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 March 31, 2003
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COMMISSION FILE NUMBER 1-13889
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MacDermid, Incorporated
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(Exact name of registrant as specified in its charter)
Connecticut 06-0435750
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
245 Freight Street, Waterbury, Connecticut 06702
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 575-5700
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n/a
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Former name, former address or 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 .
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Indicate by check mark whether the registrant is an accelerated filer as defined
inRule 12b-2 of the Act.
Yes X No .
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 1, 2003
---------------------- ------------------------------
Common Stock, no par value 32,314,172 shares
MACDERMID, INCORPORATED
INDEX
Page No.
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Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
March 31, 2003 and December 31, 2002 . . . . . . . . . . . 2-3
Consolidated Condensed Statements of Earnings
and Retained Earnings - Three Months Ended
March 31, 2003 and 2002. . . . . . . . . . . . . . . . . . 4
Consolidated Condensed Statements of Cash Flows -
Three Months Ended March 31, 2003 and 2002 . . . . . . . . 5
Notes to Consolidated Condensed Financial Statements . . . . 6-20
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . 21-27
Item 3. Quantitative and Qualitative Disclosures about Market Risk 28
Item 4. Controls and Procedures. . . . . . . . . . . . . . . . . . 28
Part II. Other Information. . . . . . . . . . . . . . . . . . . . 28
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Certifications under Section 302 of the Sarbanes-Oxley Act of 2002. 30-31
MACDERMID, INCORPORATED
CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in Thousands of Dollars)
March 31, December 31,
2003 2002
------------ --------------
Assets . . . . . . . . . . . . . . . . . (Unaudited) (Audited)
Current assets:
Cash and cash equivalents. . . . . . . . $ 46,634 $ 32,019
Accounts and notes receivable, (net
of allowance for doubtful receivables
of $14,259 and $12,743). . . . . . . . 141,277 142,806
Inventories:
Finished goods . . . . . . . . . . . . 43,174 43,639
Raw materials, supplies and equipment. 42,778 42,099
------------ --------------
85,952 85,738
Prepaid expenses . . . . . . . . . . . . 4,426 5,457
Deferred income tax asset. . . . . . . . 22,006 22,598
------------ --------------
Total current assets . . . . . . . . 300,295 288,618
Property, plant and equipment (net
of accumulated depreciation of
$160,110 and $152,751) . . . . . . . . 130,018 132,581
Goodwill . . . . . . . . . . . . . . . . 194,200 194,200
Intangibles, (net of accumulated
amortization of $19,186
and $18,961) . . . . . . . . . . . . . 31,600 31,825
Other assets . . . . . . . . . . . . . . 58,961 60,669
------------ --------------
$ 715,074 $ 707,893
============ ==============
See accompanying notes to consolidated condensed financial statements.
MACDERMID, INCORPORATED
CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in Thousands of Dollars Except Per Share Amounts)
March 31, December 31,
2003 2002
------------ --------------
Liabilities and shareholders' equity: . . . . (Unaudited) (Audited)
Current liabilities:
Notes payable . . . . . . . . . . . . . . . . $ 4,107 $ 5,124
Current installments of long-term obligations 5,352 6,230
Accounts and dividends payable. . . . . . . . 65,699 64,465
Accrued expenses. . . . . . . . . . . . . . . 62,651 69,562
Income taxes. . . . . . . . . . . . . . . . . 3,682 3,727
------------ --------------
Total current liabilities . . . . . . . . 141,491 149,108
Long-term obligations . . . . . . . . . . . . 311,586 311,813
Accrued post-retirement and
post-employment benefits. . . . . . . . . . 20,021 19,688
Deferred income taxes . . . . . . . . . . . . 5,429 5,535
Other long-term liabilities . . . . . . . . . 1,092 1,138
Minority interest . . . . . . . . . . . . . . 2,873 2,873
Shareholders' equity:
Common stock stated value
$1.00 per share . . . . . . . . . . . . . . 46,642 46,640
Additional paid-in capital. . . . . . . . . . 22,288 21,261
Retained earnings . . . . . . . . . . . . . . 236,307 225,387
Cumulative comprehensive
income equity adjustments . . . . . . . . . (12,941) (15,786)
Cost of treasury shares . . . . . . . . . . . (59,714) (59,764)
------------ --------------
Total shareholders' equity. . . . . . . . 232,582 217,738
------------ --------------
$ 715,074 $ 707,893
============ ==============
See accompanying notes to consolidated condensed financial statements.
MACDERMID, INCORPORATED
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
AND RETAINED EARNINGS
(Amounts in Thousands of Dollars Except Share and Per Share Amounts)
(Unaudited)
Three Months Ended March 31,
2003 2002
------------------------------ ------------
Net sales . . . . . . . . . . . . . . . . . $ 172,430 $ 166,956
Cost of sales . . . . . . . . . . . . . . . 98,180 97,535
------------------------------ ------------
Gross profit. . . . . . . . . . . . . . 74,250 69,421
Operating expenses:
Selling, technical and administrative . . 49,122 47,063
Amortization. . . . . . . . . . . . . . . 770 1,568
------------------------------ ------------
49,892 48,631
------------------------------ ------------
Operating profit. . . . . . . . . . . . 24,358 20,790
Interest income . . . . . . . . . . . . . (195) (140)
Interest expense. . . . . . . . . . . . . 7,891 9,200
Other income. . . . . . . . . . . . . . . (920) (452)
Other expense . . . . . . . . . . . . . . 572 645
------------------------------ ------------
7,348 9,253
------------------------------ ------------
Earnings before taxes and
minority interest . . . . . . . . . . . . 17,010 11,537
Income taxes. . . . . . . . . . . . . . . . (5,444) (4,039)
Minority interest . . . . . . . . . . . . . -- (166)
------------------------------ ------------
Net earnings. . . . . . . . . . . . . . . . 11,566 7,332
Retained earnings, beginning of period. . . 225,387 218,619
Cash dividends declared . . . . . . . . . . (646) (645)
------------------------------ ------------
Retained earnings, end of period. . . . . . $ 236,307 $ 225,306
============================== ============
Net earnings per common share:
Basic . . . . . . . . . . . . . . . . . . $ 0.36 $ 0.23
============================== ============
Diluted . . . . . . . . . . . . . . . . . $ 0.36 $ 0.23
============================== ============
Cash dividends per common share . . . . . . $ 0.02 $ 0.02
============================== ============
Weighted average common shares outstanding:
Basic . . . . . . . . . . . . . . . . . . 32,295,541 32,221,436
============================== ============
Diluted . . . . . . . . . . . . . . . . . 32,467,172 32,492,880
============================== ============
See accompanying notes to consolidated condensed financial statements.
MACDERMID, INCORPORATED
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Amounts In Thousands of Dollars)
(Unaudited)
Three Months Ended March 31,
2003 2002
------------------------------ ---------
Net cash flows from operating activities:. . . . $ 19,397 $ 12,877
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . (979) (1,170)
Proceeds from disposition of fixed assets. . . - 14
------------------------------ ---------
Net cash flows used in investing activities. . (979) (1,156)
Cash flows from financing activities:
Net repayments of short-term borrowings. . . . (2,237) (3,281)
Long-term borrowings . . . . . . . . . . . . . - 11,276
Long-term repayments . . . . . . . . . . . . . (1,333) (21,610)
Issuance from treasury shares. . . . . . . . . 50 -
Dividends paid . . . . . . . . . . . . . . . . (646) (645)
------------------------------ ---------
Net cash flows used in financing activities. . (4,166) (14,260)
Effect of exchange rate changes on
cash and cash equivalents. . . . . . . . . . . 363 (114)
------------------------------ ---------
Increase (decrease) in cash and cash equivalents 14,615 (2,653)
Cash and cash equivalents at beginning of period 32,019 17,067
------------------------------ ---------
Cash and cash equivalents at end of period . . . $ 46,634 $ 14,414
============================== =========
See accompanying notes to consolidated condensed financial statements.
MACDERMID, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(In Thousands of Dollars, Except Share and Per Share Amounts)
Note 1. Summary of Significant Accounting Policies
The accompanying unaudited consolidated condensed financial statements reflect
all normal and recurring adjustments that are, in the opinion of management,
necessary to present fairly the financial position of MacDermid, Incorporated
("the Corporation") and its subsidiary companies as of March 31, 2003 and the
results of operations and cash flows for the three month periods ended March 31,
2003 and 2002. The results of operations for these periods are not necessarily
indicative of trends, or of the results to be expected for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been omitted. These financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Corporation's Annual Report for the year ended
December 31, 2002.
Note 2. Common Share Data
The following table summarizes common share activity during the three month
periods ended March 31, 2003 and 2002.
Three Months Ended March 31,
----------------------------
2003 2002
----------------------------
Balance beginning of period. 46,639,757 46,409,757
Shares issued - stock awards 2,668 130,000
----------------------------
Balance end of period. . . . 46,642,425 46,539,757
============================
The Board of Directors from time-to-time authorize the purchase of issued and
outstanding shares of the Corporation's common stock. Such additional shares
may be acquired through privately negotiated transactions or on the open market.
