UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549-1004
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED December 31, 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, no par value - 25,136,349 shares as of February 1, 1999.
<PAGE>
-2-
MACDERMID, INCORPORATED
INDEX
PART I. Financial Information
Item 1. Financial Statements
Page No.
Consolidated Condensed Balance Sheets
December 31, 1998 and March 31, 1998 3-4
Consolidated Condensed Statements of Earnings
and Retained Earnings - Nine Months and Three Months
Ended December 31, 1998 and 1997 5
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended December 31, 1998 and 1997 6
Notes to Consolidated Condensed Financial Statements 7-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-15
PART II. Other Information 16
Signatures 17
<PAGE>
-3-
<TABLE>
PART I. - FINANCIAL INFORMATION
MACDERMID, INCORPORATED
CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in thousands of dollars except share amounts)
<CAPTION>
December 31, March 31,
1998 1998
------------ ---------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 31,188 $ 3,549
Available-For-Sale Securities 846 4,729
Accounts and Notes Receivable
(Net of Allowance for Doubtful
Receivables of $7,584 and $3,598) 110,043 72,675
Inventories
Finished Goods 30,213 27,197
Raw Materials 22,415 22,442
-------- --------
52,628 49,639
Prepaid Expenses 3,919 2,255
Deferred Income Tax Asset 3,982 3,970
-------- --------
Total Current Assets 202,606 136,817
Property, Plant and Equipment (Net of Accumulated
Depreciation of $48,532 and $44,847) 63,466 42,946
Goodwill (Net of Accumulated Amortization of
$12,683 and $9,495) (Note 2) 210,464 87,856
Other Assets 53,088 32,641
-------- --------
Total Assets $529,624 $300,260
======== ========
<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
-4-
<TABLE>
<CAPTION>
December 31, March 31,
1998 1998
----------- ---------
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes Payable $ 3,544 $ 9,962
Current Installments of Long-term Obligations 24,089 12,442
Accounts and Dividends Payable 38,155 25,105
Accrued Expenses 56,826 32,784
Income Taxes 13,785 5,710
-------- --------
Total Current Liabilities 136,399 86,003
Long-term Obligations (Note 3) 258,186 103,983
Accrued Postretirement and Postemployment Benefits 4,387 4,291
Deferred Income Taxes 525 345
Minority Interest in Subsidiaries 82 93
Shareholders' Equity
Common Stock Stated Value $1 per Share 39,393 39,265
Additional Paid-In Capital 1,540 -
Retained Earnings 148,615 124,043
Comprehensive Income Equity Adjustments:(Note 4)
Cumulative Foreign Currency Translation (1,511) (3,160)
Available-for-Sale Securities Holding Loss (249) -
Less Cost of 14,256,410 and 14,169,582 Common
Shares in Treasury (Note 5) (57,743) (54,603)
-------- --------
Total Shareholders' Equity 130,045 105,545
-------- --------
$529,624 $300,260
======== ========
<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
-5-
<TABLE>
MACDERMID, INCORPORATED
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(Unaudited)
(Amounts in Thousands Except Share and Per Share Amounts)
<CAPTION>
Nine Months Ended Three Months Ended
December 31, December 31,
---------------- ------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $263,644 $233,672 $ 96,716 $ 83,869
Cost and Expenses:
Cost of Sales 133,532 113,766 48,707 42,458
Selling, Technical and Administrative
Expenses/Amortization 84,009 78,709 31,459 27,452
Interest Income (797) (359) (408) (117)
Interest Expense 8,086 5,571 3,421 2,121
Other (Income) Expense - Net (792) 471 (385) (76)
-------- ------- -------- ---------
224,038 198,158 82,794 71,838
-------- -------- -------- ---------
Earnings Before Income Taxes 39,606 35,514 13,922 12,031
Income Taxes 13,526 12,962 4,588 4,391
-------- -------- -------- ---------
Net Earnings 26,080 22,552 9,334 7,640
Preferred Dividends - (309) - -
-------- -------- -------- ---------
Earnings Available for
Common Shareholders 26,080 22,243 9,334 7,640
Retained Earnings, Beginning of
Period 124,043 113,632 139,783 127,403
Cash Dividends Declared (1,508) (1,250) (502) (418)
------- -------- -------- ---------
Retained Earnings, End of Period $148,615 $134,625 $148,615 $134,625
======== ======== ======== ========
Net Earnings Per Common Share (Note 6)
Basic $1.04 $0.89 $0.37 $0.30
===== ===== ===== =====
Diluted $1.03 $0.87 $0.37 $0.30
===== ===== ===== =====
Cash Dividends Per Common Share $0.06 $0.05 $0.02 $0.0167
===== ===== ===== =======
Weighted Average Common Shares
Outstanding :
Basic 25,140,710 24,937,851 25,136,349 25,096,499
