a December year end;
(ii) the 50% joint venture investment in the ordinary shares of Canning-Metfin
Chemicals Limited which in turn owns 90% of the ordinary shares of Canning-
Metfin Chemicals (Shanghai) Limited. Canning-Metfin Chemicals Limited is a
holding company and Canning-Metfin Chemicals (Shanghai) Limited manufactures,
sells and distributes Canning products and third party materials. Both
companies are registered in the Peoples' Republic of China and have a December
year end. The consolidated capital and reserves were Pounds 224,000 at 31st
December 1997 with a loss of Pounds 82,000 relating to start up costs incurred
in the period; and
(iii) 48% holding of common stock of Taskem, Inc., of Cleveland, Ohio, USA.
The company's capital and reserves were Pounds 1,157,000 at 31st December 1997
with a profit of Pounds 15,000 for the period since acquisition. The company
is registered in the USA and manufactures, sells and distributes surface
finishing and other speciality chemicals, and related products and
accessories. Taskem, Inc., has a September year end.
10. Stocks
<TABLE>
<CAPTION>
1997 1996
Pounds 000 Pounds 000
----------- ----------
<S> <C> <C>
Raw materials 2,782 3,227
Work in progress 192 187
Finished stock and goods for resale 2,936 2,737
----- -----
5,910 6,151
----- -----
</TABLE>
The current replacement costs of stocks does not differ materially from the
historical costs noted above.
Certain subsidiary undertakings have consignment stock arrangements with
suppliers in the ordinary course of business. Inventory drawn from
consignment stock is generally invoiced to the companies concerned at the
price ruling at the date of draw down. The value of such stock, at cost, which
has been excluded from the balance sheet in accordance with the application
notes included in FRS5, amounted to Pounds 507,000 (1996: Pounds 275,000).
<TABLE>
<CAPTION>
1997 1996
Pounds 000 Pounds 000
---------- ----------
<S> <C> <C>
11. Debtors
Amounts falling due within one year:
Trade debtors 17,851 17,447
Amounts owed by associated undertakings 161 129
Tax recoverable 304 703
Prepayments and accrued income 580 642
Other debtors 930 790
------ ------
19,826 19,711
Amounts falling due after one year:
Amounts owed by associated undertakings 357 383
Tax recoverable 65 138
Deferred taxation (note 15) 263 295
Other debtors 238 217
------ ------
923 1,033
------ ------
20,749 20,744
------ ------
12. Short term borrowings (unsecured)
Bank overdrafts 192 182
Bank loans 7,044 4,162
------ ------
7,236 4,344
------ ------
13. Creditors: due within one year
Trade creditors 8,824 9,523
Other taxation and social security 1,830 1,838
Dividends 1,577 1,471
Corporation tax 2,240 2,044
Advance corporation tax 654 613
Accruals 1,454 1,080
Other creditors 1,392 1,896
------ ------
17,971 18,465
------ ------
14. Creditors: due after more than one year
Bank loans 4,937 8,077
Other creditors 169 187
------ ------
5,106 8,264
------ ------
Analysis of bank loans and overdrafts (unsecured):
Repayable
1-2 years 76 3,256
2-5 years 4,273 238
After 5 years 588 4,583
------ ------
4,937 8,077
Within one year (note 12) 7,236 4,344
------ ------
12,173 12,421
------ ------
</TABLE>
Other bank loans repayable by installments after five years are
repayable in 2005 and 2007 and bear interest at 1.3% and 1.1% respectively
above the appropriate inter-bank offer rate.
The company entered into interest swap arrangements under which it has
contracted to deposit Pounds 4 million in sterling at 6.43% and to borrow FF
30 million at 4.57%, these rates of interest being fixed until August 1998.
The group has Pounds 7.2 million of undrawn committed borrowing facilities and
Pounds 0.4 million of undrawn uncommitted borrowing facilities available all
of which expire in more than one year.
15. Provisions for liabilities and charges
<TABLE>
<CAPTION>
Discontinued
Overseas business
pensions provisions Total
Pounds 000 Pounds 000 Pounds 000
---------- ----------- ----------
<S> <C> <C> <C>
1997
- ----
At 1st January 1997 1,338 313 1,651
Exchange adjustments (146) (32) (178)
Charge/(release) to profit and
loss account 164 (76) 88
Payments (45) (171) (216)
------ ------ ------
At 31st December 1997 1,311 34 1,345
------ ------ -----
1996
- ----
At 1st January 1996 1,633 744 2,377
Exchange adjustments (206) (70) (276)
Acquisition of subsidiary undertaking 3 - 3
Release of profit and loss account (17) (322) (339)
Payments (75) (39) (114)
------ ------ ------
At 31st December 1996 1,338 313 1,651
------ ------ -----
1997 1996
Pounds 000 Pounds 000
---------- ----------
Movement on deferred tax asset
At 1st January (295) (904)
Exchange adjustments 32 77
Acquisition of subsidiary undertakings - (1)
Charge to profit and loss account - 533
----- -----
At 31st December (263) (295)
----- -----
Analysis of deferred tax assets 1997 1996
Pounds 000 Pounds 000
---------- ----------
Accelerated capital allowances 65 71
Taxation losses (97) (107)
Other timing differences (231) (259)
----- -----
Deferred tax asset (263) (295)
----- -----
<FN>
The deferred tax asset, principally related to pensions and post retirement
obligations, is included in debtors (note 11).