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 authorizations 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). Common
shares held in treasury, were 14,346,884 at March 31, 2003 and 14,349,453 at
December 31, 2002. Authorization to purchase approximately 1,000,000 common
shares remained as of March 31, 2003. Subsequently, on May 7, 2003, the Board
of Directors voted to supercede the previous authorization with a new
authorization to purchase up to 3,000,000 common shares. Also, on May 7, 2003,
the Corporation executed a purchase and sale agreement with Citicorp Venture
Capital Ltd, to aquire all of their 2,201,720 outstanding common shares on or
before November 3, 2003. A complete copy of this agreement has been filed on
the Corporation's Form 8-K dated May 7, 2003.
Note 3. Earnings Per Common Share
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 contingently issuable common shares from stock
options, stock awards and share warrants outstanding during the period.
Earnings per share ("EPS") is calculated based upon net earnings available for
common shareholders. Options to purchase 1,429,625 shares of common stock were
outstanding during the period but were not included in the computation of
diluted EPS because those options would be antidilutive based on current market
prices.
The following table reconciles basic weighted-average common shares outstanding
to diluted weighted-average common shares outstanding.
Three Months Ended March 31,
2003 2002
---------------------------- ----------
Basic common shares. . . . . . . 32,295,541 32,221,436
Dilutive effect of stock options 171,631 271,444
---------------------------- ----------
Diluted common shares. . . . . . 32,467,172 32,492,880
============================ ==========
Note 4. Stock-Based Plans
Effective April 1, 2001, the Corporation adopted the fair value expense
recognition provisions of Statement of Financial Accounting Standards No. 123,
Accounting for Stock Based Compensation (SFAS123), prospectively, to all stock
options granted, modified or settled after April 1, 2001. Accordingly,
compensation expense is measured using the fair value at the date of grant for
options granted after April 1, 2001, with the resulting expense charged over the
period in which the options are earned. In three month periods ended March 31,
2003 and 2002, there was $1,031 and $729, respectively, charged to expense.
Previously, and since April 1, 1996, the Corporation had adopted the disclosure
requirements of SFAS123 while accounting for its stock options by applying the
expense recognition provisions of APB Opinion No. 25, Accounting for Stock
Issued to Employees ("APB25").
Had the Corporation used the fair value expense recognition method of accounting
for all stock options granted under its plans between April 1, 1996 and April 1,
2001, net earnings and net earnings per common share for the three month periods
ended March 31, 2003 and 2002, would have been reduced to the following pro
forma amounts:
Three Months Ended March 31,
2003 2002
------------------------------ -------
Net earnings available for
common shareholders as
reported . . . . . . . . . . . . . $ 11,566 $7,332
Add: stock based employee
compensation expense included
in reported net income, net of
related tax effects. . . . . . . . 701 474
Deduct: total stock based
employee compensation
expense determined under fair
value based method for all
awards, net of related tax effects (861) (645)
------------------------------ -------
Pro forma net earnings . . . . . . $ 11,406 $7,161
============================== =======
Net earnings per common share:
Basic
As reported. . . . . . . . . . $ 0.36 $ 0.23
Pro forma. . . . . . . . . . . $ 0.35 $ 0.22
Diluted
As reported. . . . . . . . . . $ 0.36 $ 0.23
Pro forma. . . . . . . . . . . $ 0.35 $ 0.22
Note 5. Goodwill and Other Intangible Assets
In accordance with Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets ("SFAS 142"), goodwill and intangible assets with
indeterminable lives are no longer amortized, but instead the carrying amounts
will be periodically compared to the current fair value and, if impairment
occurs, an adjustment to the carrying amount will be required with a charge to
expense in the period identified. This could result in a future write-down or
write-off of such assets.
Goodwill carrying amounts for both the period ended March 31, 2003 and December
31, 2002, by segment, are as follows; Advanced Surface Finishing "ASF", $122,070
and Printing Solutions "PS", $72,130; for a total balance of $194,200.
Acquired intangible assets are summarized as follows:
March 31, 2003 December 31, 2002
--------------- -------------------
Gross Carrying Accumulated Net Gross Carrying Accumulated Net
Amount Amortization Amount Amount Amortization Amount
--------------- ------------------- ------- --------------- -------------- -------
Patents. . $ 19,698 $ (8,403) $11,295 $ 19,698 $ (8,123) $11,575
Trademarks 27,481 (8,903) 18,578 27,481 (8,788) 18,693
Others . . 3,607 (1,880) 1,727 3,607 (2,050) 1,557
--------------- ------------------- ------- --------------- -------------- -------
Total . $ 50,786 $ (19,186) $31,600 $ 50,786 $ (18,961) $31,825
=============== =================== ======= =============== ============== =======
Included in the table above, is the net carrying amount of $16,233 at March
31,2003 and December 31, 2002 for trademarks which are not being amortized due
to the indefinite life associated with these assets.
Note 6. Comprehensive Income and Accumulated Other Comprehensive Income
The components of comprehensive income for the three month periods ended March
31, 2003 and 2002 are as follows:
Three Months Ended March 31,
2003 2002
----------------------------- -------
Net earnings. . . . . . . . . . . . . . . $ 11,566 $7,332
Other comprehensive income:
Foreign currency translation adjustment 2,845 (410)
Hedging activities. . . . . . . . . . . - 250
----------------------------- -------
Comprehensive income. . . . . . . . . . . $ 14,411 $7,172
============================= =======
The components of accumulated other comprehensive income as of March 31, 2003
and December 31, 2002 are as follows:
March 31, 2003 December 31, 2002
---------------- -------------------
Cumulative equity adjustments for:
Foreign currency translation . . . . $ (2,527) $ (5,372)
Additional minimum pension liability (10,414) (10,414)
---------------- -------------------
Accumulated other comprehensive income. $ (12,941) $ (15,786)
================ ===================
Note 7. Segment Reporting
The Corporation operates on a worldwide basis, supplying proprietary chemicals
for two distinct segments, Advanced Surface Finishing and Printing Solutions. A
third segment, Electronics Manufacturing designs and manufactures printed
circuits boards in Europe through a majority owned subsidiary. These three
segments, under which the Corporation operates, are managed separately as each
segment has differences in technology and marketing strategies. Chemicals
supplied by the Advanced Surface Finishing segment are used for cleaning,
activating, polishing, mechanical plating and galvanizing, electro-plating,
phosphatising, stripping and coating, filtering, anti-tarnishing and rust
retarding for metal and plastic surfaces associated with automotive and
industrial applications, as well as, etching copper and imprinting electrical
patterns for various electronics applications, and as lubricants and cleaning
agents associated with offshore oil and gas operations. The products supplied
by the Printing Solutions segment include offset printing blankets and
photo-polymer plates used in packaging and newspaper printing, offset printing
applications, and digital printers and supplies. The Electronics Manufacturing
segment produces a wide variety of both single-sided and double-sided printed
circuit boards.
The business segments reported below are the segments of the Corporation for
which separate financial information is available and for which operating
results are reviewed by executive management to assess performance of the
Corporation. The accounting policies of each business segment are the same as
those described in the Summary of Significant Accounting Policies, Note 1.
Net sales for all of the Corporation's products fall into one of the three
business segments. The business segment results of operations include certain
operating costs, which are allocated based on the relative burden each segment
bears on those costs. Operating income amounts are reviewed before amortization
of intangible assets and non-recurring charges. The business segment
identifiable assets which follow are reconciled to total consolidated assets
including unallocated corporate assets which consist primarily of deferred tax
assets, deferred bond financing fees and certain other long term assets not
directly associated with the support of the individual segments.
Results of operations by segment: Three Months Ended March 31,
2003 2002
------------------------------ ---------
Net sales:
Advanced surface finishing. . . $ 83,814 $ 78,431
Printing solutions. . . . . . . 67,833 68,353
Electronics manufacturing . . . 20,783 20,172
------------------------------ ---------
Consolidated net sales. . . . $ 172,430 $166,956
------------------------------ ---------
Operating income (loss):
Advanced surface finishing. . . $ 12,901 $ 10,092
Printing solutions. . . . . . . 12,259 11,269
Electronics manufacturing . . . (32) 997
Amortization expense. . . . . . (770) (1,568)
------------------------------ ---------
Consolidated operating profit $ 24,358 $ 20,790
============================== =========
Identifiable assets by segment: March 31, 2003 December 31, 2002
--------------- ------------------
Advanced surface finishing. . . $ 147,767 $ 136,436
Printing solutions. . . . . . . 405,580 410,087
Electronics manufacturing . . . 96,562 95,961
Corporate-wide. . . . . . . . . 65,165 65,409
--------------- ------------------
Consolidated assets. . . . . $ 715,074 $ 707,893
=============== ==================
Note 8. Acquisition Reserves
The Corporation established acquisition reserves (included in accrued expenses)
in fiscal year 1999 when recording the acquisition of W.Canning, plc. The
reorganization of employees has been completed. The reorganization of
facilities is proceeding as planned. Five facilities have been closed with
those activities assimilated elsewhere. Negotiations are ongoing regarding the
elimination of certain leased facilities and sale of owned facilities. See
Contingencies and Legal Matters, Note 11, regarding environmental activity.