========== ========== ========== ==========
Diluted 25,433,675 25,503,759 25,415,922 25,421,952
========== ========== ========== ==========
<FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
-6-
<TABLE>
MACDERMID, INCORPORATED
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
Nine Months Ended
December 31,
--------------------
1998 1997
---- ----
<S> <C> <C>
Net Cash Flows from Operating Activities $41,603 $25,570
Cash Flows from Investing Activities:
Capital Expenditures (4,043) (3,205)
Proceeds from Disposition of Fixed Assets 60 639
Purchase/Sale of Available-for-Sale Securities (262) -
Acquisitions/Investments in Businesses(Note 2) (169,535) (25,130)
------- -------
Net Cash Flows Used in Investing Activities (173,780) (27,696)
------- -------
Cash Flows from Financing Activities:
Short-Term (Repayments)/Borrowings - net (6,583) (451)
Long-Term Borrowings 317,175 53,622
Long-Term Repayments (146,566) (13,990)
Exercise of Stock Options 162 1,690
Purchase of Treasury Shares (3,140) (7,196)
Dividends Paid (1,508) (1,250)
Preferred Stock Redemption - (32,745)
------- -------
Net Cash Flows From/Used in
Financing Activities 159,540 (320)
Effect of Exchange Rate Changes on Cash 276 (251)
and Cash Equivalents ------- -------
Net Decrease in Cash and Cash Equivalents 27,639 (2,697)
Cash and Cash Equivalents at Beginning of Year 3,549 6,530
------- -------
Cash and Cash Equivalents at End of Period $31,188 $ 3,833
======= =======
Cash Paid for Interest $ 6,458 $ 5,177
======= =======
Cash Paid for Income Taxes $ 8,451 $ 9,340
======= =======
<FN>
See accompanying notes to consolidated condensed financial statements.
</FN>
</TABLE>
<PAGE>
-7-
MACDERMID, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
The March 31, 1998 condensed consolidated balance sheet amounts
have been derived from the previously audited consolidated balance
sheets of MacDermid, Incorporated (the Corporation). The balance
of the condensed financial information reflects all adjustments
which are, in the opinion of management, necessary for a fair
presentation of the financial position, results of operations and
cash flows for the interim periods presented and are of a normal
recurring nature unless otherwise disclosed in this report. The
results of operations for the nine month and three month periods
ended December 31, 1998 and 1997 are not necessarily indicative of
trends or of the results to be expected for the full year. The
statements should be read in conjunction with the notes to the
consolidated financial statements included in the Corporation's 1998
Annual Report. Certain amounts on the Consolidated Condensed
Balance Sheets and Consolidated Condensed Statements of Earnings and
Retained Earnings have been restated to conform with the current
fiscal year presentation.
Note 2. Acquisitions and Investments
On December 2, 1998, the Corporation closed its cash tender offer
thereby acquiring approximately 95% of the outstanding share capital
of W. Canning plc. (Canning). The Corporation acquired all
remaining shares of Canning through a statutory compulsory procedure
which was completed February 5, 1999.
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 NationsBank N.A., a subsidiary of BankAmerica
Corporation, as administrative agent and a lender under a combined
revolving loan, US Dollar term loan and Pound Sterling term loan
agreement.
The Consolidated Condensed Balance Sheets display increased assets
and liabilities, primarily as a result of the inclusion of amounts
for Canning. The amounts recorded for the assets and liabilities
acquired, using the purchase method of accounting, results in an
approximate 50% increase in the Corporation's total assets which are
subject to adjustment whenever final evaluations are completed. Any
such adjustments are not expected to be materially different from
the amounts presented. One month of Canning activity is included in
the results of operations for the three and nine month periods ended
December 31, 1998.
<PAGE>
-8-
Canning, based in Birmingham, England, is an international specialty
chemical company, similar to the Corporation, operating various
facilities for manufacturing and research. Canning has operations
predominately in Europe and North America and, to a lesser extent,
in Asia. Canning operates in four principle product groupings;
Surface Finishing with emphasis in plating technologies, Synthetic
Lubricants and Fluids for the offshore oil industry, Sealants and
Adhesives used by component manufacturers and Additives for fuel,
water and waste treatment industries.
