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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549 - 1004
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED March 31, 2004
--------------
[ ] TRANSITION REPORT PERSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________ TO _____________
COMMISSION FILE NUMBER 1-13889
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MacDermid, Incorporated
-----------------------
(Exact name of registrant as specified in its charter)
Connecticut 06-0435750
-------------- ------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
245 Freight Street, Waterbury, Connecticut 06702
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 575-5700
---------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark whether the registrant is an accelerated filer as defined
in Rule 12b-2 of the Act.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 1, 2004
---------------------- ------------------------------
Common Stock, no par value 30,297,727 shares
MACDERMID, INCORPORATED
INDEX
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 2004 and December 31, 2003 . . . . . . . . . . . 2-3
Consolidated Statements of Earnings - Three Months Ended
March 31, 2004 and 2003. . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2004 and 2003 . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . 6 - 19
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . 20 - 27
Item 3. Quantitative and Qualitative Disclosures about Market Risk 28
Item 4. Controls and Procedures. . . . . . . . . . . . . . . . . . 29
Part II. Other Information. . . . . . . . . . . . . . . . . . . . 30
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
MACDERMID, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of dollars)
March 31, December 31,
2004 2003
------------ ------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents . . . . . . . $ 66,559 $ 61,294
Accounts receivable, net
of allowance for doubtful receivables
of $11,686 and $11,908, respectively. 143,794 137,149
Inventories . . . . . . . . . . . . . . 79,367 75,775
Prepaid expenses. . . . . . . . . . . . 6,998 8,137
Deferred income taxes . . . . . . . . . 22,916 22,960
------------ -------------
Total current assets. . . . . . . . 319,634 305,315
Property, plant and equipment, net
of accumulated depreciation of
$174,123 and $172,741, respectively . 110,380 113,642
Goodwill. . . . . . . . . . . . . . . . 194,200 194,200
Intangibles, net. . . . . . . . . . . . 29,634 30,061
Deferred income taxes . . . . . . . . . 32,785 31,759
Other assets, net . . . . . . . . . . . 20,653 22,258
------------ -------------
$ 707,286 $ 697,235
============ =============
See accompanying notes to consolidated financial statements.
MACDERMID, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of dollars except share and per share amounts)
March 31, December 31,
2004 2003
(Unaudited)
------------ --------------
Liabilities and shareholders' equity:
Current liabilities:
Notes payable . . . . . . . . . . . . . . . . $ 686 $ 940
Current installments of long-term obligations 470 558
Accounts and dividends payable. . . . . . . . 54,989 54,061
Accrued compensation. . . . . . . . . . . . . 9,388 11,860
Accrued interest. . . . . . . . . . . . . . . 5,855 12,732
Accrued expenses, other . . . . . . . . . . . 43,552 42,252
Income taxes. . . . . . . . . . . . . . . . . 6,311 3,220
------------ --------------
Total current liabilities . . . . . . . . 121,251 125,623
Long-term obligations . . . . . . . . . . . . 301,251 301,203
Retirement benefits, less current portion . . 20,103 20,679
Deferred income taxes . . . . . . . . . . . . 7,315 6,232
Other long-term liabilities . . . . . . . . . 4,428 4,486
------------ --------------
Total liabilities . . . . . . . . . . . . 454,348 458,223
============ ==============
Shareholders' equity:
Common stock, authorized 75,000,000
shares, issued 46,818,200 at March 31, 2004,
and 46,813,138 shares at December 31,
2003, at stated value of $1.00 per share. . . 46,818 46,813
Additional paid-in capital. . . . . . . . . . 27,492 25,884
Retained earnings . . . . . . . . . . . . . . 290,386 278,705
Accumulated other comprehensive income. . . . 2,955 2,355
Less - cost of common shares held in
treasury, 16,547,686 at March 31,2004, and
16,548,604 at December 31, 2003 . . . . . . . (114,713) (114,745)
------------ --------------
Total shareholders' equity. . . . . . . . 252,938 239,012
------------ --------------
$ 707,286 $ 697,235
============ ==============
See accompanying notes to consolidated financial statements.
MACDERMID, INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands of dollars except share and per share amounts)
(Unaudited)
Three Months Ended March 31,
2004 2003
------------------------------ ------------
Net sales . . . . . . . . . . . . . . . . . $ 162,012 $ 152,803
Cost of sales . . . . . . . . . . . . . . . 84,486 80,261
------------------------------ ------------
Gross profit. . . . . . . . . . . . . . 77,526 72,542
Operating expenses:
Selling, technical and administrative . . 49,983 47,383
Amortization. . . . . . . . . . . . . . . 734 769
------------------------------ ------------
50,717 48,152
------------------------------ ------------
Operating profit. . . . . . . . . . . . 26,809 24,390
Other income (expense):
Interest income . . . . . . . . . . . . . 228 185
Interest expense. . . . . . . . . . . . . (7,819) (7,623)
Miscellaneous income. . . . . . . . . . . - 207
Miscellaneous expense . . . . . . . . . . (258) -
------------------------------ ------------
(7,849) (7,231)
------------------------------ ------------
Earnings from continuing operations before
income taxes. . . . . . . . . . . . . . . 18,960 17,159
Income taxes. . . . . . . . . . . . . . . . (6,067) (5,491)
------------------------------ ------------
Earnings from continuing operations . . . . 12,893 11,668
Discontinued operations, net of tax . . . . - (102)
------------------------------ ------------
Net earnings. . . . . . . . . . . . . . . . $ 12,893 $ 11,566
============================== ============
Basic earnings per common share:
Continuing operations. . . . . . . . . . $ 0.43 $ 0.36
Discontinued operations. . . . . . . . . - -
------------------------------ ------------
Net earnings per common share . . . . $ 0.43 $ 0.36
============================== ============
Diluted earnings per common share:
Continuing operations. . . . . . . . . . $ 0.42 $ 0.36
Discontinued operations. . . . . . . . . - -
------------------------------ ------------
Net earnings per common share. . . . . $ 0.42 $ 0.36
============================== ============
Cash dividends per common share . . . . . . $ 0.04 $ 0.02
============================== ============
Weighted average common shares outstanding:
Basic . . . . . . . . . . . . . . . . . . 30,266,513 32,295,541
============================== ============
Diluted . . . . . . . . . . . . . . . . . 31,041,763 32,467,172
============================== ============
See accompanying notes to consolidated financial statements.