The following table summarizes the cumulative activity for these reserves, since
inception through March 31, 2003, including cash payments of $16 for the three
months ended March 31, 2003:
Inception Adjustments Payments Balance
---------- ----------- -------- --------
Facilities. . $ 4,200 885 3,463 $ 1,622
Redundancies. 2,050 3,100 5,150 -
Environmental 2,000 - 188 1,812
---------- ----------- -------- --------
Total. . . $ 8,250 3,985 8,801 $ 3,434
========== =========== ======== ========
Note 9. Supplemental Cash Flow Information
The following table illustrates the major components of net cash flows from
operating activities as well as cash paid for interest and income taxes for the
three months ended March 31, 2003 and 2002:
Three Months Ended March 31,
2003 2002
------------------------------ --------
Net cash flows from operating activities:
Net earnings. . . . . . . . . . . . . . . . . . . $ 11,566 $ 7,332
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation . . . . . . . . . . . . . . . . . 5,246 5,291
Amortization . . . . . . . . . . . . . . . . . 770 1,568
Provision for bad debts. . . . . . . . . . . . 1,789 1,521
Stock compensation expense . . . . . . . . . . 1,031 729
Other changes in assets and liabilities. . . . (1,005) (3,564)
------------------------------ --------
Net cash flows from operating activities . . . $ 19,397 $12,877
============================== ========
Cash paid for interest. . . . . . . . . . . . . . $ 14,812 $17,973
============================== ========
Cash paid for income taxes. . . . . . . . . . . . $ 2,109 $ 2,178
============================== ========
Note 10. Market Risk
The Corporation is exposed to market risk in the normal course of business
activity due to its operations in different foreign countries and its ongoing
investing and financing activities. The risk of loss can be assessed from the
perspective of adverse changes in fair values, cash flows and future earnings.
The Corporation has established policies and procedures governing its management
of market risks and the use of financial instruments to manage exposure to such
risks. Management continually reviews the balance between foreign currency
denominated assets and liabilities in order to minimize the Corporation's
exposure to foreign exchange fluctuations.
The Corporation operates manufacturing facilities in ten countries and sells
products in over twenty-five countries. Approximately 60% of the Corporation's
net sales and identifiable assets are denominated in currencies other than the
US Dollar, predominantly the Euro, the Pound Sterling, the Yen, Hong Kong and
New Taiwan Dollars. For the three month period ending March 31, 2003, there was
a favorable foreign currency translation effect on earnings of approximately
$0.02 per share, or 6%. The annual impact on operating cash flows historically
has been insignificant.
The Corporation's business operations, consist principally of manufacture and
sale of specialty chemicals, supplies and related equipment to customers
throughout much of the world. Approximately 40% of the business is concentrated
in a wide variety of applications used in the printing and packaging industries,
while 30% of the business is concentrated to customers supplying a wide variety
of chemicals to manufacturers of printed circuit boards with many different
end-use applications, as well as the manufacture of printed circuit boards
supplied to the electronics industry. As is usual for these businesses, the
Corporation generally does not require collateral or other security as a
condition of sale rather relying on credit approval, balance limitation and
monitoring procedures to control credit risk of trade account financial
instruments. Management believes that reserves for losses, which are
established based upon review of account balances and historical experience, are
adequate.
The Corporation has been exposed to interest rate risk, primarily from its
credit facility which is based upon various floating rates. The Corporation had
entered into interest rate swap agreements for the purpose of reducing its
exposure to possible future changes in interest rates. A remaining interest
rate swap is considered speculative as there are no outstanding balances under
the credit facility. The Corporation reduced its exposure to interest rate risk
with a fixed rate bond offering during transition year 2001. For additional
information, see Financial Information for Guarantors of the Corporation's Bond
Offering, Note 12. Based upon the Corporation's current debt structure and
expected levels of borrowing in 2003, an increase in interest rates would not
result in an incremental interest expense. The Corporation does not enter into
derivative financial instruments for trading purposes, it has certain other
supply agreements for raw material inventories but has chosen not to enter into
any price hedging with its suppliers for commodities.
Note 11. Contingencies and Legal Matters
Environmental Issues: The nature of the Corporation's operations, as
manufacturers and distributors of specialty chemicals and systems, and products,
including raw materials, expose it to the risk of liabilities or claims with
respect to environmental cleanup or other matters, including those in connection
with the disposal of hazardous materials. As such, the Corporation is subject
to extensive U.S. and foreign laws and regulations relating to environmental
protection and worker health and safety, including those governing: discharges
of pollutants into the air and water; the management and disposal of hazardous
substances and wastes; and the cleanup of contaminated properties. The
Corporation has incurred, and will continue to incur, significant costs and
capital expenditures in complying with these laws and regulations. The
Corporation could incur significant additional costs, including cleanup costs,
fines and sanctions and third-party claims, as a result of violations of or
liabilities under environmental laws. In order to ensure compliance with
applicable environmental, health and safety laws and regulations, the
Corporation maintains a disciplined environmental and occupational safety and
health compliance program, which includes conducting regular internal and
external audits at its plants to identify and categorize potential environmental
exposure.
The Corporation has been named as a potentially responsible party ("PRP") at
three Superfund sites. There are many other PRPs involved at each of these
sites. The Corporation has recorded its best estimate of liabilities in
connection with site clean-up based upon the extent of its involvement, the
number of PRPs and estimates of the total costs of the site clean-up that
reflect the results of environmental investigations and remediation estimates
produced by remediation contractors. While the ultimate costs of such
liabilities are difficult to predict, the Corporation does not expect that its
costs associated with these sites will be material.
In addition, some of the Corporation's facilities have an extended history of
chemical processes or other industrial activities. Contaminants have been
detected at some of these sites, with respect to which the Corporation is
conducting environmental investigations and/or cleanup activities. These sites
include certain sites acquired in the December 1998 acquisition of W. Canning
plc, such as the Kearny, New Jersey and Waukegan, Illinois sites. The
Corporation has established an environmental remediation reserve, predominantly
attributable to those Canning sites that it believes will require environmental
remediation. With respect to those sites, it also believes that its Canning
subsidiary is entitled under the acquisition agreement to withhold a deferred
purchase price payment of approximately $2,000. The Corporation estimates the
range of cleanup costs at its Canning sites between $2,000 and $5,000.
Investigations into the extent of contamination, however, are ongoing with
respect to some of these sites. To the extent the Corporation's liabilities
exceed $2,000, it may be entitled to additional indemnification payments. Such
recovery may be uncertain, however, and would likely involve significant
litigation expense. The Corporation does not anticipate that it will be
materially affected by environmental remediation costs, or any related claims,
at any contaminated sites, including the Canning sites. It is difficult,
however, to predict the final costs and timing of costs of site remediation.
Ultimate costs may vary from current estimates and reserves, and the discovery
of additional contaminants at these or other sites or the imposition of
additional cleanup obligations, or third-party claims relating thereto, could
result in significant additional costs.
Legal Proceedings: On January 30, 1997, the Corporation was served with a
subpoena from a federal grand jury in Connecticut requesting certain documents
relating to an accidental spill from its Huntingdon Avenue, Waterbury,
Connecticut facility that occurred in November of 1994, together with other
information relating to operations and compliance at the Huntingdon Avenue
facility. The Corporation was subsequently informed that it is a subject of the
grand jury's investigation in connection with alleged criminal violations of the
federal Clean Water Act pertaining to its wastewater handling practices. In
addition, two of the Corporation's former employees, who worked at the
Huntington Avenue facility, pled guilty in early 2001 to misdemeanor violations
under the Clean Water Act in connection with the above matter. These
individuals were sentenced to fines of $25 and $10 and 2 years probation, as
well as community service. In a separate matter, on July 26, 1999, the
Corporation was named in a civil lawsuit commenced in the Superior Court of the
State of Connecticut brought by the Connecticut Department of Environmental
Protection alleging various compliance violations at its Huntingdon Avenue and
Freight Street locations between the years 1992 through 1998 relating to
wastewater discharges and the management of waste materials. The complaint
alleges violations of its permits issued under the Federal Clean Water Act and
the Resource Conservation and Recovery Act, as well as procedural, notification
and other requirements of Connecticut's environmental regulations over the
foregoing period of time.
The Corporation voluntarily resolved both of these matters on November 28, 2001.
As a result, MacDermid, Incorporated was required to pay fines and penalties
totaling $2,500, without interest, over six quarterly installments. As of March
31, 2003, the Corporation had paid $2,375. A final payment for these fines of
$125 was paid on April 30, 2003. In addition, the Corporation was required to
pay $1,550 to various local charitable and environmental organizations and
causes. As of March 31, 2003, the Corporation had paid $1,420. A final payment
for these donations of $130 was paid on April 30, 2003. The Corporation has
been placed on probation for two years and will perform certain environmental
audits, as well as other environmentally related actions. The Corporation had
recorded liabilities during the negotiation period and therefore its results of
operations and financial position were not affected by these arrangements.
Various other legal proceedings are pending against the Corporation. The
Corporation considers all such proceedings to be ordinary litigation incident to
the nature of its business. Certain claims are covered by liability insurance.
The Corporation believes that the resolution of these claims to the extent not
covered by insurance will not, individually or in the aggregate, have a material
adverse effect on its financial position or results of operations.