</TABLE>
16. Called up equity share capital
<TABLE>
<CAPTION>
1997 1996 1997 1996
Number Number 000 Pounds 000
---------- ---------- -------------------
<S> <C> <C> <C> <C>
Issued ordinary shares of 25p each
fully paid 29,196,634 28,846,634 7,299,158 7,211,658
Unissued shares of 25p each 8,403,366 8,753,366 2,100,842 2,188,342
---------- ---------- --------- ---------
Authorised ordinary shares of
25p each 37,600,000 37,600,000 9,400,000 9,400,000
---------- ---------- --------- ---------
</TABLE>
Allotment of shares
<TABLE>
During 1997 new ordinary shares of 25 pence each in the company were
issued as follows:
<CAPTION>
No. of Price per Value/ Reason
Allotment date shares share proceeds for issue
<S> <C> <C> <C> <C>
2nd April 1997 50,000 157.00p Pounds 78,500 Executive share options
23rd April 1997 240,000 157.00p Pounds 376,800 Executive share options
23rd April 1997 30,000 250.69p Pounds 75,207 Executive share options
6th May 1997 30,000 157.00p Pounds 47,100 Executive share options
</TABLE>
<TABLE>
During 1996 new ordinary shares of 25 pence each in the company were
issued as follows:
<CAPTION>
No. of Price per Value/ Reason
Allotment date shares share proceeds for issue
<S> <C> <C> <C> <C>
Various 1996 167,493 80.00p Pounds 133,994 Savings related share
option
2nd December1996 40,000 125.50p Pounds 50,200 Executive share options
Various 1996 165,000 205.00p Pounds 338,250 Executive share options
</TABLE>
Employee share options
<TABLE>
Options outstanding under the W. Canning 1995 Employee Savings Related Scheme,
the W. Canning 1985 Scheme and the W. Canning 1995 Executive Share Option
Scheme were as follows:
<CAPTION>
1st January Granted Exercised Lapsed 31st December
1997 1997
-------- ------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
Savings-related share
option scheme:
exercisable between
1st January 2000 and
1st July 2004 at 214p 173,360 - - (5,724) 167,636
1985 Share option
scheme:
exercisable between
1st January 1997 and
30th June 2003 at 157p 380,000 - (320,000) (30,000) 30,000
1995 Executive share
option scheme:
exercisable between
1st January1999 and
30th June 2002 at a base
price of 233p (actual
option price of share
exercised 250.69p) 349,000 - (30,000) (9,000) 310,000
1995 Executive share
option scheme:
exercisable between
1st July 2000 and
31st December 2003 at
a base price of 305p - 40,000 - - 40,000
</TABLE>
<TABLE>
<CAPTION>
1st January Granted Exercised Lapsed 31st December
1996 1996
-------- ------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
Savings-related share
option scheme:
exercisable between
1st January 1996 and
1st July 1996 at 80p 170,679 - (167,493) (3,186) -
Savings-related share
option scheme:
exercisable between
1st January 2000 and
1st July 2004 at 214p - 173,360 - - 173,360
1985 Executive share
option scheme:
exercisable before
31st December 1996
at 205p 165,000 - (165,000) - -
1985 Executive share
option scheme:
exercisable between
1st July1996 and
30th June 1999 at 125.5p 50,000 - (40,000) (10,000) -
1985 Share option
scheme:
exercisable between
1st January 1997 and
30th June 2003 at 157p 380,000 - - - 380,000
1995 Executive share
option scheme:
exercisable between
1st January 1999 and
30th June 2002 at a base
price of 233p 349,000 - - - 349,000
</TABLE>
17. Reserves
<TABLE>
<CAPTION>
Share Revaluation Merger Goodwill Profit and
premium reserve reserve reserve loss account
000 Pounds 000 Pounds 000 Pounds 000 Pounds 000
---------- ---------- ------- ------ ----------
<S> <C> <C> <C> <C> <C>
At 1st January 1997 18,994 2,045 6,631 (11,402) 444
Reclassification - - (2,351) - 2,351
Issue of shares 490 - - - -
Profit for the year - - - - 3,405
Exchange movements - (36) - - (260)
Goodwill on acquisitions - - - (1,001) -
------ ------ ------- -------- ------
At 31st December 1997 19,484 2,009 4,280 (12,403) 5,940
------ ------ ------- -------- ------
At 1st January 1996 18,564 2,082 6,631 (8,495) (2,759)
Issue of shares 430 - - - -
Profit for the year - - - - 3,336
Exchange movements - (37) - - (133)
Goodwill on acquisitions - - - (2,907) -
------ ------ ------- -------- ------
At 31st December 1996 18,994 2,045 6,631 (11,402) 444
------ ------ ------- -------- ------
</TABLE>
Net exchange movements include Pounds 971,000 (1996: Pounds 861,000) reduction
in foreign currency borrowings used to match overseas investments.
The reclassification relates to the disposal of Societe des Adhesifs de
Bellegarde Ain S.A. in 1993 and the reallocation of the related merger reserve
established on acquisition to profit and loss account.