On April 28, 1998 a subsidiary of the Corporation acquired a 30%
investment in an Italian specialty chemical company. Additionally,
there was a separate investment made in a joint venture. These
investments will be recognized under equity accounting, results of
which are not expected to be material. The assets of two separate
small industrial products companies were acquired under purchase
accounting, which collectively is not currently material to the
financial position or results of operations of the Corporation, in
addition to the other transactions described above.
Note 3. Long-Term Obligations
Long-term borrowings from a group of banks consist of US Dollar six-
year term loans in the principle amount of $200.3 million and a
Pound Sterling term loan in the principle amount of Pound Sterling
45 million (at the December 31, 1998 balance sheet exchange rate of
Pound Sterling 1.66:$1 which is equivalent to $74.7 million). The
loans bear interest at a variable rate based on a ratio of the
Corporation's debt to earnings before certain expenses and which
falls in a range of 0.75% to 1.75% above the quarter end London
interbank market rate (LIBOR). The US LIBOR, for the US Dollar term
loan, was 5.22% and the UK LIBOR, for the Pound Sterling term loan,
was 6.43% at December 16, 1998. The Corporation has entered into
interest rate swap agreements with a group of banks for the purpose
of reducing its exposure to possible future changes in interest
rates. The effective interest rate on all borrowings at December
31, 1998 was 6.9%. Under the loans, the most restrictive covenants
provide that: earnings before interest and taxes as a ratio of
interest must be greater than 2.5 to 1 and consolidated net worth
must be at least $103 million. Commitment fees are variable,
ranging from 25.0 to 37.5 basis points.
<PAGE>
-9-
The US Dollar term loan and Pound Sterling term loan principles are
to be paid in quarterly installments over a six year period
beginning June 30, 1999. Annual principle repayments, for each, by
fiscal year are as follows:
<TABLE>
<S> <C> <C>
2000 $ 20,030,000 Pound 4,500,000
2001 23,672,000 5,318,000
2002 32,776,000 7,364,000
2003 43,702,000 9,818,000
2004 44,612,000 10,023,000
Thereafter 35,508,000 7,977,000
------------- ----------------
Total $ 200,300,000 Pound 45,000,000
------------- ----------------
</TABLE>
Further details are in the Credit Agreement which has been filed
with the Corporation's Form 8-K filed on December 17, 1998.
Note 4. Comprehensive Income
As of April 1, 1998, the Corporation has adopted the Financial
Accounting Standards Board Statement of Financial Accounting
Standard No. 130, Reporting Comprehensive Income (SFAS130). SFAS130
established standards for reporting and display of comprehensive
income and its components in the financial statements. Tax is
provided for at the effective rate of the jurisdiction under which
the other comprehensive income (loss) arises. At December 31, 1998,
accrured income tax liability includes a benefit in the amount of
$153. The Corporation does not provide for U.S. income taxes on
foreign currency translation adjustments since it does not provide
for such taxes on undistributed earnings of foreign subsidiaries.
The components of comprehensive income for the nine month and three
month periods ended December 31, 1998 and 1997 are as follows:
<TABLE>
Nine Months Ended Three Months Ended
December 31, December 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net Earnings $26,080 $22,243 $ 9,334 $ 7,640
Other Comprehensive Income:
Cumulative Foreign Currency
Translation Adjustment 1,649 (3,009) 1,091 (2,030)
Available-for-Sale Securities
unrealized (loss)/gain,
net of tax (249) - 1,091 -
------- ------- ------ ------
Comprehensive Income $27,480 $19,234 $11,516 $ 5,610
------- ------- ------ ------
</TABLE>
<PAGE>
-10-
Note 5. Stock Repurchase Authorization
On July 22, 1998 the Board of Directors authorized the Corporation
to purchase up to 1,000,000 shares of its common stock. At December
31, 1998, there remained authorization to purchase approximately
995,000 shares. Such additional shares may be acquired through
privately negotiated transactions or on the open market from time to
time. Any future repurchases by MacDermid will depend on various
factors, including the market price of the shares, the Corporation's
business and financial position and general economic and market
conditions. Additional shares acquired pursuant to such
authorization will be held in the Corporation's treasury and will be
available for the Corporation to issue for various corporate
purposes without further shareholder action (except as required by
applicable law or the rules of any securities exchange on which the
shares are then listed).