MACDERMID, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of dollars)
(Unaudited)
Three Months Ended March 31,
2004 2003
------------------------------ --------
Net cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . $ 12,893 $11,566
Adjustments to reconcile net income to net income from
continuing operations:
Loss from discontinued operations, net of taxes. . . . . - 102
------------------------------ --------
Income from continuing operations. . . . . . . . . . . . 12,893 11,668
------------------------------ --------
Adjustments to reconcile earnings from continuing
operations to net cash provided by operating activities:
Depreciation. . . . . . . . . . . . . . . . . . . . . 4,125 3,941
Amortization. . . . . . . . . . . . . . . . . . . . . 734 769
Provision for bad debts . . . . . . . . . . . . . . . 599 1,720
Deferred income taxes . . . . . . . . . . . . . . . . (149) -
Stock compensation expense. . . . . . . . . . . . . . 1,560 1,031
Changes in assets and liabilities:
(Increase) decrease in receivables. . . . . . . . . . (7,543) 1,786
(Increase) decrease in inventories. . . . . . . . . . (3,758) 1,548
Decrease in prepaid expenses. . . . . . . . . . . . . 1,133 1,068
Increase (decrease) in accounts payable . . . . . . . 1,217 (748)
Decrease in accrued expenses. . . . . . . . . . . . . (8,273) (7,950)
Increase in income tax liabilities. . . . . . . . . . 3,084 583
Other . . . . . . . . . . . . . . . . . . . . . . . . 1,567 1,752
------------------------------ --------
Cash provided by continuing operations . . . . . . . . . 7,189 17,168
Cash provided by discontinued operations . . . . . . . . - 2,229
------------------------------ --------
Net cash flows provided by operating activities . . . 7,189 19,397
------------------------------ --------
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . . . . . (1,301) (979)
Proceeds from disposition of fixed assets. . . . . . . 519 -
------------------------------ --------
Net cash flows used in investing activities. . . . . . (782) (979)
------------------------------ --------
Cash flows from financing activities:
Net repayments of short-term borrowings. . . . . . . . (201) (2,237)
Repayments of long-term borrowings . . . . . . . . . . (121) (1,333)
Issuance from treasury shares. . . . . . . . . . . . . 31 50
Proceeds from exercise of stock options. . . . . . . . 54 -
Dividends paid . . . . . . . . . . . . . . . . . . . . (1,212) (646)
------------------------------ --------
Net cash flows used in financing activities. . . . . . (1,449) (4,166)
------------------------------ --------
Effect of exchange rate changes on
cash and cash equivalents. . . . . . . . . . . . . . . 307 363
------------------------------ --------
Net increase in cash and cash equivalents. . . . . . . . 5,265 14,615
Cash and cash equivalents at beginning of period . . . . 61,294 32,019
------------------------------ --------
Cash and cash equivalents at end of period . . . . . . . $ 66,559 $46,634
============================== ========
Cash paid for interest . . . . . . . . . . . . . . . . . $ 14,320 $14,812
============================== ========
Cash paid for income taxes . . . . . . . . . . . . . . . $ 2,720 $ 2,109
============================== ========
See accompanying notes to consolidated financial statements.
MACDERMID, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of dollars, except share and per share amounts)
Note 1. Summary of Significant Accounting Policies
The accompanying unaudited consolidated 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, 2004, and the results
of operations and cash flows for the three month periods ended March 31, 2004,
and 2003. 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, 2003.
Note 2. Earnings Per Common Share
Earnings per share ("EPS") is calculated based upon net earnings available for
common shareholders. 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 warrants that were
outstanding during the period, under the treasury stock method. Options to
purchase 544,450 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 market prices as of March 31, 2004.
The following table reconciles basic weighted-average common shares outstanding
to diluted weighted-average common shares outstanding:
Three Months Ended March 31,
2004 2003
---------------------------- ----------
Basic common shares. . . . . . . 30,266,513 32,295,541
Dilutive effect of stock options 775,250 171,631
---------------------------- ----------
Diluted common shares. . . . . . 31,041,763 32,467,172
============================ ===========
Note 3. 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 (SFAS 123), 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. The resulting expense is amortized over
the period in which the options are earned. During the three month periods
ended March 31, 2004, and 2003, there was $1,489 and $972, respectively, charged
to expense related to stock options. Previously, and since April 1, 1996, the
Corporation had adopted the disclosure requirements of SFAS 123 and continued to
account for its stock options by applying the expense recognition provisions of
APB Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25").
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, 2004, and 2003, would have been reduced to the following
pro forma amounts:
Three Months Ended March 31,
2004 2003
------------------------------ --------
Net earnings available for
common shareholders as
reported . . . . . . . . . . . . . $ 12,893 $11,566
Add: stock based employee
compensation expense included
in reported net income, net of
related tax effects. . . . . . . . 1,061 701
Deduct: total stock based
employee compensation
expense determined under fair
value based method for all
awards, net of related tax effects (1,139) (861)
------------------------------ --------
Pro forma net earnings . . . . . . $ 12,815 $11,406
============================= =========
Net earnings per common share:
Basic
As reported. . . . . . . . . . $ 0.43 $ 0.36
Pro forma. . . . . . . . . . . $ 0.42 $ 0.35
Diluted
As reported. . . . . . . . . . $ 0.42 $ 0.36
Pro forma. . . . . . . . . . . $ 0.41 $ 0.35
Note 4. 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 periods ended March 31, 2004, and
December 31, 2003, totaled $194,200 and, by segment, were: Advanced Surface
Finishing, $122,070, and Printing Solutions, $72,130.
Acquired intangible assets are summarized as follows:
March 31, 2004 December 31, 2003
--------------------------------------------- ---------------------------------------
Gross Carrying Accumulated Net Gross Carrying Accumulated Net
Amount Amortization Amount Amount Amortization Amount
--------------------------------------------- ----------------------------------------
Patents. . $ 17,566 $ (7,174) $10,392 $ 17,566 $ (6,851) $10,715
Trademarks 20,130 (1,998) 18,132 20,133 (1,951) 18,182
Others . . 2,645 (1,535) 1,110 2,628 (1,464) 1,164
--------------- ------------------- ------- --------------- -------------- -------
Total . $ 40,341 $ (10,707) $29,634 $ 40,327 $ (10,266) $30,061
=============== =================== ======= =============== ============== =======
Included in the table above, is the net carrying amount of $16,233 at March 31,
2004, and December 31, 2003, for trademarks which are not being amortized due to
the indefinite life associated with these assets.
Note 5. Comprehensive Income and Accumulated Other Comprehensive Income
The components of comprehensive income for the three month periods ended March
31, 2004 and 2003 are as follows:
Three Months Ended March 31,
2004 2003
----------------------------- -------
Net earnings. . . . . . . . . . . . . . . $ 12,893 $11,566
Other comprehensive income:
Foreign currency translation adjustment 600 2,845
----------------------------- -------
Comprehensive income. . . . . . . . . . . $ 13,493 $14,411
============================= =======
Note 6. Segment Reporting
The Corporation operates on a worldwide basis, supplying proprietary chemicals
for two distinct segments, Advanced Surface Finishing and Printing Solutions.