18. Reconciliation of movements in shareholders' funds
<TABLE>
<CAPTION>
1997 1996
Pounds 000 Pounds 000
---------- ----------
<S> <C> <C>
Profit for the financial year attributable
to shareholders 6,079 5,786
Other recognised gains and losses relating to the year (296) (170)
-------- --------
5,783 5,616
Dividends (2,674) (2,450)
New share capital subscribed 577 523
Goodwill arising on acquisition of businesses (1,001) (2,907)
-------- --------
Net change in shareholders' funds 2,685 782
Shareholders' funds at 1st January 23,924 23,142
-------- --------
Shareholders' funds at 31st December 26,609 23,924
-------- --------
</TABLE>
19. Reconciliation of operating profit to cash inflow
from operating activities
<TABLE>
<CAPTION>
1997 1996 1995
Pounds 000 Pounds 000 Pounds 000
--------- ---------- ----------
<S> <C> <C> <C>
Operating profit 8,768 8,843 7,230
Depreciation on tangible assets 1,700 1,626 1,525
(Increase)/decrease in stocks (55) 354 197
Increase in debtors (1,607) (305) (518)
(Decrease)/increase in creditors (226) 173 (139)
Decrease in provisions (138) (461) (184)
------- ------- -------
Net cash inflow from operating activities 8,442 10,230 8,111
</TABLE>
20. Analysis of cash flows shown net in the
cash flow statement
<TABLE>
<CAPTION>
1997 1996 1995
Pounds 000 Pounds 000 Pounds 000
---------- ---------- ----------
<S> <C> <C> <C>
Returns on investment and servicing
of finance Interest received 1,194 941 1,041
Interest paid (822) (907) (1,155)
------- ------- -------
Net cash inflow from returns on
investments and servicing of finance 372 34 (114)
------- ------- -------
Capital expenditure
Payments to acquire tangible fixed assets (2,465) (3,216) (2,393)
Receipts from sale of tangible fixed assets 68 148 44
Receipts from sale of fixed asset investment - 13 -
------- ------- -------
Net cash outflow for capital expenditure (2,397) (3,055) (2,349)
------- ------- -------
Acquisitions
Purchase of minority interest - - (46)
Payments to acquire businesses (38) (3,169) -
Payment to acquire interest in joint venture (154) - -
Payments to acquire interest in associated
undertaking (1,527) - -
------- ------- -------
Net cash outflow for acquisitions (1,719) (3,169) (46)
------- ------- -------
Management of liquid resources
Increase in money market deposits (1,100) (691) (1,404)
------- ------- -------
Net cash outflow from management of
liquid resources (1,100) (691) (1,404)
------- ------- -------
Financing
Issue of ordinary share capital 577 523 267
New loans 2,092 3,625 3,607
------- ------- -------
2,669 4,148 3,874
Repayment of long term borrowings (1,280) (1,501) (3,167)
------- ------- -------
Net cash inflow from financing 1,389 2,647 707
------- ------- -------
</TABLE>
21. Analysis of net funds
<TABLE>
<CAPTION>
1st January Cash Exchange 31st December
1997 flow movements 1997
Pounds 000 Pounds 000 Pounds 000 Pounds 000
<S> <C> <C> <C> <C>
Cash at bank and in hand 1,304 195 (248) 1,251
Bank overdrafts (182) (3) (7) (192)
------- ------ ------- -------
1,122 192 (255) 1,059
Short term deposits 15,200 1,100 - 16,300
Bank loans (12,239) (812) 1,070 (11,981)
------- ------ ------- -------
Net funds 4,083 480 815 5,378
------- ------ ------- -------
</TABLE>
<TABLE>
1st January Cash Acquis- Exchange 31st December
1996 flow itions movements 1996
000 Pounds 000 000 Pounds 000 Pounds 000
<S> <C> <C> <C> <C> <C>
Cash at bank and in hand 1,249 293 - (238) 1,304
Bank overdrafts (1,156) 1,049 - (75) (182)
------- ------ ---- ------ -------
93 1,342 - (313) 1,122
Short term deposits 14,509 691 - - 15,200
Bank loans (12,041) (2,124) (93) 2,019 (12,239)
------- ------ ---- ------- -------
Net funds 2,561 (91) (93) 1,706 4,083
------- ------ ---- ------- -------
</TABLE>
<TABLE>
<CAPTION>
1st January Cash Exchange 31st December
1995 flow movements 1995
Pounds 000 Pounds 000 Pounds 000 Pounds 000
<S> <C> <C> <C> <C>
Cash at bank and in hand 1,537 (349) 61 1,249
Bank overdrafts (2,125) 1,155 (186) (1,156)
------- ------ ------- -------
(588) 806 (125) 93
Short term deposits 13,105 1,404 - 14,509
Bank loans (10,622) (440) (979) (12,041)
------- ------ ------- -------
Net funds 1,895 1,770 (1,104) 2,561
------- ------ ------- -------
</TABLE>
22. Acquisition of businesses
The fair values attributed at acquisition
are as per the vendor books, as follows:
<TABLE>
<CAPTION>
1997 1996 1995
Pounds 000 Pounds 000 Pounds 000
<S> <C> <C> <C>
Fixed assets - 98 -
Investment in joint venture 154 - -
Investment in associated undertaking 540 88 -
Stock 24 224 -
Debtors - 664 -
Cash at bank - 405 -
Bank overdraft - (403) -
Bank loans - (93) -
Creditors - (718) -
Provisions - (3) -
Minority interest - - 28
----- ----- ---
Net assets 718 262 28
Goodwill 1,001 2,907 18
----- ----- ---
Acquisition of businesses during the year 1,719 3,169 46
----- ----- ---
</TABLE>
Goodwill has been estimated based on a provisional view of the fair values of
assets and liabilities at acquisition and may be subject to review in the
coming year.
<TABLE>
<CAPTION>
1997 1996 1995
Pounds 000 Pounds 000 Pounds 000
<S> <C> <C> <C>
Net cash outflow
Purchase of businesses 38 2,927 -
Purchase of interest in joint venture 154 - -
Purchase of interest in associated undertaking 1,422 - -
Costs relating to acquisitions 105 242 -
Purchase of minority interests - - 46
----- ----- --
Net cash outflow for acquisitions 1,719 3,169 46
----- ----- --
</TABLE>
23. Related party transactions
<TABLE>
<CAPTION>
Sales to Amounts owed by
related party related party
1997 1996 1997 1996
Pounds 000 Pounds 000
--------------- ---------------
<S> <C> <C> <C> <C>
Canning Japan K.K. 596 353 465 513
Metfin Supplies Co. Limited 3,487 3,459 1,390 1,398
Canning-Metfin Chemicals
Limited 70 11 87 11
Canning-Metfin Chemicals
(Shanghai) Limited 40 - 44 -
</TABLE>
The major shareholders in Metfin Supplies Co. Limited are the partners in the
Canning-Metfin Chemicals Limited joint venture. Details of the relationships
with the other related parties are given in note 9.
Other than the transactions noted above, there were no other related party
transactions requiring disclosure under FRS8.