Note 6. Earnings Per Common Share
The Corporation has adopted the Financial Accounting Standards Board
Statement of Financial Accounting Standard No. 128, Earnings per
Share (SFAS128), as of December 31, 1997. The computation of basic
earnings per share is based upon the weighted average number of
outstanding common shares. The computation of diluted earnings per
share is based upon the weighted average number of outstanding
common shares plus the effect of all dilutive potential common
shares that were outstanding during the period. Earnings per share
is calculated based upon net earnings available for common
shareholders after deduction for preferred dividends. In addition,
all prior year per share amounts (as well as number of common shares
and dividends per common share) have been restated to give
retroactive effect to a stock split as of February 6, 1998.
<PAGE>
-11-
ITEM 2:
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion compares the results of operations for the three and
nine month periods which ended December 31, 1998 to the same periods in 1997
and provides information with respect to changes in financial condition during
the nine months then ended.
SALES
Total sales for the current quarter, $96.7 million, increased $12.8 million,
or 15% from $83.9 million for the same period last year. There was sales
revenue, in the amount $10.8 million, representing one month from the Canning
business included in the current fiscal period. Excluding the business
acquired, proprietary chemical sales increased 3% over the same period last
year. With the exception of a soft domestic electronics market, all
geographic regions worldwide continue to sustain strengthening proprietary
business. Foreign currency translation had a relatively minimal effect,
increasing reported sales by $0.5 million, or less than 1%, for the quarter as
compared to the same period last year.
For the nine month period overall sales, $263.6 million (including $10.8
million for one month Canning business), are up 13% from $233.7 million for
the same period last year. Net proprietary chemical sales (excluding
Canning) increased 4% over the same nine month period last year. Foreign
currency translation had the effect of reducing reported sales $4.5 million,
or 2%, for the nine month period.
COSTS AND EXPENSES
Gross profits are up 16% for the quarter and 9% for the nine months as
compared to the like periods last year. The acquired Canning operations
raised gross profits 13% and 5% for the quarter and nine month periods,
respectively. The balance of the growth was achieved by the continued
advancement of proprietary chemical sales enhanced by increased equipment
sales. Gross profit as a percentage of sales when compared to the similar
periods last year is flat with the three month period while somewhat less than
the nine month period due to incremental equipment business for which margins
are typically much lower than proprietary business.
<PAGE>
-12-
Selling, technical and administrative (ST&A) expenses, before ST&A associated
with the Canning business, are somewhat flat with both the quarter and nine
month period as compared to the similar periods last year. The incremental
ST&A from the acquired Canning operations results in total ST&A increases of
14% for the quarter and 6% for the nine month period as compared to the
similar periods last year. ST&A incurred in support of business growth and to
a lesser extent to establish market presence for new technologies was somewhat
offset by certain focused cost reductions and also by changes in foreign
currency translation which had the effect of reducing the reported increase by
approximately 2% for the nine month period. ST&A as a percentage of sales for
the three month period is approximately 33%, the same as the like period last
year, while 32% this year as compared to 34% last year, for the nine month
period. Operating profits for the three and nine month periods increased 19%
and 13%, respectively, over the corresponding periods last year. The
increased operating profit results from increased sales coupled with a lesser
increase in costs and expenses supporting new business and investment in
growth strategies, in both the three and nine month periods.
As a result, earnings before interest, taxes, depreciation and amortization
(EBITDA) is $55.5 million for the nine months ended December 31, 1998 as
compared to $48.9 million for the same period last year.
PROVISION FOR INCOME TAXES
Ongoing tax minimization strategies and, to a lesser degree, equity earnings
recorded this year have brought down the effective income tax rate to
approximately 34.2% for the nine months ended December 31, 1998, from
approximately 36.5% for the same period in 1997.
NET EARNINGS
Net earnings available to common shareholders increased 22% for the three
month period and 17% for the nine month period as compared to the similar
periods last year despite increased interest expense, up 61% and 45% for the
three and nine month periods, respectively, on borrowings for acquisitions and
equity investments made during the present fiscal year. The Canning
acquisition had no material effect on the net earnings of either the three or
nine month periods as there is only one month results included, in each.