Note 12. Financial Information for Guarantors of the Corporation's Bond
Offering
The Corporation issued 9 1/8% Senior Subordinated Notes ("bonds") effective
June 20, 2001, for the face amount of $301,500, which pay interest semiannually
on January 15th and July 15th and mature in 2011. The proceeds were used to pay
down long-term debt. These bonds are guaranteed by substantially all existing
and future directly or indirectly wholly-owned domestic restricted subsidiaries
of the Corporation ("guarantors"). The guarantors, fully, jointly and
severally, irrevocably and unconditionally guarantee the performance and payment
when due of all the obligations under the bonds. The Corporation's unrestricted
subsidiaries that resulted from the January 2001 Eurocir acquisition and its
foreign subsidiaries are not guarantors of the indebtedness under the bonds.
The following financial information is presented to give additional disclosures
to the consolidated condensed financial statements, with respect to: a) the
parent (MacDermid, Incorporated as the issuer), b) the guarantors, c) the
non-guarantor subsidiaries, d) the unrestricted non-guarantor subsidiaries, e)
elimination entries and f) the Corporation on a consolidated basis for and as of
the fiscal periods ended March 31, 2003 and 2002 and December 31, 2002. The
equity method has been used by the parent with respect to investments in
guarantor subsidiaries. The equity method also has been used by subsidiary
guarantors with respect to investments in non-guarantor subsidiaries and by
subsidiary non-guarantors with respect to investments in unrestricted
non-guarantor subsidiaries. Financial statements for subsidiary guarantors are
presented as a combined entity. The financial information includes certain
allocations of revenues and expenses based on management's best estimates which
is not necessarily indicative of financial position, results of operations and
cash flows that these entities would have achieved on a stand-alone basis and
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Corporation's Annual Report for the year ended
December 31, 2002.
CONSOLIDATED CONDENSED BALANCE SHEET
MARCH 31, 2003
(unaudited)
MacDermid
Unrestricted Incorporated
MacDermid Guarantor Nonguarantor Nonguarantor And
Incorporated Subsidiaries Subsidiaries Subsidiaries Eliminations Subsidiaries
------------- -------------- -------------- -------------- -------------- -------------
ASSETS
Current assets:
Cash and cash equivalents . $ 23,900 $ 1,784 $ 20,704 $ 246 $ - $ 46,634
Accounts receivables, net . 11,789 20,931 95,899 12,658 - 141,277
Due (to) from affiliates. . 110,080 (57,764) (23,609) (28,707) - -
Inventories . . . . . . . . 9,248 26,055 41,942 8,707 - 85,952
Prepaid expenses. . . . . . 315 708 3,403 - - 4,426
Deferred income taxes . . . 17,059 - 4,065 882 - 22,006
------------- -------------- -------------- -------------- -------------- -------------
Total current assets. . . . 172,391 (8,286) 142,404 (6,214) - 300,295
Property, plant and
equipment, net. . . . . . . 14,493 41,550 54,721 19,254 - 130,018
Goodwill. . . . . . . . . . 21,680 68,574 103,946 - - 194,200
Intangibles, net. . . . . . - 6,447 25,068 85 - 31,600
Investments in subsidiaries 328,359 236,026 (22,453) - (541,932) -
Other assets. . . . . . . . 39,360 8,946 7,962 2,693 - 58,961
------------- -------------- -------------- -------------- -------------- -------------
$ 576,283 $ 353,257 $ 311,648 $ 15,818 $ (541,932) $ 715,074
============= ============== ============== ============== ============== =============
CONSOLIDATED CONDENSED BALANCE SHEET (continued)
MARCH 31, 2003
(unaudited)
MacDermid
Unrestricted Incorporated
MacDermid Guarantor Nonguarantor Nonguarantor And
Incorporated Subsidiaries Subsidiaries Subsidiaries Eliminations Subsidiaries
-------------- -------------- ------------- -------------- -------------- --------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable . . . . . . . . $ - $ - $ 1,405 $ 2,702 $ - $ 4,107
Current installments of long-
term obligations. . . . . . . - 146 348 4,858 - 5,352
Accounts and dividend payable 11,229 7,578 31,436 15,456 - 65,699
Accrued expenses. . . . . . . 25,184 8,045 25,937 3,485 - 62,651
Income taxes. . . . . . . . . (10,000) 8,472 5,875 (665) - 3,682
-------------- -------------- ------------- -------------- -------------- --------------
Total current liabilities . . 26,413 24,241 65,001 25,836 - 141,491
Long-term obligations . . . . 301,757 614 555 8,660 - 311,586
Accrued postretirement. . . . 15,533 - 4,488 - - 20,021
Deferred income taxes . . . . (2) - 4,612 819 - 5,429
Other long-term liabilities . - 43 966 83 - 1,092
Minority interest . . . . . . - - - 2,873 - 2,873
Shareholders' equity:
Common stock. . . . . . . . . 46,642 (50) 3,760 3 (3,713) 46,642
Additional paid-in capital. . 22,288 207,741 109,614 10,260 (327,615) 22,288
Retained earnings . . . . . . 236,307 126,076 122,002 (30,382) (217,696) 236,307
Cumulative comprehensive
income equity
adjustment, net. . . . . . (12,941) (5,408) 650 (2,334) 7,092 (12,941)
Less cost common shares
in treasury. . . . . . . . (59,714) - - - - (59,714)
-------------- -------------- ------------- -------------- -------------- --------------
Total shareholders' equity. . 232,582 328,359 236,026 (22,453) (541,932) 232,582
-------------- -------------- ------------- -------------- -------------- --------------
$ 576,283 $ 353,257 $ 311,648 $ 15,818 $ (541,932) $ 715,074
============== ============== ============= ============== ============== ==============
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
THREE MONTHS ENDED MARCH 31, 2003
(unaudited)
MacDermid
Unrestricted Incorporated
MacDermid Guarantor Nonguarantor Nonguarantor And
Incorporated Subsidiaries Subsidiaries Subsidiaries Eliminations Subsidiaries
-------------- -------------- -------------- -------------- -------------- --------------
Net sales. . . . . . . . . $ 23,080 $ 42,601 $ 90,587 $ 20,783 $ (4,621) $ 172,430
Cost of sales. . . . . . . 14,800 19,721 49,205 19,075 (4,621) 98,180
-------------- -------------- -------------- -------------- -------------- --------------
Gross profit . . . . . . . 8,280 22,880 41,382 1,708 - 74,250
Operating expenses:
Selling, technical and
administrative . . . . . . 12,437 10,272 24,672 1,741 - 49,122
Amortization . . . . . . . - 510 252 8 - 770
-------------- -------------- -------------- -------------- -------------- --------------
12,437 10,782 24,924 1,749 - 49,892
-------------- -------------- -------------- -------------- -------------- --------------
Operating profit (loss). . (4,157) 12,098 16,458 (41) - 24,358
Equity in earnings of
subsidiaries . . . . . . . (18,293) (10,521) 465 - 28,349 -
Interest income. . . . . . (31) (16) (138) (10) - (195)
Interest expense . . . . . 7,816 (1,122) 570 627 - 7,891
Other expense (income),
net. . . . . . . . . . . . (182) (47) 23 (142) - (348)
-------------- -------------- -------------- -------------- -------------- --------------
(10,690) (11,706) 920 475 28,349 7,348
-------------- -------------- -------------- -------------- -------------- --------------
Earnings before taxes and
minority interest. . . . . 6,533 23,804 15,538 (516) (28,349) 17,010
Income taxes benefit
(expense). . . . . . . . . 5,033 (5,511) (5,017) 51 - (5,444)
Minority interest. . . . . - - - - - -
-------------- -------------- -------------- -------------- -------------- --------------
Net earnings (loss). . . . $ 11,566 $ 18,293 $ 10,521 $ (465) $ (28,349) $ 11,566
============== ============== ============== ============== ============== ==============
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2003
(unaudited)
MacDermid
Unrestricted Incorporated
MacDermid Guarantor Nonguarantor Nonguarantor And
Incorporated Subsidiaries Subsidiaries Subsidiaries Eliminations Subsidiaries
-------------- -------------- -------------- -------------- ------------- --------------
Net cash flows provided
by (used in) operating
activities:. . . . . . . . $ (18,926) $ 16,653 $ 19,725 $ 1,945 $ - $ 19,397
Investing activities:
Capital expenditures . . . (36) (188) (518) (237) - (979)
Proceeds from disposition
of fixed assets. . . . . . - - - - - -
-------------- -------------- -------------- -------------- ------------- --------------
Net cash flows provided
by (used in) investing
activities . . . . . . . . (36) (188) (518) (237) - (979)
-------------- -------------- -------------- -------------- ------------- --------------
Financing activities:
Net proceeds from
(repayments of) short-term
borrowings . . . . . . . . 21,692 (12,849) (10,345) (735) - (2,237)
Long-term borrowings . . . - - - - - -
Long-term repayments . . . - (256) - (1,077) - (1,333)
Issuance from treasury
shares . . . . . . . . . . 50 - - - - 50
Dividends paid . . . . . . 6,968 (3,891) (3,723) - - (646)
-------------- -------------- -------------- -------------- ------------- --------------
Net cash flows provided
by (used in) financing
activities . . . . . . . . 28,710 (16,996) (14,068) (1,812) - (4,166)