24. Leasing commitments
Commitments for the next year under operating leases, none of which relate to
the company, are as follows:
<TABLE>
<CAPTION>
1997 1996
Land and Land and
buildings Other buildings Other
Pounds 000 Pounds 000
------------------ -------------------
<S> <C> <C> <C> <C>
Terminating:
Within one year 20 24 - 10
Over one year and less than
five years 13 144 25 118
Over five years 33 19 82 2
66 187 107 130
</TABLE>
25. Capital commitments
Capital expenditure commitments at 31st December 1997 were Pounds 194,000
(1996: Pounds 104,000), none of which related to the company.
26. Pension schemes
General
The majority of group companies either operate individual pension schemes or,
in certain overseas countries, are committed to make lump sum payments to
employees upon their retirement.
In all cases the pension scheme cost charged to the profit and loss account
and shown in note 3 is calculated to spread the cost of pensions over the
working lives of the employees who are members of the schemes.
Major UK Schemes
The principal scheme is the Canning Retirement and Death Benefit Scheme. It
is established as a separate fund and administered by a corporate trustee
which has seven directors. There is an independent chairman and three of the
seven directors are elected by employees. The scheme's assets are invested
independently of the group with no element of self-investment.
With effect from 6th April 1997 the scheme converted from a defined benefit to
a defined contribution (money purchase) basis for pensionable service on or
after that date. Past service benefits accrued as of 5th April 1997 (with
certain improvements for all categories of member as of that date) continue on
the defined benefit basis, and are treated as deferred pensions.
Contributions for service on or after 6th April 1997 are paid into a defined
contribution scheme.
The last actuarial valuation of the scheme was carried out by independent
consulting actuaries in November 1996 and based on a valuation date of 6th
April 1996. The valuation was performed using the projected accrued benefit
method. The key assumptions used were investment return of 8% per annum,
salary escalation of 6% and dividend growth of 4%. It showed that the scheme
had sufficient assets (valued at Pounds 20.7 million) to meet in full
retirement benefits accrued to the valuation date and that the recommended
contribution rate would have been sufficient to provide the balance of
benefits anticipated to accrue in future had the defined benefit basis of the
scheme continued. The valuation also considered the effect on the funding
position of the conversion to a defined contribution basis for pensionable
service on or after 6th April 1997 and proposed improvements to benefits from
that date and concluded that the scheme would still have sufficient assets to
cover its liabilities on the revised basis.
No accrual is required under the provisions of SSAP 24.
27. Canning principal subsidiary undertakings
<TABLE>
<CAPTION>
Country of operation
Name of subsidiary and incorporation Description of activity
<S> <C> <C>
Wm. Canning Limited England
Surface Finishing Division Surface finishing
Marston Bentley Division Sealants and adhesives, and
synthetic lubricants and fluids
Water Management and Gamlen
Division Additives for water and waste
treatment
Gamlen Industries S.A. France Additives for fuel, water and
waste treatment, surface
finishing
Amco S.A.R.L. France Additives for fuel
Reico S.A. (including
Eficca) France Additives for water and waste
treatment, and industrial
cleaning and maintenance
chemicals and aerosols
Addeco S.A.R.L. France Additives for water and waste
treatment, and industrial
cleaning and maintenance
chemicals and aerosols
W. Canning GmbH Germany Surface finishing
Vapla Galvanotechnik GmbH Germany Surface finishing
Marston Bentley Domsel GmbH Germany Sealants and adhesives and
elastomer radial seals
Levenit Chemical S.r.l.
(90% holding in ordinary
shares) Italy Synthetic lubricants and fluids
Gamlen S.r.l. Italy Additives for fuel, water and
waste treatment
Gamlen S.A. Spain Additives for fuel, water and
waste treatment
Gamlen B.V. Holland Additives for fuel, water and
waste treatment
W. Canning, Inc. USA Synthetic lubricants and
fluids, sealants and adhesives,
additives for fuel, water and
waste treatment, surface
finishing
</TABLE>
Except where otherwise stated all the above subsidiaries are wholly-owned in
ordinary shares at 31st December 1997. At 31st December 1997 Wm. Canning
Limited was directly owned by W. Canning plc, the remaining companies being
sub-subsidiaries.
28. Summary of differences between UK and US generally accepted accounting
principles
The Group's financial statements are prepared in accordance with generally
accepted accounting principles in the United Kingdom (UK GAAP) which differ in
certain respects from generally accepted accounting principles in the United
States (US GAAP). A summary of significant differences follows. While this
is not a comprehensive summary of all significant differences between UK and
US GAAP it includes those differences which are most likely to have an effect
on the Group's financial statements.
Pensions and Post Retirement Obligations
The Group maintains pension schemes, as described in note 26, under UK GAAP.
For US GAAP, companies must use the projected unit credit method to determine
benefit obligation, however, actuarial gain/loss within a 10% corridor do not
have to be recognized. Canning's actuaries have been requested to ascertain
what the pension and post retirement obligations liability and related charges
to the profit and loss accounts would have been under US GAAP. The exercise
is not yet complete. It is not believed that the application of US GAAP will
have a material effect. In the event that there is a material difference,
between the figures contained herein and the actuarial report, then MacDermid
shall amend this report.
Differences which would likely have a significant effect on the Group's net
income and shareholders' equity are set out below.
Goodwill
In the Group's financial statements goodwill arising on the acquisition of a
subsidiary is written off against reserves in the group balance sheet in the
year in which the acquisition is made. Under US GAAP such goodwill is
capitalized and amortized through the consolidated income statement for a
period of up to 40 years. The Group has determined that a 40 year life is
appropriate given the nature of the Group's operations.
Revaluation of Properties
Under UK GAAP properties may be restated on the basis of appraised values in
financial statements prepared in all other respects in accordance with the
historical cost convention. Increases in value are credited directly to the
revaluation reserve and depreciation is calculated on the revalued basis.