FINANCIAL CONDITION
Operating activities during the nine months ending December 31, 1998 resulted
in a net cash inflow of $41.6 million. The cash generated was primarily used
for debt repayments of $33.3 million, for purchases of 86,828 shares of the
Corporation's common shares for a total of $3.1 million and for dividends to
common shareholders and capital improvements. Working Capital at December 31,
1998 was $77.1 million as compared to $50.8 million at March 31, 1998.
<PAGE>
-13-
Capital expenditures were $4.0 million for the nine months ended December 31,
1998 and are in line with the full year total planned expenditures of
approximately $8.0 million for the fiscal year.
The Corporation entered into a long-term credit agreement, dated as of October
25, 1998, as amended and restated as of December 15, 1998, with Nations Bank
N.A., a subsidiary of Bank America Corporation, as administrative agent and a
lender under a combined revolving loan, US Dollar term loan facility and Pound
Sterling facility, in place of the Corporation's previous long-term credit
arrangement. Borrowings were made on the new credit facility during the
current quarter, in the amount of $275 million, in order to pay off the
previously existing credit arrangement and to effect the acquisition of the
Canning share capital. As a result of the borrowings being made for
acquisitions and investment opportunities the outstanding balance on the
Corporation's credit facilities increased a net $158.9 million during the
year. The amounts outstanding on the long-term credit arrangement consists of
a six-year US Dollar term loan which has a balance of $200.3 million and a
Pound Sterling term loan which has a balance of $74.7 million (Pound Sterling
45 million) at December 31, 1998.
The Corporation's other credit facilities, which presently total approximately
$30 million, together with the revolving credit facilities and the
Corporation's cash flows from operations are adequate to fund expected working
capital and capital expenditures.
New Accounting Pronouncements
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standard No.131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS131). SFAS131 establishes standards for the way
public enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
segment information in interim financial reports. SFAS131 is effective for
fiscal years beginning after December 15, 1997.
FASB also issued Statement of Financial Accounting Statement No.133,
"Accounting for Derivative Instruments and Hedging Activities" (SFAS133).
SFAS133 replaces existing pronouncements and practices with a single,
integrated accounting framework for derivatives and hedging activities.
SFAS133 is effective for fiscal years beginning after June 15, 1999.
The Corporation is currently evaluating the requirements of both SFAS131 and
SFAS133 and believes that the adoption of these statements will not have a
material impact on previously reported information.
<PAGE>
-14-
Year 2000 Conversion
Computer programs which recognize only two digits, rather than four digits, to
define the applicable year will be at risk for possible miscalculations,
classification errors or system failures. The Corporation has implemented a
plan for evaluating and minimizing the risks and costs associated with the
Year 2000. Costs associated with the Year 2000 compliance are immaterial and
have been expensed to the ongoing information systems operations as incurred.
The cost of Year 2000 remediation continues to be absorbed within the total
costs for the general operation of the information systems which are expected
to continue at the historical levels of approximately $2 million annually.
Based on present assessment of the systems of the Corporation and its
suppliers and customers, the cost of addressing the Year 2000 issues is not
currently expected to have a material adverse impact on the financial
position, results of operations or cash flows, in future periods, of the
Corporation. However, if the Corporation or its suppliers and customers are
unable to resolve such issues in a timely manner the Corporation's financial
condition and results of operations could be adversely affected. Accordingly,
the Corporation is seriously attempting to reach millennium compliance,
particularly, in the areas of: Information Systems, Suppliers and Customers,
Manufacturing and Facilities and Contingency Planning. The present status of
MacDermid's millennium compliance is explained below.
Information Systems: All worldwide computer systems have been inventoried.
The US network systems and personal computer systems are currently being
tested and are generally believed to be in compliance. The software package
that controls the US supply chain (purchasing, manufacturing, order
processing, billing and shipping) has been verified by the ITAA2000
Certification Program to be presently compliant. Certifications have been
received from the suppliers of the US human resource and payroll systems and
those assurances are in the process of being tested. In addition, all systems
worldwide have been similarly reviewed and compliant systems are expected to
be in place at each location by the end of the fiscal year.
Suppliers and Customers: The Corporation has identified substantially all its
key suppliers and asked them for assurance of compliance through direct
interviews and survey mailings. A follow-up effort to those which have not
communicated a readiness at this time is in process, while, alternate
suppliers have been identified should the Year 2000 prove to be an obstacle
for any present supplier. The design of company manufactured equipment that
is operating at some customer locations has been reviewed for date controls.
It is believed that there are no such controls which could be adversely
affected by the Year 2000. No major portion of the Corporation's business is
dependent upon a single customer or a few customers, the loss of which would
have a materially adverse effect on its business.