These segments 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.
Net sales for all of the Corporation's products fall into one of these two
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.
Three Months Ended March 31,
2004 2003
------------------------------ ---------
Results of operations by segment:
Net sales:
Advanced Surface Finishing. . . $ 93,488 $ 84,970
Printing Solutions. . . . . . . 68,524 67,833
------------------------------ ---------
Consolidated net sales. . . . $ 162,012 $152,803
------------------------------ ---------
Operating profit (loss):
Advanced Surface Finishing. . . $ 15,415 $ 12,900
Printing Solutions. . . . . . . 12,128 12,259
------------------------------ ---------
27,543 25,159
Amortization of intangibles . . (734) (769)
------------------------------ ---------
Consolidated operating profit $ 26,809 $ 24,390
============================== =========
March 31, 2004 December 31, 2003
--------------- ------------------
Identifiable assets by segment:
Advanced Surface Finishing. . . $ 221,992 $ 234,950
Printing Solutions. . . . . . . 375,041 374,247
Corporate . . . . . . . . . . . 110,253 88,038
--------------- ------------------
Consolidated assets. . . . . $ 707,286 $ 697,235
=============== ==================
Note 7. 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.
At March 31, 2004, reserves of $452 remained in other accrued liabilities on the
consolidated balance sheet, which relates to the facilities. During the three
months ended March 31, 2004, cash payments of $32 were made relating to these
reserves.
Note 8. Discontinued Operations
On December 9, 2003, the Corporation sold its 60% interest in Eurocir S.A.
(Eurocir) to the 40% stakeholders of Eurocir. The Eurocir operations
represented substantially all of the remaining electronics manufacturing segment
and as such the sale was accounted for as discontinued operations in accordance
with Statement of Financial Accounting Standards No.144, Accounting for the
Disposal or Impairment of Long-Lived Assets ("SFAS 144"). The operating results
and cash flows from operations of the electronics manufacturing segment have
therefore been segregated from continuing operations on the Corporation's
consolidated statements of earnings and consolidated statements of cash flows
for all prior periods presented.
The following table presents the amounts segregated from the consolidated
statements of earnings and reflected as discontinued operations:
Three Months Ended
March 31, 2003
--------------------
Net Sales. . . . . . . . . . . . . . $ 20,783
Loss before income taxes . . . . . . $ (150)
Income tax benefit . . . . . . . . . 48
--------------------
Discountinued operations, net of tax $ (102)
====================
Note 9. Inventories
The major components of inventory at March 31, 2004 and December 31, 2003 were
as follows:
March 31, 2004 December 31, 2003
--------------- ------------------
Finished goods . . . . . . $ 41,207 $ 37,396
Raw materials and supplies 30,572 30,062
Equipment. . . . . . . . . 7,588 8,317
--------------- ------------------
Inventories. . . . . . . . $ 79,367 $ 75,775
=============== ==================
Note 10. Postretirement Benefits Plans
The following table shows the components of the net periodic pension benefit
costs incurred by the Corporation:
Pension Benefits
Three Months Ended March 31,
------------------------------ -------
2004 2003
------------------------------ -------
Net Periodic benefit cost:
Service Costs . . . . . . . . . . . $ 936 $ 894
Interest Costs. . . . . . . . . . . 898 820
Expect return on plan assets. . . . (876) (716)
Amortization of prior service costs 6 6
Recognized actuarial (gain)/loss. . 83 60
------------------------------ -------
Net periodic benefit cost . . . . . $ 1,047 $1,064
============================= ========
The estimated net periodic benefit cost for the Corporation's other
postretirement benefits was $160 for the three months ended March 31, 2004, and
2003.
The Corporation previously disclosed in its financial statements for the year
ended December 31, 2003, that it expected to contribute $3,136 to it's pension
plans in 2004. As of March 31, 2004, $1,000 of contributions have been made.
The Corporation currently expects to contribute $2,136 to it's pension plans
during the remainder of 2004.
Note 11. Contingencies, Environmental and Legal Matters
Environmental Issues:
The nature of the Corporation's operations, as manufacturers and distributors of
specialty chemical products and systems, expose it to the risk of liability 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 is named as a potentially responsible party ("PRP") at two
Superfund sites. There are many other PRPs involved at 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 ("the acquisition
agreement") to withhold a deferred purchase price payment of approximately
$1,600. The Corporation estimates the range of cleanup costs at the 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 $1,600 it may be entitled to
additional indemnification payments. Such recovery may be uncertain, however,
and would likely involve significant litigation expense. The Corporation has
instituted an arbitration to enforce the obligations of other parties to the
acquisition agreement concerning the remediation of the Kearney, New Jersey and
Waukegan, Illinois sites. The arbitration has been concluded with a
confirmation, in favor of the Corporation, that the former primary shareholders
of the entity that operated the Kearney, New Jersey site are responsible for its
remediation to applicable state standards and an order to establish a time line
for completion of the remediation. The Corporation expects that the remediation
will take several years. The Corporation believes that remediation of the
Waukegan, Illinois site is complete and is in the process of applying for a no
further action letter from the state. The Corporation is also in the process of
characterizing contamination at its Huntingdon Avenue, Waterbury, Connecticut
site which was closed in the quarter ended September 30, 2003. 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 and the Huntingdon Avenue, Waterbury, Connecticut site. 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:
From time to time there are various legal proceedings 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. To the extent reasonably estimable, reserves have been
established regarding pending legal proceedings.