Under US GAAP such revaluations of property would not be reflected in the
financial statements and depreciation would be based on historical cost.
Deferred Taxation
Under UK GAAP, deferred income taxes are accounted for using the liability
method to the extent that it is considered probable that a liability or assets
will be recognized in the foreseeable future. Under US GAAP, deferred income
taxes are accounted for using the liability method on all temporary
differences and deferred tax assets are recognized, net of valuation
allowance, where it is more than likely that they will be realised.
Proposed Dividends
Under UK GAAP, dividends are charged to retained earnings when they are
proposed by the directors even though they are normally subject to approval
subsequently by shareholders at the annual general meeting. Under US GAAP, a
proposed final dividend would not be accounted for until the following
accounting period.
The following is a summary of the significant adjustments to the Group's net
income as a result of differences between UK GAAP and US GAAP:
<TABLE>
<CAPTION>
Year Ended
1997 1996
000 Pounds 000
<S> <C> <C>
Profit for the financial year in accordance with UK GAAP 6,079 5,786
US GAAP adjustments:
Decrease due to goodwill amortization (294) (257)
Increase due to revaluation of properties 18 18
Increase/(decrease) due to deferred tax 4 (9)
------ -----
Net income in accordance with US GAAP 5,807 5,538
------ -----
</TABLE>
The following is a summary of the significant adjustments to equity
shareholders' funds to bring the UK GAAP balances in accordance with US GAAP:
<TABLE>
<CAPTION>
December 31,
1997 1996
000 Pounds 000
<S> <C> <C>
Equity shareholders' funds under UK GAAP 26,609 23,924
US GAAP adjustments:
Increase due to effects of goodwill previously
written off against reserves 10,324 9,616
Decrease due to the revaluation of tangible
fixed assets (1,657) (1,711)
Increase due to deferred tax 3,071 3,497
Increase due to the timing of dividends proposed 1,577 1,471
------- -------
Equity shareholders' funds under US GAAP 39,924 36,797
------- -------
</TABLE>
Cash flow statements, under UK GAAP comply with Financial Reporting Standard
No.1 (FRS1), while, under US GAAP comply with Statement of Financial
Accounting Standards No.95 (SFAS95). The principle difference between the
standards relate to classification. Under FRS1, cash flows are presented for
operating activities; returns on investments and servicing of finance;
taxation; investing activities; and financing activities. Under SFAS95, cash
flows are presented for only three categories; operating; investing; and
financing.
<TABLE>
A summarized cash flow under US GAAP is as follows:
<CAPTION>
December 31,
1997 1996
000 Pounds 000
<S> <C> <C>
Cash inflow from operating activities 6,587 7,964
Cash outflow from investing activities (4,116) (6,224)
Cash outflow from financing activities (1,176) (756)
Effect of exchange rates on cash and cash equivalents (248) (238)
------- -------
Increase in cash and cash equivalents 1,047 746
Cash and cash equivalents at beginning of year 16,504 15,758
------- -------
Cash and cash equivalents at end of year 17,551 16,504
------- -------
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS (Logo)
Cornwall Court
19 Cornwall Street
Birmingham
REPORT OF INDEPENDENT ACCOUNTANTS
To the shareholders and Board of Directors of W. Canning plc:
We have audited the accompanying consolidated balance sheets of W. Canning plc
and its subsidiaries ("the Company") as of 31 March 1997 and 31 March 1996 and
the related consolidated profit and loss accounts, cash flow statements,
reconciliations of net cash flow to movement in net funds, consolidated
statements of total recognised gains and losses and reconciliations of
movements in consolidated shareholders' funds for the three years ended 31
December 1997, 1996, and 1995 all expressed in pounds sterling. These
consolidated financial statements are the responsibility of the management of
the Company. Our responsibility is to express an audit opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United Kingdom which do not differ in any material respects
from auditing standards generally accepted in the United States. 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 audit provides 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 The
Company as of 31 December 1997 and 1996 and the results of the Company's
operations and its cash flows for each of the three years in the period ended
31 December 1997 in conformity with generally accepted accounting principles
in the United Kingdom.
Accounting principles generally accepted in the United Kingdom differ in
certain significant respects from accounting principles generally accepted in
the United States. The application of the latter would have affected the
determination of the consolidated profit expressed in pounds sterling for each
of the two years in the period ended 31 December 1997 and the determination of
consolidated shareholders' funds and consolidated financial position also
expressed in pounds sterling as at 31 December 1997 and 1996. Note 28 to the
consolidated financial statements summarises the effect for each of the two
years in the period ended 31 December 1997 and as of 31 December 1997 and
1996. As discussed further in note 28, further adjustments may be required in
respect of pensions and other post retirement obligations as an exercise to
quantify these differences has not yet been completed.