<PAGE>
-15-
Manufacturing and Facilities: The core manufacturing process is not
automated. Certain non-material support processes have computer systems that
are presently being evaluated and tested and are expected to be updated and in
compliance by the end of fiscal 1999. None of the support systems are
expected to be able to cause a disruption to the business should an undetected
issue arise. All facilities have been reviewed and inventoried. Some
facilities have certain systems which use date functions for which upgrades
have been made available through present suppliers. US Phones and voice mail
systems are believed to be materially compliant. Security, fire, heating,
cooling and related systems are expected to be made compliant by the end of
the fiscal year. Should utility providers not sufficiently resolve their own
Year 2000 issues the uninterrupted operation of the Corporation may be
adversely affected.
Contingency Planning: As the Corporation continues to address the Year 2000
issues, primarily using internal resources, other areas for concern may arise.
It is understood that those with which the Corporation conducts business face
similar issues and uncertainties. To handle the most reasonably likely worst
case scenarios the Corporation has subscribed to national disaster recovery
programs for potential computer systems or utilities service interruptions.
Further, all computerized processes for the supply chain are backed by manual
procedures. These procedures are in place at the present time and paper forms
are readily available on hand and can be used for a reasonable period of time.
It is estimated there would be approximately between 200 to 300 key suppliers
and the similar number of key customers should this course prove necessary.
Alternate suppliers have been identified should the Corporation be faced with
the need to source differently from the arrangements presently in place.
Ongoing planning and testing is being conducted in order to prevent these
scenarios and additional cost that would be associated with them.
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.
<PAGE>
-16-
PART II. OTHER INFORMATION
ITEM 2 : Changes in the Rights of Security Holders
None.
ITEM 5 : Other Information
5.1 As previously reported, the Corporation issued a press release on October
26, 1998 to announce a cash tender offer (offer) for the acquisition of the
whole of the ordinary share capital, not already owned by MacDermid, of W.
Canning Plc. Subsequently, the Corporation issued a press release on December
2, 1998 to announce that the offer was closed and unconditional as of that
date. The fully subscribed offer was valued at approximately $150 million at
the then prevailing currency exchange rates. The accounts of Canning were
included in the consolidated balance sheet as of December 31, 1998 and results
of operations have been included in consolidated results beginning December 1,
1998.
5.2 On January 28, 1999 the Corporation issued a press release to announce
that, effective April, its acting Cheif Financial Officer will be resigning to
pursue personal interests while, effective February, a Cheif Operations
Officer and Vice President of Finance have been hired.
ITEM 6 : Exhibits and Reports on Form 8-K
6.1 On December 8, 1998, the Corporation filed a Form S-3 Shelf Registration.
The Form S-3 is incorporated by reference herein.
6.2 On December 17, 1998, the Corporation filed its Form 8-K to report the
completion of acquisition of the whole of the ordinary share capital of W.
Canning, plc not already owned by the Corporation. The Form 8-K is
incorporated by reference herein.
<PAGE>
-17-
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 12, 1999 /s/Daniel H. Leever
Daniel H. Leever
Chairman and Chief Executive
Officer
Date: February 12, 1999 /s/Gregory M. Bolingbroke
Gregory M. Bolingbroke
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<FISCAL-YEAR-END> Mar-31-1999
<PERIOD-START> Apr-01-1998
<PERIOD-END> Dec-31-1998
<PERIOD-TYPE> 9-MOS
<CASH> 31188
<SECURITIES> 846
<RECEIVABLES> 110043
<ALLOWANCES> 7584
<INVENTORY> 52628
<CURRENT-ASSETS> 202606
<PP&E> 111998
<DEPRECIATION> 48532
<TOTAL-ASSETS> 529624
<CURRENT-LIABILITIES> 136399
<BONDS> 258186
0
0
<COMMON> 39393
<OTHER-SE> 90652
<TOTAL-LIABILITY-AND-EQUITY> 529624
<SALES> 263644
<TOTAL-REVENUES> 263644
<CGS> 133532
<TOTAL-COSTS> 224038
<OTHER-EXPENSES> 90506
<LOSS-PROVISION> 1073
<INTEREST-EXPENSE> 8086
<INCOME-PRETAX> 39606
<INCOME-TAX> 13526
<INCOME-CONTINUING> 26080
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26080
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.03
</TABLE>