Note 12. Financial Information for Guarantors of the Corporation's Bond
Offering
The Corporation issued 9 1/8% Senior Subordinated Notes ("Bond Offering")
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 existing long-term debt. This Bond Offering is 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
Bond Offering. The Corporation's foreign subsidiaries are not guarantors of the
indebtedness under the Bond Offering. The following financial information is
presented to give additional disclosures to the Corporation's Consolidated
Financial Statements, with respect to: a) MacDermid, Incorporated (as the
issuer), b) the Guarantors, c) the non-guarantor subsidiaries, d) elimination
entries, and e) the Corporation on a consolidated basis for and as of the the
fiscal periods ended March 31, 2004, and 2003, and December 31, 2003. The
equity method has been used by the Corporation with respect to investments in
subsidiaries. The equity method also has been used by subsidiary guarantors
with respect to investments in 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, 2003. Certain prior
period amounts have been reclassified to conform to the current period
presentation.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2004
(unaudited)
MacDermid
Incorporated
MacDermid Guarantor Nonguarantor and
Incorporated Subsidiaries Subsidiaries Eliminations Subsidiaries
------------- ------------- -------------- -------------- -------------
ASSETS
Current assets:
Cash and cash equivalents . $ 40,704 $ 1,603 $ 24,252 $ - $ 66,559
Accounts receivables, net . 11,816 18,278 113,700 - 143,794
Due (to) from affiliates. . 56,092 27,192 (83,284) - -
Inventories, net. . . . . . 7,051 23,824 48,492 - 79,367
Prepaid expenses. . . . . . 910 1,522 4,566 - 6,998
Deferred income taxes . . . 17,883 - 5,033 - 22,916
------------- ------------- -------------- -------------- -------------
Total current assets. . . . 134,456 72,419 112,759 - 319,634
Property, plant and
equipment, net. . . . . . . 13,483 38,332 58,565 - 110,380
Goodwill. . . . . . . . . . 21,680 68,574 103,946 - 194,200
Intangibles, net. . . . . . - 5,505 24,129 - 29,634
Investments in subsidiaries 401,175 232,591 - (633,766) -
Deferred income taxes . . . 19,745 - 13,040 - 32,785
Other assets, net . . . . . 7,322 5,845 7,486 - 20,653
------------- ------------- -------------- -------------- -------------
$ 597,861 $ 423,266 $ 319,925 $ (633,766) $ 707,286
============= ============= ============= =============== =============
CONSOLIDATED BALANCE SHEET (continued)
MARCH 31, 2004
(unaudited)
MacDermid
Incorporated
MacDermid Guarantor Nonguarantor and
Incorporated Subsidiaries Subsidiaries Eliminations Subsidiaries
-------------- -------------- ------------- -------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable. . . . . . . . . . . . $ - $ - $ 686 $ - $ 686
Current installments of long-
term obligations . . . . . . . . . . - 146 324 - 470
Accounts and dividends payable . . . 10,373 8,148 36,468 - 54,989
Accrued expenses . . . . . . . . . . 21,245 6,790 30,760 - 58,795
Income taxes . . . . . . . . . . . . (5,011) 6,510 4,812 - 6,311
-------------- -------------- ------------- -------------- --------------
Total current liabilities. . . . . . 26,607 21,594 73,050 - 121,251
Long-term obligations. . . . . . . . 300,295 476 480 - 301,251
Retirement benefits, less
current portion. . . . . . . . . . . 14,607 - 5,496 - 20,103
Deferred income taxes. . . . . . . . - - 7,315 - 7,315
Other long-term liabilities. . . . . 3,414 21 993 - 4,428
-------------- -------------- ------------- -------------- --------------
Total liabilities. . . . . . . . . . 344,923 22,091 87,334 - 454,348
Shareholders' equity:
Common stock . . . . . . . . . . . . 46,818 (51) 3,747 (3,696) 46,818
Additional paid-in capital . . . . . 27,492 207,561 106,939 (314,500) 27,492
Retained earnings. . . . . . . . . . 290,386 193,299 114,988 (308,287) 290,386
Accumulated other
comprehensive income . . . . . . . . 2,955 366 6,917 (7,283) 2,955
Less cost of common shares
held in treasury . . . . . . . . . (114,713) - - - (114,713)
-------------- -------------- ------------- -------------- --------------
Total shareholders' equity . . . . . 252,938 401,175 232,591 (633,766) 252,938
-------------- -------------- ------------- -------------- --------------
$ 597,861 $ 423,266 $ 319,925 $ (633,766) $ 707,286
============= ============== ============== ============== ==============
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED MARCH 31, 2004
(unaudited)
MacDermid
Incorporated
MacDermid Guarantor Nonguarantor and
Incorporated Subsidiaries Subsidiaries Eliminations Subsidiaries
-------------- -------------- -------------- -------------- --------------
Net sales . . . . . . . $ 23,480 $ 39,815 $ 103,204 $ (4,487) $ 162,012
Cost of sales . . . . . 15,749 16,822 56,402 (4,487) 84,486
-------------- -------------- -------------- -------------- --------------
Gross profit. . . . . . 7,731 22,993 46,802 - 77,526
Operating expenses:
Selling, technical and
administrative. . . . . 12,089 8,551 29,343 - 49,983
Amortization. . . . . . - 448 286 - 734
-------------- -------------- -------------- -------------- --------------
12,089 8,999 29,629 - 50,717
-------------- -------------- -------------- -------------- --------------
Operating profit (loss) (4,358) 13,994 17,173 - 26,809
Equity in earnings of
subsidiaries. . . . . . 20,543 10,635 - (31,178) -
Interest income . . . . 30 7 191 - 228
Interest expense. . . . (8,017) 1,210 (1,012) - (7,819)
Miscellaneous income
expense), net . . . . . 35 325 (618) - (258)
-------------- -------------- -------------- -------------- --------------
12,591 12,177 (1,439) (31,178) (7,849)
-------------- -------------- -------------- -------------- --------------
Earnings (loss) before
taxes . . . . . . . . . 8,233 26,171 15,734 (31,178) 18,960
Income tax benefit
(expense) . . . . . . . 4,660 (5,628) (5,099) - (6,067)
-------------- -------------- -------------- -------------- --------------
Net earnings (loss) . . $ 12,893 $ 20,543 $ 10,635 $ (31,178) $ 12,893
============= ============== ============== =============== ==============
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2004
(unaudited)
MacDermid
Incorporated
MacDermid Guarantor Nonguarantor and
Incorporated Subsidiaries Subsidiaries Subsidiaries
-------------- -------------- -------------- --------------
Net cash flows (used in)
provided by operating
activities. . . . . . . . . $ (17,141) $ 14,849 $ 9,481 $ 7,189
Investing activities:
Capital expenditures. . . . (118) (475) (708) (1,301)
Proceeds from disposition
of fixed assets . . . . . . - 512 7 519
-------------- -------------- -------------- --------------
Net cash flows (used in)
provided by investing
activities. . . . . . . . . (118) 37 (701) (782)
-------------- -------------- -------------- --------------
Financing activities:
Net proceeds from
(repayments of) short-term
borrowings. . . . . . . . . 29,516 (14,804) (14,913) (201)
Repayments of long-term
borrowings. . . . . . . . . - - (121) (121)
Proceeds from exercise of
stock options . . . . . . . 54 - - 54
Issuance from treasury
shares. . . . . . . . . . . 31 - - 31
Dividends paid. . . . . . . 10,067 235 (11,514) (1,212)
-------------- -------------- -------------- --------------
Net cash flows provided
by (used in) financing
activities. . . . . . . . . 39,668 (14,569) (26,548) (1,449)
-------------- -------------- -------------- --------------
Effect of exchange rate
changes on cash and cash
equivalents . . . . . . . . - - 307 307
-------------- -------------- -------------- --------------
Net increase (decrease) in
cash and cash equivalents . 22,409 317 (17,461) 5,265
Cash and cash equivalents
at beginning of period. . . 18,295 1,286 41,713 61,294
-------------- -------------- -------------- --------------
Cash and cash equivalents
at end of period. . . . . . $ 40,704 $ 1,603 $ 24,252 $ 66,559
============== ============== ============== ==============
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003
MacDermid
Incorporated
MacDermid Guarantor Nonguarantor and
Incorporated Subsidiaries Subsidiaries Eliminations Subsidiaries
------------- ------------- -------------- -------------- -------------
Assets
Current assets:
Cash and cash equivalents. . . . . $ 18,295 $ 1,286 $ 41,713 $ -- $ 61,294
Accounts receivables, net. . . . . 10,598 16,523 110,028 -- 137,149
Due from/(to) affiliates . . . . . 89,236 12,554 (101,790) -- --
Inventories, net . . . . . . . . . 6,417 23,343 46,015 -- 75,775
Prepaid expenses . . . . . . . . . 1,188 1,925 5,024 -- 8,137
Deferred income taxes. . . . . . . 17,890 -- 5,070 -- 22,960
------------- ------------- -------------- -------------- -------------
Total current assets . . . . . . . 143,624 55,631 106,060 -- 305,315
Property, plant and equipment, net 13,962 39,386 60,294 -- 113,642
Goodwill . . . . . . . . . . . . . 21,680 68,574 103,946 -- 194,200
Intangibles, net . . . . . . . . . -- 5,672 24,389 -- 30,061
Investments in subsidiaries. . . . 391,289 232,851 -- (624,140) --
Deferred income taxes. . . . . . . 19,745 -- 12,014 -- 31,759
Other assets, net. . . . . . . . . 8,196 6,532 7,530 -- 22,258
------------- ------------- -------------- -------------- -------------
$ 598,496 $ 408,646 $ 314,233 $ (624,140) $ 697,235
============= ============= ============== ============== =============
CONSOLIDATED BALANCE SHEET (continued)
DECEMBER 31, 2003
MacDermid
Incorporated
MacDermid Guarantor Nonguarantor and
Incorporated Subsidiaries Subsidiaries Eliminations Subsidiaries
-------------- -------------- -------------- -------------- --------------
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable. . . . . . . . . . . . $ -- $ -- $ 940 $ -- $ 940
Current installments of long-
term obligations . . . . . . . . . . -- 146 412 -- 558
Accounts and dividends payable . . . 8,281 7,267 38,513 -- 54,061
Accrued expenses . . . . . . . . . . 29,157 8,511 29,176 -- 66,844
Income taxes . . . . . . . . . . . . 3,239 882 (901) -- 3,220
-------------- -------------- -------------- -------------- --------------
Total current liabilities. . . . . . 40,677 16,806 68,140 -- 125,623
Long-term obligations. . . . . . . . 300,265 524 414 -- 301,203
Retirement benefits, less
current portion. . . . . . . . . . . 15,123 -- 5,556 -- 20,679
Deferred income taxes. . . . . . . . -- -- 6,232 -- 6,232
Other long-term liabilities. . . . . 3,419 27 1,040 -- 4,486
-------------- -------------- -------------- -------------- --------------
Total liabilities . . . . . . . . 359,484 17,357 81,382 -- 458,223
Shareholders' equity:
Common stock . . . . . . . . . . . . 46,813 (50) 3,747 (3,697) 46,813
Additional paid-in capital . . . . . 25,884 207,561 106,939 (314,500) 25,884
Retained earnings. . . . . . . . . . 278,705 187,362 119,195 (306,557) 278,705
Accumulated other
comprehensive income . . . . . . . . 2,355 (3,584) 2,970 614 2,355
Less cost of common shares
held in treasury . . . . . . . . . . (114,745) -- -- -- (114,745)
-------------- -------------- -------------- -------------- --------------
Total shareholders' equity . . . . . 239,012 391,289 232,851 (624,140) 239,012
-------------- -------------- -------------- -------------- --------------
$ 598,496 $ 408,646 $ 314,233 $ (624,140) $ 697,235
============= =============== ============== ============== ==============
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED MARCH 31, 2003
(unaudited)
MacDermid
Incorporated
MacDermid Guarantor Nonguarantor Discontinued and
Incorporated Subsidiaries Subsidiaries Operations Eliminations Subsidiaries
-------------- -------------- -------------- -------------- -------------- --------------
Net sales . . . . . . . . $ 23,080 $ 43,463 $ 90,881 $ - $ (4,621) $ 152,803
Cost of sales . . . . . . 14,800 20,098 49,984 - (4,621) 80,261
-------------- -------------- -------------- -------------- -------------- --------------
Gross profit. . . . . . . 8,280 23,365 40,897 - - 72,542
Operating expenses:
Selling, technical and
administrative. . . . . . 12,437 10,396 24,550 - - 47,383
Amortization. . . . . . . - 510 259 - - 769
-------------- -------------- -------------- -------------- -------------- --------------
12,437 10,906 24,809 - - 48,152
-------------- -------------- -------------- -------------- -------------- --------------
Operating (loss) profit . (4,157) 12,459 16,088 - - 24,390
Equity in earnings of
subsidiaries. . . . . . . 18,418 10,283 (102) - (28,599) -
Interest income . . . . . 31 16 138 - - 185
Interest expense. . . . . (7,816) 1,122 (929) - - (7,623)
Miscellaneous income
(expense), net. . . . . . 182 48 (23) - - 207
-------------- -------------- -------------- -------------- -------------- --------------
10,815 11,469 (916) - (28,599) (7,231)
-------------- -------------- -------------- -------------- -------------- --------------
Earnings from continuing
operations before taxes . 6,658 23,928 15,172 - (28,599) 17,159
Income tax benefit
(expense) . . . . . . . . 4,908 (5,510) (4,889) - - (5,491)
-------------- -------------- -------------- -------------- -------------- --------------
Earnings from continuing
operations. . . . . . . . 11,566 18,418 10,283 - (28,599) 11,668
Discontinued operations,
net of tax. . . . . . . . - - - (102) - (102)
-------------- -------------- -------------- -------------- -------------- --------------
Net earnings (loss) . . . $ 11,566 $ 18,418 $ 10,283 $ (102) $ (28,599) $ 11,566
============== ============== ============== ============== ============== ==============
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2003
(unaudited)
MacDermid
Incorporated
MacDermid Guarantor Nonguarantor Discontinued and
Incorporated Subsidiaries Subsidiaries Operations Subsidiaries
-------------- -------------- -------------- -------------- --------------
Net cash flows provided
by (used in) operating
activities . . . . . . . . $ (18,926) $ 16,653 $ 19,366 $ 2,304 $ 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 (13,105) (9,782) (1,042) (2,237)
Repayments of long-term
borrowings . . . . . . . . - - (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) (13,761) (2,119) (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) 5,438 (40) 14,615
Cash and cash equivalents
at beginning of period . . 14,153 2,314 15,268 284 32,019
-------------- -------------- -------------- -------------- --------------
Cash and cash equivalents
at end of period . . . . . $ 23,901 $ 1,783 $ 20,706 $ 244 $ 46,634
============== ============== ============== ============== ==============
ITEM 2:
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(in thousand of dollars, except shares and per share amounts)
CONSOLIDATED OVERVIEW
Highlights
The Corporation consists of two business segments, Advanced Surface Finishing
and Printing Solutions. The Advanced Surface Finishing (ASF) segment supplies
chemicals used for finishing metals and non-metallic surfaces for automotive and
other industrial applications, electro-plating metal surfaces, etching, and
imaging to imprint electrical patterns on circuit boards for the electronics
industry, and offshore lubricants and cleaners for the offshore oil and gas
markets. The Printing Solutions (Printing) segment supplies a complete line of
offset printing blankets, photo-polymer plates and digital printers for use in
the commercial printing and packaging industries for image transfer.
Our performance for the first quarter of 2004 reflects our continued emphasis on
efficiency improvements that we have been implementing throughout the
organization together with our strong global presence, operating primarily in
the US, Europe and Asia Pacific. Significant items affecting the 2004 first
quarter results compared to the 2003 first quarter include the positive impact
of foreign currency translation, higher proprietary sales in the Asia Pacific
ASF segment and lower proprietary sales in our Americas Printing segment.
Proprietary sales in our ASF Asia Pacific segment are higher in the first
quarter of 2004 compared to the same period in 2003 primarily as a result of an
overall favorable market situation with regard to electronics in Asia, with the
addition of new customers and capacity expansion at existing customers.
Proprietary sales in the Americas for our Printing segment are lower in the 2004
period compared to the 2003 period primarily resulting from weak demand for
printing plates used in the packaging and publication markets.
Approximately 60% of our net sales and our identifiable assets in the 2004
period are denominated in currencies other than the US dollar, predominantly the
Euro, Pound Sterling, Yen, Hong Kong and New Taiwan dollars. For the first
quarter of 2004, net sales and net earnings were favorably impacted by the
effect of foreign currency translation resulting primarily from the Euro and
Pound Sterling strengthening against the US dollar compared to the first quarter
of 2003. We do not manage our foreign currency exposure in a manner that would
entirely eliminate the effects of changes in foreign exchange rates on our
earnings, cash flows and fair values of assets and liabilities. Accordingly,
reported sales, net earnings, cash flows and fair values have been and in the
future may be affected by changes in foreign exchange rates. In addition,
because of the extensive nature of our foreign business activities, financial
results could be adversely affected by changes in worldwide economic conditions,
changes in trade policies or tariffs, changes in interest rates, and political
unrest.
Cash flow from continuing operations was $7,189 for the first quarter of 2004
compared to $17,168 for the first quarter of 2003. The decline was primarily
the result of higher accounts receivable and higher inventories at March 31,
2004 compared to March 31, 2003. The increase in accounts receivable is
primarily attributable to higher sales activities in late February and March of
2004. The increased inventories was primarily the result of timing issues.
Summary of the results for the quarter
Net sales for the first quarter of fiscal 2004 were $162,012, which was
$9,209 or 6% more than net sales of $152,803 for the same period in fiscal 2003.
Proprietary sales of $152,199 also increased 6% in the first quarter of fiscal
2004 compared to the first quarter in fiscal 2003, and these sales represented
94% of net sales for both periods. There was a positive effect on translated
sales resulting from foreign currencies strengthening against the US dollar,
primarily the Euro and Pound Sterling. Excluding the effect of foreign
currency, proprietary sales and net sales would have been down by roughly 1% in
the first quarter of 2004 compared to the same period in 2003. This decline is
primarily due to lower proprietary sales in our Americas Printing Segment, which
was partially offset by higher proprietary sales in our Asia Pacific ASF
Segment, as discussed above.
Cost of sales for the first quarter of 2004 were $84,486, which was $4,225 or
5% more than the same period for 2003. This increase was the result of the
effect of translation from foreign currencies. Excluding the effect of foreign
currency, the gross profit percentage was 47.9% for the 2004 period compared to
47.2% for the 2003 period. This gross profit improvement was primarily
attributable to cost reduction efforts throughout 2003.
Selling, technical and administrative (ST&A) expenses were up $2,600 for the
first quarter of 2004 compared to the same period in 2003. This 5% increase
results from the effect of translation from foreign currencies. Excluding this
effect, ST&A would have been 1% lower compared to the same period in 2003
primarily attributable to cost reduction efforts throughout 2003. Somewhat
offsetting these cost reductions are increased stock compensation and research
and development expenses, included in ST&A. Stock compensation expense of $1,560
for the 2004 period and $1,031 for the 2003 period are primarily the result of
the application of the fair value expense method of accounting under Statement
of Financial Accounting Standard No. 123, Accounting for Stock Based
Compensation (SFAS 123). We believe that this method is a better reflection of
the expense of the Corporation's stock options in the periods impacted by these
instruments. Also included in ST&A is research and development expense of
$5,357 for the three months ended March 31, 2004 compared to $4,866 for the same
period last year. We expect research and development spending for all of 2004
to approximate $22,000 compared to $19,955 for the year end December 31, 2003.
Operating profit in the first quarter of 2004 increased to $26,809, or 16.5%
as a percentage of net sales, compared to $24,390, or 16.0%, for the 2003
period. Excluding the effect of the translation from foreign currencies, the
2003 operating profit percentage would have been 15.9%. This improvement in the
operating profit percentage was primarily attributable to cost reduction efforts
throughout 2003.
Net earnings from continuing operations for the first quarter of 2004 were
$12,893, or a diluted $0.42 per common share, as compared to $11,566, or a
diluted $0.36 per common share, for the same period in 2003. The reported net
earnings for the 2004 period compared to the 2003 period were favorably impacted
by $0.03 per share due to the positive effect from foreign currency translation
and $0.02 per share due to the lower average diluted shares as a result of the
purchase of common stock in 2003.
Loss from discontinued operations, net of tax, in the first quarter of 2003
was related to the Corporation's 60% interest in Eurocir S.A., a printed circuit
board manufacturer located in Europe, which we sold on December 9, 2003. The
Eurocir operations represented substantially all of the remaining electronics
manufacturing segment. Accordingly, the sale was accounted for as a
discontinued operation. As such, presentation of our consolidated statements of
earnings and cash flows has been restated to reflect continuing operations, with
a separate presentation of results from discontinued operations.
Key opportunities and risks
We continue to focus on improving top line sales and the generation of cash
from operations in order to grow shareholder value. Top line sales growth over
the longer term will be dependent on communicating our capabilities through new
marketing efforts and expanding our capabilities by adding new products from
internal research and development efforts, exploiting our internal knowledge
base and acquisitions. Additionally, working capital initiatives continue to
focus on improving accounts receivable days sales outstanding and reduction of
inventory levels in order to maximize cash flows during a period of continued
economic uncertainty in our primary markets.
Our products are sold in a competitive, global economy. Competitors include
many large multi-national chemical firms based in Europe, Asia and the US. New
competitive products or pricing policies of our competitors can materially
affect demand for and pricing of our products. We also manufacture and sell our
products to customers in industries and countries that are experiencing periods
of rapid change, most notably countries in Latin America and the Asia-Pacific
region. These factors have had and in the future could have an affect demand for
our products and therefore may have a significant impact on financial results.
We have invested significant resources in intellectual properties such as
patents, trademarks, copyrights and trade secrets. Since we depend on these
intellectual resources for our financial stability and future growth, we rely on
the protection that these intellectual property rights provide. The development
and successful implementation of new, competing technologies in the market place
could significantly impact future financial results.
SEGMENT SALES, COSTS AND EXPENSES
Advanced Surface Finishing:
Net sales for the ASF segment were $93,488, up 10% in the first quarter of 2004
compared to the first quarter of 2003. Proprietary sales represented
approximately 90% of total sales in both periods. Excluding the effect of
foreign currency, proprietary sales and net sales would have increased by
approximately 2% and 1%, respectively, in the first quarter of 2004 compared to
the same period in 2003. These higher sales were primarily the result of an
overall favorable market situation with regard to electronics in Asia, as
discussed previously.
The net increase in sales, together with additional cost efficiencies in
the 2004 period, dropped directly to operating profit. As a result, operating
profit margins improved to 16.5% for the ASF segment in the 2004 period compared
to 15.3% for the 2003 period, excluding the effect of foreign currency
translation.
Printing Solutions:
Net sales for the Printing segment were $68,524, up 1% or $691, in the first
quarter of 2004 compared to the same quarter in 2003. Proprietary sales
represented approximately 99% of total sales for both periods. Excluding the
effect of foreign currency, proprietary sales and net sales would have decreased
by approximately 4% in the 2004 quarter compared to the 2003 quarter. The
decline is primarily the result of weak demand in the Americas for printing
plates used in the packaging and publication markets.
Cost reductions almost offset the lower net sales, resulting in slightly lower
operating profit margins for the Printing segment of 17.7% in the 2004 period
compared to 17.8% for the 2003 period, excluding foreign currency translation
effects.
NON-OPERATING ACTIVITIES AND INCOME TAXES
Other income and expense
Interest expense, net of interest income, increased $153. This 2% increase
results from the translation from foreign currencies.
In the first quarter of 2004, we had $258 of miscellaneous expense and for
the first quarter of 2003 we had miscellaneous income of $207. The primary
reason for the variance is related to foreign currency losses recognized in the
2004 period compared to currency gains in the 2003 period.
Income taxes
The overall effective income tax rate attributable to continuing operations was
32% for the first quarter of 2004 and 2003. This effective tax rate reflects
the utilization of foreign tax credits and an earnings mix from lower taxed
jurisdictions.
Discontinued operations
Loss from discontinued operations, net of tax, in the first quarter of 2003
was related to the Corporation's 60% interest in Eurocir S.A., a printed circuit
board manufacturer located in Europe, which we sold on December 9, 2003,
discussed above. This divestiture ended the Corporation's electronics
manufacturing operations. See Note 8 in Item 1 for further discussion.
LIQUIDITY AND CAPITAL RESOURCES
The table below summarizes the Corporation's cash flows for the three months
ended March 31, 2004 and 2003:
Three Months Ended March 31,
----------------------------------------------------
2004 2003 Variance
------------------------------ -------- ----------
Cash provided by (used for):
Continuing operations . . . . . . . . . $ 7,189 $17,168 $ (9,979)
Discontinued operations . . . . . . . . - 2,229 (2,229)
------------------------------ -------- ----------
Total Operating Activities. . . . . . . 7,189 19,397 (12,208)
Investing Activities. . . . . . . . . . (782) (979) 197
Financing Activities. . . . . . . . . . (1,449) (4,166) 2,717
Effect of exchange rate changes on cash 307 363 (56)
------------------------------ -------- ----------
Net change in cash. . . . . . . . . . . $ 5,265 $14,615 $ (9,350)
------------------------------ -------- ----------
Cash flow from continuing operations declined for the first quarter of 2004
compared to the 2003 quarter primarily as a result of higher accounts receivable
and higher inventories at March 31, 2004, compared to March 31, 2003. The cash
flow from discontinued operations in the 2003 quarter related to the sale of our
interest in Eurocir S.A. in the fourth quarter of 2003, as previously noted.
Investing activities were comprised of capital expenditures and proceeds from
the disposition of fixed assets. Capital expenditures increased by $322 in the
first quarter of 2004 compared to the same period in 2003 primarily as a result
of our plant expansion in China. Capital expenditures for the current year are
expected to total approximately $15,000. During the 2004 period, we also sold
certain properties in California for proceeds of approximately $500.
Financing activities were primarily comprised of repayments of borrowings and
dividends paid. During the 2003 period, net debt repayments were $3,570
compared to $322 of net debt repayments in 2004. This was partially offset by
$566 of higher dividend payments. On February 27, 2004 we announced that we
were increasing our quarterly dividend from $0.03 to $0.04. This raises the
annual dividend from $0.12 to $0.16. The increase was primarily due to our
strong financial position and the continued generation of cash from operations.
The Board of Directors from time-to-time authorizes 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). At March
31, 2004, the outstanding authorization to purchase approximately 1 million
shares would cost approximately $35,190 million.
The Corporation has the financial flexibility to deliver shareholder value
described above while meeting its contractual obligations. The Corporation
currently has $66,559 in cash along with $101,910 in other net current monetary
assets (excludes deferred taxes and prepaid expenses). In addition to these
resources 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.
Future estimated contractual cash commitments for the years subsequent to March
31, 2004 are summarized in the following table:
Next 12 Months 2-4 Years 5 or More Years Total
--------------- ------------ ---------------- --------
Long-term debt . . . . . . . . . . $ 238 $ - $ 300,294 $300,532
Semi-annual bond interest. . . . . 27,512 82,536 96,292 206,340
Capital leases . . . . . . . . . . 360 650 179 1,189
Operating leases . . . . . . . . . 7,010 10,238 7,307 24,555
Pension funding requirements . . . 3,136 10,500 3,500 17,136
Purchase obligations and other . . 7,163 - - 7,163
--------------- ------------ ---------------- --------
Total contractual cash commitments $ 45,419 $ 103,924 $ 407,572 $556,915
=============== ============ ================ ========
The following table reflects the Corporation's ability to fund both its required
obligations and its shareholder growth initiatives for fiscal 2004:
Cash and cash equivalents as March 31, 2004 . . . . . . . . $ 66,559
Other net current monetary assets as of March 31, 2004. . . 101,910
Available borrowings under revolving loan facility. . . . . 50,000
Availability under other uncommitted credit facilities. . . 59,000
--------
Total cash available and potentially available. . . . . 277,469
Total contractual cash commitments. . . . . . . . . . . . . 45,419
Expected capital expenditures . . . . . . . . . . . . . . . 13,699
Expected research and development spending. . . . . . . . . 16,643
Expected dividend payments. . . . . . . . . . . . . . . . . 3,636
--------
Excess of cash available and potentially available over
requirements . . . . . . . . . . . . . . . . . . . . $198,072
========
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 judgment based on its understanding and analysis of the
relevant circumstances to reach these decisions. By their nature, these
judgments 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
market. Management regularly reviews obsolescence to determine that inventories
are appropriately reserved. In making any determination, historical write-offs,
customer demand, product evolution, 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 life of the asset
are capitalized. Costs and accumulated depreciation and amortization on assets
fully depreciated, 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 management's evaluation. 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 liability 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 affect current year and future
year pension expense and the projected benefit obligation. The plan discount
rate assumption was changed to 6.25% in 2003 from 6.75% in 2002 and the rate of
compensation increase assumption was changed to 4.5% in 2003 from 5.0% in 2002.
The net effect of changing these assumptions resulted in an increase of
approximately $2,950 in the projected benefit obligation and is expected to keep
pension expense flat in 2004. Management estimates that a 50 basis point drop
in the discount rate for the valuation at December 31, 2004, will increase the
plan's projected benefit obligation by approximately $4,800 and increase the
plan's pension expense by approximately $700. However, these increases could be
offset by other factors such as favorable asset experience or additional cash
contributions to the plan.
NEW ACCOUNTING STANDARDS:
The FASB finalized Staff Position No. FAS106-1, Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (FAS106-1), in January 2004. FAS106-1 permits the
deferral of application of Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Postretirement Benefits Other than Pensions, to the
Medicare Prescription Drug Bill. The FASB plans to address the related issues
by issuing guidance in the second quarter of 2004. The Corporation has deferred
application of FAS106-1 until the issuance of final guidance by the FASB.
ENVIRONMENTAL and LEGAL MATTERS
Environmental Issues:
The nature of the Corporation's operations, as manufacturers and distributors of
specialty chemical products and systems expose it to the risk of liability 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 is named as a potentially responsible party ("PRP") at two
Superfund sites. There are many other PRPs involved at 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 ("the acquisition
agreement") to withhold a deferred purchase price payment of approximately
$1,600. The Corporation estimates the range of cleanup costs at the 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 $1,600 it may be entitled to
additional indemnification payments. Such recovery may be uncertain, however,
and would likely involve significant litigation expense. The Corporation has
instituted an arbitration to enforce the obligations of other parties to the
acquisition agreement concerning the remediation of the Kearney, New Jersey and
Waukegan, Illinois sites. The arbitration has been concluded with a
confirmation, in favor of the Corporation, that the former primary shareholders
of the entity that operated the Kearney, New Jersey site are responsible for its
remediation to applicable state standards and an order to establish a time line
for completion of the remediation. The Corporation expects that the remediation
will take several years. The Corporation believes that remediation of the
Waukegan, Illinois site is complete and is in the process of applying for a no
further action letter from the state. The Corporation is also in the process of
characterizing contamination at its Huntingdon Avenue, Waterbury, Connecticut
site which was closed in the quarter ended September 30, 2003. 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 and the Huntingdon Avenue, Waterbury, Connecticut site. 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:
Various 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. To the
extent reasonably estimable, reserves have been established regarding pending
legal proceedings.
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
The Corporation is exposed to market risk in the normal course of business
activity due to its operations in different foreign currencies 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, 2004, there was
a favorable foreign currency translation effect on earnings of approximately
$0.03 per share, or 7%, when compared to the three months ended March 31, 2003.
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 42% of the business is concentrated
in the printing business, used for a wide variety of applications, while 58% of
the business is concentrated to customers supplying a wide variety of chemicals
to manufacturers of automotive, other industrial, electronics and offshore
applications. 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 2001. For additional information, see
Note 12, Financial Information for Guarantors of the Corporation's Bond
Offering, in Part I, Item 1. Based upon the Corporation's current debt
structure and expected levels of borrowing in 2004, 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 but has
certain other supply agreements for raw material inventories and has chosen not
to enter into any price hedging with its suppliers for commodities.
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
4(a) The annual meeting of shareholders was held on April 27, 2004, in Waterbury
CT.
4(b) The following is a tabulation of the results of voting by security holders
for the election of directors:
Nominees . . . . . . Votes for Votes withheld
- -------------------- ---------- --------------
Daniel H. Leever . . 28,404,692 1,119,296
- -------------------- ---------- --------------
Donald G. Ogilvie. . 28,339,065 1,184,923
- -------------------- ---------- --------------
James C. Smith . . . 28,427,199 1,096,789
- -------------------- ---------- --------------
Joseph M. Silvestri. 27,868,726 1,655,262
- -------------------- ---------- --------------
T. Quin Spitzer, Jr. 28,251,240 1,272,748
- -------------------- ---------- --------------
Robert L. Ecklin . . 28,427,465 1,096,523
- -------------------- ---------- --------------
4(c) The following is a tabulation of the results of voting by security holders
for the ratification of appointment of KPMG as the Corporation's independent
accountants:
Votes for: 28,762,331 Votes against: 706,127 Abstain: 55,530
4(d) The following is a tabulation of the results of voting by security holders
for the ammnedment to the MacDermid Incorporated 2001 key executive performance
equity plan:
Votes for: 22,274,959 Votes against: 2,576,457 Abstain: 1,531,699
4(e) The following is a tabulation of the results of voting by security holders
for the ammnedment to the MacDermid Incorporated 1995 equity incentive plan:
Votes for: 23,212,405 Votes against: 1,704,040 Abstain: 1,466,669
ITEM 5 : Other Information
None.
ITEM 6(a) : Exhibits
31.1 Certification of Daniel H. Leever pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Gregory M. Bolingbroke pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
3 2 Written Statement of Chief Executive Officer and Chief Financial
Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (18 U.S.C. 1350)
ITEM 6(b) : Reports on Form 8-K
Current Report on Form 8-K dated February 10, 2004, regarding earnings for the
fiscal year ended December 31, 2003.
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 7, 2004 /s/ Daniel H. Leever
------------- -----------------------
Daniel H. Leever
Chairman, President and
Chief Executive Officer
Date: May 7, 2004 /s/ Gregory M. Bolingbroke
------------- -----------------------------
Gregory M. Bolingbroke
Senior Vice President, Finance