/s/ PricewaterhouseCoopers
PricewaterhouseCoopers
Chartered Accountants and Registered Auditors
18 March 1998, except for note 28 which
is as of 16 February 1999
<TABLE>
W. Canning plc
Unaudited Interim - Consolidated Summary Balance Sheets
(Amounts in Thousands of Pounds Sterling)
<CAPTION>
At June 30,
1998 1997
<S> <C> <C>
Fixed Assets
Tangible Assets Pounds 14,211 Pounds 13,481
Goodwill 5,359 -
Investments 1,055 142
------- -------
20,625 13,623
------- -------
Current Assets
Stocks 6,999 6,262
Debtors 23,446 20,767
Cash 12,462 19,482
------- -------
42,907 46,511
------- -------
Creditors: amounts falling due within one year (24,825) (20,856)
------- -------
Net Current Assets 18,082 25,655
------- -------
Total Assets Less Current Liabilities 38,707 39,278
Creditors: amounts falling due after one year (9,389) (12,837)
------- -------
Pounds 29,318 Pounds 26,441
------- -------
Shareholders' Funds 29,318 26,263
Minority Interests -- 178
------- -------
Pounds 29,318 Pounds 26,441
------- -------
</TABLE>
The estimated effect on the Group's shareholders' funds, as at 30th June 1998,
of the significant differences between UK GAAP and US GAAP are as follows:
<TABLE>
<S> <C>
Shareholders' funds under UK GAAP Pounds 29,318
Increase due to effects of goodwill previously written
off against reserves 10,168
Decrease due to the revaluation of tangible fixed assets (1,648)
Increase due to deferred tax 3,061
-------
Shareholders' funds under US GAAP Pounds 40,899
-------
</TABLE>
<TABLE>
W.Canning plc
Unaudited Interim - Consolidated Summary Profit and Loss Account
(Amounts in Thousands of Pounds Sterling, Except Per Share Amounts)
<CAPTION>
For the Six Months Ended June 30,
1998 1997
<S> <C> <C>
Sales Pounds 41,315 Pounds 37,540
Operating Profit 4,080 4,455
Income from Associated Undertakings 143 33
Interest 29 113
------ ------
Profit Before Taxation 4,252 4,601
------ ------
Taxation: UK (781) (999)
: Overseas (600) (537)
Minority Interest (7) (13)
------ ------
Profit Attributable to Shareholders 2,864 3,052
------ ------
Earnings Per Share 9.7p 10.5p
Dividend Per Share 3.85p 3.70p
Amount Absorbed 1,137 1,080
</TABLE>
<TABLE>
The estimated effect on the Group's net income, for the six months ended 30th
June 1998, of the significant differences between UK GAAP and US GAAP are as
follows:
<S> <C>
Profit attributable to shareholders in accordance with UK GAAP Pounds 2,864
US GAAP adjustments:
Decrease due to goodwill amortization (156)
Increase due to revaluation of properties 9
------
Net income in accordance with US GAAP Pounds 2,717
------
</TABLE>
<TABLE>
W.Canning plc
Unaudited Interim - Consolidated Summary Cash Flow
(Amounts in Thousands of Pounds Sterling)
<CAPTION>
For the Six Months Ended June 30,
1998 Pounds 1997
------- -------
<S> <C> <C>
Net cash inflow from operating activities 4,029 4,048
Return on investments and servicing of finance 94 113
Taxation (1,493) (950)
Purchase of tangible assets (1,210) (1,587)
Sale of tangible assets 53 43
Purchase of fixed asset investments (78) -
Net cash outflow for capital expenditure (1,235) (1,544)
Net cash outflow for acquisitions (8,093) -
Management of liquid resources 4,500 (2,100)
Financing
Issue of ordinary shares 913 577
New loans 2,700 1,374
Repayment of loans (2,636) (368)
------- -------
Net cash inflow from financing 977 1,583
------- -------
(Decrease) / increase in cash less bank overdrafts (1,221) 1,150
------- -------
</TABLE>
A summarized cash flow under US GAAP, for the six months ended 30th June 1998,
is as follows:
<TABLE>
<S> <C>
Cash inflow from operating activities 2,630
Cash outflow from investing activities (9,328)
Cash inflow from financing activities 1,544
Effect of exchange rates on cash and cash equivalents 67
-------
Decrease in cash and cash equivalents (5,087)
Cash and cash equivalents at beginning of year 17,551
------
Cash and cash equivalents at end of year 12,464
------
</TABLE>
<TABLE>
MacDermid, Incorporated
Pro Forma Condensed Combined Balance Sheet
For the Period Ended March 31, 1998
(Amounts in Thousands of Dollars)
<CAPTION>
MacDermid, W.Canning Pro Forma Pro Forma
Incorporated plc Adjustments Combined
------------ --------- ----------- --------
<S> <C> <C> <C> <C>
Assets
Current Assets:
Cash and Cash Equivalents $3,549 $29,333 -- $32,882
Accounts and Notes
Receivable (Net of
Allowance for Doubtful
Receivables of $4,803) 72,675 33,709 (2,320) <F> 104,064
Inventories
Finished Goods 27,197 4,907 -- 32,104
Raw Materials 22,442 4,970 -- 27,412
--------- -------- --------- ---------
49,639 9,877 -- 59,516
Prepaid Expenses and
Other Current Assets 6,225 969 -- 7,194
--------- -------- --------- ---------
Total Current Assets 132,088 73,888 (2,320) 203,656
Property, Plant and
Equipment (Net of
Accumulated Depreciation
of $65,485) 42,946 22,416 30 <C> 65,392
Goodwill (Net of
Accumulated
Amortization of $16,095) 87,856 -- 121,996 <A><E> 209,852
Other Assets 37,370 1,382 2,320 <F> 41,072
--------- -------- --------- ---------
$300,260 $97,686 $122,026 $519,972
--------- -------- --------- ---------
Liabilities and
Shareholders' Equity
Current Liabilities:
Notes Payable and Current
Installments of Long-Term
Obligations $22,404 $11,772 -- $34,176
Accounts and Dividends
Payable 25,105 17,704 -- 42,809
Accrued Expenses 32,784 7,815 20,985 <E> 61,584
Income Taxes 5,710 4,837 (4,189) <D> 6,358
--------- -------- --------- ---------
Total Current Liabilities 86,003 42,128 16,796 144,927
Long-Term Obligations 103,983 8,534 143,430 <E> 255,947
Accrued Postretirement
and Postemployment Benefits 4,291 -- -- 4,291
Deferred Income Taxes 345 2,248 -- 2,593
Minority Interest in
Subsidiaries 93 304 -- 397
Shareholders' Equity
Common Stock stated
$1 per share 39,265 12,199 (12,199) <E> 39,265
Additional Paid-In Capital -- 32,564 (32,564) <E> --
Retained Earnings 124,043 (291) 6,563 <A-E>130,315
Cumulative Equity
Adjustment from
Foreign Currency
Translation (3,160) -- -- (3,160)
Less Cost of 14,169,582
Common Shares in Treasury (54,603) -- -- (54,603)
--------- -------- --------- ---------
Total Shareholder's Equity 105,545 44,472 (38,200) 111,817
--------- -------- --------- ---------
$300,260 $97,686 $122,026 $519,972
--------- -------- --------- ---------
<FN>
See accompanying notes to Pro Forma Condensed Combined Financial Statements.