-------------- -------------- -------------- -------------- ------------- --------------
Effect of exchange rate
changes on cash and cash
equivalents. . . . . . . . - - 351 12 - 363
-------------- -------------- -------------- -------------- ------------- --------------
Net (decrease) increase in
cash and cash equivalents. 9,748 (531) 5,490 (92) - 14,615
Cash and cash equivalents
at beginning of period . . 14,153 2,314 15,214 338 - 32,019
-------------- -------------- -------------- -------------- ------------- --------------
Cash and cash equivalents
at end of period . . . . . $ 23,901 $ 1,783 $ 20,704 $ 246 $ - $ 46,634
============== ============== ============== ============== ============= ==============
CONSOLIDATED CONDENSED BALANCE SHEET
DECEMBER 31, 2002
(audited)
MacDermid
Unrestricted Incorporated
MacDermid Guarantor Nonguarantor Nonguarantor And
Incorporated Subsidiaries Subsidiaries Subsidiaries Eliminations Subsidiaries
------------- -------------- -------------- -------------- -------------- -------------
ASSETS
Current assets:
Cash and cash equivalents . $ 14,153 $ 2,314 $ 15,214 $ 338 $ - $ 32,019
Accounts receivables, net . 10,561 21,322 98,228 12,695 - 142,806
Due (to) from affiliates. . 132,264 (69,017) (36,066) (27,181) - -
Inventories . . . . . . . . 9,002 26,269 42,497 7,970 - 85,738
Prepaid expenses. . . . . . 488 1,323 3,646 - - 5,457
Deferred income taxes . . . 17,059 - 4,587 952 - 22,598
------------- -------------- -------------- -------------- -------------- -------------
Total current assets. . . . 183,527 (17,789) 128,106 (5,226) - 288,618
Property, plant and
equipment, net. . . . . . . 15,100 42,779 55,129 19,573 - 132,581
Goodwill. . . . . . . . . . 21,680 68,574 103,946 - - 194,200
Intangibles, net. . . . . . - 6,686 25,049 90 - 31,825
Investments in subsidiaries 314,126 225,676 (21,318) - (518,484) -
Other assets. . . . . . . . 39,485 10,130 8,722 2,332 - 60,669
------------- -------------- -------------- -------------- -------------- -------------
$ 573,918 $ 336,056 $ 299,634 $ 16,769 $ (518,484) $ 707,893
============= ============== ============== ============== ============== =============
CONSOLIDATED CONDENSED BALANCE SHEET (continued)
DECEMBER 31, 2002
(audited)
MacDermid
Unrestricted Incorporated
MacDermid Guarantor Nonguarantor Nonguarantor And
Incorporated Subsidiaries Subsidiaries Subsidiaries Eliminations Subsidiaries
-------------- -------------- -------------- -------------- -------------- --------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable . . . . . . . . $ - $ - $ 1,792 $ 3,332 $ - $ 5,124
Current installments of long-
term obligations. . . . . . . - 146 391 5,693 - 6,230
Accounts and dividend payable 11,854 7,975 30,347 14,289 - 64,465
Accrued expenses. . . . . . . 31,897 10,250 24,591 2,824 - 69,562
Income taxes. . . . . . . . . (4,763) 2,804 6,201 (515) - 3,727
-------------- -------------- -------------- -------------- -------------- --------------
Total current liabilities . . 38,988 21,175 63,322 25,623 - 149,108
Long-term obligations . . . . 301,732 705 719 8,657 - 311,813
Accrued postretirement. . . . 15,462 - 4,226 - - 19,688
Deferred income taxes . . . . - - 4,719 816 - 5,535
Other long-term liabilities . (2) 50 972 118 - 1,138
Minority interest . . . . . . - - - 2,873 - 2,873
Shareholders' equity:
Common stock. . . . . . . . . 46,640 (50) 3,760 3 (3,713) 46,640
Additional paid-in capital. . 21,261 207,741 109,614 10,260 (327,615) 21,261
Retained earnings . . . . . . 225,387 115,397 115,205 (29,917) (200,685) 225,387
Cumulative comprehensive
income equity
adjustment, net. . . . . . (15,786) (8,962) (2,903) (1,664) 13,529 (15,786)
Less cost common shares
In treasury. . . . . . . . (59,764) - - - - (59,764)
-------------- -------------- -------------- -------------- -------------- --------------
Total shareholders' equity. . 217,738 314,126 225,676 (21,318) (518,484) 217,738
-------------- -------------- -------------- -------------- -------------- --------------
$ 573,918 $ 336,056 $ 299,634 $ 16,769 $ (518,484) $ 707,893
============== ============== ============== ============== ============== ==============
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
THREE MONTHS ENDED MARCH 31, 2002
(unaudited)
MacDermid
Unrestricted Incorporated
MacDermid Guarantor Nonguarantor Nonguarantor And
Incorporated Subsidiaries Subsidiaries Subsidiaries Eliminations Subsidiaries
-------------- -------------- -------------- -------------- -------------- --------------
Net sales. . . . . . . . . $ 24,796 $ 46,291 $ 79,920 $ 20,172 $ (4,223) $ 166,956
Cost of sales. . . . . . . 15,711 24,043 44,313 17,691 (4,223) 97,535
-------------- -------------- -------------- -------------- -------------- --------------
Gross profit . . . . . . . 9,085 22,248 35,607 2,481 - 69,421
Operating expenses:
Selling, technical and
administrative . . . . . . 13,165 10,213 22,202 1,483 - 47,063
Amortization . . . . . . . 866 410 285 7 - 1,568
-------------- -------------- -------------- -------------- -------------- --------------
14,031 10,623 22,487 1,490 - 48,631
-------------- -------------- -------------- -------------- -------------- --------------
Operating profit (loss). . (4,946) 11,625 13,120 991 - 20,790
Equity in earnings of
subsidiaries . . . . . . . (13,096) (7,570) 51 - 20,615 -
Interest income. . . . . . (22) (33) (79) (6) - (140)
Interest expense . . . . . 4,016 3,006 1,529 649 - 9,200
Other expense (income),
net. . . . . . . . . . . . 457 (180) (98) 14 - 193
-------------- -------------- -------------- -------------- -------------- --------------
(8,645) (4,777) 1,403 657 20,615 9,253
-------------- -------------- -------------- -------------- -------------- --------------
Earnings before taxes and
minority interest. . . . . 3,699 16,402 11,717 334 (20,615) 11,537
Income taxes benefit
(expense). . . . . . . . . 3,633 (3,306) (4,147) (219) - (4,039)
Minority interest. . . . . - - - (166) - (166)
-------------- -------------- -------------- -------------- -------------- --------------
Net earnings (loss). . . . $ 7,332 $ 13,096 $ 7,570 $ (51) $ (20,615) $ 7,332
============== ============== ============== ============== ============== ==============
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2002
(unaudited)
MacDermid
Unrestricted Incorporated
MacDermid Guarantor Nonguarantor Nonguarantor And
Incorporated Subsidiaries Subsidiaries Subsidiaries Eliminations Subsidiaries
-------------- -------------- -------------- -------------- ------------- --------------
Net cash flows provided
by (used in) operating
activities:. . . . . . . . $ (12,819) $ 14,220 $ 12,587 $ (1,111) $ - $ 12,877
Investing activities:
Capital expenditures . . . (98) (220) (264) (588) - (1,170)
Proceeds from disposition
of fixed assets. . . . . . - - 14 - - 14
-------------- -------------- -------------- -------------- ------------- --------------
Net cash flows provided
by (used in) investing
activities . . . . . . . . (98) (220) (250) (588) - (1,156)
-------------- -------------- -------------- -------------- ------------- --------------
Financing activities:
Net proceeds from
(repayments of) short-term
borrowings . . . . . . . . 5,734 (8,760) (1,905) 1,650 - (3,281)
Long-term borrowings . . . 11,000 - - 276 - 11,276
Long-term repayments . . . (15,000) - (6,061) (549) - (21,610)
Dividends paid . . . . . . 8,291 (5,915) (3,021) - - (645)
-------------- -------------- -------------- -------------- ------------- --------------
Net cash flows provided
by (used in) financing
activities . . . . . . . . 10,025 (14,675) (10,987) 1,377 - (14,260)
-------------- -------------- -------------- -------------- ------------- --------------
Effect of exchange rate
changes on cash and cash
equivalents. . . . . . . . - - (104) (10) - (114)
-------------- -------------- -------------- -------------- ------------- --------------
Net (decrease) increase in
cash and cash equivalents. (2,892) (675) 1,246 (332) - (2,653)
Cash and cash equivalents
at beginning of period . . 4,419 1,881 10,261 506 - 17,067
Cash and cash equivalents
-------------- -------------- -------------- -------------- ------------- --------------
at end of period . . . . . $ 1,527 $ 1,206 $ 11,507 $ 174 $ - $ 14,414
============== ============== ============== ============== ============= ==============
ITEM 2:
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion compares the results of operations for the three month
period which ended March 31, 2003 to the same period in 2002.
SALES, COSTS AND EXPENSES
Advanced Surface Finishing: Net sales for the current quarter were $83.8
million, an increase of $5.4 million, or 7% from $78.4 million in the same
period last year. This includes a positive foreign currency translation effect
of $6.9 million, otherwise total sales would have shown a 2% decrease.
Proprietary sales, excluding the effects of foreign currency translation, were
2% lower than the same period last year. Proprietary sales remain weak largely
due to lower consumer spending in the electronics industries and a cyclical
slowdown for industrial applications.
Costs, as a percentage of sales were well below the same period last year.
Lower costs were significantly influenced by the closure of a North American
production facility. Gross profit percentage was 50.9% as compared to 49.0% for
the same period last year, in a large part, the result of cost reduction
efforts.
Selling, technical and administrative expenses ("ST&A") were $29.8 million this
quarter, a 5% increase as compared to $28.3 million for the same period last
year. The increase is from a $2.6 million foreign currency translation effect,
otherwise ST&A would have decreased 4%. ST&A as a percentage of sales for the
current quarter was 35.6% as compared to 36.1% in the same period last year.
Total amortization expense was $0.6 million for the three month period ended
March 31, 2003, which was $0.8 million less than the same period last year.
As a result of the factors discussed above, advanced surface finishing operating
profit (after amortization) increased 41% to $12.3 million from $8.7 million.
Printing Solutions: Net sales for the current quarter were $67.8 million, a
decrease of $0.6 million, or 1% from $68.4 million in the same period last year.
This includes a positive foreign currency translation effect of $2.8 million,
otherwise total sales would have shown a 5% decrease. Sales to the commercial
advertising customers have not returned to levels previously enjoyed as activity
in these industries remain soft.
Costs, as a percentage of sales were well below the same period last year
largely due to the closure of a North American production facility. Gross
profit percentage was 44.0% as compared to 41.7% for the same period last year,
influenced through cost reduction efforts.
ST&A expenses were $17.6 million this quarter, a 2% increase as compared to
$17.2 million for the same period last year. The increase is from a $0.7
million foreign currency translation effect, otherwise ST&A would have decreased
2%. ST&A as a percentage of sales for the current quarter was 25.9% as compared
to 25.2% in the same period last year. Total amortization expense was $0.1
million for the three month period ended March 31, 2003, similar to the same
period last year.
As a result of the factors discussed above, printing solutions operating profit
(after amortization) increased 9% to $12.1 million from $11.1 million.
Electronics Manufacturing: Net sales for the current quarter were $20.8 million,
an increase of $0.6 million, or 3% from $20.2 million in the same period last
year. This includes a positive effect of foreign currency translation of $3.8
million, otherwise total sales would have shown a 16% decrease.
Costs, as a percentage of sales increased and as a result gross profit
percentage was 8.2% as compared to 12.3% for the same period last year. The
major factors were higher depreciation coupled with some labor and utilities
increases.
ST&A expenses increased $0.2 million, or 17% as compared to the same period last
year, the result of a $0.4 million foreign currency translation effect.
As a result of the factors discussed above, the electronics manufacturing
operating profit (after amortization) was break-even for the three month period
ended March 31, 2003 as compared to an operating profit of $1.0 million for the
same period last year.
Consolidated: Net sales for the current quarter, $172.4 million increased $5.4
million or 3% from $167.0 million in the same period last year. This includes a
$13.5 million positive effect from foreign currency translation which resulted
in higher reported sales. Without this effect, reported sales would have
decreased 5% and proprietary sales, which were roughly 82% of total net sales in
both periods would have decreased 4%.
Gross profits increased 7% for the three month period ended March 31, 2003 as
compared to the same period last year. The closure of production facilities and
other cost reduction efforts more than compensated for weak sales volumes.
Accordingly, gross profit as a percentage of sales was 43.1% for the three month
period ended March 31, 2003, as compared to 41.6% for the same period last year.
ST&A expenses were $2.0 million, or 4% more than the same period last year,
however, excluding a $3.7 million foreign currency translation effect, ST&A
expenses would have been 4% lower. ST&A as a percentage of sales for the three
month period was 28.5% as compared to 28.2% for the same period last year.
Total amortization expense was $0.8 million for the three month period ended
March 31, 2003. This was $0.8 million less than the same period last year.
Operating profit (after amortization) for the three month period was $24.4
million, an increase of $3.6 million, or approximately 17% more than $20.8
million for the same period last year.
PROVISION FOR INCOME TAXES
The Corporation's effective income tax rate approximates 32% for the three month
period ended March 31, 2003 and 35% for the same period in 2002. The rate
difference is mainly attributable to a change in earnings mix from higher to
lower taxed jurisdictions and the implementation of domestic tax minimization
strategies.
NET EARNINGS
Net interest expense, $7.7 million was approximately 15% less than the same
period last year, as a result of over $70.0 million debt repayments between the
periods. Net earnings available to common shareholders for the three month
period ended March 31, 2003, $0.36 per share was 57% higher than $0.23 per share
for the same period last year. The impact from foreign currency translation was
favorable to reported earnings by approximately $0.02 per share for the three
month period.
Financial Condition
Operating activities during the three months ending March 31, 2003 provided a
net cash inflow of $19.4 million. This included net earnings of $11.6 million,
non-cash expenses for depreciation, amortization, bad debts and stock
compensation of $8.8 million, offset by a net increase in operating assets and
liabilities of $1.0 million, which is attributable to a semi-annual interest
payment. Cash generated from operations during this period principally remained
on the balance sheet, as debt other than senior subordinated bonds has been
essentially extinguished.
Investing activities for the three months ended March 31, 2003 utilized net cash
of $1.0 million, all of which relates to capital expenditures. This capital
spending compares with total planned expenditures of approximately $13.0 million
for the full year.
Financing activities for the three months ended March 31, 2003 consisted of a
net use of cash of $4.2 million primarily used for a net debt repayment of $3.6
million and dividends to shareholders of $0.6 million ($0.02 per common share).
The Corporation's financial position remains strong. Working capital at March
31, 2003 was $158.8 million as compared to $139.5 million at December 31, 2002.
The Corporation issued 9 1/8% senior subordinated notes effective June 20, 2001,
for the face amount of $301.5 million, which pay interest semiannually on
January 15th and July 15th and mature in 2011. The Corporation also has a
long-term credit arrangement, which consists of a combined revolving loan
facility that permits borrowings, denominated in US dollars and foreign
currencies, of up to $50 million. There has been no balance outstanding, or
activity on this revolving loan facility for the periods presented. The
Corporation has other uncommitted credit facilities which presently total
approximately $59 million. These, together with the Corporation's cash flows
from operations are adequate to fund working capital and expected capital
expenditures.
There are no long-term commitments (including the short-term portion) which
would have a significant impact upon results of operations, financial condition
or liquidity of the Corporation, other than the obligations in the following
table:
($millions) . . . . . . . . . . . . This Year 2-4 Years 5 or More Years Total
---------- ---------- ---------------- ------
Long-term debt . . . . $ 4.3 $ 7.8 $ 302.2 $314.3
Capital leases . . . . 1.0 1.2 0.4 2.6
Operating leases . . . 9.0 10.2 5.2 24.4
---------- ---------- ---------------- ------
Total contractual cash commitments. $ 14.3 $ 19.2 $ 307.8 $341.3
========== ========== ================ ======
The Board of Directors from time-to-time authorize the purchase of issued and
outstanding shares of the Corporation's common stock. Such additional shares
may be acquired through privately negotiated transactions or on the open market.
Any future repurchases by the Corporation will depend on various factors
including the market price of its shares, its business and financial position
and general economic or market conditions. Additional shares acquired pursuant
to such authorizations 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). At March 31,
2003, the outstanding authorization to purchase approximately 1.0 million shares
would cost approximately $20.4 million. Subsequently, on May 7, 2003, the Board
of Directors voted to supercede the previous authorization with a new
authorization to purchase up to 3.0 million common shares. Also, on May 7,
2003, the Corporation executed a purchase and sale agreement with Citicorp
Venture Capital Ltd, to aquire all of their 2.2 million outstanding common
shares on or before November 3, 2003. Initially, 1.3 million shares will be
purchased for $30.5 million. The remaining 0.9 million shares will be purchased
for not less than $19.2 million and not more than $21.3 million.
The following table presents owner earnings for the three month periods ended
March 31, 2003 and 2002. Owner earnings is defined as cash flow from operations
less net capital spending and is not intended to represent cash flow from
operations as defined by generally accepted accounting principles. This measure
should not be used as an alternative to net income as an indicator of operating
performance or to cash flows as a measure of liquidity. Management believes
that owner earnings portrays a meaningful measure of the impact of free cash
flow, which is an important factor towards the growth of intrinsic shareholder
value over time.
Three Months Ended March 31,
2003 2002
------------------------------ ------
Cash provided by operations $ 19.4 $12.9
Less: net capital spending. (1.0) (1.2)
------------------------------ ------
Owner earnings. . . . . . . $ 18.4 $11.7
============================== ======
CRITICAL ACCOUNTING POLICIES
In preparing the consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America, management must
undertake decisions that impact the reported amounts and related disclosures.
Such decisions include the selection of the appropriate accounting principles to
be applied and also assumptions upon which accounting estimates are based.
Management applies judgement based on its understanding and analysis of the
relevant circumstances to reach these decisions. By their nature, these
judgements are subject to an inherent degree of uncertainty, accordingly actual
results could differ significantly from the estimates applied.
The Corporation's critical accounting policies include the following:
Revenue Recognition: The Corporation recognizes revenue, including freight
charged to customers, when products are shipped and the customer takes ownership
and assumes the risk of loss, collection of the relevant receivable is probable,
persuasive evidence that an arrangement exists and the sales price is fixed or
determinable. The Corporation's shipping terms are customarily "FOB shipping
point" and do not include right of inspection or acceptance provisions.