</TABLE>
<TABLE>
MacDermid, Incorporated
Pro Forma Condensed Combined Statement of Earnings
For the Year Ended March 31, 1998
(In Thousands of Dollars Except Share and Per Share Amounts)
<CAPTION>
MacDermid, W.Canning Pro Forma Pro Forma
Incorporated plc Adjustments Combined
------------ --------- ----------- ----------
<S> <C> <C> <C> <C>
Net Sales $314,058 $123,681 -- $437,739
--------- -------- -------- --------
Cost of Sales, ST&A
Expenses and Amortization 258,453 109,027 $3,094 <A><C> 370,574
Interest Expense 7,758 1,466 9,800 <B> 19,024
Other Expenses (Net) (259) (1,994) -- (2,253)
--------- -------- -------- --------
265,952 108,499 12,894 387,345
--------- -------- -------- --------
Earnings Before Income
Taxes 48,106 15,182 (12,894) 50,394
Income Taxes 17,309 5,022 (4,189) <D> 18,142
--------- -------- -------- --------
Net Earnings 30,797 10,160 (8,705) 32,252
Preferred Dividends (309) -- -- (309)
--------- -------- -------- --------
Net Earnings - Available
for Common Shareholders $30,488 $10,160 $(8,705) $31,943
--------- -------- -------- --------
Average Common Shares Outstanding:
Basic 24,976,931
----------
Diluted 25,483,844
----------
Net Earnings Per Common Share:
Basic $1.28
Diluted $1.25
Cash Dividends Per Common Share $0.08
<FN>
See accompanying notes to Pro Forma Condensed Combined Financial Statements.
</TABLE>
<TABLE>
MacDermid, Incorporated
Pro Forma Condensed Combined Statement of Earnings
For the Six Months Ended September 30, 1998
(In Thousands of Dollars Except Share and Per Share Amounts)
<CAPTION>
MacDermid, W.Canning Pro Forma Pro Forma
Incorporated plc Adjustments Combined
<S> <C> <C> <C> <C>
Net Sales $166,928 $69,050 -- $235,978
-------- ------- ------- --------
Cost of Sales, ST&A Expenses
and Amortization 137,374 62,231 $1,547 <A><C> 201,152
Interest Expense 4,665 48 4,300 <B> 9,013
Other Expenses (Net) (795) (324) -- (1,119)
-------- ------- ------- --------
141,244 61,955 5,847 209,046
-------- ------- ------- --------
Earnings Before Income Taxes 25,684 7,095 (5,847) 26,932
Income Taxes 8,938 2,308 (1,820)<D> 9,426
-------- ------- ------- --------
Net Earnings - Available
for Common Shareholders $16,746 $4,787 $(4,027) $17,506
-------- ------- ------- --------
Average Common Shares Outstanding:
Basic 25,142,902
----------
Diluted 25,445,589
----------
Net Earnings Per Common Share:
Basic $0.70
Diluted $0.69
Cash Dividends Per Common Share $0.04
<FN>
See accompanying notes to Pro Forma Condensed Combined Financial Statements.
</TABLE>
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
The unaudited pro forma condensed combined financial statements (pro formas)
are presented herewith for illustrative purposes only, giving effect to the
acquisition, as described, and therefore would not necessarily be indicative
of the operating results and financial position that might have been achieved
had the combination occurred as of an earlier date, nor are they necessarily
indicative of operating results and financial position which may occur in
future periods. These pro forma financial statements should be read in
conjunction with the consolidated financial statements of MacDermid,
Incorporated (the Corporation) included in the annual report filed on Form 10K
for the year ended March 31, 1998.
On December 2, 1998, the date of acquisition, the Corporation closed its cash
tender offer for the outstanding shares of W. Canning plc and through a
statutory compulsory procedure, which was completed February 5, 1999, has
acquired a full 100% of the share capital. The cash purchase price and
related costs, totaling $164.4 million, was obtained on behalf of the
Corporation's wholly owned subsidiary, MacDermid (UK) Limited, which will hold
the investment, through borrowings from Nations Bank N.A., a subsidiary of
BankAmerica Corporation, as administrative agent and a lender under a combined
revolving loan, US Dollar term loan and Pounds Sterling term loan agreement.
This acquisition of an international specialty chemical organization,
predominately in Europe and North America and to a lesser extent in Asia,
includes various facilities for manufacturing and research.
The acquisition will be accounted for as a purchase in accordance with the
purchase method of accounting. Under the purchase method of accounting the
purchase cost will be allocated to acquired assets and liabilities based on
their relative fair values as of the closing date with the excess of the
purchase cost over fair value allocated to goodwill. The actual results of W.
Canning plc's business has been consolidated with the Corporation's operations
since the date of acquisition. The balance sheet filed with the report on
Form 10-Q dated February 12, 1999 includes a preliminary allocation of the
purchase price subject to adjustments after a final evaluation has been
completed. Any such adjustments, based on current information, are not
expected to be material.
The accompanying pro formas present the pro forma condensed combined balance
sheet at March 31, 1998, combining the historical consolidated balance sheet
of the Corporation and the group balance sheet of W. Canning plc as if the
transaction had been consumated on March 31, 1998 and present the pro forma
condensed combined statement of operations for the year ended March 31, 1998
and the six months ended September 30, 1998 as if the acquisition had occurred
on April 1, 1997, the beginning of the periods presented. The foreign
currency rate of exchange of Pounds 1.6713 : $1.00 was applied to effect the
pro formas.