Equipment sales arrangements may include right of inspection or acceptance
provisions in which case revenue is deferred until these provisions have been
satisfied.
Accounts Receivable: The Corporation performs ongoing credit evaluations of its
customers and adjusts credit limits based upon payment history and the
customer's credit worthiness. The Corporation continually monitors collections
and payments from its customers and maintains a provision for estimated credit
losses based upon historical experience and any specific customer collection
issues that it has identified. While such credit losses have historically been
within management's expectations and the provisions for bad debts established,
there is no guarantee that the Corporation will continue to experience the same
credit loss rates as in the past.
Inventories: The Corporation values inventory at lower of average cost or
replacement market. Management regularly reviews obsolescence to determine that
inventories are appropriately reserved. In making any determination, historical
write-offs, customer demand, alternative product uses, usage rates and
quantities of stock on hand are considered. Inventory in excess of the
Corporation's estimated usage requirements is written down to its estimated net
realizable value.
Goodwill and other long-lived assets: The Corporation records property, plant
and equipment at cost. Depreciation and amortization of property, plant and
equipment are provided over the estimated useful lives of the respective assets,
on the straight-line basis. The Corporation categorizes and depreciates its
assets over periods ranging from 3-5 years for computers, software, furniture,
fixtures and autos, 5-20 years for machinery and equipment, and 5-30 years for
building and building improvements. Leasehold improvements are amortized over
the lesser of the useful life of the asset or the life of the lease.
Expenditures for maintenance and repairs are charged directly to expense;
renewals and betterments, which significantly extend the useful lives are
capitalized. Costs and accumulated depreciation and amortization on assets
retired or disposed of are removed from the accounts and any resulting gains or
losses are credited or charged to earnings. Patents and various other
intangible assets are amortized on a straight-line basis over their estimated
useful lives as determined by an appropriate valuation. The present periods of
amortization are 15 years for patents and range between 5 and 30 years for other
separately identified intangible assets. The Corporation assesses the carrying
value of goodwill and other long-lived assets in accordance with SFAS142 and
SFAS144. In many instances, projected future cash flows are used in these
assessments. Estimation factors, including but not limited to, the timing of
new product introductions, market conditions and competitive environment could
affect previous projections.
Environmental Matters: The nature of the Corporation's operations and products
exposes it to the risk of liabilities or claims with respect to environmental
cleanup or other matters, including those in connection with the disposal of
hazardous materials. As such, the Corporation is subject to extensive U.S. and
foreign laws and regulations relating to environmental protection and worker
health and safety, including those governing: discharges of pollutants into the
air and water; the management and disposal of hazardous substances and wastes;
and the cleanup of contaminated properties. The Corporation has incurred, and
will continue to incur, significant costs and capital expenditures in complying
with these laws and regulations. The Corporation could incur significant
additional costs, including cleanup costs, fines and sanctions and third-party
claims, as a result of violations of or liabilities under environmental laws.
In order to ensure compliance with applicable environmental, health and safety
laws and regulations, the Corporation maintains a disciplined environmental and
occupational safety and health compliance program, which includes conducting
regular internal and external audits at its plants to identify and categorize
potential environmental exposure. It is the Corporation's policy to review
these environmental issues in light of historical experience and to reserve for
those that both a liability has become probable and the cost is reasonably
estimable, in accordance with Statement of Financial Accounting Standards No. 5,
"Accounting for Contingencies".
Employee Benefit Plans: The Corporation sponsors a defined benefit plan and a
retirement medical benefit plan for its domestic employees providing retirement
benefits based upon years of service and compensation levels. The Corporation
also sponsored a defined benefit plan for its United Kingdom based employees
employed at its Canning subsidiary that was frozen as of April 6, 1997, when the
plan was converted from a defined benefit plan to a defined contribution plan.
The projected benefit obligations and pension expenses from both of these plans
is dependent upon various factors such as the discount rate, actual return on
plan assets and the funding of the plan. Management can neither predict the
future interest rate environment, which directly impacts the selection of future
discount rates, nor predict future asset returns that the pension plan will
experience. Changes in these assumptions will effect current year and future
year pension expense and the projected benefit obligation. Management estimates
that a 50 basis point drop in the discount rate for the valuation at December
31, 2003, will increase the plan's projected benefit obligation by approximately
$4,500 and increase the plan's pension expense by approximately $1,000.
However, these increases could be offset by other factors such as favorable
asset experience or additional cash contributions to the plan.
NEW ACCOUNTING STANDARDS
In January 2003, the FASB issued Statement of Financial Accounting Standards No.
148, Accounting for Stock-based Compensation - Transition and Disclosure
(SFAS148) which amends SFAS123 to provide alternative methods of transition for
enterprises that elect to change to the SFAS123 fair value method of accounting
for stock-based employee compensation. Since the Corporation adopted the fair
value method of accounting for stock-based employee compensation for the
reporting year ended December 31, 2001, the alternative methods of transition to
that method provided by SFAS148 do not have any effect on its financial
statements. SFAS148 also amends the disclosure requirements of SFAS123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. The required interim disclosures
have been provided in Stock-Based Plans, Note 4 to these consolidated condensed
financial statements.
Statement of Financial Accounting Standards No. 143, Accounting for Asset
Retirement Obligations (SFAS143) addresses financial accounting and reporting
for obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. SFAS143 requires recognition of asset
retirement obligations as a liability rather than a contra-asset. The adoption
of SFAS143, effective January 1, 2003, did not have an impact on the carrying
amount of the Corporation's long-lived assets or liabilities.
Statement of Financial Accounting Standards No. 145, Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections (SFAS145) among other things, rescinds SFAS No. 4, which required
all gains and losses from the extinguishment of debt to be classified as an
extraordinary item and amends SFAS No. 13 to require that certain lease
modifications that have economic effects similar to sale-leaseback transactions
be accounted for in the same manner as sale-leaseback transactions. The
adoption of SFAS145, effective January 1, 2003, did not have an impact on the
Corporation's financial statements.
Statement of Financial Accounting Standards No. 146, Accounting for Costs
Associated with Exit or Disposal Activities (SFAS146) requires companies to
recognize costs associated with exit or disposal activities when a liability is
incurred rather than at the date of a commitment to an exit or disposal plan.
The provisions of SFAS146 are effective for exit or disposal activities that are
initiated after December 31, 2002. The adoption of SFAS146, effective January
1, 2003, did not have an impact on the Corporation's financial statements.
Interpretation No. 45 (FIN45) Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others, which
requires that a liability be recorded in the guarantor's balance sheet upon
issuance of a guarantee. In addition, FIN45 requires disclosures about the
guarantees that an entity has issued, including product warranty liabilities.
The Corporation does not maintain any warranty expense or related liabilities
for its core specialty chemicals business. Warranties for certain ancillary
businesses are not material. The Corporation adopted FIN45 at December 31, 2002
and it did not have a material effect on its consolidated financial statements.
In January 2003, the FASB issued FIN No. 46 (FIN46) Consolidation of Variable
Interest Entities and Interpretation of Accounting Research Bulletin No. 51.
FIN46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN46 is
effective for all new variable interest entities created or acquired after
January 31, 2003. The Corporation does not expect that the adoption of FIN46
will have a significant effect on its consolidated financial statements.
ENVIRONMENTAL and LEGAL MATTERS
Environmental Issues: The nature of the Corporation's operations, as
manufacturers and distributors of specialty chemicals and systems, and products,
including raw materials, expose it to the risk of liabilities or claims with
respect to environmental cleanup or other matters, including those in connection
with the disposal of hazardous materials. As such, the Corporation is subject
to extensive U.S. and foreign laws and regulations relating to environmental
protection and worker health and safety, including those governing: discharges
of pollutants into the air and water; the management and disposal of hazardous
substances and wastes; and the cleanup of contaminated properties. The
Corporation has incurred, and will continue to incur, significant costs and
capital expenditures in complying with these laws and regulations. The
Corporation could incur significant additional costs, including cleanup costs,
fines and sanctions and third-party claims, as a result of violations of or
liabilities under environmental laws. In order to ensure compliance with
applicable environmental, health and safety laws and regulations, the
Corporation maintains a disciplined environmental and occupational safety and
health compliance program, which includes conducting regular internal and
external audits at its plants to identify and categorize potential environmental
exposure.
The Corporation has been named as a potentially responsible party ("PRP") at
three Superfund sites. There are many other PRPs involved at each of these
sites. The Corporation has recorded its best estimate of liabilities in
connection with site clean-up based upon the extent of its involvement, the
number of PRPs and estimates of the total costs of the site clean-up that
reflect the results of environmental investigations and remediation estimates
produced by remediation contractors. While the ultimate costs of such
liabilities are difficult to predict, the Corporation does not expect that its
costs associated with these sites will be material.
In addition, some of the Corporation's facilities have an extended history of
chemical processes or other industrial activities. Contaminants have been
detected at some of these sites, with respect to which the Corporation is
conducting environmental investigations and/or cleanup activities. These sites
include certain sites acquired in the December 1998 acquisition of W. Canning
plc, such as the Kearny, New Jersey and Waukegan, Illinois sites. The
Corporation has established an environmental remediation reserve, predominantly
attributable to those Canning sites that it believes will require environmental
remediation. With respect to those sites, it also believes that its Canning
subsidiary is entitled under the acquisition agreement to withhold a deferred
purchase price payment of approximately $2.0 million. The Corporation estimates
the range of cleanup costs at its Canning sites between $2.0 million and $5.0
million. Investigations into the extent of contamination, however, are ongoing
with respect to some of these sites. To the extent the Corporation's
liabilities exceed $2.0 million, it may be entitled to additional
indemnification payments. Such recovery may be uncertain, however, and would
likely involve significant litigation expense. The Corporation does not
anticipate that it will be materially affected by environmental remediation
costs, or any related claims, at any contaminated sites, including the Canning
sites. It is difficult, however, to predict the final costs and timing of costs
of site remediation. Ultimate costs may vary from current estimates and
reserves, and the discovery of additional contaminants at these or other sites
or the imposition of additional cleanup obligations, or third-party claims
relating thereto, could result in significant additional costs.
Legal Proceedings: On January 30, 1997, the Corporation was served with a
subpoena from a federal grand jury in Connecticut requesting certain documents
relating to an accidental spill from its Huntingdon Avenue, Waterbury,
Connecticut facility that occurred in November of 1994, together with other
information relating to operations and compliance at the Huntingdon Avenue
facility. The Corporation was subsequently informed that it is a subject of the
grand jury's investigation in connection with alleged criminal violations of the
federal Clean Water Act pertaining to its wastewater handling practices. In
addition, two of the Corporation's former employees, who worked at the
Huntington Avenue facility, pled guilty in early 2001 to misdemeanor violations
under the Clean Water Act in connection with the above matter. These
individuals were sentenced to fines of $25 thousand and $10 thousand and 2 years
probation, as well as community service. In a separate matter, on July 26,
1999, the Corporation was named in a civil lawsuit commenced in the Superior
Court of the State of Connecticut brought by the Connecticut Department of
Environmental Protection alleging various compliance violations at its
Huntingdon Avenue and Freight Street locations between the years 1992 through
1998 relating to wastewater discharges and the management of waste materials.
The complaint alleges violations of its permits issued under the Federal Clean
Water Act and the Resource Conservation and Recovery Act, as well as procedural,
notification and other requirements of Connecticut's environmental regulations
over the foregoing period of time.
The Corporation voluntarily resolved both of these matters on November 28, 2001.
As a result, MacDermid, Incorporated was required to pay fines and penalties
totaling $2.5 million, without interest, over six quarterly installments. As of
March 31, 2003, the Corporation has paid the entire $2.5 million. In addition,
the Corporation was required to pay $1.5 million to various local charitable and
environmental organizations and causes. As of March 31, 2003, the Corporation
has paid $1.4 million and a final payment for these donations of $0.1 million
was paid on April 30, 2003. The Corporation has been placed on probation for
two years and will perform certain environmental audits, as well as other
environmentally related actions. The Corporation had recorded liabilities
during the negotiation period and therefore its results of operations and
financial position were not affected by these arrangements.
Various other legal proceedings are pending against the Corporation. The
Corporation considers all such proceedings to be ordinary litigation incident to
the nature of its business. Certain claims are covered by liability insurance.
The Corporation believes that the resolution of these claims to the extent not
covered by insurance will not, individually or in the aggregate, have a material
adverse effect on its financial position or results of operations.
FORWARD-LOOKING STATEMENTS
This report and other Corporation reports include forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements relate to analyses and other information that is based on
forecasts of future results and estimates of amounts not yet determinable. These
statements also relate to future prospects, developments and business
strategies. The statements contained in this report that are not statements of
historical fact may include forward-looking statements that involve a number of
risks and uncertainties. The words "anticipate," "believe," "could,"
"estimate," "expect," "intend," "may," "plan," "predict," "project," "will" and
similar terms and phrases, including references to assumptions, have been used
to identify forward-looking statements. These forward-looking statements are
made based on management's expectations and beliefs concerning future events
affecting the Corporation and are subject to uncertainties and factors relating
to its operations and business environment, all of which are difficult to
predict and many of which are beyond its control, that could cause actual
results to differ materially from those matters expressed in or implied by these
forward-looking statements. The following factors are among those that may cause
actual results to differ materially from the forward-looking statements:
acquisitions and dispositions, environmental liabilities, changes in general
economic, business and industry conditions, changes in current advertising,
promotional and pricing levels, changes in political and social conditions and
local regulations, foreign currency fluctuations, inflation, significant
litigation; changes in sales mix, competition, disruptions of established supply
channels, degree of acceptance of new products, difficulty of forecasting sales
at various times in various markets, the availability, terms and deployment of
capital, and the other factors discussed elsewhere in this report.
All forward-looking statements should be considered in light of these factors.
The Corporation undertakes no obligation to update forward-looking statements or
risk factors to reflect new information, future events or otherwise.
ITEM 3:
Quantitative and Qualitative Disclosures
About Market Risk
Refer to the notes to the consolidated condensed financial statements, Market
Risk, Note 10.
ITEM 4:
Controls and Procedures
The Corporation's principle executive and financial officers have evaluated the
effectiveness of the Corporation's disclosure controls and procedures (as
defined in Rule 13a-14(c) under the Securities Exchange Act of 1934) as of a
date within 90 days of the filing of this report. Based on that evaluation,
they have concluded that the Corporation's disclosure controls and procedures
are adequate and effective. There have been no significant changes in the
Corporation's internal controls or in other factors that could significantly
affect internal controls subsequent to the date they completed their evaluation.
PART II. OTHER INFORMATION
ITEM 1 : Legal Proceedings
Refer to the notes to the consolidated condensed financial statements,
Contingencies and Legal Matters, Note 11.
ITEM 2 : Changes in Securities and Use of Proceeds
None.
ITEM 3 : Defaults Upon Senior Securities
None.
ITEM 4 : Submission of Matters to a Vote of Security Holders
None.
ITEM 5 : Other Information
None.
ITEM 6(a) : Exhibits
6(a).1 The Corporation filed a Form S-3 Shelf Registration on February 27, 2003.
The Form S-3 is incorporated by reference herein.
6(a).2 On March 27, 2003, the Corporation filed its Form 10-K/A to provide
additional disclosure regarding non-GAAP references contained in the Message to
Shareholders attached as exhibit 13 to its Form 10K. The Form 10K/A is
incorporated by reference herein.
6(a).3 The Corporation signed a new Credit Agreement with Bank of America, N.A.
on April 28, 2003, which is included as Exhibit 4 to this filing.
6(a).4 Signature page for certifications under Section 906 of the Sarbanes-Oxley
Act of 2002 is included as Exhibit 99 to this filing.
ITEM 6(b) : Reports on Form 8-K
On May 7, 2003, the Corporation filed its Form 8-K to disclose a purchase and
sale agreement had been signed with Citicorp Venture Capital Ltd ("CVC") for the
Corporation to purchase all of CVC's common shares of MacDermid, Incorporated.
The Form 8-K is incorporated by reference herein.
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: May 15, 2003 /s/ Daniel H. Leever
-------------- -----------------------
Daniel H. Leever
Chairman, President and
Chief Executive Officer
Date: May 15, 2003 /s/ Gregory M. Bolingbroke
-------------- -----------------------------
Gregory M. Bolingbroke
Senior Vice President,
Treasurer and Corporate Controller
PRINCIPLE FINANCIAL OFFICER CERTIFICATION
I, Gregory M. Bolingbroke, certify that:
1. I have reviewed this quarterly report on Form 10-Q of MacDermid,
Incorporated;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "evaluation date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
evaluation date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors:
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weakness in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequentt to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 15, 2003 / s / Gregory M. Bolingbroke
-------------- ---------------------------------
Name: Gregory M. Bolingbroke
Title: Senior Vice President, Treasurer
and Corporate Controller
PRINCIPLE EXECUTIVE OFFICER CERTIFICATION
I, Daniel H. Leever, certify that:
1. I have reviewed this quarterly report on Form 10-Q of MacDermid,
Incorporated;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "evaluation date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
evaluation date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors:
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weakness in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequentt to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 15, 2003 /s/ Daniel H. Leever
-------------- -----------------------
Name: Daniel H. Leever
Title: Chairman, President and
Chief Executive Officer
EXHIBIT 99
STATEMENT UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned officers of MacDermid, Incorporated ("the Corporation") hereby
certify that, as of the date of this statement, the Corporation's quarterly
report on Form 10Q for the period ended March 31, 2003 ("the Report") fully
complies with the requirements of section 13(a) of the Securities Exchange Act
of 1934 and that information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations as of and
for the three month period ended March 31, 2003.
The purpose of this statement is solely to comply with Title 18, Chapter 63,
Section 1350 of the United States Code, as amended by Section 906 of the
Sarbanes-Oxley Act of 2002. This statement is not "filed" for the purposes of
Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the
liabilities of that Act or any other federal or state law or regulation.
Date: May 15, 2003 /s/ Daniel H. Leever
-------------- -----------------------
Daniel H. Leever
Chairman, President and
Chief Executive Officer
Date: May 15, 2003 /s/ Gregory M. Bolingbroke
-------------- -----------------------------
Gregory M. Bolingbroke
Senior Vice President,
Treasurer and Corporate Controller