TRANSACTIONS BETWEEN MACDERMID, INCORPORATED AND W. CANNING, PLC
MacDermid, Incorporated has sold certain of W. Canning, plc's products over
the prior years. The volumes and amounts are not material and, therefore, are
not considered in the pro formas adjustments.
Pro Forma Condensed Combined Financial Statement Adjustments for the
Year Ended March 31, 1998 and Six Months Ended September 30, 1998
The unaudited pro formas assume the W. Canning plc purchase as of
April 1, 1997. The pro forma adjustments to the historical financial
statements are as follows:
<TABLE>
<CAPTION>
March 31, September 30,
1998 1998
<S> <C> <C>
(A) Amortization Expense 3,124 1,562
Goodwill (3,124) (1,562)
</TABLE>
To record the amortization of goodwill allocated
from the purchase price over 40 years.
<TABLE>
<S> <C> <C>
(B) Interest Expense 9,800 4,300
Retained Earnings (9,800) (4,300)
</TABLE>
To record additional interest expense at the present interest rate of 6.92%
for the term loan borrowings. The long-term debt repayment schedule under the
credit facility was applied as if the borrowings began on April 1, 1997.
<TABLE>
<S> <C> <C>
(C) Property, Plant & Equipment 30 15
Depreciation Expense (30) (15)
</TABLE>
To reverse the periodic revaluation of certain property allowed for UK GAAP
and to reflect the historical cost depreciation of fixed assets under US GAAP.
<TABLE>
<S> <C> <C>
(D) Accrued Income Taxes 4,189 1,820
Income Tax Provision (4,189) (1,820)
</TABLE>
To provide for federal and state income taxes on the above adjustments and
adjust at the Corporation's prevailing effective tax rate arising from the
combination of the operating results in each of the periods.
<TABLE>
<S> <C> <C>
(E) Investment 39,295 N/A
Goodwill 125,120 N/A
Accrued Expenses (20,985) N/A
Long-Term Debt (143,430) N/A
Common Stock 12,199 N/A
Additional Paid in Capital 32,564 N/A
Retained Earnings (5,468) N/A
Investment (39,295) N/A
</TABLE>
To record the investment in assets and offsetting elimination of opening
equity in W. Canning plc and to recognize the goodwill arising from the
purchase price allocation with associated reserves for restructuring and
record additional debt incurred to effect the acquisition.
<TABLE>
<S> <C> <C>
(F) Other Assets 2,320 N/A
Accounts and Notes Receivable (2,320) N/A
</TABLE>
To reclassify amounts that are long-term in nature but were recorded as
current receivables in the statements of W. Canning plc.
Outlook: Issues and Risks
This report and other Corporation reports and statements describe many
of the positive factors affecting the Corporation's future business
prospects. Investors should also be aware of factors which could have
a negative impact on those prospects. These include political,
economic or other conditions such as currency exchange rates,
inflation rates, recessionary or expansive trends, taxes and
regulations and laws affecting the business; competitive products,
advertising, promotional and pricing activity; the degree of
acceptance of new product introductions in the marketplace; and the
difficulty of forecasting sales at certain times in certain markets.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MacDermid, Incorporated
(Registrant)
Date: February 16, 1999 / s / John L. Cordani
John L. Cordani
Corporate Secretary
Date: February 16, 1999 / s / Gregory M. Bolingbroke
Gregory M. Bolingbroke
Corporate Controller
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
PRICEWATERHOUSECOOPERS (Logo)
Cornwall Court
19 Cornwall Street
Birmingham
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the prospectus
constituting part of the Registration Statements on Form S3 (File No. 333-
68535) of MacDermid, Incorporated of our report on W.Canning plc dated 18
March 1998, except for note 28 which is as of 16 February 1999, appearing in
this Form 8-K/A of MacDermid, Incorporated.
/s/ PricewaterhouseCoopers
16 February 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> 12-MOS
<CASH> 17551
<SECURITIES> 0
<RECEIVABLES> 20749
<ALLOWANCES> 721
<INVENTORY> 5910
<CURRENT-ASSETS> 44210
<PP&E> 25328
<DEPRECIATION> 11916
<TOTAL-ASSETS> 58449
<CURRENT-LIABILITIES> 25207
<BONDS> 5106
0
0
<COMMON> 7299
<OTHER-SE> 19310
<TOTAL-LIABILITY-AND-EQUITY> 58449
<SALES> 74003
<TOTAL-REVENUES> 74003
<CGS> 31122
<TOTAL-COSTS> 65235
<OTHER-EXPENSES> 34113
<LOSS-PROVISION> 123
<INTEREST-EXPENSE> 877
<INCOME-PRETAX> 9084
<INCOME-TAX> 3005
<INCOME-CONTINUING> 6079
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6079
<EPS-PRIMARY> 0.209
<EPS-DILUTED> 0.209
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<PERIOD-TYPE> 6-MOS
<CASH> 12462
<SECURITIES> 0
<RECEIVABLES> 23446
<ALLOWANCES> 886
<INVENTORY> 6999
<CURRENT-ASSETS> 42907
<PP&E> 26977
<DEPRECIATION> 12766
<TOTAL-ASSETS> 63532
<CURRENT-LIABILITIES> 24825
<BONDS> 7905
0
0
<COMMON> 7299
<OTHER-SE> 22019
<TOTAL-LIABILITY-AND-EQUITY> 63532
<SALES> 41315
<TOTAL-REVENUES> 41315
<CGS> 17765
<TOTAL-COSTS> 37235
<OTHER-EXPENSES> 19470
<LOSS-PROVISION> 165
<INTEREST-EXPENSE> 517
<INCOME-PRETAX> 4245
<INCOME-TAX> 1381
<INCOME-CONTINUING> 2864
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2864
<EPS-PRIMARY> 0.097
<EPS-DILUTED> 0.097
</TABLE